TOPICS OF THE DAY
THE NEW INDUSTRIAL GOSPEL
A
i MONTH ago there were references in the newspapers to an inquiry into industrial production in America conducted by two English engineers, both Cambridge men, Mr. Bertram Austin and Mr. W. Francis Lloyd. We understand that they undertook their mission of their own accord ; they were not sent by the Government or by any firm ; they went out as visitors paying their own expenses because they were impelled by a devouring curiosity and a thirst for a kind of knowledge that would be of advantage to their country. In the industrial domain they were like Browning's Grammarian ; they were " soul-hydroptic with a sacred thirst." We have written frequently about the revolution towards capital which has produced in America extraordinary advances in the standards of living and has simultaneously sent wages soaring upwards and reduced prices.
The secret of this remarkable phenomenon is well worth study and so far as we know it has been studied by no English observers more carefully or to more effect than by Mr. Austin and Mr. Lloyd. Their analysis seems to us to contain all the law and the prophets of successful industrial production under capitalism. We offer them our sincere congratulations on their high- spirited and excellent work. We have their Report before us and we propose briefly to summarize it, but let us add that as it was printed for private circulation it will be useless for our readers to ask us where they can - obtain copies. , We hope, however, that the report may be reprinted and distributed widely.
The authors sweep aside the easy and familiar explan- ation that the prosperity of America is due to the wealth of her natural resources, her great home market, and the influx of gold. They have come to the conclusion that she stumbled upon the secret of success when the scarcity of labour forced her to concentrate on the adoption of devices for saving time and trouble. The result of her highly modern methods is that employer and employed have been enriching themselves together. Take the position of the wage-earning class. In the past seven years deposits in the Savings Banks have been doubled. The hand-workers are also investors in the companies. The authors attribute the rise of the new methods more to Mr. Henry Ford than to any other man. We will interpolate here something which the authors do not say—that Mr. Ford started in business with the ideals of a benefactor rather than those of a money maker. He saw in the motor-car the popular vehicle of the future, and he made up his mind to discover the most serviceable design of motor-car for common use ; to produce it as cheaply as possible and to pay as high wages as possible. He thought little, he has told us himself, about his own profits, though, of course, he saw that if his plan succeeded it would bring him wealth. He never dreamed that it would be a gold mine as it has turned out to be. He has achieved his ideals ; he has paid the highest wages known anywhere in the world for similar work ; . and incidentally he has become a multi-millionaire. • The first principle the authors lay down is that the best policy is to reduce prices to the consumer as far as possible, at the same timer maintaining, or improving quality. This is, of course, merely the old doctrine of a large turnover and small but quick returns. The old doctrine proves to have been even sounder than it seemed. Obviously when prices are reduced more people can afford to- buy the article.. It has been learned. in America that the market increases with greater rapidity than could-have' been reckoned Upon at every -fresh reduction in price. In order to reduce prices every kind of labour-saving and time-saving device must be used. The tendency in America is to standardize thinks which formerly it would have been thought impossible to standardize. The manufacturers of house-heating furnaces, for instanee, have reduced the number of their models from 150 to 20. We have heard it said that there are now only four types of bedsteads in the whole of the United States !
The danger, of course, is that there Will come a general dullness into' the nation from Monotony of design and monotony of labour. It may be found that "universal plodding prisons up the nimble spirits in the arteries." In the end individual craftsmanship may have to come to the rescue of mass production.
The second principle is that the productive capacity per head of labour can be increased in exact proportion to the improvement in time andtrouble saving appliances. Upon the truth of this principle depends the American policy of ruthlessly scrapping plant which is in any way out of date. The- authors noticed that it was often considered more advantageous when scrapping plant to abandon both building and machinery rather than incur the expense of dismantling. In one organization the authors saw no member of the staff making any written entries of any description. Calculating and ledger. posting machines were universally employed.
The third principle is one which we have emphasized for years. Though obvious it is too often overlooked: It is that rapidity of turnover involves smaller capital requirements. A man who produces rapidly is producing economically and is therefore worth unusually high -wages: If he produces in, say, seven hours what the ordinary man produces in ten hours, he is saving for his firm every day, as compared with the other man, a man's share of the cost of overhead charges for three hours. The old-fashioned employer who cut a man down simply because he thought he was" earning too much " probably never thought of such a simple economic fact as that The fourth principle is that high wages do not necess- arily mean a high level of prices. In America it is accepted that the higher the wages the better it is for the com- munity, as the wage earners are able to spend more. In practice this means that the best plan is to pay by results. Under this system the general level of wages in America is now higher than in 1920, while wholesale prices are lower. The wage rate -had risen in 1924 to 128 per cent. above the pre-War level ; while the-whole- sale price level had dropped from 126 per cent. to 50 per cent, above pre-War level. The British figures_ are in striking contrast. In 1924 the wage level had dropped to 70 per cent. above the pre-War level, while the wholesale price level had dropped to 74 per cent.
The remaining principles are that it is important that every possible attention should be paid to the welfare of employees ; that a free exchange of ideas between competing firms is an advantage to everybody ; that promotion should be by merit only ; that research work is of prime importance; and that the elimination of waste is essential to national prosperity.
- The idea that competing firms should help one another is novel but seems fully to have justified itself on the ground that when any class of article becomes more popular everybody manufacturing that article shares in theincrease of wealth. -It is therefore wise for mann-. facturers in the same trade to create by joint effort a general prosperity for that trade. Moreover, monopoly prices tend to destroy the individual initiative of a firm: The object in _America is continuous reduction in price: Price-maintenance as a good in itself -is ridiculed. -
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