CHAPTER XX

LABOR ECONOMICS

I. The organization of labor.

A. The capitalization of industry, the separation of the worker from the product of his labor, and the intensive specialization in production, have created two classes, which though characteristic of other ages, nevertheless have since the growth of modern industry, become more distinct. These are the workers who possess the labor factor, and the capitalists who control the instruments of production. The one has unquestionably been at a great disadvantage in the matter of selling his labor to the employer. For that reason the association of workers arose to equalize the advantages of bargaining, in order that both factors might enjoy equal opportunities. There are several reasons why labor has been at a disadvantage in the ordinary bargaining proc

ess.

1. In the first place the entrepreneur is the principal bargainer in the world's trade. He must acquire capital, land and labor in order to establish his enterprise. When the establishment is in operation his chief function is trading in raw materials and disposing of finished products. This brings him in contact with shrewd business men, and unless

he is fairly skillful, he finds himself at great disadvantage. This ability gives him a superiority over labor. The latter being less alert and usually unfamiliar with the process of bargaining can hardly be expected to match his wits against one whose chief duty is to buy and sell at all times, at a profit, if he is to maintain his business. Consequently the entrepreneur is more apt to bargain, while the worker merely sells, at a price in order to secure work.

2. In the next place the worker has only his labor to sell, which is the only source of his income. If he cannot dispose of it today, that much has been lost. Its perishability demands that he accept the terms of the entrepreneur, lest his income be permanently reduced by that amount.

3. The capitalist can live on his surplus, whereas, labor generally has no reserve. The one having a larger borrowing power, need not purchase the worker's hire should he think the wage asked is high. Labor cannot wait; it must have work in order to exist, and unless it agrees to the conditions determined by the entrepreneur, it gains nothing, and in the meantime loses the amount of income that was offered.

B. The fundamental principle of labor organization is to supplant unorganized ineffective units by organized effective associations. The individual laborer has always been more or less dispensable. The great numbers of workers put each individual in a position of great disadvantage. As long

as he remained an independent factor he could be spared. He could be hired or fired with little or no effect upon the labor supply or the productivity of the industry. Come or go, his presence would not be noticed, his absence would not be missed. A business could readily get along without him, because as a rule, there were many to take his place. If, on the other hand, he can organize the various elements of his class into an effective body, each individual adhering to the principles of collective bargaining, the ineffective units cease to be dispensable and as a body constitute an indispensable part of industry.

II. History of labor organization.

A. When the Roman Empire fell, there developed a feudal system of government for the preservation of law and order, in which the feudal lord assumed the responsibility of caring for his subjects. This form of social organization survived for several centuries when it was succeeded by the craft guilds, which were associations of workers for the maintenance of their independence. With the rise of the national state and modern industry, the old feudal regime gave way altogether and at the same time saw the disintegration of the guilds.

There is no reason to believe that the modern labor union has any connection with ancient combinations. Furthermore, it cannot be conclusively demonstrated that the union arose as reaction to the Industrial Revolution, because it preceded the factory system by at least half a century. It more than likely developed with the

industrial movement that reduced the possibility of the journeyman overcoming the barrier of industry, and himself becoming a master craftsman, to own his own tools and sell his product. Thus certain transient associations passed into more formal trade combinations.

B. The first trade unions grew up among the woolen workers and the midland framework knitters in the west of England. During the eighteenth century their existence was uncertain, but with the rise of the factory system, by the end of the first quarter of the nineteenth century they had become substantial and were highly organized in many trades. The industrial depression of that time overtook them and for nearly twenty years until 1843 they were barely able to maintain themselves. With the commercial revival, they acquired greater financial strength, combined the functions of a trade protective society. with those of a permanent insurance company, and substituted salaried officers for the casual leaders who had previously run them.

C. The first American labor organization was the New York Society of Journeymen Shipwrights, which was incorporated in 1803. From that year onward the growth of the American labor organization has been steady, although not entirely uninterrupted. The period of real expansion followed the course that was at the time taking place in England, from 1825 to 1850. This has been. called the "flowering period" of American labor organizations. In England it was referred to as the "revolutionary period." There was no attempt to discriminate among the membership,

skilled and unskilled; women and farmers, everyone and anyone was invited to become associated. Among these organizations were such typical unions as the Industrial Congress of the United States, New England Working Men's Association, and the New England Protective Union, all of which came into existence about the year 1845.

The period from 1850 to 1866 was the time when a great many national and international unions were formed. The first among these was the International Typographical Union which was organized in 1850. By 1866 there were approximately forty of these larger associations.

The National Labor Union was formed in 1866 from a large number of the country's labor organizations. It reached the zenith of its power two years later, when it had an aggregate membership of 640,000. Poor leadership caused it to become involved in politics, and instead of confining itself to labor problems, its active attention was directed to wild schemes of irredeemable paper money, which among other activities culminated in an early decline.

The Noble Order of the Knights of Labor began with a modest local union of seven garment cutters in 1869, and eventually continued the work of the National Labor Union. The rise of the Knights of Labor was no less than that of the union it followed, and in 1886, it had a membership of 600,000. From that year on it declined steadily due to the cooperative schemes in which it became involved at a tremendous cost,