55 
 ><3 
 
 UC-NRLF 
 
 .vinivioRANDUM 
 
 ON THE 
 
 Industrial Situation 
 After the War 
 
 THE GARTON FOUNDATION 
 
 Privately circulated among Employers, Representatives 
 
 of Labour, and public men of all parties, 
 
 May— September, 1916. Now published 
 
 as revised in the light of criticisms 
 
 and suggestions received 
 
 1/- 
 
 PRICE I /■ NET 
 
 HARRISON & SONS 
 
 Printers in Ordinary to His Majesty 
 
 ST. MARTIN'S LANE, LONDON. W.C. 
 
MEMORANDUM 
 
 ON THE 
 
 Industrial Situation 
 After the War 
 
 THE GARTON FOUNDATION 
 
 Privately circulated among Employers, Representatives 
 
 of Labour, and public men of all parties, 
 
 May— September, 1916. Now published 
 
 as revised in the light of criticisms 
 
 and suggestions received 
 
 OCTOBER, 1916 
 
 HARRISON & SONS 
 
 Printers in Ordinary to His Majesty 
 
 ST. MARTIN'S LANE, LONDON, W.C. 
 

 Preface. 
 
 This Memorandum is the work of a group of men who came together, 
 at the instance of the Garton Foundation, for the purpose of discussing the 
 industrial situation in this country at the close of the present war. The group 
 included men of very varied views, in touch with both the Capitalist and 
 Employing Classes and Organised Labour, as well as with financial, economic 
 and administrative circles. As a result of their inquiries and of correspondence 
 and discussion with representatives of all parties to industry, they became 
 convinced that the return from war to peace conditions would inevitably 
 involve great difficulties, which might result, if not carefully and skilfully 
 •handled, in a grave outbreak of industrial disorder. 
 
 In the endeavour to find a solution of these difficulties, they were led to 
 analyse the more permanent causes of industrial friction and inefficiency, and 
 to seek the means by which these causes might be removed or their action 
 circumscribed. It is their behef that these means can be found and that an 
 emergency which threatened all classes of the community with serious loss 
 and hardship may be used as an opportunity for placing the whole industrial 
 life of the country on a sounder basis. 
 
 In that behef, this Mem.orandum was compiled. It has been the object 
 of its authors to keep always in mind the human as well as the economic side 
 of industry. They are conscious that this country has suffered much in the 
 past from the habit of sectional thinking, which divides our national activities 
 into water-tight compartments and regards the nation itself as composed of 
 detached or hostile classes. The keener consciousness of corporate life, which 
 is perhaps the most beneficial result of the present struggle, has created an 
 atmosphere in which it is easier to conceive of industry as an inseparable part 
 of the fife of the nation ; and of those concerned in industry, whether as 
 employers or employed, as co-workers in the task of building up a future 
 worthy of the sacrifices which have been made during the war. 
 
 The Memorandum has already been privately circulated, to a considerable 
 extent, among employers of labour, leaders of working class opinion, and 
 those wlio have taken a prominent place in the discussion of economic and 
 social questions. A large number of criticisms and suggestions have been 
 received, which have been collated, carefully examined and, in many cases, 
 incorporated in the Memorandum. Tlic general tone of its reception on all 
 sides has been such as to encourage its publication as a contribution to public 
 discussion of what is per]ia])s tlie most urgent question, after tlie imm(>diate 
 conduct of the war, with which the country is confronted to-day. 
 
r,\ . 
 
 It is evident that in order to avert the threatened dangers and to take 
 full advantage of the opportunity afforded by the circumstances of the war, 
 with its upheaval of existing conditions and its challenge to accepted ideas, 
 study of the questions involved must begin while the war is still with us. Many 
 Government Committees and many non-official bodies are, in fact, already at 
 work upon various aspects of the problem. There is, however, a danger that 
 the number and complexity of the questions involved, and especially of those 
 relating to the actual period of demobilisation, may divert attention from the 
 broader aspects of industrial reconstruction and the fundamental principles 
 of industrial policy. The authors of the Memorandum have endeavoured 
 throughout to keep their eyes fixed upon the fundamental facts of industrial 
 life and the spirit by which it should be animated, treating the more detailed 
 problems of demobilisation and reconstruction with a view to showing them in 
 their right proportion and relation to the main issues. 
 
 The Trustees of the Garton Foundation (The Rt. Hon. A. J. Balfour, M.P., 
 The Rt. Hon. Viscount Esher, G.C.B., and Sir Richard Garton) have permitted 
 the devotion of its staff and resources to this work in the belief that sincere 
 and intelligent inquiry with regard to these questions cannot fail to be of 
 national service. While they do not in any way identify themselves with the 
 conclusions arrived at by its authors, they believe that nothing but good can 
 come of submitting them to the test of public discussion. In that belief they 
 have sanctioned its publication in its present form. 
 
 (8767) 
 
 381173 
 
Synopsis.* 
 
 A.— THE INDUSTRIAL SITUATION 
 
 TO-DAY. (1-12) 
 Grave apprehensions entertained by Employers 
 
 and Employed. [1) 
 The appearance of present prosperity deceptive. 
 
 (2-4) 
 Industrial unrest only suspended. (5-7) 
 The dangers of sectional thinking. (S—11) 
 Relation of industrial to social and political 
 
 problems. (12) 
 
 B.— THE EFFECTS OF THE WAR ON THE 
 INDUSTRIAL SITUATION. (13-63) 
 I.— Employment : (15-25) 
 (i) The Supply of Labour. (16-19) 
 
 (a) Demobilisation. (16-17) 
 
 (b) Diminution of Government Orders. (18) 
 
 (c) Stopgap and emergency workers. (19) 
 (ii) The Demand for Labour. (20-23) 
 
 (a) Repair and reconstruction demand. (21) 
 
 (b) Revival of private demand. (22) 
 
 (c) Revival of foreign trade. (23) 
 Prospects of Employment : No " shortage of 
 
 work " or " surplus of labour," but a good deal of 
 unemployment due to difficulties of re-adjustment. 
 (24-25) 
 
 II.— Earnings : (26-39) 
 
 The national income cannot exceed the sum of 
 
 goods and services produced (or received 
 
 from without). (26) 
 Causes tending to lessen Production : (27—33) 
 
 (a) Men killed and incapacitated. (27) 
 
 (b) Emigration. (28) 
 
 Losses by death or emigration will not 
 be wholly compensated by reduc- 
 tion in number of consumers, or by 
 new workers. (29-30) 
 
 (c) Deterioration of National Plant. (31) 
 
 (d) Effects of Overwork. (32) 
 
 (e) Suspension of Industrial Education. (33) 
 Causes tending to increase Production : (34—37) 
 
 Many people may work harder and 
 former non-producers may con- 
 ■ tinue working. (34) 
 Conversion of new munition plant. 
 
 [35) 
 Better organisation of production. 
 (36) 
 Reduction of Income from A broad. (38) 
 Net Effect of the War on Earnings : Unless 
 a special effort is made, the national income is Ukely 
 to be lower than before the war, and the Ukelihood 
 of quarreUing over its apportionment will be 
 increased. (39) 
 
 III.— The Distribution of Earnings : (40-46) 
 New factors affecting questions of distribution. 
 (40) 
 
 (a) High Prices. (41) 
 
 (b) High War Wages. (42-43) 
 
 Weekly earnings and rates per hour. 
 
 (42) 
 Effect of prices on real wages. (42) 
 Effect of State allowances (43) 
 
 (c) War Loans and Taxation : Effect on 
 
 distribution of national income. (44) 
 
 (d) Dearness of Capital. (45) 
 Prospects with regard to the Distribution 
 
 OF Earnings : The operation of the above factors 
 will be unfavourable to industry, and particularly to 
 
 labour. Unless output can be expanded, conflicts 
 between employers and employed are probable. (46) 
 
 IV.— Capital and Credit : (47) 
 Fixed Capital will have depreciated ; fluid capital 
 will be scarce and dear ; we may be threatened 
 with a partial collapse of credit when embar- 
 goes are removed and financial obhgations have 
 to be met. 
 
 V. — Spirit and Temper : (48-63) 
 
 The difficulties of the situation may be compU- 
 
 cated by an ugly temper arising from several 
 
 causes. (48-49) 
 
 (a) Economic Discontent (50-54) 
 
 Low real wages and unemployment. 
 
 (50-51) 
 Cessation of Separation Allowances. 
 
 (52) ' 
 The war has strengthened the demand 
 
 for better conditions. (53) 
 Capital and Management will be liit 
 
 by restricted output, increased cost 
 
 of production and heavy taxation. 
 
 (54)- 
 
 (b) Class-Suspicion (55) 
 
 Removal of Trades Union safeguards ; 
 war-time strikes ; fear that soldiers 
 may be used for strike-breaking or 
 as " black-leg " labour. 
 
 (c) Psychological Reactions : (56-62) 
 
 Reaction following on war-time 
 
 efforts. (57) 
 Resentment against burdens of war. 
 
 (58-60) 
 " Wrecker " doctrines. (61) 
 Reactionaries in Emplo5dng Class. 
 (62) 
 Prospects as to Spirit and Temper : If not 
 checked, an ugly spirit and temper may easily 
 develop and render a satisfactory solution of indus- 
 trial problems impossible. (63) 
 
 C— THE PROBLEM AND SOME REME- 
 DIES. (64-132) 
 
 I.— The Problem : (64-78) 
 
 (i) The Emergency Problem : (65-70) 
 
 Every class has much to lose by 
 industrial conflict. The event is 
 uncertain and the prize of victory 
 will perish in the struggle, 
 (ii) The Constructive Problem : (71-72) 
 
 The Constructive Problem is con- 
 cerned both with meeting the more 
 lasting effects of the war, and with 
 the permanent difficulties of our 
 industrial hfe. (71) 
 
 The great opportunity. (72 
 
 If the measures by which the 
 emergency is handled can be such 
 as will make for permanent recon- 
 struction, so much the better. (73) 
 Both the Emergency and the 
 Constructive Problem are dual in 
 their nature. The direct effects of 
 the war can be dealt with by 
 specific remedial measures ; the 
 underlying problem of industrial 
 policy and relations requires 
 broader and more far-reaching 
 treatment. (74-78) 
 
 * The numbers in brackets relate to paragraphs, not to pages. 
 
 4 
 
C— THE PROBLEM AND SOME REME- 
 DIES— contd. 
 
 II. — Emergency Measures : (79-93) 
 (i) Demobilisation : [79-87] 
 
 [a) The finding of jobs. {79-80) 
 
 [b) The assuring of decent wages. [81-83) 
 
 [c) Setthng men on the land. [84) 
 
 [d) Teaching men trades. [85) 
 
 [e) The new workshops. [86-87). 
 
 (ii) The Exodus from the War Industries : 
 
 [88-92) 
 
 The number affected. [88) 
 
 Transferred workers. [89) 
 
 New workers. [90) 
 
 Boy and girl labour. [91) 
 
 The remedies. [92) 
 (iii) Industrial Friction : [93) 
 
 Whatever remedial measures may be 
 adopted, friction can only be 
 avoided by agreeinent between 
 Capital, Management and Labour 
 as to the future organisation of 
 industry. 
 
 III. — Constructive Measures : [94-132) 
 (i) Industrial Efficiency : [94-112) 
 
 [a) Physical efficiency. [95) 
 
 [b) Mental and manual efficiency — The 
 
 Primary Schools. [96) 
 
 [c) Continuation education. [97) 
 
 [d) Labour-saving machinery. [98-102) 
 
 [e) Works organisation. [103-105) 
 (/) Labour Legislation. (106) 
 
 [g) Reform of the Patent Laws. [107) 
 [h) The Encouragement of Research. [108) 
 [i) Improved methods of distribution. [109) 
 [k) Banking and credit facilities. [110-111) 
 The Danger of Panic Economy. [112) 
 (ii) Increased Saving : [113-117) 
 
 Capital for the repair and improve- 
 ment of the national plant and the 
 reconstruction of devastated areas 
 can only be furnished by people 
 producing much, spending little on 
 consumption of goods, and saving 
 the balance. [113) 
 Need for education in the principles 
 
 of economy. [114) 
 The distribution of national wealth 
 and its effect upon saving. [115) 
 Working-class saving and the dangers 
 
 of injudicious " thrift." [116) 
 The relation of saving to demand. 
 [117) 
 (iii) Assured Markets : [118-128) 
 (a)^Home Demand : [119-122) 
 
 The methods of capital renewal. [119) 
 The effect of protective tariffs. [120- 
 122) 
 
 (b) Empire Markets : [123) 
 
 The question of Imperial^Fiscal 
 Union. 
 
 (c) Foreign Markets : (124-126) 
 
 The organisation of selhng ; consular 
 service ; adaptabihty and langu- 
 id' ages; Ministry of Commerce. (i24) 
 
 Prestige. (125) 
 
 The connection between home and 
 foreign markets. (126) 
 
 (d) Allied Zollverein and trade war. (127-128) 
 (iv) Land : (129-130) 
 
 The question of land ownership and 
 economic rent. 
 
 (v) Agriculture : (131) 
 
 The need for better organisation and 
 education. 
 
 The above remedial measures, though important, 
 will not solve the fundamental question of Industrial 
 Unrest. (132) 
 
 D.— THE FUNDAMENTAL PROBLEM. (133- 
 
 180) 
 To understand the fundamental problem we must 
 examine the essentials of industrial welfare. 
 (133) 
 The foundation of industrial welfare is produc- 
 tion : its volume, its quality and the conditions 
 of work. [134) 
 Increased saving, for the renewal of capital and 
 plant is an essential of increased output. (135) 
 Increased Production, Increased Saving, 
 Increased Confidence are the keys to 
 the whole problem. [136) 
 Limitation of Production : 
 By Employers. (137-138) 
 By Labour. (139-140) 
 Why and how restrictions should be re- 
 moved. (141) 
 The Fundamental Question — The Rela- 
 tion between Employers and Em- 
 ployed. (142) 
 The interests of Employers and Employed 
 are concurrent as regards production and 
 only partly antagonistic as regards dis- 
 tribution. (143-144) 
 The question of status. (145-147) 
 The grievances of Employers. (148-149) 
 So long as the fundamental interests of 
 Employers and Employed are beheved 
 to be purely antagonistic, production 
 and saving will be hampered. (150-152) 
 
 The four guiding principles. (153) 
 
 (a) The necessity of increased efficiency in 
 
 production. 
 
 (b) Increased efficiency must be sought for 
 
 in better methods and organisation, 
 and in a new attitude towards Industry. 
 
 (c) These reforms can only be accomphshed 
 
 by the co-operation of Labour, Manage- 
 ment and Capital. 
 
 (d) In order to secure this co-operation, 
 \ Labour must have a voice in matters 
 j relating to its special interests. 
 
 In deahng with an immediate problem we must 
 work with the materials at hand. Gradual pro- 
 gress achieved by co-operation is better and more 
 certain than revolutionary methods. (154) 
 Demands made on all classes and the necessity 
 
 of meeting them. (155-158) 
 The State cannot move in advance of pubhc 
 opinion. (159) 
 The Functions of Capital, Management and 
 Labour. (160) 
 
 Inter-relation of these functions and con- 
 sequent common interests. (161-162) 
 Why the possibihties of co-operation are not 
 recognised. The causes of conflict. (163 
 -169) 
 
 The Outlines of a Settlement. (170-180) 
 Appendix A. — A Suggested Experiment. 
 Appendix B. — Works Lectures. 
 
A. — The Industrial Situation To-day. 
 
 I. The probable course of Trade and . Industry after 
 the war is already engaging the attention of numerous 
 official and non-official bodies. Some of these bodies 
 are concerned with the difficulties of demobilisation and 
 a return from war to peace activities ; others with the 
 possibilities of development and expansion which the 
 changed political and economic conditions appear to 
 hold out to us. Both aspects of the problem have 
 attracted a considerable amount of attention ; but it is 
 doubtful whether there is as yet any widespread public 
 recognition either of the dangers by which we shall be 
 threatened, or of the greatness of the opportunity which 
 will be presented to us. Among those who are closely 
 connected with Industry, whether as Employers or as 
 leaders of Organised Labour, there are many who regard 
 the future with grave apprehension. Both in the diffi- 
 culties inseparable from readjustment and in the more 
 permanent effects of the war upon our economic life, they 
 foresee the occasion of a renewed outbreak of industrial 
 friction which would not only obstruct our commercial 
 progress but seriously cripple our power of recovery, 
 
 2. The seeming prosperity of the country during 
 the war has obscured the realities of the situation. 
 Because the war has not given rise to unemployment 
 and the financial crisis which followed on its outbreak 
 was successfully tided over, many observers ignore 
 the industrial dislocation which has taken place. 
 Because there has been a general cessation of disputes 
 between Labour and Capital, which has enabled us to 
 concentrate our energies upon the vigorous prosecution 
 of the war, they imagine that the problem of industrial 
 unrest has in some way been solved. 
 
 3. These conclusions are altogether contrary to the 
 facts of the case. The prosperity of the present is 
 artificial and transient. It is due in part to strenuous 
 exertion which cannot be continued indefinitely ; in 
 part to sacrifices which go unreahsed because they are 
 not proclaimed ; in part to the depletion of accumulated 
 stocks ; in part to the suspension of expenditure on 
 national plant which, if continued, would end in dilapida- 
 tion ; in part to the temporary absorption into industry 
 
of people who will not continue to be producers after 
 the war ; in part to borrowing and recalling money from 
 abroad. It resembles in large measure the lavishness 
 of the spendthrift which leads to bankruptcy. The 
 absence of unemployment is due, not to thriving 
 trade, but to the withdrawal of several million men 
 from the labour market, the inflation of the currency, and 
 the concentration of purchasing power in the hands of 
 the State, which has not to study the absorptive power 
 of commercial markets for the disposal of its purchases, 
 but uses them to destruction as fast as they are pro- 
 duced. It is not till these stimulants are removed 
 and we are left once more to the operation of the 
 ordinary laws of supply and demand, complicated by the 
 difficulties of readjustment to normal conditions, that 
 the real situation created by the war will become 
 obvious. 
 
 4. It may be said that the success with which our 
 national organisation and activities were adapted to the 
 circumstances of the war gives a fair promise of similar 
 success in the readjustments necessitated by peace. But 
 the problems presented by a temporary crisis in which 
 economic considerations sink into a secondary place and 
 the strongest possible appeal is made to the spirit of 
 self-sacrifice in all classes, afford no real parallel to 
 those presented by a return to normal conditions after 
 a long period of dislocation. The factors mentioned in 
 the preceding paragraph, while they have eased the 
 situation during the war, will become a source of weak- 
 ness as soon as peace is signed. In some cases, such as 
 the withdrawal of men from the labour market, their 
 operation will be exactly reversed. In others, such as 
 the depletion of stocks and the suspension of expenditure 
 on national plant, immediate relief has been purchased 
 by mortgaging the future. The war has, in these two 
 regards, been paid for by drafts upon our prospective 
 wealth which will have to be met at a time when the 
 enthusiasm which sustains a nation during war has given 
 place to the reaction that usually follows a period of 
 tension. The rapid recovery of Industry from the shock 
 of war affords no ground for dismissing Hghtly the 
 difficulties inherent in a return to peace conditions. On 
 the contrary, an examination of the causes of that 
 recovery reveals additional grounds for viewing those 
 
difficulties with concern. The prospect is a grave one 
 and it is likely to be further complicated by the spirit 
 in which it is regarded by both parties to Industry. 
 
 |~ 5. Even were the present relations of Employers and 
 Employed entirely harmonious, we could not feel 
 complete confidence in the continuance of that harmony 
 after the war. But such is not the case. Even under 
 the stress of war there is ill-feeUng, suspicion, and 
 recrimination. Charges have been made against each side 
 of placing personal and class interests before national 
 welfare, and of using the national emergency to snatch 
 present gains and to strengthen its strategical position 
 for the resumption of industrial hostihties. Employers 
 have pointed to extortionate wage demands, broken time, 
 slackness, insubordination, and sullen resistance to 
 temporary changes, the necessity for which has been 
 openly acknowledged. The workers have pointed to war 
 profits, to the virtual enslavement of labour by the 
 misuse of powers conferred by the State, to attempts 
 to undermine and weaken the Unions and so to establish 
 
 an ascendancy which may be maintained after the war. 
 
 They lay stress, also, on the increased cost of living, 
 which they attribute in the main to the deliberate action 
 of manufacturers and traders, more studious of their 
 own than of the national advantage. The closing of the 
 ordinary channels for the ventilation of grievances has 
 served only to intensify the bitterness of such feelings. 
 6. There is a prevalent belief that the " brother- 
 hood of the trenches " and workshops, the spirit of 
 co-operation and self-sacrifice which has made possible 
 our efforts in the war, will remain as a permanent 
 factor in our national life. A great deal has been 
 said of the effect of discipline upon the men who have 
 served at the front, and it is widely assumed that on 
 their return they will be more amenable to management 
 and less responsive to agitation. Those who argue thus 
 do so mostly on general principles and probabilities. 
 But it is no use arguing that certain conditions ought 
 to produce certain effects if the facts show that they 
 do not. There is evidence that many of the men who 
 return from the trenches to the great munition and 
 shipbuilding centres are, within a few weeks of their 
 return, amongst those who exhibit most actively their 
 discontent with present conditions. Among those who 
 
have fought in Flanders or who have been employed in 
 making shells at home, there are many who look forward 
 to a great social upheaval following the war. To some 
 this may be distressing and almost incredible. The 
 facts remain, and the facts must be faced. 
 
 7. So long as the country is actually at war, this spirit 
 is likely to be held in check both by the abnormal condi- 
 tions of State control and by the patriotism of the mass 
 of the people. So long as the peril from without remains 
 the supreme factor, we may look to the workman to 
 forego his most cherished safeguards and to employers 
 and the propertied classes to bear patiently restriction 
 of profits and an unparalleled burden of taxation. But 
 we have had signs already, in the war-time strikes, in 
 the denunciations of profiteering, and in the evidence of 
 a great body of suppressed resentment on both sides, 
 which does not as yet come to the surface, that the 
 industrial peace is only a truce. It would be a mistake 
 to assume that this truce will survive the immediate 
 pressure of foreign war which brought it about. 
 
 8. The truth is that the war has effected a temporary 
 alliance between different parties and different classes 
 similar to that frequently effected between States. Just 
 as nations formerly bitterly opposed have been united 
 in face of a common peril, so Liberal and Tory, Labour 
 and Capital, have united to-day for a specific -purpose. 
 When that purpose has been achieved the alliance will 
 break up, unless more permanent ties of interest and 
 sympathy can be created. 
 
 9. For aid in the creation of such ties we can, indeed, 
 look to that quickened sense of corporate responsibility 
 which the war has developed. But for this purpose it 
 will not suffice to rely upon any vague sentiment of 
 goodwill. We have for so long been accustomed to 
 consider the community as divided into classes having 
 neither common aims nor common interests, and to 
 regard the operations of industry as something apart 
 from the moral and intellectual life of the nation or of the 
 individual, that it will not be easy to carry into the 
 industrial sphere that spirit of united effort and high 
 endeavour which has been awakened by the great 
 conflict. The workman's sense of loyalty in times of 
 peace has been excited by his Union or by his class 
 rather than by any conception of national unity. The 
 
 (8767) 9 B 
 
employer's business patriotism has stopped short at the 
 conception of successful resistance to foreign competi- 
 tion. By both alike the internal organisation of industry 
 has been considered as a purely domestic affair, a busi- 
 ness bargain to be arrived at by a compromise between 
 competing interests. The events of the past two years 
 have emphasised both the advantage of co-ordinated 
 action and the closeness with which Industry is linked 
 to every other element of our national life and strength. 
 But to bring home these truths to the bulk of Employers 
 and Employed, it will be necessary to make very clear 
 the relations between the various parties to Industry, 
 and between Industry itself and social and political 
 development. The unity of national effort in the war 
 has arisen mainly from the clearness of the issues involved 
 and the force with which they have been brought home 
 to every section of the people. In order to achieve a 
 similar unity of purpose and effort in the activities of 
 peace, it will be necessary to make the issues equally 
 plain and to embody in the form of a concrete pohcy the 
 principles which underlie them. 
 
 10. The idea that the united front shown by the 
 country to the external enemy implies of itself the burial 
 of class hatred and suspicion and that the suspension of 
 controversy during the war foreshadows the cessation of 
 industrial disputes after the war, is dangerous just because 
 it is so attractive. The natural desire to accentuate 
 the appearance of unity and minimise internal differences 
 leads us to treat as neghgible, sections of public opinion 
 which are really powerful and may become predominant. 
 The spirit of patriotism which induces the majority of all 
 classes to remain silent as to their grievances is con- 
 strued to mean that the feeling of grievance does not 
 exist. At the same time that criticism is denounced as 
 unpatriotic, abstention from criticism is supposed to 
 imply unqualified approval. 
 
 11. The war has not put an end to industrial unrest. 
 Every one of the old causes of dispute remains, and others 
 of a most serious nature have been added in the course 
 of the war. The very moderation and unselfishness 
 shown by the responsible leaders of Organised Labour 
 are looked upon by important sections of their following 
 as a betrayal of the cause and by some Employers as 
 a tactical opportunity. The efforts of the Government 
 
to safeguard the interests of the workers are likely to 
 give rise to unreasonable demands for future action on 
 the one side and ungenerous criticism on the other. The 
 difficult and complex problem of the return to peace con- 
 ditions will bristle with thorny questions only to be solved 
 successfully by the clear-sighted and unselfish co-opera- 
 tion of all concerned. There are too many indications that 
 they may be approached in a spirit of passion and suspicion 
 which would render a satisfactory solution impossible. 
 
 12. This would be a serious matter even if the in- 
 dustrial problem stood alone. Failure to cope with the 
 economic situation must necessarily involve widespread 
 loss and misery. But the industrial problem is in- 
 extricably entangled with social and political develop- 
 ment. It is not merely that a certain minimum 
 standard of material well-being is a necessary condition 
 of moral and intellectual advance, or that commercial 
 prosperity is an important factor in the strength and 
 prestige of the State. Industry itself has a human side^ 
 The discontent of Labour is not exclusively a matter of I 
 wages and hours of work. It is becoming increasingly 
 evident that it is based to a very large extent upon 
 questions of status and social conditions. It is not to 
 be desired, however, that the matter should be con- 
 sidered from a class or sectional standpoint. Industrial 
 life is simply one phase of the national activities, and the 
 responsibility of seeing that the conditions of industrial 
 life are such as make for conscious and efficient citizen- 
 ship rests upon the community as a whole. The spirit 
 in which both Employers and Employed regard their 
 common work will colour not only their relations to each 
 other but their general attitude towards the corporate 
 life of the nation. That attitude has been roughly 
 challenged by the war, which has profoundly disturbed'^ 
 the current both of circumstances and of ideas. It has 
 shaken men's faith in the permanence of existing condi- 
 tions and accustomed them to the contemplation of great 
 changes and to the possibility of extraordinary exertions. 
 The moment is a propitious one for an attempt to under~ 
 stand more clearly than in the past the fundamental prin- 
 ciples of industrial relations and their place in the national 
 life. The forces of change are visibly at work, and it rests 
 with us whether we allow them to hurry us blindly with 
 them, or direct them along the path of ordered progress. 
 
 (8767) II ij 2 
 
B.— The Effects of the War on the 
 Industrial Situation. 
 
 13. The problems arising directly from the effects of 
 the war are, in themselves, sufficiently serious. It has 
 involved a dislocation of industry, a diversion of labour 
 and capital and general effort to purely military objects, 
 which has not only made inroads on the national wealth 
 but has introduced altogether new factors into the 
 problems of our industrial life. To accomplish the 
 change from war to peace conditions without undue 
 friction or loss, to accommodate our methods and 
 organisation to the new burdens and altered circum- 
 stances, is a task as heavy as any trading community has 
 had to face. 
 
 14. The industrial effects of the war may be grouped 
 under five main heads : — Employment ; Earnings ; 
 Distribution of Earnings ; Capital and Credit ; Spirit 
 and Temper. 
 
 I.— EMPLOYMENT. 
 
 15. The problem of Employment has two phases : 
 (i) the Supply of Labour ; and (2) the Demand for 
 Labour. 
 
 (i) The Supply of Labour. 
 
 (a) Demobilisation. 
 
 16. The first factor to be considered is the return of 
 some three or four million men from military to civil 
 life. It is impossible to forecast the establishments which 
 may be considered necessary after the war, but even on 
 the assumption that our standing army is raised to a 
 Continental standard, there will probably be somewhere 
 about three million men to be re-introduced into civil 
 employment. 
 
 17. The problem of demobilisation is already receiv- 
 ing attention with a view to preventing the flooding of 
 the labour market. The cost of maintaining forces on 
 the present scale must, however, set a limit to the period 
 of demobilisation. 
 
 (b) Diminution of Government Orders. 
 
 18. In addition to men actually under arms, those 
 who have been diverted from their normal employment 
 to the manufacture of munitions and material of war 
 
will have to return to civil industry as the Govern- 
 ment orders for naval construction, artillery, ammuni- 
 tion and equipment are reduced to the peace scale. 
 
 (c) Stopgap and Emergency Workers. 
 
 19. The necessities of the war have brought into 
 active employment a large number of people, 
 especially women, who had not previously been engaged 
 in industry. Some of these have been introduced into 
 various trades to take the place of men serving with the 
 colours. Others have been called into activity by the 
 abnormal demand for munitions of war. Estimates of 
 the increase in the number of women workers in the 
 productive side of industry vary between 200,000 and 
 300,000, whilst the number of those engaged in com- 
 mercial and institutional occupations — offices, shops, 
 railways, administration, education — is estimated to 
 have increased by something over 300,000 ; but it is to 
 be remembered that a great proportion of these are 
 women who in the ordinary course would have retired 
 from industry. A large number of former non-producers 
 (in the industrial sense) have none the less been added 
 to the labour force of the country. It is probable that 
 many of these will desire to remain wage-earners. 
 Apart from the attraction of economic independence, 
 some will be compelled to seek continued employment 
 by the death or disablement of those on whom they 
 were dependent, or by diminution of income through 
 the financial results of the war. In addition, there 
 are large numbers of women who have left their ordinary 
 employment to take up munition work. These women, 
 as well as the men who have been transferred from civil 
 to war industries, will have to return to their former 
 occupations or find other jobs. A large number of 
 boys have also been introduced into industry, and the 
 total number of those who have become workers for 
 the first time during the war, or have been transferred 
 from one form of employment to another as the direct 
 result of war conditions, will probably amount to some- 
 thing like a million and a half, divided fairly equally 
 between the sexes. When the special necessities of their 
 war employment come to an end, all these will be added 
 to the general reservoir from which the supply of labour 
 is drawn. 
 
 •3 
 
(ii) The Demand for Labour. 
 
 20. The demand for Labour will arise from three 
 sources ; one directly connected with the war, the others 
 representing a return to normal conditions. 
 
 {a) Repair and Reconstruction Demand. 
 
 21. The repair and replacement of property damaged 
 or destroyed during the course of the war will be an 
 important factor in providing immediate work. In this 
 country the amount of property destroyed is compara- 
 tively small ; but there will be a demand for new tonnage 
 to replace vessels sunk, for commercial motors and other 
 material to replace those used for war purposes. Roads 
 cut up by use for heavy military transport will require 
 mending. Plant and machinery adapted to war pur- 
 poses or left idle through stagnation of trade will need 
 alteration and repair. Repairs and renewals postponed 
 for the period of the war will have to be carried out. 
 Depleted trading and domestic stocks will have to be 
 replenished. In the devastated districts of Belgium, 
 France and Poland reconstruction on a big scale will 
 be necessary. Roads, bridges, railways, factories, 
 machinery, houses, churches, will have to be recon- 
 structed or replaced. In all this work our foundries 
 and factories will find their opportunity. 
 
 {b) Revival of Private Demand. 
 
 22. Whilst the daily expenditure of some munition 
 workers and government contractors, and of some 
 recipients of war allowances, has largely increased 
 during the war, the private expenditure of the majority 
 of people has been considerably reduced. They have 
 spent as little as possible on new clothes, new furniture, 
 books, utensils, decorations. Such demands may be 
 regarded as in part postponed and accumulating. How 
 far people will have the means to make their demands 
 effective will depend on the general industrial and 
 financial position, but it is to be expected that in the 
 relief and reaction following the declaration of peace 
 money will be more freely spent and there will be an 
 increase in the demands of one section of the public 
 which will more than offset the decrease in the expendi- 
 ture of other sections. 
 
 (c) Revival of Foreign Trade. 
 
 23. We may hope also for a revival of the Foreign 
 Demand, but we shall be faced by foreign competition 
 
 14 
 
in overseas markets, perhaps still keener than before 
 the war, and the size of the demand itself will depend 
 largely upon financial conditions. It is certain, however, 
 that many branches of commerce suspended by the war 
 will revive. Unfulfilled contracts will have to be exe- 
 cuted. Orders which have been held back owing to 
 difficulties of transport, or to the diversion of labour from 
 industry to war service in this country, will come forward. 
 The release of shipping taken over for war purposes will 
 enable the foreign countries most affected to make good 
 a long period of interrupted communication. There will 
 be a loss of German and Austrian orders, but this loss 
 will be largely compensated by increased trade with 
 our Dominions and Allies, whilst the chief neutrals, 
 who have on the balance considerably profited by the 
 war, will provide unusually good markets. Taking all 
 these factors together, it is probable that unless a violent 
 dislocation of the foreign exchanges takes place there 
 will be a considerable revival of foreign trade, even 
 apart from purely reconstructive orders. It may, 
 however, be some time before it reaches the pre-war 
 level. 
 
 PROSPECTS OF EMPLOYMENT. 
 
 24. Against the effects of demobilisation, the cessation 
 of Government orders for war work, and the addition of 
 new workers to the labour market, we can therefore set 
 off three great sources of employment — the necessity 
 for reconstructive work, the revival of private buying 
 and the revival of foreign trade. So far as we can forecast 
 the net effect of these factors, we may expect a consider- 
 able amount of unemployment, due not to " shortage 
 of work" or " surplus of labour," but to the general dis- 
 location of industry caused by the war and the difficulties 
 of readjustment. 
 
 25. The immediate problem will, indeed, be rather 
 the adjustment than the provision of employment. The 
 returned soldiers and discharged munition workers will 
 have to be absorbed into the trades where the demand 
 is greatest. Emergency workers, employed on Govern- 
 ment contracts, will have to be found a place in civil 
 industries. In cases where men now serving have been 
 guaranteed replacement on their return, the stopgap 
 workers will have to seek other occupation. In many 
 
 15 
 
cases, the experience of the war has shown that a work- 
 shop or office can be run effectively by a smaller staff 
 than hitherto and men whose places have not been 
 guaranteed may have to go elsewhere. It is probable that 
 many clerical workers and male domestics will have to 
 turn to industrial employment, owing to the competition 
 of female workers and the continued reduction of estab- 
 lishments. The work of reconstruction and the effect of 
 orders held back for the period of the war will create an 
 abnormal demand in special trades. The whole machinery 
 of industry and of home and foreign trade will have to 
 be readjusted to normal conditions. To carry out this 
 complicated task will tax both the goodwill and in- 
 genuity of all concerned, if it is to be accomplished 
 without temporary local distress of a more or less serious 
 character. 
 
 II.— EARNINGS. 
 
 26. The first step in any enquiry into earnings is the 
 realisation that wealth cannot be distributed before it is 
 produced ; and that the national income cannot exceed 
 the aggregate value of goods produced and services 
 rendered within the country or received from without 
 in payment for goods and services, or as interest on 
 foreign investments. So stated, the proposition will be 
 recognised as a truism, but a failure to realise its truth 
 lies at the root of a host of economic fallacies, especially 
 on the part of those who concern themselves wholly with 
 distribution and those who prescribe some single specific 
 as the cure for every national evil. The foundation of 
 prosperity is production and many causes will tend to 
 reduce production after the war. 
 
 Causes Tending to Lessen Production. 
 
 (a) Men Killed and Incapacitated. 
 
 27. A very large number of those formerly engaged 
 in productive work will have been killed, or wholly or 
 partly incapacitated. We can only guess at the figure, 
 but it may probably be put without exaggeration at 
 over half a million. To these must be added a certain 
 number who, though their names have not appeared in 
 the lists of sick or wounded, have suffered in body or 
 in mind under the severe conditions of trench warfare 
 and will feel the effects of the strain in after life. 
 
 i6 
 
(b) Emigration. 
 
 28. Of the men who come back it is at least possible 
 that we shall lose large mmibers through emigration. 
 Many will have become discontented with sedentary 
 occupations and will prefer the free and open-air life 
 of the Overseas Dominions. Many will seek better 
 prospects abroad through fear of the hard conditions 
 likely to be found at home. Such has been the common 
 experience of nations after great wars, and in this case 
 the Dominions will themselves have lost a large number 
 of workers and will be the more inclined to encourage 
 immigration. 
 
 29. When a man in the prime of life dies or emigrates, 
 it is a real loss to the home country. It is true that he 
 has consumed as well as produced and when he is gone 
 there is a consumer as well as a producer the less. But 
 an adult man normally produces two or three times as 
 much as he personally consumes. He has to produce 
 enough in his working years to provide for the up- 
 bringing of children and for maintenance in old age. 
 Or, looking at it in another way, the rearing, educating 
 and training of a competent producer entails a cost of 
 several hundred pounds to the community and the 
 expenditure vested in him is lost to that community 
 when he dies or leaves and settles abroad. 
 
 30. Even assuming the number of new workers to 
 equal the total number lost by death, disablement or 
 emigration, we shall still be faced by a diminution in the 
 ranks of our most efficient producers, for which the new 
 and imperfectly trained labour introduced during the 
 war will form only a partial substitute. 
 
 (c) Deterioration of National Plant. 
 
 31. The national plant will have seriously de- 
 teriorated. By " national plant " is meant the whole 
 machinery of production and distribution with which the 
 industries of the country are carried on — factories, work- 
 shops, machines, tools, railways, roads. While certain 
 trades have been obliged to maintain themselves at the 
 highest level of efficiency, others less directly associated 
 with war work have been largely at a standstill. Re- 
 newals and improvements have had to stand over till 
 after the war ; machinery has deteriorated through 
 
 (8767) 17 c 
 
enforced idleness and lack of attention. The permanent 
 way and rolling-stock of our railways, the upkeep of our 
 roads, have been perforce neglected. All these factors 
 make for diminished efficiency and reduced production. 
 
 (d) Effects of Overwork. 
 
 32. In the war industries many employers and 
 employees have been working long hours, in some cases 
 with no week-end break and no holidays. The strain of 
 such continued over-exertion can be borne for a time, 
 but its effects are felt later. Some diminution of pro- 
 ductive capacity must be allowed for on this count. 
 
 (e) Suspension of Industrial Education. 
 
 33. Finally, the suspension of industrial education 
 will necessarily bear fruit in lessened efficiency. Our 
 young men have left their colleges and technical schools 
 for the trenches. The laboratories and training shops 
 have been turned into cramming establishments for 
 munition workers. Apprentices and improvers have been 
 withdrawn from the trades which they were learning. 
 Boys and girls who would have been apprenticed to 
 various trades have gone to blind-alley work in the 
 munition shops. In addition to this interference with 
 directly vocational training, the ordinary schools have 
 suffered from the withdrawal of teachers, the intro- 
 duction of less qualified assistants and the interruption 
 of training courses. Unless an effort is made to make 
 up the leewa3^ there is a danger that children now in 
 the schools will arrive at the age for vocational instruc- 
 tion with their general intelligence and capacity for 
 learning less fully developed than might have been the 
 case. 
 
 Causes Tending to Increase Production. 
 
 34. Against the above must be set a number of new 
 (' factors tending to increase the national output. In 
 
 many ways the war has acted as a stimulus to industry. 
 While the strenuous exertions of those engaged in war 
 industries may be followed by a reaction, it is probable 
 that on the whole the habits acquired during the war 
 may result in raising the general average of application. 
 Many may work harder and more efficiently than they 
 
 18 
 
did. To this end the effort to recover, in harder circum- . 
 stances, the standard of Hving maintained before the 
 war will materially contribute. Some at least of those 
 who survive the ordeal of the trenches \\ill come back 
 keener, quicker and more physically fit than they went. 
 The number of former non-producers who continue 
 working will probably be large, and in many quarters 
 they have revealed unsuspected adaptability and 
 endurance. 
 
 35. Much, though by no means all, of the special 
 plant erected for war purposes can be adapted to peace ^ 
 industries. In some cases, as in the shipbuilding and 
 army clothing branches, it will be as readily available 
 for manufacturing for the peace markets as for supplying 
 naval and military requirements. A large number of 
 buildings and machine tools erected during the war can 
 be taken over with little or no alteration. Others can 
 be converted to the uses of ordinary trade in the same 
 way as those existing before the war were adapted to 
 the manufacture of munitions. 
 
 36. Under the stress of the war there has arisen 
 a keener appreciation of the need for scientific pro- 
 duction. In many trades great strides have been made 
 in the direction of standardisation of parts, better 
 management of the supply of raw material and better 
 organisation of business. A knowledge has been gained 
 of special processes hitherto monopolised by German or 
 Austrian firms. Our manufacturers have become 
 accustomed to the supply of necessary articles on a 
 larger massed scale. In the engineering industry the 
 use of jigs, limit gauges, and automatic or semi-auto- 
 matic machine tools has been enormously extended, 
 and works that have acquired for the first time an 
 intimate familiarity with these appliances will doubtless 
 continue to use them in connection with their accus- 1 
 tomed work after the war. — ^ 
 
 37. But when all these things have been allowed for, 
 it remains certain that the national production must, 
 for many years, be reduced, unless it can be rendered 
 more efficient by better organisation of Industry. 
 
 Reduction of Income from Abroad. 
 
 38. How far the income hitherto received from 
 abroad in the shape of interest on foreign investments 
 
 (8767) 19 c 2 
 
will prove to be diminished after the war is, at present, 
 problematical. The heavy sales of foreign securities 
 and the contraction of national and private debts in 
 foreign money markets will make for a considerable 
 diminution ; but against this must be set off the loans, 
 almost equivalent in amount, made to our Dominions 
 and Allies, which will presumably bear interest and be 
 subject to repayment. Income from this latter source 
 will be government income, and will go to pay interest 
 and redemption on State loans contracted at home 
 and abroad. Income from abroad in the shape of 
 payment for shipping, banking, and insurance services, 
 may take some years before it reaches its pre-war level. 
 
 Net Effect of the War on Earnings. 
 
 39 . Taken as a whole, there can be no reasonable 
 doubt that, unless an organised effort towards increased 
 production is made, the aggregate national income is 
 likely to be much lower than before the war. The 
 decrease will be cloaked to some extent by the inflation 
 of money values. It is conceivable that whilst real 
 income in terms of goods and services will be diminished, 
 nominal income in terms of money will be the same or 
 even higher. This may ease matters for a while, but 
 in the long run income is assessed at its intrinsic value ; 
 and with the smaller total available for distribution, the 
 likelihood of quarrelling over its apportionment will 
 increase. 
 
 III.— THE DISTRIBUTION OF EARNINGS. 
 
 40. With a general reduction in the national income 
 — the amount of wealth to be distributed — the question 
 of distribution will become acute. It will be complicated 
 and intensified by the introduction of several new 
 factors. 
 
 (a) High Prices. 
 
 41. The rise in the cost of living has imposed a burden 
 on the working and lower middle classes during the war, 
 which is perhaps inadequately appreciated by those who 
 are accustomed to a larger margin for retrenchment. The 
 release of shipping employed for war purposes, the 
 resumption of industry and the re-opening of closed 
 
sources of supply will no doubt operate in the direction of 
 a fall. On the other hand, the general decrease in pro- 
 duction, the higher cost of production due to deterioration 
 of plant and diminished efficiency, the corresponding 
 decrease in production abroad and the general financial 
 and industrial dislocation will all conspire to keep prices 
 up or even to force them still higher. The probable 
 sequel will be a demand for increase in nominal wages to 
 enable the previous level of real wages — the standard of 
 living — to be maintained. The satisfaction of this 
 demand may quite well lead to a further raising of prices, 
 resulting in much hardship among those employed in 
 trades in which no increase of wages has been secured. 
 The professional classes and clerical workers, whose 
 nominal earnings have not generally speaking been 
 increased during the war, will be very hard hit. The 
 real value of incomes derived from investments paying 
 a fixed rate of interest will be appreciably diminished. 
 Apart from currency influences the lowering of prices will 
 depend upon increased industrial output, and upon the 
 extent to which the consumption of luxuries, with its 
 consequent employment of workers on the creation of 
 useless commodities, is foregone, enabling labour to be 
 diverted into industries producing the necessaries of 
 life. Increased taxation will contribute to this end, 
 but will not relieve wealthier people of the obligation 
 to accept without demur a diminished proportion of 
 the national income if this should prove to be necessary 
 in order to save the poorer sections of the community 
 from severe hardship. Ill-considered fiscal changes 
 might, on the other hand, drive prices still higher or 
 retard their fall. 
 
 {b) High War Wages. 
 
 42. The urgent demand for munitions and material 
 of war, together with shortage of labour, has led to 
 high rates of wages being paid for war work. The 
 amount of such increases has been greatly exaggerated 
 in the popular mind by confusing weekly earnings 
 with rates per hour. The large sums frequently m.en- 
 tioned as being taken home by particular workmen 
 at the end of the week are in almost all cases earned by 
 unsparing labour on piece tasks, or by working long 
 hours overtime. Family earnings have also in many 
 
cases been increased as a result of more members 
 of the family going out to work. The standard of 
 comparison in any consideration of wage movements 
 is the rate per hour, and whilst wage rates in the munition 
 industries have substantially increased, the average 
 advance in all industries has been more than counter- 
 balanced by the rise in prices. It follows therefore 
 that any serious reduction in rates after the war will 
 leave the generality of workers in a far worse position 
 than before the war. It is to be remembered also that 
 there are a great many employments in which wages 
 have increased not at all or very little during the war. 
 Wage-earners in these cases are already suffering from 
 the increase of prices and will continue so to suffer long 
 after peace is declared, unless some very definite steps 
 are taken to improve their lot. 
 
 43. The attitude of unskilled and unorganised labour 
 after the war will be influenced by the fact that in military 
 service many of them will have made acquaintance with 
 a hitherto unknown standard of maintenance. They 
 have been better fed and better clothed than ever before. 
 Their dependents, too, have been receiving State allow- 
 ances, often increased by their own earnings. These 
 people will not readily go back to the old conditions of 
 employment and life. For these reasons among others, 
 large sections of lower-paid wage-earners will resent 
 and resist any attempt to make good a reduction in the 
 national income at the expense of themselves and their 
 families. 
 
 (c) War Loans and Taxation. 
 
 44. An enormously increased national debt will be 
 one of the inevitable legacies of the war. Its amount 
 will depend upon the duration of the war, but it will 
 probably not be less than ;^3, 000,000, 000. The payment 
 of interest on this debt, and the provision of a sinking 
 fund for its redemption, will involve an annual ex- 
 penditure beginning at ;^25o,ooo,ooo and diminishing 
 gradually year by year as the debt is reduced. This 
 will materially affect the distribution of the national 
 income. A portion of the debt may be presumed to 
 be covered, as already mentioned, by loans to Allies 
 and to the Dominions, but as for the rest the financial 
 obligations of the National Debt will entail the trans- 
 
 22 
 
ference of say ^[200,000,000 per annum, roughly one- 
 tenth of the whole national income, from the general 
 body of taxpayers to a comparatively small class of 
 investors. How far this will intensify inequalities in 
 distribution will depend upon the incidence of after-war 
 taxation. If an undue share of the burden is placed 
 upon the non-investing classes the balance of distribution 
 will be seriously disturbed, and it is even conceivable 
 that a demand for repudiation might arise. The possi- 
 biHty of this becomes less remote when the situation in 
 Germany and Austria is considered. There is a likelihood 
 of the German and Austrian Governments being unable 
 to pay the interest on their war debts, and legislation 
 amounting to virtual repudiation may have to be passed. 
 Such an example would not be without its reactions here. 
 It would be asked how we, overloaded wdth debt and 
 taxes, were to compete in the world's markets with 
 nations who had repudiated their debts. But anything 
 amounting to even partial repudiation or to adverse dis- 
 crimination between holders of war loan and of other 
 securities would be unjust, dishonourable and disastrous. 
 Any drift in that direction can best be prevented by 
 encouraging wage-earners to save and to invest their 
 savings in small Government bonds ; but still more by 
 avoiding, after the war, the raising of revenue by the 
 taxation of necessaries. If the incidence of taxation is 
 such that revenue is drawn mainly from the creditor 
 classes, the distribution of the national income will so 
 far be left unaffected. 
 
 [d) Dearness of Capital. 
 
 45. With the prospective diminution in the volume 
 and flow of wealth, capital available for investment 
 will be scarce and dear and credit facilities are likely 
 to be limited. The argument has been put forward 
 that the new national debt makes ideal banker's 
 collateral, and so constitutes a basis for a great exten- 
 sion of credit ; but this appears to overlook the fact 
 that the volume of credit, though conditioned by 
 enterprise and confidence, is otherwise dependent upon 
 the continuous output of actual wealth. While a 
 particular kind of paper may be more acceptable 
 as a basis of credit than another, an increase in the 
 amount of that paper will not swell the volume of 
 
 23 
 
credit as a whole. There is also some expectation that 
 the Government will be able to repeat and perhaps to 
 extend the operations of August, 1914, in the way of 
 credit creation or subsidy ; but here again it is apt to be 
 overlooked that such emergency measures cannot by 
 their very nature be made a permanent and continuous 
 feature of the financial system. New capital may 
 therefore be expected to command a high return after 
 the war, and to absorb a correspondingly large share 
 of the national income in proportion to the amount 
 of capital provided. 
 
 PROSPECTS WITH REGARD TO THE 
 DISTRIBUTION OF EARNINGS. 
 
 46. Of the four above-mentioned factors tending to 
 influence distribution, two, high prices and dear capital, 
 will react unfavourably to Labour and are hardly 
 susceptible of concerted or legislative modification. High 
 prices may make for higher profits, and thus enable 
 higher wages to be paid ; but unless the national finances 
 are handled with great discretion heavy taxation will 
 operate against both the making of profits and the 
 enjoying of wages received. The loading of the scales 
 would in any case appear to be against Industry, and 
 perhaps more particularly against Labour ; and unless 
 every effort is made to expand the national output it 
 is difficult to see how conflicts between employers and 
 employed can be avoided. 
 
 IV.— CAPITAL AND CREDIT. 
 
 47. It has already been shown that the fixed Capital 
 of the country, its plant and communications, will have 
 deteriorated to a serious extent, and that new Capital will 
 be scarce and dear owing to the restriction of production 
 and war losses. The critical period for credit will not 
 have been passed until twelve months after the end of 
 the war, when the emergency legislation affecting bills 
 of exchange, debts and mortgages expires. It is possible 
 that when em.bargoes are removed and financial obliga- 
 tions have to be met, it may be necessary for the State 
 to exercise discretion and even to ask for new powers in 
 order to stave off a partial collapse of credit. 
 
 24 
 
v.— SPIRIT AND TEMPER. 
 
 48. The problems presented by the industrial situa- 
 tion would be difficult enough if they were faced in the 
 best spirit and with the coolest wisdom. Unfortunately, 
 as has already been suggested, there is a strong likelihood 
 of their being complicated by the existence on all sides 
 of an ugly temper which will render it difficult to 
 arrange an acceptable settlement of the issues at stake. 
 
 49. In so far as this temper is directly connected with 
 the war it may be summarised under three heads : — 
 Economic Discontent ; Class-Suspicion ; Psychological 
 Reactions. 
 
 {a) Economic Discontent. 
 
 50. We have seen that several causes will conspire 
 to reduce the earnings of Labour after the war. Even 
 should nominal wages remain at a high level or be in- 
 creased, real wages will be low owing to the increase in 
 prices. At the same time there will be a certain amount 
 of unemployment due to the difficulties of readjustment. 
 
 51. These are phenomena particularly likely to cause 
 discontent. The man who sees that while he is receiving 
 more money his spending power is actually decreased, 
 the man who finds a difficulty in obtaining work although 
 he knows that there is no general lack of demand for 
 labour, are both apt to imagine themselves cheated and 
 to break out into fierce resentment against those better 
 off than themselves. To say that this resentment is in 
 large part the result of defective reasoning will not get 
 rid of the trouble. It is not easy for men to reason 
 on economic causes when the result is felt not merely 
 in need for retrenchment but in want of necessaries. 
 
 52. The sense of hardship will be aggravated by the 
 cessation of separation allowances. There is no doubt 
 that in many cases, such as the families of agricultural 
 labourers and unorganised workers, the separation 
 allowances have represented a substantial increase in 
 spending power, while the wage-earner has been better 
 fed and cared for in the Army than ever before. They 
 will not go back without protest to the old, often 
 wretched, conditions of their life before the war. 
 
 (8767) 25 D 
 
53- Unless some means can be found of counteracting 
 the tendencies above discussed, the lot of the wage- 
 earner is likely to be a hard one. At the same time., 
 the demand for reasonable remuneration and decent 
 conditions will be stronger than ever. The national 
 exertions during the war have profoundly affected the 
 minds of the working class and have impressed them 
 with perhaps an exaggerated notion of the power of the 
 State and the extent of the national resources. It will 
 no longer be possible to silence the demand for social 
 reforms, by the assertion that they cannot be afforded. 
 Such a contention will be met by the argument that a 
 nation which has been able in an emergency to find 
 several millions a day for war purposes cannot plead 
 poverty as an excuse for neglecting the improvement of 
 social or industrial conditions. 
 
 54, While there is a danger that the real earnings of 
 Labour will be reduced, the real profits of Capital and 
 Management may suffer a similar diminution due to 
 restricted output, increased cost of production and heavy 
 taxation, whereupon the three great partners in Industry 
 will be threatened simultaneously and the competition 
 between them for its proceeds will be intensified and 
 embittered. 
 
 (&) Class-Suspicion. 
 
 r 55. The necessities of the war, especially with regard 
 to the production of munitions, have resulted in the 
 temporary abandonment of many of the Trades Union 
 " safeguards." The two most important instances are 
 the removal of restrictions on output and hours of 
 work and the dilution of skilled Union Labour by 
 partly skilled or unskilled, non-Union Labour. Pledges 
 „ have been given for the restoration of the status quo. 
 The new developments of industry, the springing 
 up of a great army of new workers and the difficulties 
 of readjustment will make it very much more difficult 
 than was expected to fulfil these pledges literally. 
 Unless some new equivalent can be found which will 
 convince the members of the Unions themselves that 
 they have gained more than they have lost, there will 
 very naturally be a strong feeling of resentment. There 
 is already only too prevalent a behef that advantage 
 
 ;?6 
 
is being taken of the war to prejudice the position 
 of Labour. Any hitcli arising in the restoration of 
 Trade Union " safeguards " will powerfully reinforce 
 this belief. The allegations made by both Employers 
 and Employed that the necessities of the war have been 
 turned to account for the promotion of class or personal 
 interests, the fear that returned soldiers may be used 
 as " blackleg " labour, the fear of the permanent intro- 
 duction of compulsory military service as a means of 
 strike-breaking and neutralising the power of Organised 
 Labour, the recollection of war-time strikes, will all tend 
 to increase the bitterness of class-suspicion. 
 
 (c) Psychological Reactions. 
 
 56. We have further to face the fact that the dis- 
 content due to economic conditions will be aggravated 
 by certain features in the general temper and spirit of the 
 nation. 
 
 57. An effort so stupendous as that made during the 
 war is almost invariably followed by a reaction. It is a 
 great thing that the response to the national call should 
 have been as ready as it has, that the Trade Unions 
 should have yielded up their most prized safeguards, 
 that men should have laboured in the munition shops 
 until they dropped at their work, that the Income Tax 
 payer should have submitted without murmuring to an 
 unprecedented increase, that so much thought and 
 effort as well as money should have been poured by the 
 leisured classes into national channels. But all history 
 teaches us that unless this energy and self-sacrifice 
 receives a fresh impetus not less potent than that of 
 the war, the removal of the stimulus will be followed 
 by a dangerous slump. 
 
 58. We have to take into account that those who 
 are crushed or hampered by the burdens arising from a 
 war are apt, when they take stock of their position, to 
 lay the blame on those responsible for the Government of 
 the nation during the war, even though they themselves 
 cordially supported the country's participation in it. 
 
 59. It must be remembered that, however these bur- 
 dens m.ay be distributed, " Equahty of Sacrifice " is in 
 point of actual fact impossible. The percentage of 
 income reduction which means to one man the giving 
 
 (S767) 27 D 2 
 
up of luxuries and curtailing of travel, means to another 
 shortage in the necessaries of life. The obligation to 
 serve implies in some cases temporary embarrassment 
 and a reduced income ; in other cases it implies selling 
 up the home and business ruin. To the sorrow of those 
 whose relatives have been killed or inj ured, there is added 
 in many cases the hardship caused by loss of the bread- 
 winner. Great numbers both of the working class and 
 the lower middle class will be hit by the war in a way 
 that those in different circumstances can only appreciate 
 with difficulty. Inevitable as this may be and unreason- 
 able as it may seem that inevitable suffering should 
 result in social or political discontent, it is no use 
 shutting our eyes to the danger that it may do so. 
 
 60. There is no doubt that the working of the 
 Munitions Acts and the Military Service Acts, the 
 methods adopted in certain quarters to promote recruit- 
 ing, the abolition of Trade Union restiictions, the 
 enormous profits made in certain trades, the rise in 
 food prices, have sown the seeds of a great deal of 
 bitterness. Much of it may be unreasonable, much of 
 it based upon demonstrably false assumptions and 
 fanned by unscrupulous controversialists on both sides ; 
 but again we are dealing with facts which must be faced. 
 61. There is thus no lack of inflammable material 
 ready to the hands of the incendiary. The incendiary 
 is not far to seek and may be found in all classes. It is 
 easy to persuade bitterly discontented men that if 
 society is thrown into the melting pot their condition 
 cannot be rendered worse and may be rendered better. 
 It may be argued that force is no remedy for economic 
 evils and that its application to social questions gives 
 very uncertain results. But such arguments require a 
 clearer atmosphere than that of class-hatred and sus- 
 picion and unless a practical and attractive alternative 
 can be offered, there is a grave danger that the extremists 
 may persuade a large following to try the chance of 
 industrial warfare. The danger of an appeal to force in 
 some form is all the greater that the war has habituated 
 men to the idea of conflict as the means of setthng 
 disputes, 
 j 62. On the other hand we have the danger arising 
 from a reactionary section among Employers, who, like 
 the Labour extremists, believe in the inevitability of 
 
 28 
 
class-warfare. There is a real danger that this section 
 may adopt to some extent the German view of Labour 
 as a force which needs to be controlled and disciplined 
 from above and may regard the war as an opportunity 
 to accomplish this end. There is reason to fear that some 
 Employers look on the Military Service Acts, the State 
 control of war industries and the temporary abandon- 
 ment of Trade Union restrictions as an opportunity to 
 establish once for all the ascendency of Capital over 
 Labour. It is not desired to question in these pages the_j 
 necessity of any measure adopted during the course of 
 the war. The gravity of the danger consists in this 
 half-acknowledged intention to use the new conditions 
 which have arisen, for the coercion of one of the parties 
 whose co-operation has made the carrying on of the war 
 possible. 
 
 PROSPECTS AS TO SPIRIT AND TEMPER. 
 
 63. The combination of economic discontent, class- 
 suspicion, the doctrines of Social Revolutionaries and 
 the danger of Industrial Prussianism, threatens us with 
 a bitter conflict between Capital and Labour which 
 would render it impossible to deal successfully with the 
 problems of readjustment and reconstruction. Only by 
 uniting the efforts of all classes towards common ends, 
 on the lines of a broad national policy, can such a 
 catastrophe be averted. 
 
 29 
 
C. — The Problem and Some Remedies. 
 
 I.— THE PROBLEM. 
 
 64. The Problem before us has been sufficiently indi- 
 cated by the foregoing analysis of the dangers with 
 which we are threatened and the difQculties which lie in 
 our way. It is only necessary to summarise it very 
 briefly, 
 
 (i) The Emergency Problem. 
 
 65. The Emergency Problem is simply to avert an out- 
 break of industrial anarchy in the period immediately 
 following the war. 
 
 66. The urgency of the task can only be measured by 
 the magnitude of the danger. That the possibility, even 
 the probability of such a development is a very real one 
 there is every reason to believe. Whatever the upshot 
 of such an outbreak its effects would be almost equally 
 disastrous to all classes of the community. 
 
 67. To Capital it would mean a long period of sus- 
 pended activit5^ depreciation and possibly wreckage of 
 plant, heavy financial loss, a fatal handicap in competi- 
 tion with foreign manufacturers. " Victory " would be 
 dearly won at the price of leaving Labour discontented, 
 inefficient, mutinous, ready to renew the fight at the 
 first opportunity. While the questions at issue might 
 be shelved as the result of a Labour defeat, they would 
 not be solved and the increased class hostility generated 
 by the conflict would remain an insuperable bar to the 
 development either of industrial efficiency or financial 
 confidence. 
 
 68. To Labour, industrial warfare involves a long 
 period of hardship and privation. Any material advan- 
 tages gained would be largely discounted by the sufferings 
 to be endured, the depletion of Trades Union Funds and 
 the crippling of the sources of production from which 
 alone the wealth of any class can be derived. Against 
 the prospect of improved working conditions and fuller 
 recognition of the rights of Labour, must be set the risk 
 of internal dissensions arising during a prolonged struggle, 
 and the possible loss of all that has been won in past 
 years. 
 
 30 
 
69. A clear cut victory for either side is improbable. 
 In an industrial conflict on the scale anticipated it is 
 unlikely that the anticipations of either Employers or 
 Employed would be fulfilled. The passions let loose 
 and excited by the losses of Capital, the sufferings of 
 Labour and the hardships arising to the whole com- 
 munity from high prices, scarcity of commodities, dis- 
 location of the ordinary activities of life and destruction 
 of confidence, might easily create a drift towards general 
 chaos which would defy the control of either Capitalist 
 or Working-class organisations. It is not improbable 
 that an intolerable situation would be ended by hasty 
 and ill-considered State action, placing Industry as a 
 whole under the yoke of a bureaucratic tyranny — a sort 
 of industrial Napoleonism. 
 
 70. Whatever the event of the dispute, the prize of 
 victory would perish in the struggle. 
 
 (ii) The Constructive Problem. 
 
 71. The Constructive Problem is concerned with the 
 more lasting effects of the war and with those difficulties, 
 social as well as economic, of our industrial life, which 
 it has accentuated though it has not created. On the 
 one hand we have to readjust and reorganise our indus- 
 tries to meet the new conditions, to provide for replenish- 
 ing the national capital and maintaining or increasing the 
 national income. On the other hand, we have to remove 
 the evils which have rendered the industrial problem an 
 irritant in our social life, to preserve and strengthen the 
 safeguards of individual liberty and self-respect and to 
 reconcile the conflicting claims of efficient production and 
 fullness of life for the Workers. To do this with success 
 we must face boldly the whole question of industrial 
 policy. We must endeavour to devise some means 
 by which the wasteful friction between Employers and 
 Employed may be replaced by co-operation to secure 
 these national ends and the whole resources of the 
 country directed to promoting the material prosperity 
 and social well-being of all classes of the population. 
 
 72. If we can accomplish this we shall not merely 
 have dealt successfully with the situation created by the 
 war. We shall have removed the most serious obstacle 
 to industrial and social development. That the nation 
 
 31 
 
should recuperate quickly, that the national plant should 
 be restored, that capital should be plentiful, that labour 
 should be efficient — these things are necessary in order 
 that we may avert a threatened danger. To secure 
 industrial peace on terms just and honourable to both 
 sides would be to double the national strength whether 
 in industry or in citizenship. 
 
 73. It is obvious that much will be gained if we can 
 frame the measures adopted for meeting the Emergency 
 Problem in such a way as will lay the foundations of 
 permanent reconstruction. By so doing we shall wring a 
 definite good out of the evils with which we are faced, 
 and we shall have a double claim on all classes for 
 co-operation and if necessary for concessions — that they 
 may thereby both save themselves from threatened ruin 
 and look forward to a positive gain. 
 
 74. In order to deal effectively with either the 
 Emergency or the Constructive Problem, it is essential 
 to keep in mind that both are dual in their nature. 
 
 75. On the one kand are the direct economic 
 effects of the war, the difficulties of demobihsation and 
 readjustment, and the diminution of the national 
 income by deterioration of plant, loss of workers and 
 wastage of capital. These effects can be dealt with by 
 special measures framed with a view to meeting specific 
 dangers. Some of these measures will be of an emergency 
 character, having for their object to carry us through 
 the period of transition with a minimum of suffering and 
 friction. Others will be of a more constructive kind, 
 intended to increase our general industrial efficiency and 
 so to neutralise the more lasting results of the war in 
 the direction of diminished production and reduced 
 earnings. 
 
 76. On the other hand, there is the fundamental 
 problem of Industrial Unrest, which may be aggravated 
 and l)rought to a head by the effects of the war, but 
 has its roots far back in pre-war conditions. It can be 
 solved only by a much broader and more far-reaching 
 treatment, based upon a survey not of the accidental 
 circumstances of the moment, but of the permanent 
 factors of our industrial life. Unless this problem is 
 successfully solved, no other steps which may be taken 
 can be relied upon either to avert the immediate crisis 
 or to ensure the future prosperity of Industry. 
 
 32 
 
']']. Many of the detailed questions bearing upon the 
 work of readjustment and reconstruction are already 
 the subject of investigation by Government Depart- 
 ments, by well-equipped societies, or by groups of 
 men having expert knowledge and practical experience. 
 It is well that this work should be done by those who 
 have special equipment for dealing with its various 
 phases. But two things require to be kept con- 
 stantly in mind. First : No single detailed measure 
 however important in itself and however thoroughly it 
 is worked out, will form a substitute for clear thinking 
 with regard to the essential principles of industrial life 
 and a united effort by those concerned to give them 
 fuller expression in their joint activities. Secondly, it 
 is essential to avoid clashing or overlapping by the 
 various movements represented and to give the work of 
 each its proper place and perspective in the wider scheme. 
 
 78. For the above reasons we propose to do little 
 more than indicate a number of the more important 
 matters which require study with a view to neutralising 
 the direct effects of the war, reserving for more extended 
 treatment in our final section, the fundamental problem 
 which is both the most important and the least recognised. 
 
 II.— EMERGENCY MEASURES. 
 
 (i) Demobilisation. 
 
 (a) The Finding of Jobs. 
 
 79. It has been shown that the probable cause of 
 unemployment after the war will be, not the lack of a 
 demand for labour, but the difficulty of bringing together 
 the workman and the job. A nucleus of the requisite 
 machinery is provided by the Employment Department 
 of the Board of Trade ; but the emergency will call for 
 operations far beyond the scope of the existing organisa- 
 tion. The creation of joint committees, representing 
 Employers, the Trade Unions and Labour generally, 
 working in conjunction with the Board of Trade, will 
 give the best hope of obtaining the necessary knowledge 
 as to the conditions of demand in particular localities 
 and trades. It should be possible for the Government 
 to obtain a complete, or approximately complete, register 
 of the previous occupations and capacities of the men 
 to be disbanded. A Central Conference composed of 
 representatives of the State, Employers and Labour, 
 
 (8767) II E 
 
worldng on the knowledge thus obtained, would be in a 
 position to co-ordinate the work of the various com- 
 mittees and of the Labour Exchanges, and to direct the 
 stream of demobilised men towards those districts and 
 industries where the probability of immediate reinstate- 
 ment or absorption was greatest. So far as military 
 exigencies will permit, it is very desirable that workers 
 for whose services there is an assured need should be 
 the first to be disbanded, and that an early discharge 
 should be given to those for whom situations are actuaUy 
 waiting. Above all, it is vitally necessary that the pre- 
 liminary work of investigation and the creation of 
 machinery should be pushed rapidly forward, in order 
 that there may be no delay or uncertainty in taking 
 action when the time comes for disbandment. 
 
 80, Even with the most complete machinery that can 
 be devised, it is difficult to see how a certain amount of 
 temporary unemployment can be avoided if we are 
 content to rely entirely upon the ordinary course of 
 relations between demand and supply. This margin of 
 unemployment could, however, be largely reduced if 
 not extinguished, by State and Municipal expenditure 
 upon works of pubHc utiUty. Such a policy will need 
 to be carried out with care and closely watched from 
 the standpoint both of public economy and industrial 
 conditions. Employment of this nature can never form 
 a permanent substitute for that arising from industrial 
 activity and it would be worse than folly to keep men 
 engaged upon Government or Municipal w^ork when 
 the industries of the country were ready to receive 
 them. All such work should therefore be undertaken 
 in close co-operation with the Employment Depart- 
 ment of the Board of Trade and the local Committees 
 representing Employers and Employed. It should also 
 be confined to work of definite utility and as far as 
 possible to undertakings of a productive nature or 
 connected with the restoration of the national plant. 
 At the same time it would be legitimate to anticipate 
 to some extent work intended to be done in the near 
 future, in order to give employment at the moment 
 when it is most required. There is a large amount of 
 really valuable work to be done in connection with hous- 
 ing, the repair and improvement of roads, afforestation, 
 the reclamation of waste land, etc., which would prove 
 a sound investment both from the social and economic 
 
 34 
 
point of view, and which the training of the returned 
 soldiers in trench warfare would have fitted them to 
 accomplish efficiently. 
 
 (b) The Assuring of Decent Wages. 
 8r. We shall undoubtedly have to meet a demand 
 that men returning to civil life shall be placed in a 
 position no worse than that which they occupied before 
 the war. Since the cost of living has risen and will 
 remain high, this will involve a demand for propor- 
 tionately increased wages. In the case of men who have 
 been guaranteed re-implacement, it is desirable that 
 employers should take this change of conditions into 
 sympathetic consideration. Men who do not return to 
 a specific job but who work at a staple trade will, of 
 course, look for the standard rate of wages current at 
 the date of their return. Any attempt to use ex-service 
 men as a means of substituting the old rates of wages for 
 those which have been granted to meet the increased 
 cost of living, would certainly arouse resentment and 
 might very well give rise to serious trouble. 
 
 82. In the case of those trades in which organisation 
 is but feeble and in which standard rates of pay can 
 hardly be said to exist, it is probable that improvement 
 could be secured by the apphcation to them of the Trade 
 Boards Act. Experience has shown that the fixing of 
 minimum rates under this Act has had a beneficial effect 
 on the wages paid, and that the increases so secured have 
 raised the workers affected just above that margin where 
 they become capable of organising and securing fair 
 conditions of employment for themselves. The fixing 
 of minimum rates in certain trades has also had a 
 stimulative effect upon workshop management in those 
 numerous cases where the methods and organisation 
 were such as to leave room for an improvement out of 
 which the increased labour charge could be recouped. 
 Direct legislative action of this character could be taken 
 in addition to no less important measures for the train- 
 ing of those who are employed in, or might otherwise 
 enter, low paid occupations — measures which are not 
 only of direct value to those immediately affected, but 
 also of indirect value in mitigating the rigour of com- 
 petition among the remainder. A Minimum Wage law 
 is a powerful instrument for achieving improvement and 
 should not be neglected, but it is well to recognise that 
 
 (8767) 35 E2 
 
its indiscriminate application might be attended by 
 certain risks. There is in many trades a margin of 
 unexhausted possibilities which a wisely fixed minimum 
 wage would do much to utilise. Beyond such a margin a 
 minimum wage would represent an increase in the cost 
 of production and selling prices, and might simply 
 become a tax on the community as a whole for the 
 benefit of the workers in the particular trade. 
 
 83. The whole question of wages is very closely 
 related to the larger problem of Industrial Unrest. If 
 the mutual hostility of Employers and Employed can 
 be replaced by a spirit of co-operation based on mutual 
 understanding and agreement, there will be less likeli- 
 hood of friction over details of the wage question and a 
 better chance of an all round improvement in the condi- 
 tion of workers, due to increased efficiency in production, 
 
 (c) Settling Men on the Tand. 
 
 84. The settlement of returned soldiers on the land is 
 desirable from many points of view. It might retain 
 in this country men unwilling to return to sedentary 
 occupations, who would otherwise emigrate ; and, if 
 successful, would tend to render the country more 
 self-supporting and to improve the national physique. 
 It would, therefore, conduce both to the efficiency of 
 national defence and to social welfare. The respective 
 advantages of State, local and co-operative settlements, 
 the desirability of ownership or tenancy of small holdings 
 — all these matters are already receiving the careful 
 attention of experts. It is doubtful, however, whether 
 sufficient consideration has been given to the question 
 whether the end desired can be best attained by organised 
 settlement of individuals or groups on created holdings 
 or by so promoting the prosperity of agriculture gener- 
 ally and its status as an occupation, that men will be 
 drawn to it by economic and social attractions. Prob- 
 ably both means may usefully be employed, and atten- 
 tion should not be concentrated on one to the exclusion 
 of the other. The problem of agricultural credit, 
 whether on a co-operative basis or otherwise, is an 
 important phase of the general question of land settle- 
 ment, which must not be overlooked. 
 
 {d) Teaching Men Trades. 
 
 85. In the reinstatement of demobiHsed men and 
 the adjustment of labour to the new conditions, large 
 
 36 
 
numbers of skilled workers may find themselves com- 
 pelled to seek employment in trades for which they 
 have not been trained. To allow these men to sink 
 into the ranks of unskilled labour would be manifestly 
 unfair to them and harmful to the community. It will 
 therefore, be necessary, as soon as the Board of Trade 
 Employment Department is able to forecast with some 
 accuracy the directions in which demand is likely to be 
 brisk, to make preparations for teaching men those 
 trades in which there is the best prospect of employ- 
 ment. Of less economic importance, but a debt of 
 honour which the nation must not forget to pay, is 
 the obligation to teach men who are prevented by partial 
 disablement from following their old occupations, some 
 trade within their present capacity. 
 
 (e) The New Workshops. 
 86. Although the plant normally employed in many 
 industries has been allowed to fall, to some extent, into 
 disrepair, a great deal of new plant has been created for 
 the purpose of making munitions. Much of this, though 
 unfortunately by no means all, is convertible for the 
 purposes of civil industry. Part of this plant is in the 
 hands of private owners who will, in the ordinary course 
 of business, make the utmost possible use of it for 
 industrial purposes. Much of it, however, is in the new 
 factories and workshops owned by the State. Of these 
 some may be permanently retained by the Government 
 for the manufacture of war material. With regard to 
 the rest, it will be a question how far they should remain 
 under State control and how far they should be sold to 
 private firms. The former course would not necessarily 
 involve the entry of the State into competitive industry. 
 The new workshops could be used for the manufacture 
 of plant and appliances used in the work of Government 
 Departments, such as telephone, telegraph and Post 
 Office equipment. Since this course would involve the 
 maintenance of a permanent staff, it would not perform 
 the function of steadying general employment or pro- 
 viding temporary relief during the period of transition. 
 But it might enable the Government to offer 
 immediate and permanent employment at standard 
 wages to some demobilised men who had lost their old 
 jobs and were prepared to undergo training for new tasks. 
 It is at least possible, however, that sale to private 
 
 37 
 
enterprise would result in more efficient use being made 
 of the plant. The knowledge acquired departmentally 
 as to the adequacy of existing plant in the various 
 industries to meet probable requirements may be used 
 as a guide in considering the question of transfer. In 
 many cases it is probable that the cost of conversion 
 would be such as to make economical working impossible, 
 and it will be necessary to be careful lest reluctance to 
 scrap State owned property should result in ill-advised 
 and wasteful attempts to use it for the fulfilment of 
 Government orders. 
 
 87. On the cessation of hostilities, it will be possible 
 gradually to reduce the production of munitions and 
 military material to a peace level. There will, however, 
 be an immense vis inerticB to be overcome, tending to 
 keep a high proportion of our productive power engaged 
 for months after the war on munition work. It is not 
 easy suddenly to stop or divert the activities of so 
 powerful and so highly organised a machinery as that 
 controlled by the Ministry of Munitions. Many firms 
 will be interested in the continuance of profitable con- 
 tracts. Many people will be interested in the retention 
 of secure and well-paid employment. There will be a 
 natural tendency to continue automatically the expen- 
 diture of unexpended votes. Varying estimates will, no 
 doubt, be formed as to the proper standard of peace 
 requirements. At the same time, it is essential that, 
 without prejudicing the requirements of national defence, 
 we should act promptly and vigorously in switching off 
 munition work, scrapping what is half-done and re- 
 adapting our industrial plant to the uses of peace. In 
 all the metal industries there will be an abundance of 
 orders waiting for execution and it depends upon the 
 rapidity with which we effect this transference of effort 
 whether we get these orders before they have gone 
 elsewhere. 
 
 (ii) The Exodus from the War Industries. 
 
 88. The problem of providing peace employment for 
 those who have acted during the war as stop-gap and 
 emergency workers will be of less magnitude than that 
 of reinstating the returned soldiers ; but it will none the 
 less be a formidable one. We have seen (paragraph 19) 
 that the total number affected will probably fall little 
 short of a million and a half, about half of whom will be 
 
 38 
 
women and girls. This total may be divided into several 
 classes, both as regards the nature of their employ- 
 ment and the problem which they will present on a 
 return to peace conditions. 
 
 89. The necessities of the war have resulted in the 
 employment of a large number of additional workers in 
 the munition, equipment, chemical and other industries, 
 either for the purpose of making material of war or to 
 supply the exceptional demand for labour created in 
 certain trades by the circumstances of wartime, such 
 as the cutting off of imports from abroad. The great 
 majority of these have left other employments, either 
 because trade was slack in their own line, or because 
 of the higher remuneration or greater attractiveness of 
 war work. Most of those who have done so may be 
 expected to gravitate back to their former occupations ; 
 but not all \\dll find it possible to gain immediate rein- 
 statement. A large section consists of married women, 
 more particularly of women whose husbands are with 
 the Colours, who have returned to industry during the 
 war. The majority of these will doubtless return to 
 domestic life ; but many of them may be compelled to 
 continue as wage earners, or may desire to do so. A 
 further section consists of girls who would in the normal 
 course have entered industry during the period of the 
 war, and whose circumstances will certainly require 
 them to seek other paid occupations when their war 
 employment has come to an end. 
 
 90. In addition to those who have been added to the 
 number employed on special industries, many women 
 have gone into factories, shops and offices to take the 
 place of enlisted men. A large proportion of thesfe are 
 young women who would not, in the ordinary course, 
 have sought for paid employment. Here again, it is 
 probable that a certain number will withdraw from 
 industry when the national emergency is passed, but 
 that a large number will remain as wage earners, either 
 from necessity or from preference. There are also a 
 considerable number of former domestic servants, some 
 of whom will desire to retain the greater freedom and 
 higher remuneration of their new occupations. Such 
 women, whether they have taken the place of enlisted 
 men or have been employed on munition work, will 
 present a difficult problem ; for they have had no pre- 
 war industrial training and the instruction which they 
 
 39 
 
have received in the performance of speciahsed tasks 
 will not be of much service in securing employment when 
 war work comes to an end, or the men whom they have 
 released return. It is probable that a more scientific 
 organisation of office-staffs may find a permanent place 
 for some of those who have entered on commercial life ; 
 but the greater number of these new workers will have 
 to look for industrial employment, and unless a satis- 
 factory method of dealing with the difficulty can be 
 found, there is grave danger of their drifting into the 
 lowest grades of unskilled labour or the ranks of the 
 unemployed. 
 
 91, Finally, there remains the problem of boy and 
 girl labour. During the war, many children have become 
 wage-earners before arriving at the statutory working 
 age, and have been put to work in which they have no 
 future, and are receiving very little instruction of general 
 utility. In the case of these juvenile workers the primary 
 necessity is to make good the interruption of their educa- 
 tion, both general and vocational. 
 
 92. The general situation with regard to stop-gap 
 and emergency workers will be somewhat relieved by 
 the fact that many women who would normally have 
 quitted industry for domestic life have deferred doing 
 so until after the war. The places vacated by them will 
 be available for those who are returning to ordinary 
 employment from the war industries. In the main, 
 however, the problem is similar to that of demobilisation, 
 and must be treated on the same lines. As in the case of 
 returned soldiers, the transition may be eased by Govern- 
 ment orders for reconstruction work and for undertakings 
 of national utility. The special difficulties presented 
 by the case of the new women workers, with no previous 
 industrial training, and the boy and girl labour taken 
 on for war purposes, will require separate treatment. 
 The only way in which these workers can be raised 
 above the level of unskilled Labour or assured permanent 
 work, is by the adoption of a comprehensive policy of 
 technical and vocational education, directed to fitting 
 them for those trades in which there are the best pros- 
 pects of employment. 
 
 (iii) Industrial Friction. 
 
 - 
 
 ' 93. Whatever emergency measures may be adopted, 
 the avoidance of friction depends upon an agreement 
 
 40 
 
between Labour, Management and jCapital as to the 
 future organisation of industry. Such an agreement 
 must be based on frank recognition of the existing 
 grievances of all parties and can only be attained by 
 bringing home to the minds of each class the dangers 
 arising from conflict and the advantages to be gained byi 
 co-operation. The possibility of such an agreement will 
 be discussed in the concluding section of this Memo- 
 randum. 
 
 in.— CONSTRUCTIVE MEASURES. 
 (i) Industrial Efficiency. 
 
 94. The first essential of Industrial Efficiency is the 
 will to produce, which can only be obtained by providing 
 suflicient incentive and promoting confidence. It is 
 therefore dependent upon a satisfactory solution of the 
 fundamental problem. — ' 
 
 Subject to the satisfaction of this primary requisite, 
 much may be done to promote efficiency by an all round 
 improvement in our industrial organisation. A number 
 of practical steps in this direction are suggested below. 
 
 {a) Physical Efficiency. 
 
 95. The basis of all national progress, whether indus- 
 trial or social, is the health and physical efficiency of the 
 people. Any improvement in this respect must be 
 sought along two lines — the improvement of conditions 
 and the spread of knowledge. The conditions which 
 exist at present in the over-crowded areas of our towns 
 and in many of our villages render healthy life impos- 
 sible. The progress of physical degeneracy must be 
 arrested by increased attention to the care of child fife, 
 the improving of housing conditions, both in town and 
 country, and the creation of open spaces. These steps are 
 essential not merely to the efficiency of the working 
 class, but to the health and character of the nation. 
 Closely connected with this question is that of healthful 
 conditions of work. Not only justice and humanity, but 
 sheer economic necessity should prompt us to enforce 
 strictly all regulations of factory and other work in the 
 interests of health, cleanliness and decency. It is 
 equally important that ample opportunities and faci- 
 lities should be afforded to all industrial workers for 
 rest, recreation and exercise. Neither efficient workers 
 
 (8767) 41 F 
 
nor healthy and self-respecting citizens can be obtained 
 -if any part of the community is denied access to the 
 materials of social life. The assurance of a minimum 
 standard of maintenance, enabling sufficient food and 
 clothing to be provided for every member of a family, 
 is bound up with the question of wages and must be 
 taken into account in any consideration of that question. 
 While the difficulties in the way of establishing a general 
 minimum wage by State action are great and probably 
 prohibitive, the wage rates in any trade should bear 
 a definite relation to the cost of living. A healthy 
 public opinion and the common sense of employers 
 should both be brought to bear upon the dangers arising 
 from an inadequate standard of life. To ensure full 
 value being received for the money spent on food, the 
 laws against adulteration should be strengthened both 
 in their provisions and enforcement. Adulterated food 
 and impure milk are still responsible for much mal- 
 nutrition. All these questions of conditions are funda- 
 mental and unless they are attended to, we can look 
 for no great progress ; but in order to obtain the best 
 results a simultaneous effort must be made to extenc' 
 knowledge and training. The work already done in the 
 schools in the direction of physical training and the 
 teaching of elementary hygiene, is excellent ; but with 
 greater national attention to these subjects, resulting 
 in further financial provision, it could be largely 
 extended. The same remark applies to the teaching 
 of domestic economy. While the workers are rightly 
 suspicious and resentful of grandmotherly interference, 
 an infinite amount of waste and loss could be saved by 
 spreading among all classes a sounder knowledge of how 
 to lay out the family income and employ the domestic 
 equipment so as to obtain the best return. No class 
 is free from the reproach of wasteful expenditure and 
 inefficient methods and a knowledge of simple facts in 
 elementary economics should form part of the teaching 
 in all schools. 
 
 (b) Mental and Manual Efficiency — The Primary Schools. 
 96. The foundations of mental and manual efficiency 
 Imust be laid in the primary schools. There is observable 
 among some industrialists a recurring tendency to 
 regard all but the barest rudiments of general education 
 as useless and even injurious to the average run of 
 working-class children, and to urge that at an early age 
 
 42 
 
all but the most promising should be trained solely with 
 a view to fitting them for a specific occupation. Thisj 
 course, however, is open to serious objections, both 
 from the social and from the industrial point of view. 
 The effects of technical instruction at a very early 
 age are undoubtedly injurious to mental develop- 
 ment. It must inevitably be acquired mechanically 
 and without understanding, and the cramping effect 
 of a purely utilitarian education upon intelligence and 
 character renders it a poor preparation even for indus- 
 trial life. From the social standpoint there are grave 
 disadvantages, both to the working class and to the 
 community as a whole,/in restricting the education of 
 any children to their training as operatives. At the 
 same time, the connection between the general education 
 given in primary schools and industrial efficiency is close, 
 and may be rendered still closer. The modern educa- 
 tional systems, which aim at fostering the child's intel- 
 ligence and developing its powers of self-expression, 
 even more than at imparting instruction, can be made 
 to form the best possible basis for subsequent specialised 
 training. At present the elementary schools still suffer 
 to some extent from the pressure of stereotyped codes 
 laying an undue emphasis on " book-learning," and the 
 development of the child-mind is too often choked by 
 cramming in the upper standards. What is Vv'anted is 
 not that those who have the welfare of the industrial 
 class at heart should seek to limit the time and attention 
 given to general education, but that they should ally 
 themselves with those educational reformers, within the 
 schools as well as outside them, who are striving to 
 simplify the curriculum and to lay increased emphasis 
 on the formative side of education. Special attention 
 should be given to that part of the course which is 
 devoted to bringing out the child's powers of observation 
 and placing it in an intelligent relation with its environ- 
 ment. The " eye and hand training " which already 
 forms a large part of the work is capable of great 
 extension. To confine it to preparation for any particular 
 trade would be to rob it of most of its educational and 
 much of its industrial value. Its purpose is to perfect 
 the instrument of which subsequent vocational traniing 
 will teach the use. Experience shows that instruction 
 in any subject is acquired more quickly and more 
 thoroughly if it is postponed until the mind and senses 
 of the child have been thoroughly and painstakingh' 
 
 (8767) 43 F 2 
 
prepared to receive it. Education along these lines will 
 produce at the same time efficient workers and intelligent 
 citizens ; and the development of the communal and 
 team spirit, by the organised games which are coming 
 more and more into favour, will play its part in both 
 these relations. Our hope for the future must lie largely 
 in co-operation between the industrialists and sociologists, 
 who can best indicate the national requirements, and the 
 practical educationalists who are entitled by training 
 and experience to indicate the methods of attaining them. 
 
 {c) Mental and Manual Efficiency — Continuation Education. 
 97. The work of the primary schools must be carried 
 forward and developed by the improvement of our 
 system of Continuation Education. There is no greater 
 source of national waste than that which takes place by 
 the premature withdrawal of our children from school 
 life, just at the age when they are best fitted to profit 
 by it. The figures in this respect are so startling that 
 they are worth quoting. In England, out of two and 
 three-quarter million boys and girls between the ages 
 of 12 and 16, nearly 1,100,000 get no further education 
 after the age of thirteen. Of the remaining 1,650,000, the 
 great bulk are educated, mostly in the elementary school, 
 only until the age of fourteen. Only 250,000, or one in 
 eleven, go to proper secondary schools, and in most 
 cases they are there only for a short time. These figures 
 make it easy to understand the superior success of 
 Germany in so many departments of activity. That 
 success is not due to the character of the education 
 received by young people in Germany. It is due to the 
 fact that so very much greater a proportion of young 
 people in that country receive any systematic education 
 at all during the all-important years between 14 and 18. 
 The same is true of University education which, what- 
 ever its quahty, is far more widely diffused in Germany 
 than in this country. Both for the sake of the future 
 of British Industry and from the poin of view of the 
 development of intelligent citizens, it is essential that 
 means should be found by wliich general education can 
 be continued after the close of the primary school period. 
 This is the more important because the conditions of 
 modern industry are such as to make it impossible to 
 rely on apprenticeship as a generally satisfactory method 
 of industrial training. The methods of attaining the 
 desired end remain to be considered. 
 
 44 
 
Evening Classes. — Continuation education in this 
 countr}^ has for many years past existed in the form of 
 evening schools. These have rendered much good service, 
 but attendance has been voluntary and the number of 
 students has always been small in proportion to the 
 whole number of juveniles employed in industry. More- 
 over, attendance at an evening school for one, two, or 
 more hours, after a 9^-hour day in the works, puts a 
 heavy strain on mind and body, and in the case of the 
 keenest and most promising youths, has often resulted in 
 complete breakdown. Evening classes are thus open 
 to serious objection and further progress can hardly be 
 expected from a development of the system. 
 
 Part-Time Day Schools.— The method of evening 
 schools having been found unsatisfactory, should be 
 replaced by a system of compulsory part-time day 
 Continuation Schools for all young persons between 
 14 and 18 who are not receiving whole-time education. 
 Employers, as a whole, must be required to follow the 
 example already set by many among their number, who 
 allow their young employees a substantial period every 
 week for attendance at school. These Continuation 
 Schools, if they are to do the best for their pupils, must 
 not be purely technical or specialised in character, but 
 must continue the general civic education from the point 
 where it was left at the primary school, and must lay 
 due stress on the physical side of development and on 
 the corporate life which is the essence of the " public- 
 school spirit " in the schools of the well-to-do for boys . 
 of the same age. Education at this stage must still be 
 primarily formative in its purpose : and it is because 
 British schools of the older type have always kept this 
 larger aim steadily in view that they have developed 
 the qualities of adaptability and initiative which the 
 war has revealed. The true period for specialisation and 
 the perfecting of industrial, as of professional training, 
 is after the age of 18 for it is only then that most young 
 people become fixed in what is likely to be a Hfe-long 
 occupation, and have the necessary knowledge and 
 general equipment to understand the bearings of the 
 special work which falls to their lot. For this specialised 
 training the part-time school, with skilled craftsman 
 teachers, afford the best opportunity. The combination 
 of vocational instruction in the case of younger pupils, 
 who have developed a special bent towards any par- 
 ticular craft, with the continuation of their general 
 
 45 
 
education, is already provided for, to some extent, by 
 the Junior Technical Schools which have been established 
 in many of our large towns. 
 
 . The Universities. — Much more could also be done to 
 bring the University life of the country into closer touch 
 with the professional and industrial classes. A Uni- 
 versity should not only be a training ground for the 
 recognised professions, but a centre of research in con- 
 nection with the industries of the country. Moreover, it 
 has a distinctive and peculiar part to play in what has 
 come to be termed the work of adult education. It 
 should form a meeting place for those engaged in every 
 department of life, and the natural home of the thought 
 and discussion of the country on pubhc affairs. Used 
 in this spirit, the Universities should go far to redeem 
 the country from the shallow and sectional discussions 
 which have disturbed it in recent years. 
 
 {d) Labour-saving Machinery. 
 
 98. There is no question that an increase in the 
 industrial output could be obtained by a wider utilisa- 
 tion of labour-saving machinery. From the Employers' 
 point of view, the cost of an improvement of this kind 
 in existing plant would be repaid in a very short period 
 and would yield a high return on the capital invested. 
 
 ( The Workman, however, usually resists and obstructs, 
 or, at any rate, resents its introduction, and before such 
 extension can be advocated as an item in the programme 
 of reconstruction, the grounds of this opposition must 
 be examined from the point of view of the Men as well 
 as of the Employer. 
 
 99. The strongest form assumed by this hostility 
 rests upon a human and not upon an economic basis. 
 It arises from a profound dislike of seeing handicraft 
 replaced by the machine and the craftsman relegated 
 to the position of a macliine minder. The argument 
 that the use of automatic machines will increase output 
 leaves this objection untouched, because the question 
 is not one of the worker's remuneration but of his posi- 
 tion and self-respect. The tendency of work under 
 modern conditions to become a mere mechanical routine 
 and of the worker himself to become dehumanised during 
 his hours of labour is at the bottom of the wide-spread 
 intellectual revolt against the industrial system. This 
 feeling is not only a natural one, but is based upon 
 
 46 
 
sound instincts. It must be taken fully into account 
 in any discussion of the subject. 
 
 100. It will be admitted by most of those who have 
 thought upon the question that a complete return to 
 the old conditions of handicraft is impossible. It can- 
 not, at any rate, be contemplated as a practical 
 programme for the near future. The conditions of 
 modern life involve an ever-extending amount of repeti- 
 tion work done to precise measurements. In work of 
 this kind, whether it be done by hand or by machinery, 
 there is little room for exercise of the higher faculties 
 of craftsmanship. The defence of labour-saving 
 machinery from the human standpoint is that it 
 removes the sheer muscular drudgery from such work 
 and enables a greater amount to be produced in 
 shorter hours and with less strain and exhaustion to 
 the worker. Moreover, the increased complexity of 
 machinery is continually operating in the direction of 
 restoring the balance, by calling upon the operator for 
 a care and a degree of skill approaching more nearly 
 to craftsmanship. This tendency would be largely 
 fortified if more care were taken to explain to operators 
 the purpose of their task, and the part it plays in the 
 process of production. There is no reason why even 
 the unskilled labour connected with labour-saving 
 machinery should not be based upon a foundation of 
 inteUigence and responsibility in the worker which 
 would preserve his self-respect. Nor must it be for- 
 gotten that the construction and maintenance of labour- 
 saving machinery gives rise in itself to the employment 
 ,of a large amount of highly skilled labour. 
 
 loi. The chief economic objection of the worker to the 
 introduction of labour-saving machinery arises from his 
 belief, unhappily founded on experience, that its imme- 
 diate effect is to lower his wages or deprive him of his 
 job. With some qualifications, this objection is well- 
 founded. That such a result is not invariable arises 
 partly from the fact that many labour-saving machines 
 are very costly, so that a wise emplo5^er will offer a 
 journeyman's wage to anyone who will work them to 
 their full capacity, rather than pay a labourer's wage 
 for them to be worked at half or two-thirds capacity. 
 Moreover, the ultimate effect of labour-saving machinery 
 is to lower the price of the article produced and thereby 
 to increase the demand for it, which, in its turn, will 
 react upon the demand for labour. It remains no less 
 
 47 
 
true, in the main, that when a craftsman's job passes 
 to the machine, that special skill which is his sole stock 
 in-trade loses its monopoly value and he stands in 
 danger of sinking from an employed craftsman to an 
 unemployed labour unit. 
 
 102. The existence of cases of individual hardship does 
 not, however, prove that the introduction of labour- 
 saving machinery is, in the long run, economically 
 injurious to Labour as a whole. That such cases of 
 hardship should arise is inevitable in all industrial 
 progress, as well as in every other department of life. 
 Any sudden change in industry, whether due to new 
 inventions, to fashion, or to changing conditions with 
 regard to markets or raw material, involves a similar 
 displacement. To resist the forces of change is impos- 
 sible, and the attempt to retard them is generally 
 productive of waste and friction. The better course is 
 to develop the new trade or system rapidly and efficiently 
 and at the same time to do all that is possible to bridge 
 over the period of transition and protect the individuals 
 affected. In the case of labour-saving machinery this 
 duty is particularly incumbent upon the employer, 
 because the change is one introduced by him for his own 
 profit. It is his duty so far as possible to provide alter- 
 native work for the men displaced, to take advantage of 
 the normal fluctuations of staff to spread out the period 
 of reduction, to allow time for men who cannot be 
 retained to find another job. The only course, however, 
 which will go to the root of the opposition to the intro- 
 duction of such machinery, is for the employer to take 
 the workers into his confidence ; to explain to them 
 what is proposed ; to discuss with them, through their 
 representatives or their Trade Union, the machinery 
 required to meet the demands of competition, the rate 
 of its introduction, the conditions under which it is to 
 be worked and the wages to be paid to the operators. 
 It is only by the co-operation of Employers and Employed 
 to introduce and use labour-saving machinery as a means 
 of increasing efficiency of production, and not merely 
 for the purpose of cutting down wages while increasing 
 profits, that the advantages to be derived from its use 
 can be attained with the minimum of dislocation and 
 loss to individuals. At the same time a better system 
 of education, tending to produce all-round competence 
 and adaptability, would go a long way towards placing 
 the worker above the prospect of disaster due to a change 
 in conditions. 
 
 48 
 
(e) Works Organisation. 
 
 103. No method of increasing output is more promis- 
 ing in theory than that known in America as " Scientilic 
 Management " ; but none is more open to abuse and 
 frustration in practice. It is based on the conception 
 of a works in which the whole routine, down to the last 
 detail of every operation, is organised by the manage- 
 ment, acting through a staff of efficiency experts. So 
 far as concerns the " routing " of work through the 
 shops, no objection can arise. Confusion, over-lapping, 
 delay and waste are avoided and the course of the work 
 is made to run smoothly and rapidly. These are true 
 functions of Management, and the more thoroughly 
 they are performed the more efficient will be production 
 and the less the strain on the workers. 
 
 104. With regard to the functions of Labour, the 
 methods of Scientific Management are more open to 
 question. The idea is to analyse and time the phj^sical 
 movements made in the performance of each operation 
 on every job ; to reduce each task to its simplest 
 elements ; to construct a routine from which every 
 superfluous effort or movement is eliminated ; and to 
 train workmen to follow the prescribed schedule as a 
 coach might train a boat's crew to use their oars. The 
 reactions of environment and the limitations of fatigue 
 are studied ; no overstrain is allowed ; rest periods are 
 provided. An astonishing increase in output can be 
 achieved along these lines ; so that unprecedentedly 
 high wages can be and are paid to those who will work 
 under the system. Nevertheless, it is regarded with 
 profound dislike and distrust by the general run of 
 workers, and in a great many cases attempts to put it 
 into practice have had to be abandoned. 
 
 105. The reason usually given by the men for their 
 hostility is that the employer, while paying higher wages, 
 takes care that a much more than proportionate increase 
 is effected in his own profits, so that the ratio of distri- 
 bution becomes less favourable to Labour than before. 
 But this, though a natural ground of soreness, is not 
 the main reason for the workman's opposition. Under- 
 lying all economic suspicion is the worker's instinctive 
 aversion to becoming a mindless automaton, performing 
 without variation a cycle of mechanical movements 
 which do not lead to increased general proficiency, which 
 open the way to no higher grade of employment, and 
 which are prescribed not by himself or by the traditions 
 
 {8767) 49 G 
 
or master-craftsmen of his class, but by an outside and 
 uns3^mpathetic authority in the shape of the scientific 
 expert. Before the undoubted advantages of motion 
 training can materiaHse in workshop practice, full 
 security must be given against these evils. This can be 
 done only by introducing the system with the full 
 voluntary co-operation of the men ; and such co-opera- 
 tion can only be secured by first putting the whole 
 proposition before them, explaining frankly the risks to 
 be faced as well as the benefits to be obtained, and trans- 
 forming the whole constitution of the works in such a 
 way that the men themselves may have an interest in 
 the new system and some share of control over the 
 working of it. 
 
 (/) Labour Legislation. 
 io6. It is clear that organised bodies of workers and 
 employees must in the immediate future play a greater 
 part in determining the poHcy and direction of our 
 economic life. Many industries, however, are not well 
 organised ; and only a quarter of the whole working 
 population is enrolled in trade unions. The greater 
 portion of the unorganised workers are women, young 
 persons and children, whom our labour laws are largely 
 intended to protect. Whatever may be said in favour 
 of voluntary agreements, it is inevitable that the 
 protection of women and young people must for 
 the time, be in large measure left to the State. 
 The first need is for a revision of our whole code of 
 labour laws with a view to their co-ordination and the 
 eradication of those anomaUes and historical accidents, 
 wliich for no real reason establish different standards 
 and conditions for protected persons. In the second 
 place, there is a strong case for a further limitation of 
 hours in the case of employees in factories and work- 
 shops, and distributive shops, and for a very consider- 
 able improvement in the environment in which work is 
 carried on. Far healthier workplaces, the provision of 
 dining and rest rooms, are absolutely necessary in the 
 interests alike of industrial efficiency and of social 
 welfare. In general, it may be said, that our Labour 
 Legislation should be thoroughly overhauled and 
 strengthened to meet the demand for a higher general 
 standard of life, in such ways as will increase the self- 
 respect, dignity and efficiency of the protected workers. 
 The whole task of bringing our industrial legislation on all 
 sides into conformity with the new national needs, should 
 
 50 
 
be undertaken with the active co-operation of Labour and 
 Employers ; indeed, all modifications and developments 
 should be based in the first place upon the joint recom- 
 mendations of Employers' Associations and Trade Unions. 
 
 (g) Reform of the Patent Laws. 
 
 107. The original purpose of the existing patent laws 
 was (i) to promote the commercial development of 
 inventions, by giving the inventor a monopoly in the 
 patented article for a term of years ; and (2) to ensure 
 a full account of the invention being published, in order 
 that when the monopoly period expires, anyone may be 
 in a position to make, sell or use the patented device or 
 process. As they stand at present, the laws do not 
 adequately fulfil these intentions. It is becoming 
 increasingly common for patents to be obtained or 
 acquired for the sole purpose of preventing develop- 
 ment, in the interests of an existing process. The fees 
 charged also require revision. Many minor inventions 
 though important as far as they go, and entitling the 
 inventor to the protection of the patent laws, will not 
 3deld a return proportionate to the heavy fees demanded 
 in the later years of the term. Moreover, the effect of 
 high patent fees is to place the inventor, if he is not a 
 rich man, at an unfair disadvantage as compared with 
 the capitalist, though both are equally necessary to 
 placing the invention on the market. There is a 
 tendency to forget that what the inventor gives 
 to the community in exchange for a temporary mono- 
 poly is an account of his invention from which the 
 community derives permanent benefit. To consider 
 patent fees merely as a source of revenue is, in the long 
 run, economically unsound. There is every ground for 
 believing that the pre-eminence of America in the pro- 
 duction of ingenious small tools and appliances is mainly 
 due to the superiority of her patent laws. The whole 
 matter requires careful reconsideration from the three- 
 fold point of view of stimulating invention, encouraging 
 production and the protection of the consumer. An 
 effort should especially be made to devise some means 
 whereby patentees of small means can obtain guidance 
 assistance and protection in the commercial development 
 of their inventions. 
 
 [h) The Encouragement of Research. 
 
 108. The encouragement of Research in connection 
 with the application of Science to Industry holds out 
 
 (8767) 51 G 2 
 
possibilities liitlierto better appreciated by our com- 
 mercial rivals than by ourselves. The war has called 
 attention to the advantages which the Germans, in 
 particular, have derived from their admirable organisation 
 of practical scientific training, especially in connection 
 with the chemical industries. For industrial purposes 
 research may be classified under two headings — 
 Theoretical Research of a general nature, having no 
 obvious and immediate practical application, and 
 Specific Research directed to the solution of definite 
 problems of production. Neither kind can be safely 
 neglected. The experiments of pure sciejitists have 
 often bd to discoveries of high commercial value which 
 were wholly unlooked for by those who made them. 
 The encouragement of Theoretical Research, which 
 may yield results of national utility, is a proper 
 object for State action. Specific Research, the results of 
 which will be capable of immediate commercial applica- 
 tion, can best be carried on in close connection with the 
 industries concerned. It would be well worth the while 
 of big Employers' Associations to subsidise research on 
 problems connected with their industry at Technical 
 Colleges or Municipal Laboratories in the leading centres 
 of industry, on the understanding that the results obtained 
 were communicated solely to members of the Association. 
 Such subsidies might even be extended to research of a 
 more general character, in any field touching the 
 materials and processes of the industry in question. The 
 results obtained by the scientific experts could then be 
 submitted to the staffs of works laboratories, who would 
 at once recognise the commercial possibilities which they 
 might hold and could refer them back for specific research 
 along the lines indicated by their practical knowledge 
 and experience. 
 
 {i) Improved Methods of Distribution. 
 
 109. What has been said thus far has had special 
 reference to manufacture ; but efficiency in the distri- 
 butive side of industry is no less important. To produce 
 a good article at a moderate cost is not enough ; the 
 process is only complete when it has been delivered to 
 the customer. Both transport and selling methods in this 
 country are capable of improvement. The question of 
 transport is of special importance in the case of agricul- 
 ture, the development of which has been gravely ham- 
 pered by the lack of railway or motor facilities. Both in 
 
 52 
 
regard to agriculture and manufactures, the extension of 
 these facilities and the fixing of rates require close atten- 
 tion on the part of traders, the railways and the State. 
 The system of co-operative collection and distribution 
 by means of light railways and motor services, which 
 has been so successful in Ireland, could in many cases 
 be usefully applied for bringing local products to the 
 market. The arts of selling, publicity, window-display, 
 delivery, careful study of the requirements of the public, 
 the personal element in service, the training of commercial 
 travellers, all require increased attention. The planning 
 and equipment of shops and offices, the training of the 
 staffs and the organisation of routine are as important 
 as the equivalent processes in manufacture ; and as in 
 production, the best results can only be obtained by 
 fostering the intelligence and initiative of employees 
 and cultivating the " team-spirit." At the same time, 
 the services of the specialist, the advertising or window- 
 dressing expert, are as important to the distri])utive 
 business as those of the scientist and inventor to the 
 manufacturer. 
 
 {k) Banking and Credit Facilities. 
 
 no. The solid and cautious policy of British Bankers 
 has been a main foundation of the general financial 
 soundness which has made this country the credit centre 
 of the world. It would be an irretrievable loss if their 
 reputation in this respect was allowed to suffer. Never- 
 theless it is probable that they could afford greater 
 assistance to Industry than they have done in the past, 
 without running such risks as would in any way jeopar- 
 dise their stability. In view of the probable necessities of 
 the situation, it is very desirable that the leading bankers 
 should study for themselves how far it may be possible 
 for the Banks to work in closer touch with Industry and 
 lend their invaluable support to its future developments. 
 
 III. The condition of Industry after the war will 
 render it particularly desirable that the centralisation of 
 Banking by the large Joint-Stock Banks should not be 
 allowed to hamper the discretion of trustworthy Branch 
 Managers in making the local advances on the strength 
 of non-paper collateral and of established character 
 which were a useful feature of the older system. A wise 
 use of this power would enable the Banks to render 
 valuable assistance to traders, without involving the 
 disadvantages inherent in the German conception of the 
 relations of Banking and Industry. 
 
 53 
 
The Danger of Panic Economy. 
 112. In connection with the above points, as well as 
 with those embraced under the heading of Emergency 
 Measures, it will be necessary to exercise great care 
 that a reaction from the lavish spending necessitated 
 by the war does not lead to an outbreak of panic 
 economy in State expenditure. Nothing could create a 
 worse feehng and temper than any appearance of 
 stinginess towards the men who have fought for us, 
 whether in connection with the treatment of the dis- 
 abled or the schemes for reintroducing the demobilised 
 men to civil life. These are matters of national responsi- 
 bility which cannot be left to any private efforts involv- 
 ing the stigma of charity. Nothing could be a more 
 false economy than to allow the work of education — 
 technical or general — scientific research, housing or the 
 improvement of the national health to be obstructed at 
 a time when the whole welfare of the nation turns upon 
 increased efficiency. Money spent for these purposes is 
 not expended on a luxury, but is a paying investment, 
 perhaps even an insurance. 
 
 (ii) Increased Saving. 
 
 113. Capital for the repair and improvement of the 
 national plant and the reconstruction of devastated 
 areas abroad— which will provide work at home — can 
 only be furnished by people producing much, spending 
 little on consumption of goods, and saving the balance. 
 
 114. There is real need for an educational campaign 
 to explain the principles of economy, whether with regard 
 to spending less or spending more wisely. Such questions 
 as the comparative effect upon employment of ex- 
 penditure upon luxuries and investment in productive 
 industries are very little understood. There is a vast 
 amount of wasteful expenditure by the rich which is 
 either due to sheer thoughtlessness or is excused by the 
 assumption that it " makes work." There is also a great 
 deal of wasteful expenditure by the poor, which is due 
 either to lack of training in household economy or to 
 unfavourable conditions. 
 
 115. It is necessary to bear in mind that the saving 
 and investing class is composed at the present time 
 almost exclusively of the comparatively well-to-do. If 
 any agreement for the settlement of industrial difficulties 
 is arrived at which results in a wider distribution of 
 wealth, it will be necessary to consider what can be done 
 
 54 
 
to make working-class investment, whether by indivi- 
 duals or groups, easier, safer and more attractive. The 
 Co-operative movement, Mutual Insurance and Friendh^ 
 Societies, and the management of existing Trade Union 
 Funds may supply hints as to the best means of attaining 
 this end. 
 
 ii6. There is a danger to be avoided in urging work- 
 ing class " thrift." The man who stints himself or his 
 family in the necessaries of physical, intellectual or 
 emotional life is rendering no service to the nation, 
 whatever capital he may accumulate. Up to a certain 
 point the unstinted consumption of the material of life 
 is of definite value in producing industrial efficiency and 
 capacity for citizenship. But with increased income 
 and a better acquaintance with the right use of wealth 
 a point is reached at which an increasing margin becomes 
 available for legitimate saving. It is probable that a 
 greater feeling of security and responsibility would of 
 itself lead to the useful employment of this margin. 
 
 117. In the immediate future, however, the savings 
 necessary for capital renewal will have to come mainly 
 from restricted consumption on the part of the well-to- 
 do. The cutting down of expenditure on luxuries not 
 only liberates labour for the increased production of 
 necessaries, but renders capital available for investment 
 in productive industries. Economy of this kind does not 
 diminish the total demand for goods or labour. Even 
 if the money be left in the bank, it is used as a basis 
 for the credit needed for industrial development, and 
 sets up a demand for the instruments and materials of 
 production. The volume of demand is not affected, but 
 only its character. 
 
 (iii) Assured Markets. 
 
 118. Assured Markets are essential to steady produc- 
 tion. They will be found by British industry (a) in the 
 Home Demand ; (b) in the Overseas Dominions ; (c) in 
 Foreign Trade. 
 
 (a) Home Demand. 
 
 119. The Home Demand depends first of all upon 
 the general prosperity of the people. If confidence and 
 credit are maintained and earnings are large, the increase 
 of spending power will be reflected in a brisk demand 
 for goods. In this connection the question of agricul- 
 tural development, discussed below, is important, as 
 tending to increase the spending power of a large number 
 
 55 
 
of people who have hitherto formed one of the poorest 
 sections of the home market. For the first few years 
 after the war the general demand should be guided and 
 restrained by the need of increased savings, necessitating 
 moderation in consumption as well as increased output. 
 The use of these savings for the renewal of the national 
 plant will, however, create a strong demand in those 
 trades concerned with the manufacture of the instru- 
 ments of production. As soon as the process of capital 
 renewal has been accomplished, the special necessity for 
 restricted consumption will cease and the demand will 
 become general, the annual balance of production over 
 consumption serving for the requisite additions to capital. 
 
 120. The idea of securing the home market to home 
 manufacturers by levying a duty on competitive imports 
 is an attractive one from many points of view, and the 
 circumstances of the war will give occasion for new argu- 
 ments in its favour. The anticipated danger of dumping 
 by German or American firms, anxious to get a footing 
 in the market during the period of readjustment, the 
 desire that this country should be independent of foreign 
 nations in respect of vital industries, the means afforded 
 by a tariff for raising additional revenue and the persis- 
 tence of war passions, will all go to make the setting up 
 of protective tariffs more alluring. 
 
 121. It has none the less to be remembered that pro- 
 tective duties have grave reactions and are hedged about 
 with possibilities of abuse and failure. The difficulty of 
 devising a scheme which will avoid the danger of raising 
 the cost of living out of proportion to the possible 
 increase in wages and shifting the financial burden from 
 the shoulders of the income taxpayer to those of the 
 consumer, has not yet been overcome. There is a 
 further risk that the imposition of a tariff may cripple 
 our export trade by raising the price of raw materials 
 and production and shake our position as the entrepot 
 for the world's products and the centre of the carrying 
 trade. So far as Germany is concerned, the fear of 
 dumping is probably, in large part, illusory, having 
 regard to the cutting off of her suppUes of raw material 
 during the war and the excessive drain upon her labour 
 resources. The stability of our financial position during 
 the war, as compared with other belligerents, may lead 
 us to pause before we abandon the system under which 
 our industries have developed. At a time when bold- 
 ness and initiative on the part of our leaders of industry 
 
 5^ 
 
are particularly called for, it seems specially unwise to 
 provide an artificial shelter from competition. 
 
 122. In considering the argument on either side two 
 things must be kept in mind. First, that important as 
 the Tariff question is, it cannot in any case be the 
 primary one. To say this is not to pre-judge the Tariff 
 question. Whether under a Free Trade or a Protective 
 System, the first necessities of the situation will be 
 increased output and industrial peace. The experience 
 of many years, in this country and in America, has shown 
 that under neither system can these essentials be 
 depended upon, unless a bold attempt is made to 
 grapple with our internal difficulties. Secondly, every 
 claim for a tariff must be considered not only 
 from the point of the industry affected but from 
 that of other industries, of the consumer and of the 
 nation as a whole. On this larger survey, it may prove 
 impossible for even the advocates of tariffs to ask for 
 protection in particular cases or for even their opponents 
 to resist them in others. But it is exceedingly 
 important that in every case the grounds on which 
 the tariff is claimed should be clearly understood, 
 and that if protection is granted to any particular 
 trade from considerations of national defence or 
 political desirability, it shall be granted on those 
 grounds and without any obscuring of the economic issue. 
 
 (&) Empire Markets. 
 
 123. The question of Imperial Fiscal Union will be 
 argued on the same grounds as before the war. The 
 desire for the closest possible union with the Overseas 
 Dominions has, of course, been intensified by the events 
 of the war, though it is open to doubt whether the 
 spontaneous and splendid rally of the Dominions has 
 not given a setback to the contention that fiscal ties were 
 necessary to the permanence of the Empire. It is 
 possible that they might introduce an element of dis- 
 cord and create a suspicion of attempted control by the 
 Mother Country which would render them a disruptive 
 rather than a unifying tendency. In any case the 
 question is mainly a political one, to be argued on 
 political grounds, but with a due allowance made for 
 its economic effects. 
 
 (8767) 57 H 
 
(c) Foreign Markets. 
 
 124. Success in Foreign Markets will depend, as 
 before the war, upon the production of a desirable 
 article at an attractive price and upon the skill with 
 which goods are brought to the attention of buyers. It 
 is agreed by almost all business men that there is room 
 for great improvement in the organisation of selling. 
 Up-to-date methods of publicity must be adopted. 
 Industrial concerns will need to unite for the joint culti- 
 vation of foreign markets, sinking their individual 
 rivalries and jealousies in the common object, receiving 
 much more active aid from the Board of Trade and the 
 Consular Service than has hitherto been given. A first 
 hand study of foreign markets, more efficient representa- 
 tions abroad, better co-operation between merchants and 
 shipowners, greater watchfulness by Government in cases 
 of infringement of British Trade Marks, are all measures 
 the need for which was apparent before the war and will 
 be increased by the severity of competition after peace 
 is signed. The contention that appointments to the Con- 
 sular Service should be given only to men of British 
 birth and business training will be emphasised. On the 
 other hand it is a constant complaint of our most efficient 
 Consular representatives that so little use is made of 
 their offices by traders. The need of studying the 
 requirements of foreign markets and of greater adapt- 
 ability in respect of meeting local demands, packing, 
 quotations in metric measures and foreign currency and 
 the use of foreign languages will all be brought to the 
 front. The utility or otherwise of creating a Ministry of 
 Commerce or National Trade Agency will require full 
 examination and discussion. 
 
 125. One result of the war will have been to give us 
 a certain advantage not only in the markets of our 
 Allies but in those of some neutral States. The success 
 with which our own carrying trade has been maintained, 
 while that of Germany has been completely shut down, 
 has given to our merchants an opportunity to extend 
 existing connections and form new ones which should 
 not be missed. The disregard of neutral rights shown 
 by the Germans in the use of South American territorial 
 waters is a case in which we may derive advantage from 
 a strong sentimental preference, which, however, can 
 only be maintained by sound business methods. 
 
 58 
 
126. We must not lose sight of the connection 
 between the home and foreign markets. The more goods 
 we can sell abroad the greater will be the purchasing 
 and saving power of our people at home. On the other 
 hand the ability of foreigners to buy from us depends 
 in large part upon our purchases of their products. 
 
 (d) Allied Zollverein and Trade War. 
 
 127. The proposal for an Allied Zollverein and the 
 possibility of a Trade War with Germany, as distinct 
 from ordinary commercial competition, are very large 
 questions, involving political as well as economic con- 
 siderations. It is a matter of importance that these 
 should be clearly distinguished in the discussion. It may 
 sometimes be desirable to achieve a political object 
 even at the cost of economic sacrifice ; but it is essential 
 that in so doing we should realise clearly what we are 
 about. On the other hand it leads to dangerous mental 
 confusion if a step which can be shown to be econo- 
 mically desirable is advocated on exclusively political 
 grounds. 
 
 128. We shall save ourselves from many pitfalls if 
 we keep steadily in mind that industry and war are 
 totally dissimilar operations. War is a conflict, and the 
 object of war is destruction. Industry is a process of 
 co-operation, the object of which is production. It is 
 much the same with war and trade. The conflict of war 
 and the competition of trade are different in kind as well 
 as in degree. The object of conflict is to inflict injury. 
 The object of business competition is the opportunity 
 to serve a customer. War is competition in its absolute 
 sense and in its most violent form. If nations co-operate 
 in war it is for the purpose of conflict with others. Trade 
 is competitive only in its processes ; its end is co-opera- 
 tion. We have learnt by experience that the organisation 
 and processes of peace are ill-adapted to the needs of war. 
 The processes of war are equally ill-adapted to the con- 
 ditions of industry and trade. We may have to choose 
 between war and trade. Let us at least recognise that 
 it is a choice and not confound the functions of opposites. 
 
 (iv) Land. 
 
 129. We have not dealt here with the theory that 
 the root of all economic evils is the private ownership 
 
 (8767) 59 H 2 
 
of land and that whatever may be done to increase the 
 output of wealth, the increase will automatically be 
 appropriated by the land-owning class, in the shape of 
 economic rent. In the broad sense this theory is demon- 
 strably unsound. It is certainly not the fact that the 
 increased proceeds of the great industrial development 
 during the nineteenth century have been absorbed into 
 economic rent. The general increase of rent is so gradual 
 and laggard a process compared with industrial progress 
 that it may be left out of account here. Should a rapid 
 advance in agricultural prosperity take place after the 
 war and be followed by a marked increase in rents, 
 threatening to absorb the extra earnings and discourage 
 further progress, the power of the State may have to 
 be invoked. 
 
 130. The question of land ownership and economic 
 rent is the less pressing at this juncture in that there are 
 unmistakable signs of the breakup of many of the large 
 landed estates after the war, owing to the inabihty of 
 their proprietors to keep them going on the old lines. 
 
 (v) Agriculture. 
 
 131. Far more promising than any land-nationalisa- 
 tion or single-tax project is the apphcation to agricultural 
 development of the same degree of thought, energy, 
 training, education and organisation as is devoted to 
 manufacture. It is eminently desirable that British 
 agriculture should be developed. It would render us 
 more self-sufficing in the event of isolation, it would 
 restore the balance of our national activities, it would 
 give us a healthier and more vigorous population, and 
 it would prevent the further overgrowth of our large 
 cities with its consequent over-crowding. If agriculture 
 has suffered neglect from our statesmen, it has suffered 
 far more neglect from our industrial pioneers and 
 organisers. The importance of improved facilities for 
 transport, and of investigating the problem of agricul- 
 tural credit, has already been urged (paragraphs 109 and 
 84). The multiplication of existing local Produce 
 Societies for the co-operative buying of seeds, manures, 
 appliances, feeding stuffs, etc., and the co-operative 
 marketing of the produce in bulk would do much to 
 ensure the success of the small-holder. The education of 
 
 60 
 
village children should be brought into relation with 
 their future work, just as that of town children is made 
 the basis of industrial training. We have suffered much 
 in the past from an inelastic curriculum appHed indis- 
 criminately, without any attention to the special needs 
 of localities and classes. The observation and environ- 
 ment teaching of the primary schools should be directed 
 to awakening interest in and understanding of the life 
 around them, and the eye and hand training to the 
 perfecting of those faculties which will be most useful 
 in agricultural work. At a later stage, direct vocational 
 training may be given, either at special schools or in 
 daytime classes for junior workers. In this way it 
 should be possible to make of the agricultural labourer 
 a skilled worker, and to invest his work and hfe with a 
 greater degree of dignity and interest, which will go 
 far to counteract the drift towards the urban centres. 
 The facilities for farmers and foremen to acquire a 
 knowledge of scientific farming, stock rearing and 
 gardening should also be largely increased and greater 
 encouragement given to research and experiment in 
 connection with cultivation. With an improvement both 
 in the management of the land and the efficiency of the 
 workers, the problem of agricultural wages should be 
 easier of solution, and a general rise in wages would 
 enable the question of housing in rural districts to be 
 tackled on an economic basis. 
 
 132. To sum up very briefly what has already been 
 said : We shall be faced after the war by an indus- 
 trial situation of extreme gravity due partly to the 
 intensification of the conditions which made for unrest 
 before the war, partly to the difficulties inseparable 
 from the readjustment to peace conditions. These 
 difficulties can be met to some extent by the adoption 
 of immediate remedial measures, a number of which are 
 suggested above. But these measures, important in 
 themselves, will not go to the root of the industrial 
 problem. In like manner the increased production and 
 increased saving which will be essential to the renewal 
 of the national capital and the restoration of industrial 
 prosperity can be promoted by the study and solution 
 of a large number of detailed questions bearing on 
 
 61 
 
Industrial Efficiency, Increased Savings and Assured 
 Markets. Here again the fundamentals remain un- 
 touched. At the back both of the Emergency and the 
 Constructive Problems lies the hostility between Labour, 
 Management and Capital by which production has been 
 hampered in the past and which now threatens us with 
 a crisis the dangers of which it is not easy to exaggerate. 
 Unless we can deal successfully with this basic problem, 
 no amount of skill in handling the secondary questions 
 will save us. If we can deal with it successfully we shall 
 have laid the foundation for the solution of all our other 
 difficulties, 'and we may hope not merely to avert the 
 threatened dangers but to estabhsh industrial prosperity 
 and social development upon a firmer basis. 
 
 62 
 
D.— The Fundamental Problem. 
 
 133. In order that we may understand the nature 
 and importance of the fundamental problem, it is 
 necessary to examine a little more closely the essentials 
 of industrial prosperity and its relations to national 
 welfare. 
 
 134. The foundation of industrial prosperity is pro- 
 duction. The material well-being of a nation demands 
 first, the attainment of the possible maximum both as 
 regards size and quality of output, whether of goods 
 or services ; secondly, the elimination of all waste of 
 material or effort in the process of production ; thirdly, 
 an equitable division of the proceeds of industry, enabling 
 all those concerned in the creation of wealth to obtain 
 a reasonable share of its material benefits. The social 
 welfare of the nation requires that the conditions of 
 work and the relations between the parties to industry 
 shall be such as make for intelligent and self-respecting 
 citizenship on the part of all concerned, and that the 
 activities which occupy so large a proportion of men's 
 time and powers shall be felt by them to be a fit and 
 worthy employment of their energies. Any attempt to 
 solve industrial problems which is concerned solely with 
 the distribution of earnings must necessarily be inade- 
 quate. In the first place, the amount available for 
 distribution depends upon the amount produced, and 
 an attempt by any section of the community to increase 
 its own share of the proceeds by a scheme of redistribu- 
 tion which ignores the necessity of increased creative 
 effort is apt to result in a shrinkage of the available 
 total. In the second place, the questions which centre 
 round wages and profits, important as they are, are not 
 so vital as the questions of industrial relations and social 
 conditions with which they are connected. 
 
 135. In order that production may be efficient 
 both as regards the quantity and quality of output and 
 the methods employed, it is essential that the supply of 
 capital should be adequate and that the national plant 
 should be kept up to date. The war has involved deterio- 
 ration of plant and a heavy drain on capital. In order 
 
 63 
 
that capital may be renewed and the national plant 
 repaired and kept in the highest state of efficiency it is 
 essential that confidence should be maintained and 
 savings increased. The accumulation of surplus wealth 
 which we call capital represents the balance of produc- 
 tion over consumption in previous years and is constantly 
 being added to or diminished in accordance with the 
 ratio of goods produced to goods consumed. When that 
 accumulation has been depleted, the deficiency can be 
 made good only by an increase in the annual balance. 
 It will be necessary to encourage economy in the con- 
 sumption of goods and the investment of the resulting 
 savings in productive industries. We must work hard 
 and efficiently in order to produce more. We must spend 
 less on luxuries in order that we may save more. We 
 must increase confidence in the national industries in 
 order that savings may be attracted into the right 
 channels. 
 
 136. Increased production, increased saving, increased 
 confidence — these are the three keys to the whole 
 problem. 
 
 137. Production may be hampered either in pursuance 
 of a deliberate policy, or simpty by the use of inefficient 
 methods. The interest of Employers, as a general rule, 
 is to increase output, the danger of over-stocking being 
 met by improved distributive organisation and the 
 opening up of new markets. Cases of restriction, for the 
 sake of keeping up prices, occur mainly in connection 
 with monopoly products and the problem of counter- 
 acting the influences which make for restricted output 
 in these cases deserves a more careful study than has 
 
 ^yet been given to it. There is also a tendency, perhaps 
 unconscious, on the part of some employers to throw 
 obstacles in the way of increased output due to the 
 exceptional efficiency of employees. They would rather 
 have a smaller output produced by men receiving wages 
 not above the customary limit than an increased output 
 produced by men earning exceptionally high wages. As 
 soon as the earnings of any men in their employ rise above 
 the customary level, they begin to cut piece rates, with 
 the natural result of removing the incentive to efficiency 
 and diminishing output. This policy is not only unjust 
 
 64 
 
to the men concerned ; it is shortsighted and uneconomic 
 from the point of view of the employer's own interests. 
 On the other hand, the interest of the individual employer 
 in maintaining a high standard of quality cannot be 
 taken for granted, so long as large profits can be derived 
 from the sale of inferior goods. Stronger action on the 
 part of Trade Associations, and more general education 
 of the purchasing public in standards of value, are needed 
 both in the national interest and in that of producers of 
 high class goods. 
 
 138. Much of the limitation of output on the part 
 of Employers arises from inefficiency in management 
 — conservatism in methods, the retention of badly- 
 planned works and out-of-date plant, bad organisation, 
 neglect of scientific research, the presence of " dead- 
 heads " on the office staff. There is some reason to hope 
 that the experiences of the war and the keenness oT~ 
 competition after it may lead to greater attention being 
 paid to these points. 
 
 139. The limitation of output by Labour arises partly 
 from the legitimate desire to restrict the hours of work 
 in the interest of health, education, family life and 
 enjoyment. These are considerations of social welfare 
 which cannot be set aside. We must look for greater 
 production rather from increased efficiency than from 
 an increase in the number of hours worked. There 
 are, however, large sections of Labour by whom a 
 further limitation of output is deliberately practised 
 in the assumed interests of their class as a whole. In 
 some cases the motive is the honest but mistaken belief 
 that the less each man does the more work there will 
 be to go round. " Work " is regarded as an exhaustible 
 fund, or at the best as a diminishable flow, and it is 
 assumed to be in the interests of his class that each man 
 should " use up " as little as possible. The fallacy lies 
 in the conception of an inelastic " wages fund." Wages 
 come out of the stream of products, and other factors 
 remaining constant, the distribution of wages cannot 
 be widened except by an increase of the stream. In the 
 case of trades in which employment is irregular and 
 demand uncertain, the temptation to slacken work as 
 a job nears completion is easy to understand, but the 
 results of the policy are too wasteful to be contemplated 
 with satisfaction. The remedy must be sought in a 
 
 (8767) 65 I 
 
better organisation of the industries concerned which 
 will give the workman greater security of tenure, and 
 remove the fear of unemployment or relegation to lower- 
 
 paid work as a result of exercising his maximum effort. 
 
 A further cause of limitation of output lies in the natural 
 differences of individual capacity. The workers believe 
 that if each man were allowed to produce to his full 
 power, the minimum standard demanded by the employer 
 would be based on the performances of the quickest and 
 most skilful and a " speeding-up " process would be 
 introduced, involving either excessive strain or lessened 
 earnings on the part of the majority. From this point 
 of view, restriction of output is a sacrifice made by the 
 
 /ablest workers in the interests of their fellows. While 
 such restrictions necessarily result in limiting the total 
 output, it is obvious that Labour cannot fairly be asked 
 to remove them unless some definite assurance can be 
 given against the evils anticipated. The question is one 
 which will require very serious attention both from 
 Employers and Employed, when we come to face the 
 task of industrial reconstruction. 
 
 140. With regard to quality of output it is obvious 
 that the workers' interest Hes in the direction of a high 
 standard which will improve the status of those concerned 
 in the industry. Whether from the point of view of 
 earning power or of interest and satisfaction in their 
 work, the workmen have everything to gain by the 
 standard of workmanship in their particular trade being 
 raised. A general appreciation of this fact, resulting 
 in greater attention by Labour organisations to questions 
 of craft training and quality of output would do much 
 both to raise the position of Labour itself and to strengthen 
 the hands of those employers who are striving for a high 
 level of production, as against those who seek to make 
 their profit out of the bad taste of bargain hunters. 
 
 141. It is clear that any restrictions placed upon 
 production, whether by Employers or Employed, beyond 
 those based upon the social needs of the workers, must 
 be removed if the difficulties of the economic situation 
 are to be faced successfully. In order to make good the 
 wastage of war and raise the general level of industrial 
 prosperity, the efforts of both parties must be united 
 for the purpose of increasing the quantity of output and 
 improving its quality. In order to avoid disastrous 
 
 66 
 
conflicts with regard to the distribution of earnings, the 
 national income., the total sum available for distribution, 
 must be not only maintained but increased. The pros- 
 pects of success depend upon the willingness of both 
 sides to face the facts of the situation and to throw 
 aside somewhat of their mutual distrust. It will be 
 necessary for Labour to abandon the policy of restricting 
 output and to concentrate upon demanding adequate 
 remuneration for the work performed. It will be equally 
 necessary for Employers to recognise that efficient pro- 
 duction is the only ultimate source of proftt, that the 
 policy of keeping down wages and cutting piece rates 
 is opposed to their own interests, and that industry as 
 a whole will benefit by any rise in the level of craftsman- 
 ship and production. There is to-day an urgent necessity 
 for the removal of all obstacles to any man either work- 
 ing or earning to the full extent of his capacity. 
 
 142. The argument has brought us to the fundamental 
 question which underlies all our industrial troubles — the 
 relation between Employers and Employed. The limita- 
 tion of production, whether by Labour restrictions on 
 output or cutting of piece rates by Employers, springs 
 from the belief that the interests of Employers and 
 Employed are inevitably and fundamentally hostile. If 
 it can be shown that their interests are concurrent as 
 regards production and only partially opposed even as 
 regards distribution, the way will have been paved for 
 a compromise which will leave both parties free to 
 co-operate in the work of industrial reconstruction. 
 
 143. The relations of Employers and Employed are 
 partly antagonistic as regards distribution, because it is 
 to the interest of each to secure a relatively large share 
 of the wealth produced. They are not wholly opposed, 
 even in this respect, because it is to the interest of the 
 employer that his workpeople's standard of life shall be 
 sufficiently high to promote efficiency and afford a 
 reasonable incentive to effort ; it is to the interest of the 
 workman that the firm shall be sufficiently prosperous 
 to provide steady employment. Good work cannot be 
 expected from men who are ill-fed and insufficiently 
 clothed, or who feel that they derive no advantage from 
 increased production. Continued employment cannot be 
 expected from a firm which is not making a profit on its 
 business. The qualification becomes still more important 
 
 (8767) 67 I 2 
 
when it is extended from the relations existing in a 
 particular firm to industry as a whole. It is to the 
 interest of all employers engaged in the supply of 
 common commodities that wages as a whole should be 
 good, in order that the purchasing power of their 
 customers may be high. It is to the interest of the 
 workers, who are also consumers, that firms producing 
 articles of general use should be sufficiently prosperous 
 to keep plant up to date and produce well and cheaply. 
 144. The interests of Employers and Employed are 
 concurrent as regards production, because it is to the 
 benefit of each that the total available for distribution 
 shall be as large as possible. The interest of the working 
 class in increase of output may be limited by other than 
 economic considerations. They will not accept for the 
 sake of increased wages methods of work which involve 
 loss of self-respect or a narrowing of their life by undue 
 restriction of leisure. To this extent the interest of the 
 employer may be over-ridden by considerations of social 
 welfare. The real conflict is between his economic 
 interests as an employer of labour and the social interests 
 of the community of which he is a member. But the 
 employer and employed are both concerned in increased 
 efficiency of production, which implies equal or improved 
 output at less cost to the employer and with less strain 
 to the employed. Here, too, it is to be noted that the 
 workman, as consumer, will benefit by any increase in 
 the general efficiency of production. 
 |~~ 145. The great obstacle to co-operation is the question 
 of status. The ill-will of Labour towards Capital and 
 Management is not wholly a question of their respective 
 share of earnings. Friction arising over the distribution 
 of earnings is in itself due quite as much to a sense 
 of injustice in the machinery of distribution as to 
 the desire for actual increase of wages. The funda- 
 mental grievance of Labour is that while all three are 
 necessary parties to production, the actual conditions 
 of industry have given to Capital and Management 
 y control not only over the mechanism of production, but 
 also over Labour itself. They feel that the concentration 
 of Capital in a comparatively few hands has rendered fair 
 bargaining between the parties impossible. A man who 
 leaves his work without reason inflicts on his employer 
 a certain amount of loss and inconvenience. A man 
 
 68 
 
who is dismissed without reason may lose his hveHhood_^ 
 While each great firm represents in itself a powerful 
 organisation, apart from any Employers' Association to 
 which it may belong, the men employed by the firm are 
 solitary units, having no power of collective action 
 without calling in the Trade Unions representing the 
 whole of each craft. In the last resort the only effective 
 weapon of the Trade Union is the strike, and the loss 
 inflicted by a strike or lock-out on the Capitalist Class 
 is not comparable with the acute personal suffering of 
 the workmen and their families. They feel therefore 
 that in any dispute the dice are weighted against them. 
 
 146. There is also a very widespread feeling that 
 Labour as a whole is faced by great disadvantages 
 in ventilating its grievances. The tribunals are com- 
 posed, the Press is owned and run, by men of another 
 class ; and the complaint is frequently made that 
 the Labour representative and the Labour case do not 
 receive the fair play and courtesy which would be 
 extended to those of their " opponents." _^ 
 
 147. The attitude of a certain section of Employers 
 who look on their employees as " hands," as cogwheels 
 in the industrial machine, having a market value but no 
 recognised rights as human beings, is bitterly resented. 
 Still more offensive is the attitude which regards the 
 working man as a very good fellow so long as he is kept 
 in his place and requiring to be guided and disciplined, 
 but not to be consulted in matters vitally affecting his 
 interests. Labour has come to know its power. It 
 realises that it is an indispensable party to the produc- 
 tion of wealth and it requires to be treated frankly as 
 a partner with equal rights and equal responsibilities. 
 
 148. The grievances of the Employers are no less valid. 
 They complain of deliberate limitation of output, slack- 
 ness and inefficiency in work, short time and malinger- 
 ing, the lack of any feeling of responsibility. They point 
 out that many leaders of Labour opinion carefully 
 discourage any sense of loyalty to the firm — the source 
 from which the earnings of Capital and Labour are alike 
 derived — that even a fair employer can feel no con- 
 fidence that his workmen will back him up in a pinch. 
 Any effort to improve the condition of the employees is 
 regarded as a concession extorted from weakness and is 
 followed by further demands which bear no relation to 
 
 69 
 
the condition of trade. Every period of prosperity pro- 
 duces a demand for higher wages ; but no amount of 
 depression is considered as an excuse for reverting to a 
 lower scale. The Trades Union wage regulations place 
 obstacles in the way of differentiation between the 
 efficient and industrious workman and those who are 
 less skilled or less hardworking. At the same time 
 they render it impossible to continue in employment, 
 without actual loss, men whose capacity for production 
 has been decreased by age or accident. 
 
 149. The gravest complaint, however, relates to the 
 insecurity of bargaining. The Employer's power to 
 negotiate directly with his employees is restricted by the 
 Union, yet bargains thus made with the men's accre- 
 dited representatives are continually broken by those 
 whom they profess to bind and the Union itself cannot 
 enforce the agreement which it has made. 
 
 150. So long as the fundamental interests of 
 Employers and Employed are beheved by the majority 
 to be purely antagonistic, no cure for the grievances of 
 either side is hkely to be found, since the wrongs of 
 which both sides complain spring from that very feehng 
 of hostility and suspicion. For just so long as this 
 attitude is maintained, production will fall short of its 
 possible total. 
 
 151. The limitation of production carries with it a 
 limitation of the possible amount of savings. If the total 
 amount produced is low, the balance of production ovei 
 consumption will be low also. But class-hostihty 
 hampers saving in other ways. The supposed clash of 
 interests destroys the sense of responsibility in the use 
 of wealth. Discontent with economic conditions is 
 productive of reckless expenditure. The man who feels 
 his condition of Hfe to be unworthy has no incentive 
 to save, because he has no hope of substantial improve- 
 ment in his condition. The worse that condition 
 is, the greater is his need of amusement and palliatives 
 to render it bearable. Sound investment is discouraged 
 because the prospect of repeated outbreaks of industrial 
 warfare makes confidence impossible. 
 
 152. We see, therefore, that the mutual hostihty of 
 Employers and Employed is the prime obstacle to the 
 three essentials of industrial prosperity — Increased Out- 
 put, Increased Saving, Increased Confidence. It is only 
 
 70 
 
from the removal of this obstacle that any one of the 
 three great parties to the industrial process can look 
 for a permanent increase of earnings. 
 
 153. We may therefore lay down these four broad 
 principles as those which must guide our attempt to 
 solve the Industrial Problem. ^ 
 
 {a) The first necessity of the Industrial Situa- 
 tion is greater efficiency of production. In 
 order to meet the difficulties created by 
 the war, to make good the losses of capital , 
 and to raise the standard of living amongst 
 the mass of our people, w^e must endeavour 
 to increase both the volume and the quality 
 of output. 
 
 (b) In order that this result may be obtained 
 
 without detriment to the social welfare of 
 the community, it must be sought for rather 
 in improved organisation and the elimina- 
 tion of waste and friction, than in adding to 
 the strain on the workers, and must be 
 accompanied by a change of attitude and 
 spirit which will give to Industry a worthier 
 and more clearly recognised place in our 
 national life. 
 
 (c) This can only be accomplished if the sec- 
 
 tional treatment of industrial questions is 
 replaced by the active co-operation of 
 Labour, Management and Capital to raise 
 the general level of productive capacity, to 
 maintain a high standard of workmanship, 
 and to improve working conditions. 
 
 (d) It is essential to the securing of such 
 co-operation that Labour, as a party to 
 Industry, should have a voice in matters 
 directly concerning its special interests, 
 such as rates of pay and conditions of 
 employment. It is necessary to create 
 adequate machinery both for securing 
 united action in the pursuit of common 
 ends and for the equitable adjustment of 
 points which involve competing interests. 
 This machinery must be sufficiently power- 
 ful to enable both sides to accept its 
 
 71 
 
decisions with confidence that any agree- 
 ment arrived at will be generally observed. 
 
 154. There are many to whom these principles will 
 not seem to go far enough. They are convinced that the 
 only solution lies in a complete reconstruction of Society 
 — the abolition of Private Ownership of Land and 
 Capital, the establishment of State or Guild Socialism, 
 the Re-integration of Industry, the Return to the Land, 
 the break-up of the existing Trade Unions. Accordingly 
 they reject the notion of co-operation between 
 Employers and Employed as involving an abandon- 
 ment of the first essentials of reform. If we were 
 discussing the abstract ideal of Society, it would be 
 necessary to meet their criticisms by discussing each of 
 their proposals on its merits. But the present issue is 
 a narrower one. We have to deal with a definite and 
 immediate danger^the prospect of an industrial crisis 
 following on the signing of peace. It is obvious that 
 no measure involving a radical reconstruction of the 
 social system has any chance of adoption in time to 
 avert this evil. On the other hand, the prospect of 
 any specific programme emerging from a period of internal 
 conflict is small. The results of social or political up- 
 heavals have seldom been those anticipated by their 
 promoters. The men whose ideas gave birth to the 
 French Revolution did not foresee the Terror or the 
 Empire. The Long Parliament foresaw^ neither the reign 
 of the Major-Generals nor the Restoration. If we are to 
 find a way out of the threatened difficulties, we must do 
 so by making the best use of the materials at hand, 
 accepting the conditions under which we work and 
 seeking to unite all classes in the pursuit of interests 
 which are common to all. Whatever may be the ulti- 
 mate direction of industrial progress, an advance is more 
 likely to be founded on a first right step than to come 
 through the chaos of industrial warfare and class-hatred. 
 
 155. The difficulties of devising any scheme of co- 
 operation which shall be acceptable alike to Employers 
 and Employed are great enough. It demands from both 
 a clear understanding of their respective parts in the 
 process of production, a measure of sympathy with the 
 point of view of the other parties to that process and a 
 just perception of the respective weight to be attached 
 to conflicting and to common interests. It calls for a 
 
 72 
 
certain daring in experiment and for a willingness to 
 make concessions, if needs be, for the common good. It 
 requires both parties to abandon recrimination as to the 
 mistakes of the past and to approach each other in a new 
 spirit. 
 
 156. These are great demands ; but the emergency 
 and the opportunity are also great. Whatever we may 
 do, we may be sure that things will not continue to move 
 quietly in the familiar grooves. The whole world alike 
 of conditions and ideas has been violently shaken and 
 a ferment has been set up out of which may come 
 either good or evil, but in no event a reversion to 
 the old order. We cannot alter the facts by ignoring 
 them. Our only choice lies between the risks involved 
 in abandoning ourselves passively to the forces of 
 change and the effort required to harness them for our 
 own ends. 
 
 157. To avoid chaos is much ; of itself it would be 
 worth no small sacrifice and effort on the part of all. 
 The gain which might accrue to any class from conflict 
 is shadowy and uncertain ; the loss and suffering to 
 every class alike are certain and heavy. 
 
 158. But to avoid danger is not all. It seems probable 
 that we stand to-day at one of those definite turning 
 points in human history where a generation of men has 
 it in its power, by the exercise of faith and wisdom, by 
 facing the problems of the moment without passion and 
 without shrinking, to determine the course of the future 
 for many years. If we can rise to the height of our 
 opportunity we may hope not merely to pass safely 
 through the immediate crisis, but to contribute largely 
 to the future welfare of the nation. 
 
 159. Whatever action is taken must be the result of 
 frank and fuU discussion between representatives of all 
 parties to the question. Any attempt to enforce upon 
 one party a scheme framed wholly by another would y 
 defeat its own object and precipitate the crisis. It will 
 not do to look to the Government for the initiative. 
 Whatever part the State may play in the future of 
 Industry, it cannot move in advance of the general level 
 
 of opinion among those concerned. Most of the difficulties 
 which have been analysed in this Memorandum apply 
 with equal force to State controlled industries, and while 
 the solution may involve legislative sanction or State 
 
 (8767) 73 K 
 
action, the problem itself can be settled only by agree- 
 ment between those chiefly concerned. 
 
 i6o. The first step towards agreement is to define the 
 functions of the three parties to production. 
 J Capital is necessary to a business for the erection of 
 plant, the purchase of raw material and working expenses. 
 In order that Capital should be used to the best advan- 
 tage for the purposes of industry, it is necessary that 
 investors should display sound judgment as to the 
 prospects and requirements of particular enterprises, 
 exercising caution or daring as occasion demands. 
 
 Management is concerned with the disposition of the 
 Capital provided, the erection and employment of 
 machinery and plant, the general organisation of the 
 business, the placing and acceptance of contracts, the 
 purchase of the raw material and the sale of the finished 
 product. The performance of these functions requires 
 not merely a knowledge of the particular business con- 
 cerned but of all which are in any way connected with it, 
 a careful study of markets, of methods of distribution 
 and of financial conditions. 
 
 Labour undertakes the conversion of the raw material 
 into the finished product, by aid of the plant and 
 machinery provided. While the first requisite in the 
 workman is a thorough understanding of his own job, 
 the maximum efficiency can only be attained if he has 
 a clear conception of the part played by his own work 
 in the whole process of production. 
 
 These definitions are framed with a view to a manu- 
 facturing business, but they can be adapted, by changes 
 which will readily suggest themselves and are not vital, 
 to a distributive industry. 
 
 i6i. It is obvious that the functions of Capital, 
 Management and Labour overlap. In many cases the 
 man who provides the funds of a business also directs its 
 working. In such cases he performs both the waiting 
 and risk-taking functions of Capital and Management's 
 function of expert control. It is logical to regard his 
 profits as consisting partly of interest on the capital 
 provided and partly of remuneration for his services as 
 manager. Again, a foreman or a ganger combines to 
 some extent the functions of Labour and Management ; 
 and in general, the spheres of management and labour 
 activity are too closely connected for any clear line of 
 
 74 
 
demarcation to be drawn between them. Capital itself 
 represents the result of past services performed by all 
 three parties. 
 
 162. This inter-relation of functions constitutes a real 
 partnership* between the persons concerned in any busi- 
 ness, whether as investors, managers or workmen, or in 
 any two or all of these capacities. At present the relation 
 between them is unrecognised or only partly understood, 
 and the result is to produce hostility instead of co- 
 operation between the partners. The attention of all 
 is apt to be concentrated on the points in which their 
 interests conflict to the exclusion of those in which they 
 are common. 
 
 163. This failure to realise the possibihties of co- 
 operation springs largely from neglect of a fundamental 
 principle. The first article of partnership is equahty of 
 knowledge. At present the Workers have Httle knowledge 
 of the capital risks, working expenses, estabHshment and 
 depreciation charges of a business, or of the relation 
 between their particular job and the general process of 
 production. On the other hand. Employers have, as a 
 rule, a very imperfect understanding of the Workers' 
 point of view, the degree in which they are affected by 
 economic and social considerations respectively, and the 
 effect of particular processes and methods of working 
 upon their physical and moral life. From this mutual 
 ignorance arise innumerable misunderstandings with 
 regard to rates of pay and conditions of labour which are 
 capable only of arbitrary solutions, because neither side 
 understands the standpoint of the other. It is probable 
 that a large percentage of the disputes arising over rates 
 of pay, the introduction of labour-saving machinery, 
 hours of work, the demarcation of tasks, Trade Union 
 restrictions, could be avoided or compromised, if 
 Employers and Employed really understood the reasons 
 for the attitude of the other party. In default of such 
 understanding, the dispute takes on the character of a 
 trial of strength, in which each side is compelled, for the 
 sake of principle and prestige, to put forth efforts dis- 
 proportionate to the actual point at issue. 
 
 * The word partnership is here used in its widest sense and 
 does not involve the acceptance of what are generally known as 
 co-partnership schemes, 
 
 (8767) 75 K 2 
 
164. It has been said in paragraph 145 that the chief 
 obstacle to co-operation is the question of status. The 
 development of modern industry has turned the opera- 
 tive into a mere cog in the industrial machine. The 
 average working man has no say in the management of 
 the business and very little as to the conditions of his 
 employment ; he has no interest in the success of the 
 firm, except that it should not collapse altogether ; and 
 the tendency has been more and more to reduce his work 
 to a mechanical routine. The term " wage-slavery," so 
 often used, means something more than the mere 
 economic dependence of the worker on his employment. 
 It embodies the revolt of the worker against a system 
 which gives him neither interest, nor pride, nor a sense 
 of responsibihty in his work. To a large proportion of 
 those engaged in industry their work has become some- 
 thing external to their personal life, a disagreeable 
 necessity affording no opportunity for self-expression, 
 the joy of creation, or the realisation of healthy ambitions. 
 The result has been a serious impoverishment and enfeeble- 
 ment of life and character and a permanent obstacle to 
 industrial development. It is impossible for men in 
 this position to take long views, or to consider innovations 
 from the standpoint of industry as a whole. The opposi- 
 tion to new methods of working, labour-saving machinery, 
 dilution of labour, scientific management, is only in part 
 the result of specific and reasoned objections. It springs 
 still more largely from the fact that these schemes are 
 imposed from above and are presumed to be framed 
 solely in the interest of the Employers. The opposition 
 1 to them is, in fact, a revolt against dictation. On the 
 other hand, the uncompromising attitude of Employers 
 does not, generally speaking, arise from a tyrannical 
 spirit or a mere desire for increased profits, but from 
 impatience with the men's separatist attitude and their 
 inability to realise the common dependence of Employers 
 and Employed upon the produce of their joint exertions. 
 165. The same difficulty arises in the case of distribu- 
 tion of earnings. The worker feels that his labour is 
 treated as a mere commodity, the market value of which 
 may be forced down by the Employer, irrespective of any 
 consideration of a decent standard of life for the 
 Employed, and that he receives the reward of his toil, 
 not as a matter of right or as the equitable division of 
 
 76 
 
the proceeds of joint effort, but as a dole fixed by the 
 arbitrary will of the Employer or as a concession extorted 
 by force. The Employer feels that each demand made 
 upon him represents a raid upon his profits limited solely 
 by the power of the Workers' organisations and unaffected 
 by any consideration of the working expenses of the 
 business, provision for depreciation or dilapidations, or 
 the building up of a reserve against future depression. 
 In the confusion of thought arising from imperfect 
 understanding, there is a tendency to regard the whole 
 problem as centreing round the concrete question of 
 distribution, which becomes a symbol of the general 
 opposition of interests. The consequence is that disputes 
 as to wages are often fought on either side with a bitter- 
 ness and obstinacy altogether out of proportion to the 
 amounts involved. In order to arrive at a clearer con- 
 ception, it is essential to disentangle as far as possible 
 the economic and non-economic factors. If the question 
 of status can be settled, the main obstacle to an agree- 
 ment as to distribution will have been removed. 
 
 i66. The problem is, therefore, to settle this question 
 of status in some way which shall give the workman the 
 sense of self-respect and responsibility which he desires, 
 without interfering unduly with the employer's exercise 
 of the necessary functions of management. The Trade 
 Union regulations, which have been so largely suspended 
 by agreement for the period of the war, were mostly 
 directed towards this end — the assumption by Labour of 
 some measure of control over the conditions under which 
 it works. They refer to wages, hours of labour, over- 
 time and Sunday work, apprenticeship and the method 
 of entry into particular occupations, the kind of work 
 to be performed by different classes of workers, the 
 methods of negotiation between Employers and 
 Employed and similar questions. In other words, they 
 represent an attempt to substitute for the autocratic 
 control of the employer over the working lives of his 
 employees a greater and greater degree of self-direction 
 by the organised workers themselves, acting through 
 their accredited representatives. 
 
 167. As a natural result of the assumed conflict 
 between the fundamental interests of Employers and 
 Employed, the action of the Trade Unions took the form, 
 
 77 
 
in appearance at least, of an attack upon the profits of 
 the Employers and their right to control the conduct of 
 their business. It was largely as a defence against the 
 Unions that the great Employers' Associations came 
 into being. After making all allowance for the occasional 
 insubordination of Trade Union members and the lack 
 of support given in some quarters to the Employers' 
 Federations, the effect of these parallel organisations 
 has been beneficial to both sides. Hitherto, however, 
 the action of both groups has been almost entirely 
 negative. They have placed restraints both upon 
 tyranny and upon anarchy ; they have succeeded in 
 compromising many disputes and in restricting the 
 occasions of open conflict ; but they have done little 
 or nothing to remove the continual undercurrent of 
 latent hostility and divergence of effort which has 
 hampered industrial development far more than the 
 direct effect of strikes and lock-outs. They have pro 
 tected the special interests which they respectively 
 represent ; but they have not risen to the conception of 
 combined action in pursuit of their common interests. 
 Valuable as their work has been, it can hardly be regarded 
 as an adequate return for the ability, energy and power 
 of organisation displayed on both sides. 
 
 1 68. The explanation of the comparative failure of 
 the Employers' Associations and Trade Unions on the 
 constructive side of the industrial problem is to be 
 found in their strictly sectional and defensive origin 
 and outlook. Regarding themselves as entrusted with 
 the interests of one party to Industry and not of Industry 
 itself, they have paid no attention to the problems and 
 difficulties of the other side, and they have come together 
 only when one had a demand to make of the other or 
 when a conflict was imminent. Thus they have always 
 met in an atmosphere of antagonism, and their negotia- 
 tions have been carried on as between two hostile bodies. 
 Exchange of views has come at too late a stage in the 
 proceedings, when a stand has already been taken on 
 both sides and prestige or prejudice forms an obstacle 
 to concessions. What is still more important, their dis- 
 cussions have been confined to specific points of dispute 
 and have not embraced the consideration of constructive 
 measures for the improvement of industrial conditions 
 and the increase of efficiency. Yet the possibilities of 
 
 78 
 
combined action which he in these two great groups 
 of highly organised and powerful bodies might transform 
 the whole face of industrial life. Their united knowledge 
 of both sides of the industrial process should enable them 
 to throw light on every phase of its successive develop- 
 ments. Their united strength would render them, in 
 combination, practically irresistible. But to secure the 
 realisation of these possibilities the co-operation between 
 the two groups must be continuous and constructive, 
 and must be based upon a recognition of the common 
 interests of Employers and Employed, both as parties 
 to industry and members of the community. Employers 
 must realise that both their own interests and the 
 obligations of citizenship impose upon them the necessity 
 of a sympathetic understanding of the lives and stand- 
 point of those with whom they work and a willingness 
 to co-operate, without dictation or patronage, in every 
 endeavour to improve their material or social conditions. 
 Labour must realise its direct interest in the improve- 
 ment of industrial processes, the organisation of industry, 
 the standard and quantity of production, and the elimina- 
 tion of waste in material or effort. Both the Employers' 
 Associations and Trade Unions must learn to regard 
 themselves as joint trustees of one of the most important 
 elements of the national life. > 
 
 169. The machinery necessary for such co-operation 
 will require to be created. The existing Conciliation 
 Boards, or Industrial Boards on the Australian model, 
 while they perform many useful functions, will not serve 
 this purpose. These Boards are, in fact, independent 
 Courts sitting to adjudicate upon claims in respect of 
 which the parties are unable to agree. Such a method of 
 adjudication is in many ways preferable to the alternative 
 of leaving questions to be settled by conflict, as the result 
 of a strike or lock-out. They enable Employers and Em- 
 ployed to contract on more equal terms. They result 
 also in the production of detailed evidence whereby 
 each side might, if it had the inclination, understand 
 the case of the other. But here, too, tlie exchange of 
 views comes too late and the parties meet not to co- 
 operate but to oppose each other. Moreover, they are 
 concerned solely with the settlement of specific disputes, 
 and while they may continue to do useful work in this 
 connection, they cannot provide the opportunity for 
 
 79 
 
that continuous and constructive co-operation of Manage- 
 ment and Labour which is essential to any satisfactory 
 solution of the industrial problem. 
 
 170. Something much more comprehensive is required, 
 and the task of providing it will need verj^ careful atten- 
 tion from those concerned. It is unlikely that any one 
 scheme could be devised which would be applicable 
 to all industries or in all localities. The utmost elasticity, 
 whether in present application or in future development, 
 is necessary to any system of industrial organisation, 
 for industry itself develops and modifies day by day. 
 But the general lines upon which development is possible 
 can be deduced from the foregoing analysis of the 
 difficulties to be overcome. 
 
 V" 171. In its simplest form, the new machinery would 
 consist of Joint Committees, representing both the 
 Management and the Works Staff. This method would 
 lend itself readily to experiment by individual firms and 
 could be applied even in the unorganised trades where 
 no strong Trade Unions or Federations of Employers 
 exist. At the meetings of such Committees any questions 
 affecting working methods and conditions could be 
 brought up for discussion by either side. The representa- 
 tives of Management would be required to explain the 
 nature and extent of any proposed innovation designed 
 to increase output or economise effort — the introduction 
 of new automatic machinery, time and motion study, 
 standardisation of tools, analysis of fatigue, eUmination 
 of waste — and its effect upon the earnings of the firm 
 and of the individual worker. This explanation should 
 be as clear and full as possible, with the object of giving 
 each worker an interest and sense of responsibility in his 
 work, by making clear to him, through his representatives, 
 the reason for the methods to be adopted and the relation 
 of his job to the whole process of production. The 
 proposals having been explained, the Workers' repre- 
 sentatives would consider them from the point of view 
 of the interests of the men employed, the relation 
 between the different classes of labour, the strain on the 
 workers, the amount of interest and intelligence put 
 into their work. If necessary, they would put forward 
 modifications or safeguards for the protection of these 
 interests. Where the result was to show a real divergence 
 
 80 
 
of opinion or of interest, it would be freely discussed, 
 with a view to finding a way round and adjusting the 
 balance between common and competing interests. In 
 like manner, proposals for alterations in the hours or 
 conditions of labour, in the interests of the health or 
 social welfare of the workers, would be put forward by 
 the Workers' representatives and discussed in the light 
 of any objections on the score of expense or difficulties 
 of working urged by the Representatives of Management. 
 While the Representatives of Management would natur- 
 ally be concerned mainly with the efficiency of the 
 business and those of Labour with the immediate 
 interests of the Workers, it is very desirable that neither 
 should confine their attention to their own side of the 
 business. A wise Employer will always have the interests 
 of his staff at heart, and workmen who feel themselves 
 to have a recognised interest in the business will have 
 man}^ suggestions to put forward for promoting its 
 efficiency. 
 
 172. In the staple trades, the method of Works_ 
 Committees would require to be replaced, or supple- 
 mented, by Joint Boards composed of representatives 
 of the Employers' Associations and the Trade Unions. 
 Slaving regard to the differentiation of functions 
 between Management and Labour and the large number 
 of problems affecting one or both parties, which arise 
 in a big industry, two co-equal Boards might be created 
 in each industry, one representing Management and 
 the other Labour, with a Supreme Board of Control 
 co-ordinating the work of both. The functions of the 
 Management Board would cover the " business " side 
 of the industry ; those of the Labour Board would 
 relate to conditions and hours of labour, thi' demarcation 
 of tasks and everything that touches most nearly the 
 life of the worker. Representatives of these Boards, 
 meeting on the Supreme Board of Control, would deal 
 jointly with all matters by which the interests of both 
 parties were affected. Such questions as the Dilution of 
 Labour, which is becoming increasingly important, yet 
 which cannot be dealt with satisfactorily so long as it 
 is approached from one side only, would be discussed by 
 the Joint Board of Control, both from the point of view 
 of efficiency in production and from that of the interests 
 of the Workers and the position of the Trade Unions. 
 
 (8767) 81 L 
 
In this manner it should be possible to construct and 
 give effect to a definite policy and programme for each 
 great industry as a whole, representing a reconciliation 
 between the common and competing interests of 
 Employers and Employed, and based both upon the 
 desire to obtain the maximum of efficiency and the 
 desire to obtain the best possible conditions for the 
 workers. 
 
 173. In order to avoid the evils of inelasticity an 
 over-centralisation, and to make due provision for the 
 varying conditions of different locahties-and firms, it 
 might be advisable to combine the creation of these 
 Central Boards with an organisation of District and 
 Works Committees, charged with the special care of 
 local and individual interests and problems. The repre- 
 sentation of such Committees on the Central Boards and 
 the delegation to them of local questions would constitute 
 a protection against the injustice which might otherwise 
 be done by an attempt to equahse rates of pay in areas 
 which differ widely as to the cost of housing and food, 
 or in which the conditions of production and transport 
 produce important variations in working expenses. 
 They would also serve as a protection to established 
 workshop and local craft traditions against the deaden- 
 ing tendency to a mechanical uniformity. 
 
 174. In its most ambitious form, the Supreme Board 
 of Control would resolve itself into a National Industrial 
 Council for each of the staple industries or groups of 
 alhed industries. The members would be elected by 
 baUot, each electoral unit, or pair of parallel units, 
 returning one representative of Management and one 
 of Labour. In many industries it would be desirable to 
 find a place on the Council for representatives of the 
 Applied Arts, both with a view to raising the standard 
 of design and workmanship, and with the object of 
 encouraging the human and creative interest in pro- 
 duction. A Speaker of broad sympathies and experience, 
 capable of directing and focussing the discussions upon 
 the practical problems to be dealt with, would be chsoen 
 by mutual consent, but would have no casting vote, his 
 capacity being purely advisory. Such Industrial Councils 
 would in no sense supersede the existing Employers' 
 Associations and Trade Unions, many sides of whose 
 present activities would be unaffected by the creation of 
 
 82 
 
the new bodies. Matters connected with the sources and 
 supply of raw material and the cultivation of markets for 
 the disposal of the finished products would remain exclu- 
 sively the concern of purely commercial federations of 
 manufacturers, acting in conjunction with the State. 
 The benefit side of Trade Unions and many phases of 
 the internal organisation of labour by them would be 
 similarly unaffected. In other matters the connection 
 between the old and the new bodies would be close, 
 without any loss of identity. The Unions and the 
 Employers' Associations would send their delegates to 
 the Industrial Councils charged with the defence of 
 the special interests represented by them and equipped 
 with special knowledge of their particular problems. 
 The general policy outlined by the Industrial Parlia- 
 ments would be carried out in detail largely through 
 the older organisations. 
 
 175. The field of action open to the Industrial 
 Councils would be very great. It would extend, for 
 instance, to {a) the suggestion and consideration of 
 improved methods and organisation ; (&) the mainten- 
 ance of works discipline and output ; (c) the maintenance 
 of a high standard of design and workmanship ; (d) the 
 education and training of apprentices, and the conditions 
 of entry into the industry concerned ; (e) the demarca- 
 tion of tasks ; (/) the prevention of unemployment, the 
 development of security of tenure in the trade and the 
 decasualisation of labour ; {g) questions of wages and 
 piece rates ; (A) the prosecution of research and experi- 
 ment, and (i) the improving of the public status of the 
 industry. Where the Council represented a group of 
 allied trades, it would naturally concern itself with the 
 co-ordination of their work and the adjustment of their 
 respective interests. In addition to the promotion of 
 internal prosperity, the Councils would be able to give 
 public utterance to the views and needs of each industry 
 in its relation to the whole national life. They would 
 take account not only of economic but of moral and 
 aesthetic values. Their object would be not merely to 
 increase the productive efficiency of the industry and 
 to reconcile the competing interests of those engaged in 
 it, but to emphasise the worth and dignity of industrial 
 life and to enlarge the scope offered by it to the energies 
 and ambitions of those concerned. It would be part of 
 
 (8767) 83 L 2 
 
their task to emphasise the close connection between 
 industrial questions and those relating to education and 
 social conditions. It might even be advisable to empower 
 the Industrial Councils to apply for Board of Trade 
 Orders giving legal sanction to their decisions — but this 
 would necessitate careful watching, and the provision 
 oj adequate safeguards, especially in the interests of 
 consumers. 
 
 176. There is, of course, a tendency in all great 
 associations of industrial units to develop the danger of 
 tyranny, which seems almost inseparable from a close 
 corporation. If, however, it is found that the require- 
 ments of the time call for the creation of such organisa- 
 tions, it would be well to face this danger without 
 flinching. The advantages to be obtained are enormous, 
 and with the help of the legislature and the Courts the 
 dangers can be met. 
 
 177. Whatever scheme is adopted, the essential thing 
 is that it shall give expression to a real desire for 
 co-operation between Employers and Employed. In 
 the unorganised trades. Works Committees on the plan 
 already suggested may be sufficient for present needs. 
 The probability is that, with increasing prosperity and 
 better understanding, the desire for organisation will 
 grow, and the tendency will be to extend the scope 
 both of Employers' and Labour Organisations and to 
 increase their effectiveness, so as to give the Employers' 
 Associations greater power to control the action of 
 individual firms and to enable the Trade Unions to 
 make agreements with a greater certainty of their being 
 carried out. It is evidently desirable that the organisa- 
 tion of Employers and of Labour should proceed pari 
 passu, with full mutual recognition, so that individuals 
 or small groups on one side should not find themselves 
 confronted by powerful organisations on the other. 
 When once a policy of co-operation has been introduced, 
 its future development and extension may safely be 
 left to time and experience. An attempt to lay down 
 any definite and rigid scheme at the start would prob- 
 ably defeat its own object. The whole success of the 
 pohcy depends upon the elasticity with which it can 
 be adapted to practical needs and opportunities as 
 they re\eal themselves. It is obvious that, even in 
 unorganised trades, it might be applied to many 
 
 84 
 
questions of works economy, with the result of stimu- 
 lating care and efficiency on the part of the Workers, 
 and giving Management a better understanding of 
 their point of view, to the advantage of both. In the 
 engagement of men and their allocation to different 
 departments and jobs, it should be possible to take 
 advantage of the special knowledge of both sides, by 
 consultation between the Managers and the representa- 
 tives of the works Staff as to the numbers and qualities 
 of the men required. In some cases it might even be 
 possible to appoint a permanent joint committee to deal 
 with the question of the supply of labour, and the require- 
 ments of the work in hand. 
 
 178. It is probable that some time must elapse before 
 the benefits of any such scheme as has been suggested 
 could be fuUy realised. The change of attitude involved 
 is too vital, the field of activity' is too large to hope for 
 any but gradual development. At the outset it might 
 often happen that much of the discussion, either in a 
 Works Committee, or a National Industrial Council, 
 was obstructive or irrelevent. But it has been proved 
 again and again that contact breeds mutual under- 
 standing and responsibiHty calls forth capacity. Without 
 depreciating the part which may be played by Govern- 
 ment and by independent experts in the regulation and 
 encouragement of industry, the primary essential of 
 progress is that Industry shall have faith in itself. 
 
 179. There is nothing to be gained by minimising the 
 practical difficulties. The task is one which requires the 
 co-operation of the best brains engaged in the study of 
 industrial questions, whether as Employers of Labour, 
 Leaders of working-class opinion, or Economists. Pre- 
 mature action, based upon imperfect knowledge, or an 
 ill-considered programme, would only increase the 
 difficulty of the work. But with so much to be done 
 and such great issues at stake, no time must be lost 
 in preparing the ground. The inquiries which will 
 be necessitated by the various phases of the Emergencv 
 Problem will throw valuable hght upon the methods 
 to be adopted in the larger task. The measures by 
 which that problem is dealt with may be made the 
 foundations of permanent reconstructive work. There 
 is a danger, however, lest the very complexity and 
 importance of the questions of reinstatement of demobi- 
 
Used men and readjustment of industry to peace condi- 
 tions should, divert attention from the fundamental 
 issues. It is essential that we should see_the Industrial 
 Problem as a whole, and should preserve a clear idea of 
 the relation between its several factors and the propor- 
 tionate weight to be attached to each. 
 
 i8o. It is the hope of those responsible for this Memo 
 randum that the suggestions here put forward may 
 prove of some assistance in attaining this central stand- 
 point. They have attempted to trace the causes of that 
 tlnrest by which industrial troubles have been produced 
 in the past, and by which the economic dangers arising 
 from the war are likely to be accentuated. From this 
 analysis certain broad principles have been deduced, 
 and the general lines of their application indicated. 
 There are many aspects of the problem which have 
 not been dealt with, or have only very briefly been 
 touched upon in these pages. The details of a practical 
 programme require much careful study and experiment. 
 But whatever form the new developments may take, 
 the essential preUminary is the adoption of a new 
 attitude with regard to Industry, the recognition of 
 national responsibility for industrial conditions, the 
 recognition of the joint responsibility towards the nation 
 borne by those who are engaged, whether as Employers 
 or Employed, in its activities. To hold the balance true 
 between the economic and the human side of the problem; 
 to increcLse at once the extent and quality of output ; to 
 make the work of each man, in any position, an integral 
 and worthy part of his life as a citizen ; this is a task 
 as truly national as that of victory in war. The unparal- 
 leled and undreamt of expansion of our military strength 
 which has been called forth by the European struggle, 
 may give us the measure of our capacity to meet the 
 requirements of peace. 
 
 86 
 
Appendix A. 
 
 A Suggested Experiment. 
 
 The following scheme for an experiment in industrial 
 reconstruction, as applied to the working of the Post Office, 
 is taken from a paper on " The Control of Industry after 
 the War," read by Mr. A. E. Zimmern, M.A., at the 
 Conference of Working-Class Associations held in Oxford, 
 on fuly 2ist, 22nd and 23rd, 1916. The authors of the 
 Memorandum do not identify themselves with the sugges- 
 tions made, but have thought it well to print the scheme as 
 a concrete example of one way in which the principles 
 discussed in the Memorandum could be experimentally 
 applied. It woidd be of great value as a basis for inquiry 
 and discussion if similar schemes, applicable to the leading 
 staple industries, could be -worked out by representatives 
 of the trades concerned. 
 
 English people are in the habit of believing that 
 ideas are " all very well in theory," but will never work 
 in practice. The reason why ideas which are theoreti- 
 cally sound do not work out in practice is generally 
 because they are applied without sufficient consideration 
 of the conditions of the particular case, or because those 
 who are entrusted with the task of carrying them out are 
 not in sympathy with them. It is clear that not all the 
 British industries are ripe for changes in the direction 
 of democratic control. There are a number of previous w 
 conditions which it would be well to satisfy if an experi 
 ment is to have a good chance of success. I think we 
 may broadly lay down seven conditions wliich the 
 business or industry we are looking for should satisfy : — 
 
 I. It should be a nationalised industry* — that is to 
 say, an industry which is recognised to be a public service 
 and a permanent part of the lational life. Such an 
 industry is at once more removed from the atmosphere of 
 commercialism and immune from the dangers, if also 
 
 * It should be pointed out that Mr. Zimniern's paper did not 
 discuss the question of nationalisation of industries, except in so 
 far as the Post Otrice organisation offered a specially suitable 
 field for a. first experiment in reconstruction. 
 
 87 
 
from the stimulus, of competition and to liability from 
 sudden changes on the side of demand. It would be 
 possible, of course, to choose a municipalised industry, 
 but a nationaUsed industry is more hkely to yield the 
 broad outlook required on both sides. 
 
 2. It should be an industry where the amount of 
 labour employed is relatively large compared with the 
 fixed capital invested, and where prosperity, therefore, 
 depends principally upon the efficiency of the workers. 
 Such an industry obviously affords a better ground for 
 experiments in labour management. 
 
 On the labour side it should be an industry where the 
 workers are — 
 
 3. Highly skilled. 
 
 4. Have a relatively high standard of general educa- 
 tion and intelligence. 
 
 5. Have a 'high general level of personal character. 
 
 6. Where Trade Unionism is well organised both as 
 regards numbers and spirit and has been afforded recog- 
 nition by the employing authority. 
 
 7. Where there are no serious demarcation difficulties 
 between the various Trade Unions concerned. 
 
 In the case which I propose to submit for experiment, 
 the case of the Post Office, all these conditions would 
 seem to be fulfilled. 
 
 1. It is a nationalised service. 
 
 2. The labour force — 253,750 in all, or 230,000 on 
 the manipulative side — is relatively large compared with 
 the fixed capital. 
 
 3. The work is for the most part highly skilled, as is 
 indicated by the fact that — 
 
 4. The great majority of postal workers have to / 
 pass a general examination at the age of 16 or over. 
 
 5. The morale of the service is uncommonly good. 
 In spite of obvious temptations, the number of dismissals 
 from the service is negligible. The average annual 
 percentage of dismissals in the manipulative branch of 
 the service is 0*25 per cent. 
 
 6. Trade Unionism is powerful and well organised in 
 spite of the large number of girls employed. Practically 
 all the men are organised. 
 
 88 
 
7- The unions concerned are on good terms with one 
 another and are organised for common action in a 
 National Joint Committee. 
 
 How is the work of the Post Office at present 
 organised ? There is, as akeady mentioned, a broad 
 division of the employes between what is called the 
 clerical staff and the manipulative staff. With the 
 clerical staff, which has organisations of its own, I do 
 not propose to deal in what follows. I shall confine 
 myself to the manipulative staff, consisting principally 
 of postmen, sorters, telegraphists, telephonists, and 
 engineering grades, who are represented on the National 
 Joint Committee of Post Office Associations. That 
 Committee consists of the following organisations : — 
 
 Name of 
 
 Class or Classes 
 
 Official 
 Establish- 
 
 Membership 
 
 of 
 Association. 
 
 Association. 
 
 Represented. 
 
 ment of 
 Classes. 
 
 Postmen's Federation 
 
 Postmen, assistant and 
 auxiliary postmen 
 
 68,000 
 
 51.500 
 
 Postal and Telegraph 
 
 Telegraphists, counter clerks 
 and telegraphists, sorting 
 
 35,000 
 
 22,000 
 
 clerks' Association 
 
 
 
 
 clerks and telegraphists, 
 
 
 
 
 telephonists, and learners 
 
 
 
 Fawcett Association. . 
 
 Sorters, London Postal Ser- 
 vice 
 
 7,021 
 
 6,430 
 
 Engineering & Stores 
 
 Skilled and unskilled work- 
 
 13,000 
 
 7,000 
 
 Association (Postal, 
 
 men, etc., in Engineering 
 
 
 
 Telegraph, and 
 
 and Stores Department 
 
 
 
 Telephone) 
 
 
 
 
 National Federation 
 
 Scale payment sub-post- 
 
 22,658 
 
 9,400 
 
 of Sub-Postmasters 
 
 masters 
 
 
 
 Let us now turn to the organisation of the manage- 
 ment side. The control of the Post Office is vested, 
 subject to the supremacy of the Cabinet and of Parlia- 
 ment, in the Postmaster-General and his permanent 
 Secretary, known as the Secretary of the Post Office. 
 The control of the service thus centres in the Secretary's 
 office at St, Martin's-le-Grand. The work of the 
 Secretary's office is carried on under his supervision in 
 five departments, dealing respectively with questions of 
 estabhshment, staff, buildings and equipment, organisa- 
 tion {i.e., mails, train services, collection of letters, etc.), 
 and engineering. There are also Secretaries for Scotland 
 and Ireland, who exercise a general control over the staff 
 in those countries, subject, however, to the control of 
 the Secretary's department in London. All dismissals, 
 for instance, must be referred to London. 
 
 (8767) 
 
 M 
 
As regards local administration, the country is 
 divided into 14 districts, each of which is in charge of an 
 official called the Surveyor. Surveyors are allowed fairly 
 wide powers of organisation and control, subject, how- 
 ever, in the case of the staff to the right of appeal to the 
 Secretary in London in all cases affecting either an 
 individual or a group of individuals. 
 
 Below the Surveyors are the Postmasters. In every 
 Surveyor's district there are a number of Postmasters 
 responsible for the business of the head office and certain 
 sub-offices. Postmasters are given a fairly free hand 
 in matters of organisation, but in the more important 
 matters affecting their subordinates they are required 
 to obtain the Surveyor's sanction. 
 
 Let us now turn to the question of the relation between 
 the governing authorities and the staff, so far as staff 
 conditions are concerned. Those conditions are laid 
 down in a series of regulations which may be summarised 
 as follows : The associations of postal employes have 
 been accorded recognition by the Post Office authorities ; 
 that is, they are recognised as having the right to repre- 
 sent the interests of individual workers or groups of 
 workers. The conditions under which this right may be 
 exercised are carefully defined by the authorities. The 
 general procedure is for the central office of the association 
 concerned to submit a memorial on the point at issue to 
 the Secretary or to the Postmaster-General. Such 
 memorials are invariably acknowledged, and it is possible 
 for the representatives of the association to meet the 
 authorities at periodical intervals to discuss matters 
 already submitted in writing. The matters on which the 
 associations are free to submit memorials are defined as 
 " general questions relating to the conditions at work, 
 i.e., wages, hours of duty, leave, meal reliefs, etc." 
 Memorials on local questions and on individual questions 
 other than those affecting discipline or the conduct of 
 supervising officers have to be submitted in the first 
 instance by the local branch of the association concerned 
 to the local responsible official {i.e., the Postmaster or 
 Surveyor). The local official first deals with representa- 
 tions, and, failing satisfaction, the association is at 
 liberty to carry the matter further to headquarters and 
 obtain a reply. No memorials are allowed to be sub- 
 mitted on questions relative to promotion. The liberty 
 
 90 
 
of action of the associations is also limited in the case 
 of questions of discipline. The provision in this connec- 
 tion is sufficiently important to be quoted in full : — 
 
 " Memorials respecting disciplinary measures that 
 have been taken against individual officers may br 
 submitted to the Secretary or the Postmaster-General 
 by the central body of the association in serious cases, 
 where appeals by the indi\dduals, made first to the local 
 authorities and then to the Secretary or Postmaster- 
 General, have not been successful, and where the central 
 body have satisfied themselves by a full investigation 
 of the circumstances that they can present new facts 
 or considerations which render further review desirable." 
 
 It will thus be seen that the Trade Unions are put in 
 the position of a sort of permanent and official opposition. 
 Their function is not to co-operate with the management, 
 but to criticise, not to prevent complaints, but to 
 endeavour to remedy them ; and in certain cases, such 
 as discipline, where feeling is likely to run highest, they 
 are precluded from interfering till the matter has already 
 been declared upon by the Secretary and has become 
 the subject of serious and probably bitter controversy. 
 
 How can this system of management be modified in 
 the direction outhned ? An attempt will be made in 
 the following remarks to suggest how this might be done. 
 The object of the reforms suggested is not to revolutionise 
 the organisation of the postal service or to turn the 
 Department upside down ; it is to take the existing 
 organisation as it stands and to make the least possibb 
 change compatible with granting to the staff that 
 measure of responsibility which is increasingly felt to be 
 necessary in order to secure the efficiency and harmony of 
 the service. I am indebted in what follows to my friend, 
 Mr. J. G. Newlove, a distinguished ex-student of Ruskin 
 College and now General Secretary of the Postal and 
 Telegraph Clerks' Association, who has given much time 
 and thought to the improvement of the service ^^dth 
 which he is connected, and is willing to accept full 
 responsibihty for the constructive side of this paper. 
 
 The first suggested change is that machinery shall 
 be set up which will give the central bodies of the associa- 
 tions representation on a committee of each branch of 
 the Secretary's office. Where the interests of each grade 
 
 (8767) 91 M 2 
 
are peculiar, as in the establishment branch, there should 
 be a representative of each grade ; where their interests 
 are identical, as on building questions, less would suffice. 
 
 Similar machinery should be set up in each Surveyor's 
 district. Advisory Committees should be formed to 
 discuss with the Surveyor questions of policy affecting his 
 district, and these committees should contain a representa- 
 tive of each grade to co-operate with the Surveyor's staff. 
 
 Passing do^^^l to the individual office — what corre- 
 sponds in other industries to the " workshop " — it should 
 be one of the duties of the Postmaster to consult with 
 representatives of the staff on all questions affecting the 
 particular office. This should extend to all questions 
 without exception which affect the office as a whole, for 
 all such questions must in some way reflect on the 
 organisation of the office. Even a matter like complaints 
 from the public can be traced back to office organisation. 
 
 A difficulty arises at this point as to the procedure 
 in very small offices. The associations find by experience 
 that it is often difficult in such offices to find a local 
 secretary who is sufficiently well trained to deal with 
 questions of policy. Yet it is just in such small offices 
 that precedents distasteful to the staff are apt to be 
 created. Such offices, therefore, require special treatment, 
 and it is suggested that a representative of the Executive 
 of the associations should be able, if necessary, to act 
 as a medium of advice for the smaller offices. It might 
 prove desirable in this connection to rearrange the 
 boundaries of the associations'districts so as to harmonise 
 them with the Surveyor's districts. 
 
 This procedure is in itself no great innovation. Many 
 Postmasters do already adopt means of consultation with 
 their staff, and are indeed definitely encouraged to do so 
 by the rules of the Department. The new arrangement 
 will merely serve to regularise this and to level up the 
 procedure in the various offices. It is not suggested that 
 the new committees shall have a deciding voice. Where 
 no agreement can be reached in them the decision must 
 continue to rest, as now, with the supervising authorities. 
 If on matters of importance a policy were to be adopted 
 contrary to the wishes of the associations it would 
 always be possible to them to reopen the matter through 
 their annual conference and to approach the Postmaster- 
 General as at present. But the criticism which they 
 
 92 
 
would then bring to bear would be bred of inside know- 
 ledge, and it would of necessity be constructive rather 
 than critical in tone. 
 
 This change of spirit would be likely to apply in 
 special degree to questions of financial policy. One of 
 the chief functions of the new central machinery would 
 be to discuss questions involving expenditure, and in 
 particular questions of wages or salaries. The procedure 
 at present in this connection is not satisfactory. No 
 scheme involving fresh expenditure can be adopted until 
 it has been approved by the Treasury. The present 
 method of dealing with such schemes is to refer them 
 to a Parliamentary Committee of Inquiry. The members 
 of such Committees are necessarily not conversant with 
 the whole inner working of a huge organisation like the 
 Post Office, and are, therefore, unable to form a judgment 
 at first hand on the problems submitted to them for 
 decision. They must inevitably rely for their special , 
 knowledge upon the high officials of the Department. 
 This, it ^vill be seen, naturally tends to place those at 
 present responsible for the policy of the Department in 
 a preferential position as compared with the representa- 
 tives of the staff. As under existing conditions the 
 Department is bound to consider the interests of the 
 taxpayer, its natural role is that of opposition to increases 
 in pay. This is intensified by the fact that the Post 
 Office is run at a considerable profit, amounting to no 
 less than ;£6,ooo,ooo in the last year before the war, and 
 that there is a tendency to adopt purely commercial 
 standards of successful administration. If the procedure 
 by Parliamentary Committee were abandoned and 
 questions of wages and conditions were threshed out on 
 the proposed central committees before being submitted 
 to a Parliamentary body for ratification, or final decision 
 in cases of disagreement, the arrangement would work 
 more fairly for all parties concerned, including the 
 Treasury. The elimination of friction and the consequent 
 increase of esprit de corps should go further towards true 
 efficiency and economy than the existing methods, lend- 
 ing themselves, as unequal contests always do, to undesir- 
 able and often unpleasant methods of influence and 
 agitation. If it were found possible not to pay the profits 
 of the Post Office into the ordinary revenue, but to ear- 
 mark them for special purposes of social usefulness, in 
 
 93 
 
the choice of which the associations might have a voice, 
 this would remove any feehng on the part of the staff 
 that they were being " exploited " in a commercial 
 spirit, and would act as a strong incentive to use every 
 effort to improve the service. 
 
 This brings us to the functions of the central and 
 local committees. The most important and difficult of 
 these would be the discussion of questions of discipline. 
 DiscipHne is really the crux of the whole change of 
 method and spirit proposed. The existing rule, which 
 forbids the associations to interfere except after judg- 
 ment has already been passed both locally and at the 
 centre, is based on the root principle of the old system, 
 that power is exercised from above and that the prestige 
 of the ruHng authority must not be infringed. It is 
 also based upon reasons of practical convenience in that 
 most men extremely dislike the responsibihty of sitting 
 in judgment on their companions and workmates. If 
 the associations are to receive the right of co-operating 
 with the supervisory staff in dealing with cases of dis- 
 cipline they will be assuming responsibility for giving 
 what must sometimes be very unpleasant decisions 
 against their members. But because a thing is unpleasant 
 there is no reason for not facing it. Democracy involves 
 the extension of responsibihty in things pleasant and 
 unpleasant alike. If the associations were ready to deal 
 with pay, but shirked dealing with punishment, they 
 would be false to their principles. Fortunately, the 
 number of serious cases which arise in the service is 
 extremely small, but these are just the cases which the 
 associations ought to deal with. The best arrangement 
 would seem to be to leave minor breaches of discipline 
 to be dealt with as at present by the individual Post- 
 master, but that serious cases referred by him to the 
 Surveyor should be dealt with by the Surveyor's Com- 
 mittee, where the representatives of the association 
 would be less subject than on the local committee to the 
 bias of personal feeling. Matters dealt with by the Post- 
 master would be brought before the association through 
 the local committee if it were found necessary. 
 
 Questions of recommendation for promotion should 
 also be dealt with by the Surveyor's committee. Pro- 
 motion and discipline really hang closely together ; both 
 involve difficult decisions and the danger of heart-burning^ 
 
 94 
 
But there seems no way out except through the extension 
 of the principle of responsibihty. 
 
 As regards the rest of the committee's work, it can be 
 summed up under the general heading of " conditions " 
 — hours, leave, meal rehefs, improvements in office 
 equipment, etc. Most questions of this kind would be 
 settled locally. Only questions of principle would be 
 referred to the central committee for decision. 
 
 Such, in brief outUne, is the way in which the prin- 
 ciple of democratic control might be introduced into the 
 largest single business in the country. The changes 
 suggested may seem modest in scope, but they would 
 be far-reaching in effect. The Postmaster-General who 
 had imagination enough to adopt a scheme of this 
 nature would be conferring a benefit aUke on the postal 
 workers, the Labour movement, and the whole nation. 
 To the postal workers the change would bring a new 
 sense of dignity and self-respect and satisfaction in their 
 work, and, more important perhaps even than these, it 
 would leave them free to exercise their citizen rights as 
 pure citizens without the constant temptation to use 
 political influence as a means for remedying grievances 
 arising out of their employment under Government. It 
 would thus be a charter not only of economic, but of 
 political emancipation. To the Labour movement it 
 would be an example and an inspiration to apply the 
 same principle of responsible democracy to the far more 
 difficult problems of private employment which still lie 
 unsolved before it. To the community it would mean 
 a transformation in the spirit of one of the chief of those 
 public services on the efficiency of which we shall be so 
 much dependent in the work of national reconstruction 
 after the war. A keen, willing, and enterprising Post 
 Office can be of far more service to us than we realise 
 at present. But most of all the community will benefit 
 from the knowledge that the quaUties of mind and 
 character necessary to the working of self-governing 
 institutions are not confined to any one class or section, 
 that democracy is a plant which, properly tended and 
 safeguarded, can grow and prosper in other than its 
 famiHar soil, and that our country, which has led the 
 world in the institutions of poUtics and government, is 
 ready and eager to apply the same enduring principles 
 to wider and wider fields of public business. 
 
 95 
 
Appendix B. 
 
 Works Lectures. 
 A large firm of manufacturers in the North of 
 England has recently adopted with every success the 
 following scheme for creating a better understanding 
 between the principals and the employees, and for 
 promoting the efficiency of the business. An outside 
 person, who has given much thought to industrial and 
 commercial matters, was requested by the firm to come 
 and study the business in all its bearings and phases, 
 in order to dehver lectures to the workpeople, the staff 
 and also the employers themselves, with a view of 
 making plain to each the nature of the business, the 
 principles of industrial efficiency, and the true nature 
 of industrial relations. He was given every opportunity 
 of acquainting himself with the busmess side of the 
 concern, the buying of the raw material, the administra- 
 tion of the offices and works, the finances of the firm, 
 and the sale of the finished product, and was also given 
 every facihty for famiharising himself with the fives, 
 working conditions, thoughts and aspirations of the 
 workers. In the first place arrangements were made 
 for a course of twelve lectures to the management and 
 staff. The benefits of these were so marked that a 
 further course of twelve lectures was arranged to be 
 given to selected representatives of the workpeople. 
 The lectures were given on one afternoon, for twelve 
 successive weeks, and were attended by several hundred 
 employees who were paid their wages for the time of 
 attendance, the lectures being regarded as a part of the 
 workmg routine. The lecturer was left an entirely free 
 hand as to what he should say and did in fact administer 
 praise or blame impartially upon the results of his 
 investigation. The improvement in the relations between 
 the firm and its employees surpassed all expectations, 
 and the scheme is to be estabHshed as a permanent 
 feature of the organisation of the business. Many 
 employers who have been aroused during the war to a 
 quickened consciousness of their responsibifity and who 
 desire to estabhsh for the future a new spirit in their 
 works, have asked themselves, " What can we do 
 to-morrow ? " The above scheme is suggested as an 
 answer to that question. 
 
 96 
 
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