CHAPTER III.

THE MANUFACTURING NATIONS CONSIDERED AS A GROUP IN RELATION TO THE PRESENT DEPRESSION.

It is apparent from the statistical illustrations given in the preceding chapters that the family of manufacturing states, Great Britain, France, Belgium, Germany, and the United States, if not also Austria, Russia, and Italy, are suffering from an industrial depression novel in its kind, and yet having characteristic features of similarity throughout the whole range of states. It seems to be quite true that in those states considered the volume of business and of production has not been af fected disastrously by the depression, but that prices have been greatly reduced, wages frequently reduced, and margins of profits carried to the minimum range. Over-production seems to prevail in all alike without regard to the system of commerce which exists in either. What has brought all these states to the position in which they are found at the present time constitutes a most interesting and important question in economics, and one vitally affecting the wage-workers of the world. The wide study given to this matter has resulted in some conclusions entirely warranted by the facts, which may not be lacking in value, and not only the facts, but the results of the facts, are properly stated at this point.

If each of these great communities has reached an industrial condítion involving phases common to all, there must be somewhere a line of reasons for such universal condition, and one should be able to develop the logical course of events which has brought such a wide range of states to an industrial epoch.

England, with generations of skill in mechanical employment, was the first to establish the factory system and institute a new industrial order of things, in which the division of labor became more and more an important factor.a She controlled also the exchange of the world. In her insular position she was able to make the world pay tribute to her by compelling the produce of the world to pass through her hands, either in kind or in settlement of balances. With these immense advantages, and having the control, too, of raw materials in abundance, it was natural that England should seek to supply the world with manufactured products. This she was able to do with the aid of her skill,

a The moral and industrial causes which led to the establishment of the factory system are fully outlined in a report on the "Factory System," by the writer, for the Tenth Census.

of her science, of rapid transportation, which she did much to develop, and of the vast capital which she possessed, enabling her to carry on great enterprises. So her ambition was natural and legitimate, and her great prosperity came to her without regard to any commercial system which she might have established, and in spite of commercial systems. Free trade became to her a necessity, because she sold to the world her manufactured products, and the world had few manufactured products to sell to her. With the constant increase of equipment to carry out her industrial policy, England at last found herself, on account of the course of other nations, with a plant altogether too large for the demands made upon her, and with a capacity sufficient to supply not only all her own home and colonial markets but a great share of the other markets of the world.

The United States, after the war of the Revolution, found that political freedom only had been secured as the result of the war. Industrially this country was under the control of Great Britain. It became essential to establish a commercial system, which it was thought would en. able our industries to become gradually free from the industrial control of England. This policy has, with few interruptions, been pursued to the present time. Foreign producers of manufactured goods have gradually lost the American market, and the American producers have gradually found themselves in position to supply the home demand. Stimulated in this direction, the United States has gone on perfecting machinery, duplicating plant, crowding the market with products, until to-day this country is in the exact position of England, with productive capacity far in excess of the demand upon it, and her industries, as those of Great Britain, stagnated, the wages of labor reduced, prices lowered, and the manufacturers and merchants trying to secure an outlet for surplus goods. This condition has been reached under a system the reverse of that which has prevailed in England, and while stimulation has been enhanced by the system prevailing here, the condition has been reached in spite of it.

France, at first drawing her skilled workmen from England and tardy in the establishment of the factory system, at last concluded she ought to supply her own markets at least, and so began war on British industry. With a natural ambition to supply her own markets, she has carried the stimulation so far that she has not only secured the capacity to supply herself but has a vastly enhanced capacity, and is seeking to supply others. To-day France finds herself, through her policy, in precisely the same industrial situation that attends Great Britain and America.

Germany has followed the example of France and the United States, and with precisely the same results. Her commercial policy or system has been, of late years, the same as that of the United States, while Belgium has followed that of Great Britain, and yet all these nations now find themselves in sympathy in their distress, all seeking outlets for their sur

plus production. The scale of wages in the countries named is according to the following order, the highest first: The United States, Great Britain, France, Belgium, Germany. It is difficult to connect commercial systems with this scale of wages, and when the broad view is taken that each of these countries has overstocked itself with machinery and manufacturing plant far in excess of the wants of production, and when it is considered also that the present period of industrial depression is unique in its character, as not having been attended with financial and commercial crises and panics, financial matters having been only incidentally involved, and when it is considered further that the condition of these nations has been reached under both free trade and protective policies, and under a wide range of tariff restrictions, it is readily seen that the family of nations given to mechanical production have reached an epoch in their existence, and that commercial systems which might have been at one time, or under some circumstances, necessities, are now apparently only expediencies, to be used temporarily and not as permanent features of national progress. Historically, it must be admitted that the two great opposing systems of free trade and protection have played well their parts in the industrial development of nations; but the wisdom derived from the experience of all the nations. in the race for industrial success should teach each that ultimately that system freest from restrictions will beget generally the best conditions. Meantime, expediency has its power, and must continue to exercise it until the evil resulting from changes can be met through the softening influences which come from contest and hardship. The struggle so far has had a strong influence in producing ever recurring periods of depression. These considerations are shown to be valid through the information collected by the Bureau in all the countries involved. The opinions of some of the ablest men, of wide experience and of great opportunity, substantiate the grounds taken, among others, M. de Laveleye, already referred to; Dr. Arthur von Studnitz, of Dresden; M. Piermez, of Brussels; M. Jules Duckerts, of Verviers; Professors Emil de Laveleye and Trasenster of Liège; Herr Annecke, of Berlin; and Dr. Engel, of Berlin.

In England, Belgium, and France the railroads and canals that are really needed have been built. There remain only to be constructed feeding and competing lines, and experience shows that for such lines the revenue for the capital invested is not equal to nominal remuneration. In Holland the great works are completed; Amsterdam is united to the sea, international communications have been well established, and there are no longer urgent works to be undertaken, and the reward of capital to be invested now is not sufficient to tempt lenders. In Italy and Spain the great arteries are provided with railroads, while the products moved and the revenues derived from capital invested are notoriously inferior to what was expected. When this is the case there is no prospect of rival or subsidiary lines being constructed. Harbors

and rivers are sufficiently developed, and warehouses, water and gas works, tramways, etc., are largely provided for. The Pyrenees and the Alps are tunnelled, and a sufficient network of international communication established. In England railroad building cannot be extended to a sufficient degree to absorb much capital or much labor. In Russia the principal lines of railroad have been built with the aid of the Government, and it is not likely that further construction will take place except for strategical purposes. Germany is provided with a full network of railroads, and the facilities for transportation are in excess of actual needs. Austria is in much the same condition as Germany, and Turkey also has as many railroads as can be used. In the United States the mileage of new railroads constructed has been out of all proportion to the increase of products to be carried.

The Suez Canal has been built, terrestrial and transoceanic lines of telegraph have been laid, and the merchant marine has been transformed from wood to iron,, To-day the carrying service of nations, and especially of the great marine nation, England, is overstocked to a far greater extent than the industries. On all sides one sees the accomplished results of the labor of half a century. From a financial point of view, these accomplished results should always be good, but in many cases it is apparent that undertakings have proved deceptive and Governments become needy and some, as Egypt, insolvent. Whatever may have been the financial results, industry has been enormously developed, cities have been transformed, distances covered, and a new set of economic tools has been given in profusion to rich countries, and in a more reasonable amount to poorer ones. What is strictly necessary has been done oftentimes to superfluity. This full supply of economic tools to meet the wants of nearly all branches of commerce and industry is the most important factor in the present industrial depression. It is true that the discovery of new processes of manufacture will undoubtedly continue, and this will act as an ameliorating influence, but it will not leave room for a marked extension, such as has been witnessed during the last fifty years, or afford a remunerative employment of the vast amount of capital which has been created during that period. The market price of products will continue low, no matter what the cost of production may be. The day of large profits is probably past. There may be room for further intensive, but not extensive, development of industry in the present area of civilization. Outside of the area of a high state of industrial civilization, in China, Japan, India, Australia, Persia, and South Africa, there is a vast deal to be done, but this of necessity will be accomplished slowly, as these countries, not having the capital to make speculative movements, must depend upon the money-lending countries. Supplying themselves with full facilities for industries and commerce will give to each of the great nations of Europe and of America something to do, but the part of each in this work will be small and far from enough to insure more than temporary activity. 12854 LAB-17

It may help to keep away stagnation and modify the severity and the duration of industrial depressions. There are very many influences, like the great expense of standing armies, of war and revolutions, and local features, so far as causes are concerned, which enter into the consideration of the industrial situation of the world so far as localities are specifically concerned. The present treatment only has to do with those things which seem to be common. The building of railroads and of ships, even in countries where the land is interlaced with roads and supplied with wharfs lined with shipping, must go on, because the waste needs repairing, and the great industrial work of supplying the world will furnish enough for all to do; but the brief review of the present industrial situation of the great communities involved indicates that statesmanship is required to establish such guards and checks in human affairs as shall lead to a safer and surer progress than that which has attended the past decade. In the consideration of suggested remedies and in the summary of this report facts will be brought out which will at least be suggestive of channels into which legislation, but more effectually public sentiment, may be directed. Certainly, with the aid of the wisdom of some of the best minds in Europe and America, and of men having the largest experience, these directions should have their influence.

One of the agents of the Bureau reports as the result of interviews had with leading economists in Europe the following as the predomi nant features of modern industrial development among the producing nations: (1) The influence of the increased facilities for transportation and international communication. (2) The steady progress of rising wages, contemporaneous with declining profits. (3) The enlargement of the circle of producing nations to such extent as to make the means of production far in excess of the needs of consumption. The factors responsible for this state of affairs are

(a) The desire to participate in the large profits made by those first in the field.

(b) The continuous flow of precious metals after the discovery of the gold mines of California and Australia.

(c) The extension of the credit system, facilitating the advance of capital to those who knew the processes and secrets of manufacture, but who had not the ready money to commence business on their own account.

(d) The establishment of protective tariffs in most of the western European countries and the United States inducing sharp domestic competition and over-production.

(e) The abnormal stimulus given to industry in Germany by the accomplishment of German unity and by the payment by the Government of its domestic obligations from the war indemnity received from France.