Industrial Democracy

The New Economic Age

The spirit of criticism and the measures of

reform designed to meet it, which characterized the opening years of the

twentieth century, were merely the signs of a new age. The nation had

definitely passed into industrialism. The number of city dwellers

employed for wages as contrasted with the farmers working on their own

land was steadily mounting. The free land, once the refuge of r

workingmen of the East and the immigrants from Europe, was a thing of

the past. As President Roosevelt later said in speaking of the great

coal strike, "a few generations ago, the American workman could have

saved money, gone West, and taken up a homestead. Now the free lands

were gone. In earlier days, a man who began with a pick and shovel might

come to own a mine. That outlet was now closed as regards the immense

majority.... The majority of men who earned wages in the coal industry,

if they wished to progress at all, were compelled to progress not by

ceasing to be wage-earners but by improving the conditions under which

all the wage-earners of the country lived and worked."

The disappearance of the free land, President Roosevelt went on to say,

also produced "a crass inequality in the bargaining relation of the

employer and the individual employee standing alone. The great

coal-mining and coal-carrying companies which employed their tens of

thousands could easily dispense with the services of any particular

miner. The miner, on the other hand, however expert, could not dispense

with the companies. He needed a job; his wife and children would starve

if he did not get one.... Individually the miners were impotent when

they sought to enter a wage contract with the great companies; they

could make fair terms only by uniting into trade unions to bargain

collectively." It was of this state of affairs that President Taft spoke

when he favored the modification of the common law "so as to put

employees of little power and means on a level with their employers in

adjusting and agreeing upon their mutual obligations."

John D. Rockefeller, Jr., on the side of the great captains of industry,

recognized the same facts. He said: "In the early days of the

development of industry, the employer and capital investor were

frequently one. Daily contact was had between him and his employees, who

were his friends and neighbors.... Because of the proportions which

modern industry has attained, employers and employees are too often

strangers to each other.... Personal relations can be revived only

through adequate representation of the employees. Representation is a

principle which is fundamentally just and vital to the successful

conduct of industry.... It is not consistent for us as Americans to

demand democracy in government and practice autocracy in industry....

With the developments what they are in industry to-day, there is sure to

come a progressive evolution from aristocratic single control, whether

by capital, labor, or the state, to democratic, cooeperative control by

all three."


Company Unions

The changed economic life described by the three

eminent men just quoted was acknowledged by several great companies and

business concerns. All over the country decided efforts were made to

bridge the gulf which industry and the corporation had created. Among

the devices adopted was that of the "company union." In one of the

Western lumber mills, for example, all the employees were invited to

join a company organization; they held monthly meetings to discuss

matters of common concern; they elected a "shop committee" to confer

with the representatives of the company; and periodically the agents of

the employers attended the conferences of the men to talk over matters

of mutual interest. The function of the shop committee was to consider

wages, hours, safety rules, sanitation, recreation and other problems.

Whenever any employee had a grievance he took it up with the foreman

and, if it was not settled to his satisfaction, he brought it before the

shop committee. If the members of the shop committee decided in favor of

the man with a grievance, they attempted to settle the matter with the

company's agents. All these things failing, the dispute was transferred

to a grand meeting of all the employees with the employers'

representatives, in common council. A deadlock, if it ensued from such a

conference, was broken by calling in impartial arbitrators selected by

both sides from among citizens outside the mill. Thus the employees were

given a voice in all decisions affecting their work and welfare; rights

and grievances were treated as matters of mutual interest rather than

individual concern. Representatives of trade unions from outside,

however, were rigidly excluded from all negotiations between employers

and the employees.


Another proposal for drawing capital and labor

together was to supplement the wage system by other ties. Sometimes lump

sums were paid to employees who remained in a company's service for a

definite period of years. Again they were given a certain percentage of

the annual profits. In other instances, employees were allowed to buy

stock on easy terms and thus become part owners in the concern. This

last plan was carried so far by a large soap manufacturing company that

the employees, besides becoming stockholders, secured the right to elect

representatives to serve on the board of directors who managed the

entire business. So extensive had profit-sharing become by 1914 that the

Federal Industrial Relations Committee, appointed by the President,

deemed it worthy of a special study. Though opposed by regular trade

unions, it was undoubtedly growing in popularity.

Labor Managers and Welfare Work

Another effort of employers to meet

the problems of the new age appeared in the appointment of specialists,

known as employment managers, whose task it was to study the relations

existing between masters and workers and discover practical methods for

dealing with each grievance as it arose. By 1918, hundreds of big

companies had recognized this modern "profession" and universities were

giving courses of instruction on the subject to young men and women. In

that year a national conference of employment managers was held at

Rochester, New York. The discussion revealed a wide range of duties

assigned to managers, including questions of wages, hours, sanitation,

rest rooms, recreational facilities, and welfare work of every kind

designed to make the conditions in mills and factories safer and more

humane. Thus it was evident that hundreds of employers had abandoned the

old idea that they were dealing merely with individual employees and

that their obligations ended with the payment of any wages they saw fit

to fix. In short, they were seeking to develop a spirit of cooeperation

to take the place of competition and enmity; and to increase the

production of commodities by promoting the efficiency and happiness of

the producers.


The American Federation of Labor

Meanwhile a powerful association of

workers representing all the leading trades and crafts, organized into

unions of their own, had been built up outside the control of employers.

This was the American Federation of Labor, a nation-wide union of

unions, founded in 1886 on the basis of beginnings made five years

before. At the time of its establishment it had approximately 150,000

members. Its growth up to the end of the century was slow, for the total

enrollment in 1900 was only 300,000. At that point the increase became

marked. The membership reached 1,650,000 in 1904 and more than 3,000,000

in 1919. To be counted in the ranks of organized labor were several

strong unions, friendly to the Federation, though not affiliated with

it. Such, for example, were the Railway Brotherhoods with more than half

a million members. By the opening of 1920 the total strength of

organized labor was put at about 4,000,000 members, meaning, if we

include their families, that nearly one-fifth of the people of the

United States were in some positive way dependent upon the operations of

trade unions.

Historical Background

This was the culmination of a long and

significant history. Before the end of the eighteenth century, the

skilled workmen--printers, shoemakers, tailors, and carpenters--had, as

we have seen, formed local unions in the large cities. Between 1830 and

1860, several aggressive steps were taken in the American labor

movement. For one thing, the number of local unions increased by leaps

and bounds in all the industrial towns. For another, there was

established in every large manufacturing city a central labor body

composed of delegates from the unions of the separate trades. In the

local union the printers or the cordwainers, for example, considered

only their special trade problems. In the central labor union, printers,

cordwainers, iron molders, and other craftsmen considered common

problems and learned to cooeperate with one another in enforcing the

demands of each craft. A third step was the federation of the unions of

the same craftsmen in different cities. The printers of New York,

Philadelphia, Boston, and other towns, for instance, drew together and

formed a national trade union of printers built upon the local unions of

that craft. By the eve of the Civil War there were four or five powerful

national unions of this character. The expansion of the railway made

travel and correspondence easier and national conventions possible even

for workmen of small means. About 1834 an attempt was made to federate

the unions of all the different crafts into a national organization; but

the effort was premature.

The National Labor Union.--The plan which failed in 1834 was tried

again in the sixties. During the war, industries and railways had

flourished as never before; prices had risen rapidly; the demand for

labor had increased; wages had mounted slowly, but steadily. Hundreds of

new local unions had been founded and eight or ten national trade unions

had sprung into being. The time was ripe, it seemed, for a national

consolidation of all labor's forces; and in 1866, the year after the

surrender of General Lee at Appomattox, the "National Labor Union" was

formed at Baltimore under the leadership of an experienced organizer,

W.H. Sylvis of the iron molders. The purpose of the National Labor Union

was not merely to secure labor's standard demands touching hours, wages,

and conditions of work or to maintain the gains already won. It leaned

toward political action and radical opinions. Above all, it sought to

eliminate the conflict between capital and labor by making workingmen

the owners of shops through the formation of cooeperative industries. For

six years the National Labor Union continued to hold conferences and

carry on its propaganda; but most of the cooeperative enterprises failed,

political dissensions arose, and by 1872 the experiment had come to an


The Knights of Labor.--While the National Labor Union was

experimenting, there grew up in the industrial world a more radical

organization known as the "Noble Order of the Knights of Labor." It was

founded in Philadelphia in 1869, first as a secret society with rituals,

signs, and pass words; "so that no spy of the boss can find his way into

the lodge room to betray his fellows," as the Knights put it. In form

the new organization was simple. It sought to bring all laborers,

skilled and unskilled, men and women, white and colored, into a mighty

body of local and national unions without distinction of trade or craft.

By 1885, ten years after the national organization was established, it

boasted a membership of over 700,000. In philosophy, the Knights of

Labor were socialistic, for they advocated public ownership of the

railways and other utilities and the formation of cooeperative societies

to own and manage stores and factories.

As the Knights were radical in spirit and their strikes, numerous and

prolonged, were often accompanied by violence, the organization alarmed

employers and the general public, raising up against itself a vigorous

opposition. Weaknesses within, as well as foes from without, started the

Knights on the path to dissolution. They waged more strikes than they

could carry on successfully; their cooeperative experiments failed as

those of other labor groups before them had failed; and the rank and

file could not be kept in line. The majority of the members wanted

immediate gains in wages or the reduction of hours; when their hopes

were not realized they drifted away from the order. The troubles were

increased by the appearance of the American Federation of Labor, a still

mightier organization composed mainly of skilled workers who held

strategic positions in industry. When they failed to secure the

effective support of the Federation in their efforts to organize the

unskilled, the employers closed in upon them; then the Knights declined

rapidly in power. By 1890 they were a negligible factor and in a short

time they passed into the limbo of dead experiments.

The Policies of the American Federation

Unlike the Knights of Labor,

the American Federation of Labor sought, first of all, to be very

practical in its objects and methods. It avoided all kinds of

socialistic theories and attended strictly to the business of organizing

unions for the purpose of increasing wages, shortening hours, and

improving working conditions for its members. It did not try to include

everybody in one big union but brought together the employees of each

particular craft whose interests were clearly the same. To prepare for

strikes and periods of unemployment, it raised large funds by imposing

heavy dues and created a benefit system to hold men loyally to the

union. In order to permit action on a national scale, it gave the

superior officers extensive powers over local unions.

While declaring that employers and employees had much in common, the

Federation strongly opposed company unions. Employers, it argued, were

affiliated with the National Manufacturers' Association or with similar

employers' organizations; every important industry was now national in

scope; and wages and hours, in view of competition with other shops,

could not be determined in a single factory, no matter how amicable

might be the relations of the company and its workers in that particular

plant. For these reasons, the Federation declared company unions and

local shop committees inherently weak; it insisted that hours, wages,

and other labor standards should be fixed by general trade agreements

applicable to all the plants of a given industry, even if subject to

local modifications.

At the same time, the Federation, far from deliberately antagonizing

employers, sought to enlist their cooeperation and support. It affiliated

with the National Civic Federation, an association of business men,

financiers, and professional men, founded in 1900 to promote friendly

relations in the industrial world. In brief, the American Federation of

Labor accepted the modern industrial system and, by organization within

it, endeavored to secure certain definite terms and conditions for trade



The Socialists

The trade unionism "pure and simple," espoused by the

American Federation of Labor, seemed to involve at first glance nothing

but businesslike negotiations with employers. In practice it did not

work out that way. The Federation was only six years old when a new

organization, appealing directly for the labor vote--namely, the

Socialist Labor Party--nominated a candidate for President, launched

into a national campaign, and called upon trade unionists to desert the

older parties and enter its fold.

The socialistic idea, introduced into national politics in 1892, had

been long in germination. Before the Civil War, a number of reformers,

including Nathaniel Hawthorne, Horace Greeley, and Wendell Phillips,

deeply moved by the poverty of the great industrial cities, had

earnestly sought relief in the establishment of cooeperative or

communistic colonies. They believed that people should go into the

country, secure land and tools, own them in common so that no one could

profit from exclusive ownership, and produce by common labor the food

and clothing necessary for their support. For a time this movement

attracted wide interest, but it had little vitality. Nearly all the

colonies failed. Selfishness and indolence usually disrupted the best of


In the course of time this "Utopian" idea was abandoned, and another set

of socialist doctrines, claiming to be more "scientific," appeared

instead. The new school of socialists, adopting the principles of a

German writer and agitator, Karl Marx, appealed directly to workingmen.

It urged them to unite against the capitalists, to get possession of the

machinery of government, and to introduce collective or public ownership

of railways, land, mines, mills, and other means of production. The

Marxian socialists, therefore, became political. They sought to organize

labor and to win elections. Like the other parties they put forward

candidates and platforms. The Socialist Labor party in 1892, for

example, declared in favor of government ownership of utilities, free

school books, woman suffrage, heavy income taxes, and the referendum.

The Socialist party, founded in 1900, with Eugene V. Debs, the leader of

the Pullman strike, as its candidate, called for public ownership of all

trusts, monopolies, mines, railways; and the chief means of production.

In the course of time the vote of the latter organization rose to

considerable proportions, reaching almost a million in 1912. It declined

four years later and then rose in 1920 to about the same figure.

In their appeal for votes, the socialists of every type turned first to

labor. At the annual conventions of the American Federation of Labor

they besought the delegates to endorse socialism. The president of the

Federation, Samuel Gompers, on each occasion took the floor against

them. He repudiated socialism and the socialists, on both theoretical

and practical grounds. He opposed too much public ownership, declaring

that the government was as likely as any private employer to oppress

labor. The approval of socialism, he maintained, would split the

Federation on the rock of politics, weaken it in its fight for higher

wages and shorter hours, and prejudice the public against it. At every

turn he was able to vanquish the socialists in the Federation, although

he could not prevent it from endorsing public ownership of the railways

at the convention of 1920.

The Extreme Radicals

Some of the socialists, defeated in their

efforts to capture organized labor and seeing that the gains in

elections were very meager, broke away from both trade unionism and

politics. One faction, the Industrial Workers of the World, founded in

1905, declared themselves opposed to all capitalists, the wages system,

and craft unions. They asserted that the "working class and the

employing class have nothing in common" and that trade unions only

pitted one set of workers against another set. They repudiated all

government ownership and the government itself, boldly proclaiming their

intention to unite all employees into one big union and seize the

railways, mines, and mills of the country. This doctrine, so

revolutionary in tone, called down upon the extremists the condemnation

of the American Federation of Labor as well as of the general public. At

its convention in 1919, the Federation went on record as "opposed to

Bolshevism, I.W.W.-ism, and the irresponsible leadership that encourages

such a policy." It announced its "firm adherence to American ideals."

The Federation and Political Issues

The hostility of the Federation

to the socialists did not mean, however, that it was indifferent to

political issues or political parties. On the contrary, from time to

time, at its annual conventions, it endorsed political and social

reforms, such as the initiative, referendum, and recall, the abolition

of child labor, the exclusion of Oriental labor, old-age pensions, and

government ownership. Moreover it adopted the policy of "rewarding

friends and punishing enemies" by advising members to vote for or

against candidates according to their stand on the demands of organized


This policy was pursued with especial zeal in connection with disputes

over the use of injunctions in labor controversies. An injunction is a

bill or writ issued by a judge ordering some person or corporation to do

or to refrain from doing something. For example, a judge may order a

trade union to refrain from interfering with non-union men or to

continue at work handling goods made by non-union labor; and he may fine

or imprison those who disobey his injunction, the penalty being

inflicted for "contempt of court." This ancient legal device came into

prominence in connection with nation-wide railway strikes in 1877. It

was applied with increasing frequency after its effective use against

Eugene V. Debs in the Pullman strike of 1894.

Aroused by the extensive use of the writ, organized labor demanded that

the power of judges to issue injunctions in labor disputes be limited by

law. Representatives of the unions sought support from the Democrats and

the Republicans; they received from the former very specific and cordial

endorsement. In 1896 the Democratic platform denounced "government by

injunction as a new and highly dangerous form of oppression." Mr.

Gompers, while refusing to commit the Federation to Democratic politics,

privately supported Mr. Bryan. In 1908, he came out openly and boasted

that eighty per cent of the votes of the Federation had been cast for

the Democratic candidate. Again in 1912 the same policy was pursued. The

reward was the enactment in 1914 of a federal law exempting trade unions

from prosecution as combinations in restraint of trade, limiting the use

of the injunction in labor disputes, and prescribing trial by jury in

case of contempt of court. This measure was hailed by Mr. Gompers as the

"Magna Carta of Labor" and a vindication of his policy. As a matter of

fact, however, it did not prevent the continued use of injunctions

against trade unions. Nevertheless Mr. Gompers was unshaken in his

conviction that organized labor should not attempt to form an

independent political party or endorse socialist or other radical

economic theories.

Organized Labor and the Public

Besides its relations to employers,

radicals within its own ranks, and political questions, the Federation

had to face responsibilities to the general public. With the passing of

time these became heavy and grave. While industries were small and

conflicts were local in character, a strike seldom affected anybody but

the employer and the employees immediately involved in it. When,

however, industries and trade unions became organized on a national

scale and a strike could paralyze a basic enterprise like coal mining or

railways, the vital interests of all citizens were put in jeopardy.

Moreover, as increases in wages and reductions in hours often added

directly to the cost of living, the action of the unions affected the

well-being of all--the food, clothing, and shelter of the whole people.

For the purpose of meeting the issue raised by this state of affairs, it

was suggested that employers and employees should lay their disputes

before commissions of arbitration for decision and settlement. President

Cleveland, in a message of April 2, 1886, proposed such a method for

disposing of industrial controversies, and two years later Congress

enacted a voluntary arbitration law applicable to the railways. The

principle was extended in 1898 and again in 1913, and under the

authority of the federal government many contentions in the railway

world were settled by arbitration.

The success of such legislation induced some students of industrial

questions to urge that unions and employers should be compelled to

submit all disputes to official tribunals of arbitration. Kansas

actually passed such a law in 1920. Congress in the Esch-Cummins railway

bill of the same year created a federal board of nine members to which

all railway controversies, not settled by negotiation, must be

submitted. Strikes, however, were not absolutely forbidden. Generally

speaking, both employers and employees opposed compulsory adjustments

without offering any substitute in case voluntary arbitration should not

be accepted by both parties to a dispute.


The Problems of Immigration

From its very inception, the American

Federation of Labor, like the Knights of Labor before it, was confronted

by numerous questions raised by the ever swelling tide of aliens coming

to our shores. In its effort to make each trade union all-inclusive, it

had to wrestle with a score or more languages. When it succeeded in

thoroughly organizing a craft, it often found its purposes defeated by

an influx of foreigners ready to work for lower wages and thus undermine

the foundations of the union.

At the same time, persons outside the labor movement began to be

apprehensive as they contemplated the undoubted evil, as well as the

good, that seemed to be associated with the "alien invasion." They saw

whole sections of great cities occupied by people speaking foreign

tongues, reading only foreign newspapers, and looking to the Old World

alone for their ideas and their customs. They witnessed an expanding

army of total illiterates, men and women who could read and write no

language at all; while among those aliens who could read few there were

who knew anything of American history, traditions, and ideals. Official

reports revealed that over twenty per cent of the men of the draft army

during the World War could not read a newspaper or write a letter home.

Perhaps most alarming of all was the discovery that thousands of alien

men are in the United States only on a temporary sojourn, solely to make

money and return home with their savings. These men, willing to work for

low wages and live in places unfit for human beings, have no stake in

this country and do not care what becomes of it.

The Restriction of Immigration

In all this there was, strictly

speaking, no cause for surprise. Since the foundation of our republic

the policy of the government had been to encourage the coming of the

alien. For nearly one hundred years no restraining act was passed by

Congress, while two important laws positively encouraged it; namely, the

homestead act of 1862 and the contract immigration law of 1864. Not

until American workingmen came into open collision with cheap Chinese

labor on the Pacific Coast did the federal government spread the first

measure of limitation on the statute books. After the discovery of gold,

and particularly after the opening of the railway construction era, a

horde of laborers from China descended upon California. Accustomed to

starvation wages and indifferent to the conditions of living, they

threatened to cut the American standard to the point of subsistence. By

1876 the protest of American labor was loud and long and both the

Republicans and the Democrats gave heed to it. In 1882 Congress enacted

a law prohibiting the admission of Chinese laborers to the United States

for a term of ten years--later extended by legislation. In a little

while the demand arose for the exclusion of the Japanese as well. In

this case no exclusion law was passed; but an understanding was reached

by which Japan agreed not to issue passports to her laborers authorizing

them to come to the United States. By act of Congress in 1907 the

President was empowered to exclude any laborers who, having passports to

Canada, Hawaii, or Mexico, attempted to enter our country.

These laws and agreements, however, did not remove all grounds for the

agitation of the subject. They were difficult to enforce and it was

claimed by residents of the Coast that in spite of federal authority

Oriental laborers were finding their way into American ports. Moreover,

several Western states, anxious to preserve the soil for American

ownership, enacted laws making it impossible for Chinese and Japanese to

buy land outright; and in other ways they discriminated against

Orientals. Such proceedings placed the federal government in an

embarrassing position. By treaty it had guaranteed specific rights to

Japanese citizens in the United States, and the government at Tokyo

contended that the state laws just cited violated the terms of the

international agreement. The Western states were fixed in their

determination to control Oriental residents; Japan was equally

persistent in asking that no badge of inferiority be attached to her

citizens. Subjected to pressure on both sides, the federal government

sought a way out of the deadlock.

Having embarked upon the policy of restriction in 1882, Congress readily

extended it. In that same year it barred paupers, criminals, convicts,

and the insane. Three years later, mainly owing to the pressure of the

Knights of Labor, it forbade any person, company, or association to

import aliens under contract. By an act of 1887, the contract labor

restriction was made even more severe. In 1903, anarchists were excluded

and the bureau of immigration was transferred from the Treasury

Department to the Department of Commerce and Labor, in order to provide

for a more rigid execution of the law. In 1907 the classes of persons

denied admission were widened to embrace those suffering from physical

and mental defects and otherwise unfit for effective citizenship. When

the Department of Labor was established in 1913 the enforcement of the

law was placed in the hands of the Secretary of Labor, W.B. Wilson, who

was a former leader in the American Federation of Labor.

The Literacy Test

Still the advocates of restriction were not

satisfied. Still organized labor protested and demanded more protection

against the competition of immigrants. In 1917 it won a thirty-year

battle in the passage of a bill excluding "all aliens over sixteen years

of age, physically capable of reading, who cannot read the English

language or some other language or dialect, including Hebrew or

Yiddish." Even President Wilson could not block it, for a two-thirds

vote to overcome his veto was mustered in Congress.

This act, while it served to exclude illiterates, made no drastic cut in

the volume of immigration. Indeed a material reduction was resolutely

opposed in many quarters. People of certain nationalities already in the

United States objected to every barrier that shut out their own kinsmen.

Some Americans of the old stock still held to the idea that the United

States should continue to be an asylum for "the oppressed of the earth."

Many employers looked upon an increased labor supply as the means of

escaping what they called "the domination of trade unions." In the babel

of countless voices, the discussion of these vital matters went on in

town and country.


Intimately connected with the subject of immigration

was a call for the "Americanization" of the alien already within our

gates. The revelation of the illiteracy in the army raised the cry and

the demand was intensified when it was found that many of the leaders

among the extreme radicals were foreign in birth and citizenship.

Innumerable programs for assimilating the alien to American life were

drawn up, and in 1919 a national conference on the subject was held in

Washington under the auspices of the Department of the Interior. All

were agreed that the foreigner should be taught to speak and write the

language and understand the government of our country. Congress was

urged to lend aid in this vast undertaking. America, as ex-President

Roosevelt had said, was to find out "whether it was a nation or a