CHAPTER XXVIII

EXCHANGE AND TRANSPORTATION

207. =Mercantile Exchange.=—Important as is the manufacturing industry in the life of the city, it is only a part of the economic activity that is continually going on in its streets and buildings. The mercantile houses that carry on wholesale and retail trade, the towering office-buildings, and the railway and steamship terminals contain numerous groups of workers all engaged in the social task of supplying human wants, while streets and railways are avenues of traffic. The manufacture of goods is but a part of the process; distribution is as important as production. All these sources of supply are connected with banks and trust companies that furnish money and credit for business of every kind. The economic activities of a city form an intricate network in which the people are involved.

Hardly second in importance to manufacturing is mercantile exchange. The manufacturer, after he has paid his workers, owns the goods that have been produced, but to get his living he must sell them. To do this he establishes relations with the merchant. Their relations are carried on through agents, some of whom travel from place to place taking orders, others establish office headquarters in the larger centres of trade. Once the merchant has opened his store or shop and purchased his goods he seeks to establish trade relations with as many individual customers as he can attract. Mercantile business is carried on in two kinds of stores, those which supply one kind of goods in wholesale or retail quantities, like groceries or dry goods, and those which maintain numerous departments for different kinds of manufactured goods. Large department stores have become a special feature of mercantile exchange in cities of considerable size, but they do not destroy the smaller merchants, though competition is often difficult.

208. =The Ethics of Business.=—The methods of carrying on mercantile business are based, as in the factory, on the principle of getting the largest possible profits. The welfare of employees is a secondary consideration. Expense of maintenance is heavy. Rents are costly in desirable locations; the expense of carrying a large stock of merchandise makes it necessary to borrow capital on which interest must be paid; the obligations of a large pay-roll must be met at frequent intervals, whether business is good or bad. All these items are present in varying degree, whatever the size of the business, except where a merchant has capital enough of his own to carry on a small business and can attend to the wants of his customers alone or with the help of his family. The temptation of the merchant is strong to use every possible means to make a success of his business, paying wages as low as possible, in order to cut down expenses, and offering all kinds of inducements to customers in order to sell his goods. The ethics of trade need improvement. It is by no means true, as some agitators declare, that the whole business system is corrupt, that honesty is rare, and that the merchant is without a conscience. General corruption is impossible in a commercial age like this, when the whole system of business is built on credit, and large transactions are carried on, as on the Stock Exchange, with full confidence in the word or even the nod of an operator. Of course, shoddy and impure goods are sold over the counter and the customer often pays more than an article is really worth, but every mercantile house has its popular reputation to sustain as well as its rated financial standing, and the business concern that does not deal honorably soon loses profitable trade.

Exchange constitutes an important division of the science of economics, but its social causes and effects are of even greater consequence. Exchange is dependent upon the diffusion of information, the expansion of interests, and growing confidence between those who effect a transaction. When mutual wants are few it is possible to carry on business by means of barter; when trade increases money becomes a necessary medium; world commerce requires a system of credit which rests on social trust and integrity. Conversely, there are social consequences that come from customs of exchange. It enlarges human interests. It stimulates socialization of habits and broader ideas. It encourages industry and thrift and promotes division of labor. It strengthens social organization and tends to make it more efficient. Altogether, exchange of goods must be regarded as among the most important functions of society.

209. =Business Employees.=—The business ethics that are most open to criticism are those that govern the relations of the merchant and his employees. Here the system of employment is much the same as in the factory. The merchant deals with his employees through superintendents of departments. The employment manager hires the persons who seem best qualified for the position, and they are assigned to a department. They are under the orders of the head of the department, and their success or failure depends largely on his good-will. Wages and privileges are in his hand, and if he is morally unscrupulous he can ruin a weak-willed subordinate. There is little coherence among employees; there are always men and women who stand ready to take a vacant position, and often no particular skill or experience is required. There has been no such solidifying of interests by trade-unions as in the factory; the individual makes his own contract and stands on his own feet. On the other hand, there is an increasing number of employers who feel their responsibility to those who are in their employ, and, except in the department stores, they are usually associated personally with their employees. Welfare work is not uncommon in the large establishments, and a minimum wage is being adopted here and there.

One of the worst abuses of the department store is the low-paid labor of women and girls. It is possible for girls who live at home to get along on a few dollars a week, but they establish a scale of wages so low that it is impossible for the young woman who is dependent on her own resources to get enough to eat and wear and keep well. The physical and moral wrecks that result are disheartening. Nourishing food in sufficient quantities to repair the waste of nerve and tissue cannot be obtained on five or six dollars a week, when room rent and clothing and necessary incidentals, like car-fare, have to be included. There are always human beasts of prey who are prepared to give financial assistance in exchange for sex gratification, and it is difficult to resist temptation when one's nervous vigor and strength of will are at the breaking-point. It is not strange that there is an economic element among the causes of the social evil; it is remarkable that moral sturdiness resists so much temptation.

210. =Offices.=—The numerous office-buildings that have arisen so rapidly in recent years in the cities also have large corps of women workers. They have personal relations with employers much more frequently, for there are thousands of offices where a few stenographers or even a single secretary are sufficient. Office work is skilled labor, is better paid, and attracts women of better attainments and higher ideals than in department store or factory. Office relations are pleasant as well as profitable. The demands are exacting; labor at the typewriter, the proof-sheets, or the bookkeeper's desk is tiresome, but the society of the office is congenial, working conditions are healthful and cheerful in most cases, and there are many opportunities for increasing efficiency and promotion. The office has its hardships. Everything is on a business basis, and there is little allowance for feelings or disposition. There are days when trials multiply and an atmosphere of irritation prevails; there are seasons when the constant rush creates a wearing nervous tension, and other seasons, when business is so poor that occasionally there are breakdowns of health or moral rectitude; but on the whole the office presents a simpler industrial problem than the factory or the store.

211. =Transportation.=—A third industry that has its centre in the city but extends across continents and seas is the business of transportation. Manufactured goods are conveyed from the factory to the warehouse and the store, goods sold in the mercantile establishment are delivered from door to door, but enormous quantities of the products of economic activity are hauled to greater distances by truck, car, and steamship. The city is a point to which roads, railways, and steamship lines converge, and from which they radiate in every direction. By long and short hauls, by express and freight, vast quantities of food products and manufactured goods pour into the metropolis, part to be used in its numerous dwellings, part to be shipped again to distant points. Along the same routes passengers are transported, journeying in all directions on a multitude of errands, jostling for a moment as they hurry to and from the means of conveyance, and then swinging away, each on its individual orbit, like comet or giant sun that nods acquaintance but once in a thousand years.

The business of transportation occupies the time and attention of thousands of workers, and its ramifications are endless. It is not limited to a particular region like agriculture, or to towns and cities like manufacturing; it is not stopped by tariff walls or ocean boundaries. An acre of wheat is cut by the reaper, threshed, and carted to the elevator by wagon or motor truck. The railroad-car is hauled alongside, and with other bushels of its kind the grain is transported to a giant flour-mill, where it is turned into a whitened, pulverized product, packed in barrels, and shipped across the ocean to a foreign port. Conveyed by rail or truck to the bakery, the flour undergoes transformation into bread, and takes its final journey to hotel, restaurant, and dwelling-house. Similarly, every kind of raw material finds its destination far from the place of its production and is consumed directly or as a manufactured product. This gigantic business of transportation is the means of providing for the sustenance and comfort of millions of human beings, and in spite of the extensive use of machinery it requires at every step the co-operative labor of human beings.

212. =Growth of Interdependence.=—It is the far-flung lines of commerce that bind together the peoples of the world. Formerly there were periods of history, as in the European Middle Ages, when a social group produced nearly everything that it needed for consumption and commerce was small; but now all countries exchange their own products for others that they cannot so readily produce. The requirements of commerce have broken down the barriers between races, and have compelled mutual acquaintance and knowledge of languages, mutual confidence in one another's good intentions, and mutual understanding of one another's wants. The demands of commerce have precipitated wars, but have also brought victories of peace. They have stimulated the invention of improved means of communication, as the demands of manufacturing stimulated invention of machinery. The slow progress of horse-drawn vehicles over poor roads provoked the invention of improved highways and then of railroads. The application of steam to locomotives and ships revolutionized commerce, and by the steady improvements of many years has given to the eager trader and traveller the speedy, palatial steamship and the train de luxe.

Transportation depends, however, on the man behind the engine rather than on the mass of steel that is conjured into motion. Successful commerce waits for the willingness and skill of worker and director. There must be the same division and direction of labor and the same spirit of co-operation; there must be intelligence in planning schedules for traffic and overcoming obstacles of nature and human frailty and incompetence. The teamster, the longshoreman, the freight-handler, and the engineer must all feel the push of the economic demand, keeping them steadily at work. A strike on any portion of the line ties up traffic and upsets the calculations of manufacturer, merchant, and consumer, for they are all dependent upon the servants of transportation.

213. =Problems of Transportation.=—There are problems of transportation that are of a purely economic nature, but there are also problems that are of social concern. The first problem is that of safe and rapid transportation. The comfort and safety of the millions who travel on business or for pleasure is a primary concern of society. If the roads are not kept in repair and the steamship lanes patrolled, if the rolling-stock is allowed to deteriorate and become liable to accident, if engine-drivers and helmsmen are intemperate or careless, if efficiency is not maintained, or if safety is sacrificed to speed, the public is not well served. Many are the illustrations of neglect and inefficiency that have culminated in accident and death. Or the transportation company is slow to adopt new inventions and to meet the expense that is necessary to equip a steamer or a railroad for speed, or to provide rapid interurban or suburban transit. Poor management or single tracks delay fast freights, or congested terminals tie up traffic. These inconveniences not only consume profits and ruffle the tempers of working men, but they are a social waste of time and effort, and they stand in the way of improved living conditions. The congestion of population in the cities can easily be remedied when rapid and cheap transit make it possible for working men to live twenty or thirty miles out of town. The standard of living can be raised appreciably when fast trolley or steam service provides the products of the farms in abundance and in fresh condition.

Another problem is that of the worker. The same temptation faces the transportation manager that appears in the factory and the mercantile house. The expenses of traffic are enormous. Railways alone cost hundreds of millions for equipment and service, and there are periods when commerce slackens and earnings fall away. It is easier to cut wages than to postpone improvements or to raise freight or passenger rates. In the United States an interstate commerce commission regulates rates, but questions of wages and hours of labor are between the management and the men. Friction frequently develops, and hostility in the past has produced labor organizations that are well knit and powerful, so that the railroad man has succeeded in securing fair treatment, but there are other branches of transportation service where the servants of the public find their labor poorly paid and precarious in tenure. Teamsters and freight-handlers find conditions hard; sailors and dock-hands are often thrown out of employment. Whole armies of transportation employees have been enrolled since trolley-lines and automobile service have been organized. Fewer persons drive their own horses and vehicles, and many who walked to and from business or school now ride. Transportation service has been vastly extended, but there are continually more people to be accommodated, and motor-men, conductors, and chauffeurs to be adjusted to wage scales and service hours.

214. =Monopoly.=—A persistent tendency in transportation has been toward monopoly. Express service between two points becomes controlled by a single company, and the charges are increased. A street-railway company secures a valuable city franchise, lays its tracks on the principal streets, and monopolizes the business. Service may be poor and fares may be raised, unless kept down by a railroad commission, but the public must endure inconvenience, discomfort, and oppression, or walk. Railroad systems absorb short lines and control traffic over great districts; unless they are under government regulation they may adjust their time schedules and freight charges arbitrarily and impose as large a burden as the traffic will bear; the public is helpless, because there is no other suitable conveyance for passengers or freight. It is for these reasons that the United States has taken the control of interstate commerce into its own hands and regulated it, while the States have shown a disposition to inflict penalties upon recalcitrant corporations operating within State boundaries. It is the policy of government, also, to prevent control of one railroad by another, to the added inconvenience and expense of the public. But since 1890 there has been a rapid tendency toward a consolidation of business enterprises, by which railroads became united into a few gigantic systems, street railways were consolidated into a few large companies, and ocean-steamship companies amalgamated into an international combination.

215. =Government Ownership vs. Regulation.=—Nor did monopoly confine itself to transportation. The control of public utilities has passed into fewer hands. Coal companies, gas and electric light corporations, telegraph and telephone companies tend to monopolize business over large sections of country. Some of these possess a natural monopoly right, and if managed in the interests of the public that they serve, may be permitted to carry on their business without interference. But their large incomes and disposition to oppress their constituents has produced many demands for government ownership, especially of coal companies and railroads, and though for less reason of telephone and telegraph lines. Government ownership has been tried in Europe and in Australasia, but experience does not prove that it is universally desirable. There are financial objections in connection with purchase and operation, and the question of efficiency of government employees is open to debate. Enough experiments have been tried in the United States to render very doubtful the advisability of government ownership of any of these large enterprises where politics wield so large a power and democracy delights to shift office and responsibility. But it is desirable that the government of State and nation have power to regulate business associations that control the public welfare as widely as do railroads, telegraph-lines, and navigation companies. By legislation, incorporation, and taxation the government may keep its hand upon monopoly and, if necessary, supersede it, but the system which has grown up by a natural process is to be given full opportunity to justify itself before government assumes its functions. It is hardly to be expected that government regulation will be faultless, American experience with regulating commissions has not been altogether satisfactory, but society needs protection, and this the government may well provide.

216. =Trusts.=—The tendency to monopoly is not confined to any one department of economic activity. Manufacturing, mercantile, and banking companies have all tended to combine in large corporations, partly for greater economy, partly for an increase of profits through manipulating reorganization of stock companies, and partly for centralization of control. In the process, while the cost of certain products has been reduced by economy in operating expenses, the enormous dividend requirements of heavily capitalized corporations has necessitated high prices, a large business, and the danger of overproduction, and a virtual monopoly has made it possible to lift prices to a level that pinches the consumer. By a grim irony of circumstance, these giant and often ruthless corporations have taken the name of trusts, but they do not incline to recognize that the people's rights are in their trust. Not every trust is harmful to society, and certainly trusts need not be destroyed. They have come into existence by a natural economic process, and as far as they cheapen the cost of production and improve the manufacture and distribution of the product they are a social gain, but they need to be controlled, and it is the function of government to regulate them in the interests of society at large. It has been found by experience that publicity of corporate business is one of the best methods of control. In the long run every social organization must obtain the sanction of public opinion if it is to become a recognized institution, and in a democratic country like the United States no trust can become so independent or monopolistic that it can afford to disregard the public will and the public good, as certain American corporations have discovered to their grief.

217. =The Chances of Progress.=—Every economic problem resolves itself into a social problem. The satisfaction of human wants is the province of the manufacturer, the merchant, and the transporter, but it is not limited to any one or all of these, nor is society under their control. The range of wants is so great, the desires of social beings branch out into so many broad interests, that no one line of enterprise or one group of men can control more than a small portion of society. The whole is greater than any of its parts. There will be groups that are unfortunate, communities and races that will suffer temporarily in the process of social adjustment, but the welfare of the many can never long be sacrificed to the selfishness of the few. Social revolution in some form will take place. It may not be accomplished in a day or a year, but the social will is sure to assert itself and to right the people's wrongs. The social process that is going on in the modern city has aggravated the friction of industrial relations; the haste with which business is carried on is one of its chief causes; but the very speed of the movement will carry society the sooner out of its acute distresses into a better adjusted system of industry. So far most of the world's progress has been by a slow course of natural adjustment of individuals and groups to one another; that process cannot be stopped, but it can be directed by those who are conscious of the maladjustments that exist and perceive ways and means of improvement. Under such persons as leaders purposive progress may be achieved more rapidly and effectually in the near future.

READING REFERENCES

HADLEY: Standards of Public Morality, pages 33-96.

NEARING: Wages in the United States, pages 93-96.

NEARING AND WATSON: Economics, pages 241-255, 314-320.

VROOMAN: American Railway Problems, pages 1-181.

BOLEN: Plain Facts as to the Trusts and the Tariff, pages 3-236.

BOGART: Economic History of the United States, pages 186-216, 305-337, 400-418.

MONTGOMERY: Vital American Problems, pages 3-91.