If we consider individuals of the higher group, we shall find that the grounds for classifying them separately from wageworkers are not always distinct. It may be doubtful whether a particular man should be rated as a workman, or as a subordinate member of the employer's staff. In the case of responsible managers this uncertainty disappears. The manager of a great manufactory does what is clearly identified as entrepreneur's work, and receives a reward which, in the minds of those who pay it, stands in a recognized ratio to the product which is secured by his efficiency. Such a man is identified with employers in interest, acts with them when labor conflicts arise, and carries with him the staff of assistants who help to execute his plans and, in some degree, share his fortunes. Here lies the essential distinction between salaried labor and the true wage-labor to which our inquiry is now confined.

America affords the conditions most favorable to the levelling process which is reducing the workman proper to a single social stratum. To this extent our democracy has an economic basis. Free education and native versatility elevate the lower substrata, while machine processes depress the higher. High general wages assist, by placing within the reach of the children of the state that modicum of training which opens many callings to their selection. The barriers that separated wage-earners into broad non-competing strata are, to all intents and purposes, things of the past.

Art may create barriers where nature has destroyed them. The concerted action of men may set in motion aristocratizing influences, where a natural evolution would lead to democracy. Trades unions may obstruct the transfer of labor from one occupation to another, and create a partial monopoly of favored employments. Restrictions on apprenticeships like those which prevailed among the medieval guilds might, if carried far enough, erect a palisade around each of the minute trades which the factory system has developed, and substitute for the general strata of former times an artificial grouping far more undemocratic in its practical working. Labor organization has in fact taken this course, to an extent that produces appreciable effects

on relative wages. The boy who has both time and ability to learn a trade is not always permitted to do so; and hence arises the need of trade schools, especially in self-governing countries. It is an important question whether the principle of equality and consequent fraternity is to prevail over the artificial tendency to exclusiveness and antagonism. In the long run and in the general field it must prevail; the forces in its favor are too powerful to be resisted. The education which increases men's working ability, the change of method which makes less and less demands on that ability, supplemented by the public sentiment that revolts at the policy of denying to men the opportunity to do what they can for themselves and for society, will keep within bounds the effort to monopolize skill by reviving guild regulations. Trades unions may, for some time, interpose obstacles to the free transfer of labor to the points of greatest demand, which is the potential competition of Professor Cairnes' theory; but, in the long run, causes beyond arbitrary control will keep this movement nearly free.

It is not workmen but employers who have erected the chief artificial barriers against competition. A startling recent development is the system of combinations by which producers of > particular articles have attempted arbitrarily to control the supply and the market value of their respective products. This apparently wholesale abrogation of economic law was unthought of by early economists; and although in Professor Cairnes' time the pooling process had begun, even he regarded capital as in a universal ebb and flow, ready to move spontaneously to the point where it could gain the largest returns. Toward the close of what we have termed the century of transition, pro>ducers' combinations appeared on a large scale; and very lately they have stolen a forced march upon economists. While we slept, as it were, and dreamed of the regulation of values by the automatic flow of capital to the points of highest profit, the principle apparently ceased to operate within very extensive fields. It would be easy to name a hundred staple articles, like glass, wall-paper, cut nails, screws, files, spool silk, anthracite coal, steel rails, etc., of which the supply and the market

value are fixed by agreement by strong associations of producers. < The scientific significance of this transition is a question for immediate study. Have we come unconsciously under a régime of arbitrary values? Is the old regulating principle, competition, abrogated? Is it subject to disturbances so vast and uncertain. as to baffle scientific calculation?

The practical inquiry must be guided here as elsewhere by a study of principles. Combinations have their roots in the nature of social industry and are normal in their origin, their development, and their practical working. They are neither to be deprecated by scientists nor suppressed by legislators. They are the result of an evolution, and are the happy outcome of a competition so abnormal that the continuance of it would have meant wide-spread ruin. A successful attempt to suppress them by law would involve the reversion of industrial systems to a cast-off type, the renewal of abuses from which society has escaped by a step in development. Combinations are to be accepted, studied, and, probably, regulated; they ought not to be suppressed if such action were practicable. This action is fortunately not practicable except in the early stages of their growth, while their form is still crude, and while the initial difficulties of the system are great. The repressive policy may then, for a time, succeed; but it must be at the cost of social retrogradation and economic loss.

Modern production is not an individualistic process; it is the act of society as a whole, and each separate man in the ranks finds his function narrowly limited. Parts of the productive operation are assigned to sub-organizations, and these are subjected to a discipline which limits each member to an infinitesimal part of general industry. He may be one of a group that collectively cuts trees, or of another that saws logs, or of another that fashions lumber into furniture. The chair that a primitive settler would have hewn out with an axe is the product of one of the numerous sub-organisms of society. The relations of these sub-organisms to each other, though intricate, are capable of clear analysis. We select a typical one for study, and, to avoid confusion, consider no relations that are not essential to

our present purpose. Crudely represented, the furniture-making group arranges itself as follows:

Finishing

Cabinet making

Transporting

Lumber dealing

Wood cutting

Each stratum shows a subdivision into capitalists and workmen; and in each case there range themselves on the side of the capitalists a few men of managing ability, who constitute with their employer a sort of collective entrepreneur, and whose rewards, in the form of salaries, have more in common with profits than they have with wages.

True competition is limited by nature to the strata here indicated; cutters compete only with cutters, lumber dealers with lumber dealers, etc. The distinction between this grouping

and that of Professor Cairnes consists, not in the fact that the classification here proposed follows the lines of occupation, but in the fact that it is based on real and not on potential competition. Whether a workman can or cannot transfer himself from one sub-group to another is a question which we do not raise. We inquire simply with whom he competes while remaining in his own group and continuing to discharge his special function. In this lies the practical fruit to be gained by a study of the grouping. As bearing on the direct adjustment of relative wages, the question to be considered is: Whether wood-cutters are potential competitors of furniture makers, etc.; whether they or their children have such a choice of occupations open to them that the rewards of all tend toward a general uniformity? As bearing on the question which we are now considering, the point to be studied is: What groups of men are brought into competition with each other by the nature of their industrial functions, and what consequences result from this grouping? It is to be noted, moreover, that in the sale of commodities, finished or unfinished, the competition is not between

workmen, nor between employers, separately considered, but between industrial establishments in their entirety. One furniture manufactory as a whole competes with another. Each is an organism in itself; and although the employer in each case becomes the owner of the product, and places it in his own name upon the market, yet his relations with his men are such as to make them partners in the sacrifice which creates the product, and in the rewards derived from it. It is the efficiency of both workmen and employers, and the relations between the two, that determine the competing ability of an industrial establishment. Competition in the sale of commodities is limited to establishments of the same sub-class; it is confined by nature within horizontal lines like those which, in the case of one representative group, we have indicated in the foregoing diagram.

These sub-groups are now solidifying. Within many of the pairs of parallel lines competition has exterminated the weak producers, and becoming fiercer as the survivors become fewer and stronger, is compelling them, in the end, to unite or perish. "Let us have peace" has become the watchword in this part of the field; and the truce which has ensued has taken the form of a system of producers' combinations.

These unions aim to fix prices and, as a means thereto, to restrict production. The one process limits actual competition, and the other potential. To decide upon a price list, and to abide by it, is to allay the rivalry between similar producers; to restrict production is to disturb the relations between dissimilar producers. An arbitrary restriction upon the amount of a commodity which can be placed upon the market checks the enlargement of the industry, and thus obstructs the transfer of labor and capital from group to group-which is the potential competition of Professor Cairnes' theory. Could each group solidify into a corporation that could control its members within and suppress rivalry without, the whole industrial field would become definitely non-competitive. The old regulator of values would be lost, and the appeal for state intervention would acquire great force. The study of the coming interval is that of