PROFIT-SHARING AND OWNERSHIP. T HE following is Mr. Frederick Mills's Memorandum

on Labour Unrest laid by him before the Coal Commission, to which we have made allusion already :— " LABOUR UNREST.

Much has been written on this subject, but very little that is really convincing to the man working for weekly wages, which in pre-war days were often precarious and not infre- quently inadequate ; there was little provision for enforced idleness arising from ill-health, and for natural or premature old age. On the other hand there were large numbers of men in constant employment earning wages far in excess of the incomes of many of the lower middle classes, who, having the initiativb of saving and investing, saved and invested, whereas the working men had neither been taught nor encouraged to do either. Many of them could have worked more regularly and earned more if they had been taught the value of thrift.

Mr. W. H. Mallock has repeatedly shown by the evidence of Government Returns, how comparatively small is the Return on Capital and how many times it is turned over' in the payment of wages, and yet hardly anything else is preached by Labour Organizers than the doctrine that Capitalists are avaricious and that Labour is entitled to a larger share of the proceeds of industry. During the war this doctrine has been pushed for all it was worth, so much so, that, in order to maintain industrial peace at home, Government has been compelled to grant increase after increase to the wages in essential industries until we have arrived at the position that all essential commodities are now subsidized, that is to say, their cost is greater than the selling. price.

Now these things are possible, and indeed imperative, during a great war, but they cannot stand the light of the fierce post- war conditions that will certainly arise. The problem before us is. how to meet them.

One post-war condition is certain ; Labour will resist any reduction of their war-time wages, which in this country are now roundly what they were in America before the war. The writer is of opinion that there is no need to reduce wages from their present standard, always provided they are accompanied by an efficiency corresponding with it; Yes, 'there's the rub.'

All employers will agree that there is no more remarkable result of war-time conditions than the loss of efficiency—in its broadest sense, and arising out of lost time, slacking, sub- stitution, and other causes—and unless our pre-war efficiency is restored, aye, improved upon, certain disaster awaits us industrially.

Now, it would be folly to rely upon the return of our gallant Sailors and Soldier a to their normal employment; many of the very best—in every sense of the word—being the first to volunteer, have paid by death and mutilation the penalty of Patriotism.

They—God rest them that are gone and sustain them that are left—are not available. The requirements of an Army do not afford a braining suited to industrial life—(the writer is aware that expression is contrary to that held by many people b3fore the war); in any event, millions of men are to return to civilian life conscious that they stood between us and the Deluge for a bob a day,' and they will want a taste of the good things their friends who stayed at home have been enjoying.

Another post-war condition . is equally certain ; whether this Country obtains an indemnity or no, the war has got to be paid for, and that can only be done by an enormous increase of profitable industry, far and away beyond pre-war figures. It can be axle, but only if the working classes are convinced it is to their advantage to earn every penny of the unreduced war level wages which can also be paid in the process. Millions of men firmly believe That by their sweat, the Rich become richer, and the Poor become poorer ' ; and it is of little use to tell them they don't.'

The result not only desired, but vitally necessary, can only be obtained if Capital and Labour work in complete harmony for a common purpose. How then is this atmosphere to be obtained ?

First of all it is necessary that a few postulates be stated, and what is more important, accepted :—

I.—Mankind without Capital is incapable of procuring for itself more than bare necessaries to maintain life, and these precariously.

2.—There are countries to-day possessing boundless mineral and other resources which, for want of Capital, support a sparse population in primitive manner, from hand to mouth.

is not necessary for mankind to live in other than primitive manner, but if it be thought desirable, then it is only possible by the introduction and expansion of remunerative Capital. 4.—History affords no instance of material progress except by the introduction of Capital. 5.—History does afford instances of disaster where Capital is destroyed or rendered unremunerative. 6.—Unless Capital is reasonably remunerated it must perish.

7.—The State possessing no incentive to initiate, can foster but not create Capital.

Labour must assimilate Capitalism into its blood. Trades Union must invest in the Share Capital of our industries and be represented on the Boards of Management. Labour has shown in this war that it is capable of directing industries. Labour must be better educated; the Educational system must be completely overhauled ; Teachers must be selected because they know something and can teach it-; they must be better paid ; Schools must be more hygienic, and classes smaller ; games and physical culture must be encouraged, and, above all, children must be taught to be obedient, to be honourable, and to be thrifty.

In the Workshop, the workers should never be penalized because they earn too much money ; piece-rates should never be reduced; workers should be encouraged to earn the largest penny, and be taught how to invest their savings. How many working men, until the introduction of War Bonds, knew what to do with their first five or ten pounds of surplus earnings ?

There is no half-way house, profit-sharing is useless in most industries ; all Capital has come from small beginnings, Capital being merely the surplus saved after outgoings of all sorts are met ; if profitably invested, it makes for expansion and progress; if squandered on unnecessary objects, it is lost. The cure then is for working men to invest their surplus earnings in the industries of their country, preferably their own industry. In one Company of my acquaintance there are ten thousand Shareholders with an average holding of £400, many of them living at addresses which indicate that they themselves are working men, and there are fifteen thousand workpeople ; it is not beyond the dreams of possibility that the workpeople should own the Capital of the Company—an average of about £260—and thus secure every penny of the proceeds of their own industry.

How seldom, however, do we find workmen owning shares in the Company they work for ? They are not encouraged to do so, either by Trades Union Leaders or by Company Directors.

The writer firmly believes that this plan should be tested ; many industries, those employing large numbers of hands in proportion to the Capital employed, lend themselves to it. Here is an opportunity for a group of wealthy men to start an industry, by advancing say four-fifths of the Capital, to be redeemed over a period by a fixed percentage of the wages earned with such an incentive, can it be doubted that it soon would be redeemed ?

Such a trial would at all events indicate whether working men truly want the share the Capitalist now gets, and work for it, or merely want to dwell in idle comfort at some one else's expense ! The writer is prepared to take a hand in testing the worth of his belief that the working classes are not vicious, but merely ignorant of the way out of industrial strife."

Another Memorandum by Mr. Mills must be quoted, which, though drawn up previously to the Memorandum we have just given, goes into greater detail in regard to Mr. Mills 's specific proposals to remedy the present con- dition of the Coal Industry and Labour generally :—

"LABOUR UNREST AND THE REMEDY.

1.—Labour Unrest was greatly in evidence before the war, and is deep seated.

2.—The present turmoil is mostly due to mismanagement, unavoidable perhaps, but still mismanagement. There are at least four departments of the State endeavouring, largely conflict with each other, to deal with this one problem.

3.—Labour'8 chief complaint is, shortly, that it does not receive a fair share of the products of our industrial system, and for want of a better reason blames Capital.

4.—There is much loose talk about Capital as a system, not only in the Labour world, but also in other circles not directly brought into touch with the relationship between Capital and Labour.

5.—Capital is credit—the promise to pay ; it cannot long remain stagnant ; therefore, if Capital is productive, there follows progress ; if not, then disaster.

6.—Capital is not necessary in any country ; there are countries where there is little or no Capital, but in them there are no comforts and no social development.

7.—If therefore these be desired, the Capitalistic system alone can produce them. History, both ancient and modern, records no instance of progress without it, and where, as has frequently happened, Capital has been destroyed, it has had to be reorganized.

8.—Remedies for Labour Unrest have been suggested and, in some cases, tried, in order to obtain for Labour a direct interest in the Capitalistic system, notably profit-sharing, doomed to failure because, firstly, the units of labour are not like shares—fixtures ; and secondly, it is not possible to share losses.

9.—I suggest the only real remedy is for Labour to become Capitalists also, and take a share in management.

10.—It is easier than it seems. The capital of Industrial Companies is usually divided into Debentures, Preference and Ordinary Shares. The Debentures do not carry any voting. power at General Meetings, but the Preference Shares usually carry a modified voting-power, such as one vote for every five shares held. The voting-power is, as a rule, held by the holders of the Ordinary Shares.

In the case of a Company with, for the sake of argument £100,000 each Debentures, Preference and Ordinary Shares £60/70,000 holding in the Company gives control of everything, and seeing that Banks, as a rule, are willing to lend 50/75 pet cent. of the market value of Shares, it would be possible for a

person, or an entity, to control such a Company for the sum of, say, £40,000.

It is part of my scheme, however, that Labour should not, to begin with, seek to control any Company, but should take a financial interest in many, where the Directors are prepared to invite a representative of Labour to sit with them on the Board of Management. In this way,eI think, for comparatively a small amount of money, Labour can obtain a direct insight behind the scenes, would know of the difficulties and possibilities, and, in short, would be able to exercise, I hope, a wise supervision of affairs which at present they only see from one side of the table.

There are workmen on our books earning £500 or £600 a year who have little or nothing to show for it. Many men in other walks of life with that income are shareholders in Public Companies.

11.—The Ordinary Share Capital of the Ebbw Vale Company is £850,000; the wages paid last financial year amounted to £1,750,000, and the interest and dividends paid (5 per cent. Debentures, 6 per cent. Preference, and 15 per cent. Ordinary) amounted to £173,000, or, roughly, one-tenth, which, if added to the wages paid, equals 2s. in the pound.

The Ebbw Vale Company's case is fairly typical of the in- dustries where labour is the largest item in the cost, and where the amount per annum is about the same as the entire Capital —such Companies are numerous, and their output is usually of a national and essential character. I suggest this type for experiment rather than any of the following Railways : example, Ordinary Capital £37,000,000

Wages .. £7,500,000

Gas example, Ordinary Capital £16,000,000

Wages .. £1,500,000

Finance : example, Ordinary Capital £2,000,000

Wages ; represented by a few clerks and the charwoman.

12.—The process I suggest is the formation of an Investment Fund by the Trades Unions, on the lines of Investment Trust Companies, where each member contributes his savings to the common fund and receives his dividends (if any) in proportion. The Trades Unions would nominate a member, or members, on the Board of Management.

13.—To make a start, Labour must reverse its policy. If Labour employed the same vigour of a few years ago when it counselled the capture of Councils and other governing bodies. it would soon capture the control of industry, and then we should have the whole public opinion and interest in this country deprecating waste, thriftlessness, insobriety, and slackness, whilst the conditions of employment, housing. and temperance would receive greater attention and make for progress and efficiency.

14.—Efficiency will be of the greatest importance after the war, and there is nothing inconsistent with efficiency in high wages and shorter hours, rather otherwise. We cannot boycott the products of our present enemies for ever ; the word Peace' cannot contain such an element, and if it did there are a thousand ways of avoiding it ; the greater their necessities, the greater their effort.

15.—Speaking for myself, I am willing to try this new plan —the war has shown that Labour is capable of taking a share in the Government of the country. On Shell Factory and other Boards I have found Labour to be capable and efficient, and I do not fear it would not be equally so in industry against world-wide competition."