Economics of Fatigue and Unrest and the Efficiency of Labour in English and American Industry

P. Sargant Florence

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781134562268
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Structured in three parts, Economics of Fatigue and Unrest is as relevant today for the study of industrial relations and human resource management as when it was first published. It contains chapters on the following:
* The growth of technical efficiency
* The theory of fatigue and unrest
* The costs of industrial inefficiency
* The loss by staff turnover
* The loss by absence
* The loss by industrial accidents and ill-health

PART I

CHAPTER I

THE GROWTH OF TECHNICAL EFFICIENCY

From our present dizzy state it is startling to look back on the deep calm of the first seventy years of the eighteenth century. All the evils of society were yet manageable. . . . But tranquillity as usual bred carelessness ; events were left to take their own way uncontrolled ; the weeds grew fast, while none thought of sowing the good seed.

WHEN Thomas Arnold wrote these lines in 1833¹ he was viewing the English industrial revolution at close range. Fifty years later, when the same industrial upheaval was revolutionizing the economic life of America, D. A. Wells²ventured a prophecy :

The historian of the future . . . will doubtless assign to the period embraced by the life of the generation terminating in 1885, a place of importance . . . second to but very few, and perhaps to none, of the many similar epochs of time in any of the centuries that have preceded it.

The force of these observations is borne out by contemporary statistics of production, of consumption of raw materials, of exports and imports and of transport facilities by land and water. There comes a sudden acceleration, an upward swing in the curve of trade, out of all keeping with the previous pace, far outstripping the customary slight increase in the figures from decade to decade. This sudden acceleration, first observable in England and later in America and continental Europe, marking the rise of a new industrial efficiency which has continued to the present day, well deserves the name of Industrial Revolution.

THE INDUSTRIAL REVOLUTION

The early pre-eminence of England in industrial efficiency is usually ascribed to her freedom from military invasion ; the sea routes at her disposal ; the wealth accumulated in rents and in the booty of an Indian Empire ; the cheap labour released by the enclosures of the open fields ; the skilled workmanship of immigrants fleeing from persecution elsewhere ; the interest displayed in scientific experiments ; natural resources in water power, coal and iron ; and last but not least, the character of the English people themselves.

In economic terms, all the factors of production were to be had cheap. There was cheap capital, cheap labour, cheap technical ability, cheap power, and cheap raw materials. On the other hand, there was a ready market with buyers willing and able to pay for the products. In short, there was a range of prices at which goods could be supplied and at which goods would be demanded.

But whatever the underlying causes, there is no doubt that Englishmen at the time felt boundless enthusiasm for the new doctrine of efficiency, and recognized the novel and unique quality of their country’s achievements which soon came to be identified as “ progress.” The famous declamation of Lord Macaulay in the course of the debates on the Reform Bill finds an echo in numberless contemporary writings,³ and is no isolated judgment :

Our fields are cultivated with a skill unknown elsewhere, with a skill which has extracted rich harvests from moors and morasses. Our houses are filled with conveniences which the kings of former times might have envied. Our bridges, our canals, our roads, our modes of communication fill every stranger with wonder. Nowhere are manufactures carried to such perfection. Nowhere does man exercise such dominion over matter.

In sixteenth and seventeenth-century England the standard of efficiency was still largely mediæval. Industry as it was conceived in the Middle Ages was, in Mr. Lipson’s phrase, the “ limited production of a well-wrought article.” Prices were fixed by authority, workshops inspected to ensure the quality of the product, and conditions laid down for teaching apprentices. The purpose of industry was to maintain the craftsman in that standard of living to which it had pleased God to call him. There was to be no change in a man’s class ! And while sumptuary laws dictated what the poor and simple should eat or wear, the utmost extravagance among those fortunate enough to have been born gentle or noble was publicly approved of.

As a result, production in the Middle Ages was deliberate and unhurried. “ Workers had the healthy instinct not to produce more than was necessary to lead a jolly life,” and good use was made of the opportunity for relaxation offered by the Catholic calendar of saints’ days. No one worried about calculating accounts or balances. Book-keeping methods were largely of this order : “ Item, a box of gloves—but I do not know how much they were.” Or, “ Item, one owes me 19 gulden . . . but his name I have forgotten.”⁴

But this tranquil state scarcely survived the eighteenth century. Say, the French economist, found a quite different England at the close of the Napoleonic War. He was filled with wonder at the intense restless industry of all classes of Englishmen. “ Everybody runs absorbed in his own affairs,” he wrote. “ Those who allow themselves the slightest relaxation in their labours are promptly overtaken by ruin.”

By this time, indeed, a new force had invaded industry : the man or rather the economic function presented in human form, that for the last hundred years has appeared in our economic text-books as the entrepreneur. This French word is used presumably because the equivalent in English—the undertaker—is connected too familiarly with a particular line of entrepreneurship ; but the entrepreneur is precisely he who undertakes to deliver the goods to their final resting-place, and brings together and organizes the chief elements required in their delivery.

In Adam Smith’s day this individual had not yet come under academic notice. Adam Smith speaks only of land, capital and labour, without specifying how these elements were brought together except through the capitalist. But it was not long after the publication of the Wealth of Nations in 1776 that the entrepreneur thrust himself very forcibly into the public gaze and into the public life. The craftsman no longer manufactured his product in his own home with his own tools from raw materials procured by himself, and no longer sold it in finished form directly to the consumer ; it was the entrepreneur who began to supply the capital and find the market. Gradually the craftsman became a wage-earning “ employee ” dependent on the entrepreneur, who by commissioning him to turn out certain specified products finally controlled his entire economic activity.

The entrepreneur became the evangelist and protagonist of efficiency. The characteristics indigenous in the entrepreneur and usually taken to be the necessary basis of efficiency are enterprise, thrift, and honesty, or at any rate a reputation for honesty.

English enterprise had already shown itself in the free-booting voyages of Drake and other Elizabethans. Professor Schmoller speaks of these English adventurers as a “ sporting variety of men of rare bodily vigour, strong of wit, calm in deliberation and bold in action.”

Thrift had been preached as a new gospel in Florence and other cities of Italy as early as the fifteenth century, but it was in England and Scotland under the Puritan tradition that it found an abiding home among the “ middle classes.” The exhortations of Defoe to work and save and avoid all pleasures were later taken up by Franklin, whose discourses on “ holy economy ” were printed and reprinted in even the most obscure newspapers. And as a result of this general Sabbatarianism, the English “ Bourgeois ” gradually deprived himself of all pleasures on which money could be spent, and saving became more or less automatic.

But his reputation for honesty, his thorough “ respectability ”—that was the English business man’s chief source of pride. And this quality was particularly important when the entrepreneur began to rely for his capital on other people’s thrift as well as on his own. English middle-class “ solidity ” has been aptly compared by Marshall to the qualities of wool, itself one of the chief of British products.

Now the influence which inspired the thrifty, honest, enterprising entrepreneur to new heights of organizing and undertaking, and made him, indeed, the guardian spirit of efficiency, was the phenomenon of “ profit.”

David Hume touches in his Essays upon the foibles of the merchant entrepreneur :

If the employment you give him be lucrative, especially if the profit be attached to every particular exertion of industry, he has gains so often in his eye, that he acquires by degrees a passion for it, and knows no such pleasure as that of seeing the daily increase of his fortune. And that is the reason why trade increases frugality, and why, among merchants, there is the same overplus of misers over prodigals as among the possessors of land there is the contrary.

Profit differs from wages or interest in increasing or decreasing not at a constant ratio to the amount worked or saved, but at an ever accelerating or slackening rate. Profit is the difference between the entrepreneur’s total expenses and his total receipts, and it does not require a long mathematical formula to show that the slightest rise in receipts or fall in expenses may mean a manifolding of profit. Suppose a manufacturer of shoes gets 30s. for each pair, but has to pay out 28s. in materials, wages, interest, rent, etc. If he can reduce his expenses by one-seventh to 24s., while holding the price at the old level he has increased his profit on each pair from 2s. to 6s. In short, a decrease of one-seventh in expenses results in threefold the profit.

To “ economic man ” closely calculating his gains and losses, these possibilities of profit acted as magic in conjuring up efficiency. In the place of a limited production of a well-wrought article to maintain a given status, there grew up the ideal of unlimited sales of an economically made article to obtain the maximum of profits.

THE MEASURE OF EFFICIENCY

The word “ efficiency ” has been much bandied about, and though it will be difficult to resist an appeal to its seductive powers, we must beware of using the word loosely.

For instance, efficiency is often used to refer simply to the amount or quality of the product without counting the cost. Product, however, is a perfectly good word and there is no reason for using any other. Again, efficiency is sometimes used to refer to some quality inherently belonging to the human organism. Yet such terms as working capacity or willingness to work suit the case much better.

But the important consideration in business which no other word expresses so well as efficiency is the relation of product to cost. Taken in this way, efficiency refers to the amount and quality of product obtained at any given standard cost. To be quite exact, efficiency is said to be greater or less according as

is greater or less ;⁵ and since the denominator in this ratio may vary just as much as the numerator, efficiency might also refer to the cost at which any given standard of production was obtained. But this reverse method of stating efficiency is what we refer to as “ economy.” Fundamentally, efficiency and economy refer to the same relation of product and costs, though efficiency directs attention to the possibility of varying the product, while economy considers primarily the possibility of varying the costs.

The idea of efficiency—also economy—as referring to a ratio, permits a definite reference to be assigned to other words in frequent use in business and economic circles. A waste is generally used to denote any rise in cost that is not balanced by an equivalent rise in product ; a loss any fall in product that is not balanced by an equivalent fall in costs. Both wastes and losses are unproductive costs and forms of inefficiency ; waste, like the word “ economy,” refers to the matter from the cost side, whereas loss, like the word “ efficiency,” refers to the matter from the product side.

These definitions are not as definite as might be, because the kind of units in which product and cost are to be measured are left to the imagination, or, worse still, to inference. A business man will naturally think of the relation of his money returns to his money expenses, i.e. the total sales of his product as against the payments he must make to induce men to work for him, or to lend him land or capital. In short, efficiency means to him the rate of profit.

If, however, one goes behind the money measure to the things money is paying for—the efforts and sacrifices involved in working and lending, and the actual satisfaction or welfare derived from profits and other inducements—then indeed, efficiency becomes, in Mr. Hobson’s phrase, a matter of human values, or, as Marshall (22) puts it, a matter of real costs and gains.

Real efficiency would thus consist of the maximum of welfare obtainable from our limited natural resources and our (poor) human stock, and is by general agreement a consummation devoutly to be wished for. But there is difficulty in its objective measurement.

Apart from its variation from year to year and class to class, maximum wealth per head of population might serve as a rough measure, but certainly when calculated over a long period, real national efficiency will by no means coincide with immediate, private, business profitability. Nor will it coincide with the mere increase in value of output per man employed.

Yet this is the conventional measurement of efficiency used when an answer is attempted to the question so vital to the labourer immersed in industry : namely, how far the forms and methods of organization introduced by the industrial revolution are fundamentally necessary to the growth of efficiency, and how far they are merely fortuitously associated with this growth—and possibly avoidable to-day.

The revolution in industrial efficiency is usually measured in sensational statistics of increases in output per man, which tend to mislead in that they ignore the increase in costs of production other than the labour required, and chronicle only exceptional occurrences. No complete statement, for instance, seems ever to have been made of the amount of machine and equipment costs to set against increases in output per man—costs that the new efficiency has enormously increased.

Böhm-Bawerk’s exposition of “ roundabout ” production probably indicates most clearly the nature of these costs.

When primitive man began to use a hammer and chisel in place of his bare fingers to quarry stone, he undoubtedly increased his output ; but against this has to be set the time and effort spent on the “ roundabout ” journey taken in fashioning his new tools. In industry to-day the tool has given place in large measure to costly and expensively housed machines, profits from which are realized only after a long period of waiting. Unquestionably much of the saving in the cost of direct labour is offset by the growth of capital expenditure and standing charges corresponding with the cost of constructing and maintaining machinery and factories, and of organizing the so-called unproductive staff. In 1880 the annual cost of wages was reported in the United States census to have been 947 million dollars, and the capital invested 2,790 million dollars, or 2·94 times as much. In 1900 the ratio of capital to annual wages had risen to 4·23 times, and there was a corresponding increase in the ratio between the horse-power of the engines employed and the number of labourers employed. In 1880 this ratio was 1·25 (3,410,000 horse-power to 2,733,000 wage-earners) ; in 1900, 1·99.

The figures of increased production per man usually quoted not merely omit to set out all the increased costs ; they cite only exceptional cases.

A study undertaken by the U.S. Department of Labor in 1898 (7) indicates clearly the average or typical increase of efficiency as contrasted with more sensational citations. Comparisons were drawn between “ the machine method generally in...