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production. But the United States excels other nations in most lines where principles of automatic machinery, standardization, and mass output can be applied.12

The Productive Character of the Machine.-From an economic viewpoint, what are the essential characters of the machine? We have discussed the principles of division of labor and of standardization which make the machine possible, but we should carry the discussion further by inquiring: Wherein does the power of the machine consist? Why is the machine so much more effective than hand work with tools?

First, the machine uses nonhuman energy for its motive force. It utilizes the outside energy of coal, water, oil, and electricity. The machine is more effective than handicraft because it uses horse-power and kilowatt-hours. Second, the machine has superhuman speed. Wheels may revolve thousands of times per second, steel prongs and fingers may manipulate at an invisible speed, and in comparison, human hands are clumsy and slow. The machine is more effective than handicraft because it possesses swiftness of action. Third, the machine has

. superhuman accuracy. In the manufacture of machine tools, a variation of 120000 part of an inch can be detected immediately and with perfect accuracy. No laborer can repeat his motions with such perfect precision. The machine is more effective than handicraft because it can repeat its processes time after time with closest accuracy. Fourth, the machine can concentrate enormous energy in small space. A hundred thousand slaves have enough combined energy to haul a freight train,

12 The automatic machine received its first marked impetus in the United States from the manufacture of the automobile. The process is carried to the highest point in the Ford plants. Henry Ford has described leading features of the automatic process in his plants as follows: "A Ford car contains about 5,000 parts—that is counting screws, nuts, and all. Some of the parts are fairly bulky and others are almost the size of watch parts. The great economies began in assembling and then extended to other sections, so that, while today we have skilled mechanics in plenty, they do not produce automobiles they make it easy for others to produce them. Our skilled men are the tool makers, the experimental workmen, the machinists, and the pattern makers. The rank and file of men come to us unskilled; they learn their jobs within a few hours or a few days. If they do not learn within that time, they will never be of any use to us. The net result of our principles is the reduction of the necessity for thought on the part of the worker and the reduction of his movements to a minimum. He does as nearly as possible only one thing with only one movement. The assembling of the motor, formerly done by one man, is now divided into eighty-four operations—those men do the work that three times their number formerly did. Some men do only one or two small operations, others do more. The man who places a part does not fasten it-the part may not be fully in place until after several operations later. The man who puts in a bolt does not put on the nut; the man who puts on the nut does not tighten it. No workman has anything to do with moving or lifting any. thing. When we cast the first ‘Model T cylinders in 1910, everything in the place was done by hand; shovels and wheelbarrows abounded. Now we have about 5 per cent of thoroughly skilled moulders and core setters, but the remaining 95 per cent are unskilled, or to put it more accurately, must be skilled in exactly one operation which the most stupid man can learn within two days. There is not a single hand operation. If a machine can be made automatic, it is made automatic. We have less than 50,000 men on automobile production at our highest point of around 4,000 cars a day. A million men working by hand could not even approximate our present daily output.” Henry Ford, in My Life and Work, edited by Samuel Crowther, pp. 78, 79, 80, 81, 83, 87, 89, 90.

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but they cannot concentrate their energy into the small area necessary to drive a locomotive piston. Pressure of thousands of tons per square inch may be exerted by steel arms, but not by human. Human joints give way under a few hundreds of pounds pressure, but steel axles sustain thousands of tons. The machine is more effective than handicraft because it can concentrate immense power and pressure per square inch. Fifth, the machine overcomes the friction which always limits the endurance of labor. The laborer breaks down from fatigue, but the machine is comparatively fatigueless. It never tires out.

It never suffers from nerves. It never goes mad from monotony. It has no psychoneurosis. Lubrication relieves the friction of the machine, but cannot relieve the fatigue of labor. The machine is more effective than handicraft because it is immune from human fatigue.

The power of the machine is, then, fivefold: it harnesses nonhuman energy, moves at superhuman speed, repeats with superhuman precision, focuses superhuman pressure and strain per square inch, and obviates the factor of human fatigue. These are the characteristics of the machine which explain its productive power. 13

BIBLIOGRAPHY

ADAMS, H. C., A Description of Industry.
BYE, R. T., Principles of Economics, Chapter V.
DAVENPORT, H. J., Economics of Enterprise, Chapter IX.
Day, E. E., Review of Economic Statistics, 1921, p. 20; 1924, p. 201.
ELY, R. T., Outlines of Economics, Chapter VIII.
FARNHAM, D. T., America versus Europe in Industry.
FEDERAL RESERVE BOARD, Monthly Bulletin.
GOING, C. B., Industrial Engineering.
HOBSON, J. A., Work and Wealth, Chapters IV-V.
KEIR, M., Manufacturing Industries in America.
LANSBURGH, R. H., Industrial Management.
LICHTNER, W.O., Time Study and Job Analysis.
MARSHALL, ALFRED, Principles of Economics, Book IV.
NATIONAL BUREAU OF ECONOMIC RESEARCH, Income in the United States, Vol-

umes I-II.
Income in the Various States, Its Sources and Distribution in 1919, 1920,

1921.
SEAGER, H. R., Principles of Economics, Chapters IV, X.
SELIGMAN, E. R. A., Principles of Economics, Chapter XVIII.
SMITH, ADAM, Wealth of Nations, Book I, Chapter I.
STEWART, W. W., “Indexes of Production,” American Economic Review, 1921,

Volume XI, p. 68.
UNITED STATES BUREAU OF THE CENSUS, Census of Manufactures.
VANDERBLUE, H. B., Problems in Business Economics, p. 31 ff.

13 The machine has often been defined mechanically as a complex tool. The objection to this definition is that it tells us nothing significant. What is a complex tool? The machine is an embodiment of two principles,—the lever and the inclined plane. Further modification of these two principles gives the wedge, the screw, the wheel and axle, the toothed wheel, and the cord and pulley.

CHAPTER V

PROBLEMS OF PRODUCTION

The Localization of Industry.-Various geographical areas specialize in the production of particular commodities. The southern portion of the United States specializes in production of cotton, the western portion in wheat and corn. Brazil is a special producer of coffee, Cuba of sugar, the Orient of silk. Paramount factors in such specialized production of foods and crops are the climate and the nature of the soil. Mineral production is also highly specialized territorially, with respect to the geological deposits of nature. Thus, coal mines center at the beds of coal, and copper mines at the beds of copper.

Manufacture specializes with respect to a wider variety of governing factors. These factors include nearness to raw material, nearness to markets, nearness to power and fuel, nearness to suitable labor supply, nearness to capital supply, climatic advantages, the momentum of an early start, and artificial advantages. Location in a particular area is the result of some combination of these various forces. Due to different combinations of these advantages, the manufacture of automobiles is heavily concentrated in Detroit, Michigan; of rubber goods, in Akron, Ohio; of steel, in Pittsburgh, Chicago, and Gary; of chemicals, near Niagara Falls; of meat packing, in Chicago, Illinois ; of collars, in Troy, New York; of gloves, in Gloversville and Johnstown, New York; of silk and pottery, in New Jersey; of men's and women's clothing, in New York City, Rochester, and Cleveland. The bulk of manufacturing in the United States concentrates in the northern and eastern portions. This concentration is largely due to the fact that fuel and power in the form of coal and water power are located in those sections. In Europe, manufacture centers around the coal beds of England, France and Germany. Manufacture follows coal.

Specialization occurs not only between different parts of the nation, but between different nations. International specialization is illustrated by the prominence of chemicals and electrical supplies in Germany, of articles of taste, luxury and fashion in France, of automatic machinery in the United States, of cotton and woolen manufacture in England, and of raw material production in South America. Each country tends to specialize in the production of those commodities for which it is most fitted. Each country tends to apply its labor in those lines where it is most effective. By allowing each country to specialize in those lines where its labor yields the greatest results, all nations obtain a larger net product. Specialization by geographical areas is advantageous because it leads to a greater aggregate product. The international division of labor increases the total output of the nations as a whole.

The location of industry in a given community is a matter of evolution. Certain areas begin with grazing and pasturage, develop into wheat and corn production, and later take up detailed lines of manufacture. The line of progress is from extractive industries to manufacturing and commercial industries. Side by side with such forces of change are forces of inertia. Once an industry has established itself in a locality, it tends to persist. A labor supply congregates there, bankers supply financial accommodation, buyers form the habit of coming to the community to select their wares, transportation lines become perfected, and the momentum of the early start holds the industry to the original roots. This inertia may exert its influence long after any genuine advantage is to be derived from the localization. The factors which influence localization are a conflict between inertia and the status quo on the one hand and change and evolution on the other.

Not all of the reasons which influence location are defensible on grounds of superior efficiency. Many artificial reasons influence location, without regard to productive efficiency. A municipality may offer a concern tax exemption as an inducement for it to locate there. Variations in state laws affecting taxation, factory inspection, workman's insurance, regulation of business, and the like may be a deciding factor. A chamber of commerce or other business association may offer a concern a free building site or other considerations, as an incentive for a factory to locate in a given community. A business association may endeavor to keep a cut price chain store out of a community by renting or buying up all available space for location. International localization of industry is materially affected by tariffs and subsidies. Such discriminations induce concerns to establish industries, where they could not possibly survive without artificial help. A tariff is an incentive for a country to specialize in the production of commodities for which it is least fitted. All of the artificial advantages here mentioned rest upon a lessening of productive capacity but a strengthening of profit making capacity. They involve strategies and discriminations which enable the individual business to make more money, but to do so without making more goods. They are pecuniary or business advantages but industrial and production disadvantages.

Production, and Conservation of Resources.—Conservation is a problem which belongs within the scope of economics, inasmuch as economics is concerned with the economizing of the materials of production. Conservation deals with the economy of natural resources.

The uneconomical use of resources grows out of two major causes: a defective technology of physical production and a defective code of business practice and of money making. Both the physical and the pecuniary factor may be illustrated by the history of forestry exploitation in the United States. First, the technology of forestry, and of cutting, manufacturing, and consuming lumber has been extremely

wasteful. The Department of Agriculture in 1922 estimated that, out of a cut of twenty-two and a half billion cubic feet of lumber each year, we waste more than nine billion feet. This waste is attributable to leaving part of the timber on the ground, to failure to utilize by-products, and to inefficiency in mills and factories. Not only is there waste in the current production, but there is only a slight effort to reforest the cutover areas. The time required to regrow a forest is at the least from 30 to 50 years. The long period of waiting is so expensive that not more than one-quarter of the lumber cut each year is replaced by reforesting. Added to these evils is the fact that abandonment and carelessness have led to preventable fires which have devastated millions of acres. In all these respects, the technology of lumbering has been wasteful. A new technology based upon principles of conservation has been proved both possible and practicable.

The second factor, namely, the standards of private profit and of business practice, have been closely interlaced with the faulty technology. The main parts of the forest areas were permitted by the Government to fall into the control of private ownership. Lumber corporations bent solely upon immediate profit stripped the forests of their wealth, with little or no regard for the future of the country's resources. The scruples of many of the lumber companies were inadequate protection of the public interest. The incentive to “cash in” once and for all on the product as quickly as possible was increased by the fact that as long as the timber was standing, it was being "eaten up" by unscientific taxation. The methods of making money profits were not the methods suited to conserve natural resources.

Beginning after 1900, conservation policies received serious attention. Theodore Roosevelt, as President of the United States, exerted a powerful influence in the direction of conservation. The conservation program included far-reaching changes in both the physical technology of lumbering and the methods of money making. Fire prevention, reforesting, utilization of by-products, efficiency in mills and factories, development of substitutes for wood, and scientific laboratory research have been leading aspects of the new technology. Withholding forests from private ownership, leasing by the Government to private operators, regulation of lumber corporations, scientific taxation policies, and education in new standards of business practice have been leading aspects of the new business tactics. Improved technology and improved business standards make possible a checking of our profligate waste of timber resources. Proper technique of production and of business promises to stop the exhaustion of an invaluable natural resource, and to give permanence and stability to a basic national industry.

Natural resources are of two kinds: those which are replaceable, and those which are non-replaceable. Forestry and agriculture represent resources which are replaceable. Proper fertilization of the soil, rotation of crops, and cultivation are capable of indefinitely renewing the fertility of the soil. On the other hand, coal, oil, and natural gas repre

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