Prelude to the First Edition
1. Flight from the City
II. Domestic Production
III. Food, Pure Food, and FreshFood
IV. The Loom and the Sewing-machine
V. Shelter
VI. Water, Hot Water, and WasteWater
VII. Education--The Schoolof Living
VIII. Capital
IX. Security versus Insecurity
X. Independence versus Dependence

HOMESTEADING CATALOG
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CHAPTER TWO
DOMESTIC PRODUCTION

    WITH Newton, it was the falling ofan apple which led to the discovery of gravitation. With Watts, it was the poppingof the lid of a boiling kettle which led to the invention of the steam-engine. Withthe Borsodi family, it was the canning of tomatoes which led to the discovery ofdomestic production. Out of that discovery came not only an entirely new theory ofliving; it led to my writing several books dealing with various phases of the discovery--NationalAdvertising vs. Prosperity was the first; then came The Distribution Age,finally This Ugly Civilization.

    In the summer of 1920--the first summerafter our flight from the city--Mrs. Borsodi began to can and preserve a supply offruits and vegetables for winter use. I remember distinctly the pride with whichshe showed me, on my return from the city one evening, the first jars of tomatoeswhich she had canned. But with my incurable bent for economics, the question "Doesit really pay?" instantly popped into my head. Mrs. Borsodi had rather unusualequipment for doing the work efficiently. She cooked on an electric range; she useda steam-pressure cooker; she had most of the latest gadgets for reducing the laborto a minimum.

    I looked around the kitchen, and thenat the table covered with shining glass jars filled with tomatoes and tomato juice.

    "It's great," I said, "butdoes it really pay?"

    "Of course it does," washer reply.

    "Then it ought to be possibleto prove that it does--even if we take into consideration every cost--the cost ofraw materials, the value of the labor put into the work yourself, the fuel, the equipment."

    "That ought to be easy,"she maintained.

    It didn't prove as easy as we anticipated.We spent not only that evening, but many evenings, trying to arrive at a fairly accurateanswer to the question. It wasn't even easy to arrive at a satisfactory figure onthe cost of raw materials she had used. Some of the tomatoes had been grown in ourown garden; some had been purchased. How much had it cost us to produce the tomatoeswe had raised? We had kept no figures on gardening costs. Even if we had kept trackof all the odd times during which we had worked in the garden, that would have helpedlittle without a record of the time put into caring for the single row of tomatoplants we had planted.

    It proved equally difficult to determinehow much time should be charged to the actual work of canning--since several differentkinds-of household tasks in addition to canning were often performed at the sametime. While the jars were processing in the pressure cooker, work having nothingto do with canning was often performed.

    And when it came to determining howmuch electric current had been used--how much to charge for salt, spices, and othersupplies--the very smallness of the quantities used made it difficult to arrive ata figure which approximated the facts. However, by abandoning the effort to determinegardening costs, and labor costs, and substituting the market value for both rawmaterials and for labor, we did finally come to figures which I felt we might use.

    Then we still had the problem of determiningwhat it had cost to buy canned tomatoes; we had to buy canned goods in a number ofdifferent stores so as to get a fair average price on the cannery-made product; ofmaking certain that they were of a quality similar to those which we had producedat home, and of reducing the quantity in each can and each jar to some unit whichwould make comparison possible quantitatively as well as qualitatively. When wefinally made the comparison, the cost of the homemade product was between 20 percent and 30 per cent lower than the price of the factory-made merchandise.

    The result astonished me. That therewould be a saving, if no charge were made for labor, I expected. I was prepared tofind that it paid to can tomatoes whenever the cash income of a family was so lowthat anything which might be secured for the housewife's labor was a gain. But afterevery item of expense had been taken into account, and after analyzing the costsof domestic production as carefully as I would have analyzed similar costs in sucha cannery as that of the Campbell Soup Company, that a saving should be shown wasastonishing. How was it possible, I kept asking myself, for a woman, working allalone, to produce canned goods at a lower cost than could the Campbell Soup Companywith its fine division of labor, its efficient management, its labor-saving machinery,its quantity buying, its mass-production economies? Unless there was some mistakein our calculations this experiment knocked all the elaborate theories framed byeconomists to explain the industrial revolution, into a cocked hat. Unless we hadfailed to take some element of which I was ignorant into consideration, the economicactivities of mankind for nearly two hundred years had been based upon a theory asfalse as its maritime activities prior to the discovery of the fact that the worldwas round.

    Slowly I evolved an explanation ofthe paradox. First I sought for it in advertising. I wrote a whole book, NationalAdvertising vs. Prosperity, about my excursions into the much-neglected fieldof advertising economics. Advertising, however, furnished only a partial answer tothe question. While I did come to the conclusion that certain kinds of advertisinginvolved economic wastes, I discovered that the bulk of advertising had no more effectupon prices than any other activities incidental to the creation of time and placeutilities. Articles discussing my analysis of the economics of advertising were publishedin the trade press in 1922; my book appeared a year later, in 1923.

    My voyage of discovery into the realmof advertising economics led to a deeper search for the truth. Three years later,in 1926, I published the results of several years of study in a book (for which LewHahn wrote the introduction), which I called The Distribution Age.

    Here I came much nearer to a satisfactoryexplanation of the curious results of our cost studies of home canning. Factory productioncosts had, it is true, decreased year after year as industry had developed. Nothinghad developed to stop the factory in its successful competition with handicraft industry,so far as costs of production were concerned. Our economists, therefore, took itfor granted that the superiority of the factory in competition with the home wouldcontinue indefinitely into the future. What they overlooked, however, was that whileproduction costs decrease year after year, distribution costs increase. The tendencyof distribution and transportation to absorb more and more of the economies madepossible by factory production was ignored. Transportation, warehousing, advertising,salesmanship, wholesaling, retailing--all these aspects of distribution cost morethan the whole cost of fabricating the goods themselves. Less than one-third of whatthe consumer pays when actually buying goods at retail is paid for the raw materialsand costs of manufacturing finished commodities; over two-thirds is paid for distribution.While we were busily reducing the amount of labor needed to produce things--as thetechnocrats recently discovered--we were busily engaged in increasing the numbersemployed to transport, and sell, and deliver the products which we were consuming.That a time might come when all the economies of factory production would be lostin the cost of getting the product from the points of production to the points ofconsumption had been generally ignored.

    Eventually I stumbled on an economiclaw which still seems to me the only satisfactory explanation of our adventure withthe canned tomatoes: Distribution costs tend to move in inverse relationship toproduction costs. The more production costs are reduced in our factories, thehigher distribution costs on factory products become. At some point in the case ofmost products a time comes when it is cheaper to produce them individually than tobuy them factory made. Nothing that we can do to lower distribution costs by increasingthe efficiency of our railroads, and nothing that we can do to eliminate competitionas socialists propose, upsets this law. As long as we stick to the industrial productionof goods this law is operative.

    A simple illustration makes this clear.With factory production, large quantities of one product are made in one spot. Touse automatic machinery, to divide labor most efficiently, to transport raw materialsinexpensively, it is necessary to manufacture in quantity. Raw materials and fuelmost therefore be assembled from long distances before the process of fabricationcan begin. After the raw materials have been fabricated into finished goods--a processwhich may require movement of the semi-manufactured goods back and forth among severalplants located at different points of the country--the finished goods must be transportedand stored at the points of consumption until the public is ready to use them. Thelarger factories are made in order to lower production costs, the greater becomethe distances and the more intricate the problems involved in assembling the rawmaterials and distributing the finished goods. Thus the lower we make the factorycosts, the higher become the distribution costs.

    It cost the Campbell Soup Company muchless to produce a can of tomatoes in their great factories than it cost Mrs. Borsodito produce one in her kitchen. But after they had produced theirs, all the costsof getting it from their factory to the ultimate consumer had to be added. In Mrs.Borsodi's case the first cost was the final cost. No distribution costs had to beadded because the point of production and the point of consumption was the same.

    All the orthodox economic teachingsto which I had subscribed underwent a complete transformation as soon as I fullydigested the implications of this discovery.

    I discovered that more than two-thirdsof the things which the average family now buys could be produced more economicallyat home than they could be bought factory made;

    --that the average man and woman couldearn more by producing at home than by working for money in an office or factoryand that, therefore, the less time they spent working away from home and the moretime they spent working at home, the better off they would be;

    --finally, that the home itself wasstill capable of being made into a productive and creative institution and that aninvestment in a homestead equipped with efficient domestic machinery would yieldlarger returns per dollar of investment than investments in insurance, in mortgages,in stocks and bonds.

    The most modern and expensive domesticmachinery need not, therefore, be a luxury. It can be a productive investment, inspite of the fact that most manufacturers of appliances still sell their machineson the basis of a luxury appeal. Even appliances like vacuum cleaners can be madepaying investments, if the time they save is used productively in the garden, thekitchen, the sewing and loom room.

    These discoveries led to our experimentingyear after year with domestic appliances and machines. We began to experiment withthe problem of bringing back into the home, and thus under our own direct control,the various machines which the textile-mill, the cannery and packing house, the flour-mill,the clothing and garment factory, had taken over from the home during the past twohundred years. Needless to say, we have thus far only begun to explore the possibilitiesof domestic production.

    In the main the economies of factoryproduction, which are so obvious and which have led economists so far astray, consistof three things: (1) quantity buying of materials and supplies; (2) the divisionof labor with each worker in industry confined to the performance of a single operation;and (3) the use of power to eliminate labor and permit the operation of automaticmachinery. Of these, the use of power is unquestionably the most important. Today,however, power is something which the home can use to reduce costs of productionjust as well as can the factory. The situation which prevailed in the days when waterpower and steam-engines furnished the only forms of power is at an end. As long asthe only available form of power was centralized power, the transfer of machineryand production from the home and the individual, to the factory and the group, wasinevitable. But with the development of the gas-engine and the electric motor, powerbecame available in decentralized forms. The home, so far as power was concerned,had been put in position to compete with the factory.

    With this advantage of the factorynullified, its other advantages are in themselves insufficient to offset the burdenof distribution costs on most products. Furthermore, even these advantages are notas great as they seem. What is saved through minute division and subdivision of labortends often to be nullified by the higher costs of supervision and management. Andthe savings in the factory made possible by quantity buying become more and moreminute when the home begins to produce raw materials itself.

    The average factory, no doubt, doesproduce food and clothing cheaper than we produce them even with our power-drivenmachinery on the Borsodi homestead. But factory costs, because of the problem ofdistribution, are only first costs. They cannot, therefore, be compared with homecosts, which are final costs. The final cost of factory products, after distributioncosts have been added, make the great bulk of consumer goods actually more expensivethan home-made products of the same quality.

    This is what we learned from Mrs. Borsodi'sadventure with the tomatoes.


Prelude to the First Edition
1. Flight from the City
II. Domestic Production
III. Food, Pure Food, and FreshFood
IV. The Loom and the Sewing-machine
V. Shelter
VI. Water, Hot Water, and WasteWater
VII. Education--The Schoolof Living
VIII. Capital
IX. Security versus Insecurity
X. Independence versus Dependence

HOMESTEADING CATALOG
HOME PAGE