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What were the profit margins for big businesses during the Industrial Revolution?

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Mtn Dew posted on Sat, Jan 26 2013 9:39 PM

I'm teaching a lesson to 6th graders about the Industrial Revolution and would like to counter the argument that businesses made as much money as possible while putting workers in danger and that without unions and government regulation we'd still be working 18 hours days 8 days a week in coal mines and factories. I know you can't provide a safe environment without sufficient capital, but I'd like to have some evidence to back that up.

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Wheylous replied on Sat, Jan 26 2013 10:53 PM

Gabriel Kolko (New Left historian) covers the Gilded Age in The Triumph of Conservatism, where he shows that the trend at the end of the 19th century was toward decentralization, and the big businesses looked to government to "stabilize" and "rationalize" markets. I don't have numbers for the profit margins of businesses, unfortunately.

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Wheylous replied on Sat, Jan 26 2013 11:04 PM

I also don't have my Triumph with me, so I can't give you the relevant quotes, though I have notes on exactly where to find the quotes.

You could possibly explain the notion of competition on markets with an example on why milk is not priced at $20 dollars (I'm sure you can explain why). If anyone points out predatory pricing or something, use the great DiLorenzo article: http://www.cato.org/pubs/pas/pa-169es.html

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Anenome replied on Sun, Jan 27 2013 12:17 AM
 
 

Well, one thing is that Britain is higher lattitude than most people think--it's well nigh in the arctic circle. The result is very short days in winter and long days in summer. In summer the sun comes up at 3am :P and in winter it gets dark around 4pm.

So, the reports about working 18 hour days are true, except that it averaged out over the year. They didn't have artificial light back then, so they had to work long hours in summer when they had light and short hours in winter when they didn't.

And the thing about light is, there was a belief that windows made a structure weaker, so the gov regulated how many windows a building could have, keeping it artificially low. Some places also had window taxes, notably France, taxing you according to how much light went in, on the theory that the King was the 'Sun King' and owned the light and thus you owed a duty to him for its use.

As for profit margins, hard to say.

 

 
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Jargon replied on Sun, Jan 27 2013 1:00 AM

Well there's not much to say if you're trying to disprove the claim that working conditions were bad in the Gilded Age, but certainly do use Triumph of Conservatism as a resource. I believe it's available online in pdf. form. There's a section in the beginning which takes statistics from official sources showing how the number of businesses in each industry was increasing radically from 1880 to 1900. As for miners: their lives were absolute shit. You can't really get around that. But people's lives are shit in all sorts of political economies. Explaining that markets decentralize, as is statistically valid in the case of the Gilded Age per Kolko, in spite of the attempts forced on it by the state in the form of cash subsidies, land giveaways, mining rights, patent rights, regulatory agencies, credit, tariffs, banking privilege etc. is useful for a complete understanding of the beginning of the Progressive Era; it explains the impetus thereof. That is to say, the Progressive Era was the elite businessman's answer to the 'chaos' and 'danger' of the market: 'rationalization' and 'stabilization'.

 

Edit: On second thought, if you're teaching to 6th graders, just tell them that working conditions were poor but that societal wealth was growing, outputs and wages zooming up.

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The canonical texts here are the Sadler report, which levels all the accusations but turns out to be quite biased, for it interviewed disgruntled former workers, paid for tales of duress, and visited none of the factories firsthand.

And the Supplementary report to the Sadler Report which actually investigates conditions and exonerates the business owners of these charges, but is much less well known.

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Kakugo replied on Sun, Jan 27 2013 6:41 AM

In the textile industry, profits were on a general downward trend through all the XIX century. One of the reasons Manchester cotton firms became so huge was because they needed to make up in volume what they were losing due to dwindling profits caused by much increased competition. Also stiff competition from textile firms from both Germany and Belgium is what led to to a stagnation in the once powerful Dutch textile industry: both German and Belgian manufacturers were ready to take considerably smaller profits to insert themselves in the rich markets dominated up to that point by the Dutch. Once the Dutch monopoly was broken their profits started to tumble and their firms, differently from the British ones, had huge problems adapting to the new business model.

The same could be said about the US coal market. Originally the US were highly dependent on British imports. When the Virginia Basin started to be tapped, coal producers immediately offered their product at a much lower price, both because their shipping costs were so much lower and to "undercut" the British who until that point had "owned the market lock, barrel and stock". As the British were "squeezed out" by the Virginia producers, the latter's profit margins (and prices) started to increase since, with little competition from the British, they could now charge more for the same commodity. This situation, however, didn't last long, as Pennsylvania and (after the Civil War) West Virginia mining companies entered the market with a cheaper and higher quality product.

It can be said that profit margins during the Industrial Revolution were directly linked to competition. As soon as an aggressive competitor appeared, profits started to tumble down. That's why the late XIX century was the period of both cartelization (those manufacturing or producing the same goods in a given country "banding up" to keep prices and hence profits high) and increasing tariffs (to keep cheaper imported goods unpalatable or out of a given market altogether). The latter was made possible by much more powerful government institutions and a more sophisticated ideological apparatus: for example during the Napoleonic Wars, British goods were officially barred from entering the Continent. However British goods entered freely (and in huge quantity) through Hamburg to be redistributed accross Europe. French authorities turned a blind eye and contented themselves with collecting a small tax on these goods (disguised as a fine: taxing a good directly would have meant legalizing it). The Napoleonic Empire had none of the sophisticated ideological apparatus not the means to ban these goods. The former, as we know, cannot exist without government backing: after all a member of the cartel may break lose at any time or a new competitor can pop up at any time.  As Gabriel Kolko showed, railway owners lobbied long and hard to have restrictive regulation slapped on their business. On paper it may sound idiotic, but in reality it meant having a government-sanctioned monopoly.

Finally there's another thing to consider. Many of the workplace safety features we take for granted nowadays were not only unavailable in the XIX century due to lack of capital, but unthinkable given the then tech level. Looms were open structure (and hence intrinsically dangerous) because they could only be made that way with the tech then available. Still in the '60s many industrial machines had very little (if any) safety features. Losing a couple fingers while working sheet metal was common.

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