Finance Capital, Hilferding 1910


The conflict over the labour contract

The conflict over the labour contract, as is well known, has passed through three stages. In the first stage, the individual manufacturer is opposed by the individual worker. In the second, the individual manufacturer is engaged in conflict with an organization of workers, and in the third, organizations of workers are locked in conflict with employers' organizations.

The function of a trade union is to eliminate competition among workers on the labour market. It tries to achieve a monopoly of the supply of the commodity 'labour power'. Thus it constitutes, in a sense, a quota cartel ; or rather, since it is only a matter here, in relation to the capitalists, of buying and selling this commodity, a 'ring'. But every quota cartel or 'ring' suffers from the weakness that it does not control production, and so cannot regulate the extent of the supply. This weakness is inescapable in the case of a trade union. The production of labour power almost always defies regulation. Only when it is a question of skilled labour power can a workers' organization succeed in curtailing production by taking appropriate measures. A strong trade union of skilled workers, by limiting the number of apprentices, extending the period of apprenticeship, and prohibiting the employment of any but skilled workers, as recognized by the union itself, can restrict the production of such labour power and achieve some kind of monopoly position. A good example is provided by the printing unions which have made it a rule, for instance, that only highly qualified 'skilled' compositors can operate type-setting machines, even though less skilled workers with some technical training would be adequate for the job. Under favourable circumstances a strong trade union may even succeed in reversing the relationship and get a certain type of work recognized as 'skilled', and therefore entitled to a high rate of pay, by recognizing as full-fledged workers only those who have spent a considerable time in the trade. That is the practice, for example, in the English textile industry, whose monopoly position on the world market, which it still retains for some products, favoured the formation of a strong trade union and also made it easier for entrepreneurs to grant concessions since their monopoly position allowed them to pass on the cost of higher wages to consumers.

The effort to control the labour market also gives rise to a tendency to prevent competition from foreign workers by increasing the difficulties of immigration, particularly when it is a question of workers who are accustomed to low levels of living and are difficult to organize. Bans on immigration are intended to perform the same service for the trade union as does the protective tariff for the cartel.[1]

But if the trade union, as an organization of living human beings, is to attain its goal, it can do so only through the will of its members. The establishment of a monopoly presupposes that the workers will sell their labour power only through the union and only on the terms set by the union. The price of labour power has to be removed from the play of the forces of supply and demand. This means, however, that the suppliers, that is to say, the unemployed, must not become active on the labour market at prices other than those which have been set. The price is given, fixed by the will of the trade union, and the supply must adjust itself to that price rather than the price to supply and demand. The trade union thus becomes a form of co-operation between the employed and the unemployed. The unemployed must be kept from entering the labour market, in the same way as a cartel protects the market against a glut by storing products whenever production exceeds the volume of supply which suits the purpose of the cartel. The storage costs correspond to the various forms of assistance given by the unions to the unemployed, but the latter are much more important because they are the only means of restricting the supply, whereas a cartel also disposes of the far more effective means of curtailing production. On the other hand, the aim of keeping the unemployed off the labour market can be achieved by various forms of moral pressure, such as outlawing scabs, explaining how class interests are damaged, and in short by an education in trade unionism which welds the working class into a fighting unit.

The problem for the trade union, as for every other monopoly, is to control the market as fully as possible. But here the trade union encounters formidable obstacles. The transient personal interests of the individual worker often clash with the interests of the class as a whole. The organization requires certain sacrifices: dues, expenditure of time, readiness to engage in struggle. Anyone who remains outside the union earns the good will of his employer and avoids conflicts, unemployment, or demotion. The stronger the trade unions become the more the entrepreneur strives to keep his workers out of them. He substitutes his own social security arrangements for those of the trade union, and deliberately exploits the conflict between personal and class interests.

The trade union struggle is a struggle over the labour contract. The worker reproduces the value of c and creates a new value consisting of (v + s), wages and surplus value. The absolute magnitude of (v + s) depends upon the length of the working day. The shorter the working day the smaller is (v + s); and if v remains the same, the smaller is s. If working time remains the same s increases when v declines and vice versa. But this effect is offset by a change in the intensity of labour; with rising wages and a shortening of working time, the intensity of labour grows. The development of piece work and bonus payment systems represents an attempt to increase the intensity of labour to a maximum at a given level of wages and working hours, while the regulation of the speed at which machines are operated provides an objective means of increasing the intensity of labour. The achievements of the working class in reducing hours of work have certainly not reached, and in some cases are very far from reaching, the point at which they would fully compensate for the increased intensity of labour. However important the reduction of working hours has been for the social condition of workers, and however much this achievement and the struggle for it have raised their physical and cultural level, there can be little doubt that this reduction of working time has not altered the ratio of v to s at the expense of s. It has not affected the rate of profit, and from a purely economic standpoint nothing has changed. However, it should be pointed out in passing that in many industries which require high standards of precision and accuracy, longer hours of work would have been impossible, and that in general the reduction of hours of work has improved the quality of work, accelerated technological progress, and increased relative surplus value. So far as the level of wages is concerned, the connection between wage increases and increased intensity of labour is not quite so clear, but it certainly exists, and it remains extremely doubtful whether the relatively small increase in real wages, especially for unskilled workers, has increased v at the expense of s, or whether, as is far more probable, any rise in wages has been fully compensated by an increase in the intensity of labour. But it must obviously be conceded that a certain period must elapse before there is such a compensating effect, during which s is reduced by the increase in v.

Since the value of a commodity - and in this context, since we are dealing with the social relationship, we can use the shortened expression 'value' [instead of 'exchange value'-Ed.] - is equal to constant plus variable capital plus surplus value (c + v + s), a change in v to which corresponds an opposite change in s has no influence on the price of the commodity, and consequently no effect on consumers. Ricardo demonstrated conclusively that a rise in wages and a reduction in working hours can have no effect on the price of commodities. This is indeed quite evident. The annual social product falls into two parts. The first is a replacement for the means of production (machinery, raw materials, etc.) which have been used up, which has to come out of the total product. The second is the new product which has been created by the productive workers during the course of the year. This is at first in the hands of the capitalists and again comprises two parts, one constituting the income of workers, the other accruing to the capitalists as surplus value. The price of the product to consumers equals the sum of both parts [i.e. replacement plus new product - Ed.] and cannot be altered by the proportion in which the second part is divided between workers and capitalists. It is, therefore, completely nonsensical, from a social standpoint, to maintain that a rise in wages or a reduction in working hours increases the price of the product. Nevertheless, this contention is put forward over and over again, and with good reason.

The conclusion we have just reached is directly valid only for the value of commodities, that is to say, only from the standpoint of society. We know, however, that the value of a commodity undergoes a modification as a result of the attempts to equalize the rate of profit. For the individual capitalist, or the capitalist in a particular branch of industry, however, a rise in wages represents an increase in the cost outlay. Suppose that his wage bill has been 100; then using 100 of constant capital, and with a rate of profit of 30 per cent, he sold the product for 260. If the wage bill now rises to 120, as a result of a successful strike, his cost price will be 220, and if he continues to sell at the old price of 260 his profit will fall from 60 to 40 in absolute terms, while his rate of profit will decline from 30 per cent to slightly less than 19 per cent, far below the average rate of profit. An equalization of the rate of profit will have to take place. This means that a rise in wages in a particular branch of production results in a price increase in that branch of production, which takes place on the basis of the formation of a new general rate of profit lower than the one which previously prevailed. But price increases always encounter resistance; they make sales more difficult, and this in turn works against the increase in price. Contracts at the old prices have to be carried out. Above all, it takes some time to make the price increase effective. Strictly speaking, a migration of capital out of this branch of production should follow, because a price increase reduces the volume of sales, and consequently the supply, that is to say production, must be reduced. This danger that, sales will fall off varies in the different branches of production and hence also the degree of resistance offered by employers to wage demands. It also depends to a large extent upon business conditions and upon the organization of the industry whether such wage increases can be passed on more or less fully, and how quickly this can be done. Given a general rise in wages, the equalization of the altered rate of profit will result in a fall in the prices of products in those industries with an above average organic composition of capital, and a rise in the prices of products in those with an organic composition of capital below the average. Every increase in wages, however, results in a decline in the average rate of profit, although the decline may be very slight and may take effect very slowly, if it results from a wage increase in a single branch of industry.

Since individual capitalists suffer losses before prices settle at their new level, it is only natural that they should offer resistance, and that the resistance should be all the stronger, the lower the rate of profit. We saw earlier that a lower than average rate of profit prevails in small business and petty capitalist spheres of activity, and for this reason resistance will be most vigorously displayed there, while at the same time the ability to resist is least. The trade union struggle is a struggle over the rate of profit from the employers' point of view; a struggle over the level of wages (including the reduction of working time) from the standpoint of the workers. It can never be a struggle to abolish the capital relationship itself, the exploitation of labour power. For the outcome of such a struggle would always be decided in advance; since the object of capitalist production is the production of profit through the exploitation of the worker, it would appear senseless to the entrepreneur to engage in business if exploitation were eliminated. He would therefore stop production, for whatever his personal situation, it could not possibly be improved by continuing to run the business, and in such a case he would have to rely on starving out his workers. If only his own sphere of activity were threatened he would try to save at least a part of his capital by transferring it to another branch of industry. The struggle for the complete abolition of exploitation thus lies outside the scope of purely trade union activity, and can never be brought to a conclusion simply by trade union methods of struggle, as the syndicalist 'theory' would have us believe. Even where it assumes a trade union form, as in the mass strike, it is not a question of a struggle against the economic position of the entrepreneur, but of a struggle for power waged by the working class as a whole against the organized power of the bourgeoisie, the state. The economic damage inflicted upon the entrepreneur is never more than an auxiliary weapon in the struggle to disrupt the power apparatus of the state. This political task can never be the responsibility of the trade unions as such, but simply brings the trade union form of organization into the service of the political struggles of the proletariat.

But if the trade union struggle is concerned with the rate of profit, it follows that there are definite limits to the objectives that a trade union can pursue. For the employer, it is a matter of calculating whether he is in a position to put the new price level into effect, whether his losses during the transition period will not exceed the losses incurred through a prolonged strike, and finally whether there is not some possibility for him to invest his capital elsewhere, in a branch of production where the rate of profit is not directly affected by the outcome of a strike. It follows from this, however, that certain limits are set in advance to every particular trade union struggle, which it is the difficult task of the trade union leadership to recognize, and which determine their tactics. It also follows that a trade union can as a rule operate more successfully the higher is the rate of profit; whether it is generally higher, as in a boom, or higher in a particular branch of production, in consequence of its monopoly position, the achievement of extra profit through patents, etc. It is beyond the scope of this study to investigate these conditions in detail, but it will be useful to discuss briefly some general aspects of the changes in the power relations between the two classes.

It is obvious that the rise of employers' organizations involves a change in the balance of power between capital and labour. As a rule, the development of employers' organizations has been regarded, quite correctly, as a reaction to the organization of labour. But the pace of their development, as well as their power, depends essentially upon the change in the structure of industry, upon the concentration and monopolization of capital. As long as the isolated employer confronted an organized workforce the trade union had a great many measures available to it which the development of employers' organizations has now rendered ineffective. With the concentration of capital the power of the employer in the struggle over the labour contract increases, but at the same time the possibilities of organization for the more concentrated workforce also increase. Variations in the size of enterprises are responsible for quite different degrees of resistance to trade unions. The more fragmented an industry is, and the smaller the average size of the firms, the greater, in general, is the power of the trade union. Within the same industry, moreover, the power of the trade union is greater in small and medium-size firms than in the large concerns, simply because the small firms, already hard pressed by competition from the large ones, are far less able to sustain the losses involved in a struggle. The struggle of the trade unions generally promotes the trend towards large firms, and hence the growth of productivity, technological progress, a reduction in costs of production, and the emergence of relative surplus value; and in this way it creates the preconditions for obtaining new concessions.

As long as trade unions confront individual employers their position is a favourable one. They can bring their concentrated power to bear upon the isolated employer. The wage struggle is thus decomposed into a series of individual strikes. The workers of the employer concerned are supported by the whole financial strength of the trade union, which does not diminish during the struggle because the members who are still working continue to pay their dues, and perhaps special levies. The employer has to fear that his customers will be taken from him by employers who continue to produce, and that his sales will be considerably reduced even after the strike has ended. He has to make concessions, and from that moment it is in his interest that the terms to which he has agreed should become general throughout the industry, that all the other employers, whether voluntarily or under duress, should concede the same terms of employment. The isolation of the employers enables the trade unions to compel them to come to terms one after the other, through systematically conducted individual strikes, without these strikes putting too great a strain upon the resources of the unions themselves. Their successes increase their power by increasing membership and income from dues, and they emerge from the struggle stronger than before. It is clear that these tactics can be employed all the more successfully, the more tenuous the co-operation between employers, the keener the competition among them, the greater the number of employers involved, and the smaller the power of resistance of each individual employer. All these conditions obtain in those branches of activity in which small and medium-size firms predominate, and it is here that the influence and power of the unions is greatest. Large-scale industry, which can make far more accurate calculations, resists such individual strikes much more strongly, because the large firms are far more insistent on the greatest possible equality of production costs. In this case a strike can only be successful if it is general throughout the industry. An individual strike encounters much greater resistance which is far more difficult to overcome because the power of even a single large employer is far more considerable, and an understanding among a relatively small number of employers can be achieved more rapidly.[2] But the more powerful trade unions become, the stronger too is the resistance they evoke on the part of employers. The combination of workers is now confronted by the combined power of the employers. Since the influence of trade unions is greatest in the small and medium-size enterprises, it is here that resistance will also show itself most strongly. In fact, the organization of employers begins in handicraft production and in the smaller finished goods industries,[3] where the power of the unions is most strongly felt, and where it grows most rapidly in periods of boom.[4] But even though the establishment of employers' associations must unquestionably be regarded as a reaction to the trade unions,[5] and therefore occurs first in the light industries, it is by no means confined to that sphere. Cartelization and trustification merge the interests of the participating capitalists much more strongly and indissolubly, and make them a united body vis à vis the working class. The elimination of competition is not confined to the labour market - as it is in the case of the uncartelized light industries - and so the solidarity of employers is enhanced to a much greater extent. It may even go so far as to make any special organization unnecessary in those branches of industry where the position of employers is strongest. The coal syndicate makes an employers' association superfluous, and the Steel Trust makes it impossible. Even if it were true, as is always claimed officially, that German cartels do not concern themselves with labour matters, a united front of employers is taken for granted, and it is just their strength which make the specific functions of an employers' association (such as assistance during strikes) superfluous, since a 'friendly understanding' suffices in each particular case. Even here, however, a trend towards the formation of employers' associations is becoming apparent.

The formation of employers' associations makes it more difficult, if not impossible, for a trade union to achieve success in an isolated struggle, since the individual employer is now backed by his organization, which compensates him for his losses, ensures that the striking workers do not find other jobs, and makes every effort to fill the firm's most pressing orders itself. If necessary it resorts to stronger measures, and takes the offensive by extending the struggle and declaring a lockout in order to weaken the union and force it to capitulate. In such a struggle between the combined employers and the trade unions, the employers' organization is quite often the stronger of the two.[6]

An employers' association creates the possibility, in principle, of deferring a conflict. As long as labour organizations are in conflict with individual employers the choice of timing rests with the workers, and timing is a decisive factor in determining the outcome of a struggle. A work stoppage is most damaging during a boom, when the rate of profit is at its highest and the opportunities for extra profit are greatest, and in order not to lose his whole profit even a major employer would try to avoid a conflict at such a time, for the opportunity to earn that profit will not recur, at least not until the next boom. From the standpoint of the union's chances of success, a strike should be called at a time when production is at its maximum, and it is one of the difficult tasks of trade union educational work to persuade the members of the wisdom of these tactics. For it is precisely at this time that workers' incomes are highest, as a result of regular employment and overtime, and the psychological incentive to go on strike is consequently weakest. This also explains why most strikes occur during a period of prosperity before the peak of the boom is reached.

This choice of timing, however, ceases to be the prerogative of the trade unions once the employers' organization becomes well established, for the latter can now determine the time of the conflict. For them the lockout is a form of preventive war, which can best be waged during a depression when overproduction makes it quite useful to halt production, and the workers' power of resistance is at its lowest because of the excessive supply of labour on the market and the financial weakening of their organizations as a result of the large demand for financial aid and the decline in membership. This ability to postpone the occurrence of a conflict, which results from the development of an employers' organization, in itself represents a massive transfer of power.[7]

The same causes, however, which lead to the formation of employers' organizations also strengthen the trade unions, which now become a refuge for workers everywhere who do not want to be left entirely at the mercy of their employers. The fighting measures adopted by employers are also directed against those who have hitherto remained aloof from unions. Lockouts, and particularly general lockouts, provide very powerful incentives for previously unorganized workers to join the unions, and the rapid growth of membership increases their strength. The employers' associations try to counter this development by a continuing struggle against the trade unions. They attempt, by a process of careful selection, to retain unorganized workers, rather than those who are organized, in employment. The proficiency certificates of the employers' associations systematically give preference to unorganized over organized workers, and the most dangerous among the latter are proscribed by the use of blacklists. By organizing 'yellow' company unions - institutions for breeding class traitors - the employers try to divide the workers with the aid of bribes and the granting of special privileges, and to ensure the availability of a strike-breaking squad.[8] By refusing to negotiate with the union leaders they seek to undermine their moral influence. But they are fighting a vain battle, for in the final analysis the class interests of the workers are identical with their personal interests, and the trade union organization has become a matter of life and death for them. But the battle does retard the progress of the trade union movement and restrict its influence.

Just as in the period before employers' organizations existed the individual employer's power of resistance varied according to the size of the enterprise, so now the power of resistance of employers' organizations varies according to their composition. The associations in large-scale industry are the strongest, and within this group especially those in the large cartelized industries which do not have to fear the desertion or business failure of any of their members. They can rest assured that no competitor will derive any advantage from a stoppage of their plants, and where their monopoly is assured and foreign competition is of little consequence, thanks to the protective tariff, they can ultimately make up the losses sustained in a strike. Orders which have been delayed can be filled later, and the dearth of commodities resulting from the stoppage makes possible price increases, and hence the unloading of losses from the strike onto others.

Here, therefore, resistance is at its strongest, and a struggle against the trade unions easiest to undertake. Hence these industries become the leaders in the struggle of all employers' associations, and the champions of the common interests of employers in their conflict with the working class. The more the small capitalists are forced to make concessions to the trade unions, and the more ominous the power of the workers appears to them, the greater is their sense of solidarity with the big industrialists, the champions of their own cause.

The fact that the weaker associations have to come to terms with trade unions, though on more favourable conditions than was the case previously for individual employers, makes no difference. For them too, the association has eliminated the greatest dangers. It has been able to impose a strike clause for the entire industry, prevent outsiders from taking advantage of the situation by its ability to cut off supplies, thus making suppliers its allies in the struggle, and finally, assure equality in the conditions of competition, under all circumstances, by preventing individual employers from concluding separate agreements. This is best done by the conclusion of an industry-wide agreement on wage rates and conditions of employment. Such an agreement is also in the interests of the trade unions because it immediately extends any gains which have been achieved to the whole industry. Its disadvantage is that it fixes the date for a renewal of the contract in advance, and so deprives the union of its ability to decide the timing of a conflict. But since the very existence of an employers' association has already deprived the union of an exclusive power to decide when to renew the conflict, this circumstance affects both organizations in the same way. Nevertheless, this introduces a fortuitous element into the coming conflict, and a strong union will therefore try to avoid any wage agreement the duration of which may make it impossible to take advantage of a boom period.

The existence of an employers' organization has the further advantage for the employers that it makes it easier for them to pass on any increase in costs of production. We know that a successful strike means an immediate reduction below the average rate of profit of the industry affected. The equalization which must ensue through an increase in prices is facilitated and expedited by the common procedure which an employers' association can easily arrange in such an event, and this can be done even in noncartelized industries because the increase in prices corresponds to the changed cost prices. Hence it is precisely the small capitalists in the noncartelized finished goods industries who are disposed to conclude industry wide agreements.[9]

Here too arise those trends which lead to the conclusion of trade alliances. Industries which are not yet capable of forming cartels, because technological factors have kept them fragmented, try to secure a monopoly for themselves by closing the labour market to outsiders. They leave it to the trade union to do this for them, and the combined employers then have a cartel which the trade union protects against the competition of outsiders. The extra cartel profit is shared between employers and workers, thus giving the workers a stake in the existence of the cartel.

The relationships which prevail in cartelized industry are different. Here the rate of profit has already reached the highest possible level under the existing conditions of production. The price is equal, or roughly equal, to the world market price plus the protective tariff plus transport costs. In this case a wage increase cannot be passed on, and the resistance to such increases is therefore exceptionally strong. Furthermore, since the high cartel profit is already taken into account in the price of shares, a reduction in profit depresses share prices and provokes resistance from shareholders to any concessions by the directors. Their resistance is reinforced by the interests of the banks, for whom a smaller profit means smaller promoter's gains when a new share issue is made. On the other side, there is also greater resistance, for psychological reasons, from the non-working, appointed directors of the company, who have lost all contact with the workers and appear to them as representatives of alien interests. Any inclination on the part of an employer who takes personal responsibility to make concessions from time to time seems to these directors a dereliction of duty. The last vestige of personal contact disappears from the relations between workers and capitalists, and the provisions of the labour contract become a question of power, totally divorced from any sentimental considerations.[10]

The features of the industry-wide agreement which the employer finds valuable are those such as the guarantee of equality of costs, which the cartels in any case achieve through the concerted action of employers, or the guarantee of industrial peace over a certain period of time, which the cartels attain through industrial conflict on a scale that precludes frequent disputes. All that remains then is the disadvantage that industry-wide agreements constrain employers in their choice of timing for the next struggle, and have a propaganda value for the unions. Hence the rejection of such agreements in the cartelized sphere. Furthermore, the possibility of forming a cartel without trade union help makes a trade alliance, with its sharing of the extra cartel profit, entirely unnecessary.[11] The position of industries which are primarily engaged in exporting is similar to that of cartelized industry, since their prices are determined on the world market and it is more difficult to pass on wage increases.

The development of employers' and workers' organizations enhances the general social and political significance of wage conflicts. The guerrilla war of the trade unions against individual employers has given way to mass struggles which affect whole branches of industry, and if they grip the most vital sectors of production, which have become interdependent through the division of labour, they threaten to bring all social production to a standstill. The trade union struggle thus expands beyond its own sphere, ceases to be the concern only of the employers and workers directly affected, and becomes a general concern of society as a whole, that is to say, a political phenomenon. At the same time it has become increasingly difficult to bring such conflicts to an end by trade union methods alone. The more powerful the employers' organization and the trade union, the more protracted is the struggle. The question of raising wages and diminishing profits becomes a problem of power. Employers become unshakeably convinced that every concession they make will weaken their future position and enhance the moral and actual power of the trade unions; that a victory today is bound to mean future victories for the trade unions. They want to decide the conflict once and for all, and are prepared to pay the costs of warfare if it will ensure them the upper hand for a long time to come. Their capital is large enough for them to hold out, and to hold out longer than the trade unions whose resources are rapidly depleted by payments to strikers. But the conflict does not remain confined to one particular sphere of industry; it extends to others which supply raw materials, components, etc., and they too have to shut down plants and dismiss workers. This is a situation which provokes increasing bitterness among workers, and more widely in the retail trade which depends upon working class custom, and it may lead to major social and political confrontations. There is growing pressure from those who are not directly involved to end the original wage conflict, and since there is no other means available for this purpose they call for intervention by the state. The question of ending the strike is thus transformed from a trade union question into one of political power, and the more the balance of power has tilted in favour of the employers as a result of the growth of employers' organizations the more vital it is for the working class to secure for itself the strongest possible influence in political bodies, and to have representatives who will take up boldly and independently the interests of the workers against those of the employers and help them to be victorious. Such a victory, however, will not be achieved by political action alone, which indeed can only be undertaken successfully if the trade unions are strong enough to wage the purely economic struggle with such intensity and vigour that the reluctance of the bourgeois state to intervene in labour questions, against the interests of employers, has already begun to break down, and the political representatives of labour have only to complete the process. Far from the working class being able to dispense with the trade unions and to replace them by a political struggle, the increasing strength of trade union organizations is indispensable for success. But however strong the trade unions are, the very scale and intensity of their struggles gives them a political character and demonstrates to workers organized in the trade unions how trade union activity is necessarily complemented by political action. Hence a point is inevitably reached in trade union development when the formation of an independent political labour party becomes a requirement of the trade union struggle itself. Once an independent political party of the workers exists its policy is not confined for long to those issues which led to its creation, but becomes a policy which seeks to represent the class interests of workers as a whole, thus moving beyond the struggle within bourgeois society into a struggle against bourgeois society.

On the other hand, the increasing strength of employers' organizations does not by any means make the trade union struggle either unnecessary or hopeless. It would be a very partial view if we were to conclude that because the employers' organization has the ability to hold out patiently until the workers are exhausted, their trade union is financially destitute, and those who are ready to return to work gain the upper hand, trade union struggles must always end in defeat and lockouts must always be successful. For it is not simply a question of power, but of calculating the effect on the rate of profit. A lockout or strike in a period of boom always involves such great losses that it may be more advantageous for employers to accede to wage demands in order to avoid a conflict.[12] Even a trade union previously weakened by a lockout can summon enough strength to wring concessions from employers during a period of boom, although in such a case, of course, since the union also fears the cost of the struggle, these concessions would be more limited in scope than in the days when the trade unions did not yet confront any employers' organizations.


[1]This is not the place for a more detailed examination of the immigration problem, and it is in any case unnecessary in view of the thorough treatment in the issue of Die Neue Zeit referred to earlier. [See ch. 22, note 7. Ed.]

[2]Consequently, in countries where the development of trade unions comes relatively late and faces highly developed large-scale industry from the outset, they are as a rule weaker than in a country such as England, for example, where they developed in step with the growth of industry.

[3]See Gerhard Kessler, 'Die deutschen Arbeitgeberverlände', in Schriften des Vereins für Sozialpolitik, vol. 124 (1907), p. 40.

[4]ibid., p. 37.

[5]ibid., p. 20. 'As long as the workers in a firm remain an unorganized mass, even an individual employer has the upper hand. He does not need an employers' association . . . . As long, therefore, as the German trade union movement was fighting desperately to survive, roughly up to the 1880s . there was no need for employers' associations in Germany. But since the end of the 1880s, and especially since the repeal of the anti-socialist laws, when a great upsurge of the trade union movement began, accompanied by wave after wave of wage demands and strikes, employers began to combine in employers' associations in their own branches of industry - a natural reaction to the activities of the trade unions. The trade union always appears first, followed by the employers' association. By its very nature, the trade union is always the aggressor and the employers' association the defender (and the fact that occasionally the roles are reversed does not affect the general truth of this proposition). In its youth, the trade union is mainly a strike organization and the employers' association an anti-strike organization. The sooner a strong trade union appears in an industry, the sooner too will a full-blown employers' association be formed. In short, an employers' association is an organization of the employers of an industry for the purpose of regulating their relations with organized labour.'

[6]See the following comments on the situation in the United States: `Employers' associations in the United States are probably stronger and more militant than those in other countries. Almost every industry has its central, state and local associations, not to mention the combinations of these associations. The two most important are the National Association of Manufacturers and the Citizens' Industrial Association of America. The former consists almost exclusively of manufacturers and was formed in 1895 primarily in order to expand foreign markets for American products. In the last five years it has taken an active part in the fight against labour organizations and has sought to influence public opinion and federal legislation in favour of employers. In 1905 it prevented the passage of two important bills introduced in Congress at the request of labour federations. One sought to introduce an 8-hour day for all work carried out by or for the federal government, while the other sought to restrict the power of the courts to grant injunctions in labour disputes.

The Citizens' Industrial Association has a different character in that it is a federation of all local, state and national employers' and civic associations in the United States. It was organized in 1903 on the initiative of the National Association of Manufacturers for the purpose of uniting all individuals and associations into a fighting organization to combat the demands of trade unions, especially the demand for the 'closed shop' (that is, the employment of union members only in an enterprise). It has grown rapidly, and has several hundred thousand members in its national, regional and local associations. It combats all intervention in business affairs whether by the government or by the trade unions. At its third annual conference in St Louis in November 1905 it adopted resolutions on the establishment of vocational schools and certificates of proficiency (under the jurisdiction of associations) so as to provide employers with workers without regard to union membership.

Aside from the National Association of Manufacturers, two of the most important organizations connected with this Citizens' Industrial Association are the National Metal Trades Association and the National Foundries Association. When they were first organized five years ago they concluded agreements with the machine and foundry workers' unions. But these have since been cancelled, and in 1905 the Foundries Association began a struggle with the powerful foundry workers' union which has since spread to all the plants in the United States. [Halle], Weltwirtschaft, vol. III, p. 62.

[7]This is not altered by the fact that, for a time, when the development of an employers' organization and of its mode of operation is still in its early stages, the shift in timing is not fully apparent. The statistics of lockouts, as given by Kessler (op. cit., p. 259) show, first, that the number of lockouts is growing rapidly, and second, that their number is greater during a boom than during a depression. This can be explained simply by the fact that those lockouts which serve as counter-measures against strikes would naturally increase most rapidly during periods of boom, when strikes also occur most frequently. But this does not in any way refute the view that, as employers' associations grow, conflicts are more frequently postponed by employers to periods of depression and aggressive lockouts increase in number. Kessler remarks on this point (p. 243): 'Aside from sympathetic lockouts, programmatic lockouts have become frequent, particularly in recent times. The author uses this term to denote all layoffs of workers which take place without a preceding strike, in order to impose upon workers a programme specifying wage rates, hours of work, job assignments, and any other general or specific conditions of employment …

`It is quite likely that programmatic lockouts will become more important in the near future, since after the failure of negotiations for the renewal of a wage agreement, the employers' association is often more interested in the conclusion of a new wage agreement as quickly as possible than is the union, even if it has to be imposed through a conflict. Programmatic lockouts sometimes resemble aggressive strikes, and at other times defensive strikes, but more frequently the latter, which is more in accord with the character of employers' associations. Very seldom does an employers' association attempt directly to worsen the conditions for employment by means of a lockout, and this will continue to be so in the future. What happens more frequently is that workers are locked out in order to obtain a renewal of the wage agreement for some years ahead, without any improvements, and to ward off wage increases' (p. 243).

After evaluating the available statistics, Kessler reaches the conclusion that 'almost all the larger lockouts ended in complete or partial success for the employers . . . . Generally speaking, the lockout is a weapon against which workers have no defence. This is reason enough for trade union leaders to restrain any strike fever among the rank and file as much as possible, and to deal quickly with unofficial walkouts. It is also a reason for employers not to be unreasonably alarmed by the growth of labour organizations. In any case, the high costs and losses entitled by every lockout, even when the employers win, will certainly prevent this extreme weapon from being used too frequently or in clearly unjustified cases. Neither group will lose its head and go to extremes' (p. 263).

[8]'While in America it has become a specialized business to hire out gangs of professional strike-breakers, resembling the condottieri, who can be put at the disposal of this or that employer when he needs them, for a fee, in our own giant factories permanent squads of strike-breakers are maintained under the guise of welfare institutions. Thus these institutions are not a way of promoting social peace, but a weapon which makes for social conflict and strengthens the hand of one of the parties to that conflict.' Lujo Brentano in Verhandlungen des Vereins für Sozialpolitik, vol. 115 (1905), p. 142.

[9]On the other hand, the conclusion of industry-wide agreements strengthens the unions, and many workers who previously remained aloof now flock to them. This increases the resistance of the employers. Thus the most powerful German manufacturers' organization, the Zentralverband Deutscher Industrieller, passed the following resolution in May 1905: 'The Central Association of German Industrialists considers the conclusion of industrywide agreements between employers' organizations and labour organizations extremely dangerous for German industry and its future progress. Such agreements deprive the individual employer of that freedom to control his own workers which is essential to the proper conduct of his enterprise, just as they inevitably subject the individual worker to the rule of the labour organization. In the view of the Central Association, which is fully confirmed by the experience of England and America, industry-wide agreements are a serious obstacle to the technological and organizational progress of German industry.' Cited by Adolf Braun, Die Tarifverträge und die deutschen Gewerkschaften, pp. 47-8.

[10]See also the speech by State Councillor Leidig, in Verhandlungen des Vereins für Sozialpolitik, 1905, vol. 115 p. 156, and that by Dr Harms, p. 201.

[11]Adolf Braun has shown that trade alliances should also be rejected from the general standpoint of the working class: IN should be pointed out that employers are beginning to expect far-reaching results from industry-wide agreements, including the elimination of all forms of inconvenient competition, the guarantee of higher prices, and the exploitation of the consuming public. The same employers who not so long ago, and still to some extent today, were outraged by work stoppages, the restriction of immigrant labour, and the general influence exerted by trade unions on the labour market, are now considering whether it might not be a good idea, when negotiating a wage agreement, to ask trade unions to agree to clauses guaranteeing the maintenance of fixed minimum prices for the commodities produced. Besides the wage scales governing the payment of workers, there would be a schedule of prices to be charged to consumers. Trade unions bound by such a wage agreement would then be required to stop all work, as well as the supply of labour, in all cases where an employer sold his commodities at lower prices than those established by the general price schedules of the employers' associations. The trade unions would thus be forced not only to promote the rise in price of the necessities of life, and to give public support to it, but they would also become the conscious agents of the employers' interests and would be held responsible by public opinion for the rise in the cost of living. There are of course exceptional cases in which the objectives of a trade union cannot be attained in any other way, where the concessions in questions do not affect mass consumption, and where they might therefore appear justifiable. But as a rule, making such concessions in order to obtain an industry-wide agreement seems to be incompatible with the principles of the labour movement and with the objectives of trade unions.' Adolf Braun, op. cit., p. 5.

[12]It is throwing the baby out with the bath water when Naumann says: 'The sphere in which strikes can be brought to an end in the normal way (through a wage agreement) is practically coterminous with medium-size enterprise. Of course, some attempts have been made to extend wage agreements beyond that point. Nevertheless, this is a distinctive sphere in which workers can be recommended to strike, in accordance with the old liberal recipe, in order to get a wage agreement, whereas beyond this sphere there is another where a wage agreement cannot be achieved by a strike alone, for the simple reason that the elementary question "Which of us can hold out longest?" can be answered from the outset by any thinking person. If we should ever experience another miners' strike . . . both participants and outsiders know in advance that the workers could not win the kind of victory they used to achieve in the old peace negotiations, and that such strikes belong to a new species of demonstrative strikes. For even if we were to assume that one of these strikes were actually won - an entirely hypothetical assumption - the large industrial combinations have ample resources to arm themselves against the recurrence of such an event. Not long ago one of our younger bankers made the following simple calculation for me: "How much interest shall we lose if we keep a constant reserve for x or y months which will protect us completely against a possible defeat in a strike (meaning a strike in the old sense) during that period?" What follows from this? Simply that if the worker wants to improve his condition he will have to regard the strike simply as a means of appealing to the rest of the population.' F. Naumann, in Verhandlungen des Vereins für Sozialpolitik, vol. 115 (1905), p. 187.