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rary reduction of wageB, and the superseded labourers become absorbed in other employments, their labour is still productive, and the breach in the gross produce of the community is repaired, though not the detriment to the labourers. I have restated this exposition, which has already been made in a former place, to impress more strongly the truth, that a mode of production does not of necessity increase the productive effect of the collective labour of a community, because it enables a particular commodity to be sold cheaper. The one consequence generally accompanies the other, but not necessarily. I will not here repeat the reasons I formerly gave, nor anticipate those which will be given more fully hereafter, for deeming the exception to be rather a case abstractedly possible, than one which is frequently realized in fact.

A considerable part of the saving of labour effected by substituting the large syBtem of production for the small, iB the saving in the labour of the capitalists themselves. If a hundred producers with small capitals carry on separately the same business, the superintendence of each concern will probably require the whole attention of the person conducting it, sufficiently at least to hinder his time or thoughts from being disposable for anything else: while a single manufac turer possessing a capital equal to the sum of theirs, with ten or a dozen clerks, could conduct the whole of their amount of business, and have leisure too for other occupations. The small capitalist, it is true, generally combines with the business of direction some portion of the details, which the other leaves to his subordinates: the small farmer follows his own plough, the small tradesman serves in bis own shop, the small weaver plies his own zoom. But in this very union of functions there is, in a great proportion of cases, a want of economy. J he principal in the concern is either wasting, in the routine of a business, qualities suitable for the direction of it, or he is only fit for the former, and then the Utter will be ill done. T must observe

however that I do not attach, to this saving of labour, the importance often ascribed to it. There is undoubtedly much more labour expended in the superintendence of many small capitals than in that of one large capital. For this labour however the small producers have generally a full compensation, in the feeling of being their own masters, and not servants of an employer. It may be said, that if they value this independence they will submit to pay a price for it, and to sell at the reduced rates occasioned by the competition of the great dealer or manufacturer. But they cannot always do this and continue to gain a living. They thus gradually disappear from society. After having consumed their littli capital in prolonging the unsuccessful struggle, they either sink into the condition of hired labourers, or become dependent on others for support.

§ 2. Production on a large scale is greatly promoted by the practice of forming a large capital by the combination of many small contributions-, or, in other words, by the formation of joint stock companies. The advantages of the joint stock principle are numerous and important.

In the first place, many undertakings require an amount of capital beyond the means of the richest individual or private partnership. No individual could have made a railway from London to Liverpool; it is doubtful if any individual could even work the traffic on it, now when it is made. The government indeed could have done both: and in countries where the practice of co-operation is only in the earlier stages of its growth, the government can alone be looked to for any of tht works for which a great combination of means is requisite; because it can obtain those means by compulsory taxation, and is already accustomed to the conduct of large operations. For reasons, however, which are tolerably well known, and of which we shall treafully hereafter, government agency for the conduct of industrial operations ii generally one of the least eligible resources, when any other in available.

and two insurance companies, the London and the Royal Exchange.

Next, there are undertakings which , /Individuals are not absolutely inca* pable of performing, but which they cannot perform on the scale and with the continuity which are ever more and more required by the exigencies of a society in an advancing state. Individuals are quite capable of despatching ships from England to any or every part of the world, to carry passengers and letters; the thing was done before joint stock companies for the purpose were heard of. But when, from the increase of population and transactions, as well as of means of payment, the public will no longer content themselves with occasional opportunities, but require the certainty that packets shall start regularly, for some places once or even twice a day, for others once a week, for others that a steam ship of great size and expensive construction shall depart on fixed days twice in each month, it is evident that to afford an assurance of keeping up with punctuality such a circle of costly operations, requires a much larger capital and a much larger staff of qualified subordinates than can be commanded by an individual capitalist, i . There are other cases, again, in which though the business might be perfectly well transacted with small or mode

W/Another advantage of .joint stock, or Bsociated management, is its incident

rate capitals, the guarantee of a great

subscribed stock is necessary or desir-. /he managers in the success of the

of publicity. This is not an invariable, but it is a natural, consequence of the joint stock principle, and might be, as in some important cases it already is, compulsory. In banking, insurance, and other businesses which depend wholly on confidence, publicity is a still more important element of success than a large subscribed capital. A heavy loss occurring in a private bank may be kept secret; even though it were of such magnitude as to cause the ruin of the concern, the banker may still carry it on for years, trying to retrieve its position, only to fall in the end with • greater crash: but this cannot so easilj happen in the case of a joint stock com pany whose accounts are publisher periodically. The accounts, even if cooked, still exercise some check; and the suspicions of shareholders, breaking out at the general meetings, put the public on their guard.

These are some of the advantages of joint stock over individual management. But if we look to the other side .of the question, we shall find that indiA I vidual management has also very great! Advantages over joint stock. The chief of these is the much keener interest of'

able as a security to the public for the fulfilment of pecuniary engagements. This is especially the case when the nature of the business requires that numbers of persons should be willing to trust the concern with their money: as in the business of banking, and that of insurance: to both of which the joint stock principle is eminently adapted. It is an instance of the folly and jobbery of the rulers of mankind^ that until a late period the joint stock principle, as a general resort, was in this country interdicted by law to these two modes of business; to banking altogether, and to insurance in the department of sea risks; in order to bestow a lucrative monopoly on particular establishments which the government was pleased exceptionally to license, namely the Bank of England,

undertaking.

The administration of * joint stock association is, in the main, administration by hired servants. Even the committee, or board of directors, who are supposed to superintend the management, and who do really appoint and remove the managers, have no pecuniary interest in the good working of the concern beyond the shares they individually hoid, which are always a very small part of the capital of the association, and in general but a small part of the fortunes of the directors themselves; and the part they take in the management usually divides their time with many other occupations, of as great or greater importance to their own interest; the business being the principal concern of no one except those who are hired to carry it on. But

experience shows, and proverbs, the expression of popular experience, attest, now inferior is the quality of hired servants, compared with the ministration of those personally interested in the work, and how indispensable, when hired service must be employed, is "the master's eye" to watch over it.

The successful conduct of an industrial enterprise requires two quite distinct qualifications: fidelity, and zeal. The fidelity of the hired managers of a concern it is possible to secure. When ;heir work admits of being reduced to a definite set of rules, the violation of these is a matter on which conscience cannot easily blind itself, and on which responsibility may be enforced by the loss of employment. But to carry on a great business successfully, requires a hundred things which, as they cannot'' be defined beforehand, it is impossible to convert into distinct and positive obligations. First and principally, it requires that the directing mind should be incessantly occupied with the subject; should be continually laying Bchemes by which greater profit may be obtained, or expense saved. This intensity of interest in the subject it is seldom to be expected that any one should feel, who is conducting a business as the hired servant and for the profit of another. There are experiments in human affairs which are conclusive on the point. Look at the whole class of rulers, and ministers of state. The work they are entrusted with, is among the most interesting and exciting of all occupations; the personal share which they themselves reap of the national benefits or misfortunes which befal the state under their rule, is far from trifling, and the rewards and punishments which they may expect from public estimation are of the plain and palpable kind which are most keenly felt and most widely appreciated. Yet how rare a thing is it to find a statesman in whom mental indolence is not stronger than all these inducements. How infinitesimal is the proportion who trouble themselves to form, or even to attend to, plans of public improvement, unless when it is made still more troublesome to them

to remain inactive; or who have an} other real desire than that of rubbing on, so as to escape general blame. On a smaller scale, all who have ever employed hired labour have bad ample experience of the efforts made to give as little labour in exchange for the wages, as is compatible with not being turned off. The universal neglect by domestic servants of their employer's interests, wherever these are not protected by some fixed rule, is matter of common remark; unless where long continuance in the same service, ana reciprocal good offices, have produced either personal attachment, or some feeling of a common interest.

Another of the disadvantages of joint stock concerns, which is in some degree /common to all concerns on a large scale, is disregard of small gains and small savings. In the management of a great capital and great transactions, especially when the managers have not much interest in it of their own, small sums are apt to be counted for next ta nothing; they never seem worth the care and trouble which it costs to attend to them, and the credit of liberality and openhandedness is cheaply bought by a disregard of such trifling considerations. But small profits and small expenses, often repeated, amount to great gains and losses: and of this a large capitalist is often a sufficiently good calculator to be practically aware; and to arrange his business on a tystem, which if enforced by a sufficiently vigilant superintendence, precludes the possibility of the habitual waste, otherwise incident to a great business. But the managers of a joint stock concern seldom devote themselves sufficiently to the work, to enforce unremittingly, even if introduced, through every detail of the business, a really economical system.

From considerations of this nature, Adam Smith was led to enunciate as a principle, that joint stock companies could never be expected to maintain themselves without an exclusive privilege, except in branches of business which like bunking, insurance, and some others, admit of being, in a considerable degree, reduced to fixed roles This however is one of those over-statements of a true principle, often met with in Adam Smith. In his days there were few instances of joint stock companies which had been permanently successfnl without a monopoly, except the class of cases which he referred to; but since his time there have been many; and the regular increase both of the spirit of combination and of the ability to combine, will doubtless produce many more. Adam Smith fixed his observation too exclusively on the superior energy and more unremitting attention brought to a business in which the whole stake and the whole pain belong to the persons conducting it; and he overlooked various countervailing considerations which go a great way towards neutralizing even that great point of superiority.

Of these one of the most important is that which relates to the intellectual and active qualifications of the directing head. The stimulus of individual interest ie some security for exertion, but exertion is of little avail if the intelligence exerted is of an inferior order, which it must necessarily be in the majority of concerns carried on by the persons chiefly interested in them. Where the concern is large, and can afford a remuneration sufheient to attract a class of candidates superior to the common average, it is possible to select for the general management, and for all the skilled employments of a subordinate kind, persons of a degree of acquirement and cultivated intelligence which more than compensates for their inferior interest in the result. Their greater perspicacity enables them, with even a part of their minds, to see probabilities of advantage which never occur to the ordinary run of men by the continued exertion of the whole of theirs; and their superior knowledge, and habitual rectitude of perception and of judgment, guard them against blunders, the fear of which would prevent the others from hazarding their interests in any attempt out of the ordinary routine.

It must be further remarked, that it is not a necessary consequence of joint stock management, that the persons

employed, whether in superior or in subordinate orficeB, should be paid wholly by fixed salaries. There are modes of connecting more or less intimately the interest of the employee with the pecuniary success of the concern. There is a long series of intermediate positions, between working wholly on one's own account, and working by the day, week, or year for an invariable payment. Even in the case of ordinary unskilled labour, there is such a thing as task-work, or working by the piece: and the superior efficiency of this is so well known, that judicious employers always resort to it when the work admits of being put out in definite portions, without the necessity of too troublesome a surveillance to guard against inferiority in the execution. In the case of the managers of joint stock companies, and of the superintending and controlling officers in many private establishments, it is a common enough practice to connect their pecuniary interest with the interest of their employers, by giving them part of their remuneration in the form of a percentage on the profits. The personal interest thus given to hired servants is not comparable in intensity to that of the owner of the capital; but it is sufficient to be a very material stimulus to zeal and carefulness, and, when added to the advantage of superior intelligence, often raises the quality of the service much above that which the generality of masters are capable of rendering to themselves. The ulterior extensions of which this principle of remuneration is susceptible, being of great social as well as economical importance, will be more particularly adverted to in a subsequent Btage of the present inquiry.

As I have already remarked of large establishments generally, when compared with small ones, whenever competition is free its results will show whether individual orjoint stock agency is best adapted to the particular case, since that which is most efficient and most economical will always in the end succeed in underselling the other.

jj 3 The possibility of substituting the large system of production for the small, depends, of course, in the first place, on the extent of the market. The large system can only he advantageous when a large amount of business is to be done: it implies, therefore, either a populous and flourishing community, or a great opening for exportation. Again, this as well as every other change in the system of production is greatly favoured by a progressive condition of capital. It is chiefly when the capital of a country is receiving a great annual increase, that there is a large amount of capital seeking for investment: and a new enterprise is much sooner and more easily entered upon by new capital, than by withdrawing capital from existing employments. The change is also much facilitated by the existence of large capitals in few hands. It is true that the same amount of capital can be raised by bringing together many small sums. But this (besides that it is not equally well suited to all branches of industry), supposes a much greater degree of commercial confidence and enterprise diffused through the community, and belongs altogether to a more advanced stage of industrial progress.

In the countries in which there are the largest markets, the widest diffusion of commercial confidence and enterprise, the greatest annual increase of capital, and the greatest number of large capitals owned by individuals, there is a tendency to substitute more and more, in one branch of industry after another, large establishments for small ones. In England, the chief type of all theBe characteristics, there is a perpetual growth not only of large manufacturing establishments, but also, wherever a sufficient number of purchasers are assembled, of shops and warehouses for conducting retail business on a large scale. These are almost always able to undersell the smaller tradesmen, partly, it is understood, by means of division of labour, and the economy occasioned by limiting the employment of skilled agency to cases where skill is required; and partly, no doubt, by the saving of labour arising from the great scale of the transactions:

as it costs no more time, and not much more exertion of mind, to make a large purchase, for example, than a small one, and very much less than to make a number of small ones.

With a view merely to production, and to the greatest efficiency of labour, this change is wholly beneficial. In some cases it is attended with drawbacks, rather social than economical, the nature of which has been already hinted at. But whatever disadvantages may be supposed to attend on the change from a small to a large system of production, they are not applicable to the change from a large to a still larger. When, in any employment, the regime of independent small producers has either never been possible, or has been superseded, and the system of many work-people under one management has become fully established, from that time any further enlargement in the scale of production is generally an unqualified benefit. It is obvious, for example, how great an economy of labour would be obtained if London were supplied by a single gas or water company instead of the existing plurality. While there are even as many as two, this implies double establishments of all sorts, when one only, with a small increase, could probably perform the whole operation equally well; double sets of machinery and works, when the whole of the gaa or water required could generally be produced by one set only; even double sets of pipes, if the companies did not prevent this needless expense by agreeing upon a division of the territory. Were there only one establishment, it could make lower charges, consistently with obtaining the rate of profit now realized. But would it do so f Even if it did not, the community in the aggregate would still be a gaine r since the shareholders are a part of the community, and they would obtain higher profits while the consumers paid only the same. It is, however, an error to suppose that the prices are ever permanently kept down by thn competition of these companies. Where competitors are so few, they always end by agreeing not to compete. They

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