1930s >> 1930 >>

The economics of cheapness
Great Britain is losing her hold over the world market. That means producing firms are finding it harder to compete successfully against producers abroad. Every scheme is being tried to regain lost trade and to increase the quantity of goods sold. Industry to-day is carried on for the profit of the owners, and more trade, therefore, means more profit.

The most effective way to capture markets is to sell cheaper than your rivals. How can goods be sold at a lower price? Modern industry answers—”Reduce the time taken to produce them.” That is how the modern cry of Rationalisation pays tribute to the economics of Karl Marx.

Marx showed that the average amount of time taken under prevailing conditions to produce an article determined its value. So in order to sell cheaper, the manufacturers to-day use every possible method to lessen the time necessary to produce their wares.

Piece-work rates, bonus systems and other profit-sharing-schemes are adopted to arouse the worker to greater effort; to produce quicker; and to save waste. This enables the employer to produce more cheaply, whilst the workers are told they will share in the increased profits.

The “Pace-maker” and his function
The cotton trade to-day is in decline, and these speeding-up methods are being pushed in Lancashire to enable the employers to ensure their profits. The Manchester Guardian recently had an article suggesting piece-work and bonus systems as a remedy. The fixing of piece-work rates, however, we are told by the writer, is difficult, as it means getting “pace-makers,” or sloggers who can lead the rest by turning out more goods. The standards of price per piece can be fixed more profitably for the employers if really rapid workers are employed as “time setters” to cut down the time required to turn out each job. Thus the Taylor system in all its variations of efficiency is offered as a cure for “Lancashire ills.” Its adoption will certainly raise the employers’ profits, but will simply mean in practice that fewer workers are required to do the same amount of work. Any apparent increase in wages by sharing in the profits is only in actual practice a reduction of wages in relation to the increased amount of work performed. The employer’s share is that his profits are increased vastly. The worker is paid a fraction more than before for turning out a much larger product. The sole result is that the increased efforts of the workers reduce the “share” of the total product given back to the workers as wages. That is why prominent employers are so much in favour of these piece-work and profit sharing systems.

One feature of all these piece price and premium bonus ideas was noted by the Manchester Guardian writer; that is the policy of firms cutting down the piece rate once they find efficiency going up and adding to the workers’ wage. So almost as fast as the workers’ output is increased by slogging, the unit price comes down and the workers are back again to subsistence wages. Once the workers raise output it becomes the average standard for all to comply with in order to get the basic wage.

The Co-partnership fraud
Many leading employers have recently boomed another artful dodge to ensnare the workers into working in harmony with the employers. Co-partnership or shareholding by employees is the stale device which is being revived. The Economic League—that body of employers’ friends—issue many leaflets praising co-partnership as the way to social peace and workers’ prosperity.

One of the great examples of this scheme is the South Metropolitan Gas Works, who smashed their employees’ strike on the profit-sharing issue, and afterwards raised hours from 8 to 12 per day. This firm boasts that since “allowing” employees to own shares the efficiency has increased, the price of gas has fallen, and better still— profits have risen considerably. In this firm the profit-sharing scheme was made compulsory, so that all workers would take a “greater interest in their work.” It worked out in practice that fewer men were required to do the same amount of work and the tiny “share” of the workers in dividend at the end of the year proved that the owners had really shared in the added wages due to the workers for their increased efforts and output.

The workers get the “leavings”
Lord Leverhulme, of the Soap Trust, was a great believer in co-partnership. But on his death we found from the published will that he owned the entire two millions of ordinary shares himself. Not much co-partnership there ! And by “allowing” some workers to have special “employees’ shares,” receiving interest after the ordinary shareholders, Lord Leverhulme was able to pile up millions in profit. In his book on the “Six Hour Day,” he points out that he always insisted that the co-partner workers must share in the losses as well as profits. This policy was calculated to teach the workers the importance of helping the firm to make profits.

All co-partnership and similar schemes are put forward to kill any organised efforts by the workers to increase their share of the wealth produced. Under the spell of the “divi.” or bonus, the worker is to be enticed away from the struggle to push up his wages or in any way reduce the employers’ surplus.

The Co-partners get the sack
Cadbury’s and Rowntree’s are examples of “good” firms with profit-sharing policies. Recent efforts on the part of these companies to hold or increase their trade led them to use more machinery to reduce the labour costs. A reduction of workers employed resulted, and Rowntree appealed through the press for employers to give his superseded men a job. After all the work and efforts of the employees in these firms working hard to produce profits they were replaced by machines ! The co-partners were out of work ! Do you need more evidence of the function of bonus systems and co-partnership ?

The fruits of profit sharing
In the Ministry of Labour Gazette (July, 1930) appears a complete survey of all profit-sharing and co-partnership schemes operating during 1929. These schemes numbered 495, and were participated in by 260,000 employees out of 531,000 employed in these firms. The report tells us that “in all industries taken together nearly one half of the schemes started have come to an end.” We are also informed that “a considerable number of the schemes admit employees to participation in the profits only to the extent that they are able and willing to deposit savings with the firm or purchase shares.”

A famous firm practising co-partnership is the Eastman Kodak Co. Listen to Mr. George Eastman’s testimony of the profit­ able results to the firm :—

“In 1919 several thousand pounds’ worth of shares were distributed to our employees. One result was that after handing over to the workers one-third of my shares, the value of the remaining holdings soon climbed a third higher than the previous total. That was not the purpose in distributing the shares, but the result shows the business value of the act. Since the shares were distributed the market value has gone up over 150 per cent. Part of this increase in value unquestionably has been due to the wide distribution among workers and officials.”—(Co-partnership, Dec., 1927.)

The Chemical combine
Sir Alfred Mond (now Lord Melchett) is one of the chief apostles of the co-partnership device. He boasted at the annual meeting of the Imperial Chemical Industries, 1929, that 53,000 employees held shares, totalling about 850,000 shares. (This is about 17 shares each.) They are allowed to buy ordinary shares at market prices less 2/6 per share, and preference shares at the fixed price of 21/6 each. He “trusts” his employees not to sell their shares. Why so many employees put their savings into “their firm’s” shares is easily understood, as it is thought to be a means of being kept on or possibly useful in promotion. How little the workers own in the mighty Imperial Chemical Industries can be seen when it is found that the capital of this combine is over 76 millions. The co-partners have no control over “their” jobs nor any control over the business. What are a few shares owned by each worker against the huge amount owned by such Directors of the firm as Lord Melchett, Lord Birkenhead, Lord Colwyn, Sir Max Muspratt, Henry Mond, Marquess of Reading, Lord Weir, etc. ?

Longer hours for co-partners
How little Lord Melchett is interested in workers’ conditions can be seen by his efforts in Parliament to get a longer working day for miners. The Amalgamated Anthracite Collieries (owned by Imperial Chemicals) controls 12 coal concerns, and has paid huge dividends in recent years.

Who really owns most of the capital can be seen by its share-list, where dozens of shareholders own 10,000 shares and upwards each, and prominent holders like Guest, Keen & Nettlefolds own £395,000 in shares. Lady Buckland, the well-known miner, owns £395,000 in shares in company with two other aristocrats.

Is this an example of the widespread diffusion of capital that the Economic League and Mond refer to ?

How co-partnership rivets the employees to the firm which holds their “savings” can be seen from Mond’s speech at a co­ partnership luncheon :—

“What is the effect of making them shareholders? We saw some of it in the last General Strike. Not one workman in Brunner, Mond’s left his job ! while many were heard to observe that they did not intend to jeopardise their dividends at the dictates of any outside person. In the business with which I am connected we have been free from Labour disputes for fifty years.”

Lord Melchett is very reticent about the wages paid by his alkali works, mines and every other of the 50 concerns amalgamated into his trust. But the Chemical Workers’ Union are continually protesting’ against the “low” wages paid in that industry practically controlled by the combine.

The workmen co-partners have no control of the share market. Should they want to sell their shares just now what will they get? £1 ordinary shares have fallen from 45/- last year to 19/- to-day. And the 10/- deferred shares have fallen to 5/- each. (Observer, August 3rd, 1930).

The right “spirit” for slaves
Perhaps there is no better indication of Lord Melchett’s policy than the following- :

“After all, there is no more competitive spirit than that displayed by the British people. If you put them into a football match they will kill themselves every Saturday afternoon for nothing. Why not introduce the same spirit into industry?”—(Co-partnership, Dec., 1927.)

This is from his speech at the same co-partnership luncheon. How tragically true ! that is the spirit of industry—killing themselves for nothing !

Some of the conditions of the Imperial Chemical’s co-partners’ scheme are interesting :

“The scheme is an investment one, and while no absolute restriction is placed upon the workers, they will not be expected to speculate with their shares. The directors reserve the right to refuse to allot further shares to a worker who does not enter into the right spirit of the scheme.
The maximum individual allotment will be such number of shares as can he purchased by an expenditure of a sum not exceeding 20 per cent. of the annual wages or salary of the employee. To this 20 per cent. an additional 1 per cent, for each year of service above five may be added.”—(Co-partnership, Dec., 1927.)

The conditions are, of course, laid down by the firm ! The worker must enter into “the right spirit,” and he must not buy (even if he could afford it) too many shares. Perhaps he might then give up working and, like the real “partners,” live upon profits !

The purpose behind Imperial Chemicals “profit sharing” can be gleaned from the following paragraph : —

“This departure from the normal method of dealing with manual workers is described in the current issue of the Imperial Chemical Industries Magazine as an “experiment,” the continuance of which must depend on its economic result. The creation of the Staff Grade will involve a heavy initial cost which must be balanced by compensating increase of efficiency.—(Co-partnership, Sept., 1928.)

Lion and lamb shall unite!
Another well-known “Co-partnership” firm is the Brush Electrical Engineering Co. The Chairman of that concern, speaking of the results of co-partnership in his firm, says : —

“The scheme also gives us confidence of being able to maintain a fairly satisfactory dividend on the share capital, and it enables us to satisfy our customers that good service deserves a fair and adequate, though not excessive, reward for the shareholders and the staff of workers, both mental and manual.”—(Co-partnership, Sep., 1928.)

The same employer, speaking at the annual meeting of his firm this year, explained some of his principles thus : —

Greater economy by elimination of waste.
Higher efficiency by elimination of inefficient machinery and methods.
Larger output to neutralise low prices by removal of Trade Union restrictions.”—(Co-partnership, June, 1930.)

The last principle is striking, in view of the fact that the supporters of the movement, as the above magazine shows, are prominent Labour leaders, like Citrine, Ben Turner, E. F. Wise, E. L. Poulton (General Secretary of Boot and Shoe Workers). This last leader spoke at the Co-partnership Conference, May 10th, this year, and he served up this slop :—

“If the co-partnership principles are properly adopted, we shall soon get out of the slough in which we find ourselves at the present time.”

The financial steam roller
One prominent co-partner advocate is Angus Watson, of the Newcastle firm selling Skipper Sardines. His firm was recently bought out by the monster international trust, Unilever, Ltd. Angus Watson resigned as Director, and commented very bitterly on the effects of combination of firms and rationalisation. The worker who had played his part building up the firm’s assets was ruthlessly pushed out by machinery and the power of capital. What can copartnership do in face of the modern International Trust?

Edward Cadbury, the cocoa manufacturer, admits our indictment. Speaking at the Quaker Employers’ Conference :—

“He said they would all agree that the workman ought to have some voice in the management, but at present there was no way in which he could be given any effective control in large scale industry; stressing the words ‘effective control’.”—(Co-partnership, Sept., 1928.)

Reviewing the Life of Lord Leverhulme, by his son, the same paper says :—

“Lord Leverhulme’s ideas did not extend to giving any share of the control to the workers. In his particular case he did not see the reason, and perhaps there was not the demand.”

All the evidence we have produced shows that copartnership and profit-sharing schemes are merely another method of inducing the workers to continue a system in which the real control and ownership is in the hands of the employers and in which all the work must be carried on by the workers.

C.