By-product

“ The Consumer, the Paper-manufacturer, is suffering from a lack of suitable material, which the Producer is able to supply, and by so supplying and utilizing a by-product, hitherto of little value to him, places himself in a position to meet his competitors on equal, if not better terms in the market. ”

“ It has been declared, and with considerable truth, that at the American stockyards the development of the by-products is every whit as extensive and as important as the preparation of the ostensible staple product. It is actually more profitable, and brings in as great if not greater revenue. ”

“ In other words he seeks to convert his waste into an asset instead of a liability. Therefore all big producers tax their brains to invent things that can be made from their waste, and such commodities are called by-products. ”

“ It is true, therefore, of every particular producer or dealer, that a great demand, a brisk circulation, a rapid consumption, of the commodities which he sells at his shop or produces in his manufactory, is important to him. The dealer whose shop is crowded with customers, who can dispose of a product almost the very moment it is completed, makes large profits, while his next neighbour, with an equal capital but fewer customers, gains comparatively little. ”

“ In both cases the manufacturer is the one to suffer, by increasing the expense of sorting, holding the green if he is to make a high grade product, and by waste from cracking and mashing of the over-ripe. ”

“ We do not stop to consider specific and varied situations in which a change of form amounting to one in the essential character of the commodity takes place by manufacturing or processing intermediate the stages of producing and disposing of the raw material intrastate and later interstate distribution of the finished product ”

“ Thus the present desire to simplify life and the present dissatisfaction with the flimsiness of the average factory-made article, which create a demand for a smaller and better product, combine with improved means for transportation, for communication, and for transmission of power to make it practicable for small workshops to take the place, to a certain extent, of large factories, and to make it possible for the producer of household stuff to become a desirable neighbor. ”

“ Materials used in getting ready or seasoning the raw material, i.e., auxiliary material, such as paint, putty, etc., the quantity of which used on each piece of product cannot be measured with exactitude and must therefore be spread over the entire product—these and similar items constitute manufacturing supplies. They are usually treated as a part of factory expense rather than as belonging to prime cost. ”

“ It implies that if there be a naked producer or a commodity the complete production of which, including all the outlay needful for its delivery to the consumer at the very moment when he needs to consume it, occupies time and demands the empolyment of wealth in material, sustenance of producer, and tools, of none of which this producer is possessed, this pauper producer shall retain the full value of his product notwithstanding his partial dependence upon some one who provides the necessaries for his production in anticipation of his fruition. ”

“ In a small factory making just one product—or a few simple products—where the conditions are such that the manager has an intimate knowledge of all processes and can exercise personal control over them, fairly satisfactory results may accrue under this method, though the amount and therefore the cost of the material consumed in the product can never be known accurately until the inventory has been taken. ”

“ These are manufacturing countries in which the ruling classes are the captains of industry, the owners of the complete mechanism of production and transportation of commodities.
The working classes of these countries do not receive the full product of their toil and are therefore not able to buy all the goods produced by them. With the increasing perfection of the tools and the methods of production this underconsumption of commodities must also increase proportionately. ”

“ This competition not only makes the means of production dearer, but must eventually, by increasing the demand, reduce the price of the product to the ordinary level of profit, that is to an equilibrium with other commodities.644 Hence, in the beginning, every diminution of [pg 321] the cost of production645 turns to the advantage of the producer; but afterwards and permanently to that of the consumers: an economic law exceedingly beneficent in its operations, and not unlike the action of positive legislation in the matter of patents. ”

“ To be of the greatest advantage and usefulness, cost records should not only determine factory cost but they should accumulate the data needed to predetermine the selling price with accuracy.
Nature of Raw Materials and Supplies
Materials or raw materials constitute the crude commodities or semi-manufactured articles which are to be worked upon and fashioned into a new product. It is seldom that any factory takes its material in the raw form in which it comes from nature. ”

“ His factory has some distinctive product, and when he looks into his affairs he tries to find out whether he gets the utmost quantity of the product, whether he gets the best possible quality of the product, whether he gets it as efficiently and inexpensively as possible, and constantly how he can improve his factory and his processes in all these matters. ”

“ In many instances, the segments of economic endeavor embraced by these two concepts of 'industry' will be substantially coextensive, since those who employ the same types of machinery to turn out the sam general product often compete in the same market. ”

“ It may develop that some other manufacturer has developed a field wherein he can pay a price for the raw product in excess of its value as used in the department and that it should be sold for cash rather than to use it for manufacturing purposes. ”

“ The increase in the production of manufactures in the United States, far in excess of home requirements, has forced our manufacturers to seek markets in other parts of the world for their surplus product. ”

“ As handicrafts have been replaced by mass production with its great markets and transportation facilities, the close relationship between the producer and consumer of a product has been altered. Manufacturing processes, frequently valuable secrets, are ordinarily either inaccessible to or beyond the ken of the general public. ”

“ One where the material is itself an object of general or extensive consumption, and a fit and productive source of revenue. Another where a manufacture of a simpler kind, the competition of which with a like domestic article is desired to be restrained, partakes of the nature of a raw material from being capable by a further process to be converted into a manufacture of a different kind, the introduction or growth of which is desired to be encouraged. ”

“ Each kind of commodity, as it passes through the many processes from the earth to the consumer, may be looked upon as a stream whose channel is broader at some points and narrower at others. Different streams of commodities narrow at different places. Some are narrowest and in fewest hands at the transport stage, when the raw material is being concentrated for production, others in one of the processes of manufacture, others in the hands of export merchants. ”

“ Scarcely a single article of consumption comes from the hand of a single producer, but all run through a number of productive processes so that those who finally fit it for our use are only the last in a long row of producers. The production of articles for consumption and for the means of production have a wholly different character. The production for further production belongs to the domain of gigantic industries such as the iron industry, mining, etc. ”

“ These restrictions also frequently interfere with the processes of manufacture, requiring the producer to carry on his operations in the way most convenient to the revenue, though not the cheapest, or most efficient for purposes of production. ”

“ Take, for instance, an employing manufacturer who is engaged in turning raw material into finished products—cotton into cloth, iron into hardware, leather into boots, or so on, as may be, and who pays his hands, as is generally the case, once a week. Make an exact inventory of his capital on Monday morning before the beginning of work, and it will consist of his buildings, machinery, raw materials, money on hand, and finished products in stock. ”

“ Our stock of materials is, in many instances, equal to the greatest demand, and our artisans sufficient to work them up, even for exportation. In those cases, I take it to be the policy of every enlightened nation to give their manufacturers that degree of encouragement necessary to perfect them, without oppressing the other parts of the community; and, under this encouragement, the industry of the manufacturer will be employed to add to the wealth of the nation."—Idem, p. ”

“ To affirm that the labor of the manufacturer is unproductive because he consumes as much of the produce of land as he adds value to the raw material which he manufactures, is not better founded, than it would be to affirm that the labor of the farmer, which furnishes materials to the manufacturer, is unproductive because he consumes an equal value of manufactured articles. Each furnishes a certain portion of the produce of his labor to the other, and each destroys a correspondent portion of the produce of the labor of the other. ”

“ In measure as the division of labor is developed, production for personal use diminishes, and the production of commodities increases, until it finally becomes the universal form of production, and one commodity (money) is developed as a universal equivalent. As a [249] consequence of the development of the production of merchandise, the purchase and sale of goods becomes a special profession. The merchant buys for a different reason from that which influences his customers. While the latter buy for consumption, the former buys to sell again and make a profit out of the transaction. ”

“ By either destroying the requisite supply or raising the price of the article beyond what can be afforded to be given for it by the conductor of an infant manufacture, it is abandoned or fails, and there being no domestic manufactories to create a demand for the raw material which is raised by the farmer it is in vain that the competition of the like foreign article may have been destroyed. ”

“ Or in agriculture, to the contract method, whereby specified products such as sugar beets, sweet-corn, peas, beans, tomatoes, fruits, and other products for manufacture, canning, preserving, or pickling in a factory, are raised by the farmer and sold to the manufacturer at a previously agreed-upon contract price. Under the guild plan the manufacturer or importer sold usually to the ultimate consumer. So the economic system was gradually growing more complex, and the interdependence of man upon man more pronounced. ”

“ Because this phenomenon of over-supply, and consequent inconvenience or loss to the producer or dealer, may exist in the case of any one commodity whatever, many persons, including some distinguished political economists, have thought that it may exist with regard to all commodities; that there may be a general over-production of wealth; a supply of commodities in the aggregate, surpassing the demand; and a consequent depressed condition of all classes of producers. ”

“ It is a reflection which may with propriety be indulged here that this eventual diminution of the prices of manufactured articles, which is the result of internal manufacturing establishments, has a direct and very important tendency to benefit agriculture. It enables the farmer to procure, with a smaller quantity of his labor, the manufactured produce of which he stands in need, and consequently increases the value of his income and property. ”

“ Production requires for its continuation ... only material, tools, and means of subsistence for the workers, therefore as such it consumes only the corresponding part of the products: other consumers must be found for the surplus which makes up the profit, and for which there is no room in the permanent structure of industrial life, in production—consumers, namely, who are not organically connected with production, who are fortuitous to a certain extent. ”

“ Those manufactures, therefore, that are produced upon a large scale are the sort of manufactures in which we may expect the greatest reduction in cost; in which, therefore, the fall in price, with the progress of society, will be most marked. But the manufactures which are produced upon the largest scale are those for which there exists the largest demand—that is to say, are those which enter most extensively into the consumption of the great mass of people. They are [pg 484] also, I may add, those in which a fall in price is apt to stimulate a great increase of demand. ”

“ The area over which it could be performed was greatly enlarged, the cost of materials was reduced through cheaper transportation, new devices and processes were developed as a result of the competition, cheaper raw material was obtained from countries where plentiful supplies and cheap labor give low prices, and the opportunity of locating the factory near the place of production or at some convenient meeting point between the various places of production—all these contributed to reduction of cost and increase of supplies of material of manufacture. ”

“ Seeing that production is limited by consumption, what rule must be followed in distributing the results of production to be consumed in order to develop consumption to the highest possible point, and thereby in turn to create the greatest possible demand for production. ”