the management, and who do really appoint and remove the managers, have no pecuniary interest in the good working of the concern beyond the shares they individually hold, which are always a very small part of the capital of the association, and in general but small part of the fortunes of the directors themselves; and the part they take in the management usually divides their time with many other occupations, of as great or greater importance to their own interest; the business being the principal concern of no one except those who are hired to carry it on. But experience shows, and proverbs, the expression of popular experience, attest, how inferior is the quality of hired servants, compared with the ministration of those personally interested in the work, and how indispensable, when hired service must be employed, is "the master's eye" to watch over it.

The successful conduct of an industrial enterprise requires two quite distinct qualifications: fidelity, and zeal. The fidelity of the hired managers of a concern it is possible to secure. When their work admits of being reduced to a definite set of rules, the violation of these is a matter on which conscience cannot easily blind itself, and on which responsibility may be enforced by the loss of employment. But to carry on a great business successfully, requires a hundred things which, as they cannot be defined beforehand, it is impossible to convert into distinct and positive obligations. First and principally, it requires that the directing mind should be incessantly occupied with the subject; should be continually laying schemes by which greater profit may be obtained, or expense saved. This intensity of interest in the subject it is seldom to be expected that any one should feel, who is conducting a business as the hired servant and for the profit of another. There are experiments in human affairs which are conclusive on the point. Look at the whole class of rulers, and ministers of state. The work they are entrusted with, is among the most interesting and exciting of all occupations; the personal share which they themselves reap of the national

benefits or misfortunes which befal the state under their rule, is far from trifling, and the rewards and punishments which they may expect from public estimation are of the plain and palpable kind which are most keenly felt and most widely appreciated. Yet how rare a thing is it to find a statesman in whom mental indolence is not stronger than all these inducements. How infinitesimal is the proportion who trouble themselves to form, or even to attend to, plans of public improvement, unless when it is made still more troublesome to them to remain inactive; or who have any other real desire than that of rubbing on, so as to escape general blame. On a smaller scale, all who have ever employed hired labour have had ample experience of the efforts made to give as little labour in exchange for the wages, as is compatible with not being turned off. The universal neglect by domestic servants of their employer's interests, wherever these are not protected by some fixed rule, is matter of common remark; unless where long continuance in the same service, and reciprocal good offices, have produced either personal attachment, or some feeling of a common interest.

Another of the disadvantages of joint stock concerns, which is in some degree common to all concerns on a large scale, is disregard of small gains and small savings. In the management of a great capital and great transactions, especially when the managers have not much interest in it of their own, small sums are apt to be counted for next to nothing; they never seem worth the care and trouble. which it costs to attend to them, and the credit of liberality and openhandedness is cheaply bought by a disregard of such trifling considerations. But small profits and small expenses, often repeated, amount to great gains and losses: and of this a large capitalist is often a sufficiently good calculator to be practically aware; and to arrange his business on a system, which if enforced by a sufficiently vigilant superintendence, precludes the possibility of the habitual waste, otherwise incident to a great business. But the

managers of a joint stock concern seldom devote themselves sufficiently to the work, to enforce unremittingly, even if introduced, through every detail of the business, a really economical system.

From considerations of this nature, Adam Smith was led to enunciate as a principle, that joint stock companies could" never be expected to maintain themselves without an exclusive privilege, except in branches of business which like banking, insurance, and some others, admit of being, in a considerable degree, reduced to fixed rules. This however is one of those over-statements of a true principle, often met with in Adam Smith. In his days there were few instances of joint stock companies which had been permanently successful without a monopoly, except the class of cases which he referred to; but since his time there have been many; and the regular increase both of the spirit of combination and of the ability to combine, will doubtless produce many more. Adam Smith fixed his observation too exclusively on the superior energy and more unremitting attention brought to a business in which the whole stake and the whole gain belong to the persons conducting it; and he overlooked various countervailing considerations which go a great way towards neutralizing even that great point of superiority.

Of these one of the most important is that which relates to the intellectual and active qualifications of the directing head. The stimulus of individual interest is some security for exertion, but exertion is of little avail if the intelligence exerted is of an inferior order, which it must necessarily be in the majority of concerns carried on by the persons chiefly interested in them. Where the concern is large, and can afford a remuneration sufficient to attract a class of candidates superior to the common average, it is possible to select for the general management, and for all the skilled employments of a subordinate kind, persons of a degree of acquirement and cultivated intelligence which more than compensates for their inferior interest in the result. Their greater

perspicacity enables them, with even a part of their minds, to see probabilities of advantage which never occur to the ordinary run of men by the continued exertion of the whole of theirs; and their superior knowledge, and habitual rectitude of perception and of judgment, guard them against blunders, the fear of which would prevent the others from hazarding their interests in any attempt out of the ordinary routine.

It must be further remarked, that it is not a necessary consequence of joint stock management, that the persons employed, whether in superior or in subordinate offices, should be paid wholly by fixed salaries. There are modes of connecting more or less intimately the interest of the employés with the pecuniary success of the concern. There is a long series of intermediate positions, between working wholly on one's own account, and working by the day, week, or year for an invariable payment. Even in the case of ordinary unskilled labour, there is such a thing as taskwork, or working by the piece: and the superior efficiency of this is so well known, that judicious employers always resort to it when the work admits of being put out in definite portions, without the necessity of too troublesome a surveillance to guard against inferiority in the execution. In the case of the managers of joint stock companies, and of the superintending and controlling officers in many private establishments, it is a common enough practice to connect their pecuniary interest with the interest of their employers, by giving them part of their remuneration in the form of a percentage on the profits. The personal interest thus given to hired servants is not comparable in intensity to that of the owner of the capital; but it is suf ficient to be a very material stimulus to zeal and carefulness, and, when added to the advantage of superior intelligence, often raises the quality of the service much above that which the generality of masters are capable of rendering to themselves. The ulterior extensions of which this principle of remuneration is susceptible, being of great

social as well as economical importance, will be more particularly adverted to in a subsequent stage of the present inquiry.

As I have already remarked of large establishments generally, when compared with small ones, whenever competition is free its results will show whether individual or joint stock agency is best adapted to the particular case, since that which is most efficient and most economical will always in the end succeed in underselling the other.

3. The possibility of substituting the large system of production for the small, depends, of course, in the first place, on the extent of the market. The large system can only be advantageous when a large amount of business is to be done it implies, therefore, either a populous and flourishing community, or a great opening for exportation. Again, this as well as every other change in the system of production is greatly favoured by a progressive condition of capital. It is chiefly when the capital of a country is receiving a great annual increase, that there is a large amount of capital seeking for investment: and a new enterprise is much sooner and more easily entered upon by new capital, than by withdrawing capital from existing employments. The change is also much facilitated by the existence of large capitals in few hands. It is true that the same amount of capital can be raised by bringing together many small sums. But this (besides that it is not equally well suited to all branches of industry) supposes a much greater degree of commercial confidence and enterprise diffused through the community, and belongs altogether to a more advanced stage of industrial progress.

In the countries in which there are the largest markets, the widest diffusion of commercial confidence and enterprise, the greatest annual increase of capital, and the greatest number of large capitals owned by individuals, there is a tendency to substitute more and more in one branch of industry after another, large establishments for small ones.