commodities have declined from the high | English industry ought to have been level on which they stood during the few crushed by these changes, but the truth is prosperous years preceding 1873. This that then and ever since both gold and is true of all countries, but if we contrast silver have been in excess of the demand. the relative position of England and the Before dealing with what I believe to be United States—that is, of two nations the true causes of the depression, it is deunder completely opposite fiscal systems sirable to consider the general features it is found that wages fell more in the which have given a common character to latter than in the former. In the United the depressions in all parts of Europe. States, between 1873-78, wages of un- The common features have been the same skilled labor fell from 37 to 50 per cent., in all countries — first, that though prices and in the case of skilled artisans to a of commodities have been largely reduced, greater extent. In England wages de- the volume of productions and the business creased in various trades. Some of them, of commerce have not been lessened in anyas among iron-workers, in 1874, to about thing like the same proportion; second, 35 per cent. Among miners and ship- that though wages have fallen, they have builders there was considerable reduction. not declined at all in proportion to the In the cotton industry, 1877-79, wages fell fall in prices; and third, that the margin 20 per cent., advancing 10 per cent. in of profit to the capitalist has been very the two following years. On the whole of small. Capital, then, during this longthe industries of this country wages are continued depression has suffered more believed to have risen 974 per cent, be- than labor. For some time past capital, tween 1872-1883, and to have fallen in when applied to staple commodities, is the United States 5.41 per cent. Thus glad to be content with about 10 per cent. of England suffered considerably less than the cost of conversion of raw material into the United States. The demand for labor a useful product, while labor gets 90 per in the latter country contracted so much cent. Of the 10 per cent. which goes to that the immigrants, who had numbered the capitalist only from 5 to 6 can be put 400,000 annually, in the six years ending to profit, the rest going to the wear and 1873, dwindled to 138,000 in 1878. In tear of plant and machinery. There is at 1877 half the coal-miners and iron-work- present a want of harmony between capers in the United States being out of ital and labor which tends to continue the work, labor riots became serious. In 1885 depression. Sometimes working men, not depression in the United States was so content with the shorter hours of labor general that 1,000,000 laborers were out of in this country, put arbitrary limits to outemployment. At such times discontent put and to the mode in which the workers exists and strikes arise; in 1886 there shall be employed. Such restrictions to were 350 strikes, involving 450,000 work-production, lessening the very narrow men. If such events happen in America, with its protectionist policy, there is little ground for the contention of fair-traders that free trade is the cause of depression in England. But the bi-metalists bring forward their own pet theory of the appreciation of gold and the depreciation of silver, and deem that to be a sufficient explanation of depression. There might be something in this theory if the great transactions of commerce were paid for in bullion. But that merely settles the balance of exchange, for exchanges are conducted by an interchange of commodities. If the depreciation of silver had been the cause of the depression of England, which certainly has the largest traffic with silverusing countries, it ought to have been specially severe in 1873-4; for in these years Germany adopted a gold standard, contracting by extensive sales her silver coinage, while France at the same time ceased to coin silver money. By 1875 margin of profit that prevails, have stopped some works and threaten to drive others from this country to foreign parts. A better education of masters and men, which I contend for later, will show that the interests of capital and labor are not antagonistic, but identical. Having dealt with these preliminary subjects, I now turn to the discussion of the two immediate causes which have led to the universal depression in all machineusing countries for fifteen years. The first of these I have stated to be the changes produced by science in the economy of distribution, and the consequent and profound alterations which have followed in the commerce of the world. In 1869 the Suez Canal was opened, the result being that the old route round the Cape of Good Hope was in a few years abandoned for the shorter and more economical route to the East. On the old route, sailing-ships were chiefly used, and they occupied from six to eight months in in our most improved steamers. The cost of transit of a ton of wheat from Calcutta to England was 71s. 3d. in 1881 and 27s. in 1885. The haulage of a thousand miles, from Chicago to New York, brings a whole year's supply of food for a man at a cost of a single day's wage. A ton is hauled for less than a farthing per mile.* The transport of food has thus told heavily upon the agriculture of all countries, because it has made one market the world the round passage, while now the time is the Atlantic expended 200 tons of coal to shortened to thirty days. By the substi- carry an amount of cargo which can now tution of iron steamers carrying the com- be driven across for 35 tons. The dismerce of the western hemisphere through covery of Dr. Joule as to the mechanical the Suez Canal, a tonnage estimated at equivalent of heat stimulated builders, two millions of tons was practically like Elder and others, to apply the comdestroyed, and vast arrangements in com- pound engine to steamers. This has mercial industry were displaced. In the produced enormous economy of fuel. In old system of long voyages, large store- 1850 the fine steamer Persia carried houses of goods had to be provided for over cargo at an expenditure of 14,500 the shipping interests, not only in foreign lbs. of coal to a ton; now a modern ports, but also in England, which became steamer does the same work by burning the centre of warehousing, banking, and three or four hundred pounds. The effect exchange. All this was altered by the of this economy on haulage by land and mighty power of electricity. The electric transit by sea is immense. In an experitelegraph had indeed been invented in ment lately made on the London and 1837, but it required many new discover- North-Western Railway, a compound ies in science to adapt electricity to the locomotive dragged a ton of goods for one growing wants of the world. All these mile by the combustion of two ounces of have been made in recent times. The coal. In ocean navigation there is a much three discoverers who have revolutionized larger economy. A cube of coal which commerce Oersted, of Copenhagen, passes through a ring the size of a shilling Faraday and Wheatstone, of London will drive one ton of cargo for two miles lived in my own day, and indeed were my personal friends. The applications of their discoveries to the various purposes of electricity the telegraph, telephone, and electric lighting-have created new labor, but have at the same time displaced a great amount of other labor. In the United Kingdom upwards of 42,000 persons are engaged in work depending upon electricity, while probably throughout the world more than 300,000 persons win their subsistence by the recent applications of this science. The amount of labor which it has displaced cannot be calculated. The whole method of effecting exchanges has been altered, because communication in a speech recently published, so I now with other countries is now immediate,; the consumer and producer in opposite parts of the globe making their bargains in a single hour, without the intervention of mercantile agencies or the large ware. house system which former methods of commerce required. The Suez Canal and improved telegraphy made great demands for quick and economical distribution of material. Numerous steamers were built between 1870-3 for this purpose, but so rapid were the improvements that they were nearly all displaced two years afterward (1875-6), and sold at half their cost. Iron has been largely substituted by steel, both on land and at sea, Bessemer's invention having destroyed wealth; but, like the phoenix, new wealth has arisen from its ashes. A ship which in 1883 cost £24,000 can now be built for £14,000. The economy of fuel has also been very great. Shortly before the opening of the Suez Canal, the best steamers crossing and has largely destroyed the advantages of national and local markets. I have dealt with the effects of this lowering of prices upon the condition of agriculture limit my remarks to manufacturing indus try. The lowering of prices, consequent upon the more ready and economical dis. tribution of commodities both by land and sea, has necessarily had an important effect upon manufacturing production as well as upon commerce. The old factors which ruled production were the value of the raw material and the representative value in money of the labor, skilled and unskilled, used and directed by capital to convert the crude material into a finished product. These factors still rule production, but their relative values have rapidly changed in recent times. The raw mate The fall in the prices of ocean transit from New York to Liverpool has been as follows: 1886. id. 1880. 9%d. 255. 75. 6d. Grain, per bushel d. 455. 155. 75. 6d. rial can be distributed everywhere at low charges. England has lost its great advantages in the possession of coal and iron-the first the source of power, the second the material for strength. The value of raw material in industry is now the lowest factor of production, while the value of intellect in converting it into a utility, in the cheapest and best way, is the highest and dominating factor in manufactures. ficial petroleum and its derivatives. Nat- I now pass to the consideration of the second cause of depression, as that has much more influence on manufactures than the changes in distribution. This cause is, that modern inventions have produced commodities faster than the world could absorb them at remunerative prices, and in doing so have displaced old forms of labor with too great rapidity for its absorption by replacement. This may be best illustrated by a few special examples. As chemistry is the only science which I profess, I begin with some examples of chemical industries. One of the most staple and apparently permanent dyestuffs, used in dyeing and calico-printing, was the root called madder. It was grown as extensive crops in various countries of the world Turkey, Holland, Belgium, France, and Italy-and gave employment to a large number of cultivators. Commerce was startled one day to learn that chemists had made the coloring principle of madder, called alizarin, out of coal-tar, and in a short time a great change took place in agriculture, commerce, and dyeing. Madder is still used for some purposes, as in the dyeing of Turkey red, Let me pass from these chemical indusbut its importation has decreased from tries to a staple manufacture like cotton, 284 million pounds' weight, in 1872, to and observe the effect of inventions on about two million in 1887. The value of production. A farmer growing cotton prothe latter in money was only £24,000, duces about 400 lbs. per acre, or as much while that of the import of alizarin made as will produce one bale. Before Whit from coal-tar already exceeds ten times ney invented his cotton-gin, the seed had that amount, although it is also manufac- to be separated from the fibre by manual tured in this country. It occasionally happens that a new invention produces large industrial results without much displacement of labor. We see an instance of this in lucifer matches, an invention altogether new since 1836, before which time lights could only be got by the tinder-box. The mere saving of time to the population of this country, by the modern matches, amounts to twenty-six millions sterling annually, while the only displacement of labor was to the makers of tinderboxes. Among the recent chemical industries which have most affected the comforts of the poorer classes, is the invention of arti labor, but the work was so tedious that it took one man about ninety days to prepare the produce of an acre. The first form of the gin reduced the time to six days. In recent years this gin has been greatly improved, so that one man can now pick 4,000 lbs. daily instead of the old amount of 4 lbs.; in other words, one man with a machine displaced the labor of 999 workers by hand. The cotton thus picked and cleaned is spun into threads by rotatory spindles. They used to be worked by manual labor, one man to each spindle, but now one man and two children will work machines carrying two to three thousand spindles. In 1874, at the beginning of the depression, each spindle made 4,000 | at least half a million men had been withrevolutions; now it is possible to get drawn from the labor of the field, the pa 10,000 revolutions. The yarn is then tents were 502, and the result was that woven into cloth. With the old hand-loom agricultural production was not lessened a man could make from 42 to 48 yards at any time of the long campaign. Madaily. At present a skilled workman can chinery, on the other side of the Atlantic, tend six power-looms and weave 1,500 is more extensively applied to large farms yards. All these changes tend to over- than here. The reduction of manual labor production, especially when the margin of has become so great, and the methods of profit is low. I believe at recent prices distribution are so improved, that, accordthis is only about one penny for six yards ing to Atkinson, the labor of seven men of shirting, so a vast number of yards are will grow, mill, bake, and distribute as required to make a substantial profit to a loaves one thousand barrels of flour, which mill. The demand of a working man for suffices to feed one thousand men. Even cotton fabrics is, upon an average, 40 with less organized machinery we have yards yearly. This demand is determined seen in our times much displacement by his habit of wearing one shirt for a of agricultural labor in this country, and week, and it is difficult to induce him, in the result still prejudices the position of order to augment the demand, to wear one Ireland. Irish reapers cut the harvest daily; or, if he did, to persuade his wife crops in England, and took back English to wash seven shirts weekly. Cheapness money to pay rents in Ireland. With the of a commodity tends to increase demand, old sickle a man could reap one-quarter of but it does not all at once alter the habits an acre daily; but the machine reaper of classes. Supply must be adjusted to came in, and one man with two horses the ordinary comforts of the consumers. reaps from fifteen to twenty acres. The There is always a growing increment of Irishman was a good workman to thresh demand, for, even in the United Kingdom, out corn by the flail, and managed fifteen not far from a thousand souls provided to twenty bushels daily; but now one man, with bodies which must be fed and clothed, tending a machine, can thresh out hunare daily added to the population. The dreds of bushels. increase of the whole world during the In the railways a vast amount of the fifteen years of depression has been about labor of men and horses has been dis16 per cent. in population, while the in-placed, but is replaced in other forms by crease in the production of cotton has been 86 per cent. It is not surprising that a surplus like this thrown upon the markets of the world reduces prices. Manufacturers too often forget that it is not the reasonable price of a commodity, but the surplus of it above the demand, which regulates the quotations of the market. About half of our exports of cotton go to countries using silver coinage. When new markets are opened in halfcivilized countries, the demand depends not only upon the existing standard of comforts, but also upon those which are created by contact with higher civilization. This is a hope and a policy which Germany is now pursuing with great ardor. I must be content with only one or two other illustrations of the manner in which inventions give an abnormal increase to production, and displace old forms of labor. It is not in prosperous but in hard times that they chiefly arise. In 1870-72, when trade was active, there were comparatively few inventions. Take the time before the American war in 1861; the patents for new agricultural machines, on the average of several years, numbered 350; while during the war, in 1863, when the necessity of feeding the railways with material. If the locomotives on English railways were annihilated, it would require the labor of seventy-five millions of men, or of twelve millions of horses, to carry on the traffic, in an inferior way and at a much larger cost; for the cost of carting a ton's weight by a man with a cart and horse, is one shilling per mile, while the railway carries it for a penny or under. I finish my illustrations by referring to the iron industry. It is of such antiquity that the best and most economical means of production might be supposed to exist. In the year 1846 the British Association for the Advancement of Science requested Professor Bunsen, of Heidelberg, and myself to report upon the chemistry of blastfurnaces, and we showed that, at that time, no less than 81 per cent. of fuel was absolutely lost in the form of gases which escaped and were burned at the top of the furnace. In addition to this waste of fuel was the total loss of ammonia produced by the coal-a substance most valuable to agriculture as a manure. economy of the ammonia has scarcely begun to be realized at the present day, although our recommendations for the sav. The ing of fuel have long since been carried out with much economy to the price of production. There has been a rapid growth of the manufacture of iron over the world, and naturally the increase has been greatest among nations which were furthest behind. From 1870 to 1884 the make of pig iron rose 131 per cent. in Great Britain, and 237 per cent. in the rest of the world. In recent times, steel has largely substituted iron for many purposes. Formerly pig iron was transformed into bar iron in puddling furnaces, and the latter was converted into steel by a process known as cementation, which consisted in giving to the iron more carbon. Now, by the Bessemer process, steel is made direct from pig iron, already to the extent of three million tons annually, while 4 millions of capital invested in puddling furnaces have been destroyed, and the labor of 39,000 workmen have been displaced. To counterbalance these evils the price of steel, which was £12 IS. Id. per ton in 1874, was less than £4 in 1887. The illustrations already given must suffice to show how largely modern inventions have increased production and displaced labor. Ultimately, educated working men benefit by the changes, because increased production absorbs skilled labor and pays high wages for it. Ignorant workers-the hewers of wood and the drawers of water- have a bad time, for they find that the demand for unintelligent labor is constantly decreasing. In old lessons of political economy, production upon a given raw material was represented by a very simple equation, P=L+C. The product equals labor plus capital. The equation never was right, because capital is really accumulated potential labor reserved as a subsistence fund for the laborers who are employed to convert the potential into actual energy. Capital or accumulated labor is exactly like a storage battery in which electricity is accumulated. This battery regulates the work which the electricity has to perform and steadies the electric lights. Labor is now of two kinds : labor in quantity and labor in quality - the first lessening in value every year as a factor of production, while the second is always rising in value. The product is therefore actually the result of three kinds of labor -capital, or accumulated labor, labor of quality, and labor of quantity. Even now the terms of the two last forms of labor could only be expressed by multiplying (not adding) the labor of quantity by the VOL. LXII. 3175 LIVING AGE. labor of quality. Reducing this to a simple expression, the present state of manufactures depends mainly upon the intellectual condition of the producers. The competition of the world has become a competition of intellect. In the future of the world the greatest industrial nation will be the best-educated nation; it may not be so to-day, but it certainly will be so to-morrow. I have already shown how the cheapness and facility of the distribution of commodities have destroyed national markets and local advantages, making all the world into a single market. Formerly it sufficed that a merchant or a trader should be a good citizen of his own country; now he must become a citizen and trader of the world. Our merchants and manufacturers have been slow to see this, and they are allowing other better educated countries to forge ahead. Every German clerk or trader knows two languages besides his own, and is taught, scientifically and practically, the wants of commerce. The German government has established a bank of commerce which, with the efficient co-operation of the consuls living in Eastern and African countries, has had a great effect in extending their colonial markets. A country with a protectionist policy is apt to have an overproduction of commodities beyond the wants of the home market, so there is a natural desire to use this surplus in foreign markets at the very narrowest margin of profits. These have certainly been supplied with German goods for the last few years, though the prospect of continued success is doubtful, as they are always handicapped by increased cost of production; still, so far as limited statistics are to be relied on, the policy seems at present to be successful. Taking the period of depression from 1872 to 1886, the increase of German commerce has been 67 per cent., while the maritime tonnage has expanded by 120 per cent., and the bank discounts, indicating activity in industries, have augmented by 240 per cent. How far sacrifices in the prices of commodities have led to these results in making new markets we do not yet know, but the increase is out of all proportion to the growth of the German population, which has only been 11 per cent.* Berlin, like other towns of Germany, is taking active measures to promote technical education. A central technical institution, costing no A report on this subject by Mr. Giffen, about to be issued, will it is understood show that English trade has as yet not materially suffered by German competition. |