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 A CRITICISM 
 
 THEORY OF TRADES' UNIONS. 
 
 T. S. CREE. 
 
 GLASGOW: 
 PRINTED BY BELL & BAIN, 41 MITCHELL STREET. 
 
 189L 
 
 WOPENCE.
 
 
 A CRITICISM 
 
 OF THE 
 
 THEORY OF TEADES' UNIONS 
 
 H paper 
 
 READ BEFORE THE ECONOMIC SCIENCE SECTION OF THE 
 
 PHILOSOPHICAL SOCIETY OF GLASGOW, 
 
 12x11 NOVEMBER, 1890, 
 
 By T. S. CREE. 
 
 <?^ 
 
 Until about twenty years ago most economical authorities were 
 
 agreed in condemning trades' unions as a means of improving 
 
 the position of the working cLisses. Since that time a change 
 
 lias taken place in the opinion of the economists, and following 
 
 upon that, in the feeling of the general public towards those 
 
 ^organisations. The laws against combination have been abolished, 
 
 and many, if not most, people are now inclined to admit that 
 
 trades* unions \va\q done something for their members and their 
 
 class, and that, when conducted with moderation and fairness, 
 
 ^ they arc not hurtful to the commonwealth. Recent events, how- 
 
 ^ ever, and more particularly the developments of what is called the 
 
 \ new unionism, are now causing many to doubt the soundness of 
 
 ^ this new view, and the time seems opportune for stating the 
 
 ^ criticisms and objections of those who, like myself, have taken 
 
 V* an interest in the question during all these years, and have never 
 
 been able to accept the arguments upon Avhich the change of 
 
 V^pinion is based. 
 
 "^ When, therefore, our Secretary asked me to put on paper the 
 
 "T views which I had expressed last year in the discussion Avhich 
 
 ^ followed Mr. Llewellyn Smith's lecture on the great Dock Strike, 
 
 I readily agreed to do so. 
 
 420766
 
 2 
 
 Political economy is no^v a much more complicated study than 
 it "was in the days of Adam Smith or even of John Stuart Mill. 
 For instance, Professor Marshall's new book on the principles of 
 economics is full of refinements, of limitations and exceptions, 
 of subsidiary laws ■which were not thought of by the earlier 
 "writers; and in the explanation of these bye-ways there seems to 
 me to be some danger of the main road being occasionally lost 
 sight of. As the study becomes more difficult, there is a greater 
 probability of students accepting the arguments of their teachers 
 as authoritative, without taking the trouble to verify them and 
 think for themselves. There is, therefore, likely to be some 
 advantage in outsiders occasionally revicAving dogma and argument 
 in the light of experience, and experience is particularly valuable 
 where jjrinciples are sought to be applied, and a certain course 
 of action tested by them. As one who has had a good deal of 
 experience of the working of trades' unions, and has given the 
 subject some attention, I may be able to point out to some of 
 you who are more accomplished economists than I am, some 
 practical element which has been overlooked. 
 
 If, in tlie following remarks, I have to criticise unfavourably 
 some of the means taken by the working-classes to attain their 
 ends, I need hardly say that I do not do so in any spirit of 
 antagonism to the workmen. I have as much sympathy with 
 working people and their desire to better themselves as any 
 man can lune, and it is for that reason that I feel called upon 
 to speak out when I see them taking what I think to be wrong 
 methods, more likely to hurt than to better their condition. 
 
 I do not intend to speak of trades' unions as benefit societies ; 
 there is no fault to find with them there, though it may be doubted 
 whether there is any advantage in special or provident societies 
 being attached to each trade. Nor do I deny — what is perhaps 
 rather much insisted upon — that trades' unions have some educative 
 advantages. These advantages are common to all organisations, 
 Avhethcr sound in principle or the reverse, and in this case are more 
 than counterbalanced ]>y the loss of independent thought and action.
 
 I confine my criticism of trades' nnions to the question Avlicthcr 
 tlieir action is a legitimate and efficient means of raising wages. 
 I will try to avoid the use of any expression which can give 
 oifence to any trades-unionist, as far as that is consistent with 
 a plain statement of my opinions. 
 
 ]\Ir. Llewellyn Smith began his lecture last year with a short 
 exposition of the theory on Avhich trades' union action in general 
 is based. It is that theory which I now propose to discuss. I 
 have not been able to get a copy of ]\Ir. Llewellyn Smith's 
 paper ; but that is of little consecpience, as the argument is the 
 same as was first stated by Mr. John Stuart Mill in the year 
 18G9 in two articles which he wrote for the Fortnifjldhj Ileview 
 in the May and June numbers of that year, reviewing Mr. 
 Thornton's book on " Labour and its Claims." These articles are 
 now republished in his works (" Dissertations," No. IV.) 
 
 Mr. Mill is an acknowledged authoritv, and a master of the 
 art of clear exposition. His statement of the case is much fuller 
 than Mr. Llewellyn Smith's could be ; and as his argument was 
 adopted by Mr. Smith, and his again approved, as he told us, 
 by Professor Marshall, I will take the former as my text, and 
 will summarise it as fairly as I can. 
 
 In the main Mr. Mill accepts ]\Ir. Thornton's conclusions, though 
 he restates them in his own way. 
 
 In speaking of Mr. John Stuart Mill as a great authority, it is 
 necessary to remember tliat there were two very distinct periods in 
 his life and modes of thought. During the first period, under the 
 influence of his father, he was a clear and cool expositor of natural 
 laws. During the second period, under influences with which 
 those who have read his life will be familiar, he became much 
 more inclined to take a sentimental view of things, and some may 
 think was too ready to accept theories which seemed to offer a way 
 of escape from the stern operation of these laws. It is, therefore, 
 not so bold a step, as it might appear to be, to question the 
 conclusions of liis later writings. 
 
 Up till 1SG9 Mr. Mill had been an opponent of any attempt to
 
 raise wages by combination. In his " Princii>les " he says — " The 
 condition of the working-classes can be bettered in no other way 
 than by altering the proportion which capital bears to population 
 to their advantage, and every scheme for their benefit which does 
 not proceed on this as its foundation is, for all permanent purposes, 
 a delusion." But now he recants his former opinions. 
 
 Before proceeding to state his main argument, I may here say 
 that I intend to confine my remarks to the question, whether 
 trades' unions can obtain an advance of wages out of i-irofits. The 
 popular belief that there is a second source from which it is possible 
 for an augmentation to come — namely, prices — is not held, so far as 
 I am aware, by any economical authority, and it is, therefore, not 
 necessary for me to discuss it. 
 
 In case, however, there are anj^ of my hearers who hold that 
 view, I will quote a passage from Mr. Mill's essay, to which I have 
 referred. He says — " There cannot be a general rise of prices 
 miless there is more money expended. But the rise of wages does 
 not cause more money to be expended. It takes from the incomes 
 of the masters and adds to those of the workmen ; the former have 
 less to spend, the latter have more ; but the general sum of money 
 incomes of the community remains what it was, and it is upon that 
 sum that money pi'ices depend. There cannot be more money 
 expended upon everything when there is not more money to be 
 expended altogether. A rise in general Avages cannot, therefore, 
 be compensated to the employers generally by a general rise in 
 prices." " From the necessity of the case, the only fund out of which 
 an increase of wages can possibly be obtained by the labouring classes, 
 considered as a whole, is profits." 
 
 Mr. Mill elaborates this point, l)ut that should be sufficient here. 
 
 Mr. Mill's main argument is as follows : — 
 
 Mr. Thornton has shown, l)y an elaborate argument and by 
 several examples, that the law of supply and demand does not fix 
 l)ricc with perfect exactness, or rather that supply and demand 
 become equal, not at an exact point in price, but that it may be that 
 seveial prii.es, or a range of prices, will satisfy the requirements of
 
 that law ; that there is or may be a kind of table land within which 
 tlie law docs not operate. The typical example by which he proves 
 this is a sale of a hundredweight of fish by Dutch auction — that is, 
 the seller bidding down instead of the buyers bidding up. He 
 supposes that there may be only one buyer present willing to give 
 20s. for the lot, and no other Ijuyer svilling to give more than 18s.; 
 ])y the Dutch auction the buyer will take the ofi'er at 20s., while by 
 the English auction the bidding will stop at 18s., and the man who 
 is willing to give 20s. will get the fish at that i)rice, 18s., or a frac- 
 tion over it. Thus, he says, " In the same market, with the same 
 quantity of fish for sale, and with customers in number and every 
 other respect the same, the same lot of fish might fetch two very 
 different prices," and Mr. Mill goes on to say " the law is equally 
 and completely fulfilled b}^ either of these prices." Mr. Llewellyn 
 Smith's argument was exactly the same, his example being, ac- 
 cording to my recollection, as follows : — 
 
 A house builder has a house for sale, for which he would like to 
 get £1000, but would be willing to take £950 rather than miss a 
 sale. And there is a buyer who 'would like to buy at £950, but 
 would, if necessary, go the length of £1000. There is thus between 
 £950 and £1000 a kind of no-man's-land of £50, at any point of 
 which the demand and sup})ly are equal. "Whether the buj-er or 
 seller gets the larger share of that £50 depends upon astuteness in 
 bargaining or some accidental circumstance, and not at all on the 
 law of supply and demand, which is inoperative within these limits. 
 
 The principle of the two cases is exactly the same. 
 
 Mr. INIill goes on to saj^, " When the equation of demand and 
 supply leave the price indeterminate because there is more than one 
 price Avhicli would fulfil the law, neither buyers nor sellei's are 
 under the action of any motives derived from supply and demand 
 to give way to one another. Much will in that case depend on 
 Avhich side has the initiative of price. This is well exemplified in Mr. 
 Thornton's supposed Dutch auction. The commodity might go no 
 higher than 18s. if the ofi'ers came from the buyer's side, but 
 because they come from the seller the price reaches 20s. Xow, Mr.
 
 6 
 
 Thornton has Avell pointed out that this case, though exceptional 
 among auctions, is normal as regards the general course of trade. 
 As a general rule, the initiative of price does rest -with the dealers. 
 And then he goes on to sa}', " If it should turn out that the price 
 of labour falls within one of the excepted cases, the case Avhich the 
 laAv of equality between demand and supply docs not provide for 
 because several prices all agree in satisfying that law, we are 
 already able to see that the question between one of those prices 
 and another will be determined by causes which operate strongly 
 against the labourer and in favour of the employer. For there is 
 this difference between the labour market and the market for 
 tangible commodities, that in commodities it is the seller, but in 
 labour it is the buyer, who has the initiative in fixing the price. It 
 is the employee^ the purchaser of labour, who makes the offer of 
 wages ; the dealer, who is in this case the labourer, accepts or 
 refuses. Whatever advantage can be derived from the initiative is, 
 therefore, on the side of the employer, and in that contest of 
 endurance between buyer and seller, by which alone in the accepted 
 case the price so fixed can be modified, it is almost needless to say 
 that nothing but a close combination among the employed can give 
 them even a chance of successfully competing against the employers." 
 But Mr. Mill goes on to say, " It will be said that labour is not 
 in that barely possible excepted case. Supply and demand do 
 entirely govern in the price obtained for labour." " This theory rests 
 on what may l)e called the doctrine of the wages fund, and may be 
 found in every treatise on political economy, my own included." 
 And he then proceeds to state the Avages fund theory, with limitations 
 which make it no longer an operative law on one side. He con- 
 cludes with these remarks^ " There is no law of nature making it 
 inherently impossible for wages to rise to the point of absorbing 
 not only the funds which the employer intends to devote to 
 carrying on his business, Avliich may be called the wages fund, 
 but the whole of what ho allows for his i)rivatc expenses beyond 
 the necessaries of life. In short, there is abstractedly available 
 for the payment of wages not only the employer's capital, but
 
 the whole of what can ])ossibly be retrenched from his private 
 expenditure, and the hiw of wages on the side of demand amounts 
 only to the obvious pro})osition that the employers cannot pay away 
 in wages "what they have not got." 
 
 " But though the pojndation principle and its consequences arc in 
 no way touched l)y this, the doctrine hitherto taught by all, or 
 most economists, including myself, which denied that trade combina- 
 tions can raise Avages or Avhich limited their operation in that 
 respect to the somewhat earlier attainment of a rise which the 
 competition of the market would have produced M'ithout them, this 
 doctrine is deprived of its scientific value and must be thrown aside. 
 The power of trades' unions may, therefore, be so exercised as to 
 obtain for the labouring classes collectively both a larger share and 
 a larger positive amount of the produce of labour ; increasing, there- 
 fore, one of the two factors on which the remuneration of the 
 individual labourer depends. The other and still more important 
 fixctor, the number of sharers, remains unaffected. On the side of 
 supply the law, as laid down by economists, remains intact. The 
 more numerous the competitors for employment the lower, ccderis 
 jMrihis, will the wages be. And here comes in the necessity for 
 considering the question raised by these restrictive rules, forbidding 
 the employment of )ion-unionists, and limiting the number of 
 apprentices which many unions maintain, and which are sometimes 
 indispensable to the complete efficacy of unionism. For there is no 
 keeping up wages without limiting the number of competitors for 
 employment, and all such limitation inflicts distinct evil upon those 
 whom it excludes, upon that great mass of labouring population 
 which is outside the unions ; an evil not trifling, for if the system 
 were rigorously enforced, it would prevent unskilled labourers or 
 their children from ever rising to the condition of skilled." Mr. Mill 
 justifies this by two considerations. First, by considering the unions 
 of particular trades as a mere step towards a universal union 
 including all lal)our, and as a means of educating the elite of the 
 working class for such a future. And secondly, he says, " there is 
 another and less elevated, but not fallacious point of view, from
 
 \ 
 8 
 
 which the apparent injustice of unionism to the non-united class of 
 laboui'ers may be vindicated. This is the Malthusian point of view 
 so blindly decried as hostile and odious above all to the labouring 
 classes. The ignorant and untrained part of the poorer classes (such 
 unionists may say) ^Yill people up to the point which will keep their 
 wages at that miserable rate Avhich the low scale of their ideas and 
 habits makes endurable to them. As long as their minds remain 
 in their present state, our preventing them from competing with ns 
 for employment does them no real injury ; it only saves ourselves 
 from being brought down to their level Those whom we exclude 
 are a morally inferior class of labourers to us, their labour is worth 
 less, and their want of prudence and self restraint makes them much 
 more active in adding to the popidation. "We do them no wrong 
 by intrenching ourselves behind a l>arrier, to exclude those whose 
 competition would bring down our wages without more than 
 momentarily raising theirs, but only adding to the total number in 
 existence." I have given this passage at full length as it is an 
 important one, and I do not wish to do Mr. Mill an injustice by 
 compressing it. 
 
 "Well, that is the theory of trades' unions as stated by Mr. Mill, 
 and I am not aware of any fuller or more authoritative statement of 
 the case, but to make it as complete as I can I Avill add one or two 
 suj)plementary arguments taken from other economists. 
 
 Mr. Fawcett states that, as a matter of fact, wages do not rise 
 immediately with an improvement in trade Avithout the lielp of 
 a trades' union, and that uncombincd the men would not at first get 
 the share of the increased profits to which they arc entitled. 
 
 Professor Marshall says — "A man who employs a thousand others 
 is in himself an absolutely rigid combination to the extent of one 
 thousand units of buyers in the labour market." Ho also says — 
 " It is certain that manual labourers, as a class, are at a disadvantage 
 in bargaining." 
 
 And Professor Fleeming Jenkin says — " The legitimate action of 
 a trades' union is to enable the labourer to set a reserved price on 
 his merchandise. Each laljourer who has a reserved fund may
 
 9 
 
 bargain for himself, and concerted action is not theoretically neces- 
 sary to allow of bargaining, but practically the individual lal)ourer 
 seldom bargains ; but acting in concert with others he can and docs 
 set a reserved price on his labour, and gets precisely the advantage 
 that any other salesman would.' And along with this I will place 
 tho statement which we sec made by j)ul)lic men every day that, 
 but for combination, the masters would l>o able to crush the men to 
 the dust, and pay them nothing more than starvation wages. 
 
 Another plea for unionism is that it enables workmen to resist 
 the tyranny of capital ^ other matters than mere wages, such as 
 fines, arbitrary dismissal, oppressive and irritating regulations. 
 
 Professor Nicholson, in his article on wages in the Encydopcedia 
 Britannka, gives his opinion that trades' unions cannot raise nominal 
 wages much, but that their proper function is, by looking after the 
 interests of their members in various ways, to inlpro^■c their general 
 condition, and so raise the real rate of wages. 
 
 It is also said that, as a matter of fact, trades' unions have raised 
 wages. Finally, it is said that trades' unions can regulate the 
 hours of labour. Our leading politicians have lately been depre- 
 cating the interference of the State with the hours of adult male 
 labour, and have been telling the workmen that in their unions 
 they have a far more legitimate and as eftectual a means to that end. 
 
 That is the case for trades' unionism, as far as I know it.'*' 
 I will now proceed to enrpiire how far it is in accordance with 
 facts and reason. 
 
 Mr. Mill's first proposition may be admitted. Every business 
 man knows that the law of supply and demand does not fix the 
 terms of every particular bargain exactly. That is, indeed, a self- 
 evident proposition, so obvious that it must have been clear to the 
 earlier economists when discussing that law, and it is not, therefore, 
 
 * JIaiiy unionist workmen adopt ami act upon tlic principle of doini,' as 
 little work as possible so as to provide more employment for others, and some 
 unions insist on a fixed uniform rate of output and wages, thus reducing all 
 workers to the lowest level of cthcienoy, and preventing any development of 
 skill. But in this essay I am discussing the views of educated economists, 
 and need not do more than refer to such economical absurdities.
 
 10 
 
 a new discovery which invalidates or modifies the law. There is 
 generally such a thing as getting the worst or the best of a bargain. 
 That is true, but it is not the whole truth. It is, indeed, a very- 
 short view of the matter. The operation of the law does not finish 
 Avith the conclusion of that particular bargain, The goodness or 
 badness of the bargain, the amount by which the price exceeds or 
 falls below the imaginary point at which (in the old theory) demand 
 and supply are supposed to be equal, have each their effect in 
 stimulating or checking demand or supply for the future. In the ex- 
 ample Mr. Mill gives of fish selling either at 18s. or 20s., the demand 
 and supply being the same at both prices, it would still be the case 
 that a sale at 20s. would tend to stimulate future supply and check 
 demand, with a consequent tendency to a fall in price, while an 18s. 
 price would tend to bring out more buyers, and reduce the induce- 
 ment to go to sea. In the same way, if the house-builder got 
 £1,000 for his house, he would be pleased Avith his profit and 
 encouraged to build more houses, while buyers would be checked, 
 and if £950 were the price, more people would think of investing 
 in houses, while the builder would be discouraged, and not inclined 
 to build more. The low price Avoidd, therefore, tend ultimately to 
 a higher price, and the higher price would tend to a lower one. In 
 other words, while JNIr. Mill's argument is true as regards any 
 particular bargain, it is untrue if a larger unit of time be taken. 
 Over a number of cases the mean of the oscillations of price is an 
 exact point and not a range of prices, and this is true, of course, in 
 the Avages of labour as Avell as in other kinds of bargains. A higher 
 wage will bring out more labourers, and by reducing the employers' 
 profits, Avill make him less anxious to employ more labour, while 
 a lower wage has the reverse effect. The practical outcome of this 
 argument is that, while the terms of a particular l)argain are of 
 importance to the individual workman and cmi)loyer concerned, 
 they are not of much importance to the workmen and employers 
 as a Avhole, as there is always a compensating action going on Avhich 
 is bringing back wages to a true economical i)oint and not to 
 a range of prices.
 
 11 
 
 There is not an inch of ground which can be called a no-man's- 
 land within which the law of suit})ly and demand docs not operate. 
 Every farthing of variation on the price has its effect on future 
 supply and demand, just as every drop of water swells the sea. 
 
 The economic law works by tendency only. It apj)roachcs exacti- 
 tude over a multiplicity of cases, but not in any individual case. 
 
 This consideration alone vitiates Mr, Mill's whole argument. But 
 there arc many other fallacies in the paper. 
 
 If, as Mr. Mill says, the Dutch auction is favourable to the 
 seller, how is it that the great body of sellers, who have certainly 
 the choice of which form they will employ, generally prefer the 
 English auction ? and where did ^Ir. Mill learn that, generally 
 speaking, the initiative in naming a price is an advantage ? The 
 very reverse is the case. JNIr. ]\Iill has been misled by a single 
 example. In the case he speaks of 20s. is got by the Dutch 
 auction, while only 18s. would be got by the English. But the 
 man who Avas willing to give 20s. might think that there were no 
 others willing to give even 18s., and might speculate on that and 
 wait till the bidding fell to 1 7s., running a risk of losing the fish 
 altogether, for the chance of getting it at a lower figure. And in 
 practice this is found to be so, the highest prices that buyers are 
 Avilling to give being more readily reached by open competition of 
 buyers in the English auction. The Dutch auction is chiefly but 
 not always used in selling fish and fruit, perishable articles where 
 speed is the desideratum, and also by fishermen who need no 
 license. But in all or most other markets the English auction is 
 preferred by the sellers. In some trades both forms are 
 used. 
 
 In the wool trade, for instance, in a dull market, the seller is 
 obliged to adopt the Dutch method, and on a brisk day the English 
 plan is adopted, the buyers eagerly bidding against each other. In 
 each case the principle is the same, the avoidance of the initiative 
 being aimed at. And every business man knows that the same 
 principle runs through all transactions. No man says, " I will 
 give you £1,000 fur your house," but, "AVhat do you want for
 
 12 
 
 your house?" and the seller replies, "What will you give me 1" 
 each trying to avoid taking the initiative in naming a price. 
 
 Mr. JNIill's argument should, therefore, run thus, that the em- 
 ployers suffering under the necessity of taking the initiative are 
 at a great disadvantage, and require some artificial arrangements to 
 give them even a chance of contending successfully against the 
 labourers. His premises being the exact reverse of the fact, the 
 conclusion we arrive at is the opposite of his. The labourers are 
 under no disadvantage from not having the initiative, but the 
 reverse. 
 
 But although Mr, Mill lays great stress on this supposed dis- 
 advantage, which I have proved to be on the other side, I do 
 not attach much weight to it either way. The fact is, that in 
 a sensitive market the initiative or want of it is of very little 
 importance, and men do not spend much time in trying to avoid 
 it. I say in a sensitive market. Kow, what is a market ? At 
 page 38 of Professor Marshall's Princijjics of Economics, a market 
 is defined to be " the whole of any region in which buyers and sellers 
 are in such free intercourse with one another that the prices of the 
 same goods tend to equality easily and quickl}^" And the essential 
 point to make a sensitive market is that there should be a large 
 luuuber of transactions in the same goods. 
 
 Now, although I think I have disproved all that Mr. Mill asserts 
 up to this point, let lis suppose that Ave were to admit for the sake 
 of argument all that he contends for. That is, let us admit tliat 
 the law of suj)ply and demand docs not work with exactness;, and 
 that the inexactness tells against the labourers. The next question 
 is, will the remedy which Mr. JNIill proposes, the combination of 
 labourers, mitigate the evil] On the contrary, it will and does 
 enormously aggravate it. 
 
 Admitting the inexactness, it is at its maximum in articles where 
 there are few transactions, such as estates, houses, pictures, horses, 
 &c., and at its minimum where there is a keen and sensitive 
 market. The best examples of the latter arc perhaps the cotton 
 market and the market fur consols. Both these articles arc quoted
 
 ]3 
 
 in variiitions of a fraftioii of 1 per cent., about | to ^ per cent., 
 and no man would think of saying that he had got llie hcst or 
 worst of the bargain, a.s long as he got the market price. One- 
 eighth per cent, on £1,000, the price of the house Mr. Jjlewellyn 
 Smith spoke of, would be 25s., not an amount worth using nuich 
 fines.<c or force to gain. And the sensitiveness of the market 
 depends upon the number of individual transactions. In a well- 
 known stock in which there is nnich dealing a London joblier will 
 either buy or sell M'ith a margin of ^ per cent, either way. In a 
 less known stock Avhere there are few transactions he might want 
 3 or -i per cent, of a margin. 
 
 The more numerous the transactions are the smaller are the 
 variations in price between one transaction and another, and the 
 want of exactness of which Mv. ]\Iill complains is reduced to an 
 infinitesimal quantity. But Mr. Mill's remedy — combination among 
 labourers — destroys the labour market altogether, as it does away 
 with the number of individual transactions, and substitutes a 
 system of few transactions between a master and all his workmen 
 at a time, or between all the masters on one hand and all the men 
 on the other. It thus removes labour from the category of things 
 in the price of which there is a minimum of inexactness and puts it 
 among those Avhere the small number of transactions causes a 
 maximum of uncertainty. I should not put the labour market 
 in the category of the most sensitive. In no case would the rate 
 of wages fluctuate like the price of stocks or produce. The action 
 of the law, though delicate, is not ra})id. But at all events combina- 
 tion by reducing the number of transactions does enormously 
 increase the no-man's-land, the area of uncertainty in the labour 
 market. Mr. IMill's remedy thus greatly aggravates the evil which 
 he wishes to cure, or rather I should say combination creates an 
 evil where none existed before. It is often said that the work of 
 trades' unions is just the higgling of the market. But as we have 
 seen, a market involves a number of buyers and sellers, and a 
 number of transactions. Combination destroys this market, and in 
 doing so it destroys a gauge of the true price, delicate, sensitive,
 
 14 
 
 and self-acting, and, as Mr. Mill and Professor INIarshall admit, 
 almost perfect ; and it puts nothing in its place. By the law of 
 supply and demand the proper wage in any trade Avould be the 
 wage at which a sufficient number of labourers, acting individually, 
 could be found to do the work properly. That I think is a perfect 
 rule. Mr. Mill and Mr. Llewellyn Smith think it not far from 
 perfect, for you Avill observe that none of the economical authorities 
 share the extreme views of those who believe trades' unious, new 
 or old, are going to do great things for the working classes. 
 Professor Marshall in his address at Leeds the other day said that 
 while combination could do something in raising wages it could not 
 do much. But for this rule, which, while admitting it to be almost 
 perfect, they discard, what do they substitute"? They have nothing 
 to put in its place. Trades' unions have no principle by which to 
 fix the proper remuneration for labour. It should just be something- 
 more than it is. If the wage is 5d. an hour, it should be Gd.; if it 
 is 8d. it should be lOd. To ask an advance when they think trade 
 is good, and if necessary to enforce it by a strike is their only 
 principle. Professor Marshall, indeed, in his book, and Mr. 
 Mavor, in his paper on wages' theories, speak of the need 
 of collecting statistics, with the view of ascertaining what is the 
 proper share of labour in distribution. But I believe that would 
 be an impossible task. Any one who reads Professor JNIarshall's Book 
 (Book VII., Caps. 4, 5, G) will see how difficult it would be to say Avhat 
 the rate of wages should be in any trade or place. Nothing short 
 of omniscience, perfect honesty, perfect impartiality, and perfect 
 judgment Avould be sufficient for the task. 
 
 It may be ol)jected to the foregoing argument that the in- 
 creasingly imperfect mobilisation of labour and capital — due on 
 the one hand to the specialisation of labour, and on the other to 
 the increased expense of machinery — would tend to counteract 
 the diminution of the market range, which would be effected by 
 the giving up of combination. But two blacks do not make a 
 white; and even if it were true that the immobility complained 
 of made the market less sensitive, that would not be a reason
 
 15 
 
 for adopting or retaining an arrangement ■\vliich makes it less 
 sensitive still. And, while I adinit the increasing immobility 
 in regard to cajntal, I do not think it is the case that labour is 
 less mobile than before. For, though specialisation tends in that 
 direction, cheapness of travelling, quicker and better information, 
 better education, and, consequently, greater adaptability tend all 
 the other way. (See Marshall, \k G02). 
 
 On this point. General AN'alkcr, the great American economist, 
 says — " Eemembering that the one thing to be secured for the 
 proper distribution of wealth h i^rfed competition, in judging of any 
 act or measure, it should be enquired whether it will on the whole 
 and in the long run increase or diminish the substantial, not the 
 nominal, freedom of movement." "With that principle I thoroughly 
 agree, but I cannot go with General "Walker wdien he seems to 
 think that, in order that the law of supply and demand should 
 work })roperly, it would 1)C necessary that labour should be perfectly 
 mobile, that every labourer should be perfectly informed, perfectly 
 alive to his interests, and perfectly willing and able to go to the 
 locality where he could sell his labour to the best advantage. I 
 hold that something far short of that is all that is necessary. If 
 there are a few in each trade or each congested locality willing to 
 change or to send out their sous to other places or trades, that is all 
 that is needed to redress the balance. 
 
 No one can say that, in Scotland at least, we have not these 
 necessary conditions. 
 
 In a Scotch labourer's or workman's liimily there are often, I 
 might almost say generall}', as many occupations as there arc 
 members of the family. 
 
 But even if labour were so immobile as to be divided into a 
 number of separate little groups, the law of supply and demand 
 Avould still be applicable to each of these groups within itself. 
 And if it is complained that labour is less mobile than capital 
 (which I do not think is the case) there is all the more reason for 
 labourers doing everything to attract, and avoiding anything (as 
 trade unions) likely to drive away capital, seeing that it is thought 
 labour cannot follow.
 
 16 
 
 I agree with General Walker that the great desideratum is perfect 
 competition, and while that is not attainable our aim should be to 
 make it as nearly perfect as we can. But trades' unionism, which 
 he seems to appro^'e of as a remedy, does the very reverse. Its 
 aim is to restrict competition, and in this it is only too successful, 
 I knew a plumber who went to London lately for his wife's health. 
 He was told he would not be allowed to work till he joined the 
 union. He oft'ered to join, and was told he could not do so till he 
 had worked three months in a union shop. He asked what he was 
 to do, and was told to go home to Scotland, and had to do so. 
 That is a typical case of trades' unionism action, and is surely not 
 in the direction of perfect competition, nor of either nominal or 
 substantial freedom of movement. 
 
 It will noAV be convenient to leave Mr. ]\Iill for a little, and to 
 consider some of the other arguments for combination, returning 
 to Mr. Mill's paper later on. The answer to Mr. Fawcett's 
 complaint that wages do not rise immediately Avith an improve- 
 ment in trade is very simple. A rise or fall in wages ought not 
 to, and does not naturally, coincide in point of time with an 
 improvement or depression in trade. Trade is brisk and profits 
 good for some time before employers extend their operations, 
 build more ships, mills, iKrc. ; and it is only then that more men 
 are wanted, and wages rise naturally, and would do so without 
 the help of a imion; and a premature demand for an advance 
 has the effect of checking these extended operations, and so 
 limiting the ultimate demand for labour. ^ 
 
 On the other hand, trade is bad, and masters are making little 
 profit, and often suffering loss for some time before they curtail 
 their work; and it is only then (or when the natural increase of 
 labourers overtakes the demand) that men are found to be super- 
 abundant, and wages fall. If the men are at an aj»i)arent dis- 
 advantage when trade imjjroves, tlicy have at least as great a 
 corresi)Onding advantage when it falls off. 
 
 ilut again, as Professor ]\larshall sa3's, every employer of labour 
 is himself ecpial to a combination of workmen, and the tendency of
 
 17 
 
 to-day is towards amalgamation of large concerns, concentration of 
 trades into few hands. To meet these great combinations the men, 
 it is said, must combine, or they would be crushed. 
 
 The necessity is purely imaginary. ^Ve must remember that 
 the labour iu any trade is not a fixed quantity. It is constantly 
 varying. Men are dying, leaving the country, leaving the town, 
 giving up work for a great variety of reasons, and others taking 
 their places. Besides that, there are a numljcr of men — a kind 
 of fringe, as it were, on the borders of every trade — who will be 
 tempted to work when the wages are good, and fall away when 
 the wages are bad. 
 
 Now, suppose, to take an extreme case, that all the masters in a 
 trade were to amalgamate, so that there should be only ore 
 employer against many thousands of Avorknien, and therefore no 
 rival establishments competing for the men's labour. Suppose that 
 the one employer Avas paying 30s. a week, and he gradually finds 
 (for in a normal state of things these changes in the labour market 
 are very gradual, though, under combination, very violent) hi.s 
 foreman telling him men are getting scarce — that some are leaving, 
 and no new' men taking their places. He is obliged to raise the 
 wage to 31s. — and if that is not sufficient, to 32s., to bring up the 
 inducements to enter his service to the level of the competing 
 employments around him. On the other hand, when trade 
 generally is slack, the foreman will report a superabundance of 
 men applying at the gates, and few vacancies occurring ; and now 
 is the time for a reduction of wages. Even then there is no need 
 for the men to strike. Tliey may rest assured that if the reduction 
 is not justified by the facts, the facts will soon assert themselves. 
 The supply of men will fall off, and the rate will have to be raised 
 again. 
 
 But it is sai<l combination enables the men to put a reserve 
 price on their labour Avhich they could not otherwise do. Well, I 
 have said that the true economical wage is the wage neces- 
 sary to attract a sufficient nundier of men able to do the work 
 properly ; or, in other words, it is the real reserve price put upon
 
 18 
 
 their labour by the men in the trade who are in the strongest 
 position for bargaining — or, in case I may be thought to be begging 
 the question, it is admittedly very near that reserve price. 
 
 Let us see how that works. Suppose that there are 3,000 men 
 of a certain degree of skill wanted in a trade, and that 2,000 would 
 be forthcoming at a wage of 25s., 2200 at 26s., and 200 more 
 coming forward for each additional shilling offered, until, to secure 
 the last 200, the wage of 30s. has to be paid. Well, the wage in 
 that trade will be 30s. Thus the wages are fixed by the real 
 reserve price of the last batch of men required. These men are 
 the strongest men in the trade, economically. They may have 
 money saved, or they may have no families, or they may think 
 of emigrating, or may have some other employment to which they 
 can readily turn. From whatever cause, they are in a strong 
 position for bargaining, and they practically do the bargaining for 
 the whole trade. Any attempt to crush the weaker men by 
 reducing the wages would drive these strong men away, and the 
 wages would have to be raised to retain them. 
 
 Now, does combination give the men a stronger weapon than 
 that? I think not. Combination does not enable the men to 
 put a real reserve price on their labour, but only a fictitious or 
 temporary price fixed arbitrarily, for the purpose of bargaining. 
 Probably not a tenth of the labourers would, if it came to the 
 push, really make that the reserve price. The employer knows 
 that, and is thereby challenged to a trial of endurance, with the 
 certainty that, if he declines the challenge and submits, he Avill 
 shortly have a further demand made upon him. Therefore he 
 must show fight. Now, this method provides no test of the real 
 reserve price which any portion of the labourers put on their 
 services; and even if it did so, it would surely 1)e a most expensive 
 method, when, by simply doing nothing, the real reserve price 
 of the most independent men in the trade would shortly manifest 
 itself. And notice that these strong men of whom I speak, if they 
 cast in their lut willi the other men in a strike, exhaust their 
 resources, and arc no longer in sucli a strong position for bar-
 
 19 
 
 gaining. And farther, it is a very dangerous thing to put forward 
 a fictitious reserve price, as there is a risk of thereby losing the 
 market ahogether. Now, a real reserve price implies that you do 
 not greatly regret the loss of the employment; hut it might be a 
 very serious matter if the men in a strike were taken at their 
 word, and the work given up — and that is the cause of all the 
 bitter feeling in strikes. 
 
 Professor Nicholson, in his essay on Avages, says — "At the lime of 
 the Tiidors the decay of many towns was largely due to these 
 ' fraternities of evil,' as Bacon called the guilds. The history of 
 the craft guilds is full of instructive examples of the jtrinciples 
 governing Avages. No doubt their regulations tended to raise 
 wages above their natural rate ; but, as a natural consequence, 
 industries migrated to j)laces where the oppressive regulations did 
 not exist." In other words, their combination enabled them to fix a 
 reserve price, but it was a false one, and therefore dangerous. The 
 craft guild is the prototype of the trades' union. The latter helped 
 to drive shipbuilding from the Thames, and the lace curtain trade 
 from Nottingham, and now threatens to riiin the port of London. 
 
 But it may be said, what is sauce for the goose is sauce for the 
 gander. If it does the men no harm for masters to combine, why 
 should you object to men combining 1 Why should not all the men 
 in a trade combine, and fix the terms for the masters? Well, there 
 would be no objection to that, if it were possil)!e. The essential 
 point is to preserve a market by the midtiplicity of transactions. 
 If employers Averc all Avhat used to be called " wee corks," em- 
 ploying two or three men, if they Averc sufficiently small units to 
 make the dealings Avith them very numerous, I believe the law 
 Avould Avork perfectly Avith all the men combined and the masters- 
 uucombinod, and the masters Avould not suffer at all from their 
 isolation.* But that is not possible. Each master is too large a 
 unit for the dealings Avith the employers to be numerous enough 
 
 * In that case the combined men woukl be the employers and the masters 
 the employed. But management would be divorced from risk, which avouU 
 be a fatal arranfiement.
 
 20 
 
 to make a market. The market can only be preserved, therefore, 
 by the men remaining uncombined, and, as I have shown, they 
 Avould not sufter thereby in the slightest degree. And notice here 
 that while masters must make the general conditions of their 
 employment such as to attract men to fill the vacancies as they 
 occur, which is a perfect check upon masters' tyranny and low 
 wages, there is no corresponding check upon the t}'ranny of trades' 
 unions. Once they have the upper hand they may, and often do, 
 go on without any check, till they have ruined the industry and 
 themselves with it. 
 
 And here I may remark that it seems to be generally assumed 
 that emploj'ers have a great advantage in bargaining o^■er workmen, 
 because of their greater power of holding out. Economists write as 
 if a total or partial stoppage of work meant to an employer only a 
 little less profit at the end of a year, while to the workmen it is a 
 question of life and death for himself and his family. Now, men of 
 business know that most employers work largely with borrowed 
 capital, and that their own capital is often only a small part of the 
 total amount employed. They must pay interest on their borrowed 
 capital, and a stoppage of work through a strike, or a number of 
 machines standing idle for want of workers, often means not less 
 profit, l)ut an absolute loss, and if long continued, total ruin. If 
 not the employer's life, his business life is at stake, and there is 
 not in human experience a keener anguish to a sensitive and 
 honourable man than the fear of impending bankruptcy ; grief for 
 the loss of nearest and dearest friends, or the fear of death itself is 
 not more poignant. I consider that the labourer, who can generally 
 move from one employment to another, is at no disadvantage in 
 l)argaining with the employer, who is tied to his machines, which he 
 must keep fully employed or perish financially. But all this about 
 the power of holding out is bad economy. A labourer should not 
 go idle an hour longer than is necessary for looking out for other 
 employment, nor shouhl an employer adopt the jjolicy of holding 
 out by keeping his inachinery standing. And neitlicr of them 
 would think of doing so, but for this comlnnation theory.
 
 21 
 
 "NVc now come to tlic power of resisting tyranny in other 
 matters than mere Avages, Avhieh combination is said to give. 
 
 If business is to be carried on at all, the responsible managers 
 must have the power of dismissal, or there is an end of all discipline, 
 and we reach a state of chaos such as is at present to be seen in 
 the London docks. Mr. Mill says to extract real work from day 
 labourers without the power of dismissal is not practicable. And 
 as the greater includes the less, the right of dismissal includes the 
 right of every legal act up to that point. If anything illegal is 
 done, there arc the courts of law to appeal to, or the labourer has 
 the right of withdrawal. It may be said that a poor laboiu'er 
 cannot go to law, and that is often true. In the absence of 
 Mr. Herbert Spencer's plan of free law, a union of workers for 
 paying expenses of lawsuits would be a legitimate arrangement. 
 But the appeal should be to the law. An appeal to a trades' union 
 executive, an hiipcrium in impcr'io, is not satisfactory, and is dangerous 
 to the state. Such a triljunal throws discredit on the law, usurps 
 its functions, and is certain to 1)0 both incompetent and luijust. 
 Without attributing to him a double dose of original sin, a trades' 
 union secretary has more power than should be in the hands of 
 any man, even a Lord Chief Justice. 
 
 For minor annoyances not reaching to legal wrong,, the best 
 remedy is to do nothing. I will illustrate this from our business 
 experience. 
 
 I daresay we have all come across large wealthy houses who are 
 most overbearing and tyrannical in their dealings ^vith smaller 
 firms. AVe have all knoAvn merchants Avho treat travellers with the 
 greatest rudeness, who pay little attention to their appointments, 
 who make unfair deductions from their accounts, reject goods with- 
 out due cause, decline to pay accounts when due, and will listen to 
 no expostulation on these points, but simply refer the complainer to 
 his legal remedy. Is it ever thought necessary for the small firms 
 to combine against those men 1 Certainly not ! Their unreason- 
 able conduct soon comes to be discounted, and they have to pay 
 for it in some form or another. They never get the first ofter of
 
 22 
 
 bargains, they have to pay more for their regular purchases, or they 
 are left to unscrupulous dealers, who take the profit out of them by 
 cheating, which is not to be got by fair dealing. I have heard a very 
 shrewd and keen salesman say of such a man — " Well, that is the 
 very kind of man I want to do with. If no one else can get on 
 with him, I will make it my business to do so, and I will make 
 much more out of him than I can out of a decent fellow for Avhose 
 account Tom, Dick, and Harry are all competing." It is the same 
 with the tyrannical employer. He soon gets to be known. There 
 is no need for combination against him. He cannot get the best 
 men unless he pays more for them. He has to pay more or put up 
 with the poor workmen, the drinkers, and bad characters. 
 
 Justice is far more likely to be meted out to men and masters 
 alike by this method than under any system of trades' union 
 supervision. In some unions no choice is allowed. The first man 
 on the books must be taken, and thus good men get bad masters 
 and good masters bad men. 
 
 In regard to Professor Nicholson's idea that, Avhile trades' unions 
 can do little towards raising nominal wages, they can raise the real 
 rate of wages, he gives no reasons for that opinion, and I think it 
 is quite unwarranted. It seems to me that so far as any improve- 
 ment in the condition of workmen trenches upon profits, it is 
 subject to the law of supply and demand even more certainly than 
 a rise in nominal wages. 
 
 I)Ut it may be said, " by their fruits 3-e shall know them." 
 The trades' unions have raised Avages. Well, a gradual rise in 
 wages has taken place along Avith the existence of trades' unions; 
 but it does not follow that the one is a consequence of the other. 
 Post hoc sed non in'opter hoc. We see some occui)ations, the 
 workers in which have no union, and yet have got almost as great 
 a rise as those in the united trades. Some unionists say that 
 the rise which they have secured has scut up the wages in all 
 trades, lint their own economist, Mr. Mill, says that a rise gained 
 by restriction of immbcrs is at the expense of non-union workers. 
 If, therefore, we find these non-unionists getting a substantial rise,
 
 23 
 
 the inference is that thoy -would liave got a still greater one if there 
 had been no unions, and that, therefore, there has been a natural 
 rise of ■wages all round indopondently of the unions. Steam, rail- 
 ways, telegraphs, have enabled the accumulation of capital to outrun 
 population during the past generation, and the competition of 
 enriched capitalists for labourers' services has raised wages. 
 
 As to a limitation of the hours of labour by trades' union rules, I 
 think such limitation in the case of adult male labour most undesir- 
 able ; but if it is to be undertaken at all,-i-ftgcee~with Sir- Charles 
 • Di - lkc that it sho aM be done l)y-4he^tate. It chould bo tho -^ 
 ej^pr eaaion in -hiw^of the opinion -of the whoh) community, for~- 
 p ^n.nitm-y nnd sprinl reasons, Rud should not be attempted by each 
 trade, under a short-sighted and mistaken idea that wages will 
 thereby be raised or more men employed."' 
 
 I will now return to Mr. Mill's argument on the wages fund 
 theory, but before doing so I will notice a remark made by Mr. 
 Llewellyn Smith which was not in his paper, but was received 
 with great approval by some members of this section. He said 
 that wages are not paid out of capital at all. General "Walker and 
 some other modern economists hold that view, but I think they 
 have quite failed to prove their case, and there is at present a 
 decided reaction against them. The doctrine is well, and, I think, 
 conclusively controverted by ]\Ir. Macvane in the American Quarterly 
 Journal of Economics, Avhich is to be found in the library of this 
 Society. 
 
 Professor Nicholson says that wages may be said to be paid 
 partly out of capital and partly out of produce. And Professor 
 Marshall says the dispute about the wages fund theory is very 
 much a question of words. 
 
 If wages are not paid out of capital, but out of produce, Avherc 
 do they come from when there is nc produce 1 Suppose a capitalist 
 
 * "If reduction of hours results iu dccreascil production wages will fall, 
 other things being equal. If reduction of hours results in maintenance of 
 production per man there will be no additional employment, other tilings 
 being equal." — Mavor.
 
 24 
 
 should sink a mine for coal or gold, and the whole produce should 
 
 be the knowledge that there is no coal or gold there, can the men's 
 wages be paid out of that knowledge ? In the whaling industry the 
 men are fed and paid monthly wages, and in addition so much per 
 ton of oil, whalebone, and sealskins. If the ship should return 
 clean, that part of the men's pay depending on the produce is saved, 
 but the monthly Avages and keep are paid from capital and never 
 repaid to it. And where there is produce what do the labourers live 
 upon during the weeks or months or even years' which pass in some 
 businesses before there is any return 1 If a man should sit down to 
 write a book on politicak economy which will take him two or three 
 years, and has no ai>pointments, what does he live on in the mean- 
 time 1 He must live on his capital. If he has no capital he cannot 
 undertake the work, unless some other man advances him capital, 
 or hires him to do the work, in wdiich case the second party pays 
 his wages out of capital. It may be for a week or it may be for a 
 year, but every employer makes arrangements to lay aside part of 
 his capital to pay wages till his returns come in. But whether 
 wages are paid out of capital or not, the extent of the manufactur- 
 ing or industrial operations which any employer can engage in is 
 determined by the amount of the capital Avhich he has or can 
 command, and is willing to employ in that way. 
 
 The correctness of the wages fund theory is not at all necessary 
 for my position. If the rate of wages is determined even approxi- 
 mately by supply and demand that is quite sufficient for the 
 argument. And no economical authority denies that they are 
 so determined within a certain range. 
 
 Mr. Mill's objection to the wages fund theory is not of this 
 absolute kind. lie says that there is no definite part of capital 
 which can be properly so called, but that all an employer's floating 
 capital, even that Avhich he designed fur himself and his famil}', is 
 available for the payment of wages if necessary, and he goes on to 
 say the limit of the amount the employer may Ijo forced to pay in 
 wages is not the inexoral)le limits of the wages fund, but how much 
 would ruin lain or force him to aliandon the business.
 
 2a 
 
 Mr. Mill here again takes a very short vicAV, Fur, while it is 
 true that a capitalist employer may be forced to pay an amount in 
 wages Avhich Avill leave him only a bare subsistence, it is certain 
 that other capitalists will not engage in business with such a 
 prospect before them. No man would deny himself to save, and 
 then endure the anxieties of business, if he is only thereby to get 
 a bare subsistence, which he can get as a labourer. Men will save 
 money and go into business just in proportion to the inducement to 
 do so, to the prospect of the profit to be gained. Therefore, 
 although isolated employers may have to pay more than they 
 intended as their Avages fund, that fund cannot be indefinitely 
 increased from profits. 
 
 Mr. Mill's correction of the wages fund thcor}', Avhile true of 
 individual cases, is again, on the whole, quite the reverse of the 
 truth, and his argument Ixxsed on it quite unsound. The theory 
 he previously taught was the true one. An increase in wages 
 reduces profits, and reduces the inducement to save and extend 
 business, and this again tends to a reduction of wages. 
 
 Professor Marshall says, page 298 — "A fall in the rate of 
 interest docs, in general, tend to check the accumulation of 
 wealth;" at page 299 he says — "A rise in the rate of interest 
 increases the desire to save;" and at page G16 — "The rate of 
 interest cannot fall below that limit at which it offers only just 
 sufficient inducement to those who are on the margin of doubt 
 whether they will save or not." The amount of saving will depend 
 upon the inducenient given — i.e., on the rate of profits interest. 
 
 Thus, in direct contradiction to Mr. Mill, there is a law of nature 
 making it inherently impossible for wages to rise to the point of 
 absorbing the fund which the employers, on the u-JioIc, intend to 
 devote to the carrying on of their business, and also of what they 
 allow for their private expenses as well, beyond the mere neces- 
 saries of life. Ricardo says the employer's motive for accumulation 
 will diminish with every diminution of profit, and will cease 
 altogether when their profits are so low as not to afford them an 
 adequate compensation for their trouble anil risk. And as the
 
 2G 
 
 increase or, in the face of an increasing population, the keeping up 
 of wages depends upon a proportionate increase of capital and 
 employment of it in business, it follow^s that, if wages Avere so 
 high as to absorb all but a bare subsistence to the capitalist, they 
 must rapidly fall with every addition to the population. 
 
 Well, let us see how far we have got. 
 
 Mr. IMill's theory of the inexactness of the operation of the law 
 of supply and demand is wrong. 
 
 His theory of the advantage of the initiative is the reverse of 
 the truth. 
 
 His remedy for the supposed inexactness — combination — in- 
 creases it. 
 
 A rise in wages should not necessarily coincide Avith an improve- 
 ment in trade. 
 
 Combination does not increase the men's power of bargaining, 
 nor is it a proper or effective shield from tyranny. 
 
 It cannot be proved that trades' unions have raised wages. 
 
 If men's w oi'kiiig huuib aie-ttrbirreslIiLLiid it'uhould be b)' Lhe-Stetc. 
 
 Mr. Mill's objection to the wages fund theory is without foundation. 
 
 I have up to this time l)cen speaking of open unions. I do not 
 deny that, by restricting their numbers, some trades b.ave managed 
 to secure high wages ; and we will now consider Mr. Mill's justifica- 
 tion of the restriction of the number of labourers in a trade, as 
 practised by trades' unions. He admits that all that he has 
 maintained will be of no avail in keeping up Avages unless the 
 number of competitors for employment can be limited. The rise 
 in wages, he says, must be at the expense either of wages in other 
 departments or of profits, and in general both Avill contribute. I 
 have shown, I thiidv, that profits cannot be made to bear a share of 
 it Avithout re-acting upon A\-ages, so that in reality the rise of Avages 
 in one department Avill be solely at the expense of Avages in other 
 departments. Even Mr. Mill admits that it will be partly so ; and 
 he justifies that by the i)lea that unions of ])articular trades are 
 nece.-sary steps towards a luiiversal union including all labour. 
 And this is an argument Avhich has 1)een adopted by many
 
 27 
 
 economists. But I think it will not stand a moment's examina- 
 tion. "What is aimed at is a limitation of the amount of labour 
 in each trade. It is evident that, for such limitation, a union of 
 all labour is exactly the same as no union at all, while a union not 
 of all labour, but of all trades, will create an enormous army of 
 paujjers. Let us suppose that the union officials should consider 
 the excess of labour in an o])en trade to be 10 per cent, of the 
 whole, Avhich is a moderate estimate, from their point of view. 
 The surplus men from one trade could not be absorbed by other 
 trades, for these are also organised and occupied in getting rid of 
 their own surplus. 
 
 Suj)pose there are thirty trades in the country with an average of 
 200,000 men in each— 0,000,000 in all— and 2,000,000 unskilled 
 labourers. A restriction of numbers by 10 per cent, in all these 
 trades would add GOO, 000 men to the ranks of unskilled labourers. 
 But unskilled labour is also, we are told, to he organised and 
 limited in the future, and a beginning has been made in that 
 direction with the dock labourers. Unskilled labour, then, will 
 refuse the surplus G00,000 men from other trades, and will add its 
 own surplus 200,000 to the raidvs of the unemployed, making in 
 all 800,000. Those 800,000 men with their families— say 3,000,000 
 of peoj^le — would be paupers to be- kept at the public expense, of 
 which, of course, the employed men would have to bear their share. 
 Restrictive union is then a weapon directed against a part of the 
 labouring class,- and cannot be reconciled with their interests either 
 present or future. 
 
 So much for Mr. Mill's first apology for what he calls "an 
 oligarchy of manual labourers indirectly supported by a tax levied 
 on the democracy." 
 
 His second plea is, as I quoted, that the Idacklegs or knobstick?, 
 the men who are excluded, are a morally inferior class, putting no 
 restraint on their additions to the population. '• "We do them no 
 wrong," he makes his labour oligarchs sa}', " by intrenching our- 
 selves behind a barrier to exclude those whose competition would 
 bring down our wages without more than momentarily raising
 
 28 
 
 theirs, but only adding to the total number in existence." Mr. Mill 
 calls this the Malthusian theory, which I think is a libel on Mr. 
 Malthus. Mr. Malthus advocated self-restraint. He never pro- 
 posed the destruction of the weak by the strong, in order that the 
 latter should have more to divide. 
 
 We have heard of strong men on board a castaway ship seizing 
 all the food and leaving the weaker members of the crew to starve, 
 but I never before heard such conduct approved of because they 
 were morally superior. 
 
 The right to labour in any system of morality that I know 
 of is indefeasible, and the right to give employment equally so, 
 but the unionist says to men, " you shall not work," and to masters, 
 " you shall not be allowed to give work." Slavery itself was more 
 humane. And who is to be the judge of the moral superiority of the 
 unionist. The unionists themselves apparently. I do not deny 
 that there are many able and e^'en disinterested men in their ranks, 
 but are the mass of them so much superior to non-iuiionists even in 
 the matter of reckless adding to the population as to entitle them 
 to take this high ground. Is the riveter more moral than the light 
 porter or the clerk? Does he drink less, smoke less, has he fewer 
 children '? If he were inclined to save he might easily become a 
 capitalist himself without robbing the poor blackleg. According to 
 Mr. Mill, the intelligent artisan has no duties to liis employer, nor 
 any to his non-unionist neighbour ; all his moral obligations arc 
 towards himself and his fellow-unionists. I surely need say no 
 more to i)rovc that restrictive unionism is quite indefensible from a 
 moral point of view. 
 
 "We have now seen on what insufhcicnt grounds the belief that 
 trades' unions can raise general wages rests. Let us next ask what 
 is the cost to the community and workmen in particular? In 
 the first i)lacc, there is the disturbance to trade, not only from 
 stoppage of supplies, but also from violent fluctuations in prices. 
 When miners' wages are jumping up and down 40 per cent. 
 to 50 per cent, in a few months, and the coal sujiply restricted,
 
 29 
 
 and prices varying in the same way, every industr}' is injuriously 
 affected.* 
 
 Then there is the weekly or monthly contribution to the society 
 funds. And next there is the loss of wages during strikes, which 
 often swallows up all the apparent gain. But more important even 
 than those is the diminished demand for labour. Every strike, or 
 threat of a strike ; every letter from a trades' union secretary ; 
 everything that makes the position of an employer less profitable, 
 less agreeable, less honourable, has its effect in checking the demand 
 for labour. Loss by strikes must now be an element in the 
 calculations of every intending employer, and may, and often does, 
 turn the scale in deciding him not to go into business. The 
 competition of capitalists for labour, and not combination, is the 
 labourers true strength. Their policy should be to make the 
 position of employers as pleasant and profitable as possible, and to 
 
 ■^In New Zealand and Australia, where tliey carry things to tlieir logical con- 
 clusions more quickly than we do here, the boycott ordered by the trades' unions 
 at the present time is in as full force and as far reaching as it is in Tipperary, 
 One case in New Zealand is worth nciticc. 
 
 Messrs. Whitcombe & Tombs, Christchurch, having had a dispute witli the 
 Typographical Society, were boj-cottcd. The Port of Lyttleton was ordered not 
 to have any dealings with the offending firm, and the officials not complying 
 the Port was boycotted. Next, the Union Steamship Co. was boycotted for 
 sailing to Lyttleton, and all its men withdrawn ; then the railway followed, 
 and then the miners were withdrawn from the pits which supplied the steamers, 
 and even the pumping operations tiireateued with suspension, to the permanent 
 ruin of the works, and all merchants and shopkeepers dealing with any of the 
 boycotted concerns were boycotted also. Mr Miller, the Secretary of the 
 ]\Iaritime Council, said that "the first man made to suffer by dismissal or 
 suspension will be the signal for everything to stop from Auckland to the Bluff." 
 Thus, in the good time coming, wliicli trades' unionists promise us, every petty 
 quarrel between a tradesman and his men, or even with one man, is to be a 
 imiversal quarrel between all capital and all labour, and unless tlie former 
 submit at once, the whole %^ork of the country is to cease. Surely this is the 
 rcduclio ad absurdum of trades' unionism ; but yet it is the logical and in- 
 evitable outcome of the principle of combination. Champion, Burns, and 
 Hyndman see this, and are apparently deliberately carrying it to its absurd 
 conclusion, so that it may discredit the principle of freedom of action, and 
 may cause people to turn to socialism for relief.
 
 30 
 
 coax them into trade, just as a shopkeeper tries to entice customers 
 into his shop. Once in trade, nothing covdd prevent them com- 
 peting with each other for the labourers services. Instead of that 
 the policy they adopt is to harass the employers as much as possible, 
 "■pour enconrager hs autres." A parallel to their behaviour would 
 be that of a shopkeeper who should keep a dog to worry those 
 customers M'ho decline to pay his prices. He might congratulate 
 himself on his success with those who are in his shop, as the men 
 often do at the end of a strike ; l)ut he would not thereby extend 
 or maintain his connection, nor do they. I have no doubt that 
 many hundreds of millions of money, which might have l)ecn 
 profitably employed at home, have been driven abroad by the fear 
 of trades' unions. Profits have to be increased, and are increased, 
 to pay for all these risks and annoyances, and wages arc trenched 
 upon to that extent. In addition to that, employers are less able to 
 give employment, their capital having been partly lost. 
 
 Then the grinding tyranny of the unions over the men is 
 another feature of combination. Mr. Fred. Harrison, in a magazine 
 article, glorying in the success of the dock strike, said it would 
 have collapsed in a fortnight " but for the pickets." That proves 
 that he believes that a large mimber, perhaps a minority, perhaps 
 even a large majority, of the men ^vished to work but dared not. 
 Every man was watched by the pickets, and knew that, if he dared 
 to act for himself, he Avould be a marked man, and life would 
 be made a Inuxlen to him. Mr. Llewellyn Smith denied this, 
 and said that pickets were necessary to meet strangers at railway 
 stations and explain matters to them. AVell, I should think 500 
 men would be amj)le for that work. But there Avere 11,000 on 
 picket duty daily. AVhat were the odd 10,r)00 doing? The boasted 
 order of the great dock strike was like that of the coiKpierur who 
 made a wilderness and called it peace. 
 
 Again, combination fosters class prejudice and hatred. It makes 
 the bargaining no longer a contest between capital and lal>our, two 
 impersonal forces, which, if left to themselves, will find their own 
 level, but often a fiercely passionate personal struggle between
 
 31 
 
 capitalists and labourers. Professor Marshall says (p. 409) — 
 "Anger and vanity, jealousy and offended pride, arc at least an 
 common causes of strikes and lockouts as the desire for procuring 
 gain." And this is the unionists' ideal method of making a bargain ! 
 In such a contest, vheii prudence is thrown to the avIikIs, the 
 longest purse is sure to have the best of it. 
 
 I sat one night last winter at a public meeting next a re-pectablc 
 working man, who, each time tliat a reference was made to land- 
 lords and capitalists, kept saying to himself in a solemn tone of 
 deep conviction, " Hell will be tlieir portion." Mr. Gray, the 
 manager of Silvcrtown rubber works, who is known to many of us 
 in Glasgow as a singularly large-minded and warm-hearted man, 
 ■was, during the strike of the Company's Avorkers last year, each day 
 held up to public odium in the columns of the London newspapers 
 as a low, mean, sneaking rufhan, a nuirderer of women and cliildren, 
 and the men Avere quoted as hoping that they Avould l>e stokers in 
 hell that they might give it to him hot. 
 
 Mr. LlcAvcllyn Smith made light of this, and said the men's 
 language Avas strong in proportion to the poverty of their vocabu- 
 lary. They seemed to me to have a very copious Aocalnilary. But 
 I do not think ^Ir. Smith or any of us Avould like to pass through 
 such an ordeal, and I ask you if these feelings are the natural ones 
 betAveen l)uyer and seller, or such as Avould exist betAveen master 
 and man, Avithout combination. Under combination the most 
 benevolent em})Ioyer is liable to have such an experience any da}-. 
 
 It has also l)een said that this view too exclusivel}' regards labour 
 as a commodity of the same nature as other commodities. A\'cll, 
 no doubt there is a distinction in the fact that the seller, the 
 labourer, cannot be separated from his labour, from the commodity 
 which he sells. But that seems to me to be a distinction Avithout a 
 difference. I haA'C never learned how tliat distinction makes it 
 more necessary for the sellers of labour to combine than other 
 sellers, or makes their commodity less subject to the law of supply 
 and demand. Labour rescmldes in some respects jierishable com- 
 modities, and tlic holding of it back from the market in strikes is 
 very bad economy.
 
 32 
 
 "VW41, I liuvc tried to show tliat Tiy open comlnuation the 
 men cannot get any advantage, and that when some of them 
 do so by restrictive means it is at the expense of the rest of 
 the working chxss. Even if they got all that the economists 
 who favour combination allege — i.e., a chance of obtaining a 
 slightly larger share of a very narrow margin of price — I ask 
 Avould the game be worth the candle, at the cost of great disturb- 
 ance of trade, driving away of capital, cost of organisation, loss of 
 wages in strikes, tyranny over men, and class jealousy and hatred. 
 I think not. 
 
 XoAv, I Avould ask, not the economists, but those who believe 
 in labour receiving a much larger share of the produce of 
 industry, where is it to come from 1 Professor Marshall 
 estimates the average rate of interest at present at 3 per 
 cent., and that would seem to be high enough, as the Chancellor 
 of the Exchec[uor can get as much money as he likes at 2|- per 
 cent. "Well, if the increase of capital just keeps pace with the increase 
 of population at that rate, by how much can the demands of labour 
 decrease that rate Avithout the increase of capital being checked 
 and falling below the needs of an increasing population. You may 
 say our great manufacturers earn much more than 3 per cent. >So 
 many of them do, but if you allow for wages of management and 
 foi' risk of loss and of failure, it is probable that they do not earn 
 much more on the average. For every one of the great successful 
 firms Avhicli bulk largely in the public eye, there are thousands 
 which have gone to the wall. There is not a well-to-do man among 
 us who has not many relatives and friends who have lost all they 
 had in business. There is a large joint stock Coal Company, the 
 20 per cent, dividend of which was often quoted last year as a 
 reason for a rise in miners' wages. But that Company paid a 
 dividend then for the first time in the fourteen years of its existence 
 and had written ofl' as loss £100,000 of its capital, and after all 
 the 20 per cent, was only on the reduced capital of .£3 instead of 
 £10. And the average earning of the Company was, therefore, 
 instead of 20 per cent., less than one-half per cent, per aniuim.
 
 83 
 
 Professor Marshall says (page 658) — " The innnher of those who 
 succeed in husiness is but a small percentage of the whole ; and in 
 their hands are concentrated the fortunes of others several times as 
 numerous as themselves, who have made savings of their own or 
 who have inherited the savings of others and lost them all, together 
 with the fruits of their own efforts in unsuccessful business. 
 
 " In order, therefore, to find the average {n'ofits of a trade, we must 
 not divide the aggregate profits liy the number of those who are 
 reaping them, nor even by that number added to the number who 
 have failed, but from the aggregate profits of the successful, we 
 must subtract the aggregate losses of those who have failed, and 
 perhaps disappeared from the trade ; and wc must then divide the 
 remainder by the sum of the numbers of those who have succeeded 
 and those who have failed. It is probable that the true gross 
 earnings of management — that is, the excess of profits over interest 
 — is not on the average more than a half, and in some risky trades 
 not more than a tenth part of what it appears to be to persons 
 who form their estimate of the profitableness of a trade by obser- 
 vation only of those who have secured its prizes." 
 
 Now, when we remember that in all these unsuccessful ventures 
 the men are getting their steady wages all the time at a rate which 
 leaves for profits, with minimum risk, not much more than 3 per 
 cent.,* it seems to me that there is not much room for a great 
 advance out of profits, and also that the men are much better off" 
 with a fixed weekly wage than they could be under any system of 
 profit and loss sharing. 
 
 Of course all that I have said about men's trades' unions applies 
 also to trades' unions for women, with this in addition — 
 
 It is in the highest degree desirable that women should be able 
 
 * It is difficult to estimate the earnings of mana!:;ement, or profits beyond 
 interest. In some businesses it is very large, but on the average, counting 
 failures, very small. The experience of many men, wlio have invested in shares 
 of joint-stock companies, is that they would have been richer if they had never 
 done so but lent their money at a low rate of interest ; and if you attack the 
 profits of the more successful firms you reduce the average, ami the rate of 
 interest also. 
 
 3
 
 34- 
 
 to work for themselves, and not have to look to marriage as their 
 sole way of escape from dependence. Therefore, the extension of 
 the sphere of women's labour Avhich has taken place of late years is 
 most gratifying. This movement has been greatly helped, though 
 not intentionally,''^ by the men's unions. Masters have turned, in 
 weariness at the demands of the men, to female labour. There 
 is only one thing that is likely to check or retard the still further 
 development of women's industry, and that is the institution of 
 women's trades' unions. That they are unnecessary is shown by 
 the fact that no class in the community has secured a greater 
 improvement in its condition than that of domestic servants, and that 
 without any concerted action. The source from which improvement 
 has been coming, and from which alone it can come — namely, the 
 greater demand for female labour — will be weakened by the union. 
 Masters will not see the advantage of exchanging the yoke of a 
 male for that of a female union secretary. And if the women's 
 league gets the domestic servants to combine, that will cause many 
 people to give up housekeeping, and adopt the American plan of 
 living in hotels and boarding-houses, and so reduce the demand for 
 female servants. 
 
 I should have liked to discuss the principle of the sliding scale, 
 and also of Boards of Conciliation and Arbitration, but have not left 
 myself time. I will, however, say a few words. And first in regard 
 to the sliding scale, by which the price, say of coal, and miners' 
 wages are tied together. This, in my opinion, is a most clumsy 
 and unscientific contrivance, and sure to break down. There is no 
 natural immediate connection between the price of coal and miners' 
 wages. Suppose a large new convenient coalfield were to be dis- 
 covered and worked. That would increase the suj^ply of coal and 
 lower the price, wliile at the same time it would increase the 
 demand for men and raise their wages. The price of coal and 
 
 * An employer in Glasgow was waited on not long ago by the officials of the 
 union of his trade and told he had too many women in his shop and must 
 dismiss some of them, and this altliough the work they were doing was work 
 done admittedly everywhere by women.
 
 36 
 
 the rate of wages cannot be tied together any more than the 
 price of coal and the price of pit-props, and the same principle holds' 
 good in all other industries. 
 
 Then, as to arbitration. Professor Marshall says in his speech 
 at Leeds — " The first point which Courts of Conciliation and 
 Arbitration have to consider is, what are the rates of wages on 
 the one hand, and profits on the other, which are required to 
 call forth normal supplies of labour and capital; and only when 
 that has been done can an enquiry properly be made as to the 
 shares in which the two should divide between them the piece 
 of good or ill fortune which has come to the trade." 
 
 Now, where, I ask, are the data for the first pai't of the inquiry 
 to be found? A rough approximation might be got from the 
 rate of labour in other occupations — that is, the market rate which 
 at present partially rules price ; but, as combination goes on, and 
 more and more destroys the market, even this rude method is 
 closed. To suppose that such an inquiry could be conducted to 
 any satisfactory issue is to beg the whole question. In my opinion 
 it passes the wit of man. And why should the piece of good or ill 
 fortune, instead of being roughly divided in this arbitrary ftishion, 
 not be left to take its natural course. It would fall first to capital, 
 and then by an increased or diminished demand for labour, the 
 latter would eventually, slowly but certainly, get or bear its share. 
 In addition to this, arbitration and the sliding scale have this fatal 
 fault, that they are both one-sided and unfair to the masters. If 
 the price fixed is too high, the masters are bound to adhere to 
 it; if too low, the men are not bound for a day. Even if their 
 leaders observe the agreement, a lumiber of the men will simply 
 move away to other occupations, till the rate has to be raised to 
 retain them. 
 
 What is the conclusion of the whole matter ? From my point of 
 view, it is that, in fixing prices or wages, laissez faire is the true 
 economical policy. 
 
 If that was true in the simpler times of the older economists, 
 if it Avas then a mistake to attempt to fix prices arbitrarily, either
 
 36 
 
 by law or combination, much more is it the case now, when, to 
 quote Mr. Mavor on the growing complexity of economical con- 
 ditions, " though fundamental motives remain the same, they 
 assume diversified forms, and enter into relations increasingly 
 hard to disentangle." 
 
 Bargaining in wholesale by combination is a rough and bar- 
 barous process, combining a maximum of uncertainty with a 
 maximum of loss by friction. A sensitive market — the result of 
 a multiplicity of transactions — is the nearest possible approach to 
 an ideal method of arriving at the true economic price of labour 
 or anything else. 
 
 To quote our townsman, Mr. James Stirling of Cordale, who has 
 written an admirable essay on this subject — " Free competition, by 
 the unconscious moulding of human desires, brings about the same 
 adjustment of industrial interests, as would be enjoined by morality 
 on the conscious will." 
 
 'SOth January, 1891. 
 
 If the foregoing arguments are sound, no strike ever was or could 
 be justifiable, no trades' union necessarv or useful. Even the old 
 unionism, moderately and carefully employed as it sometimes was 
 by men like Mr. Broadhurst, has done much harm. But it cannot 
 be kcj)t within moderate Ixnuids. It is gradually developing into 
 what is called the new unionism. In this system the labourers in 
 every trade are to join hands to help each other in coercing the 
 capitalists in each ti-ade separately. In every trade dispute the 
 whole community is to be punished by a stoppage of all work till 
 the decrees of the union leaders are obeyed in the smallest matters. 
 In the railway strike which is now drawing to a close, an attempt 
 was made to get all the other carrying trades to join in starving 
 tlie community, so that they might force the railway managers to 
 give way. The attempt failed, but in the moment of defeat the 
 strike leaders tell us that they will be better organised and will
 
 37 
 
 win next time. And as I write, I read in this day's papers that a 
 great strike of all the shipping and carrying trades in England is 
 threatened involving the labour of a million men. 
 
 Apart from the fact that this new unionism will hurt the 
 labourers by driving away capital, it surely needs no argument to 
 prove that we are threatened with an intolerable tyranny. 
 
 The question arises, how can this be met? Evidently not by 
 the law, as political power is now chietiy in the hands of the 
 working classes, and they, generally speaking, approve of union 
 methods. And even were it otherwise, it is })robable that laws 
 against combinations could not be re-enacted without an undue 
 interference with liberty. (Something, indeed, might be done, and, 
 if there is any sense of fairness in our lawgivers, will be done to 
 check the intimidation and outrage carried on under the name of 
 picketing. But we must not exj^ect much help from the law. The 
 late examples of Australia and New Zealand, however, show us that 
 the new upionism, if boldly met, can be successfully resisted. If 
 the community * should realise its danger in time and make up its 
 mind to discountenance and resist all combinations and strikes, to 
 insist that the fixing of wages shall be left to the free competition 
 of masters for men and men for employment, or even only to put 
 down intimidation, all may yet be well. But if not, if the new 
 unionism is allowed to get the upper hand, then it will not be our 
 industry and commerce only that will be endangered, but our whole 
 civilisation. Civilisations have before now suffered shipwreck, and, 
 in ray opinion, it is neither impossible nor im])robable that trades- 
 unionism may be the rock on which ours shall go to pieces. 
 
 * Other than the labourers. 
 
 420766
 
 38 
 
 APPENDIX 
 
 In reply to the criticisms of a correspondent on the first of his 
 two Magazine articles, Mr. Mill wrote the following letter : — 
 
 Avignon, May \lth, 1869. 
 
 Dear Sir, 
 
 I thank you for your letter, as I am always glad to 
 have my opinions and arguments subjected to the criticism of any 
 one who has studied the subject. It appears to rae, however, that 
 your remarks do not touch the scientific exactness of the pro- 
 positions laid down in my article in the Fortnightlji Eevieiv, but only 
 the practical importance of the cases to which they are applicable. 
 Now, though I am far from agreeing with you as to this, I have not 
 discussed it in the article. My object, on this occasion, was to 
 show that the door is not shut on the discussion of the subject by 
 an insuperable law of nature. 
 
 It is one thing to say that labourers, by com])ination, cannot raise 
 wages (which is the doctrine of many political economists), and 
 another to say that it is not for their interest to force up wages so 
 high as to reduce profits below what is a sufficient inducement to 
 saving and to the increase of capital. 
 
 I have written a second article on the subject, which will be 
 j)rinted in the next number of the Fortnightly, and which, though it 
 will not satisfy you on all points, will, I think, show you that 1 do 
 not disregard either the moral or the prudential obligations of 
 trades' unions. 
 
 I am, Dear Sik, 
 
 Yours very faithfully, 
 
 J. S. MILL. 
 R. S. Cree, Esq.
 
 39 
 
 In regard to the above it may be remarked that the only reason 
 why it is not for the interest of the labourers to force up wages by 
 combination is that, on the whole, and in the long run, they cannot 
 thereby raise wages, ])ut the reverse. It is not denied that they 
 can sometimes do so temporarily, but they suffer for it in the long 
 run. 
 
 Mr. Mill's distinction, therefore, is one without a real difference. 
 
 We have seen and discussed the observations promised here on 
 the moral and prudential a>^pects of the question.
 
 I 

 
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