The Socialization Of Industry

We have now before us a few principles of so general a kind that they

apply to the economy of the most primitive state as well as to that of

the most advanced. It is not necessary that men should live in any

particular relation to each other, in order that, in creating and

consuming wealth, they should exemplify these principles. They would

do this even though they never came into touch with each other, but

lived, as b
st they could, each man on his solitary farm. Laws of this

general kind result from man's relation to nature, and not at all from

the relation of different men to each other. Let a man keep wholly

aloof from other men, apply his labor directly to nature, and he can

produce wealth of the various kinds that we have described. He can

secure food, clothing, and other things for his own use, and he can

make tools to help him in securing them. He will appraise the

consumers' goods according to the law of what has been called final

utility or, in another view, effective specific utility, and he will

also test the comparative usefulness of his various tools by an appeal

to the law of final or specific productivity.

Social Economy the Chief Subject of Study

We care most to know how

an organized society produces and uses its wealth, and in making this

inquiry we encounter at once phenomena that are not universal. The

civilized society creates its wealth cooeperatively, by the joint

action of its various members; that is, it proceeds by means of a

division of labor and an exchanging of products. Moreover, it has, in

some way, to share the sum total of its gains among its various

members. It has to apportion labor among different occupations for the

sake of collective production, which is a grand synthetic operation

whereby each man puts something into a common total which is the

income of all society. It has, further, to divide the grand total into

shares for its different members--an analytical operation in which

each man takes something out of the aggregate for his personal use.

This is distribution in the narrower sense of that term--the

apportionment among the members of a civilized society of the fruits

of production. In the wider sense the term also includes the

apportionment of the sacrifices incurred in the joint production.

Distribution, as thus defined, is the element that appears in economic

life in consequence of social organization. This is a secondary

element, indeed; for man, nature and their relations and interactions

are the primary facts, and the relations of men to each other come

logically after these. Social organization, however, is so

transforming in its effects as to reduce to small proportions the

amount of attention it is worth our while to devote to the economy of

the primitive types of life. It is necessary to make some study of

that economy, for it is thus that we place before ourselves the fact

that there are universal economic laws and perceive distinctly the

nature of some of the more important of them.

Facts Peculiar to Socialized Industry

The term Political Economy

denotes a science of industry[1] as thus socialized, for it is a

science of the wealth which is produced in an organized way by the

people of a more or less civilized state. The general truths which we

have thus far stated apply to such an economy, indeed, but they also

apply to the wealth-creating and wealth-consuming processes of

uncivilized peoples, and even of isolated individuals who have no

dealings with each other. They are truths of Economics in the

unrestricted sense, and we have now to study the special truths of

Political Economy. When production goes on by division of labor, as

when one man works at one occupation and another at another, phenomena

appear that do not appear in more primitive life; and still others

appear when, within each occupation, there is a division of functions

between the laborer and the capitalist, as is the case whenever one

set of men furnish tools of production and another set do the work.

The special laws of this highly developed economic system require far

more extended study than do those more general laws which are common

to it and simpler systems. We now continue to recognize the universal

and basic truths which have been stated in the foregoing chapters and

proceed to the study of the special principles which apply only to

organized economic life.

[1] We use this term in a broad sense, including agriculture

and commerce as well as manufacturing.

Specialized Production the Means of Diversified Consumption

As the

kinds of goods that we individually make become fewer, the things

which we get and use become more numerous and varied--such is the law

of economic specialization. Society as a whole produces an infinite

variety of things, and the individual member of it secures for himself

goods of very many kinds. The typical modern worker is, in his

production, a very narrow specialist, but in his consumption he is far

less a specialist than was the rude hunter who was able to enjoy only

the few goods which he himself produced. The modern worker's tastes

are omnivorous, for he has developed an immense variety of wants and,

through social organization, he has acquired the means of satisfying

many of them.

The Position of Individuals in the Producing Organism

When we say

that production has been socialized, we mean something very

far-reaching. We mean that an organization has grown up in which men

are members or parts of members, and that this great organization has

undertaken to do the productive work for all the individuals that

compose it. For the first time we now recognize a sociological fact

among the premises of economic science. When men, whose predecessors

may have lived in isolated families or in a society organized for

defense or for the mere pleasures of association, now develop a truly

economic society, the individual depends on other individuals as well

as on nature for the supply of his wants. Economic independence gives

way to interdependence, because the fortune of each man is largely

dependent, not merely on his own efforts, but on the relations which

he sustains to other men. Simple laws of nature still largely control

his income, but social laws also have a certain control over it.

Exchanges in their Primitive Stage

The exchanging of products is,

of course, the process with which the organization begins, and this

process is introduced by easy and natural stages. The man who at first

makes everything for himself develops a particular aptitude for making

some one thing; and, though he may still continue to make most things

for himself, he finds it advantageous to barter off a part of the

supply of the one article for the making of which he is especially

well fitted. He seeks out a neighbor whose special aptitude lies in a

different direction and who has a surplus of some other article. It

may be that one is a successful fisherman and the other is, by

preference, a maker of clothing, and that they can get a mutual

benefit by an exchange of food for raiment.[2]

[2] If we were giving a history of the division of labor, we

should have to record the effects of differences of climate

and of agricultural and mineral resources in occasioning, at

an early period, a territorial division of labor. We are here

describing the division of labor which occurs within a

society and in consequence of what may be called social

economic causes.

The Intermediate Type of Exchanges and the Final One

In the next

stage a man becomes wholly a specialist, making one kind of product

only and bartering it away for others. It might seem, at the first

glance, that differentiation has now done its full work; but it is

very far from having done so. Making one complete good for consumption

is still a complex operation, which can advantageously be subdivided

in such a way that one man produces a raw material while another works

it up into a useful shape. A gain may be made by a further division of

the manufacturing process, whereby the first worker makes only the

rawest material, another fashions it somewhat, a third carries the

process farther, and a fourth or a still later one completes it. In

modern industry the material must often pass through very many hands

before it is ready to be made over to the consumer. Each man in the

series puts a touch on it and passes it on to his successor.





A''' is an article of consumers' wealth and A is the rawest material

that enters into it. A' is this material somewhat transformed; A'' is

the same material after it has received the second transformation and

needs only a final touch to convert it into A''', in which state it

will be ready for the consumer's use. We have here a symbol of what is

actually taking place in the industry of the world. Cattle are grazing

on western ranches; hides are tanning in the woods of Pennsylvania;

leather is going through the many changes that fashion it into shoes

in the mills of Brockton; shoes are arranged on the shelves of

retailers in New York in readiness for the people who are to wear

them. These are stages in the making of a single product, and a

thousand different products are coming into existence in a like way.

A Representation of the Groups, or Specific Industries, which compose

Economic Society

If we put beside the series of A's a series of B's

and one of C's, we have a much simplified representation of what is

actually taking place. There are, in reality, a myriad of different

things which almost every consumer uses, and every one of them is made

by a series of productive operations like the one we have described.

The very fact that there are so many of them that it is hopeless to

try to represent them all in the table makes it desirable to

illustrate the principle by tabulating only a few and to assume that

these few are all that there are. For the purposes that we have in

mind it is entirely safe to suppose that a series of A's, one of B's,

and one of C's represent all the consumers' goods that society uses.

What we wish to ascertain is how the different series work together to

furnish an income for each member of society.

The Organization Spontaneous

Laborers can go where they will, and

yet they are in some way brought into an orderly relation to each

other, being placed in certain proportions in different industries.

Capitalists also are free to invest their funds as they will, and yet

there is a certain amount that is naturally devoted to each branch of

business. How this apportionment takes place we can most readily

ascertain by creating such an imaginary and very much simplified

society as this table furnishes.

A''' B''' C'''

A'' B'' C''

A' B' C'


The series of A's, which we have already studied, represents one kind

of raw material ripening into a finished product. B represents a

second kind of raw material, which, like the A, is produced by its own

set of workers and is then passed on to a second, who transform it

into B'--a partly finished product. These then pass it on, as the

corresponding set of men passed on the A'. They hand it over to a set

of workmen who change it into B'', a nearly completed product, and

these hand it over to men at B''', who, by giving the final

fashioning, bring it into the form of a finished consumers' good. The

C's represent another general group of workers who transform the raw

material, C, into the finished product, C'''.

Industrial Groups and Subgroups

Each of these more general bodies

of workmen and employers, such as the entire series of A's, we may

call an industrial group, and the divisions within each of them, such

as A' or A'', we may term subgroups. The product of a group is a

complete article, while that of a subgroup is not a complete article

nor any part of an article that can be taken bodily from it. Yet it is

a distinguishable element in the article. The product of the shoe

factory is certainly not complete shoes, for the owners of the factory

buy leather which has already passed through the hands of tanners; and

the tanners themselves bought it in the shape of raw hides, which were

furnished by still earlier producers. What the shoe factory has done

is to impart a new utility to dressed leather by transforming it into

shoes. It would be impossible ever to get that utility out again, or

to point to any one part of the shoe as the only part that contains

it. What the factory has really made is therefore a utility--a

distinguishable quality which pervades a concrete thing. It makes the

difference between the leather and the shoes. What the tanner has

created is, in like manner, another utility, which makes the

difference between raw hides and leather. Groups, then, in their

entirety produce whole articles for direct use, while subgroups

produce distinguishable utilities which are embodied in such articles.

The sum total of all the different utilities constitutes the article.

It is a complex of useful qualities held together by the fact that

they are attached to the same original matter.

Proportionate Production

All the subgroups working together in an

orderly way not only produce the consumers' wealth that society needs,

but produce the different kinds of consumers' goods in nicely adjusted

proportions. Unless the general order of the group system is

disturbed, there is a normal amount of A''' put on the market and also

normal amounts of B''' and C'''. This result is attained by influences

that run through the productive organism and bring about an adjustment

of the comparative amounts of labor in the different occupations. If

competition worked quite freely, this adjustment would be so nice that

no military apportionment of forces among different brigades,

regiments, etc., made consciously and by the most intelligent

commanding officer, could surpass the perfection of it. There would be

also an equally fine adjustment of the comparative amounts of capital

devoted to different industries. In the actual productive organism

each man goes where he will--capitalist, laborer, and employer of

capital and labor alike. Each man acts in this respect as though there

were no such thing as coercion, and as though he might, with unchecked

freedom, do solely what is good in his own sight. By reason of the

fact that all are seeking to produce what they can in order that they

may get what they can, there comes into operation an organic law which

brings the groups and subgroups into a delicate balance, in point of

size and output, whereby the grand total of force that society

commands is prevented from making too much of one product and too

little of another, and is made to do its utmost in getting a large sum

total of wealth for the benefit of its various members.

What the "Division of Labor" Involves

This is the real

signification of what it has been common to call the division of

labor. It is the socialization of labor, or the gathering of isolated

laborers into a great organism that, entirely without coercion,

determines in some way what each one shall do, and not only makes the

product of the whole a myriadfold greater than without any

organization it could be, but causes this product to take certain

well-adjusted shapes which, as we shall later see, serve consumers

better than they could be served by products in misadjusted


Capital as well as Labor Apportioned

As we have said, there is a

corresponding division of capital or an assignment of different parts

of the total fund to different employments; and this is made in the

same way as is the division of labor and results in an equally nice

adjustment. Each bit of capital, like each workman, becomes, as it

were, a specialist. It may take the shape of an instrument which is

capable of performing only its one service, like the loom, which is

capable of doing nothing except weaving; but even if the tool is

somewhat adaptable, like a hammer which can be used in several trades,

it is, as it were, stationed in one trade and held, by economic

influences, at that one point in the system. The house carpenter keeps

his hammer though the cabinet maker could use it. Each bit of capital

helps to create a particular utility, and the number of units of the

fund that each subgroup contains is, as we shall see, so arranged as

to enable the fund as a whole to do its utmost for the general good.

It is all without the use of force, since each bit of capital does

what its owner pleases to have it do.

A Government Presupposed

Of course there must be a government over

it all. Such a method of producing wealth could never continue unless

property were secure and unless it were made so without much effort on

the part of its owners. A blacksmith who should have at one moment to

use his hammer as a tool and at another to wield it as a weapon of

defense could make but poor headway, and a society in which such a

state of things existed in various trades would be too anarchic to

permit the elaborate division of trades which is the key to success in

industry. The most noticeable fact about organized production is that

man is forever letting go the thing he has made or helped to make and

allowing it to pass out of sight and reach without losing or greatly

imperiling his title to the amount of wealth it represents. He casts

his bread on the waters, but they bring him a return for it. Under

these circumstances it is impossible for him to protect his product as

the savage protects his tools, his clothing, and his hut. What a

modern worker makes passes into the hands of other men and gets

completely out of the maker's direct personal control. If he wanted it

again, he could never find it; and if he could find it, it would be in

a new shape and other men would have claims upon it. The man who has

sold some hides that in the end have become shoes can hardly identify

his product on the shelves of retail shoe dealers all over the

country, or perhaps all over the world. If by a miracle he could find

the particular bits of leather that in their raw stage he himself has

furnished, they would be in new and far more valuable forms than they

were when he had possession of them. The shoes contain utilities

which the man who furnished the hides cannot claim to have created.

They have been changed and improved by elements contributed by many

other persons, such as manufacturers, carriers, merchants, etc., and

he could never carry away the concrete thing that he himself produced

without carrying with it other men's property.

The Surrendering of Goods and the Retention of Values Features of

Social Industry

Socialization of industry means, then, that

individuals forego all effort to retain their own concrete products,

but that they retain certain parts of the value of the products to

which they have made contributions. The value of A''' when it is sold

is claimed by men at A''', A'', A', and A according to some principle.

The values of B''' and C''' can be followed until they reach the

pockets of the men who have contributed their several shares to the

making of these things. All this requires a government and a

well-developed system of laws and courts for the protection of

property, including the protection of it in the form of a claim to a

value that is embodied in things which have gone beyond the maker's

reach. Property here takes a refined form which requires that the man

should forego all desire to keep the literal thing he has made and

should make it his aim to retain the value of it in some other form.

It is a comparatively simple matter to guard a concrete article which

a man has in his possession, though even that requires some energy on

the part of the police force and is never quite perfectly

accomplished; but it is a far more difficult matter to enforce a claim

that a man has against other men, in consequence of some utility that

has been created by him but has gone away from him and mingled with

utilities created by many other persons in a product that the man will

never see. It is the problem of guaranteeing to the shoemaker the due

return for the stitches he has put into shoes when the shoes

themselves have gone to buyers and wearers in every quarter of the

land and many quarters of the globe.

Groups under a Socialistic State

In political economy as

distinct from general economy we take one premise from sociology and

another from politics. We assume that society exists and that it has

taken on a political character, by establishing laws with courts to

interpret them and officials to enforce them. We do not, however,

assume that the direction of industrial affairs is in the hands of

such officials. In the main industry is organized in a spontaneous

way. Men choose such occupations as they like, and when there are too

many of them in one group and too few in another, the rewards

naturally increase in the group where a larger force is needed, and

this lures men in that direction.

In a socialistic society such adjustments would be made under the

direction of the state. Officials would have to decide when more

workers are needed in the A series and less in the B series and would

have to use either inducements or some kind of compulsion in order to

move them from the one group to the other. What we actually have to

deal with is a society that shapes itself by the free acts of

individuals, and we have to see how, in this way, it organizes itself

for production and divides among different claimants the product that,

by the joint action of all of them, it creates.

Gains from the Organization of Industry

The advantages of the

division of labor consist in an increase in the quantity of products

and in an improvement in their quality, and the quantitative gain is

almost beyond computing. The advantage appears mainly in the middle

and upper subgroups of the series, which transform the materials,

rather than in the lower subgroups, which produce them; and yet there

is a gain everywhere from such organization. A man produces far more

when he performs the same operation many times than when he goes

through a whole series of unlike operations. Moreover, he can perform

the single operation far more accurately and can thus attain a more

perfect result. He can learn his minute trade more easily than he

could a complex one. Where unusual strength or skill is required, the

work may be given to persons who have the requisite quality so that a

good product can be insured, and none of the labor of these superior

workers will need to be wasted on work which inferior labor can

perfectly well perform.

Improvement in the Forms of Capital

The greatest of all the

advantages that come from this division and subdivision of

wealth-creating processes comes in the way of applying machinery. A

machine is a hopeless specialist and can, as a rule, put only a single

minute touch on the material submitted to it; and the introduction of

machines differentiates capital in a way that is parallel to the

minute subdivision of labor. If the machine is to work at all

economically, it must put its touch quickly on one after another of a

series of articles, as they are submitted to it in uninterrupted

succession. If only one kind of machine were employed in the making of

shoes--if, for instance, the sewing of the uppers to the soles were

done on sewing machines, even though all the rest were done by

hand--it would be natural and almost necessary to have one class of

workers to prepare the uppers, another to prepare the soles, and a

third to sew them together by aid of the machine. When the several

stages of the process are thus given over to different classes of

workers, the situation is ripe for the application of more machines,

and inventors readily devise apparatus that will perform one or

another minute part of the manufacturing process. In the end most

branches of manufacture take such shapes that the raw material is

intrusted to a series of machines and passes from one to another by a

nearly continuous movement, till it emerges from the hands of these

automata as complete as any manipulation can make it and ready for the

merchants who will convey it to their customers.

Economy of Capital

There is an economy of capital involved in the

fact that instruments can be used thus continuously. A worker does not

have to have several sets of tools, many of which would be idle the

greater part of the time, as would be the case if the man performed

several unlike operations; but the greatest economy comes from the

energy, rapidity, and accuracy with which the new instruments act. The

tools are far more efficient than they could be if human muscles

furnished the power and eyes and nerves supplied the deftness and

accuracy that the making of the goods requires. Automata which men set

working excel hand tools with men wielding them by a greater ratio

than can be calculated.