Production rate

“ If the output decreases at a lower rate than does the expense, then the percentage which expresses the ratio of expense to production is lowered, which means increased operating efficiency and a decrease in the cost of production. ”

“ On the whole, however, it is extremely doubtful that production has been maintained at a rate high enough to give the people of this country the same quantity of manufactured goods per person as in 1913. ”

“ As a general rule, then, things tend to exchange for one another at such values as will enable each producer to be repaid the cost of production with the ordinary profit; in other words, such as will give to all producers the same rate of profit on their outlay. But in order that the profit may be equal where the outlay, that is, the cost of production, is equal, things must on the average exchange for one another in the ratio of their cost of production; things of which the cost of production is the same, must be of the same value. ”

“ What would be the consequence of this difference in the rates of profit for capitals employed in the different branches of industry? Why, the consequence that generally obtains whenever, from whatever reason, the average rate of profit comes to differ in the different spheres of production. ”

“ The report of Ira Ayer, special agent of the Treasury Department, shows that at the date of September 30, 1892, there were 32 companies manufacturing tin and terne plate in the United States and 14 companies building new works for such manufacture. The estimated investment in buildings and plants at the close of the fiscal year June 30, 1893, if existing conditions were to be continued, was $5,000,000 and the estimated rate of production 200,000,000 pounds per annum. ”

“ Of minerals the annual production is over $120,000,000 a year. Manufactures do not flourish so readily or quickly in a young country as the primary industries—still we have a splendid variety of manufactures, which has reached $600,000,000 a year in value, and that output has increased during the last three years by 39 per cent, I think that a phenomenal rate of progress, especially when you remember our distance from the great consuming populations of the world. ”

“ In all the great branches of manufacturing industry the portion of the cost incurred in the manufacturing process bears in general a large proportion to that represented by the raw material, while the influence of industrial invention, in reducing this portion of the cost, is, as every one knows, great and unremitting in its action.”
As has been said, “the two great cheapeners of production are division of labor and machinery, and the degree in which these admit of being applied to manufacture is mainly dependent upon the scale on which the manufacturing process is carried on. ”

“ It has been of undoubted benefit to both, though it may oftentimes retard the growth of new industries by a system of rates so preferential as to enable the manufacturer a long distance from the field of production of raw material to ship the raw material to his mills, manufacture it and return the manufactured goods cheaper than the local manufacturer could afford to make it, and thus, while building up the centres of manufacture, have retarded the growth of manufacturing in the centres where the raw material is produced. ”

“ If allowed to expand for 18 years without diversion to production, the factory output could exponentiate to more than 4 X 109 tons per year, roughly the entire annual industrial output of all human civilization. ”

“ But the cost of the material forming generally a very small portion of the entire cost of the manufacture, the agricultural labour concerned in the production of manufactured goods is but a small fraction of the whole labour worked up in the commodity. All the rest of the labour tends constantly and strongly towards diminution, as the amount of production increases. Manufactures are vastly more susceptible than agriculture, of mechanical improvements, and contrivances for saving labour ”

“ In manufactures, accordingly, the causes tending to increase the productiveness of industry, preponderate greatly over the one cause which tends to diminish it: and the increase of production, called forth by the progress of society, takes place, not at an increasing, but at a continually diminishing proportional cost. ”

“ It is furthermore contended that the cost of carrying the inventories for which the purchasing, stores, and planning departments of a manufacturing concern are responsible, should be shown with interest on the money invested in them taken into consideration—this for the purpose of providing a check on the efficiency of these departments. Where also both old and new machinery is used side by side and it is desirable to compare their costs of production, the element of interest should be considered. ”

“ There are only three industries in this country—coal, steel, and ships—in which production statistics exist. I suggest that in many of our great staple industries a few simple data with regard to production should be published promptly, say every three months. The data I have in mind are the wages bill, the cost of materials, and the value of the product. It is desirable that this should be done, and I believe it can be done, for almost every great industry in the country. These three facts alone will bring the whole wages discussion down to earth. ”

“ Proportionately the growth in exports of manufactures has been even greater than that in production of manufactures. The census figures show that the gross value of manufactures produced in 1850 was, in round terms, 1 billion dollars, and in 1905, nearly 17 billion, so that the product of 1905 may be said to be about seventeen times as great as that of 1850 ”

“ The relative rates on wheat and flour, even when for domestic consumption, illustrate the same difficulty of commercial competition—the necessity of adjusting the rate on raw materials to that on the finished product. ”

“ As the inclinations and circumstances of consumers cannot be reduced to any rule, so neither can the proportions in which the two commodities will be interchanged. We know that the limits within which the variation is confined are the ratio between their costs of production in the one country, and the ratio between their costs of production in the other. Ten yards of cloth cannot exchange for more than 20 yards of linen, nor for less than 15. ”

“ Meanwhile, production improved greatly not only in the export industries but in other fields, especially mining and manufacturing. The index on the physical volume of production has risen from 97.5 in 1950 to 107.1 in 1951, with 1937 as a base. There is more manufacturing activity going on now than ever before in the history of this coun­try. ”

“ But such a rise of wages would also induce manufacturers to withdraw their capitals from manufactures, to employ them on the land; for whilst the farmer increased the price of his commodity 100 per cent., and his wages only 50 per cent., the manufacturer would be obliged also to raise wages 50 per cent., whilst he had no compensation whatever, in the rise of his manufactured commodity, for this increased charge of production; capital would consequently flow from manufactures to agriculture, till the supply would again lower the price of corn to 8s. ”

“ It is essential to realize the practical difficulties in the way of the workers getting the higher wages which all would like to see them receive. There was a Census of Production in 1907 which included all the manufacturing industries and [274] mining, and covered half the wage-earners in the United Kingdom. It ascertained the “net output” for each industry for the year by estimating the selling value of the gross product, and subtracting therefrom expenditure on raw materials, including the product of other industries which were further worked up, and fuel and some other items. ”

“ Similiarly if we wish to represent a change in the conditions of supply, such as might result, in the case of a commodity, from a tax imposed on its production, we must draw a new supply curve, ss', which in the case supposed, must lie everywhere above the old supply curve. On the other hand, the decrease or increase in demand or supply, resulting from a change in price, is represented simply by a shifting of the equilibrium from one point to another on the same curve. ”

“ The matter of properly correlating the freight rate on raw materials and the finished products made from them, is more far-reaching than it seems. The location and development of manufacturing depends upon it. The country may be [Pg 135] broadly divided into agricultural and manufacturing sections. The first of these is ambitious to develop its resources; not only to feed, but to clothe itself and make other provision for its needs. No sooner does it seek to develop local manufacturing than it finds itself exposed to competition from the older established manufacturers at a distance. ”

“ Suppose, for example, that 60 agricultural labourers, receiving 60 quarters of corn for their wages, consume fixed capital and seed amounting to the value of 60 quarters more, and that the result of their operations is a produce of 180 quarters. When we analyse the price of the seed and tools into its elements, we find that they must have been the produce of the labour of 40 men: for the wages of those 40, together with profit at the rate previously supposed (50 per cent) make up 60 quarters. ”

“ All commodities made by machinery are assimilated, at least approximately, to the wine in the preceding example. In comparison with things made wholly by immediate labour, profits enter more largely into their cost of production. Suppose two commodities, A and B, each requiring a year for its production, by means of a capital which we will on this occasion denote by money, and suppose to be 1000l. A is made wholly by immediate labour, the whole 1000l. being expended directly in wages. B is made by means of labour which costs 500l. ”

“ Then it will not pay to construct this new factory unless the trade prospects point to the probability of a profit of about $100,000 per annum. But if the old factory is equally well managed, it too should be able to earn this $100,000, which upon the capital actually sunk would represent a rate of 20 per cent. ”

“ If we had then an invariable standard, by which we could measure the variation in other commodities, we should find that the utmost limit to which they could permanently rise, was proportioned to the additional quantity of labour required for their production; and that unless more labour were required for their production, they could not rise in any degree whatever. ”

“ Commodities, though they continue to rise and fall, in proportion as more or less labour is necessary to their production, are also affected in their relative value by a rise or fall of profits, since equal profits may be derived from goods which sell for 2,000l. and from those which sell for 10,000l.; and consequently the variations of those profits, independently of any increased or diminished quantity of labour required for the goods in question, must affect their prices in different proportions. ”

“ A larger portion of the public will receive advantage from the use of the article, and they will procure it at a lower price; and the manufacturer, though his profit on each operation is reduced, will yet, by the more frequent returns on the larger produce of his factory, find his real gain at the end of the year, nearly the same as it was before; whilst the wages of the workman will return to their level, and both the manufacturer and the workman will find the demand less fluctuating, from its being dependent on a larger number of customers. ”

“ The value at which the product is transferred from the factory to the selling department is usually the wholesale market value, though it may be at a fixed per cent above the cost of manufacture. The effect of this is, of course, to limit definitely the showing of factory profit. Where the compensation or the efficiency of the factory management is measured by the savings effected over the wholesale market price of the output, there is perhaps some practical advantage in the allowance of a manufacturing profit. ”

“ By a rise in the price of labour, then, under 7 per cent, which has no effect on the prices of commodities wholly produced by labour, a fall of no less than 68 per cent is effected on those commodities wholly produced by machinery lasting 100 years. ”

“ Manufacturing industry increases its produce in proportion to the demand, and the price falls; but the produce of land cannot be so increased; and a high price is still necessary to prevent the consumption from exceeding the supply. ”

“ Returning to the main discussion, we have found that the rates on raw materials are so adjusted as to permit the manufacture of any staple article at any logical place of manufacture. On the raw material of wearing apparel the freight rate is entirely unimportant. On the lumber that enters into building material, on the ore, coke, and limestone used in the manufacture of iron and steel the freight rate is sufficient to become an appreciable factor in the cost of manufacture. ”

“ The cost of the raw material is usually less difficult to determine; but cases occasionally arise in which it becomes important to examine whether the supply, at the given price, can be depended upon: for, in the case of a small consumption, the additional demand arising from a factory may produce a considerable temporary rise, though it may ultimately reduce the price. ”

“ The present position is that we are dividing a quantity of production about the same as in 1913 among about an eighth more people. The production is expressed in more dollars through being multiplied by about 1.7 as an average. Some classes of people get more than their share by virtue of a multiplier of 2 or so, while for others the multiplier is 1.5, or maybe 1.1. ”