THE FACTORY SYSTEM AS AFFORDING MEANS OF EM- PLOYMENT TO

THE LABOURING POPULATION.

TO THE EDITOR OF THE SPECTATOR.

Edinburgh. 45th December 1843.

Saw—In my last letter I pointed out that the constant employment of the labouring population depended principally upon the production of the different commodities required for the consumption of the community being exactly suited to the demands and wants of that community—upon there being such an arrangement of the different labourers of the country in the various depart- ments of industry, as that the wants of one set of workmen would be supplied by the labours of another set of workmen ; the workmen themselves being thus the means of mutually calling each other into activity, and paying each other mutually by the produce of their respective labour. This proper distribution of industry I have called the balance of labour: and I think 1 have proved, that as long as this balance is maintained—which I am full3 of opinion would always be the case by the operation of the principle of demand and supply, pro- vided nothing artificial intervened to prevent it—there never could arise want of employment or overproduction, either from an increase of population or the application of machinery. But I have at the same time pointed out, that if this balance of labour were upset—that if, through some artificial stimulus, too much of the industry or capital of the country were directed to any one department—overproduction would be sure to take place in that department, followed by glut and stagnation of trade ; the consequence of which would react on every other branch of trade in the country, and thus cause a derange- ment of the whole industrial system of the community.

I have now to request your attention while I endeavour to point out the par- ticular departments of trade in which the partial overproductione generally take place. By analyzing the commercial crises which have occurred in this country, we find that these have invariably originated in what are called the great branches of manufacture' in our cotton, our linen, and our woollen ma- nufactures—in that class of manufactures which are fabricated by machinery, and which form our principal articles of export. There is seldom any stagna- tion in those trades and little manufactures which are principally carried on for the home market, and the artisans of which compose by far the largest part of our population. Our tailors, shoemakers, masons, carpenters, &c. seldom suffer from want of employment until they are acted upon by the stagnation In the manufacturing districts.

Every observer must have remarked that there is a continual tendency in our factory department of industry to extend itself beyond what is required to supply the wants of the consumer. The immense power of fabrication arising from steam-engines and machinery, gives the manufacturer an almost unli- mited power of production. A small increase in machinery and in the number of labourers required to work that machinery, is sufficient to fabricate articles for the consumption of thousands of additional customers. It is evident, with the most extensive foreign trade which could possibly exist, the immense power of production possessed by our mills could easily enable our manufacturers to -carry on their operations beyond the demands of all their customers. There is a certain limit in every state of trade, whether that trade be tree or restricted, beyond which the different fabrications of our factories will not he in request ; -but there is no limit to the multiplication of those fabrications. It is therefore easy to see bow every artificial stimulus to overproduction must act with pe- culiar force in mush departments of trade. Our factory system, under the present state of things, is the source both of our strength and weakness. By our excellence in this branch of industry, we are enabled not only to supply our own population with a greater number of a certain class of comforts at a cheaper rate than can be obtained by any of the other nations in the world, but we are also enabled to command, by means of our manufactures, the produce of other countries actually at a less cost of la- .hour to our own artisans than that by. which they can be obtained by the in- ;habitants of the countries in which they are raised. At the same time, how- ever, our factory system, by its continual tendency to overextend itself and to overproduce, is the chief cause of those commercial crises and that revulsion If trade by which our working population are so frequently thrown out of em-

pigment. If our manufactures could he kept within proper bounds, so that we might have the advantages arising from the great economy of labour carried out in them. without our being exposed to the evils ensuing from overproduc- tion and nvertrading, then would England he a prosperous nation. And I am fully of opinion, notwithstanding the great natural inclination of our manu- factures to overextend Themselves, that they would be kept within those pro- per hounds by the principle of demand and supply, were it not for that artificial stimulus to which Lhave 80 often alluded.

I shall now detail the manner in which overproduction takes place. Let no start from that period when trade is really prosi erous, without there being any- thing artificial in that prosperity. Every labourer in the country is at this time employed, not in merely working to fill warehouses, but in producing arti- cles really required for consumption. This is the moment vr hen the labour of

the country may he said to he balanced. and when the different workmen are rightly diatrihuted throughout the different departments of industry. Such was the state of the country in 1824 and Mt; and such I hope is the state of the country at present, Filth ugh 1 am afraid the seeds of derangement

are already sown. The manufacturers at such periods are making large pro- fits—perhaps the very highest among those whose capital is engaged in trade ;

for there is no business more profitable than that of a manufacturer, when not injured by overeompetition. Otheis seeing this—many of them without the necessary funds—rush into this department of trade, and construct new mills and machinery, which they are enabled to do by means of fictitious capital

supplied to them by the hanks. Labourers who were obtaining cons ant em- ployment and certain livelihoods, although moderate ones, are seduced by an

offer of higher wages to desert their old occupations and become spinners and

weavers. Shoemakers, tailors, masons, and agricultural workmen, who were mutually supporting each other by their labour, are brought into the factories.

Overproduction in the manufacturing department of industry as a matter of course ensues ; for the supply previous to this was exactly suited to the de- mand. The manufactured goods are not sold, but are piled up in warehouses both abroad and at home This continues for some time, by means of credits and artificial capital furnished by the banks, which enables those who are giving nothing in return to command the commodities furnished by the labour of others. Money, at least paper money, is plentiful; and the country is then

said to he in a highly flourishing condition. Such a state of things may exist for a few years, as long at least as 'he banks continue to discount the bills of

the manufacturers; but at last, the bankers take fright, and will no longer.give credits; and so the bubble bursts. The manufacturers are then no longer able to carry on ; bankruptcies ensue in every quarter ; the stored goods are taken out of Oa, warehouses both abroad and at home, and are thrown into the market, to be sold at whatever they will bring. This occasions such a glut and depreciation of price, that even those who have capital remaining dare not Con-

tinue to manufacture, for the sale of their goods at such times will not realize

one half the cost of' production. Then follow long periods of stagnation, pro- portionate, generally, to the length of time during which the artificial state of prosperity lasted. The manufacturing labourers are thrown idle, and, by ens deavouring to find other occupations, they occasion a glut in the labour-market of every other department of industry. A complete derangement of our indus- trial a) stem takes place; and things remain in this state until the extra quan- tity of goods which had been fabricated during the period of miscalled pros- perity has been exhausted, and until a new demand for our manufactures has sprung up.

Mr. COBDEN may talk as much as he pleases about trade reviving from:cora having become cheap. Every inte ligent manufacturer in the country well

knows that this is not the true cause of the late revival—knows that themtrig-

nation of trade which commenced at the end of 1836—at a period, too, when corn was cheap, and when there was no drain upon tne Bank for gold tomrply us with foreign corn—was entirely owing to overtrading during the previous

years ; and that the improvement which has now fortunately taken place can only he attributed to the contents of the warehouses being at la.t exhausted—to the bankrupt stocks bring cleared off—to the trade being relieved from the men of straw who intruded themselves with their fictitious capital, to toe great injury of those who really possessed funds—and to our manufactures being brought within their proper bounds—within those bounds prescribed by the demands of the consumers.

A change has taken place since the peace of 1815 in the mode of transacting busineaa in the manufacturing districts, which has perhaps more than anything also tended to cause glut and stagnation. Previous to this period, the manu,- facturer and the seller of the goods in the foreign market were quite distinct; each keeping himself exclusively to his own department. The manufacturer- attended solely to the business of fabrication : the merchant bought the goods

from the manufacturer out and out, and shipped them for the different markets in which he considered he could dispose of them with a profit. It was his pro-

vince to see that no more goods were sent to any one country than were in de- mand there, so that no glut took place. When the different markets were sufficiently supplied, then, as a matter of course, the merchant stopped buying from the manufacturer, who thus got due intimation that he must contract his operations. This was the good old mode in which our manufacturing tuna. actions were formerly carried on; and as long as it was followed, commercial depression from glut seldom took place ; and since it has been abandoned,-our manufacturing interest has never been in a really healthy state. But all this has been changed of late years. The manufacturer is not now content with the department of fabrication ; he must act an a merchant also. Instead, therefore, of waiting till his goods are bought from him by the met- chant, he consigns them to what is called a commmaion-agent, to be sold at the manufaciurer s risk, the commission-agent receiving a percentage op the sale; and, in order to enable the manufacturer to go on fabricating while his goods remain unsold, the commission-agent, who is frequently a man withou,t capital himself, grants his bill to the manufacturer for a half, or a third, or a fourth part of the value of the goods, as part payment of the price which-itis hoped will be realized. This bill is then discounted and rediscounted, renewed and rerenewed, in order to enable the manufacturer to continue his operations, while the goods for the sale of which it was granted are lying rotting, perhaps,

in the warehouses of Rio Janeiro or New York. In the mean time, the com- mission-agent, having made certain advances, by bill, to the manufacturer, re-

fuses to make more until he has received payment. This the manufacturer being unable to do, the coromiesionegent therefore throws all the goods which have been accumulating for some time in his warehouses into the market,

sells them for whatever they will bring, and so completely gluts the market. It very frequently happens, that the commission•agent and the manufacturer, both of whom are equally respon ible fur the hills, become bankrupt at theaame time ; when the goods are sold for the behoof of the creditors.

It is quite evident that this substitution of commission-agents for the old class of merchants, and bill transactions for cash transactions, is a mere device resorted to by the manufacturers, in their own eagerness to become rich, to enable them to extend their operations beyond those wholesome limits which prudence and good sense should point out to all those engaged in fabrication.-

viz. to measure their operations by the extent of their real sales, and when goods accumulate on their bands, to limit or even stop their work till this ac-

cumulation has been disposed of But the very reverse of this is the case with a great part of our manufacturers, who by means of their commission-agents,. their accommodation 'bills, and their paper-money, contrive at the very time they are selling the least to fabricate the most. The manufacturers theme's& are quite aware while this artificial system is going on, that a commercial crisis is inevitable ;. but every one is anxious to make a large fortune, and hopes that by some lucky chance be at least will be able to extricate himself, with large profits, brume the crash takes place.

While sucha system as this is continued, originating in and fostered by the exciting cause to which I shall afterwards direct your attention, it muet be apparent to every one that a balance of labour can never he maintained, that ourfactory interest can never he in a really prosperous condition. and that our menureeturing labourers ran never depend upon having constant employment for any continuous length of time. Under this system our factory workmen are the most miserable class of labourers in the community ; for their condition is always alternating between great prosperity and great misery. Otte year they have high wages and plenty of employment; and the next they are wander- ing threough the streets in rags, and dependent for their suppert upon the dona- tions of the charitable. The Corn-laws are unjust, and ought to Ire im- mediately aholisled ; but it is a farce to suppose that their removal would ever. Five prosperity to the manufacturing population, while husin.ss is carried on in the manner I have described.

There are many persons who, admitting that our manufactures are carried

beyond the profitable demands of consumption, maintain that this, although all evil, is necessary to the employment of the labourers el gaged there ; who if:they had not work in our factories would be without work at all. This doctrine, which I have frequently seen advanced by the Morning Chronic'e, I consider a most absurd one. I have already demonstrated, in my last letter, that if labour he only distributed so as to suit itself to the wants of the inhabit- slots of a country, the population will always have employment. Is it not then ridiculous to say that because shirts and pocket-bandkerehiefs are useful, sad afford profitable work to a certain number of labourers, a greater quantity of shirts and pocket-handkerchiefs Atould be fabricated than is required, merely for the purpose of affording employment to additional labourers, while there are innumerable other sources of occupation for the production of other articles Which are really desired by the community ?

' In short, Sir. to conclude this part of my subject, I will state that our manu-

facturing branch of industry is a source ot employment to the people like that of any other occupation or trade—like that of our tailors, our thoemakers, ur our masons: hut, like those trades, it must be kept within its proper bounds— Within those bounds which circumstances prescribe. If trade were perfectly free, and there were no tariffs to limit our sale in foreign countries, our menu- Stereo:ea= might undoubtedly be extended. But if we have nut those advan- tages, thee our factory industry must be confined to the supply of those cus- tomers who really are desirous and able to buy our goods of us. W hat right have we to expect that no manufactures should be made eve of but those that are fabricated in our own mills, and that the French and Germans should not send their cotton and woollen foods for their teas and sugars as well as we do ourselves? As much might our tailors and shoemakers be indignant because all the coats and shoes used in Paris, Berlin, and New York, are not fabricated in this country. All, 1 repeat. that we require from our factories, either as a means of adding to the national wealth or to the prosperity of the people, is, that the factories should supply our home-market with cheap and substantial articles of consumption, and enable us to obtain by exchange from abroad those commodities of foreign produce required for our own use. But to at- tempt to do more than this—to endeavour to extend our trade beyond this limit—to force our goods into markets where there is Ito demand for them, twin greater quantities than there is a demand—(and this our manufacturersare con- tinually doing'— a not only not necessary for the employment of the people, but on the contrary has alway tsthe effect of throwing the people out of tat- o, merit, by detatiging the balance of labour, and creating commercial crises, accompanied by glut, stagnation, misery, and waste of respite'. In using in this letter the phrase "overproduction," I need not remind you, Sir, that 1 do not hold the &etre tie of overproduction as that is generally under- stood On the contrary, 1 have endeavoured to point out that overproduction cannot take place in the aggregate; that, provided labour be properly distri- buted, the labourers of the community may work their fingers to the knuckles and yet have plenty of employment and plenty of demand for the produce of their labour. When using the word overproduction, 1 mean alone that partial overproduction which may take place in particular departments of industry, and which thus interferes with the production of commodities really in de- mand in other departments. I am led to be thus particular, perhaps to over- minuteness, from reading the letter of your correspondent S. S. of Leeds; who, in commenting on one of my lettere, has entirely misrepreseated my meaning (of course unintentionally). He has, in the commencement of his letter, rea- soned as if I were an apologist for the Corn-laws; and having raised up this giant of his own creation, he then proceeds to knock him down. This is a very common practice with controversialists, who, alien they find the rent argument of their opponents cannot be fairly met, fasten upon some expression, in order to raise ups superstructure which they think may be more easily demolished. 1 defy any one to point out a single message in any one of my letters which can be construed as being in favour of the Corn-laws. And most certainly, had such been my opinion, 1 should not have addressed myself to the Spectator, Which has been distinguished above every other paper in the kingdom fur its able and judicious advocacy of free trade. 1 am as much opposed to the Corn- laws as S. S. himself can be. 1 look upon them as being moat unjust and op- pressive ; and I quite concur with Dr. CHALMERS. " that their abolition is ab- solutely necessary to sweeten the breath of society." But, most undoubtedly I cannot subscribe to the doctrine of a certain part of the manufacturing class

i of Free-traders, who bold that nothing more is required than the removal of commercial restrictions; and that the prosperity of the country ikalways com- mensurate with the extent to which they, the master-manufacturers, can carry on their operations. I am of opinion there are other evils opposing to the full asgreat an obstacle to the happiness of the people as do the Corn-laws; and I wish to be allowed to direct your attention to one of those evils, and to con- eider it not as affecting one particular interest only but every class in the com- munity. I cannot subscribe to the doctrine of the League, that the Corn-law agitation should swallow up every other discussion.

[,,private note from the writer informs us that he expects to complete hie investigation in one more letter. We hope he will; for unused materials ac- annulate on our hands, and the meeting of. Parliament approaches.—End