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THE PROBLEMS OF ECONOMIC INSECURITY

That "fortune is fickle," that "life is insecure," and that "no one knows what a day may bring forth," are among the oldest and the best attested generalizations from human experience. The problems associated with insufficiency of food, accident, sickness, and old age-with sowing where one never reaps-we have, quite proverbially, always had with us. But under modern industrial conditions, in a developing system, such questions are so closely related to the whole complex of life that it is necessary for us, collectively as well as individually, to "take thought for the morrow."

The machine system, production on a large scale, pecuniary competition, dependence on distant and future markets, the rapid development of technique, the delicate organization of the "industrial machine" and the scheme of prices, the currents which carry the shock of disturbance throughout the system, the alternation of business optimism and pessimism, the violent rhythm of the economic cycle, the onward sweep into an unknown future-all of these things prevent us from adequately guarding against what the morrow has in store. The insecurity of capital is attested by failures to find purchasers for goods, by falling dividends, by business failures, by the sudden disappearance of capital values. But these things were discussed in connection with the economic cycle. It is the insecurity of the laborer wl.ach concerns us here.

To grasp the problem as a whole we must appreciate the peculiar position of the laborer in the machine system. This can best come from contrasting, say, the villein on the manor with the modern industrial "hand." Custom granted to the former the use of the same land year after year, exacted from him a fixed rent, forbade his dispossession, and made his position permanent. He and the land formed an inseparable industrial unit: there was always something for him to work with; what he produced he had. The problem of want might indeed confront him; but it was associated with a raid of an alien feudal lord upon his manor or the failure of the elements to grant a full yield from the earth. The group to which he belonged was established upon a "personal" basis, and was possessed of a spirit of solidarity. He possessed as long as they possessed.

In modern industrial society, on the contrary, there is no permanent association of the laborer with the instruments of production. He secures equipment with which to work by means of a "contract," expressed in pecuniary terms, and running for a stipulated period. He owns no equities in the property with which he works. When the contrast expires, it need not be renewed. No other property owner is compelled to make a new contract with him. The bait of higher wages, drawing him from place to place, is likely to prevent his identification with a group animated by a spirit of solidarity. He has the tremendous advantages which come from freedom of movement and the chance to take advantage of the best opportunity which presents itself. He has the disadvantages which attend short-time contracts. These last are outgrowths of two sets of conditions; first, those affecting employment, causing it to increase or decrease, and to pay higher or lower wages; and second, his own industrial powers, which may be partially impaired or even totally collapse, from accident or sickness to which he is exposed. When they are gone, as they will eventually be in old age, he has no respectable surety of support.

This larger problem involves several minor problems, very closely connected, and yet possessed each of its peculiar aspects. Unemployment, perhaps the most difficult of these, is closely associated with the short-time contract. With changing business conditions, the employer, who is dependent upon pecuniary returns, may find it impossible to renew old contracts. Changes in technique, the disappearance of his market, and a thousand other causes may contribute to this result. It is rendered more serious by the ebb and flow in the demand for labor, which is closely associated with the rhythm of the business cycle. Unfortunately the supply of labor, unlike currency, is not possessed of the necessary elasticity to meet the changing conditions. The risks are too unpredictable for insurance to become more than a palliative. The solution of the larger problem is, in general, associated with that of the other problems of the cycle.

In

Industrial accidents occur because we have not yet learned absolutely to control the dangerous natural forces which we have pent up in our machines, and because we have not learned properly and exactly to adjust our movements to these huge engines of production-and destruction. general their causes are resident in the system as a whole and cannot be directly imputed to "individuals." Unfortunately, however, their consequences may be quite concentrated. They are no respecters of persons, and are as likely as not to rob of their productive abilities laborers who have families dependent upon them. The problem involves: first, a prevention of industrial accidents, attended as they are with great losses of productive power; and second, the devising of some legal measure to compensate the injured and innocent party for his loss.

Sickness and old age are serious social problems. The former, through the absence of the laborer and the breaks in the productive process which his absence entails, piles up huge economic costs. Unless assistance be rendered at the time of stress, sickness may lead to a great loss of productive power and in many cases to permanent dependence. Provision for old age, under short-time labor contracts, is difficult and rarely is adequate. But, even if individually made, there is grave doubt whether the saving involved does not deplete the income to such an extent as seriously to cripple efficiency. At any rate the feeling of insecurity is likely to hinder the laborer's performance of his work. A scheme of insurance should be able greatly to reduce the wastes incident to both of these universal occurrences. What is needed is a long-time calculation, based on the whole life of the laborer, not a series of short-time calculations such as labor-contracts make necessary.

Finally there is the problem of insecurity due to wages too low to yield a decent standard of living. There is just now a disposition to try to solve this problem by the establishment of "minimum-wage scales." The problem is one of the most difficult in the field of economics. If the "natural," or competitive, wage is to be set aside as too low, what standard can be found to determine the proper wage? Will there not be evasion of laws prescribing "artificial" wages? To prevent this, will not the government be compelled to regulate prices, service, hiring and discharge, accounting systems, discipline, etc? Will not the experience of the government in attempting to prevent rebates be duplicated? What will be the influence of regulation on the investment of capital in the industries involved? To what lengths, and to the adoption of what new social schemes, will this policy carry us? Can the project be made to succeed without a supplementary control of the supply of labor? Would it not be better to try to solve the question through an attempt to decrease the numbers of the lower class, and through technical education? It seems, from the study which we made above of "artificial price determination," that prices seriously at variance with competitive prices cannot be enforced. Such an attempt would have far greater chances of success, if accompanied by efforts to restrict the supply or increase the efficiency of labor. A conscious "control of births," a restriction of immigration, vocational guidance, and compulsory technical training should do much

to make the minimum wage effective. If we can wait for slowly changing conditions to produce results, and if we do not force a single proposal to carry the whole burden of raising low wages, eventually we should expect success. The problem of economic insecurity occurs in its most aggravating form among unskilled and unorganized laborers. State aid will help them; but it will not free them from the necessity of working out their own salvation. Skilled and organized laborers should be able to solve their own problem through their effective device of collective bargaining.

A. INSECURITY UNDER MODERN INDUSTRIALISM 254. Competition and Personal Insecurity1

BY THOMAS KIRKUP

Perhaps the most painful feature of the working man's lot is the insecurity of his position. During the long periods of depression work is scarce and precarious, and he must go where he has a chance of finding it. At all times the changes in the labor market are so great and unexpected that he can hardly calculate upon a settled existence. Continual fluctuations of trade force him to move. He has no control, or only a very partial control, over the economic and social conditions under which he must work. A settled home, a piece of land for a garden, a fixed outlook for his family, and a reasonable prospect of a happy and comfortable old age, untroubled by the horror of losing such savings as he may have made, through want of employment, and of ending his days in a workhouse-these for a large proportion of the workmen in the industrial centers are unattainable blessings. Yet they are unquestionably such as every decent and honorable working man has a right to expect.

This condition of insecurity under the existing system of competition, however, is by no means a special evil of the workman. It is the common lot of all who are involved in it, and, not the least, of the capitalists who are exposed to ruin by it. The conditions of industry are not only beyond the control of the workmen who serve under the capitalistic system. They are beyond the effective control also of the individual capitalists whose function it is to direct. them, so that competition frequently degenerates into disorder, and into an exterminating war carried on with all the weapons permitted by the law, and with many not permitted by law-underselling, adulteration, fraud, bribery, oppression of labor. In times when industry is expanding, this may not be so apparent, but when trade becomes dull, stationary, or retrograde, the struggle grows painful, and to many of the competitors disastrous. In this struggle many 1Adapted from An Inquiry into Socialism, 68–74. Copyright by Longmans, Green & Co. (1907).

capitalists are ruined, dragging down with them numbers of workmen who have no control of their economic position, and are helpless under the calamity.

This insecurity is essentially connected with the speculative character of the competitive business. As production is so often carried on for a market of unknown and incalculable extent, and for prices which, even if obtained, cannot be accurately foreseen, uncertainty must very greatly prevail, and the speculative spirit must powerfully affect the general course of business. This spirit of speculation culminates in the great Exchanges, disturbs legitimate trade, and not infrequently throws into insecurity, panic, and disorder the industrial operations of the country, sometimes of the civilized world.

In the history of the capitalistic system nothing is so extraordinary as the rapid development of mechanical power. It is only natural, when the prizes of success are so enormous and the penalties of failure so severe, that human ingenuity and energy should be wonderfully quickened. This development of industrial power still continues in every country where modern methods have been introduced. But there is a serious evil connected with it. This is the fact that labor, which is one of the greatest factors of production, is thrown out of employment through this excessive development of machinery. But as the laborers form the bulk of the population and should be by far the largest purchasers, the very force which tends to over-fill the markets tends also to restrict the purchasing power of the majority of the community. Thus industry under the competitive system runs and must run in a vicious circle.

All the phenomena of competitive anarchy find their worst development in the great commercial and industrial crises which continually recur, and now threaten to become not only universal but chronic. It is unnecessary to recount the familiar phenomena of an industrial crisis. We have a multitude of competing capitalists of every class with a market which may be as wide as the world. Each has a vague prospect of vast possibilities of gain before him, and when trade is favorable each is anxious to make the most of his opportunities. Machinery is improved, establishments are enlarged, and better organized, production grows lively, vigorous, and rapid in an ever increasing ratio till it becomes an impetuous and feverish rush. Before long the over-filled markets are unable to take off the enormous supply. Goods will not sell. Embarrassments set in, followed by forced sales at any price. Inflation and over-confidence give place to insecurity and panic. Then comes the crash resulting in ruin to thousands of capitalists and in widespread depression and stagnation. Hundreds of thousands of workmen are thrown

out of employment. All the classes that depend on the operations of capital, that is to say the entire society, suffer more or less from the prevailing depression. And we have the fearful spectacle of starving multitudes in the midst of overflowing markets and storehouses; superabundant food and clothing and all the other means of subsistence, comfort and culture, but inaccessible even to those who are most anxious to work; vast numbers of men ruined through the very effectiveness and perfection of the productive forces which they have themselves created. The workers starve because they have produced too much and too well; through the action of mechanical forces which have been created, but are not duly controlled by

man.

So long as these productive forces are wielded in such a chaotic way by private capitalists competing for a world market, without adequate knowledge of its needs, without arrangement with each other, without system and prevision, so long must such disorder last. The capitalist, too, suffers fearfully, but it is the workman that must usually bear the heaviest burden of privation and wretchedness.

255. Machinery and the Demand for Labor2

BY JOHN A. HOBSON

The motive which induces capitalist employers to introduce into an industry machinery which shall either save labor, by doing the work which labor did before, or assist labor by making it more efficient, is a desire to reduce the expense of production. A new machine either displaces an old machine, or it undertakes a process. of industry formerly done by hand labor without machinery.

When a new process is first taken over by machinery the expenses of making and working the machines, as compared with the expenses of turning out a given product by hand labor, will involve a net diminution of employment. Proof of this is the introduction of the new machinery; otherwise no economy would be effected. Neither in economic theory nor in industrial practice is there any justification for the belief that the net result of improved machinery is a maintenance or an increase of employment within the particular trade, or even within the group of the interdependent trades engaged in producing or supplying a class of commodities. Still less support is there for this belief as applied to the trade of a particular locality or national area. While the introduction of new

Adapted from The Evolution of Modern Capitalism, new and revised edition, 317-334. Published by Charles Scribner's Sons (1906).