THE CONTEMPORARY SCIENCE SERIES.
Edited by HAVELOCK ELLIS.

EVOLUTION
OF MODERN CAPITALISM.

THE EVOLUTION

OF

MODERN CAPITALISM

A STUDY OF MACHINE PRODUCTION.

BY

JOHN A. HOBSON, M.A.,

AUTHOR OF "PROBLEMS OF POVERTY."

THE WALTER SCOTT PUBLISHING CO., LTD.,
PATERNOSTER SQUARE, LONDON, E.C.
CHARLES SCRIBNER'S SONS,
153-157 FIFTH AVENUE, NEW YORK.
1902.

PREFACE.

In seeking to express and illustrate some of the laws of the structural changes in modern industry, I have chosen a focus of study between the wider philosophic survey of treatises on Social Evolution and the special studies of modern machine-industry contained in such works as Babbage's Economy of Manufactures and Ure's Philosophy of Manufactures, or more recently in Professor Schulze-Gaevernitz's careful study of the cotton industry. By using the term "evolution" I have designed to mark the study as one of a subject-matter in process of organic change, and I have sought to trace in it some of those large movements which are characteristic of all natural growth.

The sub-title, A Study of Machine-Production, indicates a further narrowing of the investigation. Selecting the operation of modern machinery and motors for special attention, I have sought to enforce a clearer recognition of organic unity, by dwelling upon the more material aspects of industrial change which mark off the last century and a half from all former industrial epochs. The position of central importance thus assigned to machinery as a factor in industrial evolution may be—to some extent must be—deceptive, but in bringing scientific analysis to bear upon phenomena so complex and so imperfectly explored, it is essential to select some single clearly appreciable standpoint, even at the risk of failing to present the full complexity of forces in their just but bewildering interaction.

In tracing through the Business, the Trade, and the Industrial Organism the chief structural and functional changes which accompany machine-development, I have not attempted to follow out the numerous branches of social investigation which diverge from the main line of inquiry. Two studies, however, of "the competitive system" in its modern working are presented; one examining the process of restriction, by which competition of capitals gives way to different forms of combination; the other tracing in periodic Trade Depressions the natural outcome of unrestricted competition in private capitalist production.

In some final chapters I have sought to indicate the chief bearings of the changes of industrial structure upon a few of the deeper issues of social life, in particular upon the problem of the Industrial Town, and the position of woman as an industrial competitor.

A portion of Chapters VIII., IX., and X. have already appeared in the Contemporary Review and in the Political Science Quarterly Review, and I am indebted to the courtesy of the editors for permission to use them.

I have also to acknowledge most gratefully the valuable assistance rendered by Dr. William Smart of Glasgow University, who was kind enough to read through the proofs of a large portion of this book, and to make many serviceable corrections and suggestions.

JOHN A. HOBSON.

CONTENTS

THE EVOLUTION OF MODERN CAPITALISM.

THE EVOLUTION
OF MODERN CAPITALISM.

CHAPTER I.ToC

INTRODUCTION.

§ 1. Science is ever becoming more and more historical in the sense that it becomes more studiously anxious to show that the laws or principles with whose exposition it is concerned not merely are rightly derived from observation of phenomena but cover the whole range of these phenomena in the explanation they afford. So likewise History is ever becoming more scientific in the sense that facts or phenomena are so ordered in their setting as to give prominence to the ideas or principles which appear to relate them and of which they are the outward expression. Thus the old sharp line, of distinction has slipped away, and we see there is no ultimate barrier between a study of facts and a study of the laws or principles which dominate these facts. In this way the severance of History and Science becomes less logically justifiable. Yet it is still convenient that we should say of one branch of study that it is historical in the sense that it is directly and consciously engaged in the collection and clear expression of facts or phenomena as they stand objectively in place or time without any conscious reference to the laws which relate or explain them; of another branch of study that it is scientific because it is engaged in the discovery, formulation, and correct expression of the laws according to which facts are related, without affecting to give a full presentment of those facts. The treatment in this book belongs in this sense to economic science rather than to industrial history as being an endeavour to discover and interpret the laws of the movement of industrial forces during the period of the eighteenth and nineteenth centuries.

It cannot, however, be pretended that any high degree of exactitude can attach to such a scientific study.

Two chief difficulties beset any attempt to explain industrial phenomena by tracing the laws of the action of the forces manifested in them. The first is that only a limited proportion of the phenomena which at any given time constitute Industry are clearly and definitely ascertainable, and it may always be possible that the laws which satisfactorily explain the statical and dynamical relations of these may be subordinate or even counteracting forces of larger movements whose dominance would appear if all parts of the industrial whole were equally known.

The second difficulty, closely related to the first, is the inherent complexity of Industry, the continual and close interaction of a number of phenomena whose exact size and relative importance is continually shifting and baffles the keenest observer.

These difficulties, common to all sciences, are enhanced in sociological sciences by the impossibility of adequate experiment in specially prepared environments.

The degree of exactitude attainable in industrial sciences may thus appear to be limited by the development of statistical inquiry. Since the collection of accurate statistics, even on those matters which are most important, and which lend themselves most easily to statistical description, is a modern acquirement which has not yet widely spread over the whole world, while the capacity for classifying and making right use of statistics is still rarer, it is held by some that in a study where so much depends upon accurate statements of quantity little advance is at present possible.

And it is, of course, true that until the advance of organised curiosity has provided us with a complete measurement of industrial phenomena over a wide area of commerce and over a considerable period of time, the inductive science of Economics cannot approach exactitude.

But a study which cannot claim this exactness may yet be a science, and may have its value. A hypothesis which best explains the generally apparent relation between certain known phenomena is not the less science because it is liable to be succeeded by other hypotheses which with equal relative accuracy explain a wider range of similar phenomena. It is true that in studies where we know that there exists a number of unascertained factors we shall expect a more fundamental displacement of earlier and more speculative hypotheses than in studies where we know, or think we know, that most of the phenomena with which we are concerned are equally within our ken: but the earlier scientific treatment, so far as it goes, is equally necessary and equally scientific.

In modern industrial changes many different factors, material and moral, are discernibly related to one another in many complex ways. According as one or other of the leading factors is taken for a scientific objective the study assumes a widely different character.

For example, since the end of Industry is wealth for consumption it would be possible to group the industrial phenomena accordingly as they served more fully and directly to satisfy human wants, or as they affected quantitatively or qualitatively the standard of consumption, and to consider the reflex actions of changed consumption upon modes of industrial activity. Or again, considering Industry to consist essentially of organised productive human effort, those factors most closely related to changes in nature, conditions, and intensity of work might form the centre of scientific interest; and we might group our facts and forces according to their bearing upon this. These points of view would give us different objective scientific studies.

Or, once more, taking a purely subjective standpoint, we might search out the intellectual expression of these industrial changes in the changing thought and feeling of the age, tracing the educative influences of industrial development upon (1) the deliberate judgments of the business world and of economic thinkers as reflected in economic writings; (2) politics, literature, and art through the changes of social environment, and the direct stimulation of new ideas and sentiments. The deeper and more important human bearings of the changes in industrial environment might thus be brought into prominence as well as the reaction by which, through the various social avenues of law, public opinion, and private organised activity, these intellectual forces have operated in their turn upon the industrial structure.

The crowning difficulty of an adequate scientific treatment consists in the fact that each and all of these scientific objects ought to be pursued simultaneously; that is to say, the whole of the phenomena—industrial, intellectual, political, moral, æsthetic—should be presented in their just but ever-changing proportions.

This larger philosophic treatment is only named in order that it may be realised how narrow and incomplete would be even the amplest fulfilment of the purpose indicated in the title of this book.

§ 2. Industrial science has not yet sufficiently advanced to enable a full treatment of the objective phenomena to be attempted.

The method here adopted is to take for our intellectual objective one important factor in modern industrial movements, to study the laws of its development and activity, and by observing the relations which subsist between it and other leading factors or forces in industry to obtain some clearer appreciation and understanding of the structure of industry as a whole and its relation to the evolution of human society. This central factor is indicated by the descriptive title peculiarly applied to modern industry, Capitalism. A clear view of the phenomena grouped together under the head of the Industrial Revolution cannot fail to give prominence to the changes that have taken place in the structure and functional character of Capital. Whatever transformations have taken place in the character of land, the raw material of industrial wealth, and of labour, or those abilities and faculties of man which operate upon the raw material, have occurred chiefly and directly through the agency of the enlarged and more complex use of those forms of material wealth which, while embodying some element of human effort, are not directly serviceable in satisfying human want.

Writers upon Political Economy have brought much metaphysical acumen to bear upon definitions of Capital, and have reached very widely divergent conclusions as to what the term ought to mean, ignoring the clear and fairly consistent meaning the term actually possesses in the business world around them. The business world has indeed two views of Capital, but they are consistent with one another. Abstractly, money or the control of money, sometimes called credit, is Capital. Concretely, capital consists of all forms of marketable matter which embody labour. Land or nature is excluded except for improvements: human powers are excluded as not being matter; commodities in the hands of consumers are excluded because they are no longer marketable. Thus the actual concrete forms of capital are the raw materials of production, including the finished stage of shop goods; and the plant and implements used in the several processes of industry, including the monetary implements of exchange. Concrete business capital is composed of these and of nothing but these.[1] In taking modern industrial phenomena as the subject of scientific inquiry it is better to accept such terminology as is generally and consistently received by business men, than either to invent new terms or to give a private significance to some accepted term which shall be different from that given by other scientific students, and, if we may judge from past experience, probably inferior in logical exactitude to the current meaning in the business world.

§ 3. The chief material factor in the evolution of Capitalism is machinery. The growing quantity and complexity of machinery applied to purposes of manufacture and conveyance, and to the extractive industries, is the great special fact in the narrative of the expansion of modern industry.

It is therefore to the development and influence of machinery upon industry that we shall chiefly direct our attention, adopting the following method of study. It is first essential to obtain a clear understanding of the structure of industry or "the industrial organism" as a whole, and of its constituent parts, before the new industrial forces had begun to operate. We must then seek to ascertain the laws of the development and application of the new forces to the different departments of industry and the different parts of the industrial world, examining in certain typical machine industries the order and pace of the application of the new machinery and motor to the several processes. Turning our attention again to the industrial organism, we shall strive to ascertain the chief changes that have been brought about in the size and structural character of industry, in the relations of the several parts of the industrial world, of the several trades which constitute industry, of the processes within these trades, of the businesses or units which comprise a trade or a market, and of the units of capital and labour comprising a business. It will then remain to undertake closer studies of certain important special outcomes of machinery and factory production. These studies will fall into three classes. (1) The influences of machine-production upon the size of the units of capital, the intensification and limitation of competition; the natural formation of Trusts and other forms of economic monopoly of capital; trade depressions and grave industrial disorders due to discrepancies between individual and social interests in the working of modern methods of production. (2) Effects of machinery upon labour, the quantity and regularity of employment, the character and remuneration of work, the place of women in industry (3) Effects upon the industrial classes in the capacity of consumers, the growth of the large industrial town and its influences upon the physical, intellectual, moral life of the community. Lastly, an attempt will be made to summarise the net influences of modern capitalist production in their relation to other social progressive forces, and to indicate the relations between these which seem most conducive to the welfare of a community measured by generally accepted standards of character or happiness.

§ 4. Since every industrial act in a modern community has its monetary counterpart, and its importance is commonly estimated in terms of money, it will be evident that the growth of capitalism might be studied with great advantage in its monetary aspect. Corresponding to the changes in productive methods under mechanical machinery we should find the rapid growth of a complex monetary system reflecting in its international and national character, in its elaborate structure of credit, the leading characteristics which we find in modern productive and distributive industry. The whole industrial movement might be regarded from the financial or monetary point of view. But though such a study would be capable of throwing a flood of light upon the movements of concrete industrial factors at many points, the intellectual difficulties involved in simultaneously following the double study, in constantly passing from the more concrete to the more abstract contemplation of industrial phenomena, would tax the mental agility of students too severely, and would greatly diminish the chance of a substantially accurate understanding of either aspect of modern industry. We shall therefore in this study confine our attention to the concrete aspect of capitalism, merely indicating by passing references some of the direct effects upon industrial methods, especially in the expansion and complexity of markets, of the elaborate monetary system of modern exchange.

§ 5. The inherent difficulty which besets every literary presentation of the study of a living and changing organism is here present in no ordinary degree. A book of physiology is necessarily defective in that it can neither present the just simultaneity of phenomena which occur together, nor the just sequence of phenomena which are successive. Diagrams may serve effectively to set forth tolerably simple simultaneity, but a complex diagram inevitably fails of its object; for it confuses the sight of one who seeks to simultaneously grasp the whole, and thus compels a successive examination of different parts which is generally inferior to skilled narration, in that it affords no security of the fittest order of examination of the parts. For certain simple relations between the movements of a few definite objects a working model may be serviceable; but when complex changes of shape, pace, and local relations exist, when intricate interaction takes place, and when new phenomena arise affecting by their presence all former ones, little can be effected by such visual presentment. Still less can a succession of diagrams assist us to realise the continuity of the working of such shifting forces as are presented in industrial movements.

Thus while the impossibility of adequate experimentation, the difficulties of scientific observations of phenomena so vast in scope and so intricate in their relations, make the student of sociological subjects more dependent upon printed records for his material than is the case in most other sciences, these printed records induce a sequence of thought antagonistic to the grasp of a living and moving unity. This cause is primarily responsible for the failure of many of the ablest and subtlest economic treatises to impress upon the reader a clear conception of the industrial world as a single "going concern." Each piece of the mechanism is clearly described, and the reader is informed how it fits into the parts which are most closely related to it, but no simultaneous grasp of the mechanism as a working whole is attained. When we graft upon the idea of a mechanism that character of continuous self-development which transforms it into an "organism," the synthesis of the changing phenomena is still more difficult to comprehend. These difficulties can only be overcome by a recognition that the scientific imagination must play a larger part here than it does in those sciences whose subject-matter is more amenable to direct observation. In the latter the chief function of the imagination will be the increase of knowledge by means of hypotheses which tentatively transcend the region of known facts.

In economic science, as Cairnes has ably shown, the use of hypothesis is much wider, serving in large measure as a substitute for experiment.[2] But the scientific imagination has another constant service to perform. Its exercise is constantly required by the economist, and in general by the sociologist, to gather into true relations of time, space, and causality those intricately connected phenomena which, though individually amenable to sensuous presentation, are not able to be thus presented as an aggregate in their right organic order.

The attempts to construct a deductive economic science upon a piece-meal basis by framing special and separate theories of wages, rent, value, the functions of money, and so forth, are now recognised to be in large measure failures precisely because they involve the fundamental scientific fallacy of supposing that the several parts of an organic whole can be separately studied, and that from this study of the parts we can construct a correct idea of the whole. As in economic theory so in the comprehension of industrial history, no detailed investigation of a number of different heaps of facts laboriously collected by intellectual moles will suffice for our purpose. To understand the evolution of the system of modern industry we must apply to the heaps of bare unordered facts those principles of order which are now recognised as the widest generalisations or the most valid assumptions derivable from other sciences, and endeavour without slavish conformity to the formulæ of these other sciences to trace in the growth of industrial organisms those general laws of development which seem common to all bodies of closely-related phenomena.

FOOTNOTES: