45
DECLINE OF THE EMPLOYER
AT first sight it would seem that the employers must be the most powerful class in the community, because the others can do nothing without them. So they were, a hundred years ago. The dominant man then was not the capitalist nor the landlord nor the laborer, but the employer who could set capital and land and labor to work. These employers began as office employees; for business in those days was mostly on so small a scale that any middle class employee who had learnt the routine of business as a clerk or apprentice, in his father’s office or elsewhere, and who could scrape together a few hundred pounds, could enter into partnership with another thrifty employee, and set up in almost any sort of business as an employer.
But as spare money accumulated in larger and larger quantity, and enterprise expanded accordingly, business came to be done on a larger and larger scale until these old-fashioned little firms found their customers being taken away from them by big concerns and joint stock companies who could, with their huge capitals and costly machinery, not only undersell them, but make a greater profit out of their lower prices. Women see this in their shopping. They used to buy their umbrellas at an umbrella shop, their boots at a boot shop, their books at a book shop, and their lunches-out at a restaurant. Nowadays they buy them all at the same shop, lunch and all. Huge bazaars like Selfridge’s and Whiteley’s in London, and the great multiple shops in the provincial cities, are becoming the only shops where you can buy anything, because they are taking away the trade of the small separate shops and ruining the shopkeepers who kept them. These ruined shopkeepers may think themselves lucky if they get jobs in the multiple shops as shop assistants, managers of departments, and the like, when they are not too old for the change.
Sometimes the change is invisible. Certain retail trades have to be carried on in small shops scattered all over the place. For example, oil shops, public houses, and tobacconists. These look like separate small businesses. But they are not. The public houses are tied houses practically owned in dozens by the brewers. A hundred oil shops or tobacco shops may belong to a single big company, called a Trust. Just as the little businesses conducted by a couple of gentlemen partners, starting with a capital which they counted in hundreds, had to give way to companies counting their capital in thousands, so these companies are being forced to combine into Trusts which count their capital in millions.
These changes involve another which is politically very important. When the employers had it all their own way, and were in business for themselves separately and independently, they worked with what we should call small capitals, and had no difficulty in getting them. Capital was positively thrown down their throats by the bankers, who, as we shall see later, have most of the spare money to keep. Those were the days of arrogant cotton lords and merchant princes. The man who could manage a business took every penny that was left in the till when the landlord had had his rent, the capitalist (who was often himself) his interest, and the employees their wages. If he were a capable man, what remained for him as profit was enough to make him rich enough to go into Parliament if he cared to. Sometimes it was enough to enable him to buy his way into the peerage. Capital being useless and Labor helpless without him, he was, as an American economist put it, master of the situation.
When joint stock companies, which were formerly supposed to be suitable for banking and insurance only, came into business generally, the situation of the employers began to change. In a joint stock concern you have, instead of one or two capitalists, hundreds of capitalists, called shareholders, each contributing what spare money she or he can afford. It began with £100 shares, and has gone on to £10 and £1 shares; so that a single business today may belong to a host of capitalist proprietors, many of them much poorer people than could ever have acquired property in pre-company days. This had two results. One was that a woman with a £5 note to spare could allow a company to spend it, and thereby become entitled to, say, five shillings a year out of the gains of that company as long as it lasted. In this way Capitalism was strengthened by the extension of property in industry from rich people with large sums of spare money to poor people with small ones. But the employers were weakened, and finally lost their supremacy and became employees.
It happened in this way. The joint stock company system made it possible to collect much larger capitals to start business with than the old separate firms could command. It was already known that the employer with a thousand pounds worth of machinery and other aids to production (called plant) could be undersold and driven out of the market by the employer with twenty thousand pounds worth. Still, employers could get twenty thousand pounds lent to them easily enough if it was believed that they could handle it profitably. But when companies came into the field equipped with hundreds of thousands of pounds, and these companies began to combine into Trusts equipped with millions, the employers were outdone. They could not raise such sums among their acquaintances. No bank would allow them to overdraw their accounts on such a gigantic scale. To get more capital, they had to turn their businesses into joint stock companies.
This sounds simple; but the employers did not find it so. You, I hope, would not buy shares in a new company unless you saw what are called good names on the prospectus, shewing that half a dozen persons whom you believe to be wealthy, trustworthy, good judges of business, and in responsible social stations were setting you the example. If ever you do you will regret it, possibly in the workhouse. Now the art of getting at the people with the good names, and interesting them, is one at which practical employers are for the most part incurably unskilled. Therefore when they want to raise capital on the modern scale they are forced to go to persons who, having made a special profession of it, know where to go and how to proceed. These persons are called Promoters, though they usually call themselves financiers. They naturally charge a very high commission for their services; and the accountants and solicitors whose reputations inspire confidence put a high price on their names also. They all find that they can make so much by raising large capitals that it is not worth their while to trouble themselves with small ones; and the quaint result of this is that an employer finds it easier to raise large sums than small ones. If he wants only £20,000, the promoters and financiers shew him the door contemptuously: the pickings on so small a sum are beneath their notice. If, however, he wants £100,000, they will listen superciliously, and perhaps get it for him. Only, though he has to pay interest on £100,000, and stand indebted in that amount, he is very lucky if he receives £70,000 in cash. The promoters and financiers divide the odd £30,000 among themselves for their names and their trouble in raising the money. The employers are helpless in their hands: it is a case of take it or leave it: if they refuse the terms they get no capital. Thus the financiers and their go-betweens are now masters of the situation; and the men who actually conduct and order the industry of the country, who would have been great commercial magnates in Queen Victoria’s reign, are now under the thumbs of men who never employed an industrial workman nor entered a factory or mine in their lives, and never intend to.
And that is not all. When an employer turns his business into a joint stock company he becomes an employee. He may be the head employee who orders all the other employees about, engaging and dismissing them as he thinks fit; but still he is an employee, and can be dismissed by the shareholders and replaced by another manager if they think he is taking too much for his services. Against this possibility he usually protects himself by selling his establishment to the company at first for a number of shares sufficient to enable him to outvote all the discontented shareholders (each share carries a vote); and in any case his position as the established head who has made a success of the business, or at least persuaded the shareholders that he has, is a strong one. But he does not live for ever. When he dies or retires, a new manager must be found; and this successor is not his heir, but a stranger entering as a removable employee, managing the concern for a salary and perhaps a percentage of the profits.
Now an able employee-manager can command a high salary, and have a good deal of power, because he is felt to be indispensable until he is worn out. But he can never be as indispensable as the old employers who invented their own methods, and clung to their “trade secrets” jealously. Their methods necessarily resolved themselves into an office routine which could be picked up, however unintelligently, by those employed in it. The only trade secret that really counted was the new machinery, which was not secret at all; for all the great mechanical inventions are soon communized by law: that is, instead of the inventor of a machine being allowed to keep it as his private property for ever and make all the employers who use it pay him a royalty, he is allowed to monopolize it in this way under a patent for fourteen years only, after which it is at everybody’s disposal.
You can guess the inevitable result. It may take a genius to invent, say a steam-engine, but once it is invented a couple of ordinary workmen can keep it going; and when it is worn out any ordinary engineering firm can replace it by copying it. Also, though it may need exceptional talent, initiative, energy, and concentration to set up a new business, yet when it is once set up, and the routine of working it established, it can be kept going by ordinary persons who have learnt the routine, and whose rule is “When in doubt as to what to do, see what was done the last time, and do it over again”. Thus a very clever man may build up a great business, and leave it to his quite ordinary son to carry on when he is dead; and the son may get on very well without ever really understanding the business as his father did. Or the father may leave it to his daughter with the certainty that if she cannot or will not do the directing work herself, she can easily hire employee-employers who can and will, for a salary plus a percentage. The famous Krupp factory in Germany belongs to a lady. I will not go so far as to say that managerial ability has become a drug in the market, though, in the little businesses which are still conducted in the old way in the poorer middle class, the employer often has to pay his more highly skilled employees more than he gets out of the business for himself. But the monopoly of business technique which made the capitalist-employer supreme in the nineteenth century has gone for ever. Employers today are neither capitalists nor monopolists of managerial ability. The political and social power which their predecessors enjoyed has passed to the financiers and bankers, who monopolize the art of collecting millions of spare money. That monopoly will be broken in its turn by the communization of banking, to which we shall come presently.
Meanwhile you, putting all these developments together in your mind, can now contemplate the Middle Class understandingly. You know now how it sprang from the propertied class as an educated younger-son class without property, and supported itself by practising the professions, and by doing the business of the propertied class. You know how it rose to supreme power and riches when the development of modern machinery (called the Industrial Revolution) made business so big and complicated that neither the propertied class nor the working class could understand it, and the middle class men who did (called generally employers), became masters of the situation. You know how, when the first generations of employers had found out how to do this work, and established a routine of doing it which any literate man could learn and practise, and when all that remained was to find more and more capital to feed it as its concerns grew bigger and bigger, the supremacy passed from the employers to the financiers who hold it at present. You know also that this last change has been accompanied by a change in the status of the employer, who instead of hiring the land and capital of the propertied classes for a fixed payment of rent and interest, and taking as his profit all that remains, is now simply employed to manage for companies and trusts, the shareholders taking everything that is left after they have paid rent and wages (including his salary). You see that in applying for such posts he has to meet the competition not only of other middle class men as of old, but of clever sons of the working class, raised into the middle class by education at the public expense by our system of scholarships, which act as ladders from the elementary school to the University or the Polytechnic. You see that this applies not only to employers, but much more to their clerks. Clerking was formerly a monopoly of the less energetic sons of the middle class. Now that everybody has to go to school the middle class monopoly of reading, writing, and ciphering is gone; and skilled manual workers are better paid than clerks, being scarcer. As to parlormaids, what ordinary typist does not envy their creature comforts?
The Middle Station in Life no longer justifies the pæan in its praise which Daniel Defoe raised in Robinson Crusoe. For those who possess no special talent of a lucrative kind, it is now the least eligible class in the community.