UC-NRLF 
 
 MD 531 
 
 Memorandum 
 
 ON THE 
 
 Industrial Situation 
 After the War 
 
 (Garton Foundation) 
 
 REPRINTED BY 
 
 INDUSTRIAL RELATIONS DIVISION 
 UNITED STATES SHIPPING BOARD 
 EMERGENCY FLEET CORPORATION 
 
 PHILADELPHIA, PA. 
 
GIFT F 
 
Memorandum. 
 
 ON THE 
 
 Industrial Situation 
 After the War 
 
 (Garton Foundation) 
 
 REPRINTED BY 
 
 INDUSTRIAL RELATIONS DIVISION 
 UNITED STATES SHIPPING BOARD 
 EMERGENCY FLEET CORPORATION 
 
 PHILADELPHIA, PA. 
 

 - 
 
 
 
PREFACE 
 
 This Memorandum is the work of a group of men who came together, 
 at the instance of the Garton Foundation, for the purpose of discussing the 
 industrial situation in this country at the close of the present war. The 
 group included men of very varied views, in touch with both the Capitalist 
 and Employing Classes and Organised Labour, as well as with financial, 
 economic and administrative circles. As a result of their inquiries and of 
 correspondence and discussion with representatives of all parties to indus- 
 try, they became convinced that the return from war to peace conditions 
 would inevitably involve great difficulties, which might result, if not care- 
 fully and skilfully handled, in a grave outbreak of industrial disorder. 
 
 In the endeavour to find a solution of these difficulties, they were led to 
 analyse the more permanent causes of industrial friction and inefficiency, 
 and to seek the means by which these causes might be removed or their 
 action circumscribed. It is their belief that these means can be found and 
 that an emergency which threatened all classes of the community with 
 serious loss and hardship may be used as an opportunity for placing the 
 whole industrial life of the country on a sounder basis. 
 
 In that belief, this Memorandum was compiled. It has been the object 
 of its authors to keep always in mind the human as well as the economic 
 side of industry. They are conscious that this country has suffered much 
 in the past from the habit of sectional thinking, which divides our national 
 activities 'into water-tight compartments and regards the nation itself as 
 composed of detached or hostile classes. The keener consciousness of cor- 
 porate life, which is perhaps the most beneficial result of the present 
 struggle, has created an atmosphere in which it is easier to conceive of 
 industry as an inseparable part of the life of the nation; and of those con- 
 cerned in industry, whether as employers or employed, as co-workers in the 
 task of building up a future worthy of the sacrifices which have been made 
 during the war. 
 
 The Memorandum has already been privately circulated, to a con- 
 siderable extent, among employers of labour, leaders of working class 
 opinion, and those who have taken a prominent place in the discussion of 
 economic and social questions. A large number of criticisms and sugges- 
 tions have been received, which have been collated, carefully examined, and, 
 in many cases, incorporated in the Memorandum. The general tone of its 
 reception on all sides has been such as to encourage its publication as a con- 
 tribution to public discussion of what is perhaps the most urgent question, 
 after the immediate conduct of the war, with which the country is con- 
 fronted to-day. - Q 
 
 3 L-^ rJ 
 
 MQr; i Q -, 
 
It is evident that in order to avert the threatened dangers and to take 
 full advantage of the opportunity afforded by the circumstances of the war, 
 with its upheaval of existing conditions and its' challenge to accepted ideas, 
 study of the questions involved must begin while the war is still with us. 
 Many Government Committees and many non-official bodies are, in fact, 
 already at work upon various aspects of the problem. There is, however, 
 a danger that the number and complexity of the questions involved, and 
 especially of those relating to the actual period of demobilisation, may 
 divert attention from the broader aspects of industrial reconstruction and 
 the fundamental principles of industrial policy. The authors of the Mem- 
 orandum have endeavoured throughout to keep their eyes fixed upon the 
 fundamental facts of industrial life and the spirit by which it should be 
 animated, treating the more detailed problems of demobilisation and recon- 
 struction with a view to showing them in their right proportion and relation 
 to the main issues. 
 
 The Trustees of the Garton Foundation (The Kt. Hon. A. J. Balfour, 
 M.P. ; The Kt. Hon. Viscount Esher, G.C.B., and Sir Kichard Garton) have 
 permitted the devotion of its staff and resources to this work in the belief 
 that sincere 'and intelligent inquiry with regard to these questions cannot 
 fail to be of national service. While they do not in any way identify them- 
 selves with the conclusions arrived at by its authors, they believe that 
 aothing but good can come of submitting them to the test of public discus- 
 sion. In that belief they have sanctioned its publication in its present 
 form. 
 
SYNOPSIS* 
 
 A. THE INDUSTRIAL SITUATION TODAY (1-12) 
 
 Grave apprehensions entertained by Employers and Employed. ( 1 ) 
 
 The appearance of present prosperity deceptive. (2-4") 
 
 Industrial unrest otily suspended. (5-7) 
 
 The dangers of sectional thinking. (8-11) 
 
 Relation of industrial to social and political problems. (12) 
 
 B. THE EFFECTS OF THE WAR ON THE INDUSTRIAL SITUATION 
 
 (13-63) 
 
 I. Employment: (15-25) 
 
 (i) The Supply of Labour. (16-19) 
 
 (a) Demobilisation. (16-17) 
 
 (&) Diminution of Government Orders. (18) 
 
 (c) Stopgap and emergency workers. (19) 
 (ii) The Demand for Labour. (20-23) 
 
 (a) Repair and reconstruction demand. (21) 
 
 (&) Revival of private demand. (22) 
 
 (c) Revival of foreign trade. (23) 
 
 PROSPECTS OF EMPLOYMENT: No "shortage of work" or ''surplus of labour," 
 but a good deal of unemployment due to difficulties of re-adjustment. (24-25) 
 
 II. Earnings: (26-39) 
 
 The national income cannot exceed the sum of goods and services produced 
 
 (or received from without). (26) 
 Causes tending to lessen Production: (27-33) 
 (a.) Men killed and incapacitated. (27) 
 ( & ) Emigration. ( 28 ) 
 
 Losses by death or emigration will not be wholly compensated by 
 reduction in number of consumers, or by new workers. 
 (29-30) 
 
 (c) Deterioration of National Plant. (31) 
 
 (d) Effects of Overwork. (32) 
 
 (e) Suspension of Industrial Education. (33) 
 Causes tending to increase Production : ( 34-37 ) 
 
 Many people may work harder and former non-producers may con- 
 tinue working. (34) 
 
 Conversion of new munition plant. (35) 
 Better organisation of production. (36) 
 Reduction of Income from Abroad. (38) 
 
 NET EFFECT OF THE WAR ON EARNINGS : Unless a special effort is made the 
 national income is likely to be lower than before the war, and the likelihood of 
 quarrelling over its apportionment will be increased. (39) 
 
 IH._The Distribution of Earnings: (40-46) 
 
 New factors affecting questions of distribution. (40) 
 (a) High Prices. (41) 
 (&) High War Wages. (42-43) 
 
 Weekly earnings and rates per hour. (42) 
 
 Effect of Prices on Real Wages. (42) 
 
 Effect of State allowances. (43) 
 
 (c) War Loans and Taxation: Effect on distribution of national 
 
 income. (44) 
 
 (d) Dearness of Capital. (45) 
 
 *The numbers in brackets relate to paragraphs, not to pages. 
 
 5 
 
PROSPECTS WITH REGARD TO THE DISTRIBUTION OF EARNINGS: The operation 
 of the above factors will be unfavourable to industry, and particularly to labour. 
 Unless output can be expanded, conflicts between employers and employed are 
 probable. (46) 
 
 IV. Capital and Credit: (47) 
 
 Fixed Capital will have depreciated; fluid capital will be scarce and dear; 
 we may be threatened with a partial collapse of credit when embargoes 
 are removed and financial obligations have to be met. 
 
 V. Spirit and Temper: (48-63) 
 
 The difficulties of the situation may be complicated by an ugly temper arising 
 from several causes (48-49) 
 (a) Economic Discontent. (50-54) 
 
 Low real wages and unemployment. (50-51) 
 
 Cessation of Separation Allowances. (52) 
 
 The war has strengthened the demand for better conditions. (53) 
 
 Capital and Management will be hit by restricted output, increased 
 
 cost of production and heavy taxation. (54) 
 ( b ) Class-Suspicion. ( 55 ) 
 
 Removal of Trades Union safeguards; war-time strikes; fear that 
 soldiers may be used for strike-breaking or as "black-leg" labour. 
 (c) Psychological Reactions: (56-62) 
 
 Reaction following on war-time efforts. (57) 
 Resentment against burdens of war. (58-60) 
 "Wrecker " doctrines. (61) 
 Reactionaries in Employing 'Class. (62) 
 
 PROSPECTS AS TO SPIRIT AND TEMPER: If not checked, an ugly spirit and 
 temper may easily develop and render a satisfactory solution of industrial prob- 
 lems impossible. (63) 
 
 C. THE PROBLEM AND SOME REMEDIES (64-132) 
 l._The Problem: (64-78) 
 (i) The Emergency Problem: (65-70) 
 
 Every class has much to lose by industrial conflict. The event is 
 uncertain and the prize of victory will perish in the struggle, 
 (ii) The Constructive Problem: (71-72) 
 
 The Constructive Problem is concerned both with meeting the more 
 lasting effects of the war, and with the permanent difficulties 
 of our industrial life. (71) 
 The great opportunity. (72) 
 
 If the measures by which the emergency is handled can be such as 
 will make for permanent reconstruction, so much the better. 
 (73) 
 
 Both the Emergency and the Constructive Problem are dual in their 
 nature. The direct effects of the war can be dealt with by 
 specific remedial measures; the underlying problem of indus- 
 trial policy and relations requires broader and more far- 
 reaching treatment. (74-78) 
 
 II. Emergency Measures: (79-93) 
 (i) Demobilisation: (79-87) 
 
 (a) The finding of jobs. (79-80) 
 
 (&) The assuring of decent wages. (81-83) 
 
 (c) Settling men on the land. (84) 
 
 (d) Teaching men trades. (85) 
 
 (e) The new workshops. (86-87) 
 
 6 
 
C. THE PROBLEM AND SOME REMEDIES Continued. 
 
 (ii) The Exodus from the War Industries: (88-92) 
 
 The number affected. (88) 
 
 Transferred workers. (89) 
 
 New workers. (90) 
 
 Boy and girl labour. (91) 
 
 The remedies. (92) 
 (iii) Industrial Friction: (93) 
 
 Whatever remedial measures may be adopted, friction can only be 
 avoided by agreement between Capital, Management and 
 Labour as to the future organisation of industry. 
 
 III. Constructive Measures: (94-132) 
 
 (i) INDUSTRIAL EFFICIENCY: (94-112) 
 (a) Physical efficiency. (95) 
 (6) Mental and manual efficiency The Primary Schools. (9f>) 
 
 (c) Continuation education. (97) 
 
 (d) Labour-saving machinery. (98-102) 
 
 (e) Works organisation. (103-105) 
 
 (f) Labour Legislation. (106) 
 
 (g) Reform of the Patent Laws. (107) 
 
 (h) The Encouragement of Research. (108) 
 (i) Improved methods of distribution. (109) 
 
 (k) Banking and credit facilities. (110-111.) The Danger of Panic 
 Economy. (112) 
 
 (ii) INCREASED SAVING: (113-117) 
 
 Capital for the repair and improvement of the national plant and 
 the reconstruction of devastated areas can only be furnished by 
 people producing much, spending little on consumption of 
 goods, and saving the balance. (113) 
 Need for education in the principles of economy. (114) 
 The distribution of national wealth and its effect upon saving. (115) 
 Working-class saving and the dangers of injudicious "thrift." (116) 
 The relation of saving to demand. (117) 
 
 (iii) ASSURED MARKETS: (118-128) 
 (a) Home Demand: (119-122) 
 
 The methods of capital renewal. (119) 
 
 The effect of protective tariffs. (120-122) 
 ( & ) Empire Markets : ( 123 ) 
 
 The question of Imperial Fiscal Union. 
 
 (c) Foreign Markets: (124-126) 
 
 The organisation of selling; consular service; adaptability and 
 
 languages; Ministry of Commerce. (124) 
 Prestige. (125) 
 The connection between home and foreign markets. (126) 
 
 (d) Allied Zollverein and trade war. (127-128) 
 
 (iv) LAND: (129-130) 
 
 The question of land ownership and economic rent. 
 
 (v) AGRICULTURAL: (131) 
 
 The need for better organisation and education. 
 
 The above remedial measures, though important, will not solve the funda- 
 mental question of Industrial Unrest. (132) 
 
 D. THE FUNDAMENTAL PROBLEM (133-180) 
 
 To understand the fundamental problem we must examine the essentials of 
 
 industrial welfare. (133) 
 The foundation of industrial welfare is production : its volume, its quality 
 
 and the conditions of work. (134) 
 Increased saving, for the renewal of capital and plant is an essential of 
 
 increased output. (135) 
 
D. THE FUNDAMENTAL PROBLEM Continued. 
 
 INCREASED PRODUCTION, INCREASED SAVING, INCREASED CONFIDENCE 
 are the keys to the whole problem. (136) 
 
 Limitation of Production: 
 
 By Employers. (137-138) 
 
 By Labour. (139-140) 
 
 Why and how restrictions should be removed. (141) 
 
 THE FUNDAMENTAL QUESTION THE RELATION BETWEEN EMPLOY- 
 ERS AND EMPLOYED. (142) 
 
 The interests of Employers and Employed are concurrent as 
 regards productiori and only partly antagonistic as regards 
 distribution. (143-144) 
 
 The question of status. (145-147) 
 
 The grievances of Employers. (148-149) 
 
 So long as the fundamental interests of Employers and Employed 
 . are believed to be purely antagonistic, production and saving 
 will be hampered. (150-152) 
 
 The four guiding principles. (153) 
 
 (a) The necessity of increased efficiency in production. 
 (6) Increased efficiency must be sought for in better methods and organi- 
 sation, and in a new attitude towards Industry. 
 
 (c) These reforms can only be accomplished by the co-operation of 
 Labour, Management and Capital. 
 
 (d) In order to secure this co-operation, Labour must have a voice in 
 matters relating to its special interests. 
 
 In dealing with an immediate problem we must work with the materials at 
 hand. Gradual progress achieved by co-operation is better and more 
 certain than revolutionary methods. (154) 
 
 Demands made on all classes and the necessity of meeting them. 
 
 (155-158) 
 The State cannot move in advance of public opinion. (159) 
 
 THE FUNCTIONS OF CAPITAL, MANAGEMENT AND LABOUR. (160) 
 
 Inter-relation of these functions and consequent common interests. 
 
 (161-162) 
 Why the possibilities of co-operation are not recognised. The causes of 
 
 conflict. (163-169) 
 THE OUTLINES OF A SETTLEMENT. (170-180) 
 
 Appendix A. A suggested Experiment. 
 Appendix B. Works Lectures. 
 
A. The Industrial Situation Today 
 
 1. The probable course of Trade and Industry after the war is already 
 engaging the attention of numerous official and non-official bodies. Some 
 of these bodies are concerned with the difficulties of demobilisation and a 
 return from war to peace activities ; others with the possibilities of develop- 
 ment and expansion which the changed political and economic conditions 
 appear to hold out to us. Both aspects of the problem have attracted a 
 considerable amount of attention; but it is doubtful whether there is as yet 
 any widespread public recognition either of the dangers by which we shall 
 be threatened, or of the greatness of the opportunity which will be presented 
 to us. Among those who are closely connected with Industry, whether as 
 Employers or as leaders of Organised Labour, there are many who regard 
 the future with grave apprehension. Both in the difficulties inseparable 
 from readjustment and in the more permanent effects of the war upon our 
 economic life, they foresee the occasion of a renewed outbreak of industrial 
 friction which would not only obstruct our commercial progress, but 
 seriously cripple our power of recovery. 
 
 2. The seeming prosperity of the country during the war has obscured 
 the realities of the situation. Because the war has not given rise to unem- 
 ployment and the financial crisis which followed on its outbreak was suc- 
 cessfully tided over', many observers ignore the industrial dislocation which 
 has taken place. Because there has been a general cessation of disputes 
 between Labour and Capital, which has enabled us to concentrate our 
 energies upon the vigorous prosecution of the war, they imagine that the 
 problem of industrial unrest has in some way been solved. 
 
 3. These conclusions are altogether contrary to the facts of the case. 
 The prosperity of the present is artificial and transient. It is due in part 
 to strenuous exertion which cannot be continued indefinitely; in part to 
 sacrifices which go unrealised because they are not proclaimed; in part to 
 the depletion of accumulated stocks; in part to the suspension of expendi- 
 ture on national plant which, if continued, would end in dilapidation; in 
 part to the temporary absorption into industry of people who will not con- 
 tinue to be producers after the war; in part to borrowing and recalling 
 money from abroad. It resembles in large measure the lavishness of the 
 spendthrift which leads to bankruptcy. The absence of unemployment is 
 due, not to thriving trade, but to the withdrawal of several million men 
 from the labour market, the inflation of the currency, and the concentration 
 of purchasing power in the hands of the State, which has not to study the 
 absorptive power of commercial markets for the disposal of its purchases, 
 but uses them to destruction as fast as they are produced. It is not till 
 these stimulants are removed and we are left once more to the operation of 
 
 9 
 
the ordinary laws of supply and demand, complicated by the difficulties of 
 readjustment to normal conditions, that the real situation created by the 
 war will become obvious. 
 
 4. It may be said that the success with which our national organisa- 
 tion and activities were adapted to the circumstances of the war gives a 
 fair promise of similar success in the readjustments necessitated by peace, 
 But the problems presented by a temporary crisis in which economic consid- 
 erations sink into a secondary place and the strongest possible appeal is 
 miade to the spirit of self-sacrifice in all classes, afford no real parallel to 
 those presented by a return to normal conditions after a long period of dis- 
 location. . The factors mentioned in the preceding paragraph, while they 
 have eased the situation during the war, will become a source of weakness 
 as soon as peace is signed. In some cases, such as the withdrawal of men 
 from the labour market, their operation will be exactly reversed. In others, 
 such as the depletion of stocks and the suspension of expenditure on 
 national plant, immediate relief has been purchased by mortgaging the 
 future. The war has, in these two regards, been paid for by drafts upon 
 the prospective wealth which will have to be met at a time when the enthusi- 
 asm which sustains a nation during war has given place to the reaction that 
 usually follows a period of tension. The rapid recovery of Industry from 
 the shock of war affords no ground for dismissing lightly the difficulties 
 inherent in a return to peace conditions. On the contrary, an examination 
 of the causes of that recovery reveals additional grounds for viewing those 
 difficulties with concern. The prospect is a grave one and it is likely to be 
 further complicated by the spirit in which it is regarded by both parties to 
 Industry. 
 
 5. Even were the present relations of Employers and Employed 
 entirely harmonious, we could not feel complete confidence in the contin- 
 uance of that harmony after the war. But such is not the case. Even 
 under the stress of war there is ill-feeling, suspicion, and recrimination. 
 Charges have been made against each side of placing personal and cl;is> 
 interests before national welfare, and of using the national emergency to 
 snatch present gains and to strengthen its strategical position for the 
 resumption of industrial hositilities. Employers have pointed to extor- 
 tionate wage demands, broken time, slackness, insubordination, and sullen 
 resistance to temporary changes, the necessity for which has been opcnly 
 acknowledged. The workers have pointed to war profits, to the virtual 
 enslavement of labour by the misuse of powers conferred by the State, to 
 attempts to undermine and weaken the Unions and so to establish an. 
 ascendency which may be maintained after the war. They lay stress, also, 
 on the increased cost of living, which they attribute in the main to the 
 deliberate action of manufacturers and traders, more studious of their own 
 than of the national advantage. The closing of the ordinary channels for 
 the ventilation of grievances has served only to intensify the bitterness of 
 such feelings. 
 
 10 
 
6. There is a prevalent belief that the "brotherhood of the trenches" 
 and workshops, the spirit of co-operation and self-sacrifice which has made 
 possible our efforts in the war, will remain as a permanent factor in our 
 national life. A great deal has been said of the effect of discipline upon 
 the men who have served at the front, and it is widely assumed that on 
 their return they will be more amenable to management and less responsive 
 to agitation. Those who argue thus do so mostly on general principles and 
 probabilities. But it is no use arguing that certain conditions ought to 
 produce certain effects if the facts show that they do not. There is evidence 
 that many of the men who return from the trenches to the great munition 
 and shipbuilding centres are, within a few weeks to their return, amongst 
 those who exhibit most actively their discontent with present conditions. 
 Among those who have fought in Flanders or who have been employed in 
 making shells at home, there are many who look forward to a great social 
 upheaval following the war. To some this may be distressing and almost 
 incredible. The facts remain, and the facts must be faced. 
 
 7. So long as the country is actually at war, this spirit is likely to be 
 held in check both by the abnormal conditions of State control and by the 
 patriotism of the mass of the people. So lofig as the peril from without 
 remains the supreme factor, we may look to the workmen to forego his 
 most .cherished safeguards and to employers and the propertied classes to 
 bear patiently restriction of profits and an unparalleled burden of taxation. 
 But we have had signs already, in the war-time strikes, in the denunciations 
 of profiteering, and in the evidence of a great body of suppressed resent- 
 ment on both sides, which does not as yet come to the surface, that the 
 industrial peace is only a truce. It would be a mistake to assume that this 
 truce will survive the immediate pressure of foreign war which brought 
 it about. 
 
 8. The truth is that the war has effected a temporary alliance between 
 different parties and different classes similar to that frequently effected 
 between States. Just as nations formerly bitterly opposed have been united 
 in face of a common peril, so Liberal and Tory, Labour and Capital, have 
 united to-day for a specific purpose. When that purpose has been achieved 
 the alliance will break up, unless more permanent ties of interest and sym- 
 pathy can be created. 
 
 9. For aid in the creation of such ties we can, indeed, look to that 
 quickened sense of corporate responsibility which the. war has developed. 
 But for this purpose it will not suffice to rely upon any vague sentiment of 
 goodwill. We have for so long been accustomed to consider the community 
 as divided into classes having neither common aims nor common interests, 
 and to regard the operations of industry as something apart from the moral 
 and intellectual life of the nation or of the individual, that it will not be 
 easy to carry into the industrial sphere that spirit of united effort and high 
 endeavour which has been awakened by the great conflict. The workman's 
 sense of loyalty in times of peace has been excited by his Union or by his 
 class rather than by any conception of national unity. The employer's 
 
business patriotism has stopped short at the conception of successful resist- 
 ance to foreign competition. By both alike the internal organisation of 
 industry has been considered as a purely domestic affair, a business bargain 
 to be arrived at by a compromise between competing interests. The events 
 of the past two years have emphasised both the advantage of co-ordinated 
 action and the closeness with which Industry is linked to every other 
 element of our national life and strength. But to bring home these truths 
 to the bulk of Employers and Employed, it will be necessary to make very 
 clear the relations between the various parties to Industry, and between 
 Industry itself and social and political development. The unity of national 
 effort in the war has arisen mainly from the clearness of the issues involved 
 and the force with which they have been brought home to every section of 
 the people. In order to achieve a similar unity of purpose and effort in the 
 activities of peace, it will be necessary to make the issues equally plain and 
 to embody in the form of a complete policy the principles which underlie 
 them. 
 
 10. The idea that the united front shown by the country to the 
 external enemy implies of itself the burial of class hatred and suspicion 
 and that the suspension of controversy during the war foreshadows the 
 cessation of industrial disputes after the war, is dangerous just because 
 it is so attractive. The natural desire to accentuate the appearance of 
 unity and minimise internal differences leads us to treat as negligible 
 sections of public opinion which are really powerful and may become pre- 
 dominant. The spirit of patriotism which induces the majority of all 
 classes to remain silent as to their grievances is construed to mean that the 
 feeling of grievance does not exist. At the same time that criticism is de- 
 nounced as unpatriotic, abstention from criticism is supposed to imply 
 unqualified approval. 
 
 11. The war has not put an end to industrial unrest. Every one of 
 the old causes of dispute remains, and others of a most serious nature have 
 been added in the course of the war. The very moderation and unselfish- 
 ness shown by the responsible leaders of Organised Labour are looked upon 
 by important sections of their following as a betrayal of the cause and by 
 some Employers as a tactical opportunity. The efforts of the Government 
 to safeguard the interests of the workers are likely to give rise to unrea- 
 sonable demands for future action on the one side and ungenerous criticism 
 011 the other. The difficult and complex problem of the return to peace 
 conditions will bristle with thorny questions only to be solved successfully 
 by the clear-sighted and unselfish co-operation of all concerned. There are 
 too many indications that they may be approached in a spirit of passion 
 and suspicion which would render a satisfactory solution impossible. 
 
 12. This would be a serious matter even if the industrial problem 
 stood alone. Failure to cope with the economic situation must necessarily 
 involve widespread loss and misery. But the industrial problem is inex- 
 tricably entangled with social and political development. It is not merely 
 
 12 
 
that a certain minimum standard of material well-being is a necessary con- 
 dition of moral and intellectual advance, or that commercial prosperity is 
 an important factor in the strength and prestige of the State. Industry 
 itself has a human side. The discontent of Labour is not exclusively a 
 matter of wages and hours of work. It is becoming increasingly evident 
 that it is based to a very large extent upon questions of status and social 
 conditions. It is not to be desired, however, that the matter should be 
 considered from a class or sectional standpoint. Industrial life is simply 
 one phase of the national activities, and the responsibility of seeing that 
 the conditions of industrial life are such as make for conscious and efficient 
 citizenship rests upon the community as a whole. The spirit in which both 
 Employers and Employed regard their common work will colour not only 
 their relations to each other, but their general attitude towards the cor- 
 porate life of the nation. That attitude has been roughly challenged by the 
 war, which has profoundly disturbed the current both of circumstances and 
 of ideas. It has shaken men's faith in the permanence of existing condi- 
 tions and accustomed them to the contemplation of great changes and to the 
 possibility of extraordinary exertions. The moment is a propitious one for 
 an attempt to understand more clearly than in the past the fundamental 
 principles of industrial relations and their place in the national life. The 
 forces of change are visibly at work, and it rests with us whether we allow 
 them to hurry us blindly with them, or direct them along the path of 
 ordered progress. 
 
 B. The Effects of the War on the Industrial Situation 
 
 13. The problems arising directly from the effects of the war are, in 
 themselves, sufficiently serious. It has involved a dislocation of industry, a 
 diversion of labour and capital and general effort to purely military objects, 
 which has not only made inroads on the national wealth, but has introduced 
 altogether new factors into the problems of our industrial life. To accom- 
 plish the change from war to peace conditions without undue friction or 
 loss, to accommodate our methods and organisation to the new burdens and 
 altered circumstances, is a task as heavy as any trading community has had 
 to face. 
 
 14. The industrial effects of the war may be grouped under five main 
 heads: Employment; Earnings; Distribution of Earnings; Capital and 
 Credit; Spirit and Temper. 
 
 I. EMPLOYMENT 
 
 15. The problem of Employment has two phases: (1) the Supply of 
 Labour; and (2) the Demand for Labour. 
 
 (i) The Supply of Labour 
 (a) DEMOBILISATION 
 
 16. The first factor to be considered is the return of some three or 
 four million men from military to civil life. It is impossible to forecast 
 
 i3 
 
the establishments which may be considered necessary after the war, but 
 even on the assumption that our standing army is raised to a Continental 
 standard, there will probably be somewhere about three million men to be 
 re-induced into civil employment. 
 
 17. The problem of demobilisation is already receiving attention with 
 a view to preventing the flooding of the labour market. The cost of main- 
 taining forces on the present scale must, however, set a limit to the period 
 of demobilisation. 
 
 (&) DIMINUTION OF GOVERNMENT ORDERS 
 
 18. In addition to men actually under arms, those who have been 
 diverted from their normal employment to the manufacture of munitions 
 and material of war will have to return to civil industry as the Government 
 orders for naval construction, artillery, ammunition and equipment are 
 reduced to the peace scale. 
 
 (c) STOPGAP AND EMERGENCY WORKERS 
 
 19. The necessities of the war have brought into active employment 
 a large number of people, especially women, who had not previously been 
 engaged in industry. Some of these have been introduced into various 
 trades to take the place of men serving with the colours. Others have been 
 called into activity by the abnormal demand for munitions of war. Esti- 
 mates of the increase in the number of women workers in the productive 
 side of industry vary between 200,000 and 300,000, whilst the number of 
 those engaged in commercial and institutional occupations offices, shops, 
 railways, administration, education is estimated to have increased by 
 something over 300,000; but it is to be remembered that a great proportion 
 of these are women who in the ordinary course would have retired from 
 industry. A large number of former non-producers (in the industrial sense) 
 have none the less been added to the labour force of the country. It is 
 probable that many of these will desire to remain wage-earners. Apart 
 from the attraction of economic independence, some will be compelled to 
 seek continued employment by the death or disablement of those on whom 
 they were dependent, or by diminution of income through the financial 
 results of the war. In addition, there are large numbers of women who 
 have left their ordinary employment to take up munition work. These 
 women, as well as the men. who have been transferred from civil to war 
 industries, will have to return to their former occupations or find other 
 jobs. A large number of boys have also been introduced into industry, 
 and the total number of those who have become workers for the first time 
 during the war, or have been transferred from one form ,of employment to 
 another as the direct result of war conditions, will probably amount to 
 something like a million and a half, divided fairly equally between the 
 sexes. When the special necessities of their war employment come to an 
 end, all these will be added to the general reservoir from which the supply 
 of labour is drawn. 
 
 14 
 
(ii} The Demand for Labour 
 
 20. The demand for Labour will arise from three sources ; one directly 
 connected with the war, the others representing a return to normal 
 conditions. 
 
 (a) REPAIR AND RECONSTRUCTION DEMAND 
 
 21. The repair and replacement of property damaged or destroyed 
 during the course of the war will be an important factor in providing im- 
 mediate work. In this country the amount of property destroyed is com- 
 paratively small; but there will be a demand for new tonnage to replace 
 vessels sunk, for commercial motors and other material to replace those 
 used for war purposes. Roads cut up by use for heavy military transport 
 will require mending. Plant and machinery adapted to war purposes or 
 left idle through stagnation of trade will need alteration and repair. Re- 
 pairs and renewals postponed for the period of the war will have to be 
 carried out. Depleted trading and domestic stocks will have to be replen- 
 ished. In the devastated districts of Belgium, France and Poland recon- 
 struction on a big scale will be necessary. Roads, bridges, railways, fac- 
 tories, machinery, houses, churches, will have to be reconstructed or re- 
 placed. In all this work our foundries and factories will find their 
 opportunity. 
 
 (fc) REVIVAL OF PRIVATE DEMAND 
 
 22. Whilst the daily expenditure of some munition workers and gov- 
 ernment contractors, and of some recipients of war allowances, has largely 
 increased during the war, the private expenditure of the majority of people 
 has been considerably reduced. They have spent as little as possible on new 
 clothes, new furniture, books, utensils, decorations. Such demands may be 
 regarded as in part postponed and accumulating. How far people will have 
 the means to make their demands effective will depend on the general indus- 
 trial and financial position, but it is to be expected that in the relief and 
 reaction following the declaration of peace money will be more freely spent 
 and there will be an increase in the demands of one section of the public 
 which will more than offset the decrease in the expenditure of other 
 sections. 
 
 (c) REVIVAL OF FOREIGN TRADE 
 
 23. We may hope also for a revival of the Foreign Demand, but we 
 shall be faced by foreign competition in overseas markets, perhaps still 
 keener than before the war, and the size of the demand itself will depend 
 largely upon financial conditions. It is certain, however, that many 
 branches of commerce suspended by the war will revive. Unfulfilled con- 
 tracts will have to be executed. Orders which have been held back owing 
 to difficulties of transport, or to the diversion of labour from industry to 
 war service in this country, will come forward. The release of shipping 
 taken over for war purposes will enable the foreign countries most affected 
 to make good a long period of interrupted communication. There will 
 
 -15 
 
be a loss of German and Austrian orders, but this loss will be largely com- 
 pensated by increased trade with our Dominions and Allies, whilst the 
 chief neutrals, who have on the balance considerably profited by the war, 
 will provide unusually good markets. Taking all these factors together, 
 it is probable that unless a violent dislocation of the foreign exchanges takes 
 place, there will be a considerable revival of foreign trade, even apart from 
 purely reconstructive orders. It may, however, be some time before it 
 reaches the pre-war level. 
 
 PROSPECTS OF EMPLOYMENT 
 
 24. Against the effects of demobilisation, the cessation of Government 
 orders for war work, and the addition of new workers to the labour market, 
 we can, therefore, set off three great sources of employment the necessity 
 for reconstructive work, the revival of private buying arid the revival of 
 foreign trade. So far as we can forecast the net effect of these factors, we 
 may expect a considerable amount of unemployment, due not to "shortage 
 of work" or "surplus of. labour," but to the general dislocation of industry 
 caused by the war and the difficulties of readjustment. 
 
 25. The immediate problem will, indeed, be rather the adjustment 
 than the provision of employment. The returned soldiers and discharged 
 munition workers will have to be absorbed into the trades where the demand 
 is greatest. Emergency workers, employed on Government contracts, will 
 have to be found a place in civil industries. In cases where men now 
 serving have been guaranteed replacement on their return, the stopgap 
 workers will have to seek other occupation. In many cases, the experience 
 of the war has shown that a workshop or office can be run effectively by a 
 smaller staff than hitherto and men whose places have not been guaranteed 
 may have to go elsewhere. It is probable that many clerical workers and 
 male domestics will have to turn to industrial employment, owing to the 
 competition of female workers and the continued reduction of establish- 
 ments. The work of reconstruction and the effect of orders held back 
 for the period of the war will create an abnormal demand in special 
 trades. The whole machinery of industry and of home and foreign trade 
 will have to be readjusted to normal conditions. To carry out this com- 
 plicated task will tax both the goodwill and ingenuity of all con- 
 cerned, if it is to be accomplished without temporary local distress of a 
 more or less serious character. 
 
 II. EARNINGS 
 
 26. The first step in any enquiry into earnings is the realisation that 
 wealth cannot be distributed before it is produced; and that the national 
 income cannot exceed the aggregate value of goods produced and services 
 rendered within the country or received from without in payment for 
 goods and services, or as interest on foreign investments. So stated, the 
 proposition will be recognised as a truism, but a failure to realise its truth 
 lies at the root of a host of economic fallacies, especially on the part of 
 
 16 
 
those who concern themselves wholly with distribution and those who pre- 
 scribe some single specific as the cure for every national evil. The founda- 
 tion of prosperity is production and many causes will tend to reduce pro-, 
 duction after the war. 
 
 Causes Tending to Lessen Production 
 (a) MEN KILLED AND INCAPACITATED 
 
 27. A very large number of those formerly engaged in productive work 
 will have been killed, or wholly or partly incapacitated. We can only guess 
 at the figure, but it may probably be put without exaggeration at over half 
 a .million. To these must be added a cetaiii number, who, though their 
 names have not appeared in the lists of sick or wounded, have suffered 
 in body or in mind under the severe conditions of trench warfare and will 
 feel the effects of the strain in after life. 
 
 (ft) EMIGRATION 
 
 28. Of the men who come back it is at least possible that we shall 
 lose large numbers through emigration. Many will have become discon- 
 tented with sedentary occupations and will prefer the free and open-air 
 life of the Oversees Dominions. Many will seek better prospects abroad 
 through fear of the hard conditions likely to be found at home. Such has 
 been the common experience of nations after great wars, and in this case 
 the Dominions will themselves have lost a large number of workers and 
 will be the more inclined to encourage immigration. 
 
 29. When a man in the prime of life dies or emigrates, it is a real 
 loss to the home country. It is true that he has consumed as well as pro- 
 duced, and when he is gone there is a consumer as well as a producer less. 
 But an adult man normally produces two or three times as much as he per- 
 sonally consumes. He has to produce enough in his working years to pro- 
 vide for the up-bringing of children and for maintenance in old age. Or, 
 looking at it in another way, the rearing, educating and training of a com- 
 petent producer entails a cost of several hundred .pounds to the community 
 and the expenditure vested in him is lost to that community when he dies 
 or leaves and settles abroad. 
 
 30. Even assuming the number of new workers to equal the total num- 
 ber lost by death, disablement or emigration, we shall still be faced by a 
 diminution in the ranks of our most efficient producers, for which the new 
 and imperfectly trained labour introduced during the war will form only a 
 partial substitute. 
 
 (c) DETERIORATION OF NATIONAL PLANT 
 
 31. The national plant will have seriously deteriorated. By "national 
 plant" is meant the whole machinery of production and distribution with 
 which the industries of the country are carried on factories, workshops, 
 machines, tools, railways, roads. While certain trades have been obliged 
 to maintain themselves at the highest level of efficiency, others less directly 
 
associated with war work have been largely at a standstill. Renewals and 
 improvements have had to stand over till after the war; machinery has de- 
 teriorated through enforced idleness and lack of attention. The permanent 
 way and rolling-stock of our railways, the upkeep of our roads, have been 
 perforce neglected. All these factors make for diminished efficiency and 
 reduced production. 
 
 (cZ) EFFECTS OF OVERWORK 
 
 32. In the war industries many employers and employees have been 
 working long hours, in some cases with no week-end break and no holidays. 
 The strain of such continued over-exertion can be borne for a time, but its 
 effects are felt later. Some diminution of productive capacity must be 
 allowed for on this count. 
 
 (e) SUSPENSION OF INDUSTRIAL EDUCATION 
 
 33. Finally, the suspension of industrial education will necessarily 
 bear fruit in lessened efficiency. Our young men have left their colleges 
 and technical schools for the trenches. The laboratories and training 
 shops have been turned into cramming establishments for munition work- 
 ers. Apprentices and improvers have been withdrawn from the trades 
 which they were learning. Boys and girls who would have been appren- 
 ticed to various trades have gone to blind-alley work in the munition shops. 
 In addition to this interference with directly vocational training, the 
 ordinary schools have suffered from the withdrawal of teachers, the intro- 
 duction of less qualified assistants and the interruption of training courses. 
 Unless an effort is made to make up the leeway, there is a danger that chil- 
 dren now in the schools will arrive at the age for vocational instruction 
 with their general intelligence and capacity for learning less fully developed 
 than might have been the case. 
 
 Causes Tending to Increase Production 
 
 34. Against the above must be set a number of new factors tending 
 to increase the national output. In many ways the war has acted as a 
 stimulus to industry. While the strenuous exertions of those engaged in 
 war industries may be followed by a reaction, it is probable that on the 
 whole the habits acquired during the war may result in raising the general 
 average of application. Many may work harder and more efficiently than 
 they did. To this end the effort to recover, in harder circumstances, the 
 standard of living maintained before the war will materially contribute. 
 Some at least of those who survive the ordeal of the trenches will come 
 back keener, quicker and more physically fit than they went. The number' 
 of former non-producers who continue working will probably be large, and 
 in many quarters they have revealed unsuspected adaptability and 
 endurance. 
 
 35. Much, though by no means all, of the special plant erected for 
 war purposes can be adapted to peace industries. In some cases, as in the 
 shipbuilding and army clothing branches, it will be as readily available 
 
 18 
 
for manufacturing for the peace markets as for supplying naval and mili- 
 tary requirements. A large number of buildings and machine tools erected 
 during the war can be taken over with little or no alteration. Others can 
 be converted to the uses of ordinary trade in the same way as those existing 
 before the war were adapted to the manufacture of munitions. 
 
 36. Under the stress of war there has arisen a keener appreciation 
 of the need for scientific production. In many trades great strides have 
 been made in the direction of standardisation of parts, better management 
 of the supply of raw material and better organisation of business. A 
 knowledge has been gained of special processes hitherto monopolised by 
 German or Austrian firms. Our manufacturers have become accustomed 
 to the supply of necessary articles on a larger massed scale. In the engi- 
 neering industry the use of jigs, limit gauges, and automatic or semji- 
 automatic machine tools has been enormously extended, and works that 
 have acquired for the first time an intimate familiarity with these appli- 
 ances will doubtless continue to use them in connection with their accus- 
 tomed work after the war. 
 
 37. But when all these things have been allowed for, it remains certain 
 that the national production must, for many years, be reduced, unless it can 
 be rendered more efficient by better organisation of Industry. 
 
 Reduction of Income from Abroad 
 
 38. How far the income hitherto received from abroad in the shape 
 of interest on foreign investments will prove to be diminished after the war 
 is, at present, problematical. The heavy sales of foreign securities and 
 the contraction of national and private debts in foreign money markets 
 will make for a considerable diminution; but against this must be set off 
 the loans, almost equivalent in amount, made to our Dominions and Allies, 
 which will presumably bear interest and be subject to repayment. Income 
 from this latter source will be government income, and will go to pay inter- 
 est and redemption on State loans contracted at home and abroad. Income 
 from abroad in the shape of payment for shipping, banking, and insurance 
 services, may take some years before it reaches its pre-war level. 
 
 Net Effect of the War on Earnings 
 
 39. Taken as a whole, there can be no reasonable doubt that, unless 
 an organised effort towards increased production is made, the aggregate 
 national income is likely to be much lower than before the war. The de- 
 crease will be cloaked to some extent by the inflation of money values. 
 It is conceivable that whilst real income in terms of goods and services will 
 be diminished, nominal income in terms of money will be the same or even 
 higher. This may ease matters for a while, but in the long run income is 
 assessed at its intrinsic value; and with the smaller total available for 
 distribution, the likelihood of quarrelling over its apportionment will 
 increase. 
 
 19 
 
III. THE DISTRIBUTION OF EARNINGS 
 
 40. With a general reduction in the national income the amount of 
 wealth to be distributed the question of distribution will become acute. 
 It will be complicated and intensified by the introduction of several new 
 factors. 
 
 (a) High Prices 
 
 41. The rise in the cost of living has imposed a burden on the working 
 and lower middle classes during the war, which is perhaps inadequately 
 appreciated by those who are accustomed to a larger margin for retrench- 
 ment. The release of shipping employed for war purposes, the resumption 
 of industry and the re-opening of closed sources of supply will no doubt 
 operate in the direction of a fall. On the other hand, the general decrease 
 in production, the higher cost of production due to deterioration of plant 
 and diminished efficiency, the corresponding decrease in production abroad 
 and the general financial and industrial dislocation will all conspire to keep 
 prices up or even to force them still higher. The probable sequel will be 
 a demand for increase in nominal wages to enable the previous level of 
 real wages the standard of living to be maintained. The satisfaction 
 of this demand may quite well lead to a further raising of prices, result- 
 ing in much hardship among those employed in trades in which no increase 
 of wages has been secured. The professional classes and clerical workers, 
 whose nominal earnings have not, generally speaking, been increased during 
 the war, will be very hard hit. The real value of incomes derived from 
 investments paying a fixed rate of interest will be appreciably diminished. 
 Apart from currency influences, the lowering of prices will depend upon 
 increased industrial output, and upon the extent to which the consump- 
 tion of luxuries, with its consequent employment of workers on the creation 
 of useless commodities, is foregone, enabling labour to be diverted into 
 industries producing the necessaries of life. Increased taxation will con- 
 tribute to this end, but will not relieve wealthier people of the obligation 
 to accept without demur a diminished proportion of the national income 
 if this should prove to be necessary in order to save the poorer sections 
 of the community from severe hardships. Ill-considered fiscal changes 
 might, on the other hand, drive prices still higher or retard their fall. 
 
 (6) High War Wages 
 
 42. The urgent demand for munitions and material of war, together 
 with shortage of labour, has led to high rates of wages being paid for war 
 work. The amount of such increases has been greatly exaggerated in the 
 popular mind by confusing weekly earnings with rate per hour. The large 
 sums frequently mentioned as being taken home by particular workmen 
 at the end of the week are in almost all cases earned by unsparing labour 
 on piece tasks, or by working long hours overtime. Family earnings have 
 also in many cases been increased as a result of more members of the 
 
 20 
 
family going out to work. The standard of comparison in any considera- 
 tion of wage movements is the rate per hour, and whilst wage rates in 
 the munition industries have substantially increased, the average advance 
 in all industries has been more than counterbalanced by the rise in 
 prices. It follows, therefore, that any serious reduction in rates after the 
 war will leave the generality of workers in a far worse position than before 
 the war. It is to be remembered also that there are a great many employ- 
 ments in which wages have increased not at all or very little during the 
 war. Wage-earners in these cases are already suffering from the increase 
 of prices, and will continue to suffer long after peace is declared, unless 
 some very definite steps are taken to improve their lot. 
 
 43. The attitude of unskilled and unorganised labour after the war 
 will be influenced by the fact that in military service many of them will 
 have made acquaintance with a hitherto unknown standard of maintenance. 
 They have been better fed and better clothed than ever before. Their 
 dependents, too, have been receiving State allowances, often increased by 
 their own earnings. These people will not readily go back to the old 
 conditions of employment and life. For these reasons, among others, large 
 sections of lower-paid wage-earners will resent and resist any attempt to 
 make good a reduction in the national income at the expense of themselves 
 and their families. 
 
 (c) War Loans and Taxation 
 
 44. An enormously increased national debt will be one of the inevi- 
 table legacies of the war. Its amount will depend upon the duration of 
 the war, but it will probably not be less than 3,000,000,000. The payment 
 of interest on this debt, and the provision of a sinking fund for its redemp- 
 tion, will involve an annual expenditure beginning at 250,000,000 and 
 diminishing gradually year by year as the debt is reduced. This will 
 materially affect the distribution of the national income. A portion of the 
 debt may be presumed to be covered, as already mentioned by loans to 
 Allies and to the Dominions, but as for the rest the financial obligations 
 of the National Debt will entail the transference of say 200,000,000 per 
 annum, roughly one-tenth of the whole national income, from the general 
 body of taxpayers to a comparatively small class of investors. How far 
 this will intensify inequalities in distribution will depend upon the inci- 
 dence of after-war taxation. If an undue share of the burden is placed 
 upon the non-investing classes the balance of distribution will be seriously 
 disturbed, and it is even conceivable that a demand for repudiation might 
 arise. The possibility of this becomes less remote when the situation in 
 Germany and Austria is considered. There is likelihood of the German 
 and Austrian Governments being unable to pay the interest on their war 
 debts, and legislation amounting to virtual repudiation may have to be 
 passed. Such an example would not be without its reactions here. It 
 would be asked how we, overloaded with debt and taxes, were to compete 
 in the world's markets with nations who had repudiated their debts. But 
 
 21 
 
anything amounting to even partial repudiation or' to adverse discrimina- 
 tion beteen holders of war loan and of other securities would be unjust, 
 dishonourable and disastrous. Any drift in that direction can best be 
 prevented by encouraging wage-earners to save and to invest their savings 
 in small Government bonds; but still more by avoiding, after the war, 
 the raising of revenue by the taxation of necessaries. If the incidence 
 of taxation is such that revenue is drawn mainly from the creditor classes, 
 the distribution of the national income will so far be left unaffected. 
 
 (d} Dearness of Capital 
 
 45. With the prospective diminution in the volume and flow of 
 wealth, capital available for investment will be scarce and dear and credit 
 facilities are likely to be limited. The argument has been put forward 
 that the new national debt makes ideal banker's collateral, and so con- 
 stitutes a basis for a great extension of credit ; but this appears to over- 
 look the fact that the volume of credit, though conditioned by enterprise 
 and confidence, is otherwise dependent upon the continuous output of 
 actual wealth. While a particular kind of paper may be more acceptable 
 as a basis of credit than another, an increase in the amount of that paper 
 will not swell the. volume of credit as a whole. There is also some expec- 
 tation that the Government will be able to repeat and perhaps to extend 
 the operations of August, 1914, in the way of credit creation or subsidy; 
 but here again it is apt to be overlooked that such emergency measures 
 cannot by their very nature be made a permanent and continuous feature 
 of the financial system. New capital may, therefore, be expected to com- 
 mand a high return after the war, and to absorb a correspondingly large 
 share of the national income in proportion to the amount of capital 
 provided. 
 
 PROSPECTS WITH REGARD TO THE DISTRIBUTION 
 OF EARNINGS 
 
 46. Of the four above-mentioned factors tending to influence dis- 
 tribution, two, high prices and dear capital, will react unfavourably to 
 Labour and are hardly susceptible of concerted or legislative modification. 
 High prices may make for higher profits, and thus enable higher wages 
 to be paid; but unless the national finances are handled with great dis- 
 cretion heavy taxation will operate against both the making of profits and 
 the enjoying of wages received. The loading of the scales would in any 
 case appear to be against Industry, and perhaps more particularly against 
 Labour; and unless every effort is made to expand the national output it 
 is difficult to see how conflicts between employers and employed can be 
 avoided. 
 
 IV. CAPITAL AND CREDIT 
 
 47. It has already been shown that the fixed Capital of the country, 
 its plant and communications, will have deteriorated to a serious extent, 
 
 22 
 
to the national call should have been as ready as it has, that the Trade 
 Unions should have yielded up their most prized safeguards, that men 
 should have laboured in the munition shops until they dropped at their 
 work, that the Income Tax payer should have submitted without murmur- 
 ing to an unprecedented increase, that so much thought and effort as well 
 as money should have been poured by the leisured classes into national 
 channels. But all history teaches us that unless this energy and self- 
 sacrifice receives a fresh impetus not less potent than that of the war, 
 the removal of the stimulus will be followed by a dangerous slump. 
 
 58. We have to take into account that those who are crushed or 
 hampered by the burdens arising from a war are apt, when they take stock 
 of their position, to lay the blame on those responsible for the Government 
 of the nation during the war, even though they themselves cordially 
 supported the country's participation in it. 
 
 59. It must be remembered that, however these burdens may be dis- 
 tributed, "Equality of Sacrifice" is in point of actual fact impossible. The 
 percentage of income reduction which means to one man the giving up 
 of luxuries and curtailing of travel, means to another shortage in the 
 necessaries of life. The obligation to serve implies in some cases tem- 
 porary embarrassment and a reduced income; in other cases it implies 
 selling up the home and business ruin. To the sorrow of those whose 
 relatives have been killed or injured, there is added in many cases the 
 hardship caused by loss of the bread-winner. Great numbers, both of the 
 working class and the lower middle class, will be hit by the war in a way 
 that those in different circumstances can only appreciate with difficulty. 
 Inevitable as this may be and unreasonable as it may seem that inevitable 
 suffering should result in social or political discontent, it is no use shutting 
 our eyes to the danger that it may do so. 
 
 60. There is no doubt that the working of the Munitions Acts and 
 the Military Service Acts, the methods adopted in certain quarters to pro- 
 mote recruiting, the abolition of Trade Union restrictions, the enormous 
 profits made in certain trades, the rise in food prices, have sown the seeds 
 of a great deal of bitterness. Much of it may be unreasonable, much of 
 it based upon demonstrably false assumptions and fanned by unscrupulous 
 controversialists on both sides; but again we are dealing with facts which 
 must be faced. 
 
 61. There is thus no lack of inflammable material ready to the hands 
 of the incendiary. The incendiary is not far to seek and may be found 
 in all classes. It is easy to persuade bitterly discontented men that if 
 society is thrown into the melting pot their condition cannot be rendered 
 worse and may be rendered better. It may be argued that force is no 
 remedy for economic evils, and that its application to social questions 
 gives very uncertain results. But such arguments require a clearer atmos- 
 phere than that of class-hatred and suspicion, and unless a practical and 
 attractive alternative can be offered, there is a grave danger that the 
 extremists may persuade a large following to try the chance of industrial 
 
 25 
 
warfare. The danger of an appeal to force in some form is all the greater 
 that the war has habituated men to the idea of conflict as the means of 
 settling disputes. 
 
 62. On the other hand we have the danger arising from a reactionary 
 section among Employers, who, like the Labour extremists, believe in the 
 inevitability of class-warfare. There is a real danger that this section 
 may adopt to some extent the German view of Labour as a force which 
 needs to be controlled and disciplined from above and may regard the war 
 as an opportunity to accomplish this end. There is reason to fear that 
 some Employers look on the Military Service Acts, the State control of 
 war industries and the temporary abandonment of Trade Union restric- 
 tions, as an opportunity to establish once for all the ascendency of Capital 
 over Labour. It is not desired to question in these pages the necessity of 
 any measure adopted during the course of the war. The gravity of the 
 danger consists in this half-acknowledged intention to use the new con- 
 ditions which have arisen for the coercion of. one of the parties whose 
 co-operation has made the carrying on of the war possible. 
 
 PROSPECTS AS TO SPIRIT AND TEMPER 
 
 63. The combination of economic discontent, class-suspicion, the 
 doctrines of Social Revolutionaries and the danger of Industrial Prus- 
 sianism, threatens us with a bitter conflict between Capital and Labour 
 which would render it impossible to deal successfully 'with the problems 
 of readjustment and reconstruction. Only by uniting the efforts of all 
 classes towards common ends, on the lines of a broad national policy, can 
 such a catastrophe be averted. 
 
 26 
 
C. The Problem and Some Remedies 
 
 I. THE PROBLEM 
 
 64. The Problem before us has been sufficiently indicated by the fore- 
 going analysis of the dangers with which we are threatened and the 
 difficulties which lie in our way. It is only necessary to summarise it 
 very briefly. 
 
 (0 The Emergency Problem 
 
 65. The Emergency Problem is simply to avert an outbreak of indus- 
 trial anarchy in the period immediately following the war. 
 
 66. The urgency of the task can only be measured by the magnitude 
 of the danger. That the possibility, even the probability, of such a 
 development is a very real one there is every reason to believe. Whatever 
 the upshot of such an outbreak its effects would be almost equally disastrous 
 to all classes of the community. 
 
 67. To Capital it would mean a long period of suspended activity, 
 depreciation and possibly wreckage of plant, heavy financial loss, a fatal 
 handicap in competition with foreign manufacturers. "Victory" would 
 be dearly won at the price of leaving Labour dicontented, inefficient, 
 mutinous, ready to renew the fight at the first opportunity. While the 
 questions at issue might be shelved as the result of a Labour defeat, they 
 would not be solved and the increased class hostility generated by the 
 conflict would remain an insuperable bar to the development either of 
 industrial efficiency or financial confidence. 
 
 68. To Labour, industrial warfare involves a long period of hardship 
 and privation. Any material advantages gained would be largely dis- 
 counted by the sufferings to be endured, the depletion of Trades Union 
 Funds and the crippling of the sources of production from which alone 
 the wealth of any class can be derived. Against the prospect of improved 
 working conditions and fuller recognition of the rights of Labour, must 
 be set the risk of internal dissensions arising during a prolonged struggle, 
 and the possible loss of all that has been won in past years. 
 
 69. A clear cut victory for either side is improbable. In an indus- 
 trial conflict on the scale anticipated, it is unlikely that the anticipations 
 of either Employers or Employed would be fulfilled. The passions let loose 
 and excited by the losses of Capital, the sufferings of Labour and the 
 hardships arising to the whole community from high prices, scarcity of 
 commodities, dislocation of the ordinary activities of life and destruction 
 of confidence, might easily create a drift towards general chaos which 
 would defy the control of either Capitalist or Working-class organisations. 
 
 27 
 
It is not improbable that an intolerable situation would be ended by hasty 
 and ill-considered State action, placing Industry as a whole under the 
 yoke of a bureaucratic tyranny a sort of industrial Napoleonism. 
 
 70. Whatever the event of the dispute, the prize of victory would 
 perish in the struggle. 
 
 (ii) The Constructive Problem 
 
 71. The Constructive Problem is concerned with the more lasting 
 effects of the war and with those difficulties, social as well as economic, 
 of our industrial life, which it has accentuated though it has not created. 
 On the one hand we have to readjust and reorganise our industries to 
 meet the new conditions, to provide for replenishing the national capital 
 and maintaining or increasing the national income. On the other hand, 
 we have to remove the evils which have rendered the industrial problem 
 an irritant in our social life, to preserve and strengthen the safeguards 
 of individual liberty and self-respect and to reconcile the conflicting claims 
 of efficient production and fullness of life for the Workers. To do this 
 with success we must face boldly the whole question of industrial policy. 
 We must endeavour to devise some means by which the wasteful friction 
 between Employers and Employed may be replaced by co-operation to secure 
 these national ends and the whole resources of the country directed to 
 promoting the material prosperity and social well-being of all classes of 
 the population. 
 
 72. If we can accomplish this we shall not merely have dealt success- 
 fully with the situation created by the war. We shall have removed the 
 most serious obstacle to industrial and social development. That the 
 nation should recuperate quickly, that the national plant should be restored, 
 that capital should be plentiful, that labour should be efficient these 
 things are necessary in order that we may avert a threatened danger. To 
 secure industrial peace* on terms just and honourable to both sides would 
 be to double the national strength whether in industry or in citizenship. 
 
 73. It is obvious that much will be gained if we can frame the meas- 
 ures adopted for meeting the Emergency Problem in such a way as will 
 lay the foundations of permanent reconstruction. By so doing we shall 
 wring a definite good out of the evils with which we are faced, and we 
 shall have a double claim on all classes for co-operation, and if necessary 
 for concessions that they may thereby both save themselves from threat- 
 ened ruin and look forward to a positive gain. 
 
 74. In order to deal effectively with either the Emergency or the 
 Constructive Problem, it is essential to keep in mind that both are dual 
 in their nature. 
 
 75. On the one hand are the direct economic effects of the war, the 
 difficulties of demobilisation and readjustment, and the diminution of the 
 national income by deterioration of plan, loss of workers, and wastage of 
 capital. These effects can be dealt with by special measures framed with 
 a view to meeting specific dangers. Some of these measures will be of an 
 
 28 
 
emergency character, having for their object to carry us through the period 
 of transition with a minimum of suffering and friction. Others will be 
 of a more constructive kind, intended to increase our general industrial 
 efficiency and so to neutralise the more lasting results of the war in the 
 direction of diminished production and reduced earnings. 
 
 76. On the other hand, there is the fundamental problem of Indus- 
 trial Unrest, which may be aggravated and brought to a head by the effects 
 of the war, but has its roots far back in pre-war conditions. It can be 
 solved only by a much broader and more far-reaching treatment, based 
 upon a survey not of the accidental circumstances of the moment, but of 
 the permanent factors of our industrial life. Unless this problem is suc- 
 cessfully solved, no other steps which may be taken can be relied upon 
 either to avert the immediate crisis or to ensure the future prosperity of 
 Industry. 
 
 77. Many of the detailed questions bearing upon the work of readjust- 
 ment and reconstruction are already the subject of investigation by Gov- 
 ernment Departments, by well-equipped societies, or by groups of men 
 having expert knowledge and practical experience. It is well that this work 
 should be done by those who have special equipment for dealing with its 
 various phases. But two things require to be kept constantly in mind. 
 First: No single detailed measure, however important in itself and how- 
 ever thoroughly it is worked out, will form a substitute for clear thinking 
 with regard to the essential principles of industrial life and a united effort 
 by those concerned to give them fuller expression in their joint activities. 
 Secondly, it is essential to avoid clashing or overlapping by the various 
 movements represented and to give the work of each its proper place and 
 perspective in the wide scheme. 
 
 78. For the above reasons we propose to do little more than indicate 
 a number of the more important matters which require study with a view 
 to neutralising the direct effects of the war, reserving for more extended 
 treatment in our final section the fundamental problem which is both the 
 most important and the least recognised. 
 
 II. EMERGENCY MEASURES 
 
 (*) Demobilisation 
 (a) THE FINDING OF JOBS 
 
 79. It has been shown that the probable cause of unemployment after 
 the war will be, not the lack of a demand for labour, but the difficulty of 
 bringing together the workman and the job. A nucleus of the requisite 
 machinery is provided by the Employment Department of the Board of 
 Trade; but the emergency will call for operations far beyond the scope 
 of the existing organisation. The creation of joint committees, represent- 
 ing Employers, the Trade Unions and Labour generally, working in con- 
 junction with the Board of Trade, will give the best hope of obtaining the 
 necessary knowledge as to the conditions of demand in particular localities 
 
 29 
 
and trades. It should be possible for the Government to obtain a complete, 
 or approximately complete, register of the previous occupations and capac- 
 ities of the men to be disbanded. A Central Conference composed of rep- 
 resentatives of the State, Employers and Labour, working on the knowledge 
 thus obtained, would be in a position to co-ordinate the work of the various 
 committees and of the Labour Exchanges, and to direct the stream of 
 demobilised men towards these districts and industries where the prob- 
 ability of immediate reinstatement or absorption was greatest. So far as 
 military exigencies will permit, it is very desirable that workers for whose 
 services there is an assured need should be the first to be disbanded, and 
 that an early discharge should be given to those for whom situations are 
 actually waiting. Above all, it is vitally necessary that the preliminary 
 work of investigation and the creation of machinery should be pushed 
 rapidly forward, in order that there may be no delay or uncertainty in 
 taking action when the time comes for disbandment. 
 
 80. Even with the most complete machinery that can be devised, it is 
 difficult to see how a certain amount of temporary unemployment can be 
 avoided if we are -content to rely entirely upon the ordinary course of 
 relations between demand and supply. This margin of unemployment 
 could, however, be largely reduced if not extinguished, by State and Munic- 
 ipal expenditure upon works of public utility. Such a policy will need 
 to be carried out with care and closely watched from the standpoint both 
 of public economy and industrial conditions. Employment of this nature 
 can never form a permanent substitute for that arising from industrial 
 activity and it would be worse than folly to keep men engaged upon Gov- 
 ernment or Municipal work when the industries of the country were ready 
 to receive them. All such work should, therefore, be undertaken in close 
 co-operation with the Employment Department of the Board of Trade and 
 the local Committees representing Employers and Employed. It should 
 also be confined to work of definite utility and as far as possible to under- 
 takings of a productive nature or connected with the restoration of the 
 national plant. At the same time it would be legitimate to anticipate to 
 some extent work intended to be done in the near future, in order to give 
 employment at the moment when it is most required. There is a large 
 amount of really valuable work to be done in connection with housing, the 
 repair and improvement of roads, afforestation, the reclamation of waste 
 land, etc., which would prove a sound investment both from the social 
 and economic points of view, and which the training of the returned soldiers 
 in trench warfare would have fitted them to accomplish efficiently. 
 
 (fr) THE ASSURING OF DECENT WAGE 
 
 81. We shall undoubtedly have to meet a demand that men returning 
 to civil life shall be placed in a position no worse than that which they 
 occupied before the war. Since the cost of living has risen and will remain 
 high, this will involve a demand for proportionately increased wages. In 
 the case of men who have been guaranteed re-implacement, it is desirable 
 
 30 
 
that employers should take this change of conditions into sympathetic 
 consideration. Men who do not return to a specific job, but who work at a 
 staple trade will, of course, look for the standard rate of wages current at 
 the date of their return. Any attempt to use ex-service men as a means 
 of substituting the old rates of wages for those which have been granted 
 to meet the increased cost of living, would certainly arouse resentment 
 and might very well give rise to serious trouble. 
 
 82. In the case of those trades in which organisation is but feeble and 
 in which standard rates of pay can hardly be said to exist, it is probable 
 that improvement could be secured by the application to them of the Trade 
 Boards Act. Experience has shown that the fixing of minimum rates under 
 this Act has had a beneficial effect on the wages paid, and that the increases 
 so secured have raised the workers affected just above that margin where 
 they become capable of organising and securing fair conditions of employ- 
 ment for 1 themselves. The fixing of minimum rates in certain trades has 
 also had a stimulative effect upon workshop management in those numerous 
 cases where the methods and organisation were such as to leave room for 
 an improvement out of which the increased labour charge could be recouped. 
 Direct legislative action of this character could be taken in addition to no 
 less important measures for the training of those who are employed in, or 
 might otherwise enter, low paid occupations measures which are not only 
 of direct value to those immediately affected, but also of indirect value in 
 mitigating the rigour of competition among the remainder. A minimum 
 Wage law is a powerful instrument for achieving improvement and should 
 not be neglected, but it is well to recognise that its indiscriminate applica- 
 tion might be attended by certain risks. There is in many trades a margin 
 of unexhausted possibilities which a wisely fixed minimum wage would do 
 much to utilise. Beyond such a margin a minimum wage would represent 
 an increase in the- cost of production and selling prices, and might simply 
 become a tax on the community as a whole for the benefit of the workers 
 in the particular trade. 
 
 83. The whole question of wages is very closely related to the larger 
 problem of Industrial Unrest. If the mutual hostility of Employers and 
 Employed can be replaced by a spirit of co-operation based on mutual 
 understanding and agreement, there will be less likelihood of friction over 
 details of the wage question and a better chance of an all round improve- 
 ment in the conditions of workers, due to increased efficiency in production. 
 
 (c) SETTLING MEN ON THE LAND 
 
 84. The settlement of returned soldiers on the land is desirable from 
 many points of view. It might retain in this country men unwilling to 
 return to sedentary occupations, who would otherwise emigrate; and, if 
 successful, would tend to render the country more self-supporting and to 
 improve the national physique. It would, therefore, conduce both to the 
 efficiency of national defence and to social welfare. The respective advan- 
 tages of State, local and co-operative settlements, the desirability of 
 
 31 
 
ownership or tenancy of small holdings all these matters are already 
 receiving the careful attention of experts. It is doubtful, however, whether 
 sufficient consideration has been given to the question whether the end 
 desired can be best attained by organised settlement of individuals or 
 groups on created holdings or by so promoting the prosperity of agriculture 
 generally and its status as an occupation, that men will be drawn to it by 
 economic and social attractions. Probably both means may usefully be 
 employed, and attention should not be concentrated on one to the exclusion 
 of the other. The problem of agricultural credit, whether on a co-opera- 
 tive basis or otherwise, is an important phase of the general question of 
 land settlement, which must not be overlooked. 
 
 (d) TEACHING MEN TRADES 
 
 85. In the reinstatement of demobilised men and the adjustment of 
 labour to the new conditions, large numbers of skilled workers may find 
 themselves compelled to seek employment in trades for which they have 
 not been trained. To allow these men to sink into the ranks of unskilled 
 labour would be manifestly unfair to them and harmful to the community. 
 It will, therefore, be necessary, as soon as the Board of Trade Employment 
 Department is able to forecast with some accuracy the directions in which 
 demand is likely to be brisk, to make preparations for teaching men those 
 trades in which there is the best prospect of employment. Of less economic 
 importance, but a debt of honour which the nation must not forget to pay, 
 is the obligation to teach men who are prevented by partial disablement 
 from following their old occupations, some trade within their present 
 capacity. 
 
 (e) THE NEW WORKSHOPS 
 
 86. Although the plant normally employed in many industries has 
 been allowed to fall, to some extent, into disrepair, a great deal of new 
 plants have been created for the purpose of making munitions. Much of 
 this, though unfortunately by no means all, is convertible for the purposes 
 of civil industry. Part of this plant is in the hands of private owners who 
 will, in the ordinary course of business, make the utmost possible use of 
 it for industrial purposes. Much of it, however, is in the new factories 
 and workshops owned by the State. Of these some may be permanently 
 retained by the Government for the manufacture of war material. With 
 regard to the rest, it will be a question how far they should remain under 
 State control, how far they should be sold to private firms. The former 
 course would not necessarily involve the entry of the State into com- 
 petitive industry. The new workshops could be used for the manu- 
 facture of plant and appliances used in the work of Government 
 Departments, such as telephone, telegraph and Post Office equipment. 
 Since this course would involve the maintenance of a permanent staff, it 
 would not perform the function of steadying general employment or pro- 
 viding temporary relief during the period of transition. But it might 
 enable the Government to offer immediate and permanent employment at 
 
 32 
 
standard wages to some demobilised men who had lost their jobs and 
 were prepared to undergo training for new tasks. It is at least possible, 
 however, that sale to private enterprise would result in more efficient use 
 being made of the plant. The knowledge acquired departmentally as to 
 the adequacy of existing plant in the various industries to meet probable 
 requirements may be used as a guide in considering the question of transfer. 
 In many cases it is probable that the cost of conversion would be such 
 as to make economical working impossible, and it will be necessary to be 
 careful lest reluctance to scrap State owned property should result in ill- 
 advised and wasteful attempts to use it for the fulfilment of Government 
 orders. 
 
 87. On the cessation of hostilities, it will be possible gradually to 
 reduce the production of munitions and military material to a peace level. 
 There will, however, be an immense v is inertiae to be overcome, tending to 
 keep a high proportion of our productive power engaged for months after 
 the war on munition work. It is not easy suddenly to stop or divert the 
 activities of so powerful and so highly organised a machinery as that con- 
 trolled by the Ministry of Munitions. Many firms will be interested in 
 the continuance of profitable contracts. Many people will be interested in 
 the retention of secure and well-paid employment. There will be a natural 
 tendency to continue automatically the expenditure of unexpended votes. 
 Varying estimates will, no doubt, be formed as to the proper standard of 
 peace requirements. At the same time, it is essential that, without prej- 
 udicing the requirements of national defence, we should act promptly and 
 vigorously in switching off munition work, scrapping what is half-done and 
 re-adapting our industrial plant to the uses of peace. In all the metal 
 industries there will be an abundance of orders waiting for execution and 
 it depends upon the rapidity with which we effect this transference of effort 
 whether we get these orders before they have gone elsewhere. 
 
 (M) The Exodus from the War Industries 
 
 88. The problem of providing peace employment for those who have 
 acted during the war as stop-gap and emergency workers will be of less 
 magnitude than that of reinstating the returned soldiers; but it will none 
 the less be a formidable one. We have seen (paragraph 19) that the total 
 number affected will probably fall little short of a million and a half, about 
 half of whom will be women and girls. This total may be divided into 
 several classes, both as regards the nature of their employment and the 
 problem which they will present on a return to peace conditions. 
 
 89. The necessities of the war have resulted in the employment of a 
 large number of additional workers in the munition, equipment, chemical 
 and other industries, either for the purpose of making material of war or 
 to supply the exceptional demand for labour created in certain trades by 
 the circumstances of wartime, such as the cutting off of imports from 
 abroad. The great majority of these have left other employments, either 
 because trade was slack in their own line, or because of the higher remuner- 
 
 33 
 
ation or greater attractiveness of war work. Most of those who have done 
 so may be expected to gravitate back to their former occupations; but not 
 all will find it possible to gain immediate reinstatement. A large section 
 consists of married women, more particularly of women whose husbands 
 are with the Colours, who have returned to industry during the war. The 
 majority of these will doubtless return to domestic life; but many of them 
 may be compelled to continue as wage earners, or may desire to do so. A 
 further section consists of girls, who would, in the normal course, have 
 entered industry during the period of the war, and whose circumstances will 
 certainly require them! to seek other paid occupations when their war em- 
 ployment has come to an end. 
 
 90. In addition to those who have been added to the number employed 
 on special industries, many women have gone into factories, shops and offices, 
 to take the place of enlisted men. A large proportion of these are young 
 women who would not, in the ordinary course, have sought for paid employ- 
 ment. Here again, it is probable that a certain number 1 will withdraw from 
 industry when the national emergency is passed, but that a large number 
 will remain as wage earners, either from necessity or from preference. 
 There are also a considerable number of former domestic servants, some 
 of whom will desire to retain the greater freedom and higher remuneration 
 of their new occupations. Such women, whether they have taken the place 
 of enlisted men or have been employed on munition work, will present a 
 difficult problem; for they have had no pre-war industrial training and the 
 instruction which they have received in the performance of specialised 
 tasks will not be of much service in securing employment when war work 
 comes to an end, or the men whom they have released return. It is prob- 
 able that a more scientific organisation of office-staffs may find a permanent 
 place for some of those who have entered on commercial life; but the 
 greater number of these new workers will have to look for industrial 
 employment, and unless a satisfactory method of dealing with the difficulty 
 can be found, there is grave danger of their drifting into the lowest grades 
 of unskilled labour or the ranks of the unemployed. 
 
 91. Finally, there remains the problem of boy and girl labour. During 
 the war, many children have become wage-earners before arriving at the 
 statutory working age, and have been put to work in which they have no 
 future, and are receiving very little instruction of general utility. In the 
 case of these juvenile workers the primary necessity is to make good the 
 interruption of their education, both general and vocational. 
 
 92. The general situation with regard to stop-gap and emergency 
 workers will be somewhat relieved by the fact that many women who would 
 normally have quitted industry for domestic life have deferred doing so 
 until after the war. The places vacated by them will be available for those 
 who are returning to ordinary employment from the war industries. In 
 the main, however, the problem is similar to that of demobilisation, and 
 must be treated on the same lines. As in the case of returned soldiers, 
 the transition may be eased by Government orders for reconstruction work 
 
 34 
 
and for undertakings of national utility. The special difficulties presented 
 by the case of the new women workers, with no previous industrial training-, 
 and the boy and girl labour taken on for war purposes, will require separate 
 treatment. The only way in which these workers can be raised above the 
 level of unskilled Labour or assured permanent work, is by the adoption 
 of a comprehensive policy of technical and vocational education, directed 
 to fitting them for those trades in which there are the best prospects of 
 employment. 
 
 (Hi) Industrial Friction 
 
 93. Whatever emergency measures may be adopted, the avoidance of 
 friction depends upon an agreement between Labour, Management and 
 Capital as to the future organisation of industry. Such an agreement must 
 be based on frank recognition of the existing grievances of all parties and 
 can only be attained by bringing home to the minds of each class the 
 dangers arising from conflict and the advantages to be gained by co-opera- 
 tion. The possibility of such an agreement will be discussed in the con- 
 cluding section of this Memorandum. 
 
 III. CONSTRUCTIVE MEASURES 
 *. (0 Industrial Efficiency 
 
 94. The first essential of Industrial Efficiency is the will to produce, 
 which can only be obtained by providing sufficient incentive and promot- 
 ing confidence. It is, therefore, dependent upon a satisfactory solution of 
 the fundamental problem. 
 
 Subject to the satisfaction of this primary requisite, much may be 
 done to promote efficiency by an all round improvement in our industrial 
 organisation. A number of practical steps in this direction are suggested 
 below. 
 
 (a) PHYSICAL EFFICIENCY 
 
 95. The basis of all national progress, whether industrial or social, 
 is the health and physical efficiency of the people. Any improvement in 
 this respect must be sought along two lines the improvement of conditions 
 and the spread of knowledge. The conditions which exist at present in 
 the over-crowded areas of our towns and in many of our villages render 
 healthy life impossible. The progress of physical degeneracy must be 
 arrested by increased attention to the care of child life, the improving of 
 housing conditions, both in town and country, and the creation of open 
 spaces. These steps are essential, not merely to the efficiency of the work- 
 ing class, but to the health and character of the nation. Closely connected 
 with this question is that of healthful conditions of work. Not only justice 
 and humanity, but sheer economic necessity, should prompt us to enforce 
 strictly all regulations of factory and other work in the interests of health, 
 cleanliness and decency. It is equally important that ample opportunities 
 
 35 
 
and facilities should be afforded to all industrial workers for rest, recrea- 
 tion and exercise. Neither efficient workers nor healthy and self-respecting 
 citizens can be obtained if any part of the community is denied access to 
 the materials of social life. The assurance of a minimum standard of 
 maintenance, enabling sufficient food and clothing to be provided for every 
 member of a family, is bound up with the question of wages and must be 
 taken into account in any consideration of that question. While the dif- 
 ficulties in the way of establishing a general minimum wage by State action 
 are great and probably prohibitive, the wage rates in any trade should bear 
 a definite relation to the cost of living. A healthy public opinion and the 
 common sense of employers should both be brought to bear upon the dangers 
 arising from an inadequate standard of life. To ensure full value being 
 received for the money spent on food, the laws against adulteration should 
 be strengthened both in their provisions and enforcement. Adulterated 
 food and impure milk are still responsible for much malnutrition. All 
 these questions of conditions are fundamental, and unless they are attended 
 to, we can look for no great progress ; but in order to obtain the best results 
 a simultaneous effort must be made to extend knowledge and training. The 
 work already done in the schools in the direction of physical training and 
 the teaching of elementary hygiene, is excellent; but with greater national 
 attention to these subjects, resulting in further financial provision, it could 
 be largely extended. The same remark applies to the teaching of domestic 
 economy. While the workers are rightly suspicious and resentful of 
 grandmotherly interference, an infinite amount of waste and loss could be 
 saved by spreading among all classes a sounder knowledge of how to lay 
 out the family income and employ the domestic equipment so as to obtain 
 the best return. No class is free from the reproach of wasteful expenditure 
 and inefficient methods and a knowledge of simple facts in elementary 
 economics should form part of the teaching in all schools. 
 
 (fc) MENTAL AND MANUAL EFFICIENCY THE PRIMARY SCHOOLS 
 96. The foundations of mental and manual efficiency must be laid in 
 the primary schools. There is observable among some industrials a recur- 
 ring tendency to regard all but the barest rudiments of general education 
 as useless and even injurious to the average run of working-class children, 
 and to urge that at an early age all but the most promising should be 
 trained solely with a view to fitting them for a specific occupation. This 
 course, however, is open to serious objections, both from the social and 
 from the industrial point of view. The effects of technical instruction at a 
 very early age are undoubtedly injurious to mental development. It must 
 inevitably be acquired mechanically and without understanding, and the 
 cramping effect of a purely utilitarian education upon intelligence and 
 character renders it a poor preparation even for industrial life. From the 
 social standpoint there are grave disadvantages, both to the working class 
 and to the community as a whole, in restricting the education of any chil- 
 dren to their training as operatives. At the same time, the connection 
 
 36 
 
between the general education given in primary schools and industrial 
 efficiency is close, and may be rendered still closer. The modern educational 
 systems, which aim at fostering the child's intelligence and developing its 
 powers of self-expression, even more than at impairing instruction, can be 
 made to form the best possible basis for subsequent specialised training. 
 At present the elementary schools still suffer to some extent from the pres- 
 sure of sterotyped codes laying an undue emphasis on "book-learning," 
 and the development of the child-mind is too often choked by cramming in 
 the upper standards. What is wanted is not that those who have the wel- 
 fare of the industrial class at heart should seek to limit the time and 
 attention given to general education, but that they should ally themselves 
 with those educational reformers, within the schools as well as outside them, 
 who are striving to simplify the curriculum and to lay increased emphasis 
 on the formative side of education. Special attention should be given to 
 that part of the course which is devoted to bringing out the child's powers 
 of observation and placing it in an intelligent relation with its environ- 
 ment. The "eye and hand training," which already forms a large part of 
 the work, is capable of great extension. To confine it to preparation for 
 any particular trade would be to rob it of most of its educational and much 
 of its industrial value. Its purpose is to perfect the instrument of which 
 subsequent vocational training will teach the use. Experience shows that 
 instruction in any subject is acquired more quickly and more thoroughly 
 if it is postponed until the mind and senses of the child have been thor- 
 oughly and painstakingly prepared to receive it. Education along these 
 lines will produce at the same time efficient workers and intelligent citizens ; 
 and the development of the commercial and team spirit by the organised 
 games which are coming more and more into favour, will play its part in 
 both these relations. Our hope for the future must lie largely in co- 
 operation between the industrialists and sociologists, who can best indicate 
 the national requirements, and the practical educationalists who are entitled 
 by training and experience to indicate the methods of attaining them. 
 
 (c) MENTAL AND MANUAL EFFICIENCY CONTINUATION EDUCATION 
 97. The work of the primary schools must be carried forward and 
 developed by the improvement of our system of Continuation Education. 
 There is no greater source of national waste than that which takes place 
 by the premature withdrawal of our children from school life, just at the 
 age when they are best fitted to -profit by it. The figures in this respect 
 are so startling that they are worth quoting. In England, out of two and 
 three-quarter million boys and girls between the ages of 12 and 16, nearly 
 1,100,000 get no further education after the age of thirteen. Of the remain- 
 ing 1,650,000, the great bulk are educated, mostly in the elementary school, 
 only until the age of fourteen. Only 250,000, or one in eleven, go to proper 
 secondary schools, and in most cases they are there only for a short time. 
 These figures make it easy to understand the superior success of Germany 
 in so many departments of activity. That success is not due to the 
 
 37 
 
character of the education received by young people in Germany. It is 
 due to the fact that so very much greater a proportion of young people in 
 that country receive any systematic education at all during the all- 
 important years between 14 and 18. The same is true of University educa- 
 tion which, whatever its quality, is far more widely diffused in Germany 
 than in this country. Both for the sake of the future of British Industry 
 and from the point of view of the development of intelligent citizens, it is 
 essential that means should be found by which general education can be 
 continued after the close of the primary school period. This is the more 
 important because the conditions of modern industry are such as to make 
 it impossible to rely on apprenticeship as a generally satisfactory method 
 of industrial training. The methods of attaining the desired end remain to 
 be considered. 
 
 Evening Classes. Continuation education in this country has for 
 many years past existed in the form of evening schools. These have 
 rendered much good service, but attendance has been voluntary and the 
 number of students has always been small in proportion to the whole 
 number of juveniles employed in industry. Moreover, attendance at an 
 evening school for one, two, or more hours, after a 9V2-hour day in the 
 works, puts a heavy strain on mind and body, and in the case of the keenest 
 and most promising youths, has often resulted in complete breakdown. 
 Evening classes are thus open to serious objection and further progress 
 can hardly be expected from a development of the system. 
 
 Part-Time Day Schools. The method of evening schools having been 
 found unsatisfactory, it should be replaced by a system of compulsory part- 
 time day Continuation Schools for all young persons between 14 and 18 
 who are not receiving whole-time education. Employers, as a whole, must 
 be required to follow the example already set by many among their number, 
 who allow their young employees a substantial period every week for attend- 
 ance at school. These Continuation Schools, if they are to do the best for 
 their puipls, must not be purely technical or specialised in character, but 
 must continue the general civic education from the point where it was 
 left at the primary school, and must lay due stress on the physical side of 
 development and on the corporate life, which is the essence of the "public- 
 school spirit" in the schools of the well-to-do for boys of the same age. 
 Education at this stage must still be primarily formative in its purpose: 
 and it is because British schools of the older type have always kept this 
 larger aim steadily in view that they 'have developed the qualities of 
 adaptability and initiative which the war has revealed. The true period 
 for specialisation and the perfecting of industrial, as of professional train- 
 ing, is after the age of 18, for it is only then that most young people 
 become fixed in what is likely to be a life-long occupation, and have the 
 necessary knowledge and general equipment to understand the bearings of 
 the special work which falls to their lot. For this specialised training 
 the part-time school, with skilled craftsman teachers, affords the best 
 opportunity. The combination of vocational instruction in the case of 
 
 38 
 
younger pupils, who have developed a special bent towards any particular 
 craft, with the continuation of their general education, is already provided 
 for, to some extent, by the Junior Technical Schools which have been 
 established in many of our large towns. 
 
 The Universities. Much more could also be done to bring the 
 University life of the country into closer touch with the professional and 
 industrial classes. A University should not only be a training ground for 
 the recognised professions, but a centre of research in connection with the 
 industries of the country. Moreover, it has a distinctive and peculiar 
 part to play in what has come to be termed the work of adult education. 
 It should form a meeting place for those engaged in every department of 
 life, and the natural home of the thought and discussion of the country 
 on public affairs. Used in this spirit, the Universities should go far to 
 redeem the country from the shallow and sectional discussions which have 
 disturbed it in recent years. 
 
 (d) LABOUR-SAVING MACHINERY 
 
 98. There is no question that an increase in the industrial output 
 could be obtained by a wider utilisation of labour-saving machinery. 
 From the Employers' point of view, the cost of an improvement of this kind 
 in existing plant would be repaid in a very short period and would yield 
 a high return on the capital invested. The Workman, however, usually 
 resists and obstructs, or, at any rate, resents its introduction, and before 
 such extension can be advocated as an item in the programme of recon- 
 struction, the grounds of this opposition must be examined from the point 
 of view of the Men as well as of the Employer. 
 
 99. The strongest form assumed by this hostility rests upon a human 
 and not upon an economic basis. It arises from a profound dislike of 
 seeing handicraft replaced by the machine and the craftsman relegated to 
 the position of a machine minder. The argument that the use of automatic 
 machines will increase output leaves this objection untouched, because the 
 question is not one of the worker's remuneration, but of his position and 
 self-respect. The tendency of work under modern conditions to become a 
 mere mechanical routine and of the worker himself to become dehumanised 
 during his hours of labour is at the bottom of the wide-spread intellectual 
 revolt against the industrial system. This feeling is not only a natural 
 one, but is based upon sound instincts. It must be taken fully into 
 account in any discussion of the subject. 
 
 100. It will be admitted by most of those who have thought upon the 
 question that a complete return to the old conditions of handicraft is 
 impossible. It cannot, at any rate, be contemplated as a practical pro- 
 gramme for the near future. The conditions of modern life involve an 
 ever-extending amount of repetition work done to precise measurements. 
 In work of this kind, whether it be done by hand or by machinery, there 
 is little room for exercise of the higher faculties of craftsmanship. The 
 defence of labour-saving machinery from the human standpoint is that it 
 
 39 
 
removes the sheer muscular drudgery from such work and enables a greater 
 amount to be produced in shorter hours and with less strain and exhaustion 
 to the worker. Moreover, the increased complexity of machinery is con- 
 tinually operating in the direction of restoring the balance, by calling upon 
 the operator for a care and a degree of skill approaching more nearly to 
 craftsmanship. This tendency would be largely fortified if more care were 
 taken to explain to operators the purpose of their task, and the part it plays 
 in the process of production. There is no reason why even the unskilled 
 labour connected with labour-saving machinery should not be based upon a 
 foundation of intelligence and responsibility in the worker which would 
 preserve his self-respect. Nor must it be forgotten that the construction 
 and maintenance of labour-saving machinery gives rise in itself to the 
 employment of a large amount of highly skilled labour. 
 
 101. The chief economic objection of the worker to the introduction 
 of labour-saving machinery arises from his belief, unhappily founded on 
 experience, that its immediate effect is to lower his wages or deprive him of 
 his job. With some qualifications, this objection is well-founded. That 
 such a result is not invariable arises partly from the fact that many labour- 
 saving machines are very costly, so that a wise employer will offer a 
 journeyman's wage to anyone who will work them to their full capacity, 
 rather than pay a labourer's wage for them to be worked at half or two- 
 thirds capacity. Moreover, the ultimate effect of labour-saving machinery 
 is to lower the price of the article produced and thereby to increase the 
 demand for it, which, in its turn, will react upon the demand for labour. 
 It remains no less true, in the main, that when a craftsman's job passes 
 to the machine, that special skill which is his sole stock-in-trade loses its 
 monopoly value and he stands in danger of sinking from an unemployed 
 craftsman to an unemployed labour unit. 
 
 102. The existence of cases of individual hardship does not, however, 
 prove that the introduction of labour-saving machinery is, in the long run, 
 economically injurious to Labour as a whole. That such cases of hardship 
 should arise is inevitable in all industrial progress, as well as in every 
 other department of life. Any sudden change in industry, whether due to 
 new inventions, to fashion, or to changing conditions with regard to markets 
 or raw material, involves a similar displacement. To resist the forces of 
 change is impossible, and the attempt to retard them is generally pro- 
 ductive of waste and friction. The better course is to develop the new 
 trade or system rapidly and efficiently and at the same time to do all that is 
 possible to bridge over the period of transition and protect the individuals 
 affected. In the case of labour-saving machinery, this duty is particularly 
 incumbent upon the employer, because the change is one introduced by him 
 for his own profit. It is his duty so far as possible to provide alternative 
 work for the men displaced, to take advantage of the normal fluctuations 
 of staff to spread out the period of reduction, to allow time for men who 
 cannot be retained to find another job. The only course, however, which 
 will go to the root of the opposition to the introduction of such machinery, 
 
 40 
 
is' for the employer to take the workers into his confidence; to explain to 
 them what is proposed; to discuss with them, through their representatives 
 or their Trade Union, the machinery required to meet the demands of com- 
 petition, the rate of its introduction, the conditions under which it is to 
 be worked and the wages to be paid to the operators. It is only by the 
 co-operation of Employers and Employed to introduce and use labour- 
 saving machinery as a means of increasing efficiency of production, and 
 not merely for the purpose of cutting down wages while increasing profits, 
 that the advantages to be derived from its use can be attained with the 
 minimum of dislocation and loss to individuals. At .the same time a better 
 system of education, tending to produce all-round competence and adapta- 
 bility, would go a long way towards placing the worker above the prospect 
 of disaster due to a change in conditions. 
 
 (e) WORKS ORGANISATION 
 
 103. No method of increasing output is more promising in theory 
 than that known in America as "Scientific Management"; but none is more 
 open to abuse and frustration in practice. It is based on the conception of 
 a works in which the whole routine, down to the last detail of every opera- 
 tion, is organised by the management, acting through a staff of efficiency 
 experts. So far as concerns the "routing" of work through the shops, no 
 objection can arise. Confusion, over-lapping, delay and waste are avoided 
 and the course of the work is made to run smoothly and rapidly. These 
 are true functions of Management, and the more thoroughly they are per- 
 formed the more efficient will be production and the less the strain on the 
 workers. 
 
 104. With regard to the functions of Labour, the methods of Scientific 
 Management are more open to question. The idea is to analyse and time 
 the physical movements made in the performance of each operation on 
 every job; to reduce each task to its simplest elements; to constfuct a 
 routine from which every superfluous effort or movement is eliminated; 
 and to train workmen to follow the prescribed schedule as a coach might 
 train a boat's crew to use their oars. The reactions of environment and 
 the limitations of fatigue are studied; no overstrain is allowed; rest periods 
 are provided. An astonishing increase in output can be achieved along 
 these lines ; so that unprecedentedly high wages can be and are paid to those 
 who will work under the system. Nevertheless, it is regarded with profound 
 dislike and distrust by the general run of workers, and in a great many 
 cases attempts to put it into practice have had to be abandoned. 
 
 105. The reason usually given by the men for their hostility is- that 
 the employer, while paying higher wages, takes care that a much more than 
 proportionate increase is effected in his own profits, so that the ratio of 
 distribution becomes less favourable to Labour than before. But this, 
 though a natural ground of soreness, is not the main reason for the work- 
 man's opposition. Underlying all economic suspicion is the worker's 
 instinctive aversion to becoming a mindless automaton, performing without 
 
 41 
 
variation a cycle of mechanical movements which do not lead to increased 
 general proficiency, which open the way to no higher grade of employment, 
 and which are prescribed not by himself or by the traditions of master- 
 craftsmen of his class, but by an outside and unsympathetic authority in 
 the shape of the scientific expert. Before the undoubted advantages of 
 motion training can materialise in workshop practice, full security must 
 be given against these evils. This can be done only by introducing the 
 system with the full voluntary co-operation of the men; and such co-opera- 
 tion can only be secured by first putting the whole proposition before them, 
 explaining frankly the risks to be faced as well as the benefits to be 
 obtained, and transforming the whole constitution of the works in such a 
 way that the men themselves may have an interest in the new system and 
 some share of control over the working of it. 
 
 (/) LABOUR LEGISLATION 
 
 106. It is clear that organised bodies of workers and employees must 
 in the immediate future play a greater part in determining the policy and 
 direction of our economic life. Many industries, however, are not well 
 organised; and only a quarter of the whole working population is enrolled 
 in trade unions. The greater portion of the unorganised workers are 
 women, young persons and children, whom our labour laws are largely 
 intended to protect. Whatever may be said in favour of voluntary agree- 
 mentsj it is inevitable that the protection of women and young people must, 
 for the time, be in large measure left to the State. The first need is for a 
 revision of our whole code of labour laws with a view to their co-ordination 
 and the eradication of those anomalies and historical accidents, which 
 for no real reason establish different standards and conditions for pro- 
 tected persons. In the second place, there is a strong case for a further 
 limitation of hours in the case of employees in factories and workshops, and 
 distributive shops, and for a very considerable improvement in the environ- 
 ment in which work is carried on. For healthier workplaces, the provision 
 of dining and rest rooms are absolutely necessary in the interests alike of 
 industrial efficiency and of social welfare. In general, it may be said, that 
 our Labour Legislation should be thoroughly overhauled and strengthened 
 to meet the demand for a higher general standard of life, in such ways as 
 will increase the self-respect, dignity and efficiency of the protected workers. 
 The whole task of bringing our industrial legislation on all sides into con- 
 formity with the new national needs, should be undertaken with the active 
 co-operation of Labour and Employers; indeed, all modifications and 
 developments should be based in the first place upon the joint recommenda- 
 tions of Employers' Associations and Trade Unions. 
 
 (#) HEFORM OF THE PATENT LAWS 
 
 107. The original purpose of the existing patent laws was (1) to pro- 
 mote the commercial development of inventions, by giving the inventor a 
 monopoly in the patented article for a term of years; and (2) to ensure 
 
 42 
 
a full account of the invention being published, in order that when the 
 monopoly period expires, anyone may be in a position to make, sell or use 
 the patented device or process. As they stand at present, the laws do not 
 adequately fulfill these intentions. It is becoming increasingly common 
 for patents to be obtained or acquired for the sole purpose of preventing 
 development, in the interests of an existing process. The fees charged also 
 require revision. Many minor inventions, though important as far as they 
 go, and entitling the inventor to the protection of the patent laws, will not 
 yield a return proportionate to the heavy fees demanded in the later years 
 of the term. Moreover, the effect of high patent fees is to place the 
 inventor, if he is not a rich man, at an unfair disadvantage as compared 
 with the capitalist, though both are equally necessary to placing the inven- 
 tion on the market. There is a tendency to forget that what the inventor 
 gives to the community in exchange for a temporary monoply is an 
 account of his invention from which the community derives permanent 
 benefit. To consider patent fees merely as a source of revenue is, in the 
 long run, economically unsound. There is every ground for believing that 
 the pre-eminence of America in the production of ingenious small tools 
 and appliances is mainly due to the superiority of her patent laws. The 
 whole matter requires careful reconsideration from the three-fold point of 
 view of stimulating invention, encouraging production and the protection 
 of the consumer. An effort should especially be made to devise some 
 means whereby patentees of small means can obtain guidance, assistance 
 and protection in the commercial development of their inventions. 
 
 (h) ENCOURAGEMENT OF RESEARCH 
 
 108. The Encouragement of Research in connection with the applica- 
 tion of Science to Industry holds out possibilities hitherto better appreciated 
 by our commercial rivals than by ourselves. The war has called attention 
 to the advantages which the Germans, in particular, have derived from 
 their admirable organisation of practical scientific training, especially in 
 connection with the chemical industries. For industrial purposes research 
 may be classified under two headings Theoretical Research of a general 
 nature, having no obvious and immediate practical application, and Specific 
 Research directed to the solution of definite problems of production. 
 Neither kind can be safely neglected. The experiments of pure scientists 
 have often led to discoveries of high commercial value which were wholly 
 unlocked for by those who made them. The encouragement of Theoretical 
 Research, which may yield results of national utility, is a proper object for 
 State action. Specific Research, the results of which will be capable of 
 immediate commercial application, can best be carried on in close con- 
 nection with the industries concerned. It would be well worth the while of 
 big Employers' Associations to subsidise research on problems connected 
 with their industry at Technical Colleges or Municipal Laboratories in the 
 leading centres of industry, on the understanding that the results obtained 
 were communicated solely to members of the Association. Such subsidies 
 
 .43 
 
might even be extended to research of a more general character, in any field 
 touching the materials and processes of the industry in question. The 
 results obtained by the scientific experts could then be submitted to the 
 staffs of works laboratories, who would at once recognise the commercial 
 possibilities which they might hold and could refer them back for specific 
 research along the lines indicated by their practical knowledge -and 
 experience. 
 
 (i) IMPROVED METHODS OF DISTRIBUTION 
 
 109. What has been said thus far has had special reference to manu- 
 facture; but efficiency in the distributive side of industry is no less impor- 
 tant. To produce a good article at a moderate cost is not enough; the 
 process is only complete when it has been delivered to the customer. Both 
 transport and selling methods in this country are capable of improvement. 
 The question of transport is of special importance in the case of agriculture, 
 the development of which has been gravely hampered by the lack of railway 
 or motor facilities. Both in regard to agriculture and manufactures, the 
 extension of these facilities and the fixing of rates require close attention 
 on the part of traders, the railways and the State. The system of 
 co-operative collection and distribution by means of light railways and 
 motor services, which has been so successful in Ireland, could in many cases 
 be usefully applied for bringing local products to the market. The arts of 
 selling, publicity, window-display, delivery, careful study of the require- 
 ments of the public, the personal element in service, the training of com- 
 mercial travellers, all require increased attention. The planning and 
 equipment of shops and offices, the training of the staffs and the organisa- 
 tion of routine are as important as the equivalent processes in manufacture; 
 and as in production, the best results can only be obtained by fostering the 
 intelligence and initiative of employees and cultivating the "team-spirit." 
 At the same time, the services of the specialist, the advertising or window- 
 dressing expert, are as important to the distributive business as those of the 
 scientist and inventor to the manufacturer. 
 
 (fc) BANKING AND CREDIT FACILITIES 
 
 110. The solid and cautious policy of British Bankers has been a 
 main foundation of the general financial soundness which has made this 
 country the credit centre of the world. It would be an irretrievable loss if 
 their reputation in this respect was allowed to suffer. Nevertheless it is 
 probable that they could afford greater assistance to Industry than they 
 have done in the past, without running such risks as would in any way 
 jeopardise their stability. In view of the probable necessities of the 
 situation, it is very desirable that the leading bankers should study for 
 themselves how far it may be possible for the Banks to work in closer touch 
 with Industry and lend their invaluable support to its future developments. 
 
 111. The condition of Industry after the war will render it particu- 
 larly desirable that the centralisation of Banking by the large Joint-Stock 
 
 44 
 
Banks should not be allowed to hamper the discretion of trustworthy Branch 
 Managers in making the local advances on the strength of non-paper col- 
 lateral and of established character which were a useful feature of the 
 older system. A wise use of this power would enable the Banks to render 
 valuable assistance to traders, without involving the disadvantages inherent 
 in the German conception of the relations of Banking and Industry. 
 
 THE DANGER OF PANIC ECONOMY 
 
 112. In connection with the above points, as well as with those 
 embraced under the heading of Emergency Measures, it will be necessary 
 to exercise great care that a reaction from the lavish spending necessi- 
 tated by the war does not lead to an outbreak of panic economy in State 
 expenditure. Nothing could create a worse feeling and temper than any 
 appearance of stinginess towards the men who have fought for us, whether 
 in connection with the treatment of the disabled or the schemes for reintro- 
 ducing the demolished men to civil life. These are matters of national 
 responsibility which cannot be left to any private efforts involving the 
 stigma of charity. Nothing could be a more false economy than to allow 
 the work of education technical or general scientific research, housing, 
 or the improvement of the national health to be obstructed at a time when 
 the whole welfare of the nation turns upon increased efficiency. Money 
 spent for these purposes is not expended on a luxury, but is a paying invest- 
 ment, perhaps even an insurance. 
 
 X^) Increased Saving 
 
 113. Capital for the repair and improvement of the national plant 
 and the reconstruction of devastated areas abroad which will provide work 
 at home can only be furnished by people pfoducing much, spending little 
 on consumption of goods, and saving the balance. 
 
 114. There is real need for an educational campaign to explain the 
 principles of economy, whether with regard to spending less or spending 
 more wisely. Such questions as the comparative effect upon employment 
 of expenditure upon luxuries and investment in productive industries are 
 very little understood. There is a vast amount of wasteful expenditure by 
 the rich which is either due to sheer thoughtlessness or is excused by the 
 assumption that it "makes work." There is also a great deal of wasteful 
 expenditure by the poor, which is due either to lack of training in house- 
 hold economy or to unfavourable conditions. 
 
 115. It is necessary to bear in mind that the saving and investing 
 class is composed at the present time almost exclusively of the compara- 
 tively well-to-do. If any agreement for the settlement of industrial difficul- 
 ties is arrived at which results in a wider distribution of wealth, it will be 
 necessary to consider what can be done to make working-class investment, 
 whether by individuals or groups, easier, safer and more attractive. The 
 Co-operative movement, Mutual Insurance and Friendly Societies, and the 
 management of existing Trade Union Funds may supply hints as to the 
 best means of attaining this end. 
 
 45 
 
116. There is danger to be avoided in urging working class "thrift." 
 The man who stints himself or his family in the necessaries of physical, 
 intellectual or emotional life is rendering no service to the nation, whatever 
 capital he may accumulate. Up to a certain point the unstinted consump- 
 tion of the material of life is of definite value in producing industrial 
 efficiency and capacity for citizenship. But with increased income and a 
 better acquaintance with the right use of wealth a point is reached at 
 which an increasing margin becomes available for legitimate saving. It is 
 probable that a greater feeling of security and responsibility would of itself 
 lead to the useful employment of this margin. 
 
 117. In the immediate future, however, the savings necessary for 
 capital renewal will have to come mainly from restricted consumption 
 on the part of the well-to-do. The cutting down of expenditure on luxuries 
 not only liberates labour for the increased production of necessaries, but 
 renders capital available for investment in productive industries. 
 Economy of this kind does not diminish the total demand for goods or 
 labour. Even if the money be left in the bank, it is used as a basis for the 
 credit needed for industrial development, and sets up a demand for the 
 instruments and materials of production. The volume of demand is not 
 affected, but only its character. 
 
 (Hi) Assured Markets 
 
 118. Assured Markets are essential to steady production. They will 
 be found by British industry (a) in the Home Demand; (fr) in the Over- 
 seas Dominions; (c) in Foreign Trade. 
 
 (a) HOME DEMAND 
 
 119. The Home Demand depends first of all upon the general pros- 
 perity of the people. If confidence and credit are maintained and earnings 
 are large, the increase of spending power will be reflected in a brisk demand 
 for goods. In this connection the question of agricultural development, 
 discussed below, is important, as tending to increase the spending power of 
 a large number of people who have hitherto formed one of the poorest 
 sections of the home market. For the first few years after the war the 
 general demand should be guided and restrained by the need of increased 
 savings, necessitating moderation in consumption as well as increased 
 output. The use of these savings for the renewal of the national plant will, 
 howevef, create a strong demand in those trades concerned with the manu- 
 facture of the instruments of production. As soon as the process of capital 
 renewal has been accomplished, the special necessity for restricted con- 
 sumption will cease and the demand will become general, the annual balance 
 of production over consumption serving for the requisite additions to 
 capital. 
 
 120. The idea of securing the home market to home manufacturers 
 by levying a duty on competitive imports is an attractive one from many 
 points of view, and the circumstances of the war will give occasion for new 
 
 46 
 
arguments in its favour. The anticipated danger of dumping by German 
 or. American firms, anxious to get a footing in the market during the period 
 of readjustment, the desire that this country should be independent of 
 foreign nations in respect of vital industries, the means afforded by a 
 tariff for raising additional revenue and the persistence of war passions, will 
 all go to make the setting up of protective tariffs more alluring. 
 
 121. It has none the less to be remembered that protective duties have 
 grave reactions and are hedged about with possibilities of abuse and failure. 
 The difficulty of devising a scheme which will avoid the danger of raising 
 the cost of living out of proportion to the possible increase in wages and 
 shifting the financial burden from the shoulders of the income taxpayer to 
 those of the consumer, has not yet been overcome. There is a further 
 risk that the imposition of a tariff may cripple our export trade by raising 
 the price of raw materials and production and shake our position as the 
 entrepot for the world's products and the centre of the carrying trade. So 
 far as Germany is concerned, the fear of dumping is probably, in large 
 part, illusory, having regard to the cutting off of her supplies of raw 
 material during the war and the excessive drain upon her labour resources. 
 The stability of our financial position during the war, as compared with 
 other belligerents, may lead us to pause before we abandon the system under 
 which our industries have developed. At a time when boldness and 
 initiative on the part of our leaders of industry are particularly called for, 
 it Seems specially unwise to provide an artificial shelter from competition. 
 
 122. In considering the argument on either side, two things must be 
 kept in mind. First, that important as the Tariff question is, it cannot in 
 any case be the primary one. To say this is not to pre-judge the Tariff 
 question. Whether under a Free Trade or a Protective System, the first 
 necessities of the situation will be increased output and industrial peace. 
 The experience of many years, in this country and in America, has shown 
 that under neither system can these essentials be depended upon, unless a 
 bold attempt is made to grapple with our internal difficulties. Secondly, 
 every claim for a tariff must be considered not only from the point of the 
 industry affected, but from that of other industries, of the consumer and of 
 the nation as a whole. On this larger survey, it may prove impossible for 
 even the advocates of tariffs to ask for protection in particular cases or for 
 even their opponents to resist them in others. But it is exceedingly impor- 
 tant that in every case the grounds on which the tariff is claimed should be 
 clearly understood, and that if protection is granted to any particular 
 trade from considerations of national defence or political desirability, it 
 shall be granted on those gronuds and without any obscuring of the 
 economic issue. 
 
 (5) EMPIRE MARKETS 
 
 123. The question of Imperial Fiscal Union will be argued on the 
 same grounds as before the war. The desire for the closest possible union 
 with the Overseas Dominions has, of course, been intensified by the events 
 
 47 
 
of the war, though it is open to doubt whether the spontaneous and splendid 
 rally of the Dominions has not given a setback to the contention that fiscal 
 ties were necessary to the permanence of the Empire. It is possible that 
 they might introduce an element of discord and create a suspicion of 
 attempted control by the Mother Country which would render them a 
 disruptive rather than a unifying tendency. In any case the question is 
 mainly a political one, to be argued on political grounds, but with a due 
 allowance made for its economic effects. 
 
 (c) FOREIGN MARKETS 
 
 124. Success in Foreign Markets will depend, as before the war, upon 
 the production of a desirable article at an attractive price and upon the skill 
 with which goods are brought to the attention of buyers. It is agreed by 
 almost all business men that there is room for great improvement in the 
 organisation of selling. Up-to-date methods of publicity must be adopted. 
 Industrial concerns will need to unite for the joint cultivation of foreign 
 markets, sinking their individual rivalries and jealousies in the common 
 object, receiving much more active aid from the Board of Trade and the 
 Consular Service than has hitherto been given. A first hand study of 
 foreign markets, more efficient representations abroad, better co-operation 
 between merchants and shipowners, greater watchfulness by Government in 
 cases of infringement of British Trade Marks, are all measures the need for 
 which was apparent before the war and will be increased by the severity of 
 competition after peace is signed. The contention that appointments to 
 the Consular Service should be given only to men of British birth and busi- 
 ness training will be emphasised. On the other hand it is a constant com- 
 plaint of our most efficient Consular representatives that so little use is 
 made of their offices by traders. The need of studying the requirements 
 of foreign markets and of greater adaptability in respect of meeting local 
 demands, packing, quotations in metric measures and foreign currency and 
 the use of foreign languages will all be brought to the front. The utility 
 or otherwise of creating a Ministry of Commerce or National Trade Agency 
 will require full examinatior and discussion. 
 
 125. One result of the war will have been to give us a certain advan- 
 tage not only in the markets of our Allies, but in those of some neutral 
 States. The success with which our own carrying trade has been main- 
 tained, while that of Germany has been completely shut down, has given to 
 our merchants an opportunity to extend existing connections and form new 
 ones which should not be missed. The disregard of neutral rights shown by 
 the Germans in the use of South American territorial waters is a case in 
 which we may derive advantage from a strong sentimental preference, 
 which however, can only be maintained by sound business methods. 
 
 126. We must not lose sight of the connection between the home and 
 foreign markets. The more goods we can sell abroad the greater will be the 
 purchasing and saving power of our people at home. On the other hand 
 the ability of foreigners to buy from us depends in large part upon our pur- 
 chase of their products. 
 
 48 
 
(d) ALLIED ZOLLVEREIX AND TRADE WAR 
 
 127. The proposal for an Allied Zollverein and the possibility of a 
 Trade War with Germany, as distinct from ordinary commercial com- 
 petition, are very large questions, involving political as well as economic 
 considerations. It is a matter of importance that these should be clearly 
 distinguished in the discussion. It may sometimes be desirable to achieve 
 a political object even at the cost of economic sacrifice; but it is essential 
 that in so doing we should realise clearly what we are about. On the other 
 hand, it leads to dangerous mental confusion if a step which can be shown 
 to be economically desirable is advocated on exclusively political grounds. 
 
 128. We shall save ourselves from many pitfalls if we keep steadily 
 in mind that industry and war are totally dissimilar operations. War is a 
 conflict, and the object of war is destruction. Industry is a process of 
 co-operation, the object of w r hich is production. It is much the same with 
 war and trade. The conflict of war and the competition of trade are dif- 
 ferent in kind as well as in degree. The object of conflict is to inflict 
 injury. The object of business competition is the opportunity to serve a 
 customer. War is competition in its absolute sense and in its most violent 
 form. If nations co-operate in war it is for the purpose of conflict with 
 others. Trade is competitive only in its processes; its end is co-operation. 
 We have learnt by experience that the organisation and processes of peace 
 are ill-adapted to the needs of war. The processes of war are equally 
 ill- adapted to the conditions of industry and trade. We may have to choose 
 between war and trade. Let us at least recognise that it is a choice and not 
 confound the functions of opposites. 
 
 (iv*) Land 
 
 129. We have not dealt here with the theory that the root of all 
 economic evils is the private ownership of land, and that whatever may 
 be done to increase the output of wealth, the increase will automatically be 
 appropriated by the land-owning class, in the shape of economic rent. In 
 the broad sense this theory is demonstrably unsound. It is certainly not 
 the fact that the increased proceeds of the great industrial development 
 during the nineteenth century have been absorbed into economic rent. The 
 general increase of rent is so gradual and laggard a process compared with 
 industrial progress that it may be left out of account here. Should a rapid 
 advance in agricultural prosperity take place after the war and be fol- 
 lowed by a marked increase in rents, threatening to absorb the extra earn- 
 ings and discourage further progress, the power of the State may have to 
 be invoked. 
 
 130. The question of land ownership and economic rent is the less 
 pressing at this juncture in that there are unmistakable signs of the breakup 
 of many of the large landed estates after the war, owing to the inability of 
 their proprietors to keep them going on the old lines. 
 
 49 
 
(v) Agriculture 
 
 131. Far more promising than any land-nationalisation or single-tax 
 project is the application to agricultural development of the same degree 
 of thought, energy, training, education and organisation as is devoted to 
 manufacture. It is eminently desirable that British agriculture should 
 be developed. It would render us more self-sufficing in the event of isola- 
 tion, it would restore the balance of our national activities, it would give us 
 a healthier and more vigorous population, and it would prevent the further 
 overgrowth of our large cities with its consequent over-crowding. If 
 agriculture has suffered neglect from our statesmen, it has suffered far more 
 neglect from our industrial pioneers and organisers. The importance of 
 improved facilities for transport, and of investigating the problem of 
 agricultural credit, has already been urged (paragraphs 109 and 84). The 
 multiplication of existing local Produce Societies for the co-operative 
 buying of seeds, manures, appliances, feeding stuffs, etc., and the co-opera- 
 tive marketing of the produce in bulk would do much to ensure the success 
 of the small-holder. The education of village children should be brought 
 into relation with thier future work, just as that of town children is made 
 the basis of industrial training. We have suffered much in the past from 
 an inelastic curriculum applied indiscriminately, without any attention to 
 the special needs of localities and classes. T r he observation and environ- 
 ment teaching of the primary schools should be directed to awakening- 
 interest in and understanding of the life around them, and the eye and 
 hand training to the perfecting of those faculties which will be most useful 
 in agricultural work. At a later stage, direct vocational training may be 
 given, either at special schools or in daytime classes for junior workers. 
 In this way it should be possible to make of the agricultural labourer a 
 skilled worker, and to invest his work and life with a greater degree of 
 dignity and interest, which will go far to counteract the drift towards the 
 urban centres. The facilities for farmers and foremen to acquire a knowl- 
 edge of scientific farming, stock rearing and gardening should also be 
 largely increased and greater encouragement given to research and experi- 
 ment in connection with cultivation. With an improvement both in the 
 management of the land and the efficiency of the workers, the problem of 
 agricultural wages should be easier of solution, and a general rise in wages 
 would enable the question of housing in rural districts to be tackled on an 
 economic basis. 
 
 132. To sum up very briefly what has already been said: We shall be 
 faced after the war by an industrial situation of extreme gravity due partly 
 to the intensification of the conditions which made for unrest before the 
 war, partly to the difficulties inseparable from the readjustment to peace 
 conditions. These difficulties can be met to some extent by the adoption 
 of immediate remedial measures, a number of which are suggested above. 
 But these measures, important in themselves, will go to the root of the 
 industrial problem. In like manner the increased production and increased 
 saving which will be essential to the renewal of the national capital and the 
 
 50 
 
restoration of industrial prosperity, can be promoted by the study and solu- 
 tion of a large number of detailed questions bearing on Industrial Efficiency, 
 Increased Savings and Assured Markets. Here again the fundamentals 
 remain untouched. At the back both of the Emergency and the Con- 
 structive Problems lies the hostility between Labour, Management and 
 Capital by which prodiiction has been hampered in the past and which now 
 threatens us with a crisis the dangers of which it is not easy to exaggerate. 
 Unless we can deal successfully with this basic problem, no amount of skill 
 in handling the secondary questions will save us. If we can deal with it 
 successfully we shall have laid the foundation for the solution of all ouf 
 other difficulties, and we may hope not merely to avert the threatened 
 dangers, but to establish industrial prosperity and social development upon 
 a firmer basis. 
 
 51 
 
D. The Fundamental Problem 
 
 133. In order that we may understand the nature and importance of 
 the fundamental problem, it is necessary to examine a little more closely the 
 essentials of industrial prosperity and its relations to national welfare. 
 
 134. The foundation of industrial prosperity is production. The 
 material well-being of a nation demands first, the attainment of the possible 
 maximum both as regards size and quality of output, whether of goods 
 or services; secondly, the elimination of all waste of material or effort in 
 the process of production; thirdly, an equitable division of the proceeds of 
 industry, enabling all those concerned in the creation of wealth to obtain 
 a reasonable share of its material benefits. The social welfare of the nation 
 requires that the conditions of work and the relations between the parties to 
 industry shall be such as make for intelligent and self-respecting citizenship 
 on the part of all concerned, and that the activities which occupy so large a 
 proportion of men's time and powers shall be felt by them to be fit and 
 worthy employment of their energies. Any attempt to solve industrial 
 problems which is concerned solely with the distribution of earnings must 
 necessarily be inadequate. In the first place, the amount available for dis- 
 tribution depends upon the amount produced, and an attempt by any section 
 of the community to increase its own share of the proceeds by a scheme of 
 redistribution which ignores the necessity of increased creative effort is apt 
 to result in a shrinkage of the available total. In the second place, the 
 questions which centre round wages and profits, important as they are, are 
 not so vital as the questions of industrial relations and social conditions 
 with which they are connected. 
 
 135. In order that production may be efficient both as regards the 
 quantity and quality of output and the methods employed, it is essential 
 that the supply of capital should be adequate and that the national plant 
 should be kept up to date. The war has involved deterioration of plant and 
 a heavy drain on capital. In order that capital may be renewed and the 
 national plant repaired and kept in the highest state of efficiency it is 
 essential that confidence should be maintained and savings increased. The 
 accumulation of surplus wealth which we call capital represents the balance 
 of production over consumption in previous years and is constantly being 
 added to or diminished in accordance with the ratio of goods produced to 
 goods consumed. When that accumulation has been depleted, the deficiency 
 can be made good only by an increase in the annual balance. It will be 
 necessary to encourage economy in the consumption of goods and the invest- 
 ment of the resulting savings in productive industries. We must work 
 hard and efficiently in order to produce more. We must spend less on 
 luxuries in order that we may save more. We must increase confidence in 
 
 52 
 
the national industries in order that savings may be attracted into the 
 right channels. 
 
 136. Increased production, increased saving, increased confidence 
 these are the keys to the whole problem. 
 
 137. Production may be hampered either in pursuance of a deliberate 
 policy, or simply by the use of inefficient methods. The interest of Employ- 
 ers, as a general rule, is to increase output, the danger of over-stocking 
 being met by improved distributive organisation and the opening up of 
 new markets. Cases of restriction, for the sake of keeping up prices, occur 
 mainly in connection with monopoly products and the problem of counter- 
 acting the influences which make for restricted output in these cases 
 deserves a more careful study than has yet been given to it. There is also 
 a tendency, perhaps unconscious, on the part of some employers to throw 
 obstacles in the way of increased output due to the exceptional efficiency 
 of employees. They would rather have a smaller output produced by men 
 receiving wages not above the customary limit than an increased output 
 produced by men earning exceptionally high wages. As soon as the earn- 
 ings of any men in their employ rise above the customary level, they 
 begin to cut piece rates, with the natural result of removing the incentive 
 to efficiency and diminishing output. This policy is not only unjust to the 
 men concerned; it is shortsighted and uneconomic from the point of view 
 of the employer's own interests. On the other hand, the interest of the 
 individual employer in maintaining a high standard of quality cannot be 
 taken for granted, so long as large profits can be derived from the sale of 
 inferior goods. Stronger action on the part of Trade Associations, and 
 more general education of the purchasing public in standards of value, are 
 needed both in the national interest and in that of producers of high class 
 goods. 
 
 138. Much of the limitation of output on the part of Employers arises 
 from inefficiency in management conservation in methods, the retention 
 of badly-planned works and out-of-date plant, bad organisation, neglect of 
 scientific research, the presence of "dead-heads" on the office staff. There 
 is some reason to hope that the experiences of the war and the keenness of 
 competition after it may lead to greater attention being paid to these points. 
 
 139. The limitation of output by Labour arises partly from the legiti- 
 mate desire to restrict the hours of work in the interest of health, educa- 
 tion, family life and enjoyment. These are considerations of social welfare 
 which cannot be set aside. We must look for greater production rather 
 from increased efficiency than from an increase in the number of hours 
 worked. There are, however, large sections of Labour by whom a further 
 limitation of output is deliberately practised in the assumed interests of 
 their class as a whole. In some cases the motive is the honest but mistaken 
 belief that the less each man does the more work there will be to go round. 
 "Work" is regarded as an exhaustible fund, or at the best as a diminishable 
 flow, and it is assumed to be in the interests of his class that each man 
 should "use up" as little as possible. The fallacy lies in the conception of 
 
 53 
 
an inelastic "wages fund." Wages come out of the stream of products, 
 and other factors remaining constant, the distribution of wages cannot be 
 widened except by an increase of the stream. In the case of trades in 
 which employment is irregular and demand uncertain, the temptation to 
 slacken work as a job nears completion is easy to understand, but the 
 results of the policy are too wasteful to be contemplated with satisfaction. 
 The remedy must be sought in a better organisation of the industries con- 
 cerned which will give the workman greater security of tenure, and remove 
 the fear of unemployment or relegation to lower-paid work as a result of 
 exercising his maximum effort. A further cause of limitation of output 
 lies in the natural differences of individual capacity. The workers believe 
 that if each man were allowed to produce to his full power, the minimum 
 standard demanded by the employer would be based on the performances of 
 the quickest and most skilful and a "speeding-up" process would be intro- 
 duced, involving either excessive strain or lessened earnings on the part 
 of the majority. From this point of view, restriction of output is a sacrifice 
 made by the ablest workers in the interests of their fellows. While such 
 restrictions necessarily result in limiting the total output, it is obvious that 
 Labour cannot fairly be asked to remove them unless some definite assur- 
 ance can be given against the evils anticipated. The question is one which 
 will require very serious attention both from Employers and Employed, 
 when we come to face the task of industrial reconstruction. 
 
 140. With regard to quality of output it is obvious that the workers' 
 interest lies in the direction of a high standard which will improve the 
 status of those concerned in the industry. Whether from the point of view 
 of earning power or of interest and satisfaction in their work, the workmen 
 have everything to gain by the standard of workmanship in their particular 
 trade being raised. A general appreciation of this fact, resulting in greater 
 attention by Labour organisations to questions of craft training and quality 
 of output, would do much both to raise the position of Labour itself and to 
 strengthen the hands of those employers who are striving for a high level 
 of production, as against those who seek to make their profit out of the bad 
 taste of bargain hunters. 
 
 141. It is clear that any restrictions placed upon production, whether 
 by Employers or Employed, beyond those based upon the social needs of the 
 workers, must be removed if the difficulties of the economic situation are 
 to be faced successfully. In order to make good the wastage of war and 
 raise the general level of industrial prosperity, the efforts of both parties 
 must be united for the purpose of increasing the quantity of output and 
 improving its quality. In order to avoid disastrous conflicts with regard 
 to the distribution of earnings, the national income, the total sum available 
 for distribution, must not only be maintained, but increased. The pros- 
 pects of success depend upon the willingness of both sides to face the facts 
 of the situation and to throw aside somewhat of their mutual distrust. 
 It will be necessary for Labour to abandon the policy of restricting output 
 and to concentrate upon demanding adequate remuneration for the work 
 
 54 
 
performed. It will be equally necessary for Employers to recognise that 
 efficient production is the only ultimate source of profit, that the policy of 
 keeping down wages and cutting piece rates is opposed to their own inter- 
 ests, and that industry as a whole will benefit by any rise in the level of 
 craftsmanship and production. There is to-day an urgent necessity for the 
 removal of all obstacles to any man either working or earning to the full 
 extent of his capacity. 
 
 142. The argument has brought us to the fundamental question which 
 underlies all our industrial troubles the relation between Employers and 
 Employed. The limitation of production, whether by Labour restrictions 
 on output or cutting of piece rates by Employers, springs from the belief 
 that the interests of Employers and Employed are inevitably and funda- 
 mentally hostile. If it can be shown that their interests are concurrent as 
 regards production and only partially opposed even as regards distribution, 
 the way will have been paved for a compromise which will leave both 
 parties free to co-operate in the work of industrial reconstruction. 
 
 143. The relations of Employers and Employed are partly antagonistic 
 as regards distribution, because it is to the interest of each to secure a 
 relatively large share of the wealth produced. They are not wholly opposed, 
 even in this respect, because it is to the interest of the employer that his 
 workpeople's standard of life shall be sufficiently high to promote efficiency 
 and afford a reasonable incentive to effort; it is to the interest of the work- 
 man that the firm shall be sufficiently prosperous to provide steady employ- 
 ment. Good work cannot be expected from men who are ill-fed and insuffi- 
 ciently clothed, or who feel that they derive no advantage from increased 
 production. Continued employment cannot be expected from a firm which 
 is not making a profit on its business. The qualification becomes still more 
 important when it is extended from the relations existing in a particular 
 firm to industry as a whole. It is to the interest of all employers engaged 
 in the supply of common commodities that wages as a whole should be good, 
 in order that the purchasing power of their customers may be high. It is 
 to the interest of the workers, who are also consumers, that firms pro- 
 ducing aticles of general use should be sufficiently prosperous to keep plant 
 up to date and produce well and cheaply. 
 
 144. The interests of Employers and Employed are concurrent as 
 regards production, bceause it is to the benefit of each that the total 
 available for distribution shall be as large as possible. The interest of the 
 working class in increase of output may be limited by other than economic 
 considerations. They will not accept for the sake of increased wages 
 methods of work which involve loss of self-respect or a narrowing of their 
 life by undue restriction of leisure. To this extent the interest of the 
 employer may be over-ridden by considerations of social welfare. The real 
 conflict is between his economic interests as an employer of labour and the 
 social interests of the community of which he is a member. But the 
 employer and employed are both concerned in increased efficiency of pro- 
 duction, which implies equal or improved output at less cost to the 
 
 55 
 
employer and with less strain to the employed. Here, too, it is to be noted 
 that the workman, as consumer, will benefit by any increase in the general 
 efficiency of production. 
 
 145. The great obstacle to co-operation is the question of status. 
 The ill-will of Labour towards Capital and Management is not wholly a 
 question of their respective share of earnings. Friction arising over the 
 distribution of earnings is in itself due quite as much to a sense of injus- 
 tice to the machinery of distribution as to the desire for actual increase of 
 wages. The fundamental grievance of Labour is that while all three are 
 necessary parties to production, the actual conditions of industry have 
 given to Capital and Management control not only over the mechanism of 
 production, but also over Labour itself. They feel that the concentration 
 of Capital in a comparatively few hands has rendered fair bargaining 
 between the parties impossible. A man who leaves his work without reason 
 inflicts on his employer a certain amount of loss and inconvenience. A 
 man who is dismissed without reason may lose his livelihood. While each 
 great firm represents in itself a powerful organisation, apart from any 
 Employers' Association to which it may belong, the men employed by the 
 firm are solitary units, having no power of collective action without calling 
 in the Trade Unions representing the whole of each craft. In the last 
 resort the only effective weapon of the Trade Union is the strike, and the 
 loss inflicted by a strike or lock-out on the Capitalist Class is not com- 
 parable with the acute personal suffering of the workmen and their fam- 
 ilies. They feel, therefore, that in any dispute the dice are weighed 
 against them. 
 
 146. There is also a very widespread feeling that Labour as a whole 
 is faced by great disadvantages in ventilating its grievances. The tribunals 
 are composed, the Press is owned and run, by men of another class; and 
 the complaint is frequently made that the Labour representative and the 
 Labour case do not receive the fair play and courtesy which would be 
 extended to those of their "opponents." 
 
 147. The attitude of a certain section of Employers who look on 
 their employees as "hands," as cogwheels in the industrial machine, having 
 a market value, but no recognised rights as human beings, is bitterly 
 resented. Still more offensive is the attitude which regards the working 
 man as a very good fellow so long as he is kept in his place and requir- 
 ing to be guided and disciplined, but not to be consulted in matters vitally 
 affecting his interests. Labour has come to know its power. It realises 
 that it is an indispensable party to the production of wealth and it requires 
 to be treated frankly as a partner with equal rights and equal 
 responsibilities. 
 
 148. The grievances of the Employers are no less valid. They com- 
 plain of deliberate limitation of output, slackness and inefficiency in work, 
 short time and malingering, the lack of any feeling of responsibility. 
 They point out that many leaders of Labour opinion carefully discourage 
 any sense of loyalty to the firm the source from which the earnings of 
 
 56 
 
and that new Capital will be scarce and dear owing to the restriction of 
 production and war losses. The critical period for credit will not have 
 been passed until twelve months after the end of the war, when the emer- 
 gency legislation affecting bills of exchange, debts and mortgages expires.. 
 It is possible that when embargoes are removed and financial obligations, 
 have to be met, it may be necessary for the State to exercise discretion 
 and even to ask for new powers in order to stave off a partial collapse 
 of credit. 
 
 V. SPIRIT AND TEMPER 
 
 48. The problems presented by the industrial situation would be 
 difficult enough if they were faced in the best spirit and with the coolest 
 wisdom. Unfortunately, as has already been suggested, there is a strong 
 likelihood of their being complicated by the existence on all sides of an 
 ugly temper which renders it difficult to arrange an acceptable settlement 
 of the issues at stake. 
 
 49. In so far as this temper is directly connected with the war it 
 may be summarized under three heads: Economic Discontent; Class- 
 Suspicion; Psychological Reactions. 
 
 (a) Economic Discontent 
 
 50. We have seen that several causes will conspire to reduce the 
 earnings of Labour after the war. Even should nominal wages remain at 
 a high level or be increased, real wages will be low owing to the increase 
 in prices. At the same time there will be a certain amount of unemploy- 
 ment due to the difficulties of readjustment. 
 
 51. These are phenomena particularly likely to cause discontent- 
 The man who sees that while he is receiving more money, his spending 
 power is actually decreased, the man who finds a difficulty in obtaining 
 work, although he knows that there is no general lack of demand for 
 labour, are both apt to imagine themselves cheated, and to break out into 
 fierce resentment against those better off than themselves. To say that 
 this resentment is in large part the result of defective reasoning will not 
 get rid of the trouble. It is not easy for men to reason on economic 
 causes when the result is felt not merely in need for retrenchment but 
 in want of necessaries. 
 
 52. The sense of hardship will be aggravated by the cessation of 
 separation allowances. There is no doubt that in many cases, such as the 
 families of agricultural labourers and unorganised workers, the separation 
 allowances have represented a substantial increase in spending power, 
 while the wage-earner has been better fed and cared for in the Army than 
 ever before. They will not go back without protest to the old, often 
 wretched, conditions of their life before the war. 
 
 53. Unless same means can be found of counteracting the tendencies 
 above discussed, the lot of the wage-earner is likely to be a hard one. At 
 
 23 
 
the same time, the demand for reasonable remuneration and decent con- 
 ditions will be stronger than ever. The national exertions during the 
 war have profoundly affected the minds of the working class and have 
 impressed them with perhaps an exaggerated notion of the power of the 
 State and the extent of the national resources. It will no longer be pos- 
 sible to silence the demand for social reforms, by the assertion that they 
 cannot be afforded. Such a contention will be met by the argument that 
 a nation which has been able in an emergency to find several millions a 
 day for war purposes cannot plead poverty as an excuse for neglecting the 
 improvement of social or industrial conditions. 
 
 54. While there is a danger that the real earnings of Labour will 
 be reduced, the real profits of Capital and Management may suffer a 
 similar diminution due to restricted output, increased cost of production 
 and heavy taxation, whereupon the three great partners in Industry will 
 be threatened simultaneously and the competition between them for its 
 proceeds will be intensified and embittered. 
 
 (fe) Class-Suspicion 
 
 55. The necessities of the war, especially with regard to the pro- 
 duction of munitions, have resulted in the temporary abandonment of 
 many of the Trades Union "safeguards." The two most important 
 instances are the removal of restrictions on output and hours of work and 
 the dilution of skilled Union Labour by partly skilled or unskilled, non- 
 Union Labour. Pledges have been given for the restoration of the status 
 quo. The new developments of industry, the springing up of a great army 
 of new workers, and the difficulties of readjustment, will make it very 
 much more difficult than was expected to fulfil these pledges literally. 
 Unless some new equivalent can be found which will convince the mem- 
 bers of the Unions themselves that they have gained more than they 
 have lost, there will very naturally be a strong feeling of resentment. 
 There is already only too prevalent a belief that advantage is being taken 
 of the war to prejudice the position of Labour. Any hitch arising in the 
 restoration of Trade Union "safeguards" will powerfully reinforce this 
 belief. The allegations made by both Employers and Employed that the 
 necessities of the war have been turned to account for the promotion of 
 class or personal interests, the fear that returned soldiers may be used as 
 "blackleg" labour, the fear of the permanent introduction of compulsory 
 military service as a means of strike-breaking and neutralising the power 
 of Organised Labour, the recollection of war-time strikes, will all tend 
 to increase the bitterness of class-suspicion. 
 
 (c) Psychological Reactions 
 
 56. We have further to face the fact that the discontent due to 
 economic conditions will be aggravated by certain features in the general 
 temper and spirit of the nation. 
 
 57. An effort so stupendous as that made during the war is almost 
 invariably followed by a reaction. It is a great thing that the response 
 
 24 
 
Capital and Labour are alike derived that even a fair employer can feel 
 no confidence that his workmen will back him up in a pinch. Any effort 
 to improve the condition of the employees is regarded as a concession 
 extorted from weakness and is followed by further demands which bear no 
 relation to the condition of trade. Every period of prosperity produces 
 a demand for higher wages ; but no amount of depression is considered as 
 an excuse for reverting to a lower scale. The Trades Union wage regula- 
 tions place obstacles in the way of differentiation between the efficient and 
 industrious workman and those who are less skilled or less hardworking. 
 At the same time the^y render it impossible to continue in employment, 
 without actual loss, men whose capacity for production has been decreased 
 by age or accident. 
 
 149. The gravest complaint, however, relates to the' insecurity of bar- 
 gaining. The Employer's power to negotiate directly with his employees is 
 restricted by the Union, yet bargains thus made with the men's accredited 
 representatives are continually broken by those whom they profess to bind 
 and the Union itself cannot enforce the agreement which it has made. 
 
 150. So long as the fundamental interests of Employers and Employed 
 are believed by the majority to be purely antagonistic, no cure for the 
 grievances of either side is likely to be found, since the wrongs of which 
 both sides complain spring from that very feeling of hostility and suspicion. 
 For just so long as this attitude is maintained, production will fall short 
 of its possible total. 
 
 151. The limitation of production carries with it a limitation of the 
 possible amount of savings. If the total amount produced is low, the 
 balance of production over consumption also will be low. But class- 
 hostility hampers saving in other ways. The supposed clash of interests 
 destroys the sense of responsibility in the use of wealth. Discontent with 
 economic conditions is productive of reckless expenditure. The man who 
 feels his condition of life to be unworthy has no incentive to save, because he 
 has no hope of substantial improvement in his condition. The worse that 
 condition is, the greater is his need of amusement and palliatives to render 
 it bearable. Sound investment is discouraged because the prospect of 
 repeated outbreaks of industrial warfare makes confidence impossible. 
 
 152. We see, therefore, that the mutual hostility of Employers and 
 Employed is the prime obstacle to the three essentials of industrial pros- 
 perity Increased Output, Increased Saving, Increased Confidence. It is 
 only from the removal of this obstacle that any one of the three parties to 
 the industrial process can look for a permanent increase of earnings. 
 
 153. We may, therefore, law down these four broad principles as those 
 which must guide our attempt to solve the Industrial Problem. 
 
 (a) The first necessity of the Industrial Situation is greater efficiency 
 of production. In order to meet the difficulties created by the war, 
 to make good the losses of capital, and to raise the standard of 
 living amongst the mass of our people, we must endeavour to 
 increase both the volume and the quality of output. 
 
 57 
 
(b) In order that this result may be obtained without detriment to the 
 social welfare of the community, it must be sought for rather in 
 improved organisation and the elimination of waste and friction, 
 than in adding to the strain on the workers, and must be accom- 
 panied by a change of attitude and spirit which will give to Industry 
 a worthier and more clearly recognised place in our National life. 
 
 (c) This can only be accomplished if the sectional treatment of indus- 
 trial questions is replaced by the active co-operation of Labour, 
 Management and Capital to raise the general level of productive 
 capacity, to maintain a high standard of workmanship, and to 
 improve working conditions. 
 
 (rf) It is essential to the securing of such co-operation that Labour, as 
 a party to Industry, should have a voice in matters directly con- 
 cerning its special interests, such as rates of pay and conditions of 
 employment. It is necessary to create adequate machinery both 
 for securing united action in the pursuit of common ends and for the 
 equitable adjustment of points which involve competing interests. 
 This machinery must be sufficiently powerful to enable both sides 
 to accept its decisions with confidence that any agreement arrived 
 at will be generally observed. 
 
 154. There are many to whom these principles will not seem to go for 
 enough. They are convinced that the only solution lies in a complete 
 reconstruction of 'Society the abolition of Private Ownership of Land 
 and Capital, the establishment of State or Guild Socialism, the Re-integra- 
 tion of Industry, the Return to the Land, the break-up of the existing 
 Trade Unions. Accordingly they reject the notion of co-operation between 
 Employers and Employed as involving an abandonment of the first essentials 
 of reform. If we were discussing the abstract ideal of Society, it would 
 be necessary to meet their criticisms by discussing each of their proposals 
 on its merits. But the present issue is a narrower one. We have to deal 
 with a definite and immediate danger the prospect of an industrial crisis 
 following on the signing of peace. It is obvious that no measure involving 
 a radical reconstruction of the social system has any chance of adoption 
 in time to avert this evil. On the other hand, the prospect of any specific 
 programme emerging from a period of internal conflict is small. The 
 results of social or political upheavals have seldom been those anticipated 
 by their promoters. The men whose ideas gave birth to the French Revo- 
 ution did not foresee the Terror or the Empire. The Long Parliament 
 foresaw neither the reign of the Major-Generals nor the Restoration. If we 
 are to find a way out of the threatened difficulties, we must do so by 
 making the best use of the materials at hand, accepting the conditions 
 under which we work and seeking to unite all classes in the pursuit of 
 interests which are common to all. Whatever may be the ultimate direction 
 of industrial progress, 'an advance is more likely to be founded on a first 
 right step than to come through the chaos of industrial warfare and 
 class-hatred. 
 
 155. The difficulties of devising any scheme of co-operation which 
 shall be acceptable alike to Employers and Employed are great enough. 
 It demands from both a clear understanding of their respective parts in the 
 process of production, a measure of sympathy with the point of view of 
 the other parties to that process and a just perception of the respective 
 
 58 
 
weight to be attached to conflicting and to common interests. It calls for a 
 certain daring in experiment and for a willingness to make concessions, if 
 needs be, for the common good. It requires both parties to abandon 
 recrimination as to the mistakes of the past and to approach each other in 
 a new spirit. 
 
 156. These are great demands ; but the emergency and the opportunity 
 are also great. Whatever we may do, we may be sure that things will not 
 continue to move quietly in the familiar grooves. The whole world alike 
 of conditions and ideas has been violently shaken and a ferment has been 
 set up out of which may come either good or evil, but in no event a reversion 
 to the old order. We cannot alter the facts by ignoring them. Our only 
 choice lies between the risks involved in abandoning ourselves passively 
 to the forces of change and the effort required to harness them for our 
 own ends. 
 
 157. To avoid chaos is much; of itself it would be worth no small 
 sacrifice and effort on the part of all. The gain which might accrue to any 
 class from conflict is shadowy and uncertain; the loss and suffering to 
 every class alike are certain and heavy. 
 
 158. But to avoid danger is not all. It seems probable that we stand 
 to-day at one of those definite turning points in human history where 
 a generation of men has it in its power, by the exercise of faith and wisdom, 
 by facing the problems of the moment without passion and without 
 shrinking, to determine the course of the future for many years. If we 
 can rise to the height of our opportunity we may hope not merely to pass 
 safely through the immediate crisis, but to contribute largely to the future 
 welfare of the nation. 
 
 159. Whatever action is taken must be the result of frank and full 
 discussion between representatives of all parties to the question. Any 
 attempt to enforce upon one party a scheme framed wholly by another 
 would defeat its own object and precipitate the crisis. It will not do to 
 look to the Government for the initiative. Whatever part the State may 
 play in the future of Industry, it cannot move in advance of the general 
 level of opinion among those concerned. Most of the difficulties which have 
 been analysed in this Memorandum apply with equal force to State con- 
 trolled industries, and while the solution may involve legislative sanction 
 or State action, the problem itself can be settled only by agreement 
 between those chiefly concerned. 
 
 160. The first step towards agreement is to define the functions of 
 the three parties to production. 
 
 Capital is necessary to a business for the erection of plant, the pur- 
 chase of raw material and working expenses. In order that Capital should 
 be used to the best advantage for the purposes of industry, it is necessary 
 that investors should display sound judgment as to the prospects and 
 requirements of particular enterprises, exercising caution or daring as 
 occasion demands. 
 
 59 
 
Management is concerned with the disposition of the Capital provided, 
 the erection and employment of machinery and plant, the general organisa- 
 tion of the business, the placing and acceptance of contracts, the purchase 
 of the raw material and the sale of the finished product. The perform- 
 ance of these functions requires not merely a knowledge of the particular 
 business concerned, but of all which are in any way connected with it, 
 a careful study of markets, of methods of distribution and of financial 
 conditions. 
 
 Labour undertakes the conversion of the raw material into the finished 
 product, by aid of the plant and machinery provided. While the first 
 requisite in the workman is a thorough understanding of his own job, the 
 maximum efficiency can only be attained if he has a clear conception of 
 the part played by his own work in the whole process of production. 
 
 These definitions are framed with a view to a manufacturing business, 
 but they can be adapted, by changes which will readily suggest themselves 
 and are not vital, to a distributive industry. 
 
 161. It is obvious that the functions of Capital, Management and 
 Labour overlap. In many cases the man who provides the funds of a 
 business also directs its working. In such cases he performs both the 
 waiting and risk-taking functions of Capital and Management's function 
 of expert control. It is logical to regard his profits as consisting partly 
 of interest on the capital provided and partly of remuneration for his 
 services as manager. Again, a foreman or a ganger combines to some 
 extent the functions of Labour and Management; and in general, the 
 spheres of management and labour activity are too closely connected for 
 any clear line of demarcation to be drawn between them. Capital itself 
 represents the result of past services performed by all three parties. 
 
 162. This inter-relation of functions constitutes a real partnership* 
 between the persons concerned in any business, whether as investors, man- 
 agers or workmen, or in any two or all of these capacities. At present 
 the relation between them is unrecognised or only partly understood, and 
 the result is to produce hostility instead of co-operation between the 
 partners. The attention of all is apt to be concentrated on the points 
 in which their interests conflict to the exclusion of those in which they 
 are common. 
 
 163. This failure to realise the possibilities of co-operation springs 
 largely from neglect of a fundamental principle. The first article of 
 partnership is equality of knowledge. At present the Workers have little 
 knowledge of the capital risks, working expenses, establishment and depre- 
 ciation charges of a business, or of the relation between their particular 
 job and the general process of production. On the other hand, Employers 
 have, as a rule, a very imperfect understanding of the Workers' point of 
 view, the degree in which they are affected by economic and social con- 
 siderations respectively, and the effect of particular processes and methods 
 
 *The word partnership is here used in its widest sense and does not involve the 
 acceptance of what are generally known as co-partnership schemes. 
 
 60 
 
of working upon their physical and moral life. From the mutual ignorance 
 arise innumerable misunderstandings with regard to rates of pay and 
 conditions of labour which are capable only of arbitrary solutions, because 
 neither side understands the standpoint of the other. It is probable that a 
 large percentage of the disputes arising over rates of pay, the introduction 
 of labour-saving machinery, hours of work, the demarcation of tasks, 
 Trade Union restrictions, could be avoided or compromised, if Employers 
 and Employed really understood the reasons for the attitude of the other 
 party. In default of such understanding, the dispute takes on the char- 
 acter of a trial of strength, in which each side is compelled, for the sake 
 of principle and prestige, to put forth efforts disproportionate to the actual 
 point at issue. 
 
 164. It has been said in paragraph 145 that the chief obstacle to 
 co-operation is the question of status. The development of modern industry 
 has turned the operative into a mere cog in the industrial machine. The 
 average w r orking man has no say in the management of the business and 
 very little as to the conditions of his employment; he has no interest 
 in the success of the firm, except that it should not collapse altogether; 
 and the tendency has been more and more to reduce his work to a mechan- 
 ical routine. The term "wage-slavery," so often used, means something 
 more than the mere economic dependence of the worker on his employ- 
 ment. It embodies the revolt of the worker against a system which gives 
 him neither interest, nor pride, nor a sense of responsibility in his work. 
 To a large proportion of those engaged in industry their work has become 
 something external to their personal life, a disagreeable necessity afford- 
 ing no opportunity for self-expression, the joy of creation, or the realisa- 
 tion of healthy ambitions. The result has been a serious impoverishment 
 and enfeeblement of life and character and a permanent obstacle to indus- 
 trial development. It is impossible for men in this position to take long 
 views, or to consider innovations from, the standpoint of industry as a 
 whole. The opposition to new methods of working, labour-saving machin- 
 ery, dilution of labour, scientific management, is only in part the result 
 of specific and reasoned objections. It springs still more largely from the 
 fact that these schemes are imposed from above and are presumed to be 
 framed solely in the interest of the Employers. The opposition to them is, 
 in fact, a revolt against dictation. On the other hand, the uncompromising 
 attitude of Employers does not, generally speaking, arise from a tyrannical 
 spirit or a mere desire for increased profits, but from impatience with the 
 men's separatist attitude and their inability to realise the common depend- 
 ence of Employers and Employed upon the produce of their joint exertions. 
 
 165. The same difficulty arises in the case of distribution of earnings. 
 The worker feels ithat his labour is treated as a mere commodity, the 
 market value of which may be forced down by the Employer, irrespective 
 of any consideration of a decent standard of life for the Employed, and 
 that he receives the reward of his toil, not as a matter of right or as the 
 equitable division of the proceeds of joint effort, but as a dole fixed by the 
 
 61 
 
arbitrary will of the Employer or as a concession extorted by force. The 
 Employer feels that each demand made upon him represents a raid upon 
 his profits limited solely by the power of the Workers' organisations and 
 unaffected by any consideration of the working expenses of the business, 
 provision for depreciation or dilapidations, or the building up of a reserve 
 against future depression. In the confusion of thought arising from 
 imperfect understanding, there is a tendency to regard the whole problem 
 as centreing round the concrete question of distribution, which becomes 
 a symbol of the general opposition of interests. The consequence is that 
 disputes as to wages are often fought on either side with a bitterness and 
 obstinacy altogether out of proportion to the amounts involved. In order 
 to arrive at a clearer conception, it is essential to disentangle as far as 
 possible the economic and non-economic factors. If the question of status 
 can be settled, the main obstacle to an agreement as to distribution will 
 have been removed. 
 
 166. The problem is, therefore, to settle this question of status in 
 some way which shall give the workman the sense of self-respect and 
 responsibility which he desires, without interfering unduly with the 
 employer's exercise of the necessary functions of management. The Trade 
 Union regulations, which have been so largely suspended by agreement for 
 the period of the war, were mostly directed towards this end the assump- 
 tion by Labour of some measure of control over the conditions under which 
 it works. They refer to wages, hours of labour, overtime and Sunday work, 
 apprenticeship and the method of entry into particular occupations, the 
 kind of work to be performed by different classes of workers, the methods 
 of negotiation between Employers and Employed, and similar questions. 
 In other words, they represent an attempt to substitute for the autocratic 
 control of the employer over the working lives of his employees a greater 
 and greater degree of self-direction by the organised workers themselves, 
 acting through their accredited representatives. 
 
 167. As a natural result of the assumed conflict between the funda- 
 mental interests of Employers and Employed, the action of the Trade 
 Unions took the form, in appearance at least, of an attack upon the profits 
 of the Employers and their right to control the conduct of their business. 
 It was largely as a defence against the Unions that the great Employers' 
 Associations came into being. After making all allowance for the occa- 
 sional insubordination of Trade Union members and the lack of support 
 given in some quarters to the Employers' Federations, the effect of these 
 parallel organisations has been beneficial to both sides. Hitherto, however, 
 the action of both groups has been almost entirely negative. They have 
 placed restraints both upon tyranny and upon anarchy; they have succeeded 
 in compromising many disputes and in restricting the occasions of open 
 conflict ; but they have done little or nothing to remove the continual under- 
 current of latent hostility and divergence of effort which has hampered 
 industrial development far more than the direct effect of strikes and 
 lock-outs. They have potected the special interests which they respectively 
 
 62 
 
represent; but they have not risen to the conception of combined action 
 in pursuit of their common interests. Valuable as their work has been, 
 it can hardly be regarded as an adequate return for the ability, energy 
 and power of organisation displayed on both sides. 
 
 168. The explanation of the comparative failure of the Employers' 
 Associations and Trade Unions on the constructive side of the industrial 
 problem is to be found in their strictly sectional and defensive origin and 
 outlook. Regarding themselves as entrusted with the interests of one party 
 to Industry and not of Industry itself, they have paid no attention to the 
 problems and difficulties of the other side, and they have come together 
 only when one had a demand to make of the other or when a conflict was 
 imminent. Thus they have always met in an atmosphere of antagonism, 
 and their negotiations have been carried on as between two hostile bodies. 
 Exchange of views has come at too late a stage in the proceedings, when a 
 stand has already been taken on both sides and prestige or prejudice forms 
 an obstacle to concessions. What is still more important, their discussions 
 have been confined to specific points of dispute and have not embraced the 
 consideration of constructive measures for the improvement of industrial 
 conditions and the increase of efficiency. Yet the possibilities of combined 
 action which lie in these two great groups of highly organised and power- 
 ful bodies might transform the whole face of industrial life. Their united 
 knowledge of both sides of the industrial process should enable them to 
 throw light on every phase of its successive developments. Their united 
 strength would render them, in combination, practically irresistible. But 
 to secure the realisation of these possibilities the co-operation between 
 the two groups must be continuous and constructive, and must be based 
 upon a recognition of the common interests of Employers and Employed, 
 both as parties to industry and members of the community. Employers 
 must realise that both their own interests and the obligations of citizenship 
 impose upon them the necessity of a sympathetic understanding of the 
 lives and standpoint of those with whom they work and a willingness to 
 co-operate, without dictation or patronage, in every endeavour to improve 
 their material or social conditions. Labour must realise its direct interest 
 in the improvement of industrial processes, the organisation of industry, 
 the standard and quantity of production, and the elimination of waste in 
 material or effort. Both the Employers' Associations and Trade Unions 
 must learn to regard themselves as joint trustees of one of the most 
 important elements of the national life. 
 
 169. The machinery necessary for such co-operation will require to 
 be created. The existing Conciliation Boards, or Industrial Boards on the 
 Australian model, while they perform many useful functions, will not 
 serve this purpose. These Boards are, in fact, independent Courts sitting 
 to adjudicate upon claims in respect of which the parties are unable to 
 agree. Such a method of adjudication is in many ways preferable to the 
 alternative of leaving questions to be settled by conflict, as the result of a 
 strike or lock-out. They enable Employers and Employed to contract on 
 
 63 
 
more equal terms. They result also in the production of detailed evidence 
 whereby each side might, if it had the inclination, understand the case 
 of the other. But here, too, the exchange of views comes too late and 
 the parties meet not to co-operate, but to oppose each other. Moreover, 
 they are concerned solely with the settlement of specific disputes, and 
 while they may continue to do useful work in this connection, they cannot 
 provide the opportunity for that continuous and constructive co-operation 
 of Management and Labour which is essential to any satisfactory solution 
 of the industrial problem. 
 
 170. Something much more comprehensive is required, and the task 
 of providing it will need very careful attention from those concerned. It 
 is unlikely that any one scheme could be devised which would be applicable 
 to all industries or in all localities. The utmost elasticity, whether in 
 present application or in future development, is necessary to any system 
 of industrial organisation, for industry itself develops and modifies day by 
 day. But the general lines upon which development is possible can be 
 reduced from the foregoing analysis of the difficulties to be overcome. 
 
 171. In its simplest form, the new machinery would consist of Joint 
 Committees, representing both the Management and the Works Staff. This 
 method would lend itself readily to experiment by individual firms and 
 could be applied even in the unorganised trades where no strong Trade 
 Unions or Federations of Employers exist. At the meetings of such Com- 
 mittees any questions affecting working methods and conditions could be 
 brought up for discussion by either side. The representatives of Manage- 
 ment would be required to explain the nature and extent of any proposed 
 innovation designed to increase output or economise effort the intro- 
 duction of new automatic machinery, time and motion study, standardisa- 
 tion of tools, analysis of fatigue, elimination of waste and its effect upon 
 the earnings of the firm and the individual worker. This explanation 
 should be as clear and full as possible, with the object of giving each 
 worker an interest and sense of responsibility in his work, by making clear 
 to him, through his representatives, the reason for the methods to be 
 adopted and the relation of his job to the whole process of production. The 
 proposals having been explained, the Workers' representatives would con- 
 sider them from the point of view of the interests of the men employed, 
 the relation between the different classes of labour, the strain on the 
 workers, the amount of interest and intelligence put into their work. If 
 necessary, they would put forward modifications or safeguards for the 
 protection of these interests. Where the result was to show a real diver- 
 gence of opinion or of interest, it would be freely discussed, with a view 
 to finding a way round and adjusting the balance between common and 
 competing interests. In like manner, proposals for alterations in the hours 
 or conditions of labour, in the interests of the health or social welfare of 
 the workers, would be put forward by the Workers' representatives and 
 discussed in the light of any objections 011 the score of expense or difficul- 
 ties of working urged by Representatives of Management. While the 
 
 64 
 
Representatives of Management would naturally be concerned mainly with 
 the efficiency of the business and those of Labour with the immediate 
 interests of the Workers, it is very desirable that neither should confine 
 their attention to their own side of the business. A wise Employer will 
 always have the interests of his staff at heart, and workmen who feel them- 
 selves to have a recognised interest in the business will have many sug- 
 gestions to put forward for promoting its efficiency. 
 
 172. In the staple trades, the method of Works Committees would 
 require to be replaced, or supplemented, by Joint Boards contposed of 
 representatives of the Employers' Associations and the Trade Unions. 
 Having regard to the differentiation of functions between Management 
 and Labour and the large number of problems affecting one or both parties, 
 which arise in a big industry, one representing Management and the other 
 Labour, with a Supreme Board of Control co-ordinating the work of both. 
 The functions of the Management Board would cover the "business" side 
 of the industry; those of the Labour Board would relate to conditions and 
 hours of labour, the demarcation of tasks and everything that touches most 
 nearly the life of the worker. Representatives of these Boards, meeting 
 on the Supreme Board of Control, would deal jointly with all matters by 
 which the interests of both parties were affected. Such questions as the 
 Dilution of Labour, which is becoming increasingly important, yet which 
 cannot be dealt with satisfactorily so long as it is approached from one 
 side only, would be discussed by the Joint Board of Control, both from 
 the point of view of efficiency in production and from that of the interests 
 of the Workers and the position of the Trade Unions. In this manner it 
 should be possible to construct and give effect to a definite policy and 
 programme for each great industry as a whole, representing a reconciliation 
 between the common and competing interests of Employers and Employed, 
 and based both upon the desire to obtain the maximum of efficiency and 
 the desire to obtain the best possible conditions for the workers. 
 
 173. In order to avoid the evils of inelasticity and over-centralisation, 
 and to make due provision for the varying conditions of different localities 
 and firms, it might be advisable to combine the creation of these Central 
 Boards with an organisation of District and Works Committees, charged 
 with the special care of local and individual interests and problems. The 
 representation of such Committees on the Central Boards and the delega- 
 tion to them of local questions would constitute a protection against the 
 injustice which might otherwise be done by an attempt to equalise rates 
 of pay in areas which differ widely as to the cost of housing and food, or 
 in which the conditions of production and transport produce important 
 variations in working expenses. They would also serve as a protection to 
 established workshop and local craft traditions against the deadening 
 tendency to a mechanical uniformity. 
 
 174. In its most ambitious form, the Supreme Board of Control would 
 resolve itself into a National Industrial Council for each of the staple 
 industries or groups of allied industries. The members would be elected 
 
 65 
 
by ballot, each electoral unit, or pair of parallel units, returning one repre- 
 sentative of Management and one of Labour. In many industries it would 
 be desirable to find a place on the Council for representatives of the Applied 
 Arts, both with a view to raising the standard of design and workmanship, 
 and with the object of encouraging the human and creative interest in 
 production. A Speaker of broad sympathies and experience, capable of 
 directing and focussing the discussions upon the practical problems to be 
 dealt with, would be chosen by mutual consent, but would have no casting 
 vote, his capacity being purely advisory. Such Industrial Councils would 
 in no sense supersede the existing Employers' Associations and Trade 
 Unions, many sides of whose present activities would be unaffected by the 
 creation of the new bodies. Matters connected with the sources and supply 
 of raw material and the cultivation of markets for the disposal of the 
 finished products would remain exclusively the concern of purely com- 
 mercial federations of manufacturers, acting in conjunction with the State. 
 The benefit side of Trade Unions and many phases of the internal organisa- 
 tion of labour by them would be similarly unaffected. In other matters 
 the connection between the old and the new bodies would be close, without 
 any loss of identity. The Unions and the Employers' Associations would 
 send their delegates to the Industrial Councils charged with the defence of 
 the special interests represented by them and equipped with special knowl- 
 edge of their particular problems. The general policy outlined by the 
 Industrial Parliaments would be carried out in detail largely through the 
 older organisations. 
 
 175. The field of action open to the Industrial Councils would be 
 very great. It would extend, for instance, to (a) the suggestion and con- 
 sideration of improved methods and organisation; (?>) the maintenance of 
 works discipline and output; (c) the maintenance of a high standard of 
 design and workmanship; (d) the education and training of apprentices, 
 and the conditions of entry into the industry concerned; (e) the demarca- 
 tion of tasks; (f) the prevention of unemployment, the development of 
 security of tenure in the trades and the decasualisation of labour; (#) ques- 
 tions of wages and piece rates; (/i) the prosecution of research and experi- 
 ment, and (i) the improving of the public status of the industry. Where 
 the Council represented a group of allied trades, it would naturally con- 
 cern itself with the co-ordination of their work and the adjustment of their 
 respective interests. In addition to the promotion of internal prosperity, 
 the Councils would be able to give public utterance to the views and needs 
 of each industry in its relation .to the whole national life. They would 
 take account not only of economic but of moral and aesthetic values. Their 
 object would be not merely to increase .the productive efficiency of the 
 industry and to reconcile the competing interests of those engaged in it, 
 but to emphasise the worth and dignity of industrial life and to enlarge 
 the scope offered by it to the energies and ambitions of those concerned. 
 It would be part of their task to emphasise the close connection between 
 industrial questions and those relating to education and social conditions. 
 
 66 
 
It might even be advisable to empower the Industrial Councils to apply for 
 Board of Trade Orders giving legal sanction to their decisions but this 
 would necessitate careful watching, and the provision of adequate safe- 
 guards, especially in the interests of consumers. 
 
 176. There is, of course, a tendency in all great associations of 
 industrial units to develop the danger of tyranny, which seems almost 
 inseparable from a close corporation. If, however, it is found that the 
 requirements of the time call for the creation of such organisations, it 
 would be well to face this danger without flinching. The advantages to 
 be obtained are enormous, and with the help of the legislature and the 
 Courts the dangers can be met. 
 
 177. Whatever scheme is adopted, the essential thing is that it shall 
 give expression to a real desire for co-operation between Employers and 
 Employed. In the unorganised trades, Works Committees on the plan 
 already suggested may be sufficient for present needs. The probability is 
 that, with increasing prosperity and better understanding, the desire for 
 organisation will grow, and the tendency will be to extend the scope both 
 of Employers' and Labour Organisations and to increase their effectiveness, 
 so as to give the Employers' Association greater power to control the 
 action of individual firms and to enable the Trade Unions to make agree- 
 ments with the greater certainty of their being carried out. It is evidently 
 desirable that the organisation of Employers and Labour should proceed 
 pari passu, with full mutual recognition, so that individuals or small 
 groups on one side should not find themselves confronted by powerful 
 organisations on the other. When once a policy of co-operation has been 
 introduced, its future development and extension may safely be left to 
 time and experience. An attempt to lay down any definite and rigid scheme 
 at the start would probably defeat its own object. The whole success of the 
 policy depends upon the elasticity with which it can be adapted to practical 
 needs and opportunities as they reveal themselves. It is obvious that, even 
 in unorganised trades, it might be applied to many questions of works 
 economy, with the result of stimulating care and efficiency on the part 
 of the Workers, and giving Management a better understanding of their 
 point of view, to the advantage of both. In the engagement of men and 
 their allocation to different departments and jobs, it should be possible to 
 take advantage of the special knowledge of both sides, by consultation 
 between the Managers and the representatives of the Works Staff as to. the 
 numbers and qualities of the men required. In some cases it might even 
 be possible to appoint a permanent joint committee to deal with the 
 question of the supply of labour, and the requirements of the work in hand. 
 
 178. It is probable that some time must elapse before the benefits of 
 any such scheme as has been suggested could be fully realised. The change 
 of attitude involved is too vital, the field of activity is too large to hope 
 for any but gradual development. At the outset it might often happen 
 that much of the discussion, either in a Works Committee, or a National 
 Industrial Council, was obstructive or irrelevant. But it has been proved 
 
 67 
 
again and again that contact breeds mutual understanding and respon- 
 sibility calls forth capacity. Without depreciating the part which may be 
 played by Government and by independent experts in the regulation and 
 encouragement of industry, the primary essential of progress is that 
 Industry shall have faith in itself. 
 
 179. There is nothing to be gained by minimising the practical dif- 
 ficulties. The task is one which requires the co-operation of the best brains 
 engaged in the study of industrial questions, whether as Employers of 
 Labour Leaders of working-class opinion, or Economists. Premature 
 action, based upon imperfect knowledge, or an ill-considered programme, 
 would only increase the difficulty of the work. But with so much to be 
 done and such great issues at stake, no time must be lost in preparing the 
 ground. The inquiries which will be necessitated by the various phases of 
 the Emergency Problem will throw valuable light upon the methods to be 
 adopted in the larger task. The measures by which that problem is dealt 
 with may be made the foundations of permanent reconstructive work. 
 There is a danger, however, lest the very complexity and importance of 
 the questions of reinstatement of demobilised men and readjustment of 
 industry to peace conditions should divert attention from the fundamental 
 issues. It is essential that we should see the Industrial Problem as a whole, 
 and should preserve a clear idea of the relation between its several factors 
 and the proportionate weight to be attached to each. 
 
 180. It is the hope of those responsible for this Memorandum that the 
 suggestions here put forward may prove of some assistance in attaining 
 this central standpoint. They have attempted to trace the causes of that 
 unrest by which industrial troubles have been produced in the past, and 
 by which the economic dangers arising from the war are likely to be accen- 
 tuated. From this analysis certain broad principles have been deduced, 
 and the general lines of their application indicated. There are many 
 aspects of the problem which have not been dealt with, or have only very 
 briefly been touched upon in these pages. The details of a practical pro- 
 gramme require must careful study and experiment. But whatever form 
 the new developments may take, the essential preliminary is the adoption 
 of a new attitude with regard to Industry, the recognition of national 
 responsibility for industrial conditions, the recognition of the joint respon- 
 sibility towards the nation borne by those who are engaged, whether as 
 Employers or Employed, in its activities. To hold the balance true between 
 the economic and the humjan side of the problem; to increase at once the 
 extent and quality of output; to make the work of each man, in any posi- 
 tion, an integral and worthy part of his life as a citizen; this is a task 
 as truly national as that of victory in war. The unparalleled and 
 undreamt of expansion of our military strength which has been called 
 forth by the European struggle, may give us the measure of our capacity 
 to meet the requirements of peace. 
 
 68 
 
Appendix A. 
 
 A SUGGESTED EXPERIMENT 
 
 The following scheme for an experiment in industrial reconstruction, 
 as applied to the working of the Post Office, is taken from a paper on "The 
 Control of Industry after the War," read by Mr. A. E. Zimmern, M.A., at 
 the Conference of Working-Class Associations held in Oxford, on July 2\st, 
 22nd and 23rd, 1916. The authors of the Memorandum do not identify 
 themselves with the suggestions made, l>ut have thought it well to print 
 the scheme as a concrete example of one way in which the principles dis- 
 cussed in the Memorandum could be experimentally applied. It would be 
 of great value as a basis for inquiry and discussion if similar schemes, 
 applicable to the leading staple industries, could be worked out by represen- 
 tatives of the trades concerned. 
 
 English people are in the habit of believing that ideas are "all very 
 well in theory," but will never work in practice. The reason why ideas 
 which are theoretically sound do not work out in practice is generally 
 because they are applied without sufficient consideration of the conditions 
 of the particular case, or because those who are entrusted with the task 
 of carrying them out are not in sympathy with them. It is clear that not 
 all the British industries are ripe for changes in the direction of demo- 
 cratic control. There are a number of previous conditions which it would 
 be well to satisfy if an experiment is to have a good chance of success. I 
 think we may broadly law down seven conditions which the business or 
 industry we are looking for should satisfy: 
 
 1. It should be a nationalised industry* that is to say, an industry 
 which is recognised to be a public service and a permanent part of the 
 national life. Such an industry is at once removed from the atmos- 
 phere of commercialism and immune from the dangers, if also from the 
 stimulus, of competition and to liability from sudden changes on the side 
 of demand. It would be possible, of course, to choose a municipalised indus- 
 try, but a nationalised industry is more likely to yield the broad outlook 
 required on both sides. 
 
 2. It should be an industry where the amount of labour employed is 
 relatively large compared with the fixed capital invested, and where pros- 
 perity, therefore, depends principally upon the efficiency of the workers. 
 Such an industry abviously affords a better ground for experiments in 
 labour management. 
 
 On the labour side it should be an industry where the workers are: 
 
 *It should be pointed out that Mr. Zimmern's paper did not discuss the question 
 of nationalisation of industries, except in so far as the Post Office organisation offered 
 a specially suitable field for a first experiment in reconstruction. 
 
 69 
 
3. Highly skilled. 
 
 4. Have a relatively high standard of general education and 
 intelligence. 
 
 5. Have a high general level of personal character. 
 
 6. Where Trade Unionism is well organised both as regards numbers 
 and spirit and has been afforded recognition by the employing authority. 
 
 7. Where there are no serious demarcation difficulties between the 
 various Trade Unions concerned. 
 
 In the case which I propose to submit for experiment, the case of the 
 Post Office, all these conditions would seem to be fulfilled. 
 
 1. It is a nationalised service. 
 
 2. The labour force 253,750 in all, or 230,000 on the manipulative 
 side is relatively large compared with the fixed capital. 
 
 3. The work is for the most part highly skilled, as it indicated by the 
 fact that 
 
 4. The great majority of postal workers have to pass a general exam- 
 ination at the age of 16 or over. 
 
 5. The morale of the service is uncommonly good. In spite of obvious 
 temptations, the number of dismissals from the service is negligible. The 
 average annual percentage of dismissals in the manipulative branch of the 
 service is 0.25 per cent. 
 
 6. Trade Unionism is powerful and well organised in spite of the large 
 number of girls employed. Practically all the men are organised. 
 
 7. The unions concerned are on good terms with one another and are 
 organised for common action in a National Joint Committee. 
 
 How is the work of the Post Office at present organised? There is, as 
 already mentioned, a broad division of the employees between what is called 
 the clerical staff and the manipulative staff. With the clerical staff, which 
 has organisations of its own, I do not propose to deal in what follows. I 
 shall confine myself to the manipulative staff, consisting principally of post- 
 men, sorters, telegraphists, telephonists, and engineering grades, who are 
 represented on the National Joint Committee of Post Office Associations. 
 That Committee consists of the following organisations: 
 
 Name of 
 
 Class or 'Classes 
 
 Official 
 Establish- 
 
 Membership 
 
 f\f 
 
 Association 
 
 Represented 
 
 ment of 
 Classes. 
 
 OI 
 
 Association. 
 
 Postmen's Federation.. 
 
 Postmen, assistant and auxiliary 
 
 68,000 
 
 51,500 
 
 postmen 
 
 
 
 Postal and Telegraph Telegraphists, counter clerks and 
 
 85,000 
 
 22.000 
 
 Clerks' Association. . 
 
 telegraphists, sorting clerks and 
 
 
 
 
 telegraphists, telephonists, and 
 
 
 
 
 learners 
 
 
 
 Fawcett Association. .. Sorters, London Postal Service.. 
 
 7,021 
 
 0.4:50 
 
 Engineering & Stores Skilled and unskilled workmen. 
 
 13,000 
 
 7. (too 
 
 Association (Postal, 
 
 etc.. in Engineering and Stores 
 
 
 
 Telegraph and Tele- 
 
 Department 
 
 
 
 phone) 
 National Federation of 
 
 Scale payment sub-postmasters . . 
 
 22,658 
 
 9,400 
 
 Sub-Postmasters .... 
 
 
Let us now turn to the organisation of the management side. The 
 control of the Post Office is vested, subject to the supremacy of the Cabinet 
 and of Parliament, in the Postmaster-General and his permanent Secretary, 
 known as the Secretary of the Post Office. The control of the service thus 
 centres in the Secretary's office at St. Martin's-le-Grand. The work of the 
 Secretary's office is carried on under his supervision in five departments, 
 dealing respectively with questions of establishment, staff, buildings and 
 equipment, organisation (i.e., mails, train services, collection of letters, 
 etc.), and engineering. There are also Secretaries for Scotland and Ire- 
 land, who exercise a general control over the staff in those countries, subject, 
 however, to the control of the Secretary's department in London. All 
 dismissals, for instance, must be referred to London. 
 
 As regards local administration, the country is divided into 14 dis- 
 tricts, each of which is in charge of an official called the Surveyor. Sur- 
 veyors are allowed fairly wide powers of organisation and control, subject, 
 however, in the case of the staff to the right of appeal to the Secretary in 
 London in all cases affecting either individual or a group of individuals. 
 
 Below the Surveyors are the Postmasters. In every Surveyor's district 
 there are a number of Postmasters responsible for the business of the head 
 office and certain sub-offices. Postmasters are given a fairly free hand 
 in matters of organisation, but in the more important matters affecting 
 their subordinates they are required to obtain the Surveyor's sanction. 
 
 Let us now turn to the question of the relation between the governing 
 authorities and the staff, so far as staff conditions are concerned. Those 
 conditions are laid down in a series of regulations which may be sum- 
 marised as follows : The associations of postal employees have been accorded 
 recognition by the Post Office authorities; that is, they are recognised as 
 having the right to represent the interests of individual workers or groups 
 of workers. The conditions under which this right may be exercised are 
 carefully defined by the authorities. The general procedure is for the 
 central office of the association concerned to submit a memorial on the point 
 at issue to the Secretary or to the Postmaster-General. Such memorials 
 are invariably acknowledged, and it is possible for the representatives of 
 the association to meet the authorities at periodical intervals to discuss 
 matters already submitted in writing. The matters on which the associa- 
 tions are free to submit memorials are defined as "general questions relat- 
 ing to the conditions at work, i.e., wages, hours of duty, leave, meal reliefs, 
 etc." Memorials on local questions and on individual questions other than 
 those affecting discipline or the conduct of supervising officers have to be 
 submitted in the first instance by the local branch of the association con- 
 cerned to the local responsible official (i.e., the Postmaster or Surveyor). 
 The local official first deals with representations, and, failing satisfaction, 
 the association is at liberty to carry the matter further to headquarters and 
 obtain a reply. No memorials are allowed to be submitted on questions 
 relative to promotion. The liberty of action of the associations is also 
 
 71 
 
limited in the case of questions of discipline. The provision in this con- 
 nection is sufficiently important to be quoted in full: 
 
 "Memorials respecting disciplinary measures that have been taken 
 against individual officers may be submitted to the Secretary or the Post- 
 master-General by the central body of the association in serious cases, 
 where appeals by the individuals, made first to the local authorities and then 
 to the Secretary or Postmaster-General, have not been successful, and where 
 the central body have satisfied themselves by a full investigation of the 
 circumstances that they can present new facts or considerations which 
 render further review desirable." 
 
 It will thus be seen that the Trade Unions are put in the position of a 
 sort of permanent and official opposition. Their function is not to co-oper- 
 ate with the management, but to criticise, not to prevent complaints, but to 
 endeavour to remedy them; and in certain cases, such as discipline, where 
 feeling is likely to run highest, they are precluded from interfering till 
 the matter has already been declared upon by the Secretary and has become 
 the subject of serious and probably bitter controversy. 
 
 How can this system of management be modified in the direction out- 
 lined? An attempt will be made in the following remarks to suggest how 
 this might be done. The object of the reforms suggested is not to revolu- 
 tionise the organisation of the postal service or to turn the Department 
 upside down; it is to take the existing organisation as it stands and to 
 make the least possible change compatible with granting to the staff that 
 measure of responsibility which is increasingly felt to be necessary in order 
 to secure the efficiency and harmony of the service. I am indebted in what 
 follows to my friend, Mr. J. G. Newlove, a distinguished ex-student of 
 Ruskin College and now General Secretary of the Postal and Telegraph 
 Clerks' Association, who has given much time and thought to the improve- 
 ment of the service with which he is connected, and is willing to accept 
 full responsibility for the constructive side of this paper. 
 
 The first suggested change is that machinery shall be set up which will 
 give the central bodies of the association representation on a committee of 
 each branch of the Secretary's office. Where the interests of each grade 
 are peculiar, as in the establishment branch, there should be a representa- 
 tive of each grade; where their interests are identical, as on building 
 qustions, less would suffice. 
 
 Similar machinery should be set up in each Surveyor's district. 
 Advisory Committees should be formed to discuss with the Surveyor ques- 
 tions of policy affecting his district, and these committees should contain 
 a representative of each grade to co-operate with the Surveyor's staff. 
 
 Passing down to the individual office what corresponds in other indus- 
 tries to the "workshop" it should be one of the duties of the Postmaster 
 to consult with representatives of the staff on all questions affecting the 
 particular office. This should extend to all questions without exception, 
 which affect the office as a whole, for all such questions must in some 
 
 72 
 
way reflect on the organisation of the office. Even a matter like com- 
 plaints from the public can be traced back to office organisation. 
 
 A difficulty arises at this point as to the procedure in very small offices. 
 The associations find by experience that it is often difficult in such offices 
 to find a local secretary who is sufficiently well trained to deal with ques- 
 tions of policy. Yet it is just in such small offices that precedents distaste- 
 ful to the staff are apt to be created. Such offices, therefore, require special 
 treatment, and it is suggested that a representative of the Executive of the 
 associations should be able, if necessary, to act as a medium of advice for 
 the smaller offices. It might prove desirable in this connection to rearrange 
 the boundaries of the associations' -districts so as to harmonise them with 
 the Surveyor's districts. 
 
 This procedure is in itself no great innovation. Many Postmasters do 
 already adopt means of consultation with their staff, and are indeed defi- 
 nitely encouraged to do so by the rules of the Department. The new 
 arrangement will merely serve to regularise this and to level up the pro- 
 cedure in the various offices. It is not suggested that the new committees 
 shall have a deciding voice. Where 110 agreement can be reached in them 
 the decision must continue to rest, as now, with the supervising authorities. 
 If on matters of importance a policy were to be adopted contrary to the 
 wishes of the associations it would always be possible to them to reopen the 
 matter through their annual conference and to approach the Postmaster- 
 General as at present. But the criticism which they" would then bring to 
 bear would be bred of inside knowledge, and it would of necessity be 
 constructive rather than critical in tone. 
 
 This change of spirit would be likely to apply in special degree to 
 questions of financial policy. One of the chief functions of the new central 
 machinery would be to discuss questions involving expenditure, and in 
 particular questions of wages or salaries. The procedure at present in this 
 connection is not satisfactory. No scheme involving fresh expenditure can 
 be adopted until it has been approved by the Treasury. The present method 
 of dealing with such schemes is to refer them to a Parliamentary Com- 
 mittee of Inquiry. The members of such Committees are necessarily not 
 conversant with the whole inner working of a huge organisation like the 
 Post Office, and are, therefore, unable to form a judgment at first hand on 
 the problems submitted to them for decision. They must inevitably rely 
 for their special knowledge upon the high officials of the Department. 
 This, it will be seen, naturally tends to place those at present responsible 
 for the policy of the Department in a preferential position as compared 
 with the representatives of the staff. As under existing conditions the 
 Department is bound to consider the interests of the taxpayer, its natural 
 role is that of opposition to increases in pay. This is intensified by the 
 fact that the Post Office is run at a considerable profit, amounting to no 
 less than 6,000,000 in the last year before the war, and that there is a 
 tendency to adopt purely commercial standards of successful administra- 
 tion. If the procedure by Parliamentary Committee were abandoned and 
 
 73 
 
questions of wages and conditions were threshed out on the proposed central 
 committees before being submitted to a Parliamentary body for ratifica- 
 tion, or final decision in cases of disagreement, the arrangement would 
 work more fairly for all parties concerned, including the Treasury. The 
 elimination of friction and the consequent increase of esprit de corps 
 should go further towards true efficiency and economy than the existing 
 methods, lending themselves, as unequal contests always do, to undesirable 
 and often unpleasant methods of influence and agitation. It it were found 
 possible not to pay the profits of the Post Office into the ordinary revenue, 
 but to earmark them for special purposes of social usefulness, in the choice 
 of which the associations might have a voice, this would remove any feeling 
 on the part of the staff that they were being "exploited" in a commercial 
 spirit, and would act as a strong incentive to use every effort to improve 
 the service. 
 
 This brings us to the functions of the central and local committees. 
 The most important and difficult of these would be the discussion of ques- 
 tions of discipline. Discipline is really the crux of the whole change of 
 method and spirit proposed. The existing rule, which forbids the associa- 
 tions to interfere except after judgment has already been passed both 
 locally and at the centre, is based on the root principle of the old system, 
 that power is exercised from above and that the prestige of the ruling 
 authority must not be infringed. It is also based upon reasons of practical 
 convenience in that most men extremely dislike the responsibility of sitting 
 in judgment on their, companions and workmates. If the associations are 
 to receive the right of co-operating with the supervisory staff in dealing 
 with cases of discipline they will be assuming responsibility for giving what 
 must sometimes be very unpleasant decisions against their members. But 
 because a thing is unpleasant there is no reason for not facing it. Democ- 
 racy involves the extension of responsibility in things pleasant and unpleas- 
 ant alike. If the associations were ready to deal with pay, but shirked deal- 
 ing with punishment, they would be false to their principles. Fortunately, 
 the number of serious cases which arise in the service is extremely small, 
 but these are just the cases which the associations ought to deal with. The 
 best arrangement would seem to be to leave minor breaches of discipline 
 to be dealt with as at present by the individual Postmaster, but that serious 
 cases referred by him to the Surveyor should be dealt with by the Sur- 
 veyor's Committee, where the representatives of the association would be 
 less subject than on the local committee to the bias of personal feeling. 
 Matters dealt with by the Postmaster would be brought before the associa- 
 tion through the local committee if it were found necessary. 
 
 Questions of recommendation for promotion should also be dealt with 
 by the Surveyor's Committee. Promotion and discipline really hang closely 
 together; both involve difficult decisions and the danger of heart-burning. 
 But there seems no way out except through the extension of the principle 
 of responsibility. 
 
 74 
 
As regards the rest of the committee's work, it can be summed up 
 under the general heading of "conditions" hours, leave, meal reliefs, 
 improvements in office equipment, etc. Most questions of this kind would 
 be settled locally. Only questions of principle would be referred to the 
 central committee for decision. 
 
 Such, in brief outline, is the way in which the principle of democratic 
 control might be introduced into the largest single business in the country. 
 The changes suggested may seem modest in scope, but they would be far- 
 reaching in effect. The Postmaster-General who had imagination enough 
 to adopt a scheme of this nature would be conferring a benefit alike on 
 the postal workers, the Labour movement, and the whole nation. To the 
 postal workers the change would bring a new sense of dignity and self- 
 respect and satisfaction in their work, and, more important perhaps even 
 than these, it would leave them free to exercise their citizen rights as 
 pure citizens without the constant temptation to use political influence as a 
 means for remedying grievances arising out of their employment under 
 Government. It would thus be a charter not only of economic, but of 
 political emancipation. To the Labour movement it would be an example 
 and an inspiration to apply the same principle of responsible democracy 
 to the far more difficult problems of private employment which still lie 
 unsolved before it. To the community it would mean a transformation 
 in the spirit of one of the chief of those public services on the efficiency 
 of which we shall be so much dependent in the work of national recon- 
 struction after the war. A keen, willing, and enterprising Post Office can 
 be of far more service to us than we realise at present. But most of all, 
 the community will benefit from the knowledge that the qualities of mind 
 and character necessary to the working of self-governing institutions are 
 not confined to any one class or section, that democracy is a plant which, 
 properly tended and safeguarded, can grow and prosper in other than its 
 familiar soil, and that our country, which has led the world in the insti- 
 tutions of policies and government, is ready and eager to apply the same 
 enduring principles to wider fields of public business. 
 
 75 
 
Appendix B 
 
 WORKS LECTURES 
 
 A large firm of manufacturers in the North of England has recently 
 adopted with every success the following scheme for creating a better 
 understanding between the principles and the employees, and for pro- 
 moting the efficiency of the business. An outside person, who has given 
 much thought to industrial and commercial matters, was requested by the 
 firm to come and study the business in all its bearings and phases, in order 
 to deliver lectures to the workpeople, the staff and also the employers them- 
 selves, with a view of making plain to each the nature of the business, the 
 principles of industrial efficiency, and the true nature of industrial rela- 
 tions. He was given every opportunity of acquainting himself with the 
 business side of the concern, the buying of the raw material, the adminis- 
 tration of the offices and works, the finances of the firm, and the sale of 
 the finished product, and was also given every facility for familiarising 
 himself with the lives, working conditions, thoughts and aspirations of the 
 workers. In the first place arrangements were made for a course of twelve 
 lectures to the management and staff. The benefits of these were so marked 
 that a further course of twelve lectures was arranged to be given to 
 selected representatives of the workpeople. The lectures were given on 
 one afternoon, for twelve successive weeks, and were attended by several 
 hundred employees who were paid their wages for the time of attendance, 
 the lectures being regarded as a part of the working routine. The lecturer 
 was left an entirely free hand as to what he should say, and did in fact 
 administer praise or blame impartially upon the results of his investiga- 
 tion. The improvement in the relations between the firm and its employees 
 surpassed all expectations, and the scheme is to be established as a per- 
 manent feature of the organisation of the business. Many employers who 
 have been aroused during the war to a quickened consciousness of their 
 responsibility and who desire to establish for the future a new spirit in 
 their works, have asked themselves, "What can we do tomorrow?" The 
 above scheme is suggested as an answer to that question. 
 
 76 
 
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