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have changed it to “Never buy from anyone else what you can manufacture for yourself.”
The most familiar instance of this revolution of policy is seen in the English railway companies. Once a railway company was an association for getting a railway made, and running trains on it. An able essay written by Mr. Herbert Spencer forty years ago, protested strongly against any extension of a railway company's scope. Nowadays an up-to-date railway company runs docks, canals, ferries, steamships and hotels of its own, and carries on, besides, innumerable subsidiary businesses, and manufactures every conceivable kind of article, entirely by its own operatives, working under its own salaried 'staff. The directors of the London and North-Western Railway Company, for instance, with a comprehensiveness that would have staggered George Stephenson, lay it down as an axiom that the company “should be dependent on the outside world for as few as possible of the necessaries of life.” The manager at the company's great workshop-town of Crewe, “can think of nothing of importance that is imported in a manufactu except copper tubes for locomotive boilers." “ As we pass from shop to shop, here may be seen a steel canal boat in process of con. struction (for the company, it must be remembered, is a great canal proprietor); there, a lattice-work bridge is being fitted together. Further on, hydraulic pumps, cranes, and capstans crowd a huge shed. In another place, chains of all sorts and sizes, from cables to harness traces, are being forged by the ton ; close by, coal-scuttles and lamps are being turned out by the hundred. In all the works there is no stranger sight than a corner in the carpenters' shop, where two men are constantly employed making artificial limbs. Some two years back (that is, about 1885) the company embarked on this branch or manufacture, and undertook to supply legs and arms of the most finished workmanship to any man who lost his own in their service."
Nothing indeed is too small or too great for the North-Western to manufacture for itself. Crewe turns out a new locomotive engine every five days, and you may watch the company's own rails being rolled in its own steel works. At Wolverton, Mr. Acworth recounts how he “came upon a man engaged in etching designs upon the plates of ground glass that were to form the windows of lavatory compartments, and was told that the company had recently found that it could do this work for itself at half the price it had formerly paid " (pp. 60-1). Since 1881 the North-Western has been steadily eliminating the privately owned waggon. For over twenty years the companies have managed their own collection and delivery business. Nearly every company, too, now builds its own carriages. The Midland Railway prints its own tickets; whilst the Great Eastern goes a step further, and executes in its Stratford works nearly the whole of its own printing, including its gorgeous colored posters and pictorial advertisements. "In the printing works the
• The Railways of England, by W. M. Acworth. London : 1889, p. 59.
company keeps about 110 persons constantly employed, and is understood to save a good deal of money by doing so.
But the Midland has tried another experiment. At the great Trent stores are between three and four hundred thousand empty corn sacks, which the company furnishes for the conveyance of the corn from the farmer to the miller. Here, too, the contractor formerly existed and made a profit, until, a few years ago, the business was undertaken by the Company itself.
In every branch of railway management, in short, the elimination of the independent entrepreneur or contractor is being rapidly effected. It was impossible that this example, set by undertakings in many respects analagous to municipal departments, should have no influence on the business men who rule our Town Councils.
But although railway directors cannot be supposed to have been bitten by the tarantula of Collectivism, everyone will not be convinced by their remarkable change of policy. They resemble the members of a Town Council in not working for their own personal profit, and may, it is urged, therefore be indifferent whether their ambitious excursions into manufacturing industry actually pay their way. It is, therefore, interesting to find exactly the same revolution of business policy in large private undertakings. No better instance could be adduced than the history of a certain world-renowned firm of shipbuilders, whose rapid and continued expansion is one of the marvels of modern industry.
Twenty years ago this firm constructed in their own yard little more than the hulls of the vessels, contracting for all the thousand and one articles of equipment with numerous other manufacturing firms which specialized in these directions. Nowadays, this same shipbuilding firm manufactures every one of these articles—from triple-expansion engines down to the brass handles of the cabin lockers—in its own works; and turns out its vessels from keel to topmast entirely of its own construction. Instead of employing only shipwrights and platers, that firm now engages men of several hundred separate trades, who work under the salaried management of different heads of departments.
The following letter gives some of the dates and particulars of this industrial evolution :Letter from an eminent Shipbuilding Firm as to dates of Progressive Absorption of
Subsidiary Processes. I have yours of 11th inst., and have much pleasure in giving you the information you ask for respecting certain subsidiary work previously done for us by subcontractors but now carried out within our own works.
In 1879 we began to rig the ships built by us.
In 1880 we commenced plumbing work on board our ships, and to make our own sails.
In 1881 we opened an upholstery department to carry out that branch of work ourselves.
In 1882 we opened an electric light department.
It was in 1880 that we started our engine works, all the engines for vessels constructed by us up till then having been made in outside engine works. And even
* The Railways of England, by W. M. Acworth, p. 416.
after we opened the engine works certain subsidiary machinery was obtained from outside which we now construct ourselves.
For instance, in 1885, we first built crank shafts for main engines. In 1887 we began to manufacture manganese bronze propeller blades. In 1890 we began to make circulating pumps and engines, duplex pumps, steam steering engines, and brass sidelights for ships, and in the same year our smith work gradually merged into general forge work.
The history of great engineering establishments shows the same tendency. The progress of the largest firm in the United Kingdom shows how, during the present generation, business has been added to business, until the firm has become one of the largest in the world, mining its own ore, making its own pig-iron, smelting its own steel, building its own ships, erecting its own engines, constructing its own tools, and executing innumerable subsidiary works in every direction.
And, turning to quite another industry, we may cite the experience of a Birmingham manufacturer of metal goods, whose business has distanced all his rivals, and is now the largest and most prosperous in the trade. Thirty years ago he was completely under the dominion of the then prevalent idea of specialization. Everything required in his business which did not come strictly within the limited sphere of his own specialties he obtained by contract from other firms. Gradually his ideas changed, more and more of the subsidiary work was done in his own factory. He began to make his own tools and machines. He commenced to repair, and then to construct his own engines. When additions to his works were required, he picked his own clerk of the works, bought his own bricks, and engaged his own artizans. Year by year he has found himself becoming less and less dependent on outside contractors, until the other day he started making in his own essentially metal factory even the wooden hogsheads and paper boxes in which his goods were packed. And he himself attributes the continued profitableness of his business, and its very rapid expansion during times when his competitors have often been working at a loss, mainly to this progressive elimination of the contractor and subsidiary entrepreneur. The following memorandum describes these changes in his business :Memorandum by a Hardware Manufacturer, describing the Subsidiary Operations
now undertaken by his firm. I find that some time at the latter end of 1870 we first began to manufacture goods that we had previously bought from other manufacturers. These goods were chiefly unfinished work that was required to complete the various articles that we sold. In some cases I made the change because I thought I could make a better article, and possibly a cheaper one. But the important advantage was in obtaining quick deliveries, and, therefore, prompt execution of orders. Since that date we have bought less and less outside, and at the present time we make almost everything that we require.
About 1868 we began to do all our own repairs to machinery, plant, and buildings, and employed carpenters, fitters, machinemen, bricklayers, slaters, and painters.
In 1879 we began to make and design all the machinery that we required, and to erect new buildings. For some eight years earlier than this I had designed all machinery, and had it made either in Birmingham or Manchester. This alteration was made chiefly because the machines were special, and I did not want them used by competitors in my trade.
In 1884 we built large carpenters' fitting and erecting shops, to enable us to cquip ourselves a large factory we were then putting up. These shops employed some 100 hands, who for the last ten years have been fully employed.
In 1886 we began to make all the hogsheads (used for packing), packing cases, paper boxes, and everything that is required for the delivery of goods to our customers, We even make what is called wood wool, a substitute for straw. This department is a very large one, and uses up small forests of timber. This development has greatly facilitated the quick delivery of our goods, and has prevented a great waste caused by breakage in transit.
Space forbids any further multiplication of instances, or we might recount how one of the leading London publishers has lately become his own bookbinder, whilst another well-known firm combines in a single undertaking every stage of book-production, from the hiring of the author at fixed wages down to the sale of the volume by travelling pedlars. Or we might cite the colossal manufacturer of boots, buying his own hides in America, or his own gutta-percha in Borneo, and vending his wares, on the other hand, in his own retail shops all over the kingdom.
Economic criticism of the London County Council has perhaps suffered by the fact that this integration of processes, or union, under a single management, of many separate businesses, has hitherto scarcely attracted economic attention. It is, of course, by no means the same as the oft-described elimination of the small business in competition with the large. The tendency, in fact, is frequently the other way—a large specialized business becomes superseded because its customers begin to do the work for themselves, each of them in a much smaller way than the single separate factory. Thus an old-established firm of " finishers” of certain textilé manufactures have described how, during the past thirty years, they have one by one lost their best customers, not to any rivals in the “finishing” trade, but because the manufacturers were steadily tending to do their own “finishing." The essential feature of the change is the substitution of salaried work and management, for the entrepreneur laboring for his own profit. Business men have apparently discovered, contrary to ordinary economic opinion, that the economically most advantageous form of industrial organization is that in which the stimulus and temptation of profit is confined to as few of the actual workers as possible. So far is it, indeed, from being true that the hope of profit-making is the best or the chief stimulus to industrial efficiency that, from the mediæval master craftsman down to the modern captain of industry, the proportion of the population who work for profit has been steadily diminishing, The remarkable growth in the numbers of men directly employed by municipalities and other public bodies is, in fact, paralleled by an exactly similar growth in the numbers of men directly employed at salaries and wages by private establishments. The elimination of the contractor or subsidiary entrepreneur is the dominant fact in modern industry.
It is also to be noticed that the tendency is to shift the direction of industry from the producer to the consumer. The manufacturer whose business requires a steady supply of raw
material, particular kinds of tools, engines and buildings adapted to his processes, or packages ready at the very moment his wares are finished, finds that it is more convenient, less liable to mistake or delay, and, in the truest sense, more economical for him, as the consumer, to obtain all these things by his own directly employed staff, than to rely upon the competition of producing entrepreneurs or specialized firms. And thus, as the manufacturer absorbs the separate producers of the wares he consumes, he must not be surprised when the public, the ultimate consumers of the wares he produces, themselves apply the lesson, and, through their elected representatives, finally absorb him.*
Why is the elimination of the subsidiary entrepreneur more practical now than it was in the last generation ? It would take too long to examine the fundamental causes and conditions of this change in industrial organization. Most changes in social structure depend, in the long run, upon individual character ; possibly there has been a growth in the number of men who can be trusted to work efficiently and honestly as salaried managers instead of for their own personal profit. Possibly, too, as industrial organization becomes more complex, the advantage to the consumer in directly controlling the production of every article he requires, becomes more apparent. All improvements in social organization, toosteam, telegraph, the free use of the printing press, and now the telephone-facilitate the massing of workmen under single generals of industry, able efficiently to control larger and more heterogeneous and more complex industrial armies than could be managed by the captains of the past generation. Finally, as regards the substitution of the collective for the individual management of industry, it is evident that this will have been rendered increasingly practicable by the perfecting of democratic organization.
All these and other influences are but fragmentary suggestions towards the explanation of a change in industry of which the policy of public authorities in getting rid of the contractor is but one out of many manifestations. Formerly the best business management was that which itself managed least. Nowadays the best business management is that which can safely and efficiently administer most. The integration of productive processes under direct control of the consumers may or may not be economic heresy; the business history of England for the past thirty years indicates that it is industrial orthodoxy.
• Compare the steady expansion of co-operation by associations of consumerssee The Co-Operative Movement in Great Britain. By Beatrice Potter (London, 1891). The substitution, as the director of industry, of the consumer for the producer usually implies a clear economic gain in saving one of the processes of checking or examining. Mr. Herbert Spencer has himself described how the Admiralty was driven to set up its own flour mills, because it cost too much to maintain the necessary scrutiny of every sack of flour delivered by the contractors. The London County Council found that it involved no more of the time and attention of their architect and engineer actually to supervize work done by the Council's own foreman and mechanics than to keep the necessary close watch upon the contractor and his manager, who were anxious, not to make their men build well, but only quickly.