Capital Vol. III Part I
The Conversion of Surplus-Value into Profit and of the Rate of Surplus-Value
into the Rate of Profit
The assumption in this case, as in previous ones, is that no change takes place in the rate of surplus-value. It is necessary to analyse the case in its pure form. However, it might be possible for a specific capital, whose rate of surplus-value remains unchanged, to employ an increasing or decreasing number of labourers, in consequence of contraction or expansion caused by such fluctuations in the price of raw materials as we are to analyse here. In that case the quantity of surplus-value might vary, while the rate of surplus-value remains the same. Yet this should also be disregarded here as a side-issue. If improvements of machinery and changes in the price of raw materials simultaneously influence either the number of labourers employed by a definite capital, or the level of wages, one has but to put together 1) the effect caused by the variations of constant capital on the rate of profit, and 2) the effect caused by variations in wages on the rate of profit. The result is then obtained of itself.
But in general, it should be noted here, as in the previous case, that if variations take place, either due to savings in constant capital, or due to fluctuations in the price of raw materials, they always affect the rate of profit, even if they leave the wage, hence the rate and amount of surplus-value, untouched. They change the magnitude of C in s' (v/C), and thus the value of the whole fraction. It is therefore immaterial, in this case as well — in contrast to what we found in our analysis of surplus-value — in which sphere of production these variations occur; whether or not the production branches affected by them produce necessities for labourers, or constant capital for the production of such necessities. The deductions made here are equally valid for variations occurring in the production of luxury articles, and by luxury articles we here mean all production that does not serve the reproduction of labour-power.
The raw materials here include auxiliary materials as well, such as indigo, coal, gas, etc. Furthermore, so far as machinery is concerned under this head, its own raw material consists of iron, wood, leather, etc. Its own price is therefore affected by fluctuations in the price of raw materials used in its construction. To the extent that its price is raised through fluctuations, either in the price of the raw materials of which it consists, or of the auxiliary materials consumed in its operation, the rate of profit falls pro tanto. And vice versa.
In the following analysis we shall confine ourselves to fluctuations in the price of raw materials, not so far as they go to make up the raw materials of machinery serving as means of labour or as auxiliary materials applied in its operation, but in so far as they enter the process in which commodities are produced. There is just one thing to be noted here: the natural wealth in iron, coal, wood, etc., which are the principal elements used in the construction and operation of machinery, presents itself here as a natural fertility of capital and is a factor determining the rate of profit irrespective of the high or low level of wages.
Since the rate of profit is s/C, or s/(c + v), it is evident that every thing causing a variation in the magnitude of c, and thereby of C, must also bring about a variation in the rate of profit, even if s and v, and their mutual relation, remain unaltered. Now, raw materials are one of the principal components of constant capital. Even in industries which consume no actual raw materials, these enter the picture as auxiliary materials or components of machinery, etc., and their price fluctuations thus accordingly influence the rate of profit. Should the price of raw material fall by an amount = d, then s/C, or s/(c + v) becomes s/(C - d), or s/((c - d) + v). Thus, the rate of profit rises. Conversely, if the price of raw material rises, then s/C, or s/(c + v), becomes s/(C + d), or s/((c + d) + v), and the rate of profit falls. Other conditions being equal, the rate of profit, therefore, falls and rises inversely to the price of raw material. This shows, among other things, how important the low price of raw material is for industrial countries, even if fluctuations in the price of raw materials are not accompanied by variations in the sales sphere of the product, and thus quite aside from the relation of demand to supply. It follows furthermore that foreign trade influences the rate of profit, regardless of its influence on wages through the cheapening of the necessities of life. The point is that it affects the prices of raw or auxiliary materials consumed in industry and agriculture. It is due to an as yet imperfect understanding of the nature of the rate of profit and of its specific difference from the rate of surplus-value that, on the one hand, economists (like Torrens [R. Torrens, An Essay on the Production of Wealth, London, 1821, p. 28 et seq. — Ed.]) wrongly explain the marked influence of the prices of raw material on the rate of profit, which they note through practical experience, and that, on the other, economists like Ricardo [D. Ricardo, On the Principles of Political Economy, and Taxation, Third edition, London, 1821, pp. 131-138. — Ed.], who cling to general principles, do not recognise the influence of, say, world trade on the rate of profit.
This makes clear the great importance to industry of this elimination or reduction of customs duties on raw materials. The rational development of the protective tariff system made the utmost reduction of import duties on raw materials one of its cardinal principles. This, and the abolition of the duty on corn, was the main object of the English free-traders, who were primarily concerned with having the duty on cotton lifted as well.
The use of flour in the cotton industry may serve as an illustration of the importance of a price reduction for an article which is not strictly a raw material but an auxiliary and at the same time one of the principal elements of nourishment. As far back as 1837, R. H. Greg [13] calculated that the 100,000 power-looms and 250,000 hand-looms then operating in the cotton-mills of Great Britain annually consumed 41 million lbs of flour to smooth the warp. He added a third of this quantity for bleaching and other processes, and estimated the total annual value of the flour so consumed at £342,000 for the preceding ten years. A comparison with flour prices on the continent showed that the higher flour price forced upon manufacturers by corn tariffs alone amounted to £170,000 per year. Greg estimated the sum at a minimum of £200,000 for 1837 and cited a firm for which the flour price difference amounted to £1,000 annually. As a result,
"great manufacturers, thoughtful, calculating men of business, have said that ten hours' labour would be quite sufficient, if the Corn Laws were repealed". (Reports of Insp. of Fact., Oct. 1848, p. 98.)
The Corn Laws were repealed. So were the duties on cotton and other raw materials. But no sooner had this been accomplished than the opposition of the manufacturers to the Ten Hours' Bill became more violent than ever. And when the ten-hour factory day nevertheless became a law soon after, the first result was a general attempt to reduce wages.
The value of raw and auxiliary materials passes entirely and all at one time into the value of the product in the manufacture of which they are consumed, while the elements of fixed capital transfer their value to the product only gradually in proportion to their wear and tear. It follows that the price of the product is influenced far more by the price of raw materials than by that of fixed capital, although the rate of profit is determined by the total value of the capital applied no matter how much of it is consumed in the making of the product. But it is evident — although we merely mention it in passing, since we here still assume that commodities are sold at their values, so that price fluctuations caused by competition do not as yet concern us — that the expansion or contraction of the market depends on the price of the individual commodity and is inversely proportional to the rise or fall of this price. It actually develops, therefore, that the price of the product does not rise in proportion to that of the raw material, and that it does not fall in proportion to that of raw material. Consequently, the rate of profit falls lower in one instance, and rises higher in the other than would have been the case if products were sold at their value.
Further, the quantity and value of the employed machinery grows with the development of labour productivity but not in the same proportion as this productivity, i. e., not in the proportion in which this machinery increases its output. In those branches of industry, therefore, which do consume raw materials, i. e., in which the subject of labour is itself a product of previous labour, the growing productivity of labour is expressed precisely in the proportion in which a larger quantity of raw material absorbs a definite quantity of labour, hence in the increasing amount of raw material converted in, say, one hour into products, or processed into commodities. The value of raw material, therefore, forms an ever-growing component of the value of the commodity-product in proportion to the development of the productivity of labour, not only because it passes wholly into this latter value, but also because in every aliquot part of the aggregate product the portion representing depreciation of machinery and the portion formed by the newly added labour — both continually decrease. Owing to this falling tendency, the other portion of the value representing raw material increases proportionally, unless this increase is counterbalanced by a proportionate decrease in the value of the raw material arising from the growing productivity of the labour employed in its own production.
Further, raw and auxiliary materials, just like wages, form parts of the circulating capital and must, therefore, be continually replaced in their entirety through the sale of the product, while only the depreciation is to be renewed in the case of machinery, and first of all in the form of a reserve fund. It is, moreover, in no way essential for each individual sale to contribute its share to this reserve fund, so long as the total annual sales contribute their annual share. This shows again how a rise in the price of raw material can curtail or arrest the entire process of reproduction if the price realised by the sale of the commodities should not suffice to replace all the elements of these commodities. Or, it may make it impossible to continue the process on the scale required by its technical basis, so that only a part of the machinery will remain in operation, or all the machinery will work for only a fraction of the usual time.
Finally, the expense incurred through waste varies in direct proportion to the price fluctuations of the raw material, rising, when they rise and falling when they fall. But there is a limit here as well. The Factory Report for April 1850 maintained:
"One source of considerable loss arising from an advance in the price of the raw material would hardly occur to any one but a practical spinner, viz., that from waste. I am informed that when cotton advances, the cost to the spinner, of the lower qualities especially, is increased in a ratio beyond the advance actually paid, because the waste made in spinning coarse yarns is fully 15 per cent; and this rate, while it causes a loss of ½d. per lb. on cotton at 3½d. per lb., brings up the loss to 1d. per lb. when cotton advances to 7d." (Reports of Insp. of Fact., April 1850, p. 17.)
But when, as a result of the American Civil War, the price of cotton rose to a level unequalled in almost 100 years, the report read differently:
"The price now given for waste, and its re-introduction in the factory in the shape of cotton waste, go some way to compensate for the difference in the loss by waste, between Surat cotton and American cotton, about 12½ per cent.
"The waste in working Surat cotton being 25 per cent, the cost of the cotton to the spinner is enhanced one-fourth before he has manufactured it. The loss by waste used not to be of much moment when American cotton was 5d. or 6d. per lb., for it did not exceed ¾d. per lb., but it is now of great importance when upon every lb. of cotton which costs 2s. there is a loss by waste equal to 6d." [14] (Reports of Insp. of Fact., Oct. 1863, p. 106.)
II. APPRECIATION, DEPRECIATION, RELEASE AND TIE-UP OF CAPITAL
The phenomena analysed in this chapter require for their full development the credit system and competition on the world-market, the latter being the basis and the vital element of capitalist production. These more definite forms of capitalist production can only be comprehensively presented, however, after the general nature of capital is understood. Furthermore, they do not come within the scope of this work and belong to its eventual continuation. Nevertheless the phenomena listed in the above title may be discussed in a general way at this stage. They are interrelated, first with one another and, secondly, also with the rate and amount of profit. They are to be briefly discussed here if only because they create the impression that not only the rate, but also the amount of profit — which is actually identical with the amount of surplus-value — could increase or decrease independently of the movements of the quantity or rate of surplus-value.
Are we to consider release and tie-up of capital, on the one hand, and its appreciation and depreciation, on the other, as different phenomena?
The question is what we mean by release and tie-up of capital? Appreciation and depreciation are self-explanatory. All they mean is that a given capital increases or decreases in value as a result of certain general economic conditions, for we are not discussing the particular fate of an individual capital. All they mean, therefore, is that the value of a capital invested in production rises or falls, irrespective of its self-expansion by virtue of the surplus-labour employed by it.
By tie-up of capital we mean that certain portions of the total value of the product must be reconverted into elements of constant and variable capital if production is to proceed on the same scale. By release of capital we mean that a portion of the total value of the product which had to be reconverted into constant or variable capital up to a certain time, becomes disposable and superfluous, should production continue on the previous scale. This release or tie-up of capital is different from the release or tie-up of revenue. If the annual surplus-value of an individual capital C is, let us say, equal to x, then a reduction in the price of commodities consumed by the capitalists would make x — a sufficient to procure the same enjoyments, etc., as before. A portion of the revenue = a is released, therefore, and may serve either to increase consumption or to be reconverted into capital (for the purpose of accumulation). Conversely, if x + a is needed to continue to live as before, then this standard of living must either be reduced or a portion of the previously accumulated income = a, expended as revenue.
Appreciation and depreciation may affect either constant or variable capital, or both, and in the case of constant capital it may, in turn, affect either the fixed, or the circulating portion, or both.
Under constant capital we must consider the raw and auxiliary materials, including semi-finished products, all of which we here include under the term of raw materials, machinery, and other fixed capital.
In the preceding analysis we referred especially to variations in the price, or the value, of raw materials in respect to their influence on the rate of profit, and determined the general law that with other conditions being equal, the rate of profit is inversely proportional to the value of the raw materials. This is absolutely true for capital newly invested in a business enterprise, in which the investment, i. e., the conversion of money into productive capital, is only just taking place.
But aside from this capital, which is being newly invested, a large portion of the already functioning capital is in the sphere of circulation, while another portion is in the sphere of production. One portion is in the market in the shape of commodities waiting to be converted into money; another is on hand as money, in whatever form, waiting to be reconverted into elements of production; finally, a third portion is in the sphere of production, partly in its original form of means of production such as raw and auxiliary materials, semi-finished products purchased in the market, machinery and other fixed capital, and partly in the form of products which are in the process of manufacture. The effect of appreciation or depreciation depends here to a great extent on the relative proportion of these component parts. Let us, for the sake of simplicity, leave aside all fixed capital and consider only that portion of constant capital which consists of raw and auxiliary materials, and semi-finished products, and both finished commodities in the market and commodities still in the process of production.
If the price of raw material, for instance of cotton, rises, then the price of cotton goods — both semi-finished goods like yarn and finished goods like cotton fabrics — manufactured while cotton was cheaper, rises also. So does the value of the unprocessed cotton held in stock, and of the cotton in the process of manufacture. The latter because it comes to represent more labour-time in retrospect and thus adds more than its original value to the product which it enters, and more than the capitalist paid for it.
Hence, if the price of raw materials rises, and there is a considerable quantity of available finished commodities in the market, no matter what the stage of their manufacture, the value of these commodities rises, thereby enhancing the value of the existing capital. The same is true for the supply of raw materials, etc., in the hands of the producer. This appreciation of value may compensate, or more than compensate, the individual capitalist, or even an entire separate sphere of capitalist production, for the drop in the rate of profit attending a rise in the price of raw materials. Without entering into the detailed effects of competition, we might state for the sake of thoroughness that 1) if available supplies of raw material are considerable, they tend to counteract the price increase which occurred at the place of their origin; 2) if the semi-finished and finished goods press very heavily upon the market, their price is thereby prevented from rising proportionately to the price of their raw materials.
The reverse takes place when the price of raw material falls. Other circumstances remaining the same, this increases the rate of profit. The commodities in the market, the articles in the process of production, and the available supplies of raw material, depreciate in value and thereby counteract the attendant rise in the rate of profit.
The effect of price variations for raw materials is the more pronounced, the smaller the supplies available in the sphere of production and in the market at, say, the close of a business year, i.e., after the harvest in agriculture, when great quantities of raw materials are delivered anew.
We proceed in this entire analysis from the assumption that the rise or fall in prices expresses actual fluctuations in value. But since we are here concerned with the effects such price variations have on the rate of profit, it matters little what is at the bottom of them. The present statements apply equally if prices rise or fall under the influence of the credit system, competition, etc., and not on account of fluctuations in value.
Since the rate of profit equals the ratio of the excess over the value of the product to the value of the total capital advanced, a rise caused in the rate of profit by a depreciation of the advanced capital would be associated with a loss in the value of capital. Similarly, a drop caused in the rate of profit by an appreciation of the advanced capital might possibly be associated with a gain.
As for the other portion of constant capital, such as machinery and fixed capital in general, the appreciation of value taking place in it with respect mainly to buildings, real estate, etc., cannot be discussed without the theory of ground-rent, and does not therefore belong in this chapter. But of a general importance to the question of depreciation are:
The continual improvements which lower the use-value, and therefore the value, of existing machinery, factory buildings, etc. This process has a particularly dire effect during the first period of newly introduced machinery, before it attains a certain stage of maturity, when it continually becomes antiquated before it has time to reproduce its own value. This is one of the reasons for the flagrant prolongation of the working-time usual in such periods, for alternating day and night-shifts, so that the value of the machinery may be reproduced in a shorter time without having to place the figures for wear and tear too high. If, on the other hand, the short period in which the machinery is effective (its short life vis-à-vis the anticipated improvements) is not compensated in this manner, it gives up so much of its value to the product through moral depreciation that it cannot compete even with hand-labour.[15]
After machinery, equipment of buildings, and fixed capital in general, attain a certain maturity, so that they remain unaltered for some length of time at least in their basic construction, there arises a similar depreciation due to improvements in the methods of reproducing this fixed capital. The value of the machinery, etc., falls in this case not so much because the machinery is rapidly crowded out and depreciated to a certain degree by new and more productive machinery, etc., but because it can be reproduced more cheaply. This is one of the reasons why large enterprises frequently do not flourish until they pass into other hands, i. e., after their first proprietors have been bankrupted, and their successors, who buy them cheaply, therefore begin from the outset with a smaller outlay of capital.
It leaps to the eye, particularly in the case of agriculture, that the causes which raise or lower the price of a product, also raise or lower the value of capital, since the latter consists to a large degree of this product, whether as grain, cattle, etc. (Ricardo [D. Ricardo, On the Principles of Political Economy, and Taxation, Third edition, London, 1821, Chapter II. — Ed.]).
There is still variable capital to be considered.
Inasmuch as the value of labour-power rises because there is a rise in the value of the means of subsistence required for its reproduction, or falls because there is a reduction in their value — and the appreciation and depreciation of variable capital are really nothing more than expressions of these two cases — a drop in surplus-value corresponds to such appreciation and an increase in surplus-value to such depreciation, provided the length of the working-day remains the same. But other circumstances — the release and tie-up of capital — may also be associated with such cases, and since we have not analysed them so far, we shall briefly mention them now.
If wages fall in consequence of a depreciation in the value of labour-power (which may even be attended by a rise in the real price of labour), a portion of the capital hitherto invested in wages is released. Variable capital is set free. In the case of new investments of capital, this has simply the effect of its operating with a higher rate of surplus-value. It takes less money than before to set in motion the same amount of labour, and in this way the unpaid portion of labour increases at the expense of the paid portion. But in the case of already invested capital, not only does the rate of surplus-value rise but a portion of the capital previously invested in wages is also released. Until this time it was tied up and formed a regular portion which had to be deducted from the proceeds for the product and advanced for wages, acting as variable capital if the business were to continue on its former scale. Now this portion is set free and may be used as a new investment, be it to extend the same business or to operate in some other sphere of production.
Let us assume, for instance, that £500 per week were required at first to employ 500 labourers, and that now only £400 are needed for the same purpose. If the quantity of value produced in either case = £1,000, the amount of weekly surplus-value in the first case = £500 and the rate of surplus-value 500/500 = 100%. But after the wage reduction the quantity of surplus-value £1,000 - £400 = £600, and its rate 600/400 = 150%. And this increase in the rate of surplus-value is the only effect for one who starts a new enterprise in this sphere of production with a variable capital of £400 and a corresponding constant capital. But when this takes place in a business already in operation, the depreciation of the variable capital does not only increase the quantity of surplus-value from £500 to £600, and the rate of surplus-value from 100 to 150%, but releases £100 of the variable capital for the further exploitation of labour. Hence, the same amount of labour is exploited to greater advantage, and, what is more, the release of £100 makes it possible to exploit more labourers than before at the higher rate with the same variable capital of £500.
Now the reverse situation. Suppose, with 500 employed labourers, the original proportion in which the product is divided = 400v + 600s = 1,000, making the rate of surplus-value = 150%. In that case, the labourer receives £4/5 , or 16 shillings per week. Should 500 labourers cost £500 per week, due to an appreciation of variable capital, each one of them will receive a weekly wage = £1, and £400 can employ only 400 labourers. If the same number of labourers as before is put to work, therefore, we have 500v + 500s = 1,000. The rate of surplus-value would fall from 150 to 100%, which is ⅓. In the case of new capital the only effect would be this lower rate of surplus-value. Other conditions being equal, the rate of profit would also have fallen accordingly, although not in the same proportion. For instance, if c = 2,000, we have in the one case 2,000c + 400v + 600s = 3,000. The rate of surplus-value = 150%, the rate of profit = 600/2,400 = 25%. In the second case, 2,000c + 500v + 500s = 3,000. The rate of surplus-value = 100%, the rate of profit = 500/2,500 = 20%. In the case of already invested capital, however, there would be a dual effect. Only 400 labourers could be employed with a £400 variable capital, and that at a rate of surplus-value of 100%. They would therefore produce an aggregate surplus-value of only £400. Furthermore, since a constant capital of £2,000 requires 500 labourers for its operation, 400 labourers can put into motion only a constant capital of £1,600. For production to continue on the same scale, so that 1/5 of the machinery does not stand idle, £100 must be added to the variable capital in order to employ 500 labourers as before. And this can be accomplished only by tying up hitherto disposable capital, so that part of the accumulation intended to extend production serves merely to stop a gap, or a portion reserved for revenue is added to the old capital. Then a variable capital increased by £100 produces £100 less surplus-value. More capital is required to employ the same number of labourers, and at the same time the surplus-value produced by each labourer is reduced.
The advantages resulting from a release and the disadvantages resulting from a tie-up of variable capital both exist only for capital already engaged and reproducing itself under certain given conditions. For newly invested capital the advantages on the one hand, and the disadvantages on the other, are confined to an increase or drop in the rate of surplus-value, and to a corresponding, if in no way proportionate, change in the rate of profit.
The release and tie-up of variable capital, just analysed, is the result of a depreciation or appreciation of the elements of variable capital, that is, of the cost of reproducing labour-power.
But variable capital could also be released if, with the wage rate unchanged, fewer labourers were required due to the development of labour productivity to set in motion the same amount of constant capital. In like manner, there may reversely be a tie-up of additional variable capital if more labourers are required for the same quantity of constant capital due to a drop in productivity. If, on the other hand, a portion of capital formerly employed as variable capital is employed in the form of constant capital, so that merely a different distribution exists between the components of the same capital, this has an influence on both the rate of surplus-value and the rate of profit, but does not belong under the heading of tie-up and release of capital, which is here being discussed.
We have already seen that constant capital may also be tied up or released by the appreciation or depreciation of its component elements. Aside from this, it can be tied up only if the productive power of labour increases (provided a portion of the variable is not converted into constant capital), so that the same amount of labour creates a greater product and therefore sets in motion a larger constant capital. The same may occur under certain circumstances if productivity decreases, for instance in agriculture, so that the same quantity of labour requires more means of production, such as seeds or manure, drainage, etc., in order to produce the same output. Constant capital may be released without depreciation if improvements, utilisation of the forces of Nature, etc., enable a constant capital of smaller value to technically perform the same services as were formerly performed by a constant capital of greater value.
We have seen in Book II [English edition: Vol. II, Part III. — Ed.] that once commodities have been converted into money, or sold, a certain portion of this money must be reconverted into the material elements of constant capital, and in the proportions required by the technical nature of the particular sphere of production. In this respect, the most important element in all branches — aside from wages, i. e., variable capital — is raw material, including auxiliary material, which is particularly important in such lines of production as do not involve raw materials in the strict sense of the term, for instance in mining and the extractive industries in general. That portion of the price which is to make good the wear and tear of machinery enters the accounts chiefly nominally so long as the machinery is at all in an operating condition. It does not greatly matter whether it is paid for and replaced by money one day or the next, or at any other stage of the period of turnover of the capital. It is quite different in the case of the raw material. If the price of raw material rises, it may be impossible to make it good fully out of the price of the commodities after wages are deducted. Violent price fluctuations therefore cause interruptions, great collisions, even catastrophes, in the process of reproduction. It is especially agricultural produce proper, i. e., raw materials taken from organic nature, which — leaving aside the credit system for the present — is subject to such fluctuations of value in consequence of changing yields, etc. Due to uncontrollable natural conditions, favourable or unfavourable seasons, etc., the same quantity of labour may be represented in very different quantities of use-values, and a definite quantity of these use-values may therefore have very different prices. If the value x is represented by 100 lbs of the commodity a, then the price of one lb. of a = x/100; if it is represented by 1,000 lbs of a, the price of one lb. of a = x/1,000, etc. This is therefore one of the elements of these fluctuations in the price of raw materials. A second element, mentioned at this point only for the sake of completeness — since competition and the credit system are still outside the scope of our analysis — is this: It is, in the nature of things that vegetable and animal substances whose growth and production are subject to certain organic laws and bound up with definite natural time periods, cannot be suddenly augmented in the same degree as, for instance, machines and other fixed capital, or coal, ore, etc., whose reproduction can, provided the natural conditions do not change, be rapidly accomplished in an industrially developed country. It is therefore quite possible, and under a developed system of capitalist production even inevitable, that the production and increase of the portion of constant capital consisting of fixed capital, machinery, etc., should considerably outstrip the portion consisting of organic raw materials, so that demand for the latter grows more rapidly than their supply, causing their price to rise. Rising prices actually cause 1) these raw materials to be shipped from greater distances, since the mounting prices suffice to cover greater freight rates; 2) an increase in their production, which circumstance, however, will probably not, for natural reasons, multiply the quantity of products until the following year; 3) the use of various previously unused substitutes and greater utilisation of waste. When this rise of prices begins to exert a marked influence on production and supply it indicates in most cases that the turning point has been reached at which demand drops on account of the protracted rise in the price of the raw material and of all commodities of which it is an element, causing a reaction in the price of raw material. Aside from the convulsions which this causes in various forms through depreciation of capital, there are also other circumstances, which we shall mention shortly.
But so much is already evident from the foregoing: The greater the development of capitalist production, and, consequently, the greater the means of suddenly and permanently increasing that portion of constant capital consisting of machinery, etc., and the more rapid the accumulation (particularly in times of prosperity), so much greater the relative over-production of machinery and other fixed capital, so much more frequent the relative under-production of vegetable and animal raw materials, and so much more pronounced the previously described rise of their prices and the attendant reaction. And so much more frequent are the convulsions caused as they are by the violent price fluctuations of one of the main elements in the process of reproduction.
If, however, a collapse of these high prices occurs because their rise caused a drop in demand on the one hand, and, on the other, an expansion of production in one place and in another importation from remote and previously less resorted to, or entirely ignored, production areas, and, in both cases, a supply of raw materials exceeding the demand — particularly at the old high prices — then the result may be considered from different points of view. The sudden collapse of the price of raw materials checks their reproduction, and the monopoly of the original producing countries, which enjoy the most favourable conditions of production, is thereby restored — possibly with certain limitations, but restored nevertheless. True, due to the impetus it has had, reproduction of raw material proceeds on an extended scale, especially in those countries which more or less possess a monopoly of this production. But the basis on which production carries on after the extension of machinery, etc., and which, after some fluctuations, is to serve as the new normal basis, the new point of departure, is very much extended by the developments in the preceding cycle of turnover. In the meantime, the barely increased reproduction again experiences considerable impediments in some of the secondary sources of supply. For instance, it is easily demonstrated on the basis of the export tables that in the last thirty years (up to 1865) the production of cotton in India increases whenever there has been a drop in American production, and subsequently it drops again more or less permanently. During the period in which raw materials become dear, industrial capitalists join hands and form associations to regulate production. They did so after the rise of cotton prices in 1848 in Manchester, for example, and similarly in the case of flax production in Ireland. But as soon as the immediate impulse is over and the general principle of competition to "buy in the cheapest market" (instead of stimulating production in the countries of origin, as the associations attempt to do, without regard to the immediate price at which these may happen at that time to be able to supply their product) — as soon as the principle of competition again reigns supreme, the regulation of the supply is left once again to "prices". All thought of a common, all-embracing and far-sighted control of the production of raw materials gives way once more to the faith that demand and supply will mutually regulate one another. And it must be admitted that such control is on the whole irreconcilable with the laws of capitalist production, and remains for ever a pious wish, or is limited to exceptional co-operation in times of great stress and confusion.[16] The superstition of the capitalists in this respect is so deep that in their reports even factory inspectors again and again throw up their hands in astonishment. The alternation of good and bad years naturally also provides for cheaper raw materials. Aside from the direct effect this has on raising the demand, there is also the added stimulus of the previously mentioned influence on the rate of profit. The aforesaid process of production of raw materials being gradually overtaken by the production of machinery, etc., is then repeated on a larger scale. An actual improvement of raw materials satisfying not only the desired quantity, but also the quality desired, such as cotton from India of American quality, would require a prolonged, regularly growing and steady European demand (regardless of the economic conditions under which the Indian producer labours in his country). As it is, however, the sphere of production of raw materials is, by fits, first suddenly enlarged, and then again violently curtailed. All this, and the spirit of capitalist production in general, may be very well studied in the cotton shortage of 1861-65, further characterised as it was by the fact that a raw material, one of the principal elements of reproduction, was for a time entirely unavailable. To be sure, the price may also rise in the event of an abundant supply, provided the conditions for this abundance are more knotty. Or, there may be an actual shortage of raw material. It was this last situation which originally prevailed in the cotton crisis.
The closer we approach our own time in the history of production, the more regularly do we find, especially in the essential lines of industry, the ever-recurring alternation between relative appreciation and the subsequent resulting depreciation of raw materials obtained from organic nature. What we have just analysed will be illustrated by the following examples taken from reports of factory inspectors.
The moral of history, also to be deduced from other observations concerning agriculture, is that the capitalist system works against a rational agriculture, or that a rational agriculture is incompatible with the capitalist system (although the latter promotes technical improvements in agriculture), and needs either the hand of the small farmer living by his own labour or the control of associated producers.
Herewith follow the illustrations referred to above, taken from the English Factory Reports.
"The state of trade is better; but the cycle of good and bad times diminishes as machinery increases, and the changes from the one to the other happen oftener, as the demand for raw materials increases with it... At present, confidence is not only restored after the panic of 1857, but the panic itself seems to be almost forgotten. Whether this improvement will continue or not depends greatly upon the price of raw materials. There appear to me evidences already, that in some instances the maximum has been reached, beyond which their manufacture becomes gradually less and less profitable, till it ceases to be so altogether. If we take, for instance, the lucrative years in the worsted trade of 1849 and 1850, we see that the price of English combing wool stood at 1s. 1d., and of Australian at between 1s. 2d. and 1s. 5d. per lb., and that on the average of the ten years from 1841 to 1850, both inclusive, the average price of English wool never exceeded 1s. 2d. and of Australian wool 1s. 5d. per lb. But that in the commencement of the disastrous year of 1857, the price of Australian wool began with 1s. 11d., falling to 1s. 6d. in December, when the panic was at its height, but has gradually risen again to 1s. 9d. through 1858, at which it now stands; whilst that of English wool, commencing with 1s. 8d., and rising in April and September 1857 to 1s. 9d., falling in January 1858 to 1s. 2d., has since risen to 1s. 5d., which is 3d. per lb. higher than the average of the ten years to which I have referred... This shows, I think, one of three things — either that the bankruptcies which similar prices occasioned in 1857 are forgotten; or that there is barely the wool grown which the existing spindles are capable of consuming; or else, that the prices of manufactured articles are about to be permanently higher... And as in past experience I have seen spindles and looms multiply both in numbers and speed in an incredibly short space of time, and our exports of wool to France increase in an almost equal ratio, and as both at home and abroad the age of sheep seems to be getting less and less, owing to increasing populations and to what the agriculturalists call 'a quick return in stock', so I have often felt anxious for persons whom, without this knowledge, I have seen embarking skill and capital in undertakings, wholly reliant for their success on a product which can only be increased according to organic laws. ... The same state of supply and demand of all raw materials ... seems to account for many of the fluctuations in the cotton trade during past periods, as well as for the condition of the English wool market in the autumn of 1857, with its overwhelming consequences." [17] (R. Baker in Reports of Insp. of Fact., Oct. 1858, pp. 56-61.)
The halcyon days of the West-Riding worsted industry, of Yorkshire, were 1849-50. This industry employed 29,246 persons in 1838; 37,000 persons in 1843; 48,097 in 1845; and 74,891 in 1850. The same district had 2,768 mechanical looms in 1838; 11,458 in 1841; 16,870 in 1843; 19,121 in 1845 and 29,539 in 1850. (Reports of Insp. of Fact., 1850, p. 60.) This prosperity of the carded wool industry excited certain forebodings as early as October 1850. In his report for April 1851, Sub-Inspector Baker said in regard to Leeds and Bradford:
"The state of trade is, and has been for some time, very unsatisfactory. The worsted spinners are fast losing the profits of 1850, and, in the majority of cases, the manufacturers are not doing much good. I believe, at this moment, there is more woollen machinery standing than I have almost ever known at one time, and the flax spinners are also turning off hands and stopping frames. The cycles of trade, in fact, in the textile fabrics, are now extremely uncertain, and I think we shall shortly find to be true ... that there is no comparison made between the producing power of the spindles, the quantity of raw material, and the growth of the population" (p. 52).
The same is true of the cotton industry. In the cited report for October 1858, we read:
"Since the hours of labour in factories have been fixed, the amounts of consumption, produce, and wages in all textile fabrics have been reduced to a rule of three. ... I quote from a recent lecture delivered by ... the present Mayor of Blackburn, Mr. Baynes, on the cotton trade, who by such means has reduced the cotton statistics of his own neighbourhood to the closest approximation: —
"'Each real and mechanical horse-power will drive 450 self-acting mule spindles with preparation, or 200 throstle spindles, or 15 looms for 40 inches cloth, with winding, warping, and sizing. Each horse-power in spinning will give employment to 2½ operatives, but in weaving to 10 persons, at wages averaging full 10s. 6d. a week to each person. ... The average counts of yarn spun and woven are from 30s. to 32s. twist, and 34s. to 36s. weft yarns; and taking the spinning production at 13 ounces per spindle per week, will give 824,700 lbs yarn spun per week, requiring 970,000 lbs or 2,300 bales of cotton, at a cost of £28,300... The total cotton consumed in this district (within a five-mile radius round Blackburn) per week is 1,530,000 lbs, or 3,650 bales, at a cost of £44,625... This is one-eighteenth of the whole cotton spinning of the United Kingdom, and one-sixth of the whole power-loom weaving.'
"Thus we see that, according to Mr. Baynes's calculations, the total number of cotton spindles in the United Kingdom is 28,800,000, and supposing these to be always working full time, that the annual consumption of cotton ought to be 1,432,080,000 lbs. But as the import of cotton, less the export in 1856 and 1857, was only 1,022,576,832 lbs, there must necessarily be a deficiency of supply equal to 409,503,168 lbs. Mr. Baynes, however, who has been good enough to communicate with me on this subject, thinks that an annual consumption of cotton based upon the quantity used in the Blackburn district would be liable to be overcharged, owing to the difference, not only in the counts spun, but in the excellence of the machinery. He estimates the total annual consumption of cotton in the United Kingdom at 1,000,000,000 lbs. But if he is right, and there really is an excess of supply equal to 22,576,832 lbs, supply and demand seem to be nearly balanced already, without taking into consideration those additional spindles and looms which Mr. Baynes speaks of as getting ready for work in his own district, and, by parity of reasoning, probably in other districts also" (pp. 59, 60).
III. GENERAL ILLUSTRATION. THE COTTON CRISIS OF
1861-65
Preliminary History. 1845-60
1845. The golden age of cotton industry. Price of cotton very low. L. Horner says on this point:
"For the last eight years I have not known so active a state of trade as has prevailed during the last summer and autumn, particularly in cotton spinning. Throughout the half-year I have been receiving notices every week of new investments of capital in factories, either in the form of new mills being built, of the few that were untenanted finding occupiers, of enlargements of existing mills, of new engines of increased power, and of manufacturing machinery." (Reports of Insp. of Fact., Oct. 1845, p. 13.)
1846. The complaints begin:
"For a considerable time past I have heard from the occupiers of cotton mills very general complaints of the depressed state of their trade... for within the last six weeks several mills have begun to work short time, usually eight hours a day instead of twelve; this appears to be on the increase... There has been a great advance in the price of the raw material... there has been not only no advance in the manufactured articles, but ... prices are lower than they were before the rise in cotton began. From the great increase in the number of cotton mills within the last four years, there must have been, on the one hand, a greatly increased demand for the raw material, and, on the other, a greatly increased supply in the market of the manufactured articles; causes that must concurrently have operated against profits, supposing the supply of the raw material and the consumption of the manufactured article to have remained unaltered; but, of course, in the greater ratio by the late short supply of cotton, and the falling off in the demand for the manufactured articles in several markets, both home and foreign. (Reports of Insp. of Fact., Oct. 1846, p. 10.)
The rising demand for raw materials naturally went hand in hand with a market flooded with manufactures. By the way, the expansion of industry at that time and the subsequent stagnation were not confined to the cotton districts. The carded wool district of Bradford had only 318 factories in 1836 and 490 in 1846. These figures do not by any means express the actual growth of production, since the existing factories were also considerably enlarged. This was particularly true of the flax spinning-mills.
"All have contributed more or less, during the last ten years, to the overstocking of the market, to which a great part of the present stagnation of trade must be attributed... The depression... naturally results from such rapid increase of mills and machinery." (Reports of Insp. of Fact., Oct. 1846, p. 30.)
1847. In October, a money panic. Discount 8%. This was preceded by the debacle of the railway swindle and the East Indian speculation in accommodation bills. But:
"Mr. Baker enters into very interesting details respecting the increased demand, in the last few years, for cotton, wool, and flax, owing to the great extension of these trades. He considers the increased demand for these raw materials, occurring, as it has, at a period when the produce has fallen much below an average supply, as almost sufficient, even without reference to the monetary derangement, to account for the present state of these branches. This opinion is fully confirmed, by my own observations, and conversation with persons well acquainted with trade. Those several branches were all in a very depressed state, while discounts were readily obtained at and under 5 per cent. The supply of raw silk has, on the contrary, been abundant, the prices moderate, and the trade, consequently, very active, till ... the last two or three weeks, when there is no doubt the monetary derangement has affected not only the persons actually engaged in the manufacture, but more extensively still, the manufacturers of fancy goods, who were great customers to the throwster. A reference to published returns shows that the cotton trade had increased nearly 27 per cent in the last three years. Cotton has consequently increased, in round numbers, from 4d. to 6d. per lb., while twist, in consequence of the increased supply, is yet only a fraction above its former price. The woollen trade began its increase in 1836, since which Yorkshire has increased its manufacture of this article 40 per cent, but Scotland exhibits a yet greater increase. The increase of the worsted trade [18] is still larger. Calculations give a result of upwards of 74 per cent increase within the same period. The consumption of raw wool has therefore been immense. Flax has increased since 1839 about 25 per cent in England, 22 per cent in Scotland, and nearly 90 per cent in Ireland [19]; the consequence of this, in connexion with bad crops, has been that the raw material has gone up £10 per ton, while the price of yarn has fallen 6d. a bundle." (Reports of Insp. of Fact., Oct. 1847, pp. 30-31.)
1849. Since late in 1848 business revived.
"The price of flax which has been so low as to almost guarantee a reasonable profit under any future circumstances, has induced the manufacturers to carry on their work very steadily.... The woollen manufacturers were exceedingly busy for a while in the early part of the year.... I fear that consignments of woollen goods often take the place of real demand, and that periods of apparent prosperity, i. e., of full work, are not always periods of legitimate demand. In some months the worsted has been exceedingly good, in fact flourishing.... At the commencement of the period referred to, wool was exceedingly low; what was bought by the spinners was well bought, and no doubt in considerable quantities. When the price of wool rose with the spring wool sales, the spinner had the advantage, and the demand for manufactured goods becoming considerable and imperative, they kept it. " (Reports of Insp. of Fact., April 1849, p. 42.)
"If we look at the variations in the state of trade, which have occurred in the manufacturing districts of the kingdom for a period now of between three and four years, I think we must admit the existence of a great disturbing cause somewhere ... but may not the immensely productive power of increased machinery have added another element to the same cause?" (Reports of Insp. of Fact., April 1849, pp. 42, 43.)
In November 1848, and in May and summer of 1849, right up to October, business flourished.
"The worsted stuff of trade, of which Bradford and Halifax are the great hives of industry, has been the one most active; this trade has never before reached anything like the extent, to which it has now attained. Speculation, and uncertainty as to the probable supply of cotton wool, have ever had the effect of causing greater excitement, and more frequent alterations in the state of that branch of manufacture, than any other. There is ... at present an accumulation in stock of the coarser kinds of cotton goods, which creates anxiety on the part of the smaller spinners, and is already acting to their detriment, having caused several of them to work their mills short time. " (Reports of Insp. of Fact., Oct. 1849, pp. 64-65.)
1850. April. Business continued brisk. The exception:
"The great depression in a part of the cotton trade ... attributable to the scarcity in the supply of the raw material more especially adapted to the branch engaged in spinning low numbers of cotton yarns, or manufacturing heavy cotton goods. A fear is entertained that the increased machinery built recently for the worsted trade, may be followed with a similar reaction. Mr. Baker computes that in the year 1849 alone the worsted looms have increased their produce 40 per cent, and the spindles 25 or 30 per cent, and they are still increasing at the same rate. " (Reports of Insp. of Fact., April 1850, p. 54.)
1850. October.
"The high price of raw cotton continues ... to cause a considerable depression in this branch of manufacture, especially in those descriptions of goods in which the raw material constitutes a considerable part of the cost of production.... The great advance in the price of raw silk has likewise caused a depression in many branches of that manufacture." (Reports. of Insp. of Fact., Oct. 1850, p. 14.)
And on pages 31 and 33 of the same report we learn that the Committee of the Royal Society for the Promotion and Improvement of the Growth of Flax in Ireland predicted that the high price of flax, together with the low level of prices for other agricultural products, ensured a considerable increase in flax production in the ensuing year.
1853. April. Great prosperity. L. Horner says in his report:
"At no period during the last seventeen years that I have been officially acquainted with the manufacturing districts in Lancashire have I known such general prosperity; the activity in every branch is extraordinary." (Reports of Insp. of Fact., April 1853, p. 19.)
1853. October. Depression in the cotton industry. "Over-production." (Reports of Insp. of Fact., Oct. 1853, p. 15.)
1854. April.
"The woollen trade, although not brisk, has given full employment to all the factories engaged upon that fabric, and a similar remark applies to the cotton factories. The worsted trade generally has been in an uncertain and unsatisfactory condition during the whole of the last half-year. The manufacture of flax and hemp are more likely to be seriously impeded, by reason of the diminished supplies of the raw materials from Russia due to the Crimean war." (Reports of Insp. of Fact., April 1854, p. 37.)
1859.
"The trade in the Scottish flax districts still continues depressed — the raw material being scarce, as well as high in price; and the inferior quality of the last year's crop in the Baltic, from whence come our principal supplies, will have an injurious effect on the trade of the district; jute, however, which is gradually superseding flax in many of the coarser fabrics, is neither unusually high in price, nor scarce in quantity ... about one-half of the machinery in Dundee is now employed in jute spinning." (Reports of Insp. of Fact., April 1859, p. 19.) — "Owing to the high price of the raw material, flax spinning is still far from remunerating, and while all the other mills are going full time, there are several instances of the stoppage of flax machinery.... Jute spinning is ... in a rather more satisfactory state, owing to the recent decline in the price of material, which has now fallen to a very moderate point." (Reports of Insp. of Fact., Oct. 1859, p. 20.)
1861-64. American Civil War. Cotton Famine. The Greatest Example of an Interruption in the Production Process through Scarcity and Dearness of Raw Material
1860. April.
"With respect to the state of trade, I am happy to be able to inform you that, notwithstanding the high price of raw material, all the textile manufactures, with the exception of silk, have been fairly busy during the past half-year.... In some of the cotton districts hands have been advertised for, and have migrated thither from Norfolk and other rural counties. There appears to be, in every branch of trade, a great scarcity of raw material. It is ... the want of it alone, which keeps us within bounds. In the cotton trade, the erection of new mills, the formation of new systems of extension, and the demand for hands, can scarcely, I think, have been at any time exceeded. Everywhere there are new movements in search of raw material." (Reports of Insp. of Fact., April 1860, p. 57.)
1860. October.
"The state of trade in the cotton, woollen, and flax districts as been good; indeed in Ireland, it is stated to have been 'very good' for now more than a year; and that it would have been still better, but for the high price of raw material. The flax spinners appear to be looking with more anxiety than ever to the opening out of India by railways, and to the development of its agriculture, for a supply of flax which may be commensurate with their wants." (Reports of Insp. of Fact., Oct. 1860, p. 37.)
1861. April.
"The state of trade is at present depressed.... A few cotton mills are running short time, and many silk mills are only partially employed. Raw material is high. In almost every branch of textile manufacture it is above the price at which it can be manufactured for the masses of the consumers." (Reports of Insp. of Fact., April 1861, p. 33.)
It had become evident that in 1860 the cotton industry had overproduced. The effect of this made itself felt during the next few years.
"It has taken between two and three years to absorb the over-production of 1860 in the markets of the world." (Reports of Insp. of Fact., December 1863, p. 127.) "The depressed state of the markets for cotton manufactures in the East, early in 1860, had a corresponding effect upon the trade of Blackburn, in which 30,000 power-looms are usually employed almost exclusively in the production of cloth to be consumed in the East. There was consequently but a limited demand for labour for many months prior to the effects of the cotton blockade being felt.... Fortunately this preserved many of the spinners and manufacturers from being involved in the common ruin. Stocks increased in value so long as they were held, and there had been consequently nothing like that alarming depreciation in the value of property which might not unreasonably have been looked for in such a crisis." (Reports of Insp. of Fact., Oct. 1862, pp. 29, 31.)
1861. October.
"Trade has been for some time in a very depressed state. It is not improbable indeed that during the winter months many establishments will be found to work very short time. This might, however, have been anticipated ... irrespective of the causes which have interrupted our usual supplies of cotton from America and our exports, short time must have been kept during the ensuing winter in consequence of the great increase of production during the last three years, and the unsettled state of the Indian and Chinese markets." (Reports of Insp. of Fact., Oct. 1861, p. 19.)
Cotton Waste. East Indian Cotton (Surat). Influence on the Wages of Labourers. Improvement of Machinery. Adding Starch Flour and Mineral Substitutes to Cotton. Effect of Starch Flour Sizing on Labourers. Manufacturers of Finer Yarn Grades. Manufacturers' Fraud
"A manufacturer writes to me thus: 'As to estimates of consumption per spindle, I doubt if you take sufficiently into calculation the fact that when cotton is high in price, every spinner of ordinary yarns (say up to 40s.) (principally 12s. to 32s.) will raise his counts as much as he can, that is, will spin 16s. where he used to spin 12s., or 22s. in the place of 16s., and so on; and the manufacturer using these fine yarns will make his cloth the usual weight by the addition of so much more size. The trade is availing itself of this resource at present to an extent which is even discreditable. I have heard on good authority of ordinary export shirting weighing 8 lbs which was made of 5¼ lbs. cotton and 2¾ lbs size.... In cloths of other descriptions as much as 50 per cent size is sometimes added; so that a manufacturer may and does truly boast that he is getting rich by selling cloth for less money per pound than he paid for the mere yarn of which they are composed."' (Reports of Insp. of Fact., April 1864, p. 27.)
"I have also received statements that the weavers attribute increased sickness to the size which is used in dressing the warps of Surat cotton, and which is not made of the same material as formerly, viz., flour. This substitute for flour is said, however, to have the very important advantage of increasing greatly the weight of the cloth manufactured, making 15 lbs of the raw material to weigh 20 lbs when woven into cloth." (Reports of Insp. of Fact., Oct. 1863. This substitute was ground talcum, called China clay, or gypsum, called French chalk.) "The earnings of the weavers (meaning the operatives) are much reduced from the employment of substitutes for flour as sizing for warps. This sizing, which gives weight to the yarn, renders it hard and brittle. Each thread of the warp in the loom passes through a part of the loom called 'a heald', which consists of strong threads to keep the warp in its proper place, and the hard state of the warp causes the threads of the heald to break frequently; and it is said to take a weaver five minutes to tie up the threads every time they break; and a weaver has to piece these ends at least ten times as often as formerly, thus reducing the productive powers of the loom in the working-hours. " (Ibid., pp. 42-43.)
"In Ashton, Stalybridge, Mossley, Oldham, etc., the reduction of the time has been fully one-third, and the hours are lessening every week.... Simultaneously with this diminution of time there is also a reduction of wages in many departments." (Reports of Insp. of Fact., Oct. 1861, pp. 12-13.)
Early in 1861 there was a strike among the mechanical weavers in some parts of Lancashire. Several manufacturers had announced a wage reduction of 5 to 7.5%. The operatives insisted that the wage scale remain the same while working-hours were reduced. This was not granted, and a strike was called. A month later, the operatives had to give in. But then they got both.
"In addition to the reduction of wages to which the operatives at last consented, many mills are now running short time." (Reports of Insp. of Fact., April 1861, p. 23:)
1862. April.
"The sufferings of the operatives since the date of my last report have greatly increased; but at no period of the history of manufactures, have sufferings so sudden and so severe been borne with so much silent resignation and so much patient self-respect." (Reports of Insp. of Fact., April 1862, p. 10.) "The proportionate number of operatives wholly out of employment at this date appears not to be much larger than it was in 1848, when there was an ordinary panic of sufficient consequences to excite alarm amongst the manufacturers, so much as to warrant the collection of similar statistics of the state of the cotton trade as are now issued weekly.... In May 1848, the proportion of cotton operatives out of work in Manchester out of the whole number usually employed was 15 per cent, on short time 12 per cent, whilst 70 per cent were in full work. On the 28th of May of the present year, of the whole number of persons usually employed 15 per cent were out of work, 35 per cent were on short time, and 49 per cent were working full time.... In some other places, Stockport for example, the averages of short time and of non-employment are higher, whilst those of full time are less", because coarser numbers are spun there than in Manchester (p. 16).
1862. October.
"I find by the last return to Parliament that there were 2,887 cotton factories in the United Kingdom in 1861, 2,109 of them being in my district (Lancashire and Cheshire). I was aware that a very large proportion of the 2,109 factories in my district were small establishments, giving employment to few persons, but I have been surprised to find how large that proportion is. In 392, or 19 per cent, the steam-engine or waterwheel is under 10 horse-power; in 345, or 16 per cent, the horsepower is above 10 and under 20; and in 1,372 the power is 20 horses and more.... A very large proportion of these small manufacturers — being more than a third of the whole number — were operatives themselves at no distant period; they are men without command of capital. The brunt of the burden then would have to be borne by the remaining two-thirds." (Reports of Insp. of Fact., Oct. 1862, pp. 18, 19.)
According to the same report, 40,146, or 11.3%, of the cotton employees in Lancashire and Cheshire were then working full time; 134,767, or 38%, were working short time; and 179,721, or 50.7%, were unemployed. After deducting the returns from Manchester and Bolton, where mainly fine grades were spun, a line relatively little affected by the cotton famine, the matter looks still more unfavourable; namely, fully employed 8.5%, partly employed 38%, and unemployed 53.5% (pp. 19 and 20).
"Working up good or bad cotton makes a material difference to the operative. In the earlier part of the year, when manufacturers were endeavouring to keep their mills at work by using up all the moderately priced cotton they could obtain, much bad cotton was brought into mills in which good cotton was ordinarily used, and the difference to the operatives in wages was so great that many strikes took place on the ground that they could not make a fair day's wages at the old rates.... In some cases, although working full time, the difference in wages from working bad cotton was as much as one-half" (p. 27).
1863. April.
"During the present year there will not be full employment for much more than one-half of the cotton operatives in the country." (Reports of Insp. of Fact., April 1863, p. 14.)
"A very serious objection to the use of Surat cotton, as manufacturers are now compelled to use it, is that the speed of the machinery must be greatly reduced in the processes of manufacture. For some years past every effort has been made to increase the speed of machinery, in order to make the same machinery produce more work; and the reduction of the speed becomes therefore a question which affects the operative as well as the manufacturer; for the chief part of the operatives are paid by the work done; for instance, spinners are paid per lb. for the yarn spun, weavers per piece for the number of pieces woven; and even with the other classes of operatives paid by the week there would be a diminution of wages in consideration of the less amount of goods produced. From inquiries I have made, and statements placed in my hands, of the earnings of cotton operatives during the present year, I find there is a diminution averaging 20 per cent upon their former earnings, in some instances the diminution has been as much as 50 per cent, calculated upon the same rate of wages as prevailed in 1861" (p. 13). "...The sum earned depends upon ... the nature of the material operated upon.... The position of the operatives in regard to the amount of their earnings is very much better now (October 1863) than it was this time last year. Machinery has improved, the material is better understood, and the operatives are able better to overcome the difficulties they had to contend with at first. I remember being in a sewing school (a charity institution for unemployed) at Preston last spring, when two young women, who had been sent to work at a weaving shed the day before, upon the representation of the manufacturer that they could earn 4s. per week, returned to the school to be readmitted, complaining that they could not have earned 1s. per week. I have been informed of 'self-acting minders' ... men who manage a pair of self-acting mules, earning at the end of a fortnight's full work 8s. 11d., and that from this sum was deducted the rent of the house, the manufacturer, however, returning half the rent as a gift. (How generous!) The minders took away the sum of 6s. 11d. In many places the self-acting minders ranged from 5s. to 9s. per week, and the weavers from 2s. to 6s. per week in the last months of 1862.... At the present time a much more healthy state of things exists, although there is still a great decrease in the earnings in most districts.... There are several causes which have tended to the reduction of earnings, besides the shorter staple of the Surat cotton and its dirty condition; for instance, it is now the practice to mix 'waste' largely with Surat, which consequently increases the difficulties of the spinner or minder. The threads, from their shortness of fibre, are more liable to break in the drawing out of the mule and in the twisting of the yarn, and the mule cannot be kept so continuously in motion.... Then, from the great attention required in watching the threads in weaving, many weavers can only mind one loom, and very few can mind more than two looms.... There has been a direct reduction of 5, 7½ and 10 per cent upon the wages of the operatives.... In the majority of cases the operative has to make the best of his material, and to earn the best wages he can at the ordinary rates.... Another difficulty the weavers have sometimes to contend with is, that they are expected to produce well-finished cloth from inferior materials, and are subject to fine for the flaws in their work." (Reports of Insp. of Fact., Oct. 1863, pp. 41-43.)
Wages were miserable, even where work was full time. The cotton workers willingly offered themselves for all public works such as drainage, road-building, stone-breaking and street-paving, in which they were employed, to get their keep from the authorities (although this practically amounted to assistance to the manufacturer. See Book I, S. 598/589 [English edition: pp. 574-75. — Ed.]). The whole bourgeoisie stood guard over the labourers. Were the worst dog's wages offered, and a labourer refused to accept them, the Relief Committee would strike him from its lists. It was in a way a golden age for the manufacturers, for the labourers had either to starve or work at a price most profitable for the bourgeois. The Relief Committees acted as watch-dogs. At the same time, the manufacturers acted in secret agreement with the government to hinder emigration as much as possible, partly to retain in readiness the capital invested in the flesh and blood of the labourers, and partly to safeguard the house-rent squeezed out of the labourers.
"The Relief Committees acted with great strictness upon this point. If work was offered, the operatives to whom it was proposed were struck off the lists, and thus compelled to accept the offer. When they objected to accept work... the cause has been that their earnings would have been merely nominal, and the work exceedingly severe." (Reports of Insp. of Fact., Oct. 1863, p. 97.)
The operatives were willing to perform any work given to them under the Public Works Act.
"The principle upon which industrial employments were organised varied considerably in different towns, but in those places even in which the outdoor work was not absolutely a labour test the manner in which labour was remunerated by its being paid for either at the exact rate of relief, or closely approximating the rate, it became in fact a labour test" (p. 69). "The Public Works Act of 1863 was intended to remedy this inconvenience, and to enable the operative to earn his day's wages as an independent labourer. The purpose of this Act was three-fold: firstly, to enable local authorities to borrow money of the Exchequer Loan Commissioners (with consent of the President of the Central Relief Committee); secondly, to facilitate the improvement of the towns of the cotton districts; thirdly, to provide work and remunerative wages to the unemployed operatives."
Loans to the amount of £883,700 had been granted under this Act up to the end of October 1863 (p. 70). The works undertaken were mainly canalisation, road-building, street-paving, water-works reservoirs, etc.
Mr. Henderson, president of the committee in Blackburn, wrote with reference to this to factory inspector Redgrave:
"Nothing in my experience, during the present period of suffering and distress, has struck me more forcibly or given me more satisfaction, than the cheerful alacrity with which the unemployed operatives of this district have accepted of the work offered to them through the adoption of the Public Works Act, by the Corporation of Blackburn. A greater contrast than that presented between the cotton spinner as a skilled workman in a factory, and as a labourer in a sewer 14 or 18 feet deep, can scarcely be conceived."
(Depending on the size of his family, he earned 4 to 12s. per week, this enormous amount providing sometimes for a family of eight. The towns-men derived a double profit from this. In the first place, they secured money to improve their smoky and neglected cities at exceptionally low interest rates. In the second place, they paid the labourers far less than the regular wage.)
"Accustomed as he had been to a temperature all but tropical, to work at which agility and delicacy of manipulation availed him infinitely more than muscular strength and to double and sometimes treble the remuneration which it is possible for him now to obtain, his ready acceptance of the proffered employment involved an amount of self-denial and consideration the exercise of which is most creditable. In Blackburn the men have been tested at almost every variety of outdoor work; in excavating a stiff heavy clay soil to a considerable depth, in draining, in stone-breaking, in road-making, and in excavating for street sewers to a depth of 14, 16, and sometimes 20 feet. In many cases while thus employed they are standing in mud and water to the depth of 10 or 12 inches, and in all they are exposed to a climate which, for chilly humidity is not surpassed I suppose, even if it is equalled, by that of any district in England" (pp. 91-92). "The conduct of the operatives has been almost blameless, and their readiness to accept and make the best of outdoor labour" (p. 69).
1864. April.
"Complaints are occasionally made in different districts at the scarcity of hands, but this deficiency is chiefly felt in particular departments, as, for instance of weavers.... These complaints have their origin as much from the low rate of wages which the hands can earn owing to the inferior qualities of yarn used, as from any positive scarcity of work-people even in that particular department. Numerous differences have taken place during the past month between the masters of particular mills and their operatives in respect of the wages. Strikes, I am sorry to say, are but too frequently resorted to. ... The effect of the Public Works Act is felt as a competition by the mill-owners. The local committee at Bacup has suspended operations, for although all the mills are not running, yet a scarcity of hands has been experienced." (Reports of Insp. of Fact., April 1864, pp. 9, 10.)
It was indeed high time for the manufacturers. Due to the Public Works Act the demand for labour grew so strong that many a factory hand was earning 4 to 5 shillings daily in the quarries of Bacup. And so the public works were gradually suspended — this new edition of the Ateliers nationaux of 1848, but this time instituted in the interests of the bourgeoisie.
"Although I have given the actual earnings of the operatives (fully employed) in several mills, it does not follow that they earn the same amount week by week. The operatives are subject to great fluctuation, from the constant experimentalising of the manufacturers upon different kinds and proportions of cotton and waste in the same mill, the 'mixings' as it is called, being frequently changed; and the earnings of the operatives rise and fall with the quality of the cotton mixings; sometimes they have been within 15 per cent of former earnings, and then in a week or two, they have fallen from 50 to 60 per cent."
Inspector Redgrave, who makes this report, then proceeds to cite wage figures taken from actual practice, of which the following examples may suffice:
A, weaver, family of 6, employed 4 days a week, 6s. 8.5d.; B, twister, employed 4.5 days a week, 6s.; C, weaver, family of 4, employed 5 days a week, 5s. 1d.; D, slubber, family of 6, employed 4 days a week, 7s. 10d.; E, weaver, family of 7, employed 3 days a week, 5s., etc. Redgrave continues:
"The above returns are deserving of consideration, for they show that work would become a misfortune in many a family, as it not merely reduces the income, but brings it so low as to be utterly insufficient to provide more than a small portion of the absolute wants, were it not that supplemental relief is granted to operatives when the wages of the family do not reach the sum that would be given to them as relief, if they were all unemployed." (Reports of Insp. of Fact., Oct. 1863, pp. 50-53.)
"In no week since the 5th of June last was there more than two days seven hours and a few minutes employment for all the workers." (Ibid., p. 121.)
From the beginning of the crisis to March 25, 1863, nearly three million pounds sterling were expended by the guardians, the Central Relief Committee, and the Mansion House Committee. (Ibid., p. 13.)
"In a district in which the finest yarn is spun ... the spinners suffer an indirect reduction of 15 per cent in consequence of the change from South Sea Island to Egyptian cotton. In an extensive district, in many parts of which waste is largely used as a mixture with Surat ... the spinners have had a reduction of 5 per cent, and have lost from 20 to 30 per cent in addition, through working Surat and waste. The weavers are reduced from 4 looms to 2 looms. In 1860, they averaged 5s. 7d. per loom, in 1863, only 3s. 4d. The fines, which formerly varied from 3d. to 6d. (for the weaver) on American, now run up to from 1s. to 3s. 6d."
In one district, where Egyptian cotton was used with an admixture of East Indian
"the average of the mule spinners, which was in 1860 18s. to 25s., now averages from 10s. to 18s. per week, caused, in addition to inferior cotton, by the reduction of the speed of the mule to put an extra amount of twist in the yarn, which in ordinary times would be paid for according to list" (pp. 43, 44). "Although the Indian cotton may have been worked to profit by the manufacturer, it will be seen (see the wage list on p. 53) that the operatives are sufferers compared with 1861, and if the use of Surat be confirmed, the operatives will want to earn the wages of 1861, which would seriously affect the profits of the manufacturer, unless he obtain compensation either in the price of the raw cotton or of his products" (p. 105).
House-Rent.
"The rent is frequently deducted from the wages of operatives, even when working short time, by the manufacturers whose cottages they may be occupying. Nevertheless the value of this class of property has diminished, and houses may be obtained at a reduction of from 25 to 50 per cent upon the rent of the houses in ordinary times; for instance, a cottage which would have cost 3s. 6d. per week can now be had for 2s. 4d. per week, and sometimes even for less" (p. 57).
Emigration. The employers were naturally opposed to emigration of labourers, because, on the one hand,
"looking forward to the recovery of the cotton trade from its present depression, they keep within their reach the means whereby their mills can be worked in the most advantageous manner". On the other hand, "many manufacturers are owners of the houses in which operatives employed in their mills reside, and some unquestionably expect to obtain a portion of the back rent owing" (p. 96).
Mr. Bernall Osborne said in a speech to his parliamentary constituents on October 22, 1864, that the labourers of Lancashire had behaved like the ancient philosophers — (Stoics). Not like sheep?
13. The Factory Question and the Ten Hours' Bill by R. H. Greg, London, 1837, p. 115.
14. The report errs in the final sentence. Instead of 6d. it should be 3d. for loss through waste. This loss amounts to 25% in the case of Surat, and only 12½ to 15% in the case of American cotton, and this latter is meant, the same percentage having been correctly calculated for the price of 5 to 6d. It is true, however, that also in the case of American cotton brought to Europe during the latter years of the Civil War the proportion of waste often rose considerably higher than before. — F. E.
15. For examples see Babbage [On the Economy of Machinery and Manufactures, London, 1832, pp. 280-81.—Ed. ], among others. The usual expedient — a reduction of wages — is also employed in this instance, so that this continual depreciation acts quite contrary to the dreams of Mr. Carey's "harmonious brain".
16. Since the above was written (1865), competition on the world-market has been considerably intensified by the rapid development of industry in all civilised countries, especially in America and Germany. The fact that the rapidly and enormously expanding productive forces today outgrow the control of the laws of the capitalist mode of commodity exchange, within which they are supposed to operate, impresses itself more and more even on the minds of the capitalists. This is disclosed especially by two symptoms. First, by the new general mania for a protective tariff, which differs from the old protectionism in that now articles fit for export are those best protected. And secondly, by the trusts of manufacturers of whole spheres of production which regulate production, and thus prices and profits. It goes without saying that these experiments are practicable only so long as the economic climate is relative favourable. The first storm must upset them and prove that, although production assuredly needs regulation, it is certainly not the capitalist class which is fitted for that task. Meanwhile, the trusts have no other mission but to see to it that the little fish are swallowed by the big fish still more rapidly than before. — F.E.
17. It goes without saying that we do not, like Mr. Baker, explain the wool crisis of 1857 on the basis of the disproportion between the prices of raw material and product. This disproportion was itself but a symptom, and the crisis was a general one. — F.E.
18. A sharp distinction is made in England between woollen manufacture, which spins carded yarn from short wool and weaves it (main centre Leeds), and worsted manufacture, which makes worsted yarn from long wool and weaves it (main seat Bradford, in Yorkshire). — F.E.
19. This rapid expansion of output of machine-made linen yarn in Ireland dealt a death-blow to exports of linen made of hand-made yarn in Germany (Silesia, Lusatia, and Westphalia). — F.E.
Transcribed for the Internet by Hinrich Kuhls