renders the full application of machinery and routine labour impossible. The kind or degree of this irregularity may be such as to make success in the business dependent so largely upon the skill, genius, character of the operator, or upon chance, as to preclude the use of machinery or of any sort of "routine" economy.

The largest application of this principle is, of course, in agriculture. Small farms tend to survive in proportion to (a) the irregularity of soil, seed, climate, etc., and the consequent amount of detailed care and skill involved in the agricultural processes; (b) the absolute market value of the products, vegetable or animal, raised under such conditions.

2. When the individuality of the consumer impresses itself upon an industry through demand for the satisfaction of particular needs, an "art" economy is substituted for a "routine" or "machine" economy. It is this force which, in large measure, gives importance to differences of materials, and evokes skill in dealing with them. But even where complete standardisation or regularity of materials exists, the demand of consumers for goods exactly accommodated to their individual fit or fancy involves skilled workmanship, and prohibits the use of machinery or routine method. This does not necessarily imply the execution of such orders by small businesses. A large pottery company often employs a number of designers and skilled craftsmen in order to stimulate and supply the more refined demands of high-grade customers, just as a large firm of tailors or drapers may keep a special order department and a "fancy goods" department. But where the skill of some final process of production forms the chief element of use and of cost in a commodity, and especially when this output of skill approaches the nature of close personal service, the small unit of business is apt to survive.

Though the standardisation of machinery releases much work of repair from dependence on skilled engineers and smiths, while many large businesses keep repairing shops of their own, this essentially irregular work forms the basis of many small independent workshops in large manufacturing centers. Though the building and printing trades are in the main large capitalist undertakings, jobbing builders, carpenters, plumbers, and printers exist in considerable numbers for special and emergency work.

In retail trade, as we have seen, the survival of the personal relation with "customers," the adhesion of some final productive process to the art of retail distribution, sometimes the importance of mere proximity, enable the small storekeeper to hold his own.

It is natural that the productive energy which functions for the production and distribution of material and immaterial wealth in the professions, the finer arts, and in the recreative and personal services, should be least amenable to the concentrative forces of capitalism.

From these genuine economic survivals of the small business unit must be distinguished the numerous forms of small sweatshop and sweating home industry which are found everywhere in the industrial lowlands. The characteristic of such small sweating businesses is the production of low-grade routine goods by subdivided labour under conditions of low wages, low rent, and evasion of sanitary and other industrial restrictions which make this mode of production cheaper than production in a factory by machinery or by properly accommodated and protected hand labour.

It may then be concluded:

1. That an increasing proportion of the aggregate wealth (goods and services) in modern communities is produced in large and expanding businesses.

2. That this concentrative tendency is particularly operative in the making and carrying of the goods which constitute the necessaries and prime conveniences of life of the people.

3. That in the aggregate production of wealth capital plays a part of increasing importance as compared with labour.

4. That the increasing importance of capital is greatest in the production of the most fundamental and essential forms of material wealth.

5. That it is probable that an increasing proportion of the number of persons employed is employed in large or expanding business-forms, though the concentrative forces are less powerful in the case of labour than in the case of capital.

But while a larger number of processes and industries are constantly brought under the operation of the concentrative forces which make for large business-units, there is no reason to regard the economy of large-scale production as unlimited in any branch of production or transport.

The final limits of this growth are described by a recent economist as functions of: (1) the internal complexity of arrangements; (2) the importance of quality in the output; (3) the expensiveness of the machinery used; (4) external relations depending on the nature of the markets touched; (5) stability in the demand for the output; (6) the stationary character of the industry in relation to methods or

otherwise; (7) the extent of the economies to be secured by producing on a large scale.

If, however, we examine more closely the limits upon the economy of large-scale business thus indicated, we shall perceive that they ultimately rest upon a law of diminishing returns, applied, not to the mechanics, but to the administration of business. The only substantial limit to the growth of a business, from the standpoint of economy of supply, has reference to the application of administrative power; in other words, of the factors that constitute the business. unit, ability of control and management must be regarded as a constant factor. The chief cause of the survival of small forms of business in many highly skilled trades was found to be the necessity of direct detailed attention on the part of a responsible interested workman or employer. Any expansion of the business, implying delegation of this control and adoption of routine methods, would react injuriously upon the quality of the work. When the industry is highly susceptible of routine methods this economy of "the master's eye" is relatively unimportant; the managing ability is best occupied in the more general acts of organisation and control, a discretionary power of detailed management being delegated to departmental managers, overseers, and inspectors. But there must always be some limit to the economy of the managing or directing mind; every expansion brings larger intricacy, and the machinery of administration becomes more cumbersome, involving larger waste from imperfect coordination, dislocation, friction, and other disturbances.

When the financial economy of modern business introduces more division of labour into the administration, dividing the interest, responsibility, and control among a number of directors, a managing director and a number of salaried officers, difficulties of policy and of close co-ordination are apt so to increase as to outweigh the advantages of substituting many administrative minds for one. The wellrecognised failure of joint-stock companies to compete successfully with private firms in some classes of business is a clear testimony to the limits of this economy.

The real limits to concentration of capital and labour in single businesses, as distinct from single plants, are not to any large extent considerations of technical production, but of administration and of market. For this reason a larger proportion of the highest intellect engaged in business life is being directed to experiment and invention of administrative methods, including business organisation

and finance, with the double object of effecting large economies of supply-cost and of so monopolising in controlling markets as to prevent these gains passing to the consumer by competition of producers.

257. THE SWEATING SYSTEM'

In contrast with the growth of large establishments, which is so conspicuous a feature of recent economic development, it must be observed that in certain industries the small shop retains its hold. One phase of this remarkable exception to the general trend of industrial organization is found in the so-called sweating system in the manufacture of clothing, where, in certain divisions of the trade, the larger establishments have been driven out of business by smaller establishments. This supremacy of the smaller establishments is closely connected with the fact that in them are found the worst conditions of labor-low wages, long hours, and oppressive methods of payment.

The sweating system in the clothing trade, from the standpoint of organization of industry, consists in the separation of the manufacturing from the marketing of the product. The wholesale clothing manufacturer is really a wholesale merchant, and the manufacturing proper is conducted by independent contractors in their own small establishments. On the manufacturer's side there is an advantage in the small establishment. One reason why the small establishment survives is the wide variety of garments manufactured. Readymade clothing of all styles and grades is now produced in factories for men, women, and children. Hence there is an economy if each establishment specializes on certain lines; and it is usually the case that one contractor devotes his entire attention to a certain grade of coats, another to a certain grade of vests, and so on. The facts, too, that the business depends on the season, that the capital invested must lie idle during several months of the year, and that the factory must usually be located in a large city, where rents are very high, make it to the advantage of the merchant to throw the expenses of these items upon the contractor. Such articles as overalls, army clothing, and cheaper garments can be made on a large scale in successful competition with the smaller shops, but the smaller shops hold their own in the greater portion of clothing manufacture.

The principal reason, however, for the existence of the small shop is the oversupply of cheap labor, brought about through immiAdapted from Final Report of the Industrial Commission, 1902, XIX, 740–42.

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gration, and the pressure of this class of laborers to find employment under whatever conditions may be imposed. This class of labor can best be secured through the personal interest of a contractor rather than that of a foreman. The contractor lives in the neighborhood of the immigrants, is familiar with their languages, and is able to secure them in times of business activity. His solicitations are more personal than those of large employers.

On account of these conditions, the manufacturers, instead of employing foremen to supervise the manufacture of their garments, give their work out to contractors. The contractors, requiring but little capital, spring up in large numbers, and their competition with one another drives the contract price to the lowest possible limit.

Originally the sweating system was a system of working at home, whither the tailor with his family and a few helpers carried the goods which they were to prepare for the merchant. The home work or tenement-house work of former years has largely disappeared, especially for the manufacture of ready-made garments, owing particularly to legislation directed against it in the years following the influx of immigrants fifteen years and more ago. At the same time, also, the progress of the industry has demonstrated the greater economy of separate shops, where a larger number can be employed upon the same garment, with a more minute division of labor. These small shops have taken the place of the tenements in the manufacture of the bulk of ready-made clothing. Many of them are in the rear of tenements and sometimes in portions of tenements, though not in the living-rooms. There is, however, one remnant of the original home work which still largely clings to the tenement, namely, the so-called "finishing" on coats and trousers, and also certain kinds of light work by which the women of the house earn "pin money." While the greater portion of the work on ready-made clothing has been taken out of the tenement house, yet, since the "finishing" of the garments is still largely done at home, it is evident that, as far as contagious and infectious diseases are concerned, tenement-house work is fully as dangerous to the public as it was in earlier days.

258. DOES LARGE-SCALE PRODUCTION MEAN MONOPOLY ?1 Attention may now be directed to the reasons for this belief in the tendency of large-scale production to pass over into monopoly, and Adapted by permission from C. J. Bullock, "Trust Literature: A Survey and a Criticism," Quarterly Journal of Economics, XV (1900-1901), 190–210.

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