James F. Lincoln; D. Hager

Lincoln, who died in 1965 at the age of 82 and hence was spared the Great Society's additional hamstringing of employers, was as harsh on "ultraconservative" industrialists who saw workers as adversaries as he was on misguided· government. His management phi losophy combined the Golden Rule with ath letic metaphors. As he explained in his 1961 book, A New Approach to Industrial Econom ics, application of the Golden Rule leads to the type of cooperation that characterizes suc cessful athletic teams, where the coaches and Daniel Hager is a freelance writer in Lansing, Michi gan. 45 players are not antagonists but all pull togeth er for the common goal of victory. Everyone's a Manager In any organization everybody actually embraces both management and labor func tions: "All are managers when they operate a machine, an assembly line, a broom, or a punch press, or when they manage the finan cial, economic, and social activities of the company. All also are labor. Some operate machines, some operate assembly lines, some operate brooms, and some operate the activi ties with government, with sellers, with buy ers, and with the public. There can be no dividing line drawn between them. All are essential to the business and are complemen tary in their work."1 Lincoln learned about individual develop ment and voluntary cooperative accomplish ment while studying electrical engineering and playing football at Ohio State University, where he captained the undefeated 1906 team.

The next year, he became a salesman at the small struggling electrical company managed by his brother, John C. Lincoln, a better engi neer than businessman. In 1914 at age 31, James Lincoln moved up to general manager of Lincoln Electric and later became presi dent. He solicited employees for advice believing that no one person can know every thing and that others have much to contribute. Development of employees' talents became his goal, based on the foundation that "free46 THE FREEMAN/IDEASON LIBERTY • APRIL 1999 dom of the individual is essential. Freedom means responsibility. It means opportunity. It means pride in ourselves and the place that we have created for ourselves in the world. No free man ever allowed himself to infringe on the rights of others."2 His strategies excluded production speedups and even conventional profit-sharing plans, which depend on too many factors beyond the control of individuals to provide them incen tives. The New York Times obituary quoted Lincoln's core policy: "There is no limit to the production capacity of a human being. The worker who is assured the fruits of his labor will find a thousand and one ways to increase production."3 The workers themselves devised methods to improve productivity and reduce costs and benefited directly from their efforts.

The system of rewarded innovation worked so well that the labor required to produce a 200-amp welding machine dropped from about 113 hours in 1921 to about 16 in 1944. The selling price fell from $1,500 to $200. Between 1932 and 1943 worker productivity increased almost 13 times. Wholesale prices of manufactured goods rose more than 40 per cent over that span, but prices of Lincoln's arc welders were cut in half or more. Lincoln said that "The goal of an organiza tion must be this-to make a better and better product to be sold at a lower and lower price. Profit cannot be the goal. Profit must be the byproduct."4 His company paid liberal divi dends throughout the Depression and laid off no workers. Work stoppages were inconceiv able, even in the post-World War II era when strikes by organized labor became an everyday occurrence. Lincoln Electric's productivity per worker and annual worker compensation were about double the entire manufacturing sector following the war.

Sued by the Government During the New Deal, when corporate taxes were high and personal income taxes still low, the federal government sued Lincoln Electric on grounds it paid its employees too well. The case dragged on through the war years. Lin coln asked if the firm would have been sued if it had twice as many employees producing James F. Lincoln equal output at half the pay. When he was told no, he countered that the "crime" for which he was being fined was that he had freed up 2,500 people to work in the war effort else where. Government interference crimps productiv ity and creates poverty, as further exemplified by the Wagner Act, Lincoln noted. He described collective bargaining as "civil war." In contrast to incentive management's cooper ation, under the Wagner Act "government sets up on one side of a .table a group of people called 'management,' on the other side a group of people called 'labor,' orders them to fight until one or the. other gives in and signs a contract dictated by the winner.... The fact that a conflict is forced by the philosophy of collective bargaining dooms the result to failure. . . . Cooperation is killed in the struggle and progress of the company is stopped. There has never been any collective bargaining fight that did not end with higher cost of production. There has never been a collective-bargaining fight that did not result in a loss to the consumer."5 A coercion-free operation that respects all its individuals reduces costs and prices, and thereby benefits consumers, including work ers. The worker who wins in a collective bargaining war may benefit temporarily but soon needs higher wages again because lack of productivity reduces his own purchasing power. Those outside the direct scope of the bargaining war are the real victims: "Here, as is always true in war, the civilian population is overrun and suffers more than the armed forces involved in actual combat. There is no JAMES F. LINCOLN: INDUSTRIAL PEACEMAKER 47 protection for the innocent bystanders in war or in the Wagner Act. ... As the costs of the standard of living go up andjobs decrease, as they must, unrest is sure to develop. Those at the bottom of the economic ladder suffer first. Shortly thereafter, all are involved. Gov ernment then steps in, as it must under the present philosophy of government, as a provider of a standard of living for the unfor tunate. This still further upsets the eco nomic machine, and we have still higher costs because of the increased taxes and governmental interference. There are hence still fewer jobs, more government help to the needy, and hence still more need."6 "The essential for success is cooperation,"

he wrote. 7 An orphanage can efficiently feed, clothe, and house children and may even exceed parents' abilities in those respects. But it does not succeed in rearing children as well as the home does because "the essential that is left out is the friendly cooperation that is obtained in the successful family. This coop eration cannot be commanded, it must be spontaneous. It cannot be a matter of law, it must be a matter of desire."8 Lincoln foresaw in 1946 that government mandated coercion in the labor arena would deteriorate American manufacturing competi tiveness and price the nation out of significant world markets. In his last two books he acknowledged the intellectual debt he owed to Rose Wilder Lane and Dr. Frank Halliday Fer ris. His company has remained successful by continuing to adhere to his principles, despite the obstacle of ever-greater encroachment of government into workplace relations. D 1. James F. Lincoln, Lincoln's Incentive System (New York: McGraw-Hill Book Company, Inc., 1946), p. 95.

2. Ibid., p. 38. 3. New York Times, June 24, 1965, p. 35. 4. Ibid. 5. Lincoln, pp. 95, 97. 6. Ibid., pp. 98-99. 7. Ibid., p. 103. 8. Ibid., p. 101. Inspired? Shocked? Delighted? AlarBled? Let us l(.llow. We will print the most interesting and provocative letters we receive regarding Freeman articles and the issues they raise. Brevity is encouraged; longer letters may be edited because of space limita tions. Address your letters to: The Freeman, FEE, 30 S. Broadway, Irvington-on-Hudson, New York 10533; e-mail: freeman@fee.org; fax (914) 591-8910.