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Where long time movements can be charted in this manner, the concept of what will be true in the long run can be reduced to a definite and concrete quantity.

Cyclical fluctuation is the series of changes from prosperity to depression and back again which repeat themselves in modern business. The third diagram represents fluctuation due to the business cycle. The horizontal middle line is an "estimated normal." It is what production would have been if the average rate of growth and the average seasonal fluctuation had prevailed. It is what production would have been if there were no business cycle and no abnormal changes in production. The waved line in the same diagram presents a comparison of cyclical production with the computed normal. This comparison involves a process of "statistical correction." Actual production each month is corrected by eliminating both long time and seasonal movement. What is left is cyclical movement. Comparison of corrected figures of production with estimated normal shows years of depression in 1904, 1908, 1911, and 1914, and years of greater or less prosperity between these dates.*

Residual fluctuations include all changes not contained in secular, seasonal, and cyclical movement. The third diagram is not strictly and absolutely a diagram of the pure business cycle. It includes also some variation due to unusual and extraordinary influences. Predominantly it represents the business cycle, but not wholly. The residual factors may be new inventions, political influences, new foreign markets, or any other exceptional change. Earthquake, war, revolution, or fortuitous change may be responsible. For instance, if the line of pig iron production is extended through the World War period, it shows extraordinary advance, due in great part to the war demand for munitions. And production in 1919 and 1920 was drastically affected by the steel strike and effort at unionizing the mills made at that time. These unusual factors influence production, and they must be kept in mind in making an interpretation of the charts of production. The residual factor is usually included in the cyclical curve of production, and although it modifies somewhat the meaning of the curve, it does not obscure the basic fact of the cyclical type of variation as a predominant and paramount feature of production.

The Technology of Production.-The output of goods results from the technical methods and processes prevailing at the time. The accumulated store of scientific, mechanical and engineering knowledge determines the capacity to produce wealth. The vast fund of technological information and skill governs the volume of production and the rate of progress in material well-being. Advances in the production of goods waits upon advances in the state of the industrial arts. Production is a matter of technology.

4 See chapter on Business Cycles for more detailed explanation of the cyclical type of fluctuation.

In modern production this technology is the machine technology." From every economic standpoint, this is the age of the machine. The machine casts its influence over the far corners of the economic world and leaves no part untouched. It is all pervasive and all inclusive. The economic system takes its character from the machine more than from any other single factor.

The paramount economic significance of the machine technology is that it serves to increase the output from a given amount of labor. Owing to the use of machinery, the average worker today produces more than twice as much as in 1850. The mechanical capital which makes this increase possible is more than four times greater than in 1850. Superior capital equipment, superior use of machinery, superior production technology, these are the factors leading directly to superior output of goods from a given expenditure of labor.

The Division of Labor, or Specialization.-A primary feature of the machine technology is the minute division of labor. The process of making a complete product is separated into detailed fractional parts. The whole task is broken up into its elements. Labor is specialized in the performance of only one of the collective series of operations necessary to the production of the completed article.

Adam Smith, writing before the Industrial Revolution was genuinely under way in England, marveled at the division of labor under handicraft manufacture. Even before the invention of the steam engine, the spinning mule, or the cotton gin, Adam Smith could declare, "The greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed or applied, seem to have been the effects of the division of labor."

The advantages of this handicraft division of labor were: First, that by devoting all of his time to one task, the laborer became more proficient and adept in the operation; second, that by confining attention to one narrow task, the laborer's period of apprenticeship was shortened; third, that by sticking to one task, the laborer eliminated the waste motion of walking about, carrying material, changing motions, and the like; fourth, that the individual peculiarity and aptitude of the worker could be better adapted to the type of work where his efficiency would be greatest. Increased proficiency, shortened apprenticeship, economy of time and effort, adaptation of the worker to his work,-these were the classic advantages attributed to the division of labor in the pre-machine

era.

When the machine came into vogue, these advantages of specialization remained, but in greatly modified forms. The industrial revolution was a revolution in the division of labor itself. It carried specialization far 5 This is not to overlook at all the many survivals of handicraft methods found all about us. Many trades, such as building, still rely heavily upon non-machine processes. Agriculture still involves a vast amount of hand work. But after all, these survivals are not the main current. They are tributaries to the main current, which is machine production.

beyond the boldest conceptions of the economists of Adam Smith's day. It reduced the division of labor to such fine points that a process which impressed early economists as a marvel of specialization became subdivided into scores or hundreds of ultra-minute operations performed by separate laborers. The hand division of labor was one thing; the machine division of labor is quite another thing. It is vastly more complex and vastly more refined. And, what is of primary concern to economics, it is a factor which accounts for the marked increase in productive capacity in the last century.

Standardization. The degree to which machine methods can be carried in any branch of production depends upon the degree to which processes can be standardized. Whatever cannot be standardized cannot be done by machine processes. To be mechanized, a given task must be reduced to unit motions. If these unit motions can be repeated time after time with accurate sameness, they can be standardized. Such standard unit motions are the essence of the machine process. They can be repeated millions of times, with uniform accuracy, with superhuman speed, and by the application of nonhuman energy. By standardization, there occurs a transfer of skill from the craftsman to the machine. What was formerly a manual skill becomes a standardized mechanical skill.

There are still a great many processes which are not done by machinery. They are not done by machinery because as yet they have not been standardized. Goods requiring personal skill, artistry, and taste defy the machine principle. Articles of exclusive fashion still require the dexterity of hand labor. However, even in this type of workmanship, the machine has made gradual headway, and has broken down one after another of the delicate crafts into a machine operation. The onsweep of the machine has been unrelenting, and more and more it has tended to become all embracing.

Not only has standardization come to dominate the machine itself, but also it has come to dominate the whole organization of industry and business which surrounds the machine. There are standards of measurement, standards of quality, standards of performance, standards of design, and standards of labor.

(a) Standards of Measurement. Industrial organization requires units of measurement which have a common meaning in all parts of the country, and in all parts of foreign countries. These units refer to length, area, volume, weight, density, pressure, energy, heat, light, and electricity. The terminology includes meters, grams, pounds, inches, horsepower, calories, thermal units, ohms, amperes, volts, watts, and a long list of similar units. Standard gauges of tools and machinery, standard sizes of bolts, nails, and parts,—all of these represent the universal effort to standardize.

(b) Standards of Quality. Steel, coal, and other raw materials are tested in laboratories of industrial chemistry to insure that they measure up to specifications necessary in a given process of manufacture. Physical tests of tensile strength, hardness, and texture are likewise required.

The buyer of commodities requires that they shall be of standard fineness, standard composition, standard finish, standard texture, standard structure.

(c) Standards of Performance. The operating efficiency of machines and equipment rests upon standards of speed, output, and durability. Equipment which cannot measure up to the strains and loads placed upon it goes into the discard. Unless machinery can perform to standard, it is unfit for productive use.

(d) Standards of Design. In the desire to cater to novelty, personal taste, and exclusive style, production has often suffered from an overdiversification of design. Excessive multiplication of styles and designs is wasteful and costly. The remedy for such waste lies in the simplification of designs. Simplification means reducing designs to standards. For instance, a tool manufacturer reduces his line of product from 2,752 specialty items to 761 standard items. A manufacturer of farm wagons reduces his line from 1,200 makes to 90 makes. A manufacturer of pipe fittings reduces from 17,000 items to 610, and a manufacturer of men's hats reduces from 100 colors and shades to 9. Standardization displaces specialty in design, thereby making possible a greater use of machinery in production and a corresponding reduction of manufacturing costs." (e) Standards of Labor. Labor itself is standardized by the machine. régime. Job analysis and time and motion study provide a standard. task. Rate setting and scientific wage payment involve a standard wage scale. Personnel selection provides a standard workman to fit a standard. job. Standard speeds of work, standard routine in shop practice, standard union rules, dominate the worker. In consequence, repetition, monotony, and a dead level of uniformity tend to characterize the workshop.

The Automatic Machine and Quantity Production.-The complete fruition of the principle of standardization is the automatic machine. The various parts of a given product are reduced to standard sizes and shapes. Each part is interchangeable with the corresponding part of any other sample of the product. For example, a Ford automobile has about 5,000 parts. If a dozen such cars were taken entirely apart, and the various items shuffled in a general mass, and a dozen new cars were reassembled, the parts would fit the new cars as well as the old. The interchangeability of parts makes possible quantity production by the automatic machine.

This principle has been applied to a wide variety of products. Locomotives, watches, typewriters, dynamos, munitions, cash registers, agricultural implements, cloth, newspapers, and a broad variety of other products are included. Most package goods, bottled goods and canned goods rely upon automatic processes. The president of a large chain of retail stores, manufacturing and selling 5,000 different kinds of articles,

6 See R. H. Lansburgh, Industrial Management, Chapter 14; also Herbert Hoover, in Scientific Management Since Taylor, edited by E. E. Hunt, Chapter 13.

states that production depends upon "standardization, in which lies the future of large volume business." He adds, "The way to manufacture most cheaply is to establish a separate department for each article and to put it through in continuous repetitive process with a minimum of human handling.""

"Without touch or aid of human hand, an automatic machine produces complete one-dram bottles at the rate of 165 per minute." Of the 30 operations required in the manufacture of certain farm implements, one operation requires a man to feed sheets of metal into a machine which cuts them automatically into a standard pattern at the rate of 20,000 per day." The automatic switchboard is fast eliminating the telephone central. Office work has been largely taken over by automatic machines for typing, sorting, scaling, classifying, filing, addressing, computing figures, and keeping records. The Webb press for newspaper printing turns huge cylinders of paper into finished news sheets at the rate of 288,000 eight-page papers per hour.

The automatic principle is capable of all degrees of application. Semi-automatic machines require a certain amount of human control and guidance, and slightly automatic machines require a great deal of human direction. Any industry represents a combination of these varying degrees of applying the automatic principle. In the steel industry, "the pig casting machines, the open hearth charging machines, not to mention the blast furnace, skip hoist, electric crane, and the mechanically operated rolling mills have revolutionized the industry. For the most part, the steel worker of today is simply moving levers, or watching and waiting while the heat and the machinery do the work." 10 The automatic principle runs through all these processes in one form and degree or another. In the more perfect forms, automatization of processes increases the productive power of labor from 75 to 100 times.11

This great increase in productive power depends upon mass organization of the productive process. Repetitive manufacture of interchangeable parts, quantity output of commodities, low cost per unit of product, these are the heart of the process. In this type of manufacture, the United States leads the world. The United States not only excels in the automatic manufacture of consumable products, but in the automatic manufacture of machinery itself. For instance, automatic textile machines and automatic boot and shoe machines are themselves made by automatic machines. Interchangeable parts make possible machine-made machines. These machines are an important export of the United States to countries in Asia, Africa, and South America, which are in the initial stages of an industrial revolution. Other nations excel the United States in lines of production where cheap labor is the chief factor in cost of

7 System, Vol. 39, p. 355.

8 United States Tariff Commission, Annual Report, 1918. 9 C. H. Parker, Atlantic Monthly, Volume 125, pp. 12-22.

10 Industrial Management, Jan. 1, 1921, p. 63.

11 Scientific American Supplement, Volume 85, p. 278.

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