The Fallacy of an Industrial Panacea
I
OURS is a business civilization. Significant changes in the methods of making and distributing goods assume in our minds the proportions of a menace or a blessing, and have been so discussed by thoughtful writers. A large part of this discussion, however, has been conducted by people not themselves engaged in business, who have tended for the most part to overlook a fact about new business developments that would be clearly apparent to them if they were discussing changes, for example, in politics, art, or domestic life.
Innumerable factors complicate the business situation, requiring more than an offhand and detached knowledge for their analysis. The truth is that any change in the methods of doing business, such as the growth of chain stores, direct selling to the retailer, installment selling, mass product ion, mergers, or national advertising, is introduced into a highly complex environment. It runs at once against prejudices in favor of old ways of doing things and the special advantages which established business methods have for achieving certain ends.
To the uninitiated public it may frequently look as if the new way were going to overwhelm the old and inaugurate a scheme of things that must have profound implications for our economic life and incidentally for our social state in general. To the business man engaged in a new form of production or distribution, the problem of making it ‘go’ has no such simplicity. If he was not canny or careful enough in advance to realize the limitations that hedge a new idea, experience soon teaches him, and unforeseen consequences of his actions arise to plague him. His competitors, who work along traditional lines, redouble their efforts to make their way of doing things more attractive to the customer. Slowly but surely the area of his conquest, which at first grew with prodigious rapidity, approaches its limits. The seven-day wonder becomes itself merely another of the accustomed procedures of business, and the stage is cleared for the next disturbing innovation.
Among the new things business is doing, mass production has created probably the greatest popular interest. Many have hailed it as the economic messiah, which, by reducing the price of goods and at the same time raising wages, is to redeem the world from poverty. Others have asserted that it will spread throughout the industrial world, enslaving man to the machine and so imposing a spiritual poverty more serious than material want.
The average recipe for mass production would read about like this: Confine yourself to the manufacture of a few highly standardized products. Take a large plant employing many workers. Break up the manufacturing processes into minute parts. Train the individual worker to perform a very simple operation in a very expert manner. Substitute quick and accurate machine labor for hand labor wherever possible. See that the workers and machines are continuously supplied with the necessary materials to do their work. Then set everything going as fast as is humanly, or at least humanely, possible.
In the mass-production system of industry everything is definitely subordinated to the greatest possible production of standardized articles on the basis of the lowest possible costs.
Mass production in America, though young, has had a very significant growth. Unfortunately statistical evidence on its present extent is not easy to obtain. The rapid increase in the number of large-scale industrial establishments is apparent from a glance at the Federal Census of Manufactures. In 1914, 17.8 per cent of all industrial workers were employed in factories employing over 1000 workers. In 1923, 24 per cent of all workers were in such factories. However, large-scale production and mass production must be sharply differentiated.
In 1923 (the latest year in which the census classifies industries by size of establishments according to number of workers employed), of the total number of wage earners in factories employing over 1000 people 63 per cent are found in eight industries. Heading the list are iron and steel works. A portion of these mills is engaged in mass production, and another portion is just as definitely not so engaged. Next come motor vehicles and bodies, with which may be grouped the manufacture of tires. These are in very large part mass-production industries. Next but one is cotton goods. The manufacture of cotton cloth (gray goods) may probably be called a mass-production industry. This is decidedly not true of the production of the great variety of finished cotton goods. The nub of the matter lies in the definition of mass production already given. Mass production implies concentration on a few highly standardized articles. Once the manufacturer departs from an ever-higher standardization of product and processes resulting in ever-decreasing cost, he may be using large-scale production methods, but he ceases to be a real mass producer.
II
Are there factors in our present economic and social life which tend to restrict or limit the efficiency of mass production?
It is impossible to prevent certain wastes when centralized control is undertaken over large numbers of men and over many operations. In order to ensure perfect coordination among the parts of a huge factory, elaborate systems of control become necessary, and such systems can easily degenerate into the red tape which frequently stifles valuable initiative among subordinate executives and workers. Huge factories do not, of course, necessarily suffer from inflexibility, but the potentiality is there and must be constantly guarded against.
When products are made up of several different kinds of raw materials, a distinct saving in transportation costs can often be effected by making certain parts near the source of raw materials. A similar economy exists in establishing assembly plants close to points of delivery, as the component parts can usually be shipped more cheaply than the finished article. Both of these factors, it is apparent, necessitate the decentralization of the large factory unit, although on a reduced scale the mass-production formula of standardization of products, breaking down working processes into simple units, systematic routing of work, and so forth, can still be preserved.
Another tendency eating away at the huge central-factory idea is the advantage of placing small subsidiary plants in outlying communities, because of lower rentals, cheaper wages, and so forth. Here too, of course, what is being sacrificed in the mass-production idea is only the large central factory, the emphasis on uniform cheap production remaining.
The serious difficulties of mass production spring from another source — from the new conditions of the consumption market developed by business itself. Obviously, mass production requires mass demand for that which has been produced. The mass-produced article must so appeal to the public that consumers will willingly buy it in large quantities. Utility, uniform quality, and low prices are, generally, the grounds on which manufacturers of standardized products made in quantity expect the public to spend its money. That expectation no longer has its oldtime validity for a number of products.
In whatever lines of merchandise mass production was started, its success was bound to breed competition. Newcomers to mass production, who wanted to make the virtues of their competing products known to the public at large, resorted naturally to national advertising. The manufacturer who was first in the field then had to follow suit. That the consumer was being stimulated from several different sources to think in terms of a certain kind of product raised the importance of that product in the public’s estimation. More of it was bought, and other manufacturers naturally became eager to make it. Through advertising devices each was able to convince a section of the consuming public of alleged superiorities in his particular product. Price appeal could no longer be the sole criterion of purchase.
The story of tooth paste is illuminating in this connection. In the golden age before mass production and national advertising were thought of, there were one or two well-known tooth powders and a number of lesser brands having largely a local sale. Not very much attention was paid to making these tooth powders attractive to the consumer. Brushing one’s teeth was one of those necessary personal duties performed somewhat shamefacedly. Then came the first tooth paste, followed by national advertising, followed by numerous imitators. Thanks to the leadership of skilled copy writers, brushing the teeth became a major item of personal and social hygiene and etiquette — and a public duty. Tooth paste began to taste nice and to look attractive. It became associated with feminine daintiness and flashing masculine vigor. Brushing the teeth became another indispensable rite in the apotheosis of sex appeal!
Now the moral of this is that greatly enhanced tooth-paste demand was created by mass production with the aid of its twin brother, national advertising. This situation was responsible for numerous tooth-paste manufacturers, all of whom might practise mass production within limits, but no one of whom could hope to dominate the domestic market with one huge industrial aggregation grinding out the country’s tooth paste at a continually lower cost — what the first tooth-paste manufacturer may have very well expected to achieve before he was disillusioned. National advertising has become responsible for what might be termed extensible consumption, which by widening markets at first favors mass production, then restricts it by attracting new competitors into the field.
Competition wars even more ruthlessly against standardized production where the type of merchandise is one on which the individual consumer is already trained to discriminate out of his own experience. A consumer can be lured by ingratiating writing on the wall to a certain brand of tooth paste. Of its hygienic or actual value he knows nothing more than is told him — a condition which does not hold for women’s stockings, for example. Every woman has her own ideas as to what she should get in the way of stocking value for a given amount of money. It is no wonder, therefore, that we find innumerable manufacturers treading on each other’s heels in the industry; and styles, as will become clear farther on, aggravate the situation. We have, in addition to manufacturers’ brands, wholesalers’ brands, the brands of retailers, and stockings that have no brand name at all. With a field full of manufacturers the area of mass production is definitely hedged about. What is true of stockings also holds for a vast and important variety of other articles.
Chain stores, too, have caused interesting alignments of forces. Chain stores are natural allies of mass production: they constitute large areas of concentrated buying power. The inevitable uniformity of the merchandise carried by the chains, however, tends to restrict the field over which they operate. Their concentration on reliable staple items sold cheaply is already in certain lines forcing the department and the specialty stores to stimulate a demand for novelties and highly seasonal articles in order that they may make up in other ways what they lose to the chains in staple goods. As the chains tend to cover new fields of merchandise, this counterattack of the department store will gain added impetus and scope. Manufacturers will spring up to cater to the ever-widening emphasis of the department and specialty stores on new articles of individuality and distinction. It is not difficult to imagine a gigantic economic struggle in the future, in which the department stores will be constantly striving to raise certain articles into the style class, while the chains, by the bait of low price, will endeavor to keep them as staples; and style goods cannot, generally speaking, be produced in mass.
III
Retail buying habits manifesting themselves in the predominant handto-mouth buying are bringing additional worries to the mass and largescale producer. The distributor is not likely to order his merchandise in advance of need, preferring to let the manufacturer or the wholesaler gamble on acquiring stocks of merchandise which, by the current caprice of consumer desire, may become obsolete and unprofitable overnight. So far as manufacturers by sheer economic necessity or by skillful anticipation of coming styles undertake to produce in advance, they can employ large-scale production methods, but hand-to-mouth buying, by discouraging advance production and even discouraging planning for advance production, acts as a deterrent.
So marked a factor indeed has style become of recent years in the production and marketing of goods that one might as properly call this an era of style as an era of mass production. Yet there is definite opposition between these tendencies. The trend of fashion is constantly making certain styles obsolete, and obviously this acts as a powerful brake on mass production, which can, by its very nature, succeed only when there is a continuous and widening demand for the same product. If women would wear uniforms, to take an extreme instance, mass production of dresses would lower costs so steeply as to bring more than one sigh of relief from the head of the family. Since women, on the contrary, prefer individuality in their dress and frequent change of style, we have in the manufacture of women’s dresses the very converse of mass production — that is, production in many small manufacturing plants, each of which produces a fairly wide variety of merchandise.
Strange things are happening. No matter how humble its origin, style is rapidly entering fields in which the development of highly standardized merchandise has hitherto appeared to be the natural goal. The kitchen is the latest field to undergo style invasion. Yellow stoves, beflowered refrigerators, bright-colored pots and pans, are the order of the consumer’s day; and who shall say what unassuming utensil will next begin to adorn itself?
If style only manifested itself in changes of color, the interference with mass production would be, of course, slight indeed; but when variation in shape and structure becomes important, mass production receives a telling blow.
Of this tendency the automobile industry — hitherto the mainstay of mass production, as witness the Ford factory — is at the moment the paramount example. Each year one cannot help being more and more impressed with the extent to which variations in color, line, and upholstery seem to play a determining part in the choice of a car to be purchased. If utility and price were the sole criteria for motor cars, there need never have been any other car than the Ford! Whereas, on the contrary, there have arisen a host, of successful competitors in the industry, vying with each other in style quite as much as in price. Even Ford was compelled to smash one of his most cherished mass-production traditions and ree-quip his plant for the production of a new kind of car — a car with style appeal. Once launched on a style-product ion career, it is difficult to know how far he may travel the road that leads to restriction of the mass-production ideal of which he has been here and abroad the most lauded representative.
Perhaps it is not necessary to probe too deeply into the causes of this condition. Even America, with its dominant democratic institutions, is not immune from one form of social prestige — that arising out of a capacity for expenditure. Many a man of average intelligence buys a hat or a pair of shoes at a store known for the high prices of its merchandise so that his friends and the world in general will recognize his ability to splurge. To meet a similar demand there has had to be a scries of motor cars gradually ascending in price; and, although at present there is a gradual lowering of all automobile prices, due to the application of mass-production methods, relative differences in price are nevertheless scrupulously maintained and style is carefully emphasized. Clearly the automobile is a long way from a standardized utility with cost pared to the bone by mass production! And the absence of deeply imbued caste tastes and habits in the nation has been largely responsible for the paradox that, so far as mass production has meant increased income to the wage earner, this income has been to a considerable extent spent by him for the purchase of style-influenced articles. With rising means, the human desire for individuality, for being in fashion, for excelling one’s neighbors in competitive expenditure, comes to the fore — frailties that advertising knows expertly how to transmute into highest virtues. To a degree, therefore, mass production, by providing greater purchasing power to consumers, has carried within itself the seed of its own undoing.
IV
But the vexations of mass production do not end here. Extensive and expensive advertising campaigns plus high-pressure selling devices have in the past been employed in order to dispose of the vast and growing heaps of merchandise which the fertile machines have produced. In recent years a great share of the savings in cost of manufacture through mass production has been lost in increased cost of sales.
Much American salesmanship has seemed to take on the aspect of bludgeoning or cajoling the consumer into the purchase of products which he has not really needed or wanted. Forward-looking large-scale producers, confronted with the heavy expenditures necessitated by such a policy, are realizing that very substantial savings can be made by following public demand instead of trying to direct it, when a preliminary survey shows that the expense of the effort is likely to exceed the profits of the result.
A hosiery manufacturer with more than 14,000 retail outlets has, for example, arranged to keep an accurate daily record of just what types of stocking are selling in the various sections of the country. This enables the company to plan its production more intelligently, to cut down its selling cost, to increase its own turnover of finished stocks, and to achieve the economies which flow from cont inuity of operation throughout the year.
Other organizations turning out an enormous volume will no doubt be forced more and more into close study of the consumers’ needs and wants, or else will bear serious losses in profit due to the added expense of superhigh-pressure salesmanship and advertising required to sell products not freely welcomed by consumers.
There is, however, no single panacea for a complex situation. The menace of overproduction is constantly dogging the heels of mass production. Granted the best intelligence on the part of massproduction industries as to scientific analysis of demand, it still remains true that the domestic market cannot long hope to keep up with the rapidly advancing capacity of machines and skilled management to turn out goods.
Development of exports to the extent necessary to absorb surplus capacity is, in consequence, mass production’s next big hurdle. American business, sophisticated within its own borders, has, generally speaking, betrayed an astonishing naivete in regard to foreign sales. It has been indifferent to foreigners and complacently ignorant of their tastes and customs. It has yet to realize the strength behind the foreigner’s desire to want things done in his own way and to meet his particular prejudices or predilections. Its narrowoutlook on international affairs, which has prevented it from seeing that it cannot build up foreign markets in the face of high tariff walls against foreign goods, and its overexacting policy on foreign national debts are only particular phases of a general situation. Howfar America advances in its understanding of the outside world and in its desire to reach an accommodation with the foreign point of view will soon be a matter of major importance to the successful functioning of mass production.
In view of this imposing array of forces insidiously or openly agitating within business against an unmodified mass-production policy, it may seem hardly necessary to call more than passing attention to the numerous social problems that are threatening the system from without.
Students have frequently declared that mass production, by increasing the unit of output per man hour, and thereby lowering the cost of the product while raising wages, has broken the dismal shackles of traditional economics and firmly set the wage earner on the road to permanent prosperity; but lately this optimistic speculation has become overclouded by the realization that the wholesale application of power and machinery to work has resulted in forcing large numbers of workers out of employment.
According to figures issued by the National Industrial Conference Board, the physical volume of product in manufacturing industries increased 54 per cent from 1921 to 1923 against an increase in average number of wage earners in these industries of only 26.4 per cent. From 1923 to 1925 the physical volume of product increased 5.3 per cent, while the average number of wage earners decreased 4.4 per cent. On the basis of 100.0 in 1914, the product per wage earner increased from 100.8 in 1919 to 135.3 in 1925.
Theoretically, continual lowering of the cost of the product through introduction of labor-saving machinery should result in greater consumption, and hence keep employment fairly stable over a long period. In practice, however, lowering of cost cannot extend the market for any product indefinitely.
The faster industries are able to increase the output of the individual worker, the more serious the prospect for general unemployment will be. (Recent studies tend to show that large numbers of workers displaced from manufacturing industries are being absorbed in distributive enterprises.) in the long run this situation should correct itself, since human economic wants are indefinitely extensible. New kinds of products will probably be created continually to absorb the labor which has been thrown on the streets by the rapid increase in capacity of the machine. In the meantime it may seem to many that the solution lies largely in decreasing the output per worker, which would again be contrary to the traditions of mass production, instead of persistently prodding humanity to acquire new desires so that the jobless may find new jobs. The Government might even take it into its head to try to put a stop to an increase in massproduction methods for the sake of curbing growing unemployment.
The problem is not to be settled, of course, in an offhand manner, any more than the sociological objection to the standardization of labor and its consequences can be. As yet we have developed no criteria for determining the strict correctness of judgments on these matters, and must wait for enlightenment from time itself. Nevertheless, prophets are by no means rare who, like Mrs. Dora Russell, predict that subordinating primitive emotional expression to lifeless machine rhythm can only result in a spiritual reaction which will bring the whole machine age crashing about our ears.
Sufficient it is in itself that already, in the few brief years that mass production has been a major economic factor, it has encountered weighty economic obstacles to its progress: the competition which its own success engendered, important developments in the distribution system, limitations to the efficiency of centralization, and, most recently, the consumer demand for style and the motive of purchase for prestige rat her than economy. Clear it is — and the realization of this is of great importance to business leaders — that mass production is not destined, as was once expected, to be undisputed sovereign of American industrial life.
Mass production could have saved itself, and those dependent on it for a living, much money if it had tried to visualize the obstacles which have inevitably risen against it. If it is to move forward successfully in the future, it will do so only at the cost of careful study of economic and social problems which it is creating and which it must solve.
American business must be on guard against the effects of a superabundance of energy and overconfidence natural to youth and young nations. These qualities have enabled us to perform industrial miracles. They have also allowed us to rush into vast economic experiments with little or no attempt to foresee difficulties and danger. American business men are amply endowed with courage and imagination, qualities which have enabled them to overcome setbacks that would have been extremely dangerous to a less buoyant people. However, a farther vision, a more cautious planning for the future, must be added, it seems, to present excellences if American business is to fulfill its splendid promise.