Trading Butter for Iron: New Prices for Old Over a Century and a Quarter
IN 1806, a farmer brought butter and eggs to the general store at Johnstown, Pennsylvania, and traded them for iron on practically an even basis — nine cents a pound for iron, eight cents a dozen for eggs. These prices and many others, culled from the store ledger, may be found in Storey’s History of Cambria County. The contrast with present prices reveals at a glance the contribution of capitalism in raising living standards for workers.
Johnstown was then a frontier village. Now it sends iron and steel products to all parts of the earth; but in 1806 the only iron it saw came by pack horse over the mountains from the Juniata Valley. Juniata iron was none too good by modern standards, but it helped to break down the chronic iron famine of the frontier, a dearth so acute that any abandoned building was likely to be burned down for the salvage of its nails and hinges. Whatever its flaws, the quality of Juniata iron was probably as high as the quality of the farm butter for which it was bartered pound for pound.
Both materials were produced on low wage scales — forty cents a day for unskilled labor, fifty cents a day for skilled labor, were the going rates for twelve hours a day in the village, and a farmer would hardly handle fifty dollars in cash through the year. The workingman of 1806 could buy with his day’s labor roughly five pounds of either commodity. Or he could buy three or four pounds of nails, which ran thirteen to fifteen cents a pound, or half a peck of coarse salt, not too clean, at eighty cents a peck. To-day, in the same town, with mill and mine wages from five to seven dollars a day, a wage earner can buy with the proceeds of a day’s work two to three times as much butter, fifty times as many nails, and enough salt to last his family several years. Better quality, too, in every case.
The contrast is most startling in iron, the basic mineral product. When iron was scarce, it was stocked and sold by general stores to men who would take it home to be laboriously forged by themselves or a near-by smith. Today the average citizen buys no bar or pig iron, but he buys a host of iron and steel products which come to him already fabricated and assembled for use. Pig iron sells for around twenty dollars the long ton, less than a cent a pound. A Johnstown coal miner, on five dollars a day, could buy a quarter of a ton of iron with the proceeds of eight hours’ labor, a hundred times as much iron as his great-grandfather in the same locality could buy with twelve hours of his time a hundred and thirty years ago. The iron products on sale to-day are priced cheaply because the raw material is cheap. Pig iron at a cent a pound is the basis of steel at two or three cents a pound, and of automobiles at twenty-five cents a pound.
In terms of iron, real wages have increased one hundred times in spite of a one-third decrease in working hours. Even in terms of butter, although the commodity has risen to five times its former price, real wages have doubled. In iron and steel, and in the mechanical and chemical industries generally, a century and a quarter of improving processes appear to have relieved, through lowering prices, a price-and-wage relationship which except for the swift technical advance might have grown intolerably binding on the wage earner and farmer. So far industry has been able to overcome, in the products it brings to market, all the effects of the depreciating value of money and the increase in land values, rents, and raw materials resulting from increasing population.
Over the ages money shows a chronic tendency to decline in value. It is estimated that since the creation of the British pound sterling in the thirteenth century that monetary unit has declined in value until to-day it will buy no more than a tenth of the goods and services it once commanded. There are both economic and political reasons for this decline; supplies of precious metals have increased and changes in content have been a commonplace of government ever since the manipulation of the Roman aureus by Julius Cæesar.
Decline in the purchasing value of money can be measured only in goods prices. For centuries wheat, the staple food grain, was considered a just measure of the purchasing power of the British pound. When Englishmen reached the point of paying double the thirteenth-century price for wheat, they rightly considered their money had declined by half. But with the advent of the reaper and the opening of new lands in the Western Hemisphere, the price of wheat became undependable as a yardstick of money value. A combination of mechanical ingenuity and natural fertility — the effective application, in short, of an industrial machine to one phase of agriculture — upset the old relationship between money and bread. Since then the inventors and wheat agronomists have been able to keep abreast of both the gold miners and the political money changers, with the result that, except briefly during war, wheat keeps close to century-old prices.
Not so with other agricultural prices. In the one hundred and thirty years in review, median butter and egg prices have risen four to five times in value, which I suspect roughly measures the decline in the purchasing power of the dollar over that period. Both butter production and egg production require close human attention under conditions which do not permit capital aids to take the place of labor in anything like the degree possible in industrial processes. To be sure, there have been important advances in both these agricultural techniques. Butter making, for instance, is on an entirely different basis from what it was in 1806. There has been a swift and steady advance in the quality of dairy cattle, and along with it a series of important innovations — the Babcock butter tester, the power churn, the refrigerator car, the mechanical milker. A modern creamery is a highly efficient, scientifically controlled factory. But these advances, in the opinion of qualified persons, have done no more than to offset the declining fertility of land and increased rent. If their conclusion is correct, the dollar has declined to one fifth of its 1806 value, and the fact that a days work now buys more butter than it did then must be attributed largely to industrial efficiency which has both lifted wages and decreased the costs on its own products. In attributing this gain to industry, fairness requires that transportation be included in the industrial factors. Last year the railroads of America moved freight at a cost of less than a cent per mile, as against at least fifty cents a ton mile by packsaddle or wagon on rough roads. Unless ore could be brought cheaply to Johnstown from Lake Superior and other distant points, pig iron could not be sold there for less than a cent a pound. Industry and transport together have created a situation in which a dairy farmer can sell a pound of butter for at least a pound and a half of automobile. This explains why he can afford to own an automobile. Car ownership would be impossible for him if iron had not fallen in price while butter was rising in price.
Now for the root reason of this sweeping economic change. Millions in capital have been poured into iron and steel production, general manufactures and transport, with the result that a given wage will produce more and more goods as machines and improved systems increase the workers’ productivity. Industry could absorb capital in almost endless amounts without reaching the point of diminishing returns, while agriculture, by contrast, seems to be limited in that regard. At least we in America have not succeeded in capitalizing agriculture adequately on the modern scale, and perhaps it is beyond us as long as our present system of small farming holds. That is too large a question to discuss here and now, and there is no disposition to upbraid agriculture for doing its job less efficiently than industry. But with agriculture being coddled and industry penalized, it is at least in order to recognize that modern manufacturing has been highly successful in putting inventions and power to work through capital investment; and also that both laborers and consumers have benefited thereby. One can read the whole history of this unfolding in iron and steel in the story of Johnstown. The town that once starved for iron and paid distress prices for that essential commodity now sends iron and steel products to the ends of the earth. Thither came Dr. Peter Schoenberger from the Juniata, when he learned that there in Prospect Hill beside the Conemaugh lay coal, iron, and limestone in successive layers — the ideal situation for iron smelting. In the early 1850’s, the Round Mound on Prospect Hill was considered as profitable as one of the new California gold mines. There arose the Cambria Iron Works, in whose office is now displayed the Kelly converter, which made steel history. After discouraging experiments elsewhere, Kelly, the American Bessemer, found his chance there. Cambria rolled the first American steel rails, and there John Fritz, George Fritz, John Gautier, and others designed, built, and installed the mills and machines which keep their names alive wherever iron and steel are talked. The ironmasters, you see, took modern steel making away from the old-time makers who thought steel was not steel unless it could hold a cutting edge.
In due time Cambria passed to Bethlehem, and Bethlehem acquired Lackawanna, near Buffalo. There, in the new strip-and-sheet mill recently opened, one can see the latest step in the capitalizing of steel production. The technicians say that sheet-and-strip processing is the only really new thing that has happened in steel for twenty years. This mill cost $20,000,000, which is more than the capital of the entire iron industry of the country a hundred and thirty years ago. Here lineal descendants of John Fritz’s original three-way mill roll slabs of red-hot steel down to thin sheets at high speed and with minute precision. As one watches these mighty yet delicate machines at work, the mind is struck by the fact that the steel men have reached almost the ideal of continuous machine production, as exemplified best by the Fourdrinier machine for paper making. For the moment, Lackawanna is at the top in this branch of modern steel, and nothing like the efficiency of its new plant in mass steel production has ever been seen on the planet. But who would say that it is the last word ? Not I, or any other sensible person who has watched industrial development. This magnificent ensemble of really glorious engineering will some day be old, outmoded, obsolete. Iron and steel ‘do move,’ and carry all things with them.
The carpet of red steel sheet rolls on endlessly into the market. Competitors take up the challenge, breaking ground for new mills of the same type. Will this competition glut the market? How can such quantities be absorbed? These are the queries of cowardice; no steel man listens to them with patience. The country, he declares, always has lived up to its steel production except during temporary slumps, and after those totals has gone on to totals higher than before. If and when America cannot use this steel at the present price level, down will come prices bit by bit until a new balance is struck. In that way, through a hundred and thirty years, iron declined to an eighth of its former price, while wages, rents, and food prices were rising. With capital taking the chief risks, in the American manner, society eventually secures real boons from any industrial undertaking which reduces costs by improving processes.
To divorce statesmanship from history is folly, even in such simple matters as butter and iron. The antimonopoly cry was raised in iron and steel because of concentrated large ore holdings. Then scrap steel became a market standby furnishing half of present requirements,and large ore holdings are to-day more of a burden than a blessing for their owners. Temporary monopolies in minor lines may result from control of patents, but these soon pass. Some of the rewards of material monopoly may accrue for a time through the possession of superior selling and distributing systems, but these are even more ephemeral unless of real advantage to consumers. They are of little moment for the long pull, in which large-scale, well-capitalized business appears to be doing its particular job — that of producing goods — better than some other factors in our national life.