Chapter 27 Chapter 11 Industrial Organization (Continued) Mass Production

Section 1 For our present purposes, the typical industry is industry.Raw material economy. The advantages of large-scale production are most clearly expressed in industry; we may include under the heading of industry all enterprises engaged in the processing of raw materials into finished products of all kinds, suitable for sale in distant markets.The characteristic of industry that often best exemplifies the benefits of mass production is its ability to choose freely where it operates.Industry differs, on the one hand, from agriculture and other industries of natural products whose geographical distribution is determined by nature (such as mining, quarrying, fishing, etc.); This kind of industry cannot stay away from these consumers, even if it can stay away, at least there will be no great losses.

The chief benefits of mass production are the economy of technology, of machinery, and of raw materials: but the last is rapidly losing importance compared with the other two.It is true that an isolated worker throws away bits and pieces which, in the factory, are collected and put to good use; But such waste would not occur in local industry—even if it were in the hands of small manufacturers; nor in any branch of industry in modern England, except agriculture and domestic cooking. Many.There is no doubt that many of the most important advances of recent years have been made by the use of waste;

But this is generally due to special inventions, chemical or mechanical, the use of which is indeed facilitated by, but not directly dependent on, a subtle subdivision of labour. Next, when a hundred sets of furniture or clothes have to be cut out in exactly the same pattern, it is indeed worthwhile to spend a great deal of thought in planning the cutting of the boards or cloths, so that only a few scraps are wasted.But this should belong to the economy of technology; a plan can be well and carefully carried out if it can be used for many jobs.We can turn to the economy of machinery. Section 2 The benefits of large factories lie in: the use and improvement of specialized machinery, procurement and sales, specialized technology and the further division of enterprise management.Interest of small manufacturers in supervision.The development of modern knowledge has largely favored the small manufacturer.

In the neighborhood where many small industries belonging to the same branch of production are concentrated, they are still at a great disadvantage, owing to the rapid improvement and high cost of machinery, notwithstanding the assistance given to them by auxiliary industries.For, in a large factory, there are often many expensive machines specially made for the same small use, each of which requires a well-lit place, and thus adds considerably to the rent and general expenses of the factory; and the cost of repairing the machinery, as the machinery will soon have to be improved, a considerable depreciation expense must be amortized.A small manufacturer, therefore, is bound to do many things by hand or with imperfect machinery, though he knows that he can make them better and cheaper by the use of special machinery, if he can keep at it.

But, in the second place, a small manufacturer may not necessarily be acquainted with the finest machinery suitable for his purpose.Indeed, if he is engaged in an industry in which mass production has long been practiced, his machinery will be perfectly up to standard if he can afford to purchase the best machinery available on the market.In agriculture and cotton, for example, improvements in machinery are devised almost exclusively by the machine-builders; such improved machines are available to all, at most for the payment of royalties.However, industries which are still at an early stage of development, or which are rapidly changing in form, such as the chemical industry, watchmaking industry, and certain branches of the hemp and silk industry; and in order to satisfy some new desire or use a certain This is not the case in many industries, in which new raw materials are continually produced.

In these trades the new machinery and methods of manufacture are largely devised by the manufacturers for their own use.Every new modification is a new experiment which may fail; those which succeed must pay for the failure of themselves and of others; and though a small manufacturer may think he knows how to improve, he must consider, and can only The risk and expense of attempting such an improvement would be great, and would hinder his other work: even if he could accomplish it, he would not necessarily be able to make the best use of it.For instance, he may have invented a new and peculiar thing, which, if he could bring it to public attention, would have a great sale: but it would cost, I am afraid, thousands of pounds; He might just have to give up.For it was almost impossible for him to perform what Roscher called the modern industrialist's special task, which was to create new desires by showing people what they had never thought of before; A concept is suggested to people, and they are about to get it: in pottery enterprises, for example, small manufacturers are not even able to experiment with new patterns and designs, except to try them out.His chances are better with respect to improvements in manufacture of things which are already well sold.But, even so, he cannot obtain the full benefit of his invention unless he obtains a patent for it; or sells the right to use it; or borrows some capital to expand his business; nature, and employs his capital in that particular stage of manufacture to which his improvements are applied.However, these situations are exceptional after all: the increasing variety and high cost of machinery everywhere puts heavy pressure on small manufacturers.This situation has driven him out entirely from some trades, and is rapidly driving him out from others.

In some trades, however, all the advantages which great factories derive from the economy of machinery, are almost lost as soon as they reach a moderate size.For example, in the spinning of cotton and the weaving of calicoes, a smaller factory can maintain its place and keep in constant use the best-known machinery for each process of production: a large factory is thus no more than a few houses in one house. Small parallel mills; indeed, some cotton spinners, in extending their mills, find it best to add a weaving part.In this case great business has little or no economics of machinery; however, it generally has some in construction, especially of chimneys, in steam power, in the management and repair of engines and machinery. save.Large light industrial factories have their own departments of carpenters and technicians, thereby reducing repair costs and not delaying repairs when equipment breaks down.

Large factories—in fact, almost any kind of large business— There are almost always many benefits similar to the last one above, which small plants do not have.A large enterprise buys in bulk, and therefore its prices are low; its freight outlay is low, and it saves in many respects in transportation—especially if it has a railroad siding leading directly to the factory.It is often sold in large quantities, thus avoiding trouble; at the same time, it can also have a good price, because it has a large inventory, which is very convenient for customers, and customers can choose from these inventories and complete various orders; at the same time, large enterprises The reputation of the company makes customers have confidence in it.It can spend great sums on advertising, by employing traveling touts, and otherwise; its outlets furnish reliable information of its trade and private affairs in distant lands, and its own wares advertise to one another.

The economy of highly organized purchasing and selling is one of the chief causes of the present tendency of many enterprises in the same industry or trade to merge into one large association; One of the main reasons for cartel.Such an economy also often leads to the concentration of business risk on the large capitalists who distribute the work to the small capitalists. The third section continues. Second, it's about the economics of technology.Everything that has been said about the advantages of large factories in their ability to purchase specialized machinery applies equally to highly specialized techniques.A great factory can manage to keep every man it employs continually engaged in the most difficult work for which he is capable, and to reduce his sphere of work to such a degree that he acquires that dexterity and finesse by long and continual practice. .But much has been said about the advantages of the division of labor, we may turn to the indirect but important advantage which the manufacturer derives from employing many persons.

A large manufacturer has a much better chance than a small manufacturer of getting men of great talent to perform the most difficult parts of his work--on which the reputation of his business depends chiefly.This is sometimes a matter of mere handicraft in those trades which require great sensibility and ingenuity—such as house furnishing—and those which require very fine workmanship—such as fine mechanical construction. important.But in most enterprises its chief importance lies in giving the employer the facility of selecting foremen or heads of departments competent and reliable men whom he has confidence in, and they have confidence in him.Therefore, we will study the central problem of modern industrial organization——

That is, the pros and cons of further division of business management work. The fourth quarter continues. The head of a large business can reserve all his powers to meet the widest and most fundamental problems of his enterprise: he must, it is true, see whether his managers, clerks, and foremen are competent and doing well; Don't worry too much about details.He can thus keep his spirits fresh and clear in order to solve the most difficult and important problems of his enterprise; to study the wider movements of the market and the as-yet-unexpected results of current affairs at home and abroad; to try to improve his enterprise organization of internal and external relations. For most of this work the small employer has neither the ability nor the time for it; he cannot observe his trade so widely, or see so far; and he is often compelled to content himself with following in the footsteps of others.And he must spend a great deal of time doing what he is supposed to do; for, if he is to be successful, his mind must be of a high quality in some respects, and must have great powers of creation and organization; but, He still has to do many routine tasks. On the other hand, the small employer has his own interests.Everywhere he saw with his own eyes that no foreman or workman was slack, nor was his duty unclear, nor was vague words passed from one department to another.He saves him a great deal of book-keeping, and almost all of the troublesome checking systems which are necessary in large enterprises; importance. Although the small manufacturer must always be at a great disadvantage in obtaining information and conducting experiments, yet in this respect the general trend of progress is in his favour.For, in all matters of business knowledge, external economy is constantly increasing in importance compared with internal economy: newspapers, as well as trade and specialized publications of all kinds, are constantly informing him and supplying him with a wealth of information. The knowledge he needs--knowledge not so long ago was not available to anyone who could not afford to employ well-paid agents in many distant places.Secondly, business secrets are generally reduced, and the most important improvement in methods, after the trial stage, it is difficult to keep secrets for a long time, which is beneficial to small manufacturers. Industrial changes have depended less on practical experience, and more on widespread advances in scientific principles; It was also in his interest to publish it quickly.The small manufacturer, therefore, though not ahead in the race of progress, is not necessarily very far behind, if he has the time and ability to take advantage of modern conveniences to acquire knowledge.But if he can do this without neglecting the small but necessary details of business, he must be a very remarkable man indeed. Section 5. In trades which offer great economies to mass production, a firm may develop rapidly if it can easily sell its goods, but it often fails to do so. In agriculture and other trades, where the man who runs it does not gain much new economy by increasing the scale of his production, the enterprises in it are often for many years— If not many generations - keep about the same size.But this is not the case in industries where large firms have access to various very important benefits that small firms do not have.If a new entrepreneur wants to develop in such an industry, he must use his energy and adaptability, hard work and concern for small problems to deal with the relatively large capital and high degree of specialization. The wider economy of his competitors in relation to machinery and labor to a larger business.If at a later date he could double his production, and sell his goods at a price not far off from the old price, his profit would be more than doubled.This would enhance his credit with bankers and other astute lenders, enabling him to further expand his business, to greater economics, and greater profits: This in turn expands his business, and so on.At first it seemed impossible to see where he had to stop.Indeed, as his business expands, if his talent adapts to the larger sphere, as it did to the smaller sphere, if he retains his originality, versatility, and originality, perseverance, alertness, and good luck for many years in succession , then he may concentrate in his hands the entire output of this branch of industry in his area.If his goods were not too difficult to transport and sell, he might extend far from this region, to what would appear to be a limited monopoly; and a limited monopoly is a monopoly limited by : High prices induce the emergence of competing producers. But long before this purpose is attained, his progress will be halted by a decline in his taste for hard work, if not in his talent.If he can place his business in the hands of a successor who is almost as capable as himself, the prosperity of his business will last forever.However, the sustained and rapid development of his enterprise must meet two conditions that rarely exist simultaneously in the same industry.In many trades the individual producer can obtain a great "inside" economy by a great increase in the quantity of production; in many others the individual producer can easily sell that product; Both are available only in very few industries.This is not an accidental result, but almost an inevitable result. For, in those trades in which the economy of mass production is of paramount importance, the sale of most of them is difficult.No doubt there are important exceptions.For instance, the producer obtains a great deal of sale for commodities which are so simple and uniform that they can be wholesaled in large quantities.But most of these goods are agricultural products, and the rest are almost simple and common things, such as steel rails or calico, whose production can become routine just because they are simple and common things. No firm, therefore, can maintain itself in the industries producing these things unless it has the latest and expensive equipment for the main work; meanwhile, all subsidiary operations can be performed by auxiliary industries; There is not a great difference in the economies available to large and very large enterprises; and the tendency of large enterprises to crowd out small ones has gone so far as to exhaust the various means which at first promoted it. power of factors. But many of the commodities on which the tendency to increasing returns act strongly are in the main always particular goods: there are things in them which are intended to create new desires, or to satisfy old desires in new ways.Some of these goods are adapted to particular tastes, and therefore never have much marketability; others have subtle merits, and only slowly gain popularity with the public.In all such cases, the outlets of the individual enterprises are—in the main, as the case may be—limited to special markets which the enterprises gradually acquire at great expense; and although production itself may increase economically rapidly, the Not so with sales. Finally, the conditions of that industry which enable a new enterprise to quickly acquire new production economically are the conditions which enable that enterprise to be quickly replaced by new factories using new methods.Especially where the powerful economy of mass production is combined with the employment of new machinery and methods, a business which loses the extraordinary energy which enabled it to flourish, will soon decline very quickly; It is very rare that the entire life of a large enterprise can last for a long time. Section 6 Big Stores and Small Stores. The advantages of large business over small business are evident in industry, because, as we have said, large business has the special facility of concentrating a great deal of work in a small area.But there is also a strong tendency in many other industries for large firms to crowd out small ones.The retail industry in particular is changing, and small shopkeepers are losing ground. Let's look at all the benefits a large retail store has in competing with its neighbors, smaller retail stores.First of all, it obviously can buy goods on better terms, it can make the freight of goods cheaper, and can provide more varieties of designs and colors to cater to the preferences of customers.Second, it has a great technical economy: the small shopkeeper, like the small manufacturer, must spend a great deal of time doing routine tasks that do not require judgment; Assistants - Spend their full time using their judgment.Until recently, these benefits have generally been outweighed by the following greater conveniences available to small shopkeepers: The small shopkeeper can deliver goods to the customer's door; can adapt to the different tastes of the customer; knows the customer so well personally that he can safely lend capital to them on credit. But many of the changes that have taken place in recent years have favored the big stores. The habit of buying and selling on credit is dying out; the personal relationship between shopkeeper and customer is becoming more distant.The former change is a great step forward; the latter is in some respects a pity, but not entirely; for it is partly due to the fact that the real increase in self-esteem among the wealthy classes has made them no longer Mind the sycophantic gallantry they used to demand.Secondly, the increasingly precious time makes people unwilling to spend a few hours to buy things as before; they often prefer to spend a few minutes to write a long order list from various detailed price lists; The increasing convenience of mail ordering and mailing packages, among other methods, has made it easy for them to do so.When they did go shopping, the trams and local trains were often near by, and they could travel easily and cheaply to the great central stores of the neighboring cities.All these changes, even in the food business and other trades where it is not necessary to carry a great variety of stocks, have made it more difficult for the small shopkeeper than in the past to maintain his position. But, in many trades, the ever-increasing variety of commodities, and the deleterious effects of the rapid changes of fashion (now reaching almost every class of society), are even more unfavorable to the small tradesman, who cannot prepare himself There is a sufficient variety of stock for the customer to choose from, and if he is to follow closely any change in fashion, a greater proportion of his stock will be out of date than in a great store.Second, the increasing cheapness of manufactured goods in certain branches of clothing, furniture, and other industries has led people to buy ready-made goods in large stores rather than to have them made to order from small manufacturers or merchants near them. .Again, the great shopkeeper, not content with entertaining the travelers sent by the manufacturers to attract business, travels either himself or by agents to the most important industrial districts, both at home and abroad; the middleman.A tailor with moderate capital would show his customers samples of hundreds of the latest fabrics, and perhaps order the fabrics of his choice by telegraph, to be sent by post.Women often buy clothing materials directly from manufacturers, and then leave it to tailors who have no capital to do it.Small shopkeepers seem to have often maintained some status in the small repair trade: in the sale of perishable foodstuffs - especially to the working class - they kept on doing fairly well, partly because they could sell on credit Goods, and can collect small debts.In many trades, however, a firm of enormous capital would rather have many small stores than one large one.Purchasing—as well as whenever production requires it—is centralized under the management of the head office, and additional needs are supplied from the head store's stock, so that the branches are stocked in large quantities without the expense of maintaining large inventories.The manager of a branch store can then devote himself to the hospitality of customers; if he is an active man, having a direct interest in the success of his branch, he can be a formidable enemy of the shopkeeper; in many cases connected with clothing and food This is already the case in the industry. Section VII Transportation.Mines and pits. Next we may consider those industries whose geographical location is determined by the nature of the work. Country porters and a few grooms are almost the only remaining forms of small and medium-sized trades in the transport trade.Railroads and tramways increased in size, and the capital required to operate them increased even more.A large merchant fleet, under a unified management, derives all the benefits from its ability to load and discharge its cargo promptly and responsibly in many ports, and these benefits are increased by the increasing complexity and diversification of commerce; As far as the ship itself is concerned, the times are favorable to big ships, especially in the passenger transport industry.In some branches of the transport trade, therefore, the arguments in favor of state-run business are stronger than in any other business, except that of hauling out refuse, water, gas, and similar businesses. The competition between large mines and small mines, between large stone pits and small stone pits, does not show a tendency so clearly.In the history of the mining state there have been many very dark misfortunes; for the conduct of the mines depended on the integrity of the masters, and too much judgment of details and general principles, for state officials to run well: for the same reason , we may well expect the small mine or quarry to maintain its own place in competition with the larger mine or quarry, other things being equal.In some cases, however, the cost of deep shafts and the purchase of machinery and vehicles is too great for not very large businesses to afford. In agriculture there is not much division of labor, nor large-scale production; for the so-called "big farms" employ not a tenth of the labor that is concentrated in a medium-sized factory.This is partly due to natural causes, the change of seasons, and the difficulty of concentrating a large number of laborers in one place; but partly also from reasons connected with the various laws of tenancy.All these matters will best be dealt with when we deal with demand and supply in relation to land in Part VI.