On the Economy of Machinery and Manufactures

On a New System of Manufacturing

305.  A most erroneous and unfortunate opinion prevails amongst workmen in many manufacturing countries, that their own interest and that of their employers are at variance.  The consequences are that valuable machinery is sometimes neglected, and even privately injured—­that new improvements, introduced by the masters, do not receive a fair trial—­and that the talents and observations of the workmen are not directed to the improvement of the processes in which they are employed.  This error is, perhaps, most prevalent where the establishment of manufactories has been of recent origin, and where the number of persons employed in them is not very large:  thus, in some of the Prussian provinces on the Rhine it prevails to a much greater extent than in Lancashire.  Perhaps its diminished prevalence in our own manufacturing districts, arises partly from the superior information spread amongst the workmen; and partly from the frequent example of persons, who by good conduct and an attention to the interests of their employers for a series of years, have become foremen, or who have ultimately been admitted into advantageous partnerships.  Convinced as I am, from my own observation, that the prosperity and success of the master manufacturer is essential to the welfare of the workman, I am yet compelled to admit that this connection is, in many cases, too remote to be always understood by the latter, and whilst it is perfectly true that workmen, as a class, derive advantage from the prosperity of their employers, I do not think that each individual partakes of that advantage exactly in proportion to the extent to which he contributes towards it; nor do I perceive that the resulting advantage is as immediate as it might become under a different system.

306.  It would be of great importance, if, in every large establishment the mode of payment could be so arranged, that every person employed should derive advantage from the success of the whole; and that the profits of each individual should advance, as the factory itself produced profit, without the necessity of making any change in the wages.  This is by no means easy to effect, particularly amongst that class whose daily labour procures for them their daily food.  The system which has long been pursued in working the Cornish mines, although not exactly fulfilling these conditions, yet possesses advantages which make it worthy of attention, as having nearly approached towards them, and as tending to render fully effective the faculties of all who are engaged in it.  I am the more strongly induced to place before the reader a short sketch of this system, because its similarity to that which I shall afterwards recommend for trial, will perhaps remove some objections to the latter, and may also furnish some valuable hints for conducting any experiment which might be undertaken.

307.  In the mines of Cornwall, almost the whole of the operations, both above and below ground, are contracted for.  The manner of making the contract is nearly as follows.  At the end of every two months, the work which it is proposed to carry on during the next period is marked out.  It is of three kinds. 1.  Tutwork, which consists in sinking shafts, driving levels, and making excavations:  this is paid for by the fathom in depth, or in length, or by the cubic fathom. 2.  Tribute, which is payment for raising and dressing the ore, by means of a certain part of its v alue when rendered merchantable.  It is this mode of payment which produces such admirable effects.  The miners, who are to be paid in proportion to the richness of the vein, and the quantity of metal extracted from it, naturally become quicksighted in the discovery of ore, and in estimating its value; and it is their interest to avail themselves of every improvement that can bring it more cheaply to market. 3.  Dressing.  The ‘Tributors’, who dig and dress the ore, can seldom afford to dress the coarser parts of what they raise, at their contract price; this portion, therefore, is again let out to other persons, who agree to dress it at an advanced price.

The lots of ore to be dressed, and the works to be carried on, having been marked out some days before, and having been examined by the men, a kind of auction is held by the captains of the mine, in which each lot is put up, and bid for by different gangs of men.  The work is then offered, at a price usually below that bid at the auction, to the lowest bidder, who rarely declines it at the rate proposed.  The tribute is a certain sum out of every twenty shillings’ worth of ore raised, and may vary from threepence to fourteen or fifteen shillings.  The rate of earnings in tribute is very uncertain:  if a vein, which was poor when taken, becomes rich, the men earn money rapidly; and instances have occurred in which each miner of a gang has gained a hundred pounds in the two months.  These extraordinary cases, are, perhaps, of more advantage to the owners of the mine than even to the men; for whilst the skill and industry of the workmen are greatly stimulated, the owner himself always derives still greater advantage from the improvement of the vein.(1*) This system has been introduced, by Mr Taylor, into the lead mines of Flintshire, into those at Skipton in Yorkshire, and into some of the copper mines of Cumberland; and it is desirable that it should become general, because no other mode of payment affords to the workmen a measure of success so directly proportioned to the industry, the integrity, and the talent, which they exert.

308.  I shall now present the outline of a system which appears to me to be pregnant with the most important results, both to the class of workmen and to the country at large; and which, if acted upon, would, in my opinion, permanently raise the working classes, and greatly extend the manufacturing system.

The general principles on which the proposed system is founded, are

1.  That a considerable part of the wages received by each person employed should depend on the profits made by the establishment; and,

2.  That every person connected with it should derive more advantage from applying any improvement he might discover, to the factory in which he is employed, than he could by any other course.

309.  It would be difficult to prevail on the large capitalist to enter upon any system, which would change the division of the profits arising from the employment of his capital in setting skill and labour in action; any alteration, therefore, must be expected rather from the small capitalist, or from the higher class of workmen, who combine the two characters; and to these latter classes, whose welfare will be first affected, the change is most important.  I shall therefore first point out the course to be pursued in making the experiment; and then, taking a particular branch of trade as an illustration, I shall examine the merits and defects of the proposed system as applied to it.

310.  Let us suppose, in some large manufacturing town, ten or twelve of the most intelligent and skilful workmen to unite, whose characters for sobriety and steadiness are good, and are well known among their own class.  Such persons will each possess some small portion of capital; and let them join with one or two others who have raised themselves into the class of small master manufacturers, and, therefore possess rather a larger portion of capital.  Let these persons, after well considering the subject, agree to establish a manufactory of fire-irons and fenders; and let us suppose that each of the ten workmen can command forty pounds, and each of the small capitalists possesses two hundred pounds:  thus they have a capital of L800 with which to commence business; and, for the sake of simplifying, let us further suppose the labour of each of these twelve persons to be worth two pounds a week.  One portion of their capital will be expended in procuring the tools necessary for their trade, which we shall take at L400, and this must be considered as their fixed capital.  The remaining L400 must be employed as circulating capital, in purchasing the iron with which their articles are made, in paying the rent of their workshops, and in supporting themselves and their families until some portion of it is replaced by the sale of the goods produced.

311.  Now the first question to be settled is, what proportion of the profit should be allowed for the use of capital, and what for skill and labour?  It does not seem possible to decide this question by any abstract reasoning:  if the capital supplied by each partner is equal, all difficulty will be removed; if otherwise, the proportion must be left to find its level, and will be discovered by experience; and it is probable that it will not fluctuate much.  Let us suppose it to be agreed that the capital of L800 shall receive the wages of one workman.  At the end of each week every workman is to receive one pound as wages, and one pound is to be divided amongst the owners of the capital.  After a few weeks the returns will begin to come in; and they will soon become nearly uniform.  Accurate accounts should be kept of every expense and of all the sales; and at the end of each week the profit should be divided.  A certain portion should be laid aside as a reserved fund, another portion for repair of the tools, and the remainder being divided into thirteen parts, one of these parts would be divided amongst the capitalists and one belong to each workman.  Thus each man would, in ordinary circumstances, make up his usual wages of two pounds weekly.  If the factory went on prosperously, the wages of the men would increase; if the sales fell off they would be diminished.  It is important that every person employed in the establishment, whatever might be the amount paid for his services, whether he act as labourer or porter, as the clerk who keeps the accounts, or as bookkeeper employed for a few hours once a week to superintend them, should receive one half of what his service is worth in fixed salary, the other part varying with the success of the undertaking.

312.  In such a factory, of course, division of labour would be introduced:  some of the workmen would be constantly employed in forging the fire-irons, others in polishing them, others in piercing and forming the fenders.  It would be essential that the time occupied in each process, and also its expense, should be well ascertained; information which would soon be obtained very precisely.  Now, if a workman should find a mode of shortening any of the processes, he would confer a benefit on the whole party, even if they received but a small part of the resulting profit.  For the promotion of such discoveries, it would be desirable that those who make them should either receive some reward, to be determined after a sufficient trial by a committee assembling periodically; or if they be of high importance, that the discoverer should receive one-half, or twothirds, of the profit resulting from them during the next year, or some other determinate period, as might be found expedient.  As the advantages of such improvements would be clear gain to the factory, it is obvious that such a share might be allowed to the inventor, that it would be for his interest rather to give the benefit of them to his partners, than to dispose of them in any other way.

313.  The result of such arrangements in a factory would be,

1.  That every person engaged in it would have a direct interest in its prosperity; since the effect of any success, or falling off, would almost immediately produce a corresponding change in his own weekly receipts.

2.  Every person concerned in the factory would have an immediate interest in preventing any waste or mismanagement in all the departments.

3.  The talents of all connected with it would be strongly directed to its improvement in every department.

4.  None but workmen of high character and qualifications could obtain admission into such establishments; because when any additional hands were required, it would be the common interest of all to admit only the most respectable and skilful; and it would be far less easy to impose upon a dozen workmen than upon the single proprietor of a factory.

5.  When any circumstance produced a glut in the market, more skill would be directed to diminishing the cost of production; and a portion of the time of the men might then be occupied in repairing and improving their tools, for which a reserved fund would pay, thus checking present, and at the same time facilitating future production.

6.  Another advantage, of no small importance, would be the total removal of all real or imaginary causes for combinations.  The workmen and the capitalist would so shade into each other—­ would so evidently have a common interest, and their difficulties and distresses would be mutually so well understood that, instead of combining to oppress one another, the only combination which could exist would be a most powerful union between both parties to overcome their common difficulties.

314.  One of the difficulties attending such a system is, that capitalists would at first fear to embark in it, imagining that the workmen would receive too large a share of the profits:  and it is quite true that the workmen would have a larger share than at present:  but, at the same time, it is presumed the effect of the whole system would be, that the total profits of the establishment being much increased, the smaller proportion allowed to capital under this system would yet be greater in actual amount, than that which results to it from the larger share in the system now existing.

315.  It is possible that the present laws relating to partnerships might interfere with factories so conducted.  If this interference could not be obviated by confining their purchases under the proposed system to ready money, it would be desirable to consider what changes in the law would be necessary to its existence:  and this furnishes another reason for entering into the question of limited partnerships.

316.  A difficulty would occur also in discharging workmen who behaved ill, or who were not competent to their work; this would arise from their having a certain interest in the reserved fund, and, perhaps, from their possessing a certain portion of the capital employed; but without entering into detail, it may be observed, that such cases might be determined on by meetings of the whole establishment; and that if the policy of the laws favoured such establishments, it would scarcely be more difficult to enforce just regulations, than it now is to enforce some which are unjust, by means of combinations either amongst the masters or the men.

317.  Some approach to this system is already practised in several trades:  the mode of conducting the Cornish mines has already been alluded to; the payment to the crew of whaling ships is governed by this principle; the profits arising from fishing with nets on the south coast of England are thus divided:  one-half the produce belongs to the owner of the boat and net; the other half is divided in equal portions between the persons using it, who are also bound to assist in repairing the net when injured.

Notes: 

1.  For a detailed account of the method of working the Cornish mines, see a paper of Mr John Taylor’s Transactions of the Geological Society, vol. ii, p. 309.