Operative ownership : a system of industrial production based upon social justice and the rights of private property

Front matter

Gass Ll-A

Book.

Copyrights C0 I7

Preface

In the following chapters I have attempted to show the need of some system of industrial production whereby the strife and unrest which characterize industrial relations today may be avoided, the industrial freedom of the laboring classes achieved, and the rights of property restored and secured, which of late years, have been growing progressively insecure as the result of the increasing hostility of the numerically predominant propertyless element of the laboring classes, also to outline and, in a tentative way, to work out, such a system, as well as to suggest a plan whereby the general adoption of the system may be brought about.

The system proposed is to be achieved through three successive stages of development, as follows: first, joint operation of industrial establishments, with joint par-

PREFACE.

ticipation in profits, by capitalists and operatives ; second, joint ownership gradually superadded to joint operation; and, finally, complete ownership by the operatives collectively, in each establishment, of the capital, in the forms of machinery, materials, etc., with which they carry on their operations.

I make no pretense to the discovery of any new principle of the science of economics. The system which I have advocated, as well as the plan suggested for bringing it about, involves merely the application of old principles to new conditions. The principle of the ownership of the tools of industry by the individual tool-user is older than civilization; and the system of collective ownership advocated in this book is merely an adaptation of that principle to modern industrial conditions. A system of industrial production embodying the principle of collective ownership by the workers was predicted by John Stuart Mill sixty years ago, as the form of industrial association which must ultimately predominate. That principle has been advocated by many leading economists and publicists of the present day, and is in practical operation today in numerous establishments in Europe and America.

PREFACE.

So it is also in regard to the plan proposed for the general introduction of the system of collective operative ownership. Its leading features — eminent domain, the use of government credit, joint operation, and joint ownership of industry by capitalists and operatives — have been applied before in a variety of ways. What I have done in the following chapters is merely to assemble/ ideas and principles evolved in the course of the social and industrial development of society, and to arrange them in harmonious relation, in the plan above mentioned.

Arrangements between capital and labor, for participation in profits and for joint ownership, have heretofore been made only as acts of grace by benevolently disposed capitalists, and in exceptional cases; and it is the purpose of the scheme proposed in this book to provide a way by which the like benefits may hereafter be secured to operatives of industrial establishments generally, as matters of social justice and legal right, but without violating in the slightest degree the personal or property rights of the capitalist. |

While the question of the rights of private property and private industry enter into the discussion of the subject of Oper-

PREFACE.

ative Ownership as incidental to the main purpose of the book as above outlined, they are nevertheless scarcely less important, regard being had to the interests of society at large, than are the rights of labor. Indeed the rights of labor, in the sense contended for in this book, would be of comparatively little value if the industries in which labor applies itself to the production of wealth were to be continually subjected to the nagging and annoying interference of governmental regulative agencies or commissions at every turn; or if the wealth which labor produced, into whosesoever hands it might lawfully pass, were liable to be taken, or its value impaired or destroyed, by the arbitrary and unreasonable exercise of the taxing or the police power of the State.

The system described in the following pages is the more beneficial, therefore, because not only does it secure to the laborer, even in its earliest stage, a just share of the wealth which he produces, but by the direct and substantial interest which it will give him in the use of the capital invested, and, in the later stages of the system, by the ownership, in whole or in part, of that capital, it will make it to the interest of the laboring class to so exert its influence

PREFACE.

through the ballot as to protect the rights of private property and private industry against encroachments upon those rights by the government, by which means they now are often seriously impaired, while other and more serious encroachments are threatened.

I am profoundly conscious that the present volume, in its treatment of the subjects with which it deals, is full of imperfections ; and many relevant questions in relation to the scheme proposed will occur to the reader to which no answer will be found in this book. In extenuation of its short-comings in this regard, it must be borne in mind that the book is not submitted as a complete elaboration of a fully developed system, but rather as presenting in a tentative way a system which in many important features must be developed, not by a single mind, but by many, through the free expression and interchange of ideas, and in some respects also by experience. Intending to take part in the further development of the system, I shall welcome an interchange of views in regard to it with any person who may be interested in the subject and qualified by education or experience to participate in such development.

September, 1916.

Chapter I Page

The Social Unrest 7

Wage-Capitalism 11

The Rise of Wage-Capitalism in England 13

Wage-Capitalism in America 17

Scantiness of Wages 20

A Decent Living Wage 22

Elements of a Living Wage 25

False Philanthropy. .> 28

Extreme Poverty of the Working Classes 30

Appalling Infant Mortality u . . 33

Uncertainty of Employment 34

The Workers Organize 36

Strikes and their Cost 39

Exorbitant Toll of Capitalism 42

A Remedy or Socialism 44

Chapter II PROPOSED REMEDIES FOR INDUSTRIAL ILLS

Page

Socialism — Co-operation — Trade Unionism 46

Socialism 47

Socialism and Individualism 49

Present Aim of Socialism 52

Trend Towards Socialism * 54

The Government in Business 57

Is Socialism Declining? 62

Socialism a Real Menace 64

Co-operation 66

Profit Sharing and Labor Co-partnership 68

The Maison Leclaire 70

The Familistere Society of Guise 73

Slow Progress of Co-operation 77

What Co-operation Lacks 78

Trade Unionism 80

Trade Agreements 82

The True Goal of Trade Unionism. 85

CONTENTS

Chapter III Page

The Term Defined 91

Fundamental Error of the Capitalist Theory 94

Mutual Needs of Capital and Labor 97

Strife Between Capital and Labor 99

How Class Warfare May Be Ended 101

Pre-Capitalist Industries 104

Adaptation of the Principle of Workers' Ownership of

Tools to Modern Conditions 107

Distinguished Advocates of the Principle 109

Obstacles to its Adoption 110

Government Aid 114

Manner of Its Use 115

Transition from Capitalism to Operative Ownership.. 118 Joint Ownership Distinguished from Profit-sharing. . . 123

Chapter IV Page

Rights of Property Sacred 129

Views of Society Changing 131

Obstacles to Operative Ownership. 132

Example of Benevolent Capitalists 133

Eminent Domain 137

Eminent Domain an Option of Purchase 139

Eminent Domain and Government Credit 141

Examples of Government Aid 146

Ireland Before the Land Purchase Acts and After.... 148

Land Capitalism and Industrial Capitalism 150

Government Aid in the United States 151

Example of Indemnity to Government in Guaranty of

Bank Deposits 155

Safety Through Indemnity Fund 157

Little Risk and Great Benefits 160

Consider the Workingman 161

Government Credit to be Seldom Used 164

An Equitable Basis of Division. 167

Introducing the System 175

Conserving the Public Interests 177

A Joint Operative Board 179

Operatives as Joint Owners 181

Operatives as Sole Owners 182

Legislation not Indispensable 183

CONTENTS

Chapter V. BENEFITS OF OPERATIVE OWNERSHIP

Page

All Classes of Society Benefited 186

Benefits to the Employer 187

A Safeguard Against Governmental Interference 189

Benefits to Operatives 194

Great Increase of Labor Efficiency 195

Increased Efficiency Under Profit-Sharing 198

Fallacious Notions About Increase of Output 200

Most for Least and Least for Most 201

Scientific Management 202

Cheapening of Products 205

Unemployment Problem Solved 208

Benefits to the State 210

Benefits to Society , 213

Chapter VI DISAPPEARING RIGHTS OF PROPERTY

Page Conservative Tendency of Operative Ownership 218

The Rights of Private Property 220

Governmental Greed of Power 222

Forms of Governmental Encroachment on Rights of

Private Property 225

Taxation , 226

Income Taxes 230

Inheritance Taxes 232

Progressive Taxation 234

Government Regulation of Industry 238

Federal Regulation i 239

Enlargement of Governmental Powers by Judicial

Construction 241

The Sherman Anti-Trust Act 242

Venerable Traditions Violated 245

Regulation Running Riot , 246

Chapter VII DISAPPEARING RIGHTS OF PROPERTY— (Continued)

Page

The Police Power 248

Menace of the Police Power 249

CONTENTS

Page

A Creature of the Courts 250

Police Power versus Constitutional Guaranties 251

Conflicting Decisions 254

Charges of Judicial Bias 256

No Bias Against Progressive Legislation 257

Courts Influenced by Public Opinion 258

How the Police Power Operates 261

The Grange Movement 263

A Momentous Decision 2S6

Ruinous Railway Regulation 268

True Basis of Governmental Right of Regulation 269

Retrospective 273

The Cause of, and the Remedy for, Existing Conditions , 276

Conclusion

Page

Advantages Summarized 279

Paternalism Carried to Excess 282

Propertyless Class Beneficiaries of Public Extravagance 285

The Wealthy Class the Prey of Demagogues 286

Undue Interference Impossible Under Operative Ownership 289

Lack of Voting Power the Real Crime of Big Business 290

Equality of Rights Contingent upon Voting Power 291

Wealth Secure Under Operative Ownership 292

Chapter I. Wage-capitalism And The Class Struggle

THE SOCIAL UNREST.

We live in a time of unprecedented social unrest, the outcome of which no man can foresee, nor can any man predict with confidence. Many attempt such prediction, but in most cases they but reflect their own convictions as to what ought to be. Manifestations of this condition of unrest are everywhere in evidence. In the daily press, in the current magazines, in the recent book literature of economics and related subjects, we constantly see references to the prevailing social unrest. The Congress of the United States has taken official notice of the existence of this condition, and created a Commission on Industrial Relations for the purpose of investigating the cause and suggesting a remedy.

Social disturbances, sometimes of a more violent character than have, as yet, developed in the present situation, and often partaking of a political nature, have occurred in the past, now in one country and now in another; but never before has society been agitated, at once so profoundly and so universally, by a spirit of unrest, purely economic in its nature and origin, as at present. Everywhere students of sociology, men learned in the science and the history of social development, and familiar with the conditions which in the past have preceded great and violent changes in the social order, realize, and many have given utterance to the conviction, that events fraught with momentous consequences are impending, and that, if the existing social order is to be perpetuated, the conditions of wealth production must be so modified as to produce a greater measure of justice in the apportionment of the product, as between capital and labor, than obtains at the present time.

Inquiry as to the cause of the present condition of social affairs elicits a number of answers as variant as the classes represented by the persons to whom the inquiry is addressed. Thus the capitalist will give one reason, the representative of labor another, the socialist a third, the legislator a fourth, and so on; each reflecting the views more or less prevalent among the class which he represents, and affected, in greater or lesser measure, by the interests or the environment of that class.

However widely variant the answers may be in other respects, it will be observed that they all possess one feature in common, namely: that they refer the trouble proximately or remotely, to the institution of capitalism. Thus one will ascribe as the cause the selfishness and greed of the employer of labor, as manifested in his relations with his employees. Another will give as the cause the improvidence and unthriftiness of the laboring classes, which prevent them from living upon, and being content with, the ample wages, as such persons contend, which the laborer receives from his capitalist employer. A third will place the blame upon both the employer and employee for their lack of mutual co-operation for the promotion of their common interests, and their efforts to overreach one another, one by exacting the greatest possible amount of work for the least money, and the other by giving the least work for the most money. And a fourth will, perhaps, find the cause in the too rapid development, or the too general use, of machinery by which the capitalist seeks to multiply the productive power of labor, thereby throwing some of those employed out of work. But at the core of every answer will be found some feature or some idea which associates the trouble unerringly with the institution of capitalism.

The careful observer of, or the serious inquirer into, the prevailing industrial conditions, whatever his interest or his environment may be, cannot fail to perceive a causative relation between capitalism and the various social phenomena the sum of which is expressed in the term "social unrest/' To such persons the conclusion will be irresistible that if the prevailing condition of social unrest is to be remedied; if the social and political catastrophe which very many well informed, thoughtful and conservative persons can discern as the evident climax of this unrest, is to be averted, it must be done by either a radical reformation, or the total abolition, of capitalism in at least one of its most familiar phases.

In order to arrive at a proper understanding of the conditions before mentioned, of the imperative need of a remedy for those conditions, and of the merits of the remedy, which it is my intention to suggest, and to some extent, elaborate, in this volume, a brief survey of that phase of capitalism which has to do with the employment of labor for wages, of its rise and development, of its effects upon society in general, and upon the laboring classes in particular, would seem to be indispensable.

WAGE-CAPITALISM.

In the broadest and most widely recognized sense of the term, capitalism stands for all the activities, social and political, of capitalists, whereby accumulated or concentrated wealth is employed for the production of new; wealth, or by which the productiveness of capital is increased. In a narrower sense, and that in which the term is very generally used by advocates of the cause of labor in what is often called "the class struggle," it means the economic system whereby capital, in the form of land, machinery, raw materials or money, is owned, but not used, by one class of persons called capitalists, and used, but not owned, by another class, called workers, operatives, or some other name of like import, who use it in the production of new wealth; receiving for their labor a fixed or ascertainable wage, without any voice in the management of the establishment in which they are employed, nor any share in the wealth which they produce, beyond the agreed remuneration, which remuneration is fixed without any definite relation to the value of the product of such labor, and which product becomes the sole property of the capitalist.

It is with capitalism in this latter sense, which in reality is but one phase of that institution, that we shall be chiefly, though not exclusively, concerned in the following chapters; and to distinguish this sense of the term, the leading characteristic of which is the labor-wage feature, from the broader sense of the term as above defined, as well as from the wage system in general (of which system also the relations between capital and labor above mentioned present but a single phase), I shall hereafter refer to capitalism in the narrower sense above mentioned as Wage-Capitalism.

The quintessence of wage-capitalism is the relation of master and servant, a relation which involves power and dominion on the one side, and dependence and servility on the other. It is this which enables the capitalist to appropriate the whole product of the laborers' toil, over and above the meager subsistence which the laborer must receive if he is to live and reproduce his kind, so that the supply of labor at the service of the capitalist may be constant.

It is this, and the very meagerness of his wage, which holds the laborer in a condition which in a certain sense may be considered one of bondage to the capitalist. For though the laborer may sometimes exercise a certain liberty of choice as to where, or at what occupation, he will work, it is such a form of liberty as the illustrious philosopher and sociologist, Herbert Spencer, had in mind when he wrote: "This liberty amounts in practice to little more than the ability to exchange one slavery for another, since, fit only for his particular occupation, he has rarely an opportunity of doing anything more than decide in what mill he will pass the greater part of his dreary days."*

THE RISE OF WAGE-CAPITALISM IN ENGLAND.

Wage-capitalism came into existence in England during the last half of the eighteenth century as the result of conditions having their origin in the invention of the steam engine, the spinning jenny, the power loom, and such like labor-saving inventions of that period. Where formerly the industrial products required to supply the wants of society were supplied by ar-

*Principles of Sociology, by Herbert Spencer, Sec. 820.

tisans working with simple tools, in household shops, the new machinery, multiplying the productive power of each worker many times, was grouped together in spacious shops or factories, and operated by the power of a single steam engine, making competition by hand workers impracticable, so that the latter were gradually forced to abandon their domestic industries and seek employment in the factories.

The high cost of the new machines, grouped as the purposes of economy required them to be, made it impossible for the workers, even collectively, to procure the required capital to own them ; and so it was supplied, for the most part, by a class of persons who had previously amassed moderate fortunes by trading in the products of the domestic industries which the new factory system was superseding.

The greatly increased productive power of the new system was such that, even with the reduced prices obtained for the manufactured products, the supply was always greater than the demand. Also the reduced number of operatives required to supply the demand by means of the new processes, left many persons unemployed. Moreover, many of the new machines were operated by women and children which lessened still further the number of former tradesmen of the domestic industries for whom there was employment in the factories. The glut of the labor market thus produced was something unheard of, and factory owners did not scruple to take advantage of it to impose upon their unfortunate employees the most severe conditions that could be endured, while paying the lowest wages at which subsistence, with little regard to decency, could be maintained. The hours of labor were usually fourteen, and in many cases sixteen, per day, and children from six years of age up, as well as women, without regard to age or condition, were required to work in this way. The conditions of contact between the sexes in the factories were such as to promote licentiousness within and without the factory. Drunkenness and immorality in both sexes were of common occurrence. The domestic ties and the duties arising therefrom between husband and wife and between parent and child, were lightly regarded. Even human slavery, disguised as apprenticeship, was practiced. It took the form of "binding out" by poorlaw guardians to factory owners, of children from the poor houses, ostensibly as apprentices. These were herded together when not at work, in crowded and unwholesome sleeping rooms, without regard to sex, insufficiently fed, poorly clad, and, if disobedient or refractory, were cruelly beaten, so that many died from ill treatment.

A parlimentary report for the year 1833 contains the following: "We hear of children and young people in the factories overworked and beaten as if they were slaves; of diseases and distortions only found in the manufacturing districts; of filthy, wretched homes where people huddle together like beasts; we hear of women and girls working underground in the dark recesses of the coal mines, dragging loads of coal in places where horses could not go, and harnessed and crawling along the subterranean pathways like beasts of burden. Everywhere we find cruelty and oppression, and in many cases the workmen were but slaves, bound to fulfill their masters' commands under fear of dismissal and starvation."*

Such, in part, is the story of wage-capitalism as exemplified in the English factory system and in the mining industry during the first third of the last century.

♦Quoted by Charles Beard in The Industrial Revolution, London, 1901.

It seems incredible that such conditions could exist in a civilized and a Christian land; but the brief description here given falls far short of the horrible reality as related by the writers of that period. Anyone who wishes to learn more of the horrors of factory labor of which but a faint idea can be formed from what has been said in the foregoing pages, is referred to the work of P. Gaskell entitled "The Manufacturing Population of England, its moral, social and physical condition, and the changes which have arisen from the use of steam machinery" (London, 1833). Any one who reads Mr. Gaskell's work will realize that, without exaggeration, it may be said that the condition of the English factory operative in the early days of wage-capitalism was vastly worse, in regard to food, clothing, housing and morals, than that of the serfs of the middle ages, or of the negro slaves of the Southern United States before the war of the rebellion.

WAGE-CAPITALISM IN AMERICA.

In America wage-capitalism did not so early find a foot-hold, nor have the conditions which existed in the factory districts of England ever found a parallel in this country. The conditions of the working class in the early days of wage-capitalism in this country were bad enough, however, and, as to hours and general conditions of labor, differed only in degree from the conditions which existed in England, and not so greatly in that regard as one might expect in a newly settled country, "In both countries the cradle and the home were robbed to secure victims for the natal sacrifice of new-born capitalism. 95 * About the year 1316 there was estimated to have been 100,000 persons employed in the manufacture of cloth in the United States, of whom about 10 per cent, were men, 66 per cent women and female children, and 23 per cent. boys. The hours of work were twelve to fourteen per day, and the wages ranged from $11.50 per week for a comparatively small number to an average of $1.50 per week or less, for female children. The textile mills in New England generally ran thirteen hours a day the year round, and one in Connecticut ran over fifteen hours. Professor Ely, the learned American writer on economics, declares that women and children had to be at work at half past

^Social Forces in American History, page 172, by A. M. Simons.

four in the morning, and sometimes were urged on by the use of the cowhide.*

The rapid development of railway construction, which began about the year 1830, following the invention of the locomotive, the invention of the hot blast. process in the iron industry, the use of anthracite coal in the smelting of iron, and the general use of coal for steam purposes, which resulted from the rapid increase in the number of steam power industries, all combined to open a field for capital in the manufacturing, mining and transportation industries, unparalleled in the history of the world. Compared to the industrial transformation thus produced the industrial changes incident to the introduction of steam power and the factory system before mentioned, which has been called the Industrial Revolution, were of trivial importance, as measured by the amount of capital involved, the number of persons employed, and the results, as affecting the industrial and commercial future of society. In every stage of its development, however, and in every department of industry into which it has entered, the activities of capitalism have been characterized by the same faults,

^Evolution of Industrial Society, by Richard T. Ely, page 59.

which it has manifested in greater or lesser measure according to the degree of freedom with which it has been permitted to pursue its own methods in its dealings with the laboring classes, the agencies of government, and the general public.

The most pernicious of the faults of capitalism, regarded from the viewpoint of their effects upon the general well-being of society, is the manner in which, when left to themselves, capitalists in general — though with some admirable exceptions — dealt with their employees. In their inordinate greed of gain they have, speaking generally, regarded neither the lives, the health nor the moral, physical or social well-being of their employees. Until forbidden to do so by law or restrained by the power of organized labor, capitalist employers required their employees to work under unsanitary conditions, and neglected in many cases to provide suitable safety appliances to protect them from danger of accidents by exposed or otherwise dangerous conditions of machinery or places for work.

SCANTINESS OF WAGES.

In the matter of wages the smallest amount which the worker could be induced or forced to accept has generally been the measure of his remuneration. Until, by the power of organization, the laborer was enabled to wrest from his employer something more than enough to supply the bare necessities of life, that, and scarcely that, was all he received. Even with the power of organized labor behind him the average wage earner today receives less than a decent living wage. In consequence of this condition the working classes of today are compelled to submit to a low standard of living in the midst of comforts and luxuries, the products of their labors, which may be seen on every hand, for the enjoyment of the middle and upper classes — as rated by financial standards — but in which comforts and luxuries the classes which produce them are rarely or never permitted to share.

But scant as are his wages at best, and meager as is the subsistence which they afford, the earnings of the average wage-worker are still further reduced by unemployment. Without tools in the form of machinery, the worker in modern industrial operations can do nothing. But the tools belong to the capitalist, who will not allow them to be used unless he can realize a profit on the worker's labor in addition to a fair interest on his own capital. Disregarding the economic law that cheapness of a given commodity tends to create a demand for it, the average capitalist would close his establishment when business is slack, and wait for the demand to come from scarcity of supply (though the operatives starve in the meantime), rather than forego his profits or lower his interest.

Industrial production goes on increasing from year to year, under the capitalistic regime, piling up for the few, colossal fortunes wrought out of the blood and sweat and bone and muscle of the many, while the average wage-worker lives from hand to mouth, no better off at the end of the year than he was at the beginning, but one year nearer to the inevitable time when, no longer able to do a man's work, he will be rejected — "scrapped," like a worn out machine — and doomed to drag out the remainder of his miserable life as a dependent upon the filial duty of his children, or upon the charity of some more distant relative, or the still colder "charity" of the poorhouse.

A DECENT LIVING WAGE.

I said, in a preceding paragraph, that the average wage worker of today receives less than a decent living wage, and as a result is compelled to submit to a low standard of living as compared to the manner of living affected by persons of higher rank in a financial sense. I realize that standards of living are relative matters, and vary with the time, the place and the state of civilization that is in mind. It is to be understood that reference is here made to present day standards of civilization in America. The accuracy of the statement further depends upon what constitutes a living wage, for as to that there is room for a wide diversity of opinion. It is important, therefore, for the sake of clearness that some space be given, in this connection, to a discussion of the question: What constitutes a living wage and a proper standard of living for the American workingman?

Mr. John Mitchell, formerly president of the United Mine Workers of America, in his book, Organized Labor* says: "The American standard of living of the year 1903 is a different, a better, and a higher standard than the American standard of living of the year 1803. The American workman of the present day is a better workman, more intelligent, more industrious, more efficient than his forefathers of a hundred years ago. . . . While the standard of living has risen, it has not by any means kept pace with the increased productivity of labor." The workman of today is therefore, relatively to his productive power, worse off than was his prototype of a century ago.

Speaking of the standard of living that should obtain among the laboring classes in America, Mr. Mitchell says: "In cities of from five thousand to one hundred thousand inhabitants the American standard of living should mean, to the ordinary unskilled workman with an average family, a comfortable house of at least six rooms. It should mean a bathroom, good sanitary plumbing, a parlor, dining-room, kitchen and sufficient sleeping room that decency may be preserved and a reasonable degree of comfort maintained. The American standard of living should mean to the unskilled workman, carpets, pictures, books, and furniture with which to make home bright, comfortable and attractive for himself and family, an ample supply of clothing, suitable for winter and summer, and above all a sufficient quantity of good, wholesome, nourishing food at all times of the year. The American standard of living, moreover, should mean, to the unskilled workman, that his children should be kept in school until they have attained the age of sixteen at least, and that he be enabled to lay by sufficient to maintain himself and his family in times of illness, or at the close of his industrial life, when age and weakness render further work impossible, and to make provision for his family against his premature death from accident or otherwise." The rate of wages at which this standard could be maintained was estimated by Mr. Mitchell to be not less than $600 per year in communities between the limits of population above mentioned. In view of the great advance in the cost of living since Mr. Mitchell's book was written (1903) it is doubtful if this standard could be maintained now on $800 a year.