Money.

as well as the stored wheat itself, are capital goods. In the same way if it takes, on the average, thirty days to transport bananas from the growers in Central America to consumers in American cities it is indispensable to the efficient production of this fruit that a stock equal at least to thirty days' consumption be kept regularly in transit either in the warehouses of shippers, on the ocean, in the warehouses of wholesale dealers or ripening in the shops of retail vendors. Such a stock is a part of the community's capital goods.

66

The last kind of capital good enumerated, money," is too important to be dismissed with a few words and is therefore treated in separate chapters (Chapters XIX.-XXI.). Progress in § 84. The development of capitalistic production to anyCapitalistic thing like its present proportions is of comparatively recent Production: date. During the Middle Ages the capital goods used were

Middle

Ages.

Growth of
Commerce.

Influence of
Industrial
Revolution.

so few and crude that each producer supplied himself with his needed equipment without great difficulty. Instead of commanding interest the accumulated wealth of the rich had often to be stored and a fee paid for its safe-keeping.

As commerce developed there was an increasing demand for capital in the form of vessels and goods with which to stock them, and merchants, like Antonio in The Merchant of Venice, were often able to turn their accumulations to very profitable account. The use of tools and machinery in agriculture and manufacturing made little advance, however, before the period of the industrial revolution. During all these centuries the chief service of saving with a view to the future was in connection with the preservation of flocks and herds and the husbanding of the food supply and seed from one harvest to the next and from years of abundance to the lean years that were sure sooner or later to follow.

Since the beginning of the last century capitalistic production has advanced in the Western World by leaps and bounds. In place of simple hand tools and foot- and horse-power machines, complex machines driven by water, steam, electrical or gas power have come into use. These have been multiplied so rapidly that the average capital equipment of the modern producer is easily a hundredfold larger than that of the medieval workman. Enormous investments have been made

also in improved transportation facilities and in buildings for the safe housing of machinery, operatives and goods. As a result of this progress in capitalistic production and of the parallel discovery and invention of new and more efficient kinds of capital goods, the productiveness of human industry has been immensely increased. A large part of this increased return goes as interest to those who allow their wealth to remain in the form of capital in preference to converting it into consumable goods for the gratification of their immediate wants. The part that remains as the wages of labor has also grown, however, so all classes have derived material benefit from the change.

Since capitalistic processes add so largely to the productive- Conclusion. ness of industry, the development of thrift, or a willingness to forego present gratifications for the sake of the future, is an important condition to progress. What is most needed is not a general development of thrift, for many individuals are already inclined to carry saving to the point of parsimony, but a development of it, or of the prudence and forethought on which it depends, among the working classes. Accustomed for generations to live from hand to mouth, wage-earners are only just beginning to appreciate how much the accumulation of property may contribute to their well-being. Its principal advantage for them, individually, is that it will serve to carry them over periods of unemployment without that loss in efficiency that is the most pitiful result of enforced idleness for men who have nothing to fall back upon. For the whole community the aggregate savings of a thrifty laboring population would cause a great increase in its equipment of capital goods, and a corresponding improvement in its industrial processes. On both accounts the development of providence and forethought among the masses is earnestly to be desired. Equally important are improvements in the conditions of wage-earners which will encourage them to save by rendering spending up to the full limit of their incomes less imperatively necessary.

REFERENCES FOR COLLATERAL READING

*Seligman, Principles of Economics, Chap. XXI.; *Clark, Essentials of Economic Theory, Chaps. XI. and XVIII.; *Carver, Distribution of

Wealth, Chap. II.; *Bullock, Selected Readings in Economics, Chap. XI.; *Marshall, Principles of Economics, Book IV., Chap. VII.; *BöhmBawerk, The Positive Theory of Capital, Books I. and II.; *Pierson, Principles of Economics, Part I., Chap. IV.; Taussig, Principles of Economics, Chap. V.

CHAPTER X

PRODUCTION: COÖPERATION AND BUSINESS

ORGANIZATION

§ 85. Important as is an individual's capacity as a con- Coöperadition determining his productive efficiency, the way in which tion. he coöperates with others is even more essential. Alone, a man can do little more than keep himself alive, even in the most favorable environment. Working in coöperation with others he so multiplies the results of his toil that he can provide himself with comforts and luxuries as well as with necessaries.

Three varieties of coöperation may be distinguished: (1) Varieties of Simple coöperation, that is, the simple working together of Coöperaseveral for the attainment of a common purpose, as when tion. several unite to move a stone or raise a mast. (2) The division of employments, by which each gives his entire time to some one branch of production, such as farming, boatbuilding or shoe-making, and exchanges his products for the products of others. This is commonly described as the simple division of labor. It is an indirect form of coöperation in that in realizing it men work together not at the same but at different tasks, expecting to share their unlike products by means of exchange. (3) The subdivision of tasks in each employment, as when in shoemaking one makes the soles, another the uppers, another combines them, etc. This may be conveniently designated as the complex division of labor and is a chief characteristic of the factory system. As coöperation it also is indirect.

of Markets.

Progress in indirect coöperation, or the division of labor, Importance depends upon the development of markets and other facilities of Growth for exchange. For example, a man cannot be a shoemaker unless shoes are in demand by people willing and able to pay for them. Much less can a shoe factory be organized, with

Influence of

Means of
Transporta-

tion.

its elaborate subdivision of tasks and large output, unless shoes can be sold at remunerative prices. From this it may be inferred that every improvement tending to widen the market for goods is favorable to a further extension of the division of labor. The truth of this conclusion is abundantly illustrated by the history of the last one hundred years.

Before the era of steam vessels and steam railways the Improved market for most products was restricted by the high cost of transportation to limited areas near the sources of supply. Each region had to produce for itself its bulkier food articles, building materials and implements, and could import from, or export to, other regions only those products which were light and costly. Under these circumstances the division of labor could be little practised. Country districts afforded employment to a blacksmith, a carpenter and a few other specialists. A few cities grew up where those goods which could pay the relatively high costs of transportation were manufactured. But the majority of the people were forced by the conditions to give their attention to agriculture as the only means by which they could earn a living. Steam and, more recently, electrical transportation have changed this situation. At present the cost of carriage offers no insurmountable obstacle to the shipment of even cheap and bulky articles, such as wheat and coal, half-way round the world. For most goods, in place of a merely local market, there are now general markets ranging in magnitude from the market afforded by a large city to that of the whole world. Perishable goods, services and goods for which there is only a local demand, must still be produced on a small scale to meet local requirements, but the proportion of these goods to the whole mass of products is constantly diminishing. Even fruit and fresh meat have ceased to be perishable in the sense that they will not bear transportation to distant markets. Accompanying this widening of markets there has been a concentration of special industries in special localities and of business management in fewer and fewer hands. In this way full advantage has been taken of opportunities for extending the division of labor, with the result that the volume of goods produced has been enormously increased.