Richmond Palladium (Daily), Volume 37, Number 40, 21 December 1911 — Page 13

The Equal Price Law.

Page Five.

it age am pressing heavily

itMtt

special

tale arils of the pr

toes.

Tlve law has already ton applied la the United

A 4Mb where the cause of one form of eco-

waa so apparent that the remedy suggested Reference has been made before to the enormous

prlrllege the Standard Oil trust enjoyed In re

ceiving the larger rebates from the railroads and bw this) enabled that company to make gigantic strides fa monopolising the refining of oil and the distribution of Its product. At the start the Standard Oil treat enjoyed larger rebates than other refineries be

lt was the larger shipper. It wound up by de

an receiving drawbacks from the railroads,

Pail sat of the freight rates charged Its competing oil

By these two methods was secured the ellm-

of saest of the Independent oil refineries.

All ether larger shipper were using this same paws' th re.igh the railroads to build up their businesses Into monopolies at the expanse of their smaller competitors. Rebates sad drawbacks, as aids to monopoly building, wars so ajrpeentry era that congress. In spite of the eaormoos influence brought to bear on It by the interests that were benefiting under this system, was forced by pvhlle demand to pass a law abolishing all rebates and drawbacks. In doing this tt established the principle that larger and smaller shippers In the same line of business should pay the same freight rates to the railroads. No one, under the present law. Is allowed a better rate than his competitors for the same hauL Congress, by this anti-rebate law, declared that owing to the dependence of all industry upon the railroads there should be equal opportunity as far as freight rates were concerned. In other words it established the right of the smaller shipper to buy freight transportation at the same price as the shipper of the larger quantity of the same products ef ludustry. 81 nee the establishment of this law railroad men have been loud In its pralss. They have said repeatedly it has been responsible for creating a better feeling between their roads and the shipping public, inasmuch as it has wiped out all discrimination between shippers. The fairness of the principle of the law has been recognized throughout the country, as is shown by the fact that there has been no attempt made to secure Its repeal by any class of cttlsens. It Is a good law. In the case of the railroads the total amount of money received from freight rates bears Its proportionate share of the expense of operation, fixed charges and dividends. The larger shippers when they wtrs receiving rebates discounts on their freight rates- were paying less than the average amount of money required from that source to meet the cost of running the roads. In order to make up for the special favor shown the larger shippers a higher rate than tbe average necessary was charged the smaller shippers. The cost of the larger shippers' rebate fell on their competitors, Under the anti-rebate law this is now declared Illegal and both larger and smaller shippers pay the same rate, which Is the average rate necessary for the support of the railroads. It has been proved before that special privilege, which Is undoubtedly the cause of most of the economic evils from which the country is suffering, Is founded on the power of the larger purchaser to buy for less than the smaller purchaser of anything of equal quality. The equal price law is the antidote to the poison of special privilege. The power of unequal opportunity has been demonstrated la the case of the United States Steel corporation. Therefore, the theoretical application of the equal price law to this corporation should prove illuminating This Is graphically detailed In diagram O. Here the Money Power must give equal price and proportionate credit to both the Independent manufacturer and the United States Steel corporation. Furthermore, an equal selling price for ore for both the independent and the trust must be made. This could be determined by dividing the annual gross tonnage output of both the ore sources controlled by the Money Power Into the gross amount received therefor. The result would be an average selling price that would provide for absolute equality in cost of raw material for both the trust and the Independent Then, as shown In diagram O, despite the disparity in amounts of ore consumed, the question of efficiency Is supreme In determining the profits of the two concerns, tn this case the Independent Is granted a higher efficiency than the trust and. consequently, on tbe proportionate dollar for dollar investment the more efficient independent manufacturer makes 15 compared to the less efficient trust's B. Nor can the trust, through the workings of the law of special privilege, absorb either this profit or the more efficient Independent, inasmuch as all special privilege ceases the very minute the equal price law is fundamentally applied to all productive and distributive industry. DIAGRAM a Controlled By Money Power.

Ot Nor. Ore Co. U. 8 .Steel

Equal Price Credit Equal Price Credit

Independent (Smaller Purchaser)

Pc. Ore Used 10 Extra Price Cost per ton 95 Eff. of Concerns 110 Profit 15

U. S. Steel Co.

(Larger Purchaser) Jo

95 I 90

In showing the workings ot the law of special privilege, distribution was treated in the illustration of' the discounts between the Jobbers, wholesalers and merchants. The theoretical effect of the equal price law Is shown in considering tbe Burae form of distribution in diagram H. Here, also, in spite of tbe quantities of goods bought, each Jobber, wholesaler and merchant, as far as buying power is concerned, is now on an equal basis. Money alone is no longer sufficient to give one man an advantage over his competitor. All these competitors in tbe vnrious lines of distributive industry being on an equal basis, as far as tbe purchasing power of their individual dollars U concerned, it then becomes a question of efficiency as to which one will enjoy the greater amount of natural privilege. The application of the equal price law would not nu-an that all the competing units in any line of industi would h;ivt t 11 their product for the same price. It means that each unit would fix its own selling price umier competition with the other units and that prue would hie to be the same to its smaller customer as to Its larger. This rule would have to apply all through manufacturing Industry. The jobbers dealing with one factory would all buy at the same price. In selling to wholesalers a jobber would not be allowed to discriminate between the smaller and the larger. Nor would there be much inclination to do so. While there would still be the larger jobbers they would not be getting boiter prices from the manufacturers on that account. They, together with the smaller Jobbers, would be paying the average price neeessary to enable the manufacturer profitably to carry on his business. One Jobber

on account of the efficiency with which he conducted his business might be able to sell for less than a neighboring jobber. In this case, however, the smaller wholesalers wno dealt with him would have to receive the same price as the larger. DIAGRAM H.

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The wholesalers, with no discrimination in their favor from jobbers, would not be inclined to make a better price to the larger merchant than to the smaller. Nor could they in the face of a law declaring such a thing illegal. Prices would vary between different wholesaling units according to individual efficiency but that would only result in a lower average selling price for each, open to both large and small merchants, and would not be the exclusive privilege of some larger merchant. The equal pi ice law will do just one thing and do that well. It will wipe out so-called larger buying power, that is, the power of the larger purchaser. In doing this, special privilege will be eliminated and in its place will be natural privilege, which is the true foundation upon which man's efficiency should be allowed to build. Special privilege has ended in monopoly and the enslaving of efficiency. Natural privilege will enfranchise efficiency and promote efficiency competition, a far different form of competition in manufacturing industry from any to which the world has been accustomed. EFFICIENCY COMPETITION. Efficiency competition would be the outcome of the establishment of the equal price law in all industry. It would naturally follow when special privilege had been cast out, and monopoly abolished that a return to some form of competition would occur. This would be efficiency competition. Industry, prohibited from buying its raw materials or selling its products in a manner discriminative between larger and smaller purchasers, would have to rely for its development and advancement upon efficient methods of management. Capital would be compelled to perform its functions efficiently and so would directing, managerial and directed labor. Capital today Is divided between two classes. These are the investors and those in control of the forces engendered by the law of special privilege. The investors competing among themselves tend to keep interest rates as expressed in dividends at a low figure. 5 is generally considered to be about the average income rate that is consistent with sufficient security behind investments. This, of course, applies only to that class that simply loans its savings to industry and does not take part in its actual management Those in control of special privilege are the monopolists and by combining with one another they maintain their profits from special privilege at as high a rate as they dare. Their exactions, however, have proved so heavy that government Is being called upon more loudly all the time to determine what a fair profit amounts to, and to limit the profits of monopoly accordingly. The proposition of determining what is a fair profit in any way other than by competition is impossible. The socialists say that all profit is unfair. The monopolists declare that in their case the determination of profits should be left to potential competition. In this they forget that through their control of raw materials and money and credit, potential competition ceases to exist. People other than the monopolists realize this and they are the ones who think government should decide upon some rate that shall govern the profits of monopoly. These people, however, either among themselves or through their congressmen, will never be agreed whether that rate should be 5 or 25. It is a problem impossible of solution by legislation. If it is attempted through legislation, dead levelism will be established and that in any form is fatal to progressive and efficient industry. The quickest and most efficient way out of the difficulty is to dissolve the trusts and apply the equal price law to the units of each line so unmonopolized, as well as to all the rest of industry's producing and distributing units. The banking and currency systems of the country also would have to work under the equal price law, so that all the units of industry would have equal consideration when it came to the question of credit. Corollary to the establishment of the equal price law to protect industry from monopoly, industry should be protected from the possibility of artificial depressions through a minimum price law. if under efficiency competition, surrounded as it will be with protection from the influences that now profit from industrial depression, if for any reason industry becomes slack, government through the bank, which is suggested in the following chapter, should provide each line of industry with credit based on a fixed minimum price for its products. That this would be safe banking practice can not be gainsaid by anyone who holds that the products of industry give money its value as a circulating medium. Directed labor should have the broad mantle of government protection in regard to wages and conditions of work. All industrial units competing under efficiency competition should be encouraged or required to be managed under the plans ot efficient management developed by such efficiency engineers as Mr. F. W. Taylor and Mr. Harrington Emereoa. Efficiency engineering la its regard for the wages of workmen comes

nearer guaranteeing under existing conditions each man his share in the output of production than any other method. Under it the workings of the equal price law on Industry would guarantee each man approximately bis share in all the wealth created through the joint efforts of directed and directing labor and their invested savings. EFFICIENT MANAGEMENT. The following brief description of efficient management is based on tbe writings of Mr. Harrington Emerson, the efficiency engineer who is responsible for the statement that the railroads of the United States can save 11,000,000 a day by applying efficient management methods, and that they should be encouraged to do this by denying them the right to raise freight rates Indiscriminately. He is one of the master minds in the development of efficiency engineering, as is attested by the unequaled prosperity of the manufacturing plants which he has placed on the efficiency basis and their pleasant relations with their workingmen. Mr. Emerson summarizes efficient management under twelve principles. These are: (1) Definite plans and ideas (2) Supernal common sense. (3) Competent guidance. (4) Discipline. (5) The fair deal. (6) Despatching. (7) Reliable, immediate and adequate records. (S) Determination of standards. (9) Standard practice instructions. (10) Standardized conditions. (11) Standardized operations. (12) Efficiency rewards. Mr. Emerson says: The result of the application of the efficiency principles is arithmetically to improve the isolated efficiency of each separate operation. Inevitably there will be geometrically progressive improvement In the totalised efficiency. A division of the problem Is to locate thos particular operations whose arithmetically progressive advance will yield the largest geometrical gain. This is necessarily the work of staff specialists and it Is not obvious since. (1) It requires the most minute, reliable, Immediate and adequate knowledge of all the current efficiencies of separate operations. (2) It requires a knowledge of all the dependent sequences. (3) It requires the ability to foretell which inefficiencies will Improve In the least time with the least effort and least expense. (4) It requires the ability to fortell which inefficiencies will produce the largest financial or output gain In the least time with the least effort and tho least expense. After existing conditions have been thoroughly analysed, after a plan of efficient campaign hajs been evolved, the beginning has only been made, no more a victory as yet, than a plan of war is a victory over an enemy. The second great division of the problem is to build up the general organization, of staff and line. The staff plans, creates standards, the line executes. Standards for enlistment, the methods of drill, the details of equipment, the welfare of the men as to food, clothing, endurance, transportation, maintenance, are evolved by staff specialists, but put Into effect by line officials. The third great division of the problem is so to use the knowledge acquired, the plan of campaign and the competent army, as to circumvent, vanquish the enemy inefficiency. This is line duty. Officials directly in charge of work are too near to see the problems in full proportion. A nearby hummock may obscure a whole mountain range, the point of a lead pencil at arm's length completely covered Johnstone and his aeroplane when half way up In his 9.714 foot altitude flight at the international meet at Belmont Park. Men in the line often resent line orders; officials in the line often resent staff counsel. A man with a painful corn and a tight shoe resents it angrily if any one steps on his foot. He overlooks the greater fact that corns are inexcusable, that a combination of good shoemaker, chiropodist and training will make walking and even a football scrimmage pleasurable. As a general proposition the Instinct of motherhood, continuously and intensely alert, is far safer than the routine and general attention of doctors and trained nurses, but it is the doctor, not the mother, who diagnoses diphtheria, discovers and administers antitoxins, and if we are lying on an operating table it Is the surgically clean hands of the trained nurse we want around, not the tears and contaminating caresses of sympathetic relatives. When the three great divisions of the problem analysis organization and action have been competently handled, the results are so astounding as to be unbelievable, even as It was until very recently unbelievable that a single germ in mosquito saliva could multiply so rapidly, divide and subdivide into a thousand million in a short time and kill the strongest man. Tet we have always seen all around us similar phenomena of geometrical progression victory over arithmetical ability to resist. In the Seward Peninsula In Alaska, the snow lies many feet deep as late as May. The arithmetically increasing temperature, the arithmetically increasing length of the warm days make the snow that fell arithmetically the long winter through dissapear geometrically and the million tree twigs bud and subdivide geometrically into eight million leaves, each growing a hundred-fold until In ten days there is a thousand million times as much leaf surface and the whole country is a mass of green. In explanation of the application of efficiency to directed labor the following letter written by Mr. Emerson to a client is so clear that its reproduction is a case of efficiency as far as this chapter is concerned: Dear Sir: In this letter the theory of wages and ef bonus systems, and the practical application of the latter, will be illustrated at some length. What I write is based on the physiology and psychology of effort; and it is on physiological and psychological tests and principles that our bonus plans rest. Work of any kind is accomplished with least fatigue when three conditions obtain: (1) The attainment of form; (2) The sustained interest of the worker; (3) A definite task. If the worker attains form, he can accomplish very remarkable results with minimum fatigue. If the worker is interested, he can endure tremendous strain without harm. It is always easier to accomplish a definite task than to accomplish the same task without predetermination. It is easier for a man to play golf, with its definite task, than to accompany his wife on a shopping tour, with no limit as to time or distance. If, therefore, we can combine (1) Attainment of form, which means a minimum of effort for the result; (2 Sustained interest, which results In maximum effort without harm; (3) The setting of a definite task to which tbe mind is clearly made up in advance; thtn we shall attain the best physical and psychological conditions for the worker, to whom the work will become a joy instead of a hateful chore; we shall also attain the elimination of wasted effort, wasted time, wasted thought and finally, we shall be able to allot part of the gain to the worker. The reason why base ball players, foot ball players, work so much better and harder than ordinary workers Is that all three of the conditions are realised. They play in best form. They feel a sustained interest There is a definite task. The Emerson bonus plan is based oa these fundamental eonsiderations. A man of 60. or even 70. who would not be able to shovel a ton of coal in a day without extreme exhaustion, will play golf for hours. If you walked a blind man over the same course, and put him through the same movements, you would kill him with fatigue. The Emerson bonus plan sets for a given time a definite result. The time is so ample that a man can easily beat It; can, therefore, develop form, and his interest Is aroused in a double manner, firstly by beating the gam, and secondly by pulling down a reward. His interest Is continuously stimulated, for as he beats the earn more and more through attainment of better form. Le pulls down larger and larger reward. It has been found by many exhaustive experiments on man and animals that the worker can keep up indefinitely half tbe speed bo cava attain by extreme effort. Thl half op pod The Kmeroon Company calls standard. A voir easy poof lo one-third of - extreme spssa. A man Is eat ef his glace. If he cannot show even at th start

ont-th!rd of maximum spaed. If any srreater speed than one-third of maximum is attained a bonus Is paid. If extreme speed for an hour by a professional btayclo rider on a track is SO miles, we would call hair of this Or IS miles, a high standard, and 10 mlloa th lows limit. On an open road, these figures would drop to 3 smllee for extreme. 13 miles for standard, and $ miles tor minimum. Some time has to bo allowed for root, say 10 per cent This would put the standard for a full day at 1.S miles per hour, and tbo minimum at 7.3 mil an hour. Wo would pay a man no bonus for doing an avorago of 72 miles a day of 10 hours. We would call htm to account If he shoved less than 72 miles. We would give him 20 per cent bonus for 10$ miles. Above 101 miles, wo would give him a bonus ot all the time ho saved at hta day rate and 20 percent for the time ho worked. Soma efficiency engineers give him as bonus all the tlma ho saves below standard at his premium rata. This is more than we do. Wo prefer to give him all the ttmo ho aavaa at his day rata, and a bonus of 20 per cant for tbo ttmo he works because: (1) If ho boats the reasonable standard, ho Is entitled to all his savings at his day rata. The plant makes a gain through the lessoning of overhead charges. (2) Twenty per cent is the bonus that Induces standard time. (3) It is very easy to calculate this bonus either on monthly efficiency or individual job basts. This ease of calculation is a most Important feature The men know as a rule exactly what Is coming to them. They know the actual hours worked, they know the standard bonus delivered. If we divide the actual hours into the standard hours, the efficiency Is determined and the amount of bonus depends on the efficiency per cent Example: Wages per hour $0.30 Actual hours worked in a month 22.5 Standard hours delivered 2S6.7 Efficiency (286.7--262.5 109.2 Bonus 29.2 (Namely 20 for 100 and 9.2 for the extra .". Wages S;s.?S Bonus 23.00 Total $101.75 Men working on this plan have no difficulty whatever in making these calculations, and some of them in fact figure their status from day to day. The most difficult part of all our work is to establish thoroughly scientific schedules, such schedules as a physician, a physiologist, a psychologist a moralist, an athletic trainer would sanction and improve. Because this Is so difficult we approach It by degrees. We put In temporary schedules at first, group and gang schedules, and allow the plant to feol its way to ultimate operation schedules. Today there are thousands of hoi's that can trot ono mile in 2:20 or less; there was a time when Klora Temple was the only mare in the world with so low a record as 2:40. To illustrate the effects of bonus, let us assume that the wage of the bicycle rider acting as a messenger Is $0.30 an hour, that the cost of operating a messenger business amounts to $0.24 an hour overhead, that the profit on each mile is $0.02. and that there is plenty of work for 10 men 10 hours a day. . At 7.2 miles an hour, the minimum speed set above, the total mileage per day is 720 miles and the costs per mile and the totals as follows: labor cost at $0.30 an hour $ 0.041SS Overhead at $0.24 an hour 0.03333 Total cost at $0.54 an hour 0.076 Profit per mile 003 Total revenus per mile 0.05 Total costs for 720 miles 4.00 Total profits 14.40 If the messenger is put on bonus, and the standard time Is set as 10.S miles an hour, the cost per mile and totals aro as follows: Labor cost at $0.30 an hour I 0.0$77 Bonus 20 at $0.06 an hour 0.0055 Overhead at $0.24 an hour 0.0233 Total cost at $0.0 an hour 0.0665 Profit per mile e.0301 Total rovenuo per mile 0.035 Total costs for 10SO miles "0.00 Total profits An extra cost of $00 In bonus Increases profits $23.35 or 300 per cent It Is extremely important to roach the standard, and any bonus system that does not do this, Is defective. If for Instance you paid twice as much as you ought to. and the men earned $12.00 a day bonus Instead of $.00, the profits would drop to $ . but If through not paying enough bonus, say $3.00 Instead of $$.00. tbo efficiency dropped to $0 per cent or 9.71 miles per hour, then the profit would be $35.34 as compared to $3. through paying double bonus for standard efficiency. If. however, owing to tho selection of exceptional men. efficiency could bo crowded up to 130 por cent for a 40 per cent bonus, then tho account would stand: Labor cost at $0.30 an hour 9 0.033 Bonus 0.12 an hour e.oOtt Overhead at 0.24 an hour o.01$ Total cost at 0.SS an hour 0-05 Profits per mile 9048 Total profits , The increase In profits over tho 100 por cent standard Is $15.. Our aim Is to pay neither mora nor loss than that amount of bonus which will maintain tho worker's Interest in the work. Practically, we cannot vary the bonus to suit oaeh Individual worker. Some men need no stimulus, others cannot bo stimulated by any bonus; but wo have found that a standard tlmo for a bonus of 20 per cent works well. Some men will attain regularly 120 percent and they must be held back; others will average only 80 per cent, yet bo good men. but those below 70 per cent aro misfits. A plant can bo built up to an average of 120 por cent not by stimulating 80 per cent men but by selecting 120 per cent men. Our bonus resolves Itself Into this question: If the average wages of tho district aro $0.0 an hour for men averaging 60 per eent efficiency, how much will you bo obliged to pay for men of 80 per cent efficiency. 90 per cent efficiency. 100 per cent efficiency. ISO por cent efficiency. Wo find we can double a 40 per cent efficiency by paying a bonus of 8.26 per cent, that we can double a 45 per cent efficiency by paying a bonus of 10 por cent that we can double a 50 per cent efficiency by paying a bonus of 20 per cent, and that we can double a CO per nt efficiency by paying a bonus of 40 por cent. Offer an average man too little bonus and bo loses Interest, he flags. Offer him too much bonus and you spoil him and rob the plant There are however great differences In dlsarooeleness of work. To drive a motor car 60 miles an hoar Is not as heartbreaking a task as to hammer hot iron continuously with maximum strength when tho outside thermometer is at 110 and tho blacksmith works In a temperature of 10. To change the bonus rate for every different kln or work Is not practical, would occasion trouble, Jealousies, etc. We therefore, vary the schedules, not the bonus rate. Out schedules are easier for blacksmiths than for hollar makers, easier for boiler makers than for machinists. As to a motor car driver, wo would put up a reverse schedule. Bonus for driving at 30 miles an hour; none for driving at 60 miles. It Is harder to drtve slow. The object of tho schedules is to set a dofinlto standard at which to aim and to Interest tho worker nsjther too much nor too little. Tho schedule must not tempt fclm to overdo, neither must it allow his Interest to flag. Let us, however, definitely remember that a constitutionally 70 per eent man may be overdoing at 100 por cent, and that a constitutionally 140 per cent man may be underdoing at 120 per cent One of the objects of our plan of bonus is to fill the shop with selected thoroughbreds, and If wo had to offer larger bonuses to do this, we would not hesitate. In view of the prevalence of piece rates, which offer slightly more than we do at high efficiencies. wo believe our bonus rates aro practically right but even then we believe in supplementing the bonus by other ways than mere money payments, as men will work in places they like and with people they like Irrespective of money inducements. Under our principles, it Is neither the schedule nor the standard that Is permanent We are willing and ready to change both as often as conditions change. What must bo permanent are: (1) Tho attainment of form; (3) Tho Interest of the men; (3) Tho realisation, tho accomplishment eff tae een nlto task In the time est It is self-evident that we csnnet build up a 120 per cent shop lor the same rate of pay per hour as would satisfy 80 por cent men. As efficiency Increases faster than increase of pay. It Is to the former that moat attention shouH ho alractoeV Wo chaasro schedules to Increase seen inters, set to m4m that ktralBM.

Under existing oesdlUoaa oae uaft ef a