The Day After Russia Attacks
What War in Ukraine Would Look Like—and How America Should Respond
UP to two or three years ago disputes in the coal mining industry in Great Britain usually involved a confusion of differences of opinion about facts, differences about principles and conflicts of view about questions of immediate tactics and behavior. It is safe to say, however, that the coal industry is today more advanced, from the statistical and documentary points of view, than any other at any time.
As a part of the machinery of wage determination set up in 1921 the trading and revenue accounts of all collieries of any size are analyzed in great detail on standard lines by independent accountants acting for the owners and the miners respectively. Although no individual colliery details are available to the public, the aggregates of each district, showing the sundry results and expenses, expressed in relation to tonnage, etc., are compiled and are thoroughly well digested by those interested. Further investigations have been made by the recent Royal Commission into comparative facts in the other industries and in other countries, and it may be said that -- with one important exception to which reference is made later -- there are now no questions of fact having serious economic significance which are not clearly laid out upon the table for anyone to see.
Disputes should now therefore be confined to discussions of principle, but actually they still are intermingled, unfortunately, with conflicting views about the way in which immediate negotiations have been handled on either side. Such temporary matters of course occupy a prominent position during the period of a dispute for they are the immediate irritants of public opinion, but they sink into insignificance as time goes on, leaving bedrock questions still open for settlement.
Today we have the unique position of a deadlock between an economic impossibility and a psychological or physiological impossibility. On the one hand the existing demands or requirements of the workmen, at any rate until the industry is reconstituted, mean that it cannot be carried on except at a loss over the major part of its operations, and therefore cannot be continuously carried on at all on its present scale. On the other hand, the minimum needs of the owners which have to be met if this economic impossilbiity is to be avoided, mean a reduction in the standard of life of many of the men which may be partly mitigated by a lengthening of their hours.
The deadly evolution of economic events has brought about this state of affairs. While there are some points upon which each side might be blamed, neither side can be held completely responsible for the plight of the industry, nor can either side be "blamed " entirely for the stand it has taken. When on all sides and in all countries today inconvenient economic facts are being glossed over, it is not difficult to appreciate the reluctance of the men to admit the inevitability of facts so repugnant to their cherished desires and well-being.
It is not generally realized that there are now more men in employment in the industry than before the war, -- this despite a reduction of normal output of some 15 percent. Seven men are now trying to live upon the product that six enjoyed before the war. It is unnecessary to enlarge upon the reasons for diminished consumption: the increase in the use of alternative fuels; the dislocation and alteration of European markets with improverished purchasers; devices for economizing in coal, etc. Whatever these reasons may be, the fact remains that the existing output of the industry is too small for its "ground plan," as indicated by the number of mines in operation and the number of men engaged. This extent is now too great for a stable equilibrium to exist between price and reward.
The first essential therefore is a reduction of the magnitude of the industry by 15 or 20 percent. It would then be possible for the present output to be maintained by the remaining mines, under conditions which would enable wages on the present scale to be paid without actually incurring losses. It would still leave it completely necessary for the reconstruction of the industry on the lines of the recommendations of the Royal Commission to be carried out, in order that the industry should be on a progressive and satisfactory basis for the future. It is obvious that to take those mines that are worked under the least economic conditions out of the "wage-ascertainments" would mean that the average costs for the remainder of the mines in a district would be more satisfactory and give a margin of profit. If in addition to the reduction in area there were a slight lengthening of the working time for the remainder, the position of stable equilibrium would be more readily reached.
The surplusage of men in the industry has been partly caused by the frequent isolation of the mining villages from other industries and the consequent lack of mobility in labor. New pits in the eastern fields have been manned with new labor instead of with labor transferred from the declining districts. Such a transfer was next to impossible owing to lack of houses. To have left the miners' cottages in the existing areas derelict would not have enabled the country by a magic wand to produce the required houses elsewhere. Every effort has already been made to build houses rapidly to meet the actual shortage, with the result that they have sprung up in unprecedented numbers. Despite this, the problem of coping with the existing shortage has not yet been solved, and it is obvious that the effort would still less meet the requirements of transfer which would be a clear addition to such a shortage since it would "de-house" a large population at present satisfactorily housed. The Royal Commission's report has recognized the necessity for a complete transfer to other industries, and the government has assumed some responsibility for assisting in every way such contraction of the industry. Exactly what is involved in this operation beyond an extension of unemployment "doles" has not yet been constructively elaborated.
The wage system in operation in the coal industry is extraordinarily complicated. It has its origin in the events of some sixty years ago, and the number of "ingredients" in the calculation to bring the wage down to recent times has been put at over forty. This does not mean, of course, that a wage earner has to go through all these calculations to get his present weekly wage, for the computations were brought to a head or "standard" for the period as immediately before the war. (Incidentally it should be remarked that the immediate pre-war period was a boom period and the claim to perpetuate or standardize the wages of such years, so that they should operate during the periods of less prosperity, would in itself be likely to give rise to considerable difficulty.) Upon this standard has been built a complicated system of percentage additions for the general change in price levels, district adjustments, subsistence allowances and minimum wages. If any new system of computing wages is suggested, so great is the conservatism of the wage earner that the new figures have to be turned into terms of the old before they are acceptable. Men will not relinquish what they know and have experienced, however complicated, for something by the operation of which they may some day be unexpectedly deceived. Thus when the 1921 agreement brought in the new principle of dividing between the owners and the men the net proceeds of the industry, the share applicable to the men after such "ascertainment" had to be turned into terms of a percentage addition to the old wage before it was acceptable or workable.
These historical complications, together with the natural differences between the several districts and the different grades of labor, add greatly to the difficulty of the problem and to public mystification whenever miners' wages are under discussion.
Is the principle of the 1921 agreement, that there should be a fixed ratio in which the proceeds of the industry are divided, a satisfactory one? It sounds at first all that could be desired, granted that the ratio agreed upon is a reasonable one. There is no doubt in my mind that the ratio of 85 to 15 (afterwards altered to 87 to 13) on which every £100 of proceeds were to be divided between workmen and owners was a fair representation of what actually happened over a long period before the war, say twenty or twenty-five years. But it is not sufficiently realized that an accurate average for this purpose does not necessarily give a fair annual result, for it turns out to be too rigid as between good years and bad years. The average deviation over a long period from this mean ratio was 40 percent, which means that the ratio would not have been correct in more than a small minority of those years. I showed, before the Royal Commission, that the difference between the amount of wages that actually had been paid to the men before the war over a long period of years and what would have been paid if the agreement had been in force over that period was very marked, although the aggregates for the whole period were identical. The reward of the men would have fluctuated much more violently under the agreement than under the actual method then in force. As labor has no long-period "staying power" it is useless to try to compensate a man for his suffering, during a period of depression, because of the low wage which this fixed ratio gives him, by telling him that in several years to come he will have correspondingly more which will put it right. Capital may bear these differences or fluctuations, but labor cannot.
A fixed ratio of this description means that in the majority of years either the men or the owners are feeling the pinch unduly. There is little doubt that some part of the trouble felt in the last two years would have been avoided if there had been a little more elasticity in this fixed division of the proceeds.
The difference between prosperity and adversity in the industry is largely measured or borne by that proportion (roughly one-third) which goes to the export trade. Here the world price is an important factor, and when this is translated into sterling, an advance in the value of sterling means that the same world price in foreign currency brings in smaller sterling receipts to the owner. There has been in the past twelve to eighteen months a very marked reduction in the sterling price level which affects British exporters to a considerable extent. In the case of those traders whose purchases of commodities form a substantial part of their outgoings, what they suffer on the one hand may be partly counterbalanced on the other. But in the case of coal where nearly 90 percent of the price has represented the reward of labor, if no arrangements have been made in advance, or no easy apparatus exists, for securing a corresponding reduction, then the mine owners' revenue account is depressed on the receipt side and remains constant on the payment side. Something of this kind happened in 1924 and 1925 and helped to exaggerate the plight of the industry from the point of view of its profits to the owners and return to invested capital.
It is not too much to say that at the present time coal in Great Britain is being mined at a considerable average loss, and that if the whole proceeds were given to the men they would be receiving in a number of areas something below a decent minimum wage. Herein lies the economic deadlock. It may be said, "Why not let economic forces take their course and mines be shut and the men find jobs elsewhere?" The answer to this question is that the lack of fluidity of movement, the complexity of the industry, and the dislocation following the war, have made it impossible for such a remedy to work out except with the gravest hardship to vast numbers of deserving and useful citizens.
In our complex civilization in England, based on interdependency, public opinion has moved too far in the direction of humanitarian instinct to allow the miners to suffer starvation and exposure if the cause is something over which they have absolutely no control and arises from a common calamity like the war. There is this much substance in the men's view that the deadlock may be an economic one, but if it is so vital to the state for it to be on the right lines, then it is a responsibility on the state to see that no well meaning and hard working persons are brought to the gutter.
One of the recommendations of the Royal Commission (as indeed of numerous preceding bodies) has been that the state should acquire the freehold of coal -- that is, it should purchase the royalties. No one should make the mistake of thinking that in the royalty question lies the difference between the success or failure of the industry or between the present wage and a decent wage. It is much too small financially for that to be true; the effect probably does not exceed five pence or six pence per ton as against a margin of profit and loss of three shillings or four shillings per ton now in question.
If the whole royalty were to be annihilated it would not solve the present problem. As a matter of fact, insofar as the royalty is a true economic differential like an economic rent, it cannot be annihilated, whoever may own it. But it is a political and social irritant of first importance. It rarely fails to rouse deep resentment when it is graphically presented as a deliberate deduction from the reward of the worker to be paid over to the idle recipient of inherited fortune -- especially if the owner happens to be a Duke. It stands as a factor in the dispute far beyond its intrinsic importance, and to convey the royalty to state ownership on generous terms would be the best possible tactics from a political standpoint.
But the advantages would not merely be the removal of a social irritant. Not only would the State be put in possession of all coal below a certain level and of all unproved coal, but in the granting of future leases it would be able to impose such terms as would bring the working of the whole industry up to the level of the best. It would enjoy also the great advantage of being able to lease coal for working in accordance with geological conditions and not as heretofore in accordance with accidental, incidental and historical boundaries on the surface. These surface conditions have made the leasing of coal in the past an unnecessarily complicated and uneconomical affair. Again, perhaps with ten or twenty years of experience of leasing coal, the State Department would accumulate such knowledge as even to enable it to carry out the crucial experiment of state ownership in a competitive area for some particular district. This would do more than any other device to settle the vexed question as to the practicability of state ownership and would eliminate some of the present dangers of civil service control.
One of the solutions of the whole problem suggested by the workers is that the industry should be allowed a fair return upon invested capital, not including new capitalization through reconstructions, bonus shares, etc., after which the proceeds should be divided or go wholly to the men. Unfortunately for this suggestion there is no means of knowing what has been the invested capital in the past, or, if that figure were known, how much of it is effective in producing the present output. My own estimate of the capital in the industry made to the Sankey Commission some years ago, together with the known figures of the new capital introduced in the last few years, is the basis generally adopted for argument upon this subject. It is impossible to give a precise estimate of the capital invested because many of the mines come down from periods long ago, for which the records are lost, and the balance sheets merely show an original figure in one item for the whole property coming down from father to son for generations. But even if the figures were accurately known the question of principle still remains.
It is very difficult to convince the workers that you cannot stereotype the reward of capital and at the same time maintain a progressive industry. Mines are inevitably falling out of use and new mines coming in to maintain a given supply. For those that come in there must be an offer of a return upon capital which will be comparatively equal to or better than the attractions of rival industries. This sets the minimum upon which the industry can progress. In this offer there are several hidden but real essential figures. One is the price of the product at which the estimated tonnage will sell to yield a net receipt that will produce the required proportional return upon the estimated capital outlay. There cannot be two prices on the same article (allowing for quality) in the same market. Therefore the price of coal that is necessary to attract new capital will be the same price as would apply to coal from old mines. It may be a price which will yield a very small return upon old capital, or a very large return. The capital value of the old mines is very different from the capital invested and it must necessarily fluctuate more or less in response to the marginal return in new collieries.
It is not possible to sell one lump of coal at one price because it comes from a new mine, to pay the interest on new capital necessary to produce it, and at the same time to charge a different price for another lump from an old mine which will pay a fixed conventional rate on old capital. But this essential link between margin of new supply and the reward on old capital is nowhere properly appreciated as inevitable in a competitive industry.
Unfortunately disputes between masters and men have been so frequent and have been conducted under such conditions that an unique spirit of distrust exists which renders ordinary negotiation more than usually difficult. If the reorganization of coal mining on the lines of the Royal Commission's report can be accompanied by a new spirit of conciliation, it would make a profound difference to the future prospects of the industry.
Exactly why the economic disequilibrium of the coal industry should have led into a general strike is not yet clear and probably the story will not be fully written for some time. But there were certain predisposing forces at work:
First, it is represented on many hands that a concerted attempt is being made by the capitalists to depress the standard of living of the workers; that the case of the coal miner was merely the beginning of a general campaign; and that unless workers stand together to defend it at the outset the miners will go under first and the others will follow in succession. The powerfulness of this argument to those to whom it is addressed has little relation to its truth.
Second, there are various Bolshevik and revolutionary elements, particularly in the populous centers, which will make the most of any chance of disturbance and dissatisfaction and which resent all measures of conciliation.
Third, there are those who avowedly work to engineer the industry into such a condition that the state will be compelled to take it over. This would be the first step towards the much desired goal of nationalization in general.
A fourth possibility is that the railway transport workers have been taunted with their action on a certain "Black Friday" when it is alleged that they failed to make good their promise to stand by the miners. Some have felt that when the account or demand was again presented by the miners it would have to be honored if the occasion were sufficiently convincing; otherwise it would be clear that the implied undertaking was never given in good faith and was only a sentimental gesture, lacking practical courage.
It appears unlikely, however, that the hearts of more than a minority of those who loyally obeyed the call to cease work were really in the struggle. The reckoning has yet to be made up as between the different sections of labor involved, both as to the wisdom of the general strike, the responsibility for calling it, and the responsibility for terminating it.