Fabian Tract No. 84. 


THE ECONOMICS OF DIRECT 


EMPLOYMENT. 


WITH AN Accomn OF THE FAIR WAGES PoLICY. 

PUBI.JSHED BY 

THE FABIAN SOCIETY. 

PRICE ONE PENNY. 

LONDON: 
To BE OBTAINED OF THE FAB!A:-1 SoctETY, 276 STRAND, W.C. 
]ULY 1898. 



The Econornic of Direct Ernployn1ent* 

Du1u c,. the Ia t ten year there ha gradually been de\'eloped, 
among thl! >:ariou::. Town and County Council and other public 
authoritie-, a definite economic policy with regard to the employment 
uf l:J.bor. Thi;:, policy, initiated by the chool Bo.1rd for 
London in January, I 9,t ha been :uloptcJ, to a gre.tter or les cr 
degree, by ::.e1·eral hundn:d local «o,·erning bodie throughout the 
United Kingdom. It has, perhap , been mo t completely carried 
out by tlw London County Council, where it has been ucces fully 
maintained for on:r nine year , and where it ha lately b~.;cn endor. etl 

and conli.rmed by a dcci::,i1·c majority at the election of r. q . . 

The Labor Policy of the London County Council 
The Labor Policy of the London County Council h.t been 
intelligently criticized, from the point of \'iew of ~:conornic s ience, 
rn mly under thr~.;e hc,ul . In te.Hl of "buying ib labor in the 
chcape::.t market," a it wa termed, it ll<l, from the fir t, tri\cn to 
adopt a it ::.tandanl the tr.Hle union rate of w ge , and to a ert .t 
"moral minimum" of earning bdm1 1 ·hich it \I'd ine ·pcdient that 
anv London citin:n hould be allowed to ink. ~lorco1 er, II< t 
coi1tent ' ith proce ·ding on thc.c line ,1 rl!garJs the \\' rl men 
whom rt direc.tly employ-, it h. ought t hr ou<rliOut to ~ecurc th.tt 
all colltr.t tors e:ecuting its worl· hould adopt the amc pnu iplc.:. 
Fin,tlly, it ha ende:t\'Oured, whcren:r po ib!t:, to di pen e \1 ith thL 
nuddkman enlrcprcucur, and to ub titute sal,trie I uper\'i ion and 
rn na!!Cll1 nt directly un<.kr public c.vntrol. 

The Fair Wages Movement. 
Ld u take fir t what i kno11n a the Fair \V,1~c lo\cmcnt. 
.\ftcr proton~cd di•cu~ ion , repeated at inttr :tl during nine year , it 
ha bcl:ome the ettlcd policy, {a) to pa), in each trade, the recognized 
tanu.1rd r.ttc ot wage_, (h) to g-ive no adult male workman k th:tn 
6d. per hour, and no ,tdult woman le s than 1 • per week t Tho 


3 

unfamiliar with the actual practice of industrial life at first imagined 
that the trade union rate of wages meant just whatever rate the trade 
unions might choose to claim. As a matter of fact the trade union 
rate of wages is, in every organized trade, a well-understood expression, 
denoting the actual rate which has been agreed to, more 
or less explicitly, by representative employers and the trade union 
executiYes. \iVhat the Council has done has been merely to insert 
in its own standard list of wages the rate proved, on inquiry, to be 
actually recognized and adopted by the leading employers in the 
particular trade within the London district. In the whole of the 
building trades, for instance, which include seven-eighths of the 
work done for the Council, the trade union rate of wages has been 
solemnly agreed to in a formal treaty between the London Building 
Trades Federation and the London Master Builders' Association. 
So far as the organized skilled trades are concerned, the Council has 
not attempted to do more than place itself on a line with the 
common average of decent employers.

With regard to unskilled labor the case is more difficult. Here, 
in most cases, no generally recognized trade union rate exists. The 
Council has accordingly taken the position that it is undesirable, 
whatever the competition, that any of its employees should receiyeless than the minimum required for efficient and decent existence. 
Seeing that Mr. Charles Booth places the actual " poverty line" in 
London at regular earnings of 2 rs. per week, it cannot be said that 
the Council's" moral minimum'' of 2+s. for men and r8s. for women 
errs on the side of luxury or extravagance. But, unlike the Council's 
wage for skilled workmen, it is more than is actually paid by many 
conscientious employers ; and it is undoubtedly above the rate at 
which the Council could obtain similar labor, if it chose to disregard 
all other considerations. 

The labor policy of the London County Council, whether with 
regard to skilled or to unskilled labor, may be explained as the 
deliberate choice. of that form of competition which secures the 
greatest possible efficiency, as compared with the form which secure 
the greatest apparent cheapness. Public offices may be filled in one 
of two ways. We may, on the one hand, practically put the places 
up to auction, taking those candidates who offer to do the work for 
the lowest wages. Or, on the other hand, we may first fix the 
emoluments, and then pick the best of the candidates coming forward 
on those terms. When we want brain-workers of any kind, everyone 
agrees that the latter policy is the only safe one. We do not 
appoint as a judge the lawyer who offers to take the place at the 
lowest rate. No one would think of inviting competitive tenders 
from clergymen as to the price at which they would fill a Yacant 
bishopric. And a Town or County Council which bought its 
engineer or its medical officer in the cheapest market would, by 
common consent, make a very bad bargain. In all these cases we 
have learnt, by long and painful experience, that there is so much 
difference between competence and incompetence that we do not 
dream of seeking to save money by taking the candidate who offers 


his service at the lowe t rate. Unfortunately, many worthy peoplewho realize thi aspect of brainwork, bccau e they belong them elve 
to the brainworking clas , are uncon ciou that it applic, no les 
forcibly to mechanical labor. They will pay any pnce for a good

architect, but are apt to regard bricklayers and ma.on a. all equally 
"common workmen." The con equence i that, owin~ to the 
extraordinary ignorance of the middle and upper cia<-. about the 
actual life of the handicraft trade , it ha gradually become accepted 
a good bu ine~ that, though you mu t take all po· iblc trouble in 
choo ing your manager, it i afe and right to buy wage-labor at th 
lowe t market rates. But, as a matter of fact, there i a-. great a 
relative difference between one painter or pia terer and another, a 
there i between one architect or manager and another. If the 
pres ure of competition i shifted from the plane of quality to the 
plane of cheapness, all economic experience tells u that the result 
is incompetency, scamped work, the steady demoralization of the 
craftsman, and all the degradation of sweating. \Vhen a man 
engages a coachman or a gardener he under tand thi well enough,
and never for a moment think of hiring the cheape t who pre enb 
himself. Even the sharpe t-pre t.:d employer doe not t.:ntru t 
expen ive machinery to the mechanic who offers to take the lea t 
wage . The London County Council, realizing it mort: vi,·idly than 
orne bodie le s in touch with the actual fact of indu trial life, 
applie the principle all round. Whether the po. t to be tillt:d be 
that of an architect or a carpenter, the wage to be paid i~ fir t fixed 
at a rate sufficient to attract the be t cia of men in the particularoccupation. Then the most compett.:nt candidate that can be found 
i cho en. Competition among the candidate works no le 5 keenlythan before ; but it is competition tending not to reduce the price,
thereby lowering the tandard of life throughout the nation, but to 
enhance efficiency, and thus really to reduce the co t of production.
\Vith regard to the lower grade of labor a further con ideration 
enters in. It may be economically permis ible, under the pre ent 
organization of indu try, for a private employer to pay wage uponwhich, a he perfectly well know , it i impos ible for the worker to 
maintain him elf or her elf in efficiency. But when a Board of Poor 
Law Guardian find it elf re cuing from tan·ation, out of the poor 
rate, women actually employed by one of it own contractor to 
make up workhou e clothing, at wage in ufficient to keep body and 
oul together, e\·en the mo t rigorou economi t would admit that 
_omcthing was wrong. • The London County Council, re pon ible a 
it i for the health of the people ot London, decline to u'e it po I· 
tion a an employer deliberately to degrade that health by paying_ 
wage obviou ly and flagrantly in ufficicnt for maintcnanc~·. en~n it 
competition drive down wage to that pitch. Tht.: economic heretic , 
in fact, arc not the Council, but tho e who, in flat defiance of \dam 

The Chel can rd of Guard•:.ns pay it! rubbers IS. 6d. day, \\ith ut f 
' t i h mount to \eckly \\a e of 9 . A day's illne s is suffictent to t rce uch 
orker to eek rehef from the rat , nd the B ard then finds i elf re uin fr m 
s n tion its O\\n underp id 1\0rkpeople. 


Smith, McCulloch, Mill, and Marshall alike, persist in assuming that 
there is some obligatory "law, that the pressure of competition 
ought, without interference from man, to be allowed so to act as to 
degrade the whole standard of life of the whole community. 

The Moralization of the Contractor. 

Some critics, however, who do not object to the Council, like a 
pr~dent housekeeper or an experienced employer, fixing the wagesof Its servants at an adequate sum, demur to any interference with 
the freedom of contractors, and denounce as economically heretical 
the Council's standing order confining the Council's work to such 
firms as adopt the standard rates of wages. It is, say such critics, 
no concern of the Council how a contractor manages his business ; 
and if he can get his workmen at less than the ordinary price of the 
best men, so much the better for him, and, in the long run, for his 
customers. The very object of industrial competition, they would 
add, is to keep the cost of production down to the lowest possible 
point, and any interference with the contractor's freedom to do his 
business in his own way tends to increase that cost. 

It will, however, be obvious to the economist that these criticisms 
confuse cost of production with expenses of production. What 
the community has at heart is a reduction of the cost of production-that is, of the efforts and sacrifices invalved in getting the object 
desired. This is of no concern to the contractor. What he wants 
is to diminish the expenses of production to himself-that is, the 
sum which he has to pay for materials and labor. This object he 
may effect in one of two ways. He may, by skilful management, 
ingenious invention, or adroit manipulation of business, get the 
work accomplished with less effort and sacrifice on the part of those 
concerned, allowing for the reduction of the out-of-pocket paymentsby himself; or he may, on the other hand, without diminishing the 
effort and sacrifices induce those concerned to accept a smaller remuneration 
for their labor. Either way will equally serve his profit, 
but either way will not equally serve the community. In the first 
case, a real economy in the cost of production has been effected, to 
the gain of all concerned. In the second case, no economy in the 
cost of production has taken place ; but the pressure of competitionhas been used to depress the standard of life of some of the workers. 
The one result is a real and permanent advantage to the community 
; the other is a serious economic calamity bringing far-reaching 
secondary evils in its train. 

Now, many large fortunes have been made by contractors pur


suing each of these methods, and the good business man doubtless 

resorts to both of them as opportunity serves. Unfortunately it is 

much more difficult and toilsome to be perpetually making new in


ventions devising fresh labor-saving expedients, or discovering un


suspected economies, than to pare down wages, even at the risk of 

producing a slight falling off in quality, provided that the deterio


ration is not so gross as to cause the actual rejection of the work. 

It is so hard to spend laborious nights and days in improving pro



ce,,e-.. It i o ea y to find workmen eager for a j b at 10 p r c~nt. 
bdow the tandan.l rate. "~L nkind," ay Emer" 11," i a' lazy • " 
it dare., to he," and contractor-. are no c. ception. It i :tf to •<l)' 
that the more you lea,·e it open to a contractor to m:tke apr tit, byreduc111g the e. pen c of production, the lc he will trouble ahout 
lmn:ring the co t. So much i thi theca c that, under a prolon~edrc"imc of free and unrc tricted camp titian, the ,·cry e.·i ten e of 
the :liternati\'C ha. often been forgotten. "Profit-," •-:1id one .!pit


alit," are the. ha\'ing of ''age,.,,"
It \\"a in order to put a top to the con tant tendency f n


tra tor to nibble at the current . tandard w.1rrc that the London 
Coun y Council in ertcd its celebrated L ir wage clau c. The~e 
claus it will be ob~er\'cd, le3\'e open to contractors c\'cry chance of 
profit whrch come from reduction of the co. t of producti n. Byconcentrating the contractor' cncr"y and attention on thi point 
they prc~umahly incre:l"e the fierCl'lH.:,., of that part of the competiti' 
c .trug rk "hr~.:h promote. the public good. But, ju t a the 
F.rctory \d , the :\1in · Rl,.!;lllation .\ct , and the Education Act , 
" rult.: out'' of indu. tnal competition the chc.1pne,., brou~ht •tbout 
by the onrwork of women and children, or the neglect of anitary 
precaution-., o the London County Cl'uncil, rcprc.enting the people 
of Lontlon, decline to take ad\'antage of any chcapne tha i •t•t 
by merely b atin r down the . tantlard of life of particular ection of 
the wag -e, rner . Here, the key-note of the Council' policy i , not 
the ab •litioa of competition, but the hifting of it plane from mere 
cheapne to that of indu tri.tl dlicicncy. The peedin" up of 
m:1chincry, the hctter organit:Itwn of !.thor, the greater competencyof nun. ger, clerk, or craft man, are all stimulated and encour,t•rcel 
by the ddib rate clo. ing up to the contractor of other mean of 

makin<T profit.

.\nd ju t :h the Factory .\cL h,\,·e \\'{>n their way to economic 
approv.tl, not merd\' on humanitarian grounds, but a po iti,·ely 
~;onduchc to indu_trlal cffidency, o, too, it may confidently b pre· 
dieted "ill the now widely-adopted fair 1\1 ~ dau c .t 

Municipal Industry. 
\\·e come to an altogether ditTerent rangL: ot critici m when we 
cun,ider the Council' detcnnin.1tion to di pen e, whcre\'c.:r po ibl , 
with the contractor, and c.'ccute it work by engagiug tafT of 
workm n und r the upcrvi 1011 of it own ,liaricd ofli~.:er Thi 
ha b en fiercely attacked a~ being palpably and ob\'iou I~ ppo cd 


7 


to political economy and business experience. It is worth while to 
place on record the facts. 

Constructive work was not undertaken at first, but labor was 
hired to clean the bridges* and to repair the Council offices,t at a 
considerable saving compared with contract prices. The first piece 
of building work was executed by the Main Drainage Committee at 

£536 below the lowest tender of £z,r88. But the case which finallyconvinced three out of every four members of the Council of the desirability 
of executing their own works was the York-rd. Sewer. The 
engineer estimated the co t at £7,ooo, and tenders were invited in 
the usual manner. Only two were ent in, one for £n,s88, and 
the other for £I r ,6o8. The Council determined to do the work 
itself, with the result that a net saving of £4.477 was made.! 

This remarkable result naturally created a sensation in the contracting 
world, and attempts were made to impugn the engineer's 
figures. In his crushing reply he pointed out that the contractors 
had reckoned out their tenders at absurdly high prices in nearly 
every detail, charging, for instance, 6os. and 70s. respectively percubic yard of brickwork and cement, whereas the work was done at 
39s. It is clear from the other particulars given, and from facts 
notorious at the time, that an agreement had been come to by the 
contractors not to compete with one another for this job, in order to 
induce the Council to abandon its fair wages clause. The Council 
preferred to abandon the contractor.§ 

The outcome was the establishment, in the spring of r893, of a 
Works Department to execute works required by the other 
committees in precisely the same manner as a contractor. The 
Works Department stands to the other committees of the Council 
exactly in the same relation as if it were an independent contractor. 
When a committee has any work to execute, the Council's architect 
and engineer prepare the plans and make an estimate, without anyreference to the Works Department. Then the Council decides 
whether the work shall be done with or without a contractor. 
Sometime it decides to put the work up to tender, a course which 
enables it to see whether the estimates of the architect and engineer 
are trustworthy guides. The Works Department may say that it is 
not prepared to do the work, either because it is not satisfied with 
the specifications and estimates, or because it has no convenience for 
doing work at that particular site, or of that particular kind. In 
that case the job is put up to tender and done by a contractor. 

The accounts of the Works Department are kept eli tinct from 
those of other departments of the Council. The Finance Committee 
sees that it is debited with the interest and sinking fund on all the 
capital it uses ; that full allowance is made to cover depreciation and 
renewals; that a complete stocktaking is regularly carried out byindependent officers ; and that all outgoings and maintenance 
charges are properly spread over the various works done. The 

• :\linutes, Oct. r8th, 1892, pp. goo-r. t ;\linutes, June 27th, 1893, p. 683. 
j ;\linutes, October 17th, 1893. 
§See the fuller particulars in i\linutes of October 31st, 1893, pp. 1063-5. 

accounb arc dabor.ttcly dH.:ck~.:d hy the Council'. Controlh.:r, a \\ell 
a by thL. Loc.tl Gon.:rnmcnt Board' \udito1 . 
The \Vork 0~-;partment ha now been at work lor over tin: 
year , durin~ whid1 it ha!> e.·ecuted O\er £ oo,ooo worth of wort· o 
the mo.t ,·,tried character-ewer con truction, the making of road,, 
building hou es of every kind, erecting bridg~.: , carrying out ot 
e\·~o:ry ort of repairing and dewr,lting job!>, and an innumerable 
array of mbcellaneou operation . \\'hetlH:r, and to what c. t~.:nt, 
thi!> work ha been done cheaper than it would have b~.:en don~.: bycont1 actor i a matter of hot contrm·cr y.* The Progrc ,jy~,; a ;.cl t 
that, even with all the di :Hivantag~.:::. of t.trting ,t new bu inc , .md 
struggling with'' wr~.:ckl.:r " in ide the Council, the whole£ oo,ooo 
worth of work ha, tak~.:n a a whole, .md including the "jobbing 
work," been ·.·ecuted at ju t about what the architect and cngincll 
estimated. The 1\toderatcs d~.;clare that it ha co t more ; but ~.:ven 
they do nul put the c. ce at more thau .thout 5 per cent. on the 
whole-an c. ce " which any one accu tomed to build~.:r ' bilL will 
think amazingly low. But no ound jud~ment on the policy of dt -
pen ing with the contractor can be torm~.:d on ~t.tti tics of thi kind, 
ext~.:nding mer . o brief a period. \ \" ~.; nw t t.tke a wider weep, 
and ee wh.tt inler~.:nce c.m be dr:l\\ n !rom other c.·pcrience.
It i u ually a. umed by the Council' critic that it policy nf 
eliminating the contractor is an unpar.tllekd innovation, unknown 
out ide London. A little knowledge of the action of local govern-
ing bodic!> cl ~.:where would prevent thi mi~take. It i , of wur ~.;,
unnccc~"ary to remind the reader that Birmingham, domin.ttcd bythe .tride.t "eLl of the Indi\'idu.tli. t , ha municipalized it water 
.mtl it g.t which ;~re in London till left to pri,·atc enterpri l'. 
\ h.tt i not o wdl known i that the Town Council tli·pcn with 
th ~,;otlll t~:tor whenever it can, each comnlltt~.;e gdtin~ much of 
1t. own \\ m k done by it own tlirldly-cmploycd ~tafT. The Publi 
\Y ork ommittle, \\ hich look after the thoroughfare , and the 
I Iullh Committee which i re pon iblc for anit.1tion, h. vc not only 
entirely dimin.ttcd th contra~:tor !rom the de.llling .mtl rep tiring-o( 
the t1 eel .md the rcmo\·al of refu e, but c en from the laying UO\\ n 
ol ~~.mite JH' ing ami fl.t.., ing, on c a nw t protit.tble item of hi 
bu 1ne . The (,a Committee i. not content with ~.:mpl ying hun-
dr~.:d o m~.;n to nuk~.: ~· , but .tl o I ·ep it own t.t!T of c.trpclttCI ,
bri~.:kl.tye1 '• hltck mith , tinm~.;n, [Minter., !itt 1 , etc., to e:ecute it 
num rou \\·ork . The lmprm cmcnt ommittcc, like the E t t~.; 
ommitt c, h.t it own c.trpenter , fitter , bricklayer , paperhanger , 
pl:t tcr r ani zin w rk~.;r ,t whitt th \V ter mmittec, b ide 
ul r l IT of 111 bani of :1ll kin , i now • ctu.tlly 11 a •c 1 in 
1.011 tru tin ·vera! hu c d.un and 1 c en oir ncar l{hay,tdcr, l\ • 
and v.triou w.tter tow r an I phon , t •cth r wath '' rk-
accounb arc dabor.ttcly dH.:ck~.:d hy the Council'. Controlh.:r, a \\ell 
a by thL. Loc.tl Gon.:rnmcnt Board' \udito1 . 
The \Vork 0~-;partment ha now been at work lor over tin: 
year , durin~ whid1 it ha!> e.·ecuted O\er £ oo,ooo worth of wort· o 
the mo.t ,·,tried character-ewer con truction, the making of road,, 
building hou es of every kind, erecting bridg~.: , carrying out ot 
e\·~o:ry ort of repairing and dewr,lting job!>, and an innumerable 
array of mbcellaneou operation . \\'hetlH:r, and to what c. t~.:nt, 
thi!> work ha been done cheaper than it would have b~.:en don~.: bycont1 actor i a matter of hot contrm·cr y.* The Progrc ,jy~,; a ;.cl t 
that, even with all the di :Hivantag~.:::. of t.trting ,t new bu inc , .md 
struggling with'' wr~.:ckl.:r " in ide the Council, the whole£ oo,ooo 
worth of work ha, tak~.:n a a whole, .md including the "jobbing 
work," been ·.·ecuted at ju t about what the architect and cngincll 
estimated. The 1\toderatcs d~.;clare that it ha co t more ; but ~.:ven 
they do nul put the c. ce at more thau .thout 5 per cent. on the 
whole-an c. ce " which any one accu tomed to build~.:r ' bilL will 
think amazingly low. But no ound jud~ment on the policy of dt -
pen ing with the contractor can be torm~.:d on ~t.tti tics of thi kind, 
ext~.:nding mer . o brief a period. \ \" ~.; nw t t.tke a wider weep, 
and ee wh.tt inler~.:nce c.m be dr:l\\ n !rom other c.·pcrience.
It i u ually a. umed by the Council' critic that it policy nf 
eliminating the contractor is an unpar.tllekd innovation, unknown 
out ide London. A little knowledge of the action of local govern-
ing bodic!> cl ~.:where would prevent thi mi~take. It i , of wur ~.;,
unnccc~"ary to remind the reader that Birmingham, domin.ttcd bythe .tride.t "eLl of the Indi\'idu.tli. t , ha municipalized it water 
.mtl it g.t which ;~re in London till left to pri,·atc enterpri l'. 
\ h.tt i not o wdl known i that the Town Council tli·pcn with 
th ~,;otlll t~:tor whenever it can, each comnlltt~.;e gdtin~ much of 
1t. own \\ m k done by it own tlirldly-cmploycd ~tafT. The Publi 
\Y ork ommittle, \\ hich look after the thoroughfare , and the 
I Iullh Committee which i re pon iblc for anit.1tion, h. vc not only 
entirely dimin.ttcd th contra~:tor !rom the de.llling .mtl rep tiring-o( 
the t1 eel .md the rcmo\·al of refu e, but c en from the laying UO\\ n 
ol ~~.mite JH' ing ami fl.t.., ing, on c a nw t protit.tble item of hi 
bu 1ne . The (,a Committee i. not content with ~.:mpl ying hun-
dr~.:d o m~.;n to nuk~.: ~· , but .tl o I ·ep it own t.t!T of c.trpclttCI ,
bri~.:kl.tye1 '• hltck mith , tinm~.;n, [Minter., !itt 1 , etc., to e:ecute it 
num rou \\·ork . The lmprm cmcnt ommittcc, like the E t t~.; 
ommitt c, h.t it own c.trpenter , fitter , bricklayer , paperhanger , 
pl:t tcr r ani zin w rk~.;r ,t whitt th \V ter mmittec, b ide 
ul r l IT of 111 bani of :1ll kin , i now • ctu.tlly 11 a •c 1 in 
1.011 tru tin ·vera! hu c d.un and 1 c en oir ncar l{hay,tdcr, l\ • 
and v.triou w.tter tow r an I phon , t •cth r wath '' rk-

9 

n'en's dwellings to accommodate a thousand people, stables, stores, 
.vorkshops, a public hall and recreation room, a school, two hospitals, 
and a public-house-all without the intervention of a contractor. 
The construction of all the buildings on the works is being carried 
out by the workmen of the Corporation, under the superintendenceof the resident engineer and his assistant. The timber and other 

material is being purchased by tender. This method," reports the 
Water Committee, "of using material supplied by contract, and constructing 
by the direct employees of the Corporation, the Committee 
consider, under the circumstances of the case, to be the most economical, 
as well as calculated to secure the best results." But this is 
not all. The Water Committee, finding that the village would have 
beer, has decided also in this matter to dispense with any entreP1'
enettr, and has "resolved that a canteen shall be established in the 
village," out of the capital of the Birmingham citizens, and "that 
the person managing it shall have no interest whatever in the quantity 
sold.'"' 

And if we turn to Liverpool we learn that "almost all the cityengineer's work is done by men directly employed by the Corporation. 
The construction of sewers is now done entirely bythe Corporation themselves. They had such a cruel experience 
of doing the work of sewering by contractors that they have 
given it up.''t It appears that in the old days, when the contractors 
agreed and charged for two courses of brickwork, no amount of 
inspection sufficed to prevent them putting in one only. "What 
happened was this: that whenever the Inspector came round, or the 
Clerk of Works, to watch the contractors, they found the two ringsof brickwork going on very well ; as soon as the Inspector went 
away . . . the second ring of brickwork was left out . . . and 
so the sewer got weak... You ·could trace the visits of the Inspectorby the double rings" which were found here and there at intervals 
when the sewers were subsequently uncovered for repairs.!

This evidence from Liverpool is especially interesting in connection 
with what has recently been discovered at Manchester. The 
Auditor's report, published in 1896, exposes a precisely similar fraud 
in connection with the thirty-five miles of new sewers now under construction. 
This work was let to thirty-four different contractors, who 
had already received over £6oo,ooo for their work. The new city 
surveyor, finding that the work had been scamped, had "street after 
street taken up at great expense, and such an exposure was made of 
fraud and deceit as I," writes the auditor, "have never before seen. 
The men who built these sewers in a tunnel never dreamed that 
their rascality would be discovered.'' The chief method adopted, 
was, as at Liverpool, leaving out one ring of brickwork, except when 
the Corporation Inspector was signalled as being about to descend 
the shaft. Then the workmen hastily put on a second row of bricks 

* Report of the Birmingham \Vater Committee, presented Feb. 6th, I89+· 
t Evidence of the Deputy Town Clerk of Liverpool before the Unification of 
London Commission, p. 328 of c. 7+93-1. 
t Ibid, p. 328. 



10 

at thlt pol. The fr~.:qucn y nf th 

Ill 

h



I I 

have changed it to "Never buy from anyone else what you can 
manufacture for yourself." 

The most familiar instance of this revolution of policy is seen in 
the English railway companies. Once a railway company was an 
association for getting a railway made, and running trains on it. 
An able essay written by Mr. Herbert Spencer forty years ago,
protested strongly against any extension of a railway company's 
scope. Nowadays an up-to-date railway company runs docks, canals, 
ferries, steamships and hotels of its own, and carries on, besides, 
innumerable subsidiary businesses, and manufactures every conceivable 
kind of article, entirely by its own operatives, workingunder its own salaried staff. The directors of the London and 
North-Western Railway Company, for instance, with a comprehensiveness 
that would have staggered George Stephenson, lay it down 
as an axiom that the company " should be dependent on the outside 
world for as few as possible of the necessaries of life." The manager 
at the company's great workshop-town of Crewe "can think of 
nothing of importance that is imported in a manufactured state, 
except copper tubes for locomotive boilers." "As we pass from shop 
to shop, here may be seen a steel canal boat in process of construction 
(for the company, it must be remembered, is a great canal 
proprietor); there, a lattice-work bridge is being fitted together. 
Further on, hydraulic pumps, cranes, and capstans crowd a huge 
shed. In another place, chains of all sorts and sizes, from cables to 
harness traces, are being forged by the ton ; close by, coal-scuttles 
and lamps are being turned out by the hundred. In all the works 
there is no stranger sight than a corner in the carpenters' shop, 
where two men are constantly employed making artificial limbs. 
Some two years back (that is, about r885) the company embarked 
on this branch of manufacture, and undertook to supply legs and 
arms of the most finished workmanship to any man who lost his own 
in their service."* 

Nothing indeed is too small or too great for the North-Western 
to manufacture for itself. Crewe turns out a new locomotive engineevery five days, and you may watch the company's own rails beingrolled in its own steel works. At Wolverton, Mr. Acworth recounts 
how he "came upon a man engaged in etching designs upon the 
plates of ground glass that were to form the windows of lavatory 
compartments, and was told that the company had recently found 
that it could do this work for itself at half the price it had formerly 
paid" (pp. 6o-r). Since r88r the North-Western has been steadilyeliminating the privately-owned waggon. For over twenty years the 
companies have managed their own collection and delivery business. 
Nearly every company, too, now builds its own carriages. The Midland 
Railway prints its own tickets ; whilst the Great Eastern goes 
a step further and executes in its Stratford works nearly the whole 
of its own pri'nting, including its gorgeous colored posters and pictorial 
advertisements. "In the printing works the company keeps 

*The Railwa)'S o.f England, by W. M. Acworth, London: r88g, p. 59· 


about 1 10 p r on con tantly employed, nd i under tood to \'~: 
a good deal of money by doing o."* 
But the Midland ha tried another c. pcrimcnt. At the gr~:at 
Trent store arc betwccnthrc and four hundn:d thou,.,and empty~.:urn 

ack , which the company furni-he for the com ey. nee of tht: corn 
from the farmer to the miller. Here, too, the contr ctor formerly 
exi ted and made a profit, until, a few year .go, the bu in~: w. ~ 
utH.lcrtakcn by the Company it cl . 

In e\'cry branch ol raihny m, n. gement, in hort, the eli min, tton 
of the independent mlrrprcnrur or cunllactor i being rapidly 
effected. It "a-, impo ible that thi t:..unplc1 d by undertaking 
in many n: peel an l:wou to municipal departm nt , hould ha\ t: 
no influence on th bu~ine men who rule our Town Councib. 

But although raih\::1)' director cannot b~ uppo ed to h.tvc becll 
bitten by the tarantuh of ollcctiYi~m, c\·cryone will not he 
convinced by their n:markable change of policy. They re embl 
the member of a Town Council in uot worktng for their own 
per on:il profit, and may, it i urged, then~fore be indiflcrent \\hcth~t 
their ambitiou' · cur. ion into m.mulacturing indu try actuallv pa\' 
th~:ir way. It j, th~:rcfore interc ting to find e. ~:tly tilt: .1m~.: 
rc\'olution ol bu inc policy in l.trge priv.tte undett.1kin' • o 
better in. tance could be adduced th:tn the hi tory of a certatn 
world-renowned firm of hipbuildcr 1 who e rapid ami continued 
expan iou i one of the m,tn cl o mode til indu try.

T\\ enty ) car ago thi firm con tructcd in their owu y. rd ltttlc 

more than th hull of the \'c . eb, coutr.tcting for all the thou and 

and ouc artidc of equipment with numeruu-oth~:r manuLH;turing 

firm which .p cializcd in thc.e direction • 'owad:ty!> thi~ .1111 • 

hipbuilding tirrn manuf.tcturc e\'cry one of th~.; c articlt: -!rom 

triple-e. p.tn ion ngiue. do\\'n to the bra s handle of the cabin 

locker -in it own \\'Ork ; and tum out it \'C . cl from keel to 

topma t ntirely of it o\\'n con tru tion. In--tc d of employin~ 

ouly hipwri ht ~md plater , that firm now nga 'e men of e\·eral 

hundred ep r. tc trade , who work under the laricd man gemcnt 

of different he. d of departm nt 

The foiiO\\'lllg lett~:r i,·c ome of the d, te , nd p.trticular f 

thi iwlu-trial e\·olution :


tSSitJt .-l6sorp11111l o.f 

ure in i\·in } ou the in for li n 
done for u by uU. 

h•p 1 nd to ke our \\11 

In { r \ 

nd \en 


13 

after we opened the engine works certain subsidiary machinery was obtained from 
outside which we now construct ourselves. 

For instance, in 1885, we first built crank shafts for main engines. In 1887 we 
began to manufacture manganese bronze propeller blades. In 18go we began to 
make circulating pumps and engines, duplex pumps, steam steering engines, and 
hrass sidelights for ships, and in the same year our smith work gradually merged into 
general forge work. 

The history of great engineering establishments shows the same 
tendency. The progress of the largest firm in the United Kingdomshows how, during the present generation, business has been added 
to business, until the firm has become one of the largest in the 
world, mining its own ore, making its own pig-iron, smelting its own 
steel, building its own ships, erecting its own engines, constructingits own tools, and executing innumerable subsidiary works in everydirection. 

And, turning to quite another industry, we may cite the 
experience of a Birmingham manufacturer of metal goods, whose 
business has distanced all his rivals, and is now the largest and most 
prosperous in the trade. Twenty years ago he was completely under 
the dominion of the then prevalent idea of specialization. Everything 
required in his business which did not come strictly within the 
limited sphere of his own specialities he obtained by contract from 
other firms. Gradually his ideas changed, more and more of the 
subsidiary work was done in his own factory. He began to make 
his own tools and machines. He commenced to repair, and then to 
construct his own engines. When additions to his works were 
required, he picked his own clerk of the works, bought his own 
bricks, and engaged his own artizans. Year by year he has found 
himself becoming less and less dependent on outside contractors, 
until the other day he s_tarted making in his own essentially metal 
factory even the wooden hogsheads and paper boxes in which his 
goods were packed. And he himself attributes the continued 
profitableness of his business, and its very rapid expansion duringtimes when his competitors have often been working at a loss, mainly 
to this progressive elimination of the contractor and subsidiary 
entrepreneur. The following memorandum de cribes these changes 
in his business :


.Jfemorandum by a Hardwm·e Malllifactu•·er, describmg the Subsidtmy Opu·atzons110w undu·taken by his ji1·m. 

I find that some time at the latter end of 1870 we first began to manufacture 
goods that we had previously bought from other manufacturers. These goods were 
chiefly unfinished work that was required to complete the various articles that we sold. 
In some cases I made the change because I thought I could make a better article, and 
possibly a cheaper one. But the important advantage was in obtaining quickdeliveries, and, therefore, prompt execution of orders. Since that date we have 
bought less and less outside, and at the present time we make almost everything that 
we require.

About 1868 we began to do all our own repairs to machinery, plant, and buildings, 
and employed carpenters, fitters, machinemen, bricklayers, slaters, and painters.

In 1879 we began to make and design all the machinery that we required, and to 
erect new building . For some eight years earlier than this I had designed all 
machinery, and had it made either in Birmingham or :\lanchester. This alteration 
w.1s made chiefly because the machines were special, and I did not want them used 
by competitors in my trade. 


I~ 

materi,d, particular kind~ or toob, engine~ anti building, atl.lpktl to 
l~i~. processes, or packagt:s ready at the Yery momt:nt hi~ w,ne" .11 t: 
htllshed, finds that it i · nwn: conYt:nient, le~s li.1ble to mistake or 
delay•. and, in the true t sense, more economical for him, as tht: cousumer, 
to obl.lin all these thing--by his own directly-employed 
stafT, than to rely upon the competition of producing cnlrt'jlrtnl'lll-'> 
01 peLializetl firm~. .-\.nd thus, as the manuLu.:tun:r absorb~ the 

eparate producers of the "an..:s he con:-.umes, he must not be surpried 
when the public, the ultim:lte cotvm:ner~ of the w,u·l!· he 
produces, themse!Yes apply the lesson, .1ntl, throucih their electl!d 
repre. entatin:~, finally ab:>mb him.* 

\\'hy i the elimination of the :>ubsidiary t'lllrt'frt'llt'/11' more 
praLtical now than it was in the last gl!neration? It would t.tke too 
long to e.·amine the fumlament,d causes and conditions of thi 
clunge in industt ial org.mi~:,ltion. l\lost change~ in wcial structut L 
depend, in the long run, upon indi\ itlual cluraller ; po~siblj tht:re 
has been a grmrth in the number of mt:n who c.111 be tt usted to 
work ef1iciently anti hont:,tly as salarit:d m.1nagers imtead of for 
their 0\1"11 person,ll profit. Po sibly, too, :ts industrial org.111ization 
becomes nwre complex, the advant.1ge to the con~umer in direct!) 
controlling the productilln of e\"ery artick he require , b~..:comL· 
mme apparent. .\11 improYemenb in soci.tl org.uti~:ation, too-
steam, telegraph, the frcl! use of the printmg pr~..:ss, and Ill!\\ 
the tclephone-bcilitat~..: the ma ~ing of \l'orkm~..:n under single 
gencr.lls of industry, able e!Ticiently to coutrol larger and more 
hett.:rogeneou and more complex industrial at miL:, than could be 
managed by th..: captain~ of th..: past generation. Fin.dl), as r~:gards 
the substitution of the colkcti1 e for the indi1 idual man.lgetllt:llt of 
industry, it b evident th.tt thi:> will h;n~.: b~:en render..:d inctea:,ingly 
practicable by th~..: perfecting of d~moct.ttit: organization . 

•\11 th<.: t.: aut! other influences .nt: but ft.tgntetlt:tt") uggt.:stious 
towards the e.·planation of a chaugc.:: in indu try of which the policy 
of public authuritie:, in getting rid of tlw contractor i~ but oue out 
of m.mv m,mifl!station . Formerly tit<.: be t bu ttlc.::ss nun.1gemettt 
".1 th.tt which itself matl.t!.;ecl lea~t. . o11 .td.ty the be t bu ine:,s 
m.uJ.tgcm~..:ttt is tlut which c.uJ safely and cflicicntly .Hlmini~ter nw:,t. 
Th~..: integr.ttion of producti1e proce~:,cs undu direct control of tit' 
con. umers mav or nuy not be economic ht:resy ; the bu~inc s lti;toryof En~l.md ro;·the p.t~l t Wt:lll)' years !ndit:.ttl: th.tt it i~ intlu tl i.d 
01 thodo. y. 

F
F
ABIAN SOCIETY.-The F bian I tv con I of 
ment of i Hul ; particular of th con"dttlon upon


lecture In Loudon or th country; aud th folio 'ng publica ion c n 
nod fr m th r t&ry, a the Fabi n Ollie , ~16 trand, I..ondon, W.O. 

F A B I A N E S S A Y S IN S 0 C I A L I S M . (85th Thow nd.) 
Library Edllton, 4 6 (po31<1ge, 4td.J. Cheap Edition, Paper cover, 1 -; plain 
cloth, :1 -, I fr fr m th r ry.
FABIAN TRACTS and LEAFLETS. 

'J'racl , rac/1 Jt, to 3. pp.,JiriCil Jd., or 9 ·1 r doz., 14 l oth tat 
Lt>aJl•l , 11P· ta h, prace Jd (or ix co , 1 ..Pff 100, or (J prr 1 0. 

The Set of 66, po 
t free :13. Bound m Buckram, post free for 3 9· 
g.., for t, 1 ., t fr 1 . 3d. 

I.-On General Socialism in its various aspects.
T1 ' .-79· A Word of Remembrance nd Caution to the Rich, b J 11. 
\\'ooi • 78. Soctah m and the Teaching of Chn t. B~ 1 r. J 11 Ll 


1 o. 4:1 . Chri tian Sociali m. Hy I v. s I>. II ADr • 75· Labor m the 
Longe t Retgn. By dD. Y \\' BB 72· The Moral Aspect of Sociah m. 
13y w. l \' BAll•• 69. The Difficultie of Indivtduali m. By ID 1' \\" BB. 

51. Soc1ali m: True and False. By 10. 'i W 1111. 45· The Impo 1bihtie 
of Anarchi m. By lh n AnD • !lAW (pr" • 2d. ). 15. En li h 
Progres towards Social Democracy. By . \\' on. 7. Capital and Land. 
urv y of thcdi tribution of pro rty moe th cia ,. 111 I· 1 I nd (lith dn. 
re~• II !l .) 5· Fact for Soc1ah. t . milar un· y of tb di trtbutlonof 
~ucomeaud th conditiOn of th p opl . (7th dn. r vi td 1S~5) 
I • AI 1 >r .-13. What Sociali m I . 1. Why are the Many Poor? 

II. On Application of Soctalism to Particular Problems. 
TH.!.C. -85 tn pr ). The Law of Liquor L1cen mg lh I·, H I' ~ 1:. 
84. The Economic of Dtrect Employment. 83. State Arbllr tlon 
and the Living Wage. So. Shop-life and It Reform. 74· The State 
and it Functton in New Zealand. 73· Ca e for State Pen ion in 
Old Age. By G o. 1' n. 67. Women and the Factory Act . By 
,rr .• m. \' \\'FBD. so. Sweating: 1t Cau e and Remedy. 48. E1ghtHours by Law, :13. The Ca e for an Eight Hours Bill. 47· The 
Unemployed. p, Jon. Bun. , d.l'. 39· A Democratic Bud et. 
L }L T. 19. What the Farm Laborer Wants. 
III.-On Local Government Power How to use them. 
T A • 82. Workmen' Compen at1on Act : what it mean and how to 
make u e of 1t. 77· Municipalizat:on of Tramway . 76. Houses for the 
People. 62. Pan.h and Di trict Counctl • 61. The London CountyCounc1l. 6o. The London Ve tnes. 55· The Worker ' School Board 
Program. 52. State Education at Home and Abroad. By J. \\', !AnTI • 
54· The Humanizing of the Poor Law. By J. li. OAK IIOTT..-1 A L L 

81. Municipal Water. 68. The Tenant's Sanitary Catechism. 71. Same 
for London. 63. Parish Counctl Cotta es and how to get them. 58. 
Allotments and how to get them. 1' \lll \. • rt•. 'lCll' I. l'lt GH I 
(No • 30 to 37). The Unearned Increment. London's Hentage m the 
Cny Gutld Mumcipahzauon of the Ga Supply. Munic1pal Tramway 
, London' Water Tnbute. Muntcipahzation of the London 
Dock . The Scandal of London's Markets. A Labor Policy for Pubhc 
A·.tlontie . Th in a red CO\ rforld. ( d. p rdoz.); paTII. ly l -I r I 
IV. On Books. 
'19 What to Read. 
r... • u