As time goes on, invention and discovery may still further narrow the list of such articles and services, but probably never to such an extent as to make the monopoly problem one of little importance to the economist. * REFERENCES FOR COLLATERAL READING *Jenks, The Trust Problem; Report of United States Industrial Commission, Vols. I., II., XIII. and XVIII.; * Meade, Trust Finance; Clark, Control of Trusts; * Ripley, Trusts, Pools and Corporations; Montague, Trusts of To-Day; Moody, Truth about the Trusts; * Reports of the Commissioner of Corporations; Tarbell, History of the Standard Oil Company; Montague, The Standard Oil Company; Jacobstein, The Tobacco Industry in the United States; Berglund, The United States Steel Corporation. CHAPTER XXIII PLANS OF ECONOMIC REFORM 218. Four Plans of Economic Reform. The industrial system which has been described and analyzed in the preceding chapters leaves much to be desired. In proceeding now to consider different plans for its reform, we shall confine our survey to the four proposals that seem, at the present time, to merit most serious attention, that is, profitsharing, labor copartnership, land nationalization and socialism. 219. Profit-sharing. One defect charged against the present industrial system is that workmen, upon whose labor and fidelity the success of business undertakings so largely depends, receive no share of profits. Wages constitute usually their sole compensation, irrespective of the gains of the entrepreneur who employs them. To give workmen a keener interest in their work various expedients have been devised, all of which may be described as forms of profit-sharing. One of the simplest methods of profit-sharing is that which causes wages to vary on a sliding scale with the price of the product. This has long been common in the mining and iron and steel industries of Great Britain, and is not unusual in the same industries in the United States. It is, however, open to grave objections, unless standard rates of wages are established as a minimum below which earnings are not to be depressed, no matter how low the price of the product may become. In every branch of industry prices are subject to variation and tend at times to fall below the normal expenses of production. The force which is relied upon to restore them at such periods is the unwillingness of entrepreneurs to continue production at a loss. Under the sliding-scale system, wages, a principal item among the expenses of production, fall as prices fall. The consequence may be that entrepreneurs can still produce at a profit even when the price is too low to afford a fair return to wage-earners. Under such circumstances the force relied upon to restore prices is removed and they may for some time remain below the level which permits a fair competitive return to all parties. A sliding-scale method of remuneration, which has not as its basis minimum wages, is thus a menace to the permanent well-being of the wage-earning class. Another objection to the sliding scale is that it assumes a constancy of relation between the price of the product and the amount of the profits that does not in fact exist. Thus, anthracite coal-mine owners in the United States objected to the application of the system to that industry by the award of the Strike Commission already referred to (Section 165) on the ground that their expenses of production were growing each year heavier as the mines grew deeper, and that higher prices in the future would add nothing to their profits and consequently give rise to no fund to be shared with their employees. Whether this position was justified in this particular case or not, there can be no doubt that changes in prices are too inaccurate indices of changes in profits to permit the extension of the slidingscale system to many branches of business. A less objectionable, if more complex, method of sharing profits is for the entrepreneur to appraise his own services as worth a certain wages of management and to agree to distribute all profits above this sum to his employees-including himself as salaried manager-in proportion to the wages which they respectively receive. Such a distribution of profits, if fairly carried out, offers the highest incentive to all employees to contribute their maximum to the PROFIT-SHARING 425 success of the business. If anything, it errs on the side of being overgenerous to workmen, since they are guaranteed their wages whether there are any profits to distribute or not, whereas the wages of management of the entrepreneur can be paid only when profits equal at least to this amount have been realized. To obviate this difficulty it has sometimes been attempted to scale down wages proportionately when losses result in businesses which have adopted the practice of sharing profits. Logical as such a plan may seem, it is open to the fundamental objection that it makes workmen suffer for the mistakes of their employers. So long as employees have no voice in the management of the business in which they are engaged, they may rightly demand standard wages. If the employer is willing to offer them in addition a share of his profits, they should and usually will show their appreciation by attending more carefully to his interests. They should not be asked to share losses, however, as this would interfere with that elimination of unfit employers upon which progress so largely depends. Besides the plans for sharing profits described above, there are dozens of others of varying degrees of complexity. In mercantile trade it is not unusual to compensate salesmen with a certain percentage of their gross sales in addition to their salaries. Corporations are increasingly in the habit of paying bonuses to their employees out of the profits of each year's business. Several of them have introduced elaborate plans, such as that of the United States Steel Corporation, for selling stock to their employees on favorable terms and paying them a premium in addition to the usual dividend on condition that they retain the stock and with it an interest in the success of the enterprise. Some of these plans have been adopted upon humanitarian grounds, but most of them are simply enlightened expedients for increasing the interest which hired workmen feel in the quality and quantity of their work. Modern business is a vast system of co-operation, and the principal criticism, from the point of view of production, that is to be urged against it is that the co-operation is so often grudging and half-hearted. Profit-sharing is a device for bridging over the gulf between employers and employees by making the incomes of both depend directly upon the amount of profits. When adopted as a supplement to the payment of wages at standard rates it merits only commendation. It increases the productiveness of labor by giving workmen a livelier interest in the results of their toil. It adds to wages and thus permits workmen to attain to higher standards of living at the same time that it facilitates the accumulation by them of capital. Finally, it renders the relations between employers and employees more cordial, and in this way prevents strikes and lockouts. Those who object to profit-sharing do so on the ground that it is a mere palliative, when what is needed is a radical change in the present industrial system. To judge of the soundness of this criticism we must pass to a consideration of the other plans of economic reform. 220. Labor Copartnership or "Co-operation."-Labor copartnership, or "co-operation," as it is more commonly called, goes a step further than profit-sharing by making workmen partners in the businesses in which they are employed. It is a plan for dispensing with the services of the entrepreneur, or the risk-taker, and substituting for him a group of partners who both direct and carry out the undertakings in which they are engaged. Up to the present time labor copartnership has succeeded best in connection with trade, and especially retail trade. A brief description of its development in Great Britain, where it has enjoyed widest extension, will serve to introduce a discussion of its strong and weak features. Successful labor copartnership in England may be said to date from the year 1844, when the famous Rochdale co |