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Progress and Poverty
PROGRESS
AND
POVERTY
AN INQUIRY INTO THE CAUSE OF INDUSTRIAL
DEPRESSIONS AND OF INCREASE OF WANT
WITH INCREASE OF WEALTH
THE REMEDY
THE MODERN LIBRARY • NEW YORK
Random House IS THE PUBLISHER OF
THE MODERN LIBRARY
BBNNBTT A. CERi' DONALD S KLOPFER • ROBERT K. HAAS
Manufactured in the United States of America
Printed by Parkway Printing Company Bound by H Wolff
TO THOSE WHO,
SEEING THE VICE AND MISERY THAT SPRING FROM
THE UNEQUAL DISTRIBUTION
OF WEALTH AND PRIVILEGE,
FEEL THE POSSIBILITY OF A HIGHER SOCIAL STATE
AND WOULD STRIVE FOR ITS ATTAINMENT
Sax Francisco, March, 1879
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PROGRESS AND POVERTY
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>•« ■ ■■ m ' 1 *'
PROGRESS
AND
POVERTY
AN INQUIRY INTO THE CAUSE OF INDUSTRIAL
DEPRESSIONS AND OF INCREASE OF WANT
WITH INCREASE OF WEALTH
THE REMEDY
THE MODERN LIBRARY • NEW YORK
* t 1
Random House is the publisher of
THE MODERN LIBRARY
BENNETT A. CERi' • DONALD S KLOPFER ROBERT K. HAAS
Manufactured in the United States of America
Printed by Parkway Printing Company Bound by H Wolff
TO THOSE WHO,
SEEING THE VICE AND MISERY THAT SPRING PROM
THE UNEQUAL DISTRIBUTION
OP WEALTH AND PRIVILEGE,
PEEL THE POSSIBILITY OF A HIGHER SOCIAL STATE
AND WOULD STRIVE FOR ITS ATTAINMENT
Sax Francisco, March, 1879.
Make for thyself a definition or description
of the thing which is presented to thee, so as
to see distinctly what kind of a thing it is,
in its substance, in its nudity, in its complete
entirety, and tell thyself its proper name,
and the names of the things of which it has
been compounded, and into which it will be
resolved. For nothing is so productive of
elevation of mind as to be able to examine
methodically and truly every object which is
presented to thee m life, and always to look
at things so as to see at the same time what
kind of universe this is, and what kind of use
everything performs in it, and what value
everything has with reference to the whole,
and what with reference to man, who is a
citizen of the highest city, of which all other
cities are like families; what each thing is, and
of what it is composed, and how long it is the
nature of this thmg to endure.
— Marcus Aurelius Antomnus.
FOREWORD
TO THE FIFTIETH ANNIVERSARY EDITION
»
The fame won by Henry George as writer, economist
and philosopher, has not diminished with the years that
have passed since his death in 1897. On the contrary,
there has been a steadily broadening recognition of his
intellectual eminence. Significant of this was the recent
Appreciation by John Dewey, the famous American
educator and professor of philosophy at Columbia Uni-
versity, which contained these striking statements:
“It would require less than the fingers of the two hands to
enumerate those who, from Plato down, rank with Henry George
among the worlds social philosophers. ... No man, no graduate
of a higher educational institution, has a right to regard himself
as an educated man in social thought unless he has some first-
hand acquaintance with tl\e theoretical contribution of this great
American thinker.”
In this fiftieth year after the first publication of
“Progress and Poverty” it must appear to that growing
body of workers for social justice who in many lands
are spreading George’s gospel, that there is at this time
as great a need as ever for the comprehension of the
truth he sought to make plain. For, as in 1879, there
is widespread social unrest in the world. Industrial de-
pression and unemployment are conditions common to
many lands, and even in the nominally prosperous
atmosphere of the United States, vast numbers are com-
pelled to live in poverty or close to its border line. It
would appear that in the half century since “Progress
and Poverty” was published, there has been little abate-
ment of the social and economic ills that have afflicted
• •
vu
FOREWORD
• • ■
VU1
the human family everywhere, and that recur, with
unfailing regularity, in cycles that seem unexplainable
except to the followers of Henry George. And, at a
time when world opinion is demanding that statesman-
ship shall outlaw war, it is important to recall that the
World Economic Conference, held at Geneva in 1927
at the call of the League of Nations, found a definite
interdependence of the economic causes of war and
industrial depression. It seems like a vindication of the
philosophy of Henry George to find that this Conference,
to which the representatives of fifty nations were called,
unanimously arrived at the conclusion that:
*
“The main trouble now is neither any material shortage of the
resources of nature nor any inadequacy in man’s power to ex-
ploit them. It is all, in one form or another, a maladjustment;
not an insufficient productive capacity, but a senes of impedi-
ments to the full utilization of that capacity. The main obstacles
to economic revival have been the hindrances opposed to the free
flow of labor, capital, and goods”
This, in effect, is what Henry George maintained fifty
years ago, contrary to the teachings of the accepted
political economy.
Greater need than ever exists for a re-examination
by mankind of the remedy for the world’s social and
economic ills that is involved in the fundamental pro-
posals of Henry George — proposals which Tolstoy de-
clared must ultimately be accepted by the W'orld because
they are so logical and so unanswerable.
Therefore, the trustees of the Robert Schalkenbach
Foundation, of New York, which was formed to bring
about a wider acquaintance with the social and economic
philosophy of Henry George, have considered this an
appropriate time to produce from new plates this Fiftieth
Anniversary Edition of “Progress and Poverty.”
HOW THE BOOK CAME TO BE WRITTEN
In the Introduction to the Twenty-fifth Anniversary Edition,
Henry George, Jr. told interestingly, as follows, how “Progress
and Poverty” came to be written:
Out of the open West came a young man of less than
thirty to this great city of New York. He was small
of stature and slight of build. His alma mater had been
the forecastle and the printing-office. He was poor,
unheralded, unknown. lie came from a small city ris-
ing at the western golden portals of the country to set
up here, for a struggling little newspaper there, a tele-
graphic news bureau, despite the opposition of the com-
bined powerful press and telegraph monopolies. The
struggle was too unequal. The young man was over-
borne by the monopolies and his little paper crushed.
This man was Henry George and the time was 1869.
But though defeated, Henry George was not van-
quished. Out of this struggle had come a thing that was
to grow and grow until it should fill the minds and
hearts of multitudes and be as “an army with banners.”
For in the intervals of rest from his newspaper strug-
gle in this city the young correspondent had musingly
walked the streets. As he walked he was filled with
wonder at the manifestations of vast wealth. Here, as
nowhere that he had dreamed of, were private fortunes
that rivaled the riches of the fabled Monte Cristo. But
here, also, side by side with the palaces of the princely
rich, was to be seen a poverty and degradation, a want
and shame, such as made the young man from the open
West sick at heart.
Why in a land so bountifully blest, with enough and
more than enough for all, should there be such inequal-
ity of conditions? Such heaped wealth interlocked with
such deep and debasing want? Why, amid such super-
ut
jdi HOW THE BOOK CAME TO BE WRITTEN
I have been enabled to live to write it, and that you have been
enabled to live to see it. It represents a great deal of work and
i good deal of sacrifice, but now it is done. It will not be recog-
nised at first — maybe not for some time— but it will ultimately
be considered a great book, will be published in both hemispheres,
and be translated into different languages. This I know, though
neither of us may ever see it here. But the belief that I have
expressed in this book — the belief that there is yet another life
for us — makes that of little moment.
The prophecy of recognition of the book’s greatness
was fulfilled very quickly. The Appletons in New York
brought out the first regular market edition in January,
1880, just twenty-five years ago. Certain of the San
Francisco newspapers derided book and author as the
“hobby” of “little Harry George,” and predicted that
the work would never be heard of. But the press else-
where in the country and abroad, from the old
“Thunderer” in London down, and the great periodical
publications, headed by the “Edinburgh Review,” hailed
it as a remarkable book that could not be lightly brushed
aside. In the United States and England it was put
into cheap paper editions, and in that form outsold the
most popular novels of the day. In both countries, too,
it ran serially in the columns of newspapers. Into all
the chief tongues of Europe it was translated, there
being three translations into German. Probably no
exact statement of the book’s extent of publication can
be made; but a conservative estimate is that, embracing
all forms and languages, more than two million copies
of “Progress and Poverty” have been printed to date;
and that including with these the other books that have
followed from Henry George’s pen, and which might
be called “The Progress and Poverty Literature,” per-
haps five million copies have been given to the world.
Henry George, Jr.
New York,
January 24, 1905.
PREFACE TO FOURTH EDITION
The views herein set forth were in the main briefly stated in a
pamphlet entitled “Our Land and Land Policy,” published in San
Francisco in 1871. I then intended, as soon as I could, to present
them more fully, but the opportunity did not for a long time
occur. In the meanwhile I became even more firmly convinced
of their truth, and saw more completely and clearly their rela-
tions; and I also saw how many false ideas and erroneous habits
of thought stood in the way of tjieir recognition, and how neces*
sary it was to go over the whole ground.
This I have here tried to do, as thoroughly as space would per-
mit. It has been necessary for me to clear away before I could
build up, and to write at once for those who have made no
previous study of such subjects, and for those who are familiar
with economic reasonings; and, so great is the scope of the argu-
ment that it has been impossible to treat with the fullness they
deserve many of the questions raised. What I have most en-
deavored to do is to establish general principles, trusting to my
readers to carry further their applications where this is needed.
In certain respects this book will be best appreciated by those
who have some knowledge of economic literature; but no previ-
ous reading is necessary to the understanding of the argument or
the passing of judgment upon its conclusions. The facts upon
which I have relied are not facts which can be verified only by
a search through libraries. They are facts of common observa-
tion and common knowledge, which every reader can verify for
himself, just as he can decide whether the reasoning from them
is or is not valid.
Beginning with a brief statement of facts which suggest this in-
quiry, I proceed to examine the explanation currently given in
the name of political economy of the reason why, in spite of the
increase of productive power, wages tend to the minimum of a
bare living This examination shows that the current doctrine of
wages is founded upon a misconception; that, in truth, wages are
produced by the labor for which they are paid, and should, other
things being equal, increase with the number of laborers. Here
the inquiry meets a doctrine which is the foundation and center
of most important economic theories, and which has powerfully
<«•
xm
PREFACE
xlv
influenced thought in all directions — the Malthusian doctrine, that
population tends to increase faster than subsistence. Examina-
tion, however, shows that this doctrine has no real support either
in fact or in analogy, and that when brought to $ decisive test it
is utterly disproved.
Thus far the results of the inquiry, though extremely impor-
tant, are mainly negative. They show that current theories do
not satisfactorily explain the connection of poverty with material
progress, but throw no light upon the problem itself, beyond
showing that its solution must be sought in the laws which govern
the distribution of wealth. It therefore becomes necessary to
carry the inquiry into this field. A preliminary review shows
that the three laws of distribution must necessarily correlate with
each other, which as laid down by the current political economy
they fail to do, and an examination of the terminology in use
reveals the confusion of thought by which this discrepancy has
been slurred over. Proceeding then to work out the laws of
distribution, I first take up the law ot rent. This, it is readily
seen, is correctly apprehended by the current political economy.
But it is also seen that the full scope of this law has not been
appreciated, and that it involves as corollaries the laws of wages
and interest — the cause which determines what part of the prod-
uce shall go to the land owner necessarily determining what
part shall be left for labor and capital. Without resting here, I
proceed to an independent deduction of the laws of interest and
wages. I have stopped to determine the real cause and justifica-
tion of interest, and to point out a source of much misconception
— the confounding of what are really the profits of monopoly
with the legitimate earnings of capital. Then returning to the
main inquiry, investigation shows that interest must rise and fall
with wages, and depends ultimately upon the same thing as rent
— the margin of cultivation or point in production where rent
begins. A similar but independent investigation of the law of
wages yields similar harmonious results. Thus the three laws of
distribution are brought into mutual support and harmony, and
the fact that with material progress rent everywhere advances is
seen to explain the fact that wages and interest do not advance.
What causes this advance of rent is the next question that
arises, and it necessitates an examination of the effect of material
progress upon the distribution of wealth. Separating the factors
of material progress into increase of population and improve-
ments in the arts, it is first seen that increase in population tends
constantly, not merely by reducing the margin of cultivation, but
by localizing the economies and powers which come with in*
fBEFACE
XV
creased population, to increase the proportion of the aggregate
produce which is taken in rent, and to reduce that which goes as
wages and interest. Then eliminating increase of population, it
is seen that improvement in the methods and powers of produc-
tion tends in the same direction,* and, land being held as private
property, would produce in a stationary population all the effects
attributed by the Malthusian doctrine to pressure of population.
And then a consideration of the effects of the continuous increase
in land values which thus spring from material progress reveals
in the speculative advance inevitably begotten when land is pri-
vate property a derivative but most powerful cause of the increase
of rent and the crowding down of Wages. Deduction shows that
this cause must necessarily produce periodical industrial depress
sions, and induction proves the conclusion; while from the analy*
sis which has thus been made it is seen that the necessary result
of material progress, land being private property, is, no matter
what the increase in population, to force laborers to wages which
give but a bare living.
This identification of the cause that associates poverty with
progress points to the remedy, but it is to so radical a remedy
that I have next deemed it necessary to inquire whether there
is any other remedy. Beginning the investigation again from
another starting point, I have passed m examination the measures
and tendencies currently advocated or trusted in for the improve-
ment of the condition of the laboring masses. The result of this
investigation is to prove the preceding one, as it shows that
nothing short of making land common property can permanently
relieve poverty and check the tendency of wages to the starva-
tion point.
The question of justice now naturally arises, and the inquiry
passes into the field of ethics. An investigation of the nature and
basis of property shows that there is a fundamental and irrecon-
cilable difference between property in things which are the product
of labor and property m land; that the one has a natural basis
and sanction while the other has none, and that the recognition
of exclusive property in land is necessarily a denial of the right
of property in the products of labor. Further investigation shows
that private property in land always has, and always must, as
development proceeds, lead to the enslavement of the laboring
class; that land owners can make no just claim to compensation
if society choose to resume its right; that so far from private
property in land being in accordance with the natural perceptions
of men, the very reverse is true, and that in the United State*
PREFACE
tvi
we are already beginning to feel the effects of having admitted
this erroneous and destructive prmciple.
The inquiry then passes to the field of practical statesmanship.
It is seen that private property in land, instead of being neces-
sary to its improvement and use, stands in the way of improve-
ment and use, and entails an enormous waste of productive
forces; that the recognition of the common right to land involves
no shock or dispossession, but is to be reached by the simple and
easy method of abolishing all taxation save that upon 1 land
values. And this an inquiry into the principles of taxation shows
to be, in all respects, the best subject of taxation.
A consideration of the effects of the change proposed then
.‘shows that it would enormously increase production; would se-
cure justice in distribution; would benefit all classes; and would
make possible an advance to a higher and nobler civilization.
The inquiry now rises to a wider field, and recommences from
another starting point. For not only do the hopes which have
been raised come mto collision with the widespread idea that
.social progress is possible only by slow race improvement, but
the conclusions we have arrived at assert certain laws which, if
they are really natural laws, must be manifest in universal his-
tory. As a final test, it therefore becomes necessary to work out
the law of human progress, for certain great facts which force
themselves on our attention, as soon as we begin to consider this
«ubject, seem utterly inconsistent with what is now the current
theory. This inquiry shows that differences m civilization are
not due to differences in individuals, but rather to differences in
social organization; that progress, always kindled by association,
always passes into retrogression as inequality is developed; and
that even now, in modern civilization, the causes which have de-
stroyed all previous civilizations are beginning to manifest them-
selves, and that mere political democracy is running its course
toward anarchy and despotism. But it also identifies the law of
social life with the great moral law of justice, and, proving previ-
ous conclusions, shows how retrogression may be prevented and
a grander advance begun. This ends the inquiry. The final
chapter will explain itself.
The great importance of this inquiry will be obvious. If it
has been carefully and logically pursued, its conclusions com-
pletely change the character of political economy, give it the
coherence and certitude of a true science, and bnng it into full
sympathy with the aspirations of the masses of men, from which
it has long been estranged. What I have done m this book, if
I have correctly solved the great problem I have sought to in-
PREFACE
xvii
*
vestigate, is, to unite the truth perceived by the school of Smith
and Ricardo to the truth perceived by the schools of Proudhon
and Lasalle; to show that loissez jaire (in its full true meaning)
opens the way to a realization of the noble dreams" of socialism;
to identify social law with moral law, and to disprove ideas
which in the minds of many cloud grand and elevating percep-
tions.
This work was written between August, 1877, and March, 1879,
and the plates finished by September of that year. Since that
time new illustrations have been given of the correctness of the
views herein advanced, and the march of events — and especially
that great movement which has begun in Great Britain in the
Irish land agitation — shows still more clearly the pressing nature
of the problem I have endeavored to solve. But there has been
nothing in the criticisms they have received to induce the change
or modification of these views — in fact, I have yet to see an
objection not answered in advance in the book itself. And ex-
cept that some verbal errors have been corrected and a preface
added, this edition is the same as previous ones.
Henry George.
New York, November , 1880.
Henry George, bom September 2, 1839, died October 29, 1897.
During the last months of his life “Progress and Poverty” was
reset for new electrotype plates. Mr. George then made some
slight alterations m syntax and punctuation; clarified the phrase-
ology of the plane illustration in the chapter on interest (Book
III, Chapter III) ; added a reference to the recantation of Her-
bert Spencer (note to Book VII, Chapter III) ; and made a dis-
tinction between patents and copyrights (note to Book VHI,
Chapter III). With these minor exceptions, the book is identical
with the fourth edition described in the above preface.* The
present edition (1929) has been reset for new plates, and except
for a slight difference in pagmg, conforms to previous editions.
There must be refuge f Men
Perished in winter winds till one smote fire
From flint stones coldly hiding what they held,
The red spark treasured from the kindling sun;
They gorged on flesh like wolves, till one sowed com,
Which grew a weed, yet makes the life of man;
They mowed and babbled till some tongue struck speech,
And patient fingers framed the lettered sound.
What good gift have my brothers, but it came
From search and strife and loving sacrifice?
— Edwin Arnold
Never yet
Share of Truth was vainly set
In the world’s wide fallow;
After hands shall sow the seed,
After hands, from hill and mead,
Reap the harvests yellow.
—Whittier
CONTENTS
Introductory
PAGE
The Problem 3
Book I. — Wages and Capital
chapter
I. — The current doctrine of wages — its insufficiency . . 17
II. — The meaning of the terms 31
III. — Wages not drawn from capital, but produced by the
lcubor 50
IV. — The maintenance of laborers not drawn from capital . 71
V. — The real functions of capital 80
Book II. — Population and Subsistence
I. — The Malthusian theory, its genesis and support ... 91
II. — Inferences from facts 103
III. — Inferences from analogy ... 129
IV. — Disproof of the Malthusian theory 140
Book III. — The Laws op Distribution
I. — The inquiry narrowed to the laws of distribution —
necessary relation of these laws 153
II. — Rent and the law of rent 165
III. — Interest and the cause of interest 173
IV. — Of spurious capital and of profits often mistaken for
interest 189
V. — The law of interest 195
VI. — Wages and the law of wages 204
VII. — Correlation and co-ordination of these laws .... 218
VIII. — The statics of the problem thus explained .... 221
Book IV. — Effect of Material Progress
upon the Distribution of Wealth
I. — The dynamics of the problem yet to seek 227
II. — Effect of increase of population upon the distribution
of wealth 230
XX
CONTENTS
CHAPTER m
III— Effect of improvements in the arts upon the distribu-
tion of wealth ••••••••
XV .— Effect of the expectation raised by material progress .
PAGE
244
265
Book V. — The Problem Solved
I. — The primary cause of recurring paroxysms of industrial
depression b 263
II. — The persistence of poverty amid advancing wealth . . 282
•
Book VI. — The Remedy
I. — Insufficiency of remedies currently advocated . . . 299
II. — The true remedy 328
Book VII. — Justice op the Remedy
I. — Injustice of private property in land 333
II. — Enslavement of laborers the ultimate result of private
III. — Claim of land owners to compensation 358
IV. — Property in land historically considered 368
V. — Property in land in the United States 385
*
Book VIII. — Application op the Remedy
I. — Private property in land inconsistent with the best use
of land 397
II. — How equal rights to the land may be asserted and
secured 403
III. — The proposition tried by the canons of taxation . . . 408
IV. — Indorsements and objections 422
Book IX. — Effects op the Remedy
I. — Of the effect upon the production of wealth .... 433
II. — Of the effect upon distribution and thence upon pro-
duction 440
III. — Of the effect upon individuals and classes .... 447
IV. — Of the changes that would be wrought in social organi-
zation and social life 454
Book X. — The Law op Human Progress
I. — The current theory of human progress — its insufficiency
II. — Differences in civilization — to what due
III. — The law of human progress
IV. — How modem civilization may decline
V. — The central truth
475
489
506
527
544
Conclusion
The problem of individual life • . .
555
INTRODUCTORY
THE PROBLEM
Ye build! ye build! but ye enter not in,
Like the tribes whom the desert devoured in their sin
From the land of promise ye fade and die,
Ere its verdure gleams forth on your wearied eye.
— Afrs. Sigourney
INTRODUCTORY
THE PROBLEM
The present century has been marked by a prodigious
increase in wealth-producing power. The utilization of
steam and electricity, the introduction of improved proc-
esses and labor-saving machinery, the greater subdivi-
sion and grander scale of production, the wonderful
facilitation of exchanges, have multiplied enormously
the effectiveness of labor.
At the beginning of this marvelous era it was natural
to expect, and it was expected, that labor-saving inven-
tions would lighten the toil and improve the condition
of the laborer; that the enormous increase in the power
of producing wealth would make real poverty a thing of
the past. Could a man of the last century — a Franklin
or a Priestley — have seen, in a vision of the future, the
steamship taking the place of the sailing vessel, the rail-
road train of the wagon, the reaping machine of the
scythe, the threshing machine of the flail; could he have
heard the throb of the engines that in obedience to
human will, and for the satisfaction of human desire,
exert a power greater than that of all the men and all
the beasts of burden of the earth combined; could he
have seen the forest tree transformed into finished lum-
ber — into doors, sashes, blinds, boxes or barrels, with
hardly the touch of a human hand ; the great workshops
where boots and shoes are turned out by the case with
less labor than the old-fashioned cobbler could have
put on a sole; the factories where, under the eye of a
girl, cotton becomes cloth faster than hundreds of stal-
wart weavers could have turned it out with their hand-
3
4
INTRODUCTORY
looms; could he have seen steam hammers shaping
mammoth shafts and mighty anchors, and delicate ma-
chinery making tiny watches; the diamond drill cutting
through the heart of the rocks, and coal oil sparing the
whale; could he have realized the enormous saving of
labor resulting from improved facilities of exchange and
communication — sheep killed in Australia eaten fresh in
England, and the order given by the London banker in
the afternoon executed in San Francisco in the morning
of the same day; could he have conceived of the hun-
dred thousand improvements which these only suggest,
what would he have inferred as to the social condition
of mankind?
It would not have seemed like an inference; further
than the vision went it would have seemed as though
he saw; and his heart would have leaped and his nerves
would have thrilled, as one who from a height beholds
just ahead of the thirst-stricken caravan the living
gleam of rustling woods and the glint of laughing
waters. Plainly, in the sight of the imagination, he
would have beheld these new forces elevating society
from its very foundations, lifting the very poorest above
the possibility of want, exempting the very lowest from
anxiety for the material needs of life; he would have
seen these slaves of the lamp of knowledge taking on
themselves the traditional curse, these muscles of iron
and sinews of steel making the poorest laborer’s life a
holiday, in which every high quality and noble impulse
could have scope to grow.
And out of these bounteous material conditions he
would have seen arising, as necessary sequences, moral
conditions realizing the golden age of which mankind
have always dreamed. Youth no longer stunted and
starved; age no longer harried by avarice; the child at
play with the tiger; the man with the muck-rake drink-
ing in the glory of the stars. Foul things fled, fierce
the problem
5
things tame; discord turned to harmony! For how
could there be greed where all had enough? How could
the vice, the crime, the ignorance, the brutality, that
spring from poverty and the fear of poverty, exist where
poverty had vanished? Who should crouch where all
were freemen; who oppress where all were peers?
More or less vague or clear, these have been the hopes,
these the dreams born of the improvements which give
this wonderful century its preeminence. They have
sunk so deeply into the popular mind as radically to
change the currents of thought, to recast creeds and dis-
place the most fundamental conceptions. The haunting
visions of higher possibilities have not merely gathered
splendor and vividness, but their direction has changed
— instead of seeing behind the faint tinges of an expiring
sunset, all the glory of the daybreak has decked the
skies before. ,
It is true that disappointment has followed disap-
pointment, and that discovery upon discovery, and in-
vention after invention, have neither lessened the toil of
those who most need respite, nor brought plenty to the
poor. But there have been so many things to which it
seemed this failure could be laid, that up to our time the
new faith has hardly weakened. We have better appre-
ciated the difficulties to be overcome; but not the less
trusted that the tendency of the times was to overcome
them.
Now, however, we are coming into collision with facts
which there can be no mistaking. From all parts of the
civilized world come complaints of industrial depres-
sion; of labor condemned to involuntary idleness; of
capital massed and wasting; of pecuniary distress among
business men; of want and suffering and anxiety among
the working classes. All the dull, deadening pain, all
the keen, maddening anguish, that to great masses of
men are involved in the words “hard times,” afflict the
M INTRODUCTORY
world to-day. This state of things, common to com-
munities differing so widely in situation, in political
institutions, in fiscal and financial systems, in density
of population and in social organization, can hardly
be accounted for by local causes. There is distress
where large standing armies are maintained, but there
is also distress where the standing armies are nominal;
there is distress where protective tariffs stupidly and
wastefully hamper trade, but there is also distress
where trade is nearly free; there is distress where auto-
cratic government yet prevails, but there is also distress
where political power is wholly in the hands of the peo-
ple; in countries where paper is money, and in countries
where gold and silver are the only currency. Evidently,
beneath all such things as these, we must infer a com-
mon cause.
That there is a common cause, and that it is either
what we call material progress or something closely
connected with material progress, becomes more than an
inference when it is noted that the phenomena we class
together and speak of as industrial depression are but
intensifications of phenomena which always accompany
material progress, and which show themselves more
clearly and strongly as material progress goes on.
Where the conditions to which material progress every-
where tends are most fully realized — that is to say,
where population is densest, wealth greatest, and the
machinery of production and exchange most highly
developed — we find the deepest poverty, the sharpest
struggle for existence, and the most of enforced idle-
ness.
It is to the newer countries — that is, to the countries
where material progress is yet in its earlier stages — that
laborers emigrate in search of higher wages, and capital
flows in search of higher interest. It is in the older
countries — that is to say, the countries where material
THE PROBLEM
7
progress has reached later stages — that widespread desti-
tution is found in the midst of the greatest abundance.
Go into one of the new communities where Anglo-Saxon
vigor is just beginning the race of progress; where the
machinery of production and exchange is yet rude and
inefficient; where the increment of wealth is not yet
great enough to enable any class to live in ease and
luxury ; where the best house is but a cabin of logs or a
cloth and paper shanty, and the richest man is forced
to daily work — and though you will find an absence of
wealth and all its concomitants, you will find no beg-
gars. There is no luxury, but there is no destitution.
No one makes an easy living, nor a very good living;
but every one can make a living, and no one able and
willing to work is oppressed by the fear of want.
But just as such a community realizes the conditions
which all civilized communities are striving for, and ad-
vances in the scale of material progress — just as closer
settlement and a more intimate connection with the rest
of the world, and greater utilization of labor-saving ma-
chinery, make possible greater economies in production
and exchange, and wealth in consequence increases, not
merely in the aggregate, but in proportion to population
— so does poverty take a darker aspect. Some get an
infinitely .better and easier living, but others find it
hard to get a living at all. The “tramp” comes with
the locomotive, and almshouses and prisons are as
surely the marks of “material progress” as are costly
dwellings, rich warehouses, and magnificent churches.
Upon streets lighted with gas and patrolled by uni-
formed policemen, beggars wait for the passer-by, and
in the shadow of college, and library, and museum, are
gathering the more hideous Huns and fiercer Vandals of
whom Macaulay prophesied.
This fact — the great fact that poverty and all its con-
comitants show themselves in communities just as they
8
INTRODUCTORY
develop into the conditions toward which material prog-
ress tends — proves that the social difficulties existing
wherever a certain stage of progress has been reached,
do not arise from local circumstances, but are, in some
way or another, engendered by progress itself.
And, unpleasant as it may be to admit it, it is at last
becoming evident that the enormous increase in produc-
tive power which has marked the present century and is
still going on with accelerating ratio, has no tendency
to extirpate poverty or to lighten the burdens of those
compelled to toil. It simply widens the gulf between
Dives and Lazarus, and makes the struggle for exist-
ence more intense. The march of invention has clothed
mankind with powers of which a century ago the bold-
est imagination could not have dreamed. But in fac-
tories where labor-saving machinery has reached its
most wonderful development, little children are at work ;
wherever the new forces are anything like fully utilized,
large classes are maintained by charity or live on the
verge of recourse to it; amid the greatest accumulations
of wealth, men die of starvation, and puny infants
suckle dry breasts; while everywhere the greed of gain,
the worship of wealth, shows the force of the fear of
want. The promised land flies before us like the mirage.
The fruits of the tree of knowledge turn as we grasp
them to apples of Sodom that crumble at thg touch.
It is true that wealth has been greatly increased, and
that the average of comfort, leisure, and refinement has
been raised; but these gains are not general. In them
the lowest class do not share.* I do not mean that the
♦It is true that the poorest may now in certain ways enjoy
what the richest a century ago could not have commanded, but
this does not show improvement of condition so long as the
ability to obtain the necessaries of life is not increased. The
beggar in a great city may enjoy many things from which the
backwoods farmer is debarred, but that does not prove the con-
THE PROBLEM
9
condition of the lowest class has nowhere nor in anything
been improved; but that there is nowhere any im-
provement which can be credited to increased produc-
tive power. I mean that the tendency of what we call
material progress is in nowise to improve the condition
of the lowest class in the essentials of healthy, happy
human life. Nay, more, that it is still further to de-
press the condition of the lowest class. The new forces,
elevating in their nature though they be, do not act upon
the social fabric from underneath, as was for a long time
hoped and believed, but strike it at a point intermediate
between top and bottom. It is a S’ though an immense
wedge were being forced, not underneath society, but
through society. Those who are above the point of
separation are elevated, but those who are below are
crushed down.
This depressing effect is not generally realized, for it
is not apparent where there has long existed a class just
able to live. Where the lowest class barely lives, as has
been the case for a long time in many parts of Europe,
it is impossible for it to get any lower, for the next low-
est step is out of existence, and no tendency to further
depression can readily show itself. But in the progress
of new settlements to the conditions of older communi-
ties it may clearly be seen that material progress does
not merely fail to relieve poverty — it actually produces
it. In the United States it is clear that squalor and
misery, and the vices and crimes that spring from them,
everywhere increase as the village grows to the city,
and the march of development brings the advantages of
the improved methods of production and exchange.
It is in the older and richer sections of the Union that
pauperism and distress among the working classes are
dition of the city beggar better than that of the independent
fanner.
10
INTRODUCTORY
becoming most painfully apparent. If there is less deep
poverty in San Francisco than in New York, is it not
because San Francisco is yet behind New York in all
that both cities are striving for? When San Francisco
reaches the point where New York now is, who can
doubt that there will also be ragged and barefooted
children on her streets?
This association of poverty with progress is the great
enigma of our times. It is the central fact from which
spring industrial, social, and political difficulties that
perplex the world, and with which statesmanship and
philanthropy and education grapple in vain. From it
come the clouds that overhang the future of the most
progressive and self-reliant nations. It is the riddle
which the Sphinx of Fate puts to our civilization, and
which not to answer is to be destroyed. So long as
all the increased wealth which modern progress brings
goes but to build up great fortunes, to increase luxury
and make sharper the contrast between the House of
Have and the House of Want, progress is not real and
cannot be permanent. The reaction must come. The
tower leans from its foundations, and every new story
but hastens the final catastrophe. To educate men who
must be condemned to poverty, is but to make them
restive; to base on a state of most glaring social in-
equality political institutions under which men are
theoretically equal, is to stand a pyramid on its apex.
All-important as this question is, pressing itself from
every quarter painfully upon attention, it has not yet
received a solution which accounts for all the facts and
points to any clear and simple remedy. This is shown
by the widely varying attempts to account for the pre-
vailing depression. They exhibit not merely a diver-
gence between vulgar notions and scientific theories,
but also show that the concurrence which should exist
between those who avow the same general theories
THE PROBLEM
11
breaks up upon practical questions into an anarchy of
opinion. Upon high economic authority we have been
told that the prevailing depression is due to over-con-
sumption; upon equally high authority, that it is due
to over-production; while the wastes of war, the ex-
tension of railroads, the attempts of workmen to keep
up wages, the demonetization of silver, the issues of
paper money, the increase of labor-saving machinery,
the opening of shorter avenues to trade, etc., are sepa-
rately pointed out as the cause; by writers of reputation.
And while professors thus disagree, the ideas that
there is a necessary conflict between capital and labor,
that machinery is an evil, that competition must be re-
strained and interest abolished, that wealth may be
created by the issue of money, that it is the duty of
government to furnish capital or to furnish work, are
rapidly making way among the great body of the peo-
ple, who keenly feel a hurt and are sharply conscious of
a wrong. Such ideas, which bring great masses of men,
the repositories of ultimate political power, under the
leadership of charlatans and demagogues, are fraught
with danger; but they cannot be successfully combated
until political economy shall give some answer to the
great question which shall be consistent with all her
teachings, and which shall commend itself to the per-
ceptions of the great masses of men.
It must be within the province of political economy
to give such an answer. For political economy is not
a set of dogmas. It is the explanation of a certain set
of facts. It is the science which, in the sequence of cer-
tain phenomena, seeks to trace mutual relations and to
identify cause and effect, just as the physical sciences
seek to do in other sets of phenomena. It lays its
foundations upon firm ground. The premises from
which it makes its deductions are truths which have the
highest sanction; axioms which we all recognize; upon
12
INTRODUCTORY
which we safely base the reasoning and actions of every-
day life, and which may be reduced to the metaphysical
expression of the physical law that motion seeks the line
of least resistance — viz., that men seek to gratify their
desires with the least exertion. Proceeding from a basis
thus assured, its processes, which consist simply in
identification and separation, have the same certainty.
In this sense it is as exact a science as geometry, which,
from similar truths relative to space, obtains its con-
clusions by similar means, and its conclusions when valid
should be as self-apparent. And although in the do-
main of political economy we cannot test our theories
by artificially produced combinations or conditions, as
may be done in some of the other sciences, yet we can
apply tests no less conclusive, by comparing societies
in which different conditions exist, or by, in imagination,
separating, combining, adding or eliminating forces or
factors of known direction.
I propose in the following pages to attempt to solve
by the methods of political economy the great problem
I have outlined. I propose to seek the law which associ-
ates poverty with progress, and increases want with
advancing wealth; and I believe that in the explanation
of this paradox we shall find the explanation of those
recurring seasons of industrial and commercial paralysis
which, viewed independently of their relations to more
general phenomena, seem so inexplicable. Properly
commenced and carefully pursued, such an investigation
must yield a conclusion that will stand every test, and
as truth, will correlate with all other truth. For in the
sequence of phenomena there is no accident. Every
effect has a cause, and every fact implies a preceding
fact.
That political economy, as at present taught, does
not explain the persistence of poverty amid advancing
wealth in a manner which accords with the deep-seated
THE PROBLEM
13
perceptions of men; that the unquestionable truths which
it does teach are unrelated and disjointed; that it has
failed to make the progress in popular thought that
truth, even when unpleasant, must make; that, on the
contrary, after a century of cultivation, during which
it has engrossed the attention of some of the most subtle
and powerful intellects, it should be spurned by the
statesman, scouted by the masses, and relegated in the
opinion of many educated and thinking men to the rank
of a pseudo-science in which nothing i3 fixed or can
be fixed — must, it seems to me, be due not to any in-
ability of the science when properly pursued, but to
some false step in its premises, or overlooked factor in
its estimates. And as such mistakes are generally con-
cealed by the respect paid to authority, I propose in
this inquiry to take nothing for granted, but to bring
even accepted theories to the test of first principles, and
should they not stand the test, freshly to interrogate
facts in the endeavor to discover their law.
I propose to beg no question, to shrink from no con-
clusion, but to follow truth wherever it may lead. Upon
us is the responsibility of seeking the law, for in the
very heart of our civilization to-day women faint and
little children moan. But what that law may prove
to be is not our affair. If the conclusions that we
reach run counter to our prejudices, let us not flinch;
if they challenge institutions that have long been deemed
wise and natural, let us not turn back.
BOOK I
WAGES AND CAPITAL
CHAPTER i— THE CURRENT DOCTRINE— ITS INSUFFICIENCY
CHAPTER II. — THE MEANING OF THE PERMS
CHAPTER III.— WAGES NOT DRAWN FROM CAPITAL, BUT PRO-
DUCED BY THE LABOR
CHAPTER IV.— THE MAINTENANCE OF LABORERS NOT DRAWN
FROM CAPITAL
CHAPTER V.— THE REAL FUNCTIONS OF CAPITAL
He that is to follow philosophy must be a freeman in mind.
— , Ptolemy .
CHAPTER I
THE CURRENT DOCTRINE OF WAGES — ITS INSUFFICIENCY
Reducing to its most compact form the problem we
have set out to investigate, let us examine, step by step,
the explanation which political economy, as now accepted
by the best authority, gives of it.
The cause which produces poverty in the midst of
advancing wealth is evidently the cause which exhibits
itself in the tendency, everywhere recognized, of wages
to a minimum. Let us, therefore, put our inquiry into
this compact form:
*
Why, in spite of increase in productive power , do wages
tend to a minimum which will give but a bare living t
The answer of the current political economy is, that
wages are fixed by the ratio between the number of
laborers and the amount of capital devoted to the em-
ployment of labor, and constantly tend to the lowest
amount on which laborers will consent to live and repro-
duce, because the increase in the number of laborers
tends naturally to follow and overtake any increase in
capital. The increase of the divisor being thus held in
check only by the possibilities of the quotient, the divi-
dend may be increased to infinity without greater result.
In current thought this doctrine holds all but undis-
puted sway. It bears the indorsement of the very high-
est names among the cultivators of political economy,
and though there have been attacks upon it, they are
17
18
WAGES AND CAPITAL
Botkh
generally more formal than real.* It is assumed by
Buckle as the basis of his generalizations of universal
history. It is taught in all, or nearly all, the great Eng-
lish and American universities, and is laid down in
textbooks which aim at leading the masses to reason cor-
rectly upon practical affairs, while it seems to harmonize
with the new philosophy, which, having in a few years all
but conquered the scientific world, is now rapidly per-
meating the general mind.
Thus entrenched in the upper regions of thought, it is
in cruder form even more firmly rooted in what may be
styled the lower. What gives to the fallacies of protec-
tion such a tenacious hold, in spite of their evident in-
consistencies and absurdities, is the idea that the sum to
be distributed in wages is in each community a fixed one,
which the competition of “foreign labor” must still
further subdivide. The same idea underlies most of the
theories which aim at the abolition of interest and
the restriction of competition, as the means whereby the
share of the laborer in the general wealth can be in-
creased; and it crops out in every direction among those
who are not thoughtful enough to have any theories, as
may be seen in the columns of newspapers and the
debates of legislative bodies.
* This seems to me true of Mr. Thornton's objections, for while
he denies the existence of a predetermined wage fund, consisting
of a portion of capital set apart for the purchase of labor, he yet
holds (which is the essential thing) that wages are drawn from
capital, and that increase or decrease of capital is increase or de-
crease of the fund available for the payment of wages. The most
vital attack upon the wage fund doctrine of which I know is that
of Professor Francis A. Walker (The Wages Question : New York,
1876), yet he admits that wages are in large part advanced from
capital — which, so far as it goes, is all that the stanchest supporter
of the wage fund theory could claim — while he fully accepts the
Malthusian theory. Thus his practical conclusions in nowise differ
from those reached by expounders of the current theory.
Chap* !•
the current doctrine
19
And yet, widely accepted and deeply rooted as it is,
it seems to me that this theory does not tally with
obvious facte. For, if wages depend upon the ratio be-
tween the amount of labor seeking employment and the
amount of capital devoted to its employment, the rela-
tive scarcity or abundance of one factor must mean the
relative abundance or scarcity of the other. Thus,
capital must be relatively abundant where wages are
high, and relatively scarce where wages are low. Now,
as the capital used in paying wages must largely consist
of the capital constantly seeking investment, the cur-
rent rate of interest must be the measure of its relative
abundance or scarcity. So, if it be true that wages
depend upon the ratio between the amount of labor
seeking employment and the capital devoted to its em-
ployment, then high wages, the mark of the relative
scarcity of labor, must be accompanied by low interest,
the mark of the relative abundance of capital, and
reversely, lotf wages must be accompanied by high
interest.
This is not the fact, but the contrary. Eliminating
from interest the element of insurance, and regarding
only interest proper, or the return for the use of capital,
is it not a general truth that interest is high where and
when wages are high, and low where and when wages
are low? Both wages and interest have been higher
in the United States than in England, in the Pacific
than in the Atlantic States. Is it not a notorious fact
that where labor flows for higher wages, capital also
flows for higher interest? Is it not true that wherever
there has been a general rise or fall in wages there has
been at the same time a similar rise or fall in interest?
In California, for instance, when wages were higher
than anywhere else in the world, so also was interest
higher. Wages and interest have in California gone
down together. When common wages were 96 a day.
20
WAGES AND CAPITAL
Book I,
the ordinary bank rate of interest was twenty-four per
cent, per annum. Now that common wages are $2 or
$2.50 a day, the ordinary bank rate is from ten to
twelve per cent.
Now, this broad, general fact, that wages are higher
in new countries, where capital is relatively scarce,
than in old countries, where capital is relatively abun-
dant, is too glaring to be ignored. And although very
lightly touched upon, it is noticed by the expounders
of the current political economy. The manner in which
it is noticed proves what I say, that it is utterly incon-
sistent with the accepted theory of wages. For in ex-
plaining it suph writers as Mill, Fawcett, and Price
virtually give up the theory of wages upon which, in
the same treatises, they formally insist. Though they
declare that wages are fixed by the ratio between capital
and laborers, they explain the higher wages and interest
of new countries by the greater relative production of
wealth. I shall hereafter show that this is not the fact,
but that, on the contrary, the production of wealth is
relatively larger in old and densely populated countries
than in new and sparsely populated countries. But at
present I merely wish to point out the inconsistency.
For to say that the higher wages of new countries are
due to greater proportionate production, is clearly to
make the ratio with production, and not the ratio with
capital, the determinator of wages.
Though this inconsistency does not seem to have been
perceived by the class of writers to whom I refer, it has
been noticed by one of the most logical of the expound-
ers of the current political economy. Professor Caimes*
endeavors in a very ingenious way to reconcile the fact
with the theory, by assuming that in new countries,
* Some Leading Principles of Political Economy Newly Ex-
pounded, Chapter 1, Part 2.
Chap. I.
THE CURRENT DOCTRINE
21
where industry is generally directed to the production of
food and what in manufactures is called raw material, a
much larger proportion of the capital used in produc-
tion is devoted to the payment of wages than in older
countries where a greater part must be expended in
machinery and material, and thus, in the new country,
though capital is scarcer, and interest is higher, the
amount determined to the payment of wages is really
larger, and wages are also higher. For instance, of
$100,000 devoted in an old country to manufactures,
$80,000 would probably be expended for buildings, ma-
chinery and the purchase of materials, leaving but
$20,000 to be paid out in wages; whereas in a new
country, of $30,000 devoted to agriculture, etc., not
more than $5,000 would be required for tools, etc., leav-
ing $25,000 to be distributed in wages. In this way it
is explained that the wage fund may be comparatively
large where capital is comparatively scarce, and high
wages and high interest accompany each other.
In what follows I think I shall be able to show that
this explanation is based upon a total misapprehension
of the relations of labor to capital — a fundamental error
as to the fund from which wages are drawn ; but at pres-
ent it is necessary only to point out that the connection
in the fluctuation of wages and interest in the same
countries and in the same branches of industry cannot
thus be explained. In those alternations known as “good
times” and “hard times” a brisk demand for labor and
good wages is always accompanied by a brisk demand
for capital and stiff rates of interest. While, when
laborers cannot find employment and wages droop, there
is always an accumulation of capital seeking investment
at low rates.* The present depression has been no less
* Times of commercial panic are marked by high rates of dis-
count, but this is evidently not a high rate of interest, properly
so called, but a high rate of insurance against risk.
22 WAGES AND CAPITAL Book /.
marked by want of employment and distress among
the working classes than by the accumulation of un-
employed capital in all the great centers, and by nomi-
nal rates of interest on undoubted security. Thus,
under conditions which admit of no explanation con-
sistent with the current theory, do we find high interest
coinciding with high wages, and low interest with low
wages — capital seemingly scarce when labor is scarce,
and abundant when labor is abundant.
All these well known facts, which coincide with each
other, point to a relation between wages and interest,
but it is to a relation of conjunction, not of opposition.
Evidently they are utterly inconsistent with the theory
that wages are determined by the ratio between labor
and capital, or any part of capital.
How, then, it will be asked, could such a theory arise?
How is it that it has been accepted by a succession of
economists, from the time of Adam Smith to the present
day?
If we examine the reasoning by which in current
treatises this theory of wages is supported, we see at
once that it is not an induction from observed facts,
but a deduction from a previously assumed theory —
viz., that wages are drawn from capital. It being
assumed that capital is the source of wages, it neces-
sarily follows that the gross amount of wages must be
limited by the amount of capital devoted to the em-
ployment of labor, and hence that the amount individual
laborers can receive must be determined by the ratio
between their number and the amount of capital exist-
ing for their recompense.* This reasoning is valid, but
♦For instance McCulloch (Note VI to Wealth of Nations)
says: “That portion of the capital or wealth of a country which
the employers of labor intend to or are willing to pay out in the
purchase of labor, may be much larger at one time than another
But whatever may be its absolute magnitude, it obviously forms
Ckmp /. THE CURRENT P OOT K INE 23
the conclusion, as we have seen, does not correspond
with the facts. The fault, therefore, must be in the
premises. Let us see.
I am aware that the theorem that wages are drawn
from capital is one of the most fundamental and appar-
ently best settled of current political economy, and that
it has been accepted as axiomatic by all the great think-
ers who have devoted their powers, to. the elucidation
of the science. Nevertheless, I think it can be demon-
strated to be a fundamental error — the fruitful parent
of a long series of errors, which vitiate most important
practical conclusions. This demonstration I am about
to attempt. It is necessary that it should be clear and
conclusive, for a doctrine upon which so much important
reasoning is based, which is supported by such a weight
of authority, which is so plausible in itself, and is so
liable to recur in different forms, cannot be safely
brushed aside in a paragraph.
The proposition I shall endeavor to prove, is:
That wages , instead of, being drawn from capital, are
in reality drawn from tK&product of the labor for which
they are paid.*
Now, inasmuch as the current theory that wages are
the only source from which any portion of the wages of labor
can be derived. No other fund is m existence from which the
laborer, as such, can draw a single shilling. And hence it follows
that the average rate of wages, or the share of the national capi-
tal appropriated to the employment of labor falling, at an aver-
age, to each laborer, must entirely depend on its amount as
compared with the number of those amongst whom it has to be
divided.” Similar citations might be made from* all the stand-
ard economists.
* We are speaking of labor expended in production, to which
it is best for the sake of simplicity to confine the inquiry. Any
question which may arise in the reader’s mind as to wages for
unproductive services had best therefore be deferred.
•i
WAGES AND CAPITAL
Book l
24
drawn from capital also holds that capital is reimbursed
from production, this at first glance may seem a distinc-
tion without a difference — a mere change in terminology,
to discuss which would be but to add to those unprofit-
able disputes that render so much that has been written
upon politico-economic subjects as barren and worthless
as the controversies of the various learned societies
about the true reading of the inscription on the stone
that Mr. Pickwick found. But that it is much more
than a formal distinction will be apparent when it is
considered that upon the difference between the two
propositions are built up all the current theories as
to the relations of capital and labor; that from it are
deduced doctrines that, themselves regarded as axio-
matic, bound, direct, and govern the ablest minds in
the discussion of the most momentous questions. For,
upon the assumption that wages are drawn directly
from capital, and not from the product of the labor, is
based, not only the doctrine that wages depend upon
the ratio between capital and labor, but the doctrine
that industry is limited by capital — that capital must
be accumulated before labor is employed, and labor
cannot be employed except as capital is accumulated;
the doctrine that every increase of capital gives or ia
capable of giving additional employment to industry;
the doctrine that the conversion of circulating capital
into fixed capital lessens the fund applicable to the
maintenance of labor; the doctrine that more laborers
can be employed at low than at high wages; the doctrine
that capital applied to agriculture will maintain more
laborers than if applied to manufactures; the doctrine
that profits are high or low as wages are low or high, or
that they depend upon the cost of the subsistence of
laborers ; together with such paradoxes as that a demand
for commodities is not a demand for labor, or that cer-
tain commodities may be increased in cost by a reduc-
Chap. I. THE CURRENT DOCTRINE 25
tion in wages or diminished in cost by an increase in
wages.
In short, all the teachings of the current political
economy, in the widest and most important part of its
domain, are based more or less directly upon the assump-
tion that labor is maintained and paid out of existing
capital before the product which constitutes the ultimate
object is secured. If it be shown that this is an error,
and that on the contrary the maintenance and payment
of labor do not even temporarily trench on capital, but
are directly drawn from the product of the labor, then
all this vast superstructure is left without support and
must fall. And so likewise must fall the vulgar theories
which also have their base in the belief that the sum
to be distributed in wages is a fixed one, the individual
shares in which must necessarily be decreased by an
increase in the number of laborers.
The difference between the current theory and the one
I advance is, in fact, similar to that between the mer-
cantile theory of international exchanges and that with
which Adam Smith supplanted it. Between the theory
that commerce is the exchange of commodities for
money, and the theory that it is the exchange of com-
modities for commodities, there may seem no real dif-
ference when it is remembered that the adherents of the
mercantile theory did not assume that money had any
other use than as it could be exchanged for commodi-
ties. Yet, in the practical application of these two
theories, there arises all the difference between rigid
governmental protection and free trade.
If I have said enough to show the reader the ultimate
importance of the reasoning through which I am about
to ask him to follow me, it will not be necessary to
apologize in advance either for simplicity or prolixity.
In arraigning a doctrine of such importance — a doctrine
26 WAGES AND CAPITAL Boat A
supported by such a weight of authority, it is necessary
to be both clear and thorough.
Were it not for this I should be tempted to dismiss
with a sentence the assumption that wages are drawn
from capital. For all the vast superstructure which
the current political economy builds upon this doctrine
is in truth based upon a foundation which has been
merely taken for granted, without the slightest at-
tempt to distinguish the apparent from the real. Be-
cause wages are generally paid in money, and in many
of the operations of production are paid before the
product is fully completed, or can be utilized, it is in-
ferred that wages are drawn from pre-existing capital,
and, therefore, that industry is limited by capital —
that is to say that labor cannot be employed until
capital has been accumulated, and can only be employed
to the extent that capital has been accumulated.
Yet in the very treatises in which the limitation of in-
dustry by capital is laid down without reservation and
made the basis for the most important reasonings and
elaborate theories, we are told that capital is stored-
up or accumulated labor — “that part of wealth which
is saved to assist future production.” If we substitute
for the word “capital” this definition of the word, the
proposition carries its own refutation, for that labor
cannot be employed until the results of labor are saved
becomes too absurd for discussion.
Should we, however, with this reductio ad absurdum,
attempt to close the argument, we should probably be
met with the explanation, not that the first laborers were
supplied by Providence with the capital necessary to set
them to work, but that the proposition merely refers to
a state of society in which production has become a
complex operation.
But the fundamental truth, that in all economic rea-
soning must be firmly grasped, and never let go, is that
Chop. I.
THE CURRENT DOCTRINE
27
society in its most highly developed form is but an
elaboration of society in its rudest beginnings, and that
principles obvious in the simpler relations of men are
merely disguised and not abrogated or reversed by the
more intricate relations that result from the division
of labor and the use of complex tools and methods. The
steam grist mill, with its complicated machinery ex-
hibiting every diversity of motion, is simply what the
rude stone mortar dug up from an ancient river bed
was in its day — an instrument for grinding corn. And
every man engaged in it, whether tossing wood into the
furnace, running the engine, dressing stones, printing
sacks or keeping books, is really devoting his labor
to the same, purpose that the prehistoric savage did
when he used his mortar — the preparation of grain for
human food.
And so, if we reduce to their lowest terms all the
complex operations of modern production, we see that
each individual who takes part in this infinitely sub-
divided and intricate network of production and ex-
change is really doing what the primeval man did when
he climbed the trees for fruit or followed the receding
tide for shell-fish — endeavoring to obtain from nature
by the exertion of his powers the satisfaction of his
desires. If we keep this firmly in mind, if we look
upon production as a whole — as the co-operation of all
embraced in any of its great groups to satisfy the vari-
ous desires of each, we plainly see that the reward
each obtains for his exertions comes as truly and as
directly from nature as the result of that exertion, as
did that of the first man.
To illustrate: In the simplest state of which we can
conceive, each man digs his own bait and catches his
own fish. The advantages of the division of labor soon
become apparent, and one digs bait while the others
fish. Yet evidently the one who digs bait is in reality
28
WAGES AND CAPITAL
Book l
doing as much toward the catching of fish as any of
those who actually take the fish. So when the advan-
tages of canoes are discovered, and instead of all going
a-fishing, one stays behind and makes and repairs
canoes, the canoe-maker is in reality devoting his labor
to the taking of fish as much as the actual fishermen,
and the fish which he eats at night when the fishermen
come home are as truly the product of his labor as of
theirs. And thus when the division of labor is fairly
inaugurated, and instead of each attempting to satisfy
all of his wants by direct resort to nature, one fishes,
another hunts, a third picks berries, a fourth gathers
fruit, a fifth makes tools, a sixth builds huts, and a
seventh prepares clothing — each one is to the extent he
exchanges the direct product of his own labor for the
direct product of the labor of others really applying
his own labor to the production of the things he uses
— is in effect satisfying his particular desires by the
exertion of his particular pow r ers; that is to say, what
he receives he in reality produces. If he digs roots
and exchanges them for venison, he is in effect as truly
the procurer of the venison as though he had gone in
chase of the deer and left the huntsman to dig his own
roots. The common expression, “I made so and so,”
signifying “I earned so and so,” or “I earned money
with which I purchased so and so,” is, economically
speaking, not metaphorically but literally true. Earning
is making.
Now, if we follow these principles, obvious enough
in a simpler state of society, through the complexities
of the state we call civilized, we shall see clearly that
in every case in w r hich labor is exchanged for com-
modities, production really precedes enjoyment; that
wages are the earnings — that is to say, the makings of
labor — not the advances of capital, and that the laborer
who receives his wages in money (coined or printed,
Chap. /. THE CURRENT DOCTRINE 20
it may be, before his labor commenced) really receives
in return for the addition his labor has made to the
general stock of wealth, a draft upon that general stock,
which he may utilize in any particular form of wealth
that will best satisfy his desires; and that neither the
money, which is but the draft, nor the particular form
of wealth which he useu it to call for, represents advances
of capital for his maintenance, but on the contrary
represents the wealth, or a portion of the wealth, his
labor has already added to the general stock.
Keeping these principles in view we see that the
draughtsman, who, shut up in some dingy office on the
banks of the Thames, is drawing the plans for a great
marine engine, is in reality devoting his labor to the
production of bread and meat as truly as though he
were garnering the grain in California or swinging a
lariat on a La Plata pampa; that he is as truly making
his own clothing as though he were shearing sheep in
Australia or weaving cloth in Paisley, and just as ef-
fectually producing the claret he drinks at dinner as
though he gathered the grapes on the banks of the
Garonne. The miner who, two thousand feet under
ground in the heart of the Comstock, is digging out
silver ore, is, in effect, by virtue of a thousand ex-
changes, harvesting crops in valleys five thousand feet
nearer the earth’s center; chasing the whale through
Arctic icefields; plucking tobacco leaves in Virginia;
picking coffee berries in Honduras; cutting sugar cane
on the Hawaiian Islands; gathering cotton in Georgia
or weaving it in Manchester or Lowell; making quaint
wooden toys for his children in the Hartz Mountains;
or plucking amid the green and gold of Los Angeles
orchards the oranges which, when his shift is relieved,
he will take home to his sick wife. The wages which he
receives on Saturday night at the mouth of the shaft,
what are they but the certificate to all the world that
SO WAGES AND CAPITAL Bttkl
he has done these things — the primary exchange in the
long series which transmutes his labor into the things he
has really been laboring for?
•
All this is clear when looked at in this way; but to
meet this fallacy in all its strongholds and lurking places
we must change our investigation from the deductive
to the inductive form. Let us now see, if, beginning
with facts and tracing their relations, we arrive at the
same conclusions as are thus obvious when, beginning
with first principles, we trace their exemplification in
complex facts.
CHAPTER II
THE MEANING OF THE TERMS
Before proceeding further in our inquiry, let us make
sure of the meaning of our terms, for indistinctness in
their use must inevitably produce ambiguity and in-
determinateness in reasoning. Not only is it requisite
in economic reasoning to give to such words as “wealth,”
“capital,” “rent,” “wages,”, and the like, a much more
definite sense than they bear in common discourse, but,
unfortunately, even in political economy there is, as to
some of these terms, no certain meaning assigned by
common consent, different writers giving to the same
term different meanings, and the same writers often
using a term in different senses. Nothing can add to
the force of what has been said by so many eminent
authors as to the importance of clear and precise defini-
tions, save the example, not an infrequent one, of the
same authors falling into grave errors from the very
cause they warned against. And nothing so shows the
importance of language in thought as the spectacle of
even acute thinkers basing important conclusions upon
the use of the same word in varying senses. I shall
endeavor to avoid these dangers. It will be my effort
throughout, as any term becomes of importance, to
state clearly what I mean by it, and to use it in that
sense and in no other. Let me ask the reader to note
and to bear in mind the definitions thus given, as other*
wise I cannot hope to make myself properly understood-
f shall not attempt to attach arbitrary meanings to
31
32
WAGES AND CAPITAL
Book I.
words, or to coin terms, even when it would be con-
venient to do so, but shall conform to usage as closely
as is possible, only endeavoring so to fix the meaning of
words that they may clearly express thought.
What we have now on hand is to discover whether,
as a matter of fact, wages are drawn from capital. As
a preliminary, let us settle what we mean by wages and
what we mean by capital. To the former word a suf-
ficiently definite meaning has been given by economic
writers, but the ambiguities which have attached to the
use of the latter in political economy will require a
detailed examination.
As used in common discourse “wages” means a com-
pensation paid to a hired person for his services; and
we speak of one man “working for wages,” in contra-
distinction to another who is “working for himself.”
The use of the term is still further narrowed by the
habit of applying it solely to compensation paid for
manual labor. We do not speak of the wages of pro-
fessional men, managers or clerks, but of their fees,
commissions, or salaries. Thus the common meaning
of the word wages is the compensation paid to a hired
person for manual labor. But in political economy the
word wages has a much wider meaning, and includes all
returns for exertion. For, as political economists explain,
the three agents or factors in production are land, labor,
and capital, and that part of the produce which goes to
the second of these factors is by them styled wages.
Thus the term labor includes all human exertion in
the production of wealth, and wages, being that part of
the produce which goes to labor, includes all reward
for such exertion. There is, therefore, in the politico-
economic sense of the term wages no distinction as to
the kind of labor, or as to whether its reward is re-
ceived through an employer or not, but wages means the
return received for the exertion of labor, as distin-
Chap. II.
THE MEANING OF THE TERMS
33
guished from the return received for the use of capital,
and the return received by the landholder for the use
of land. The man who cultivates the soil for himself
receives his wages in its produce, just as, if he uses his
own capital and owns his own land, he may also receive
interest and rent; the hunter’s wages are the game he
kills; the fisherman’s wages are the fish he takes. The
gold washed out by the self-employing gold-digger is
as much his wages as the money paid to the hired coal
miner by the purchaser of his labor,* and, as Adam
Smith shows, the high profits of retail storekeepers are
in large part wages, being the recompense of their labor
and not of their capital. In short, whatever is received
as the result or reward of exertion is “wages.”
This is all it is now necessary to note as to “wages,”
but it is important to keep this in mind. For in the
standard economic works this sense of the term wages
is recognized with greater or less clearness only to be
subsequently ignored.
But it is more difficult to clear away from the idea of
capital the ambiguities that beset it, and to fix the
scientific use of the term. In general discourse, all sorts
of things that have a value or will yield a return are
vaguely spoken of as capital, while economic writers
vary so widely that the term can hardly be said to have
a fixed meaning. Let us compare with each other the
definitions of a few representative writers:
“That part of a man’s stock,” says Adam Smith
(Book II, Chap. I), “which he expects to afford him a
revenue, is called his capital,” and the capital of a
country or society, he goes on to say, consists of (1)
machines and instruments of trade which facilitate and
* This was recognised in common speech in California, where
the placer miners styled their earnings their “wages,” and spoke
of making high wages or low wages according to the amount of
gold taken out.
WAGES AMD CAPITAL
abridge labor; (2) buildings, not mere dwellings, but
which may be considered instruments of trade — such
as shops, farmhouses, etc.; (3) improvements of land
which better fit it for tillage or culture; (4) the ac-
quired and useful abilities of all the inhabitants; (5)
money; (6) provisions in the hands of producers and
dealers, from the sale of which they expect to derive
a profit; (7) the material of, or partially completed,
manufactured articles still in the hands of producers
or dealers; (8) completed articles still in the hands of
producers or dealers. The first four of these he styles
fixed capital, and the last four circulating capital, a dis-
tinction of which it is not necessary to our purpose to
take any note.
Ricardo’s definition is:
“Capital is that part of the wealth of a country which is em-
ployed in production, and consists of food, clothing, tools, raw
materials, machinery, etc., necessary to give effect to labor.” —
Principles of Political Economy, Chapter V.
This definition, it will be seen, is very different from
that of Adam Smith, as it excludes many of the things
which he includes — as acquired talents, articles of mere
taste or luxury in the possession of producers or deal-
ers; and includes some things he excludes — such as food,
clothing, etc., in the possession of the consumer.
McCulloch’s definition is:
"The capital of a nation really comprises all those portions of
the produce of industry existing in it that may be directly em-
ployed either to support human existence or to facilitate pro-
duction .” — Notes on Wealth of Nations, Book It, Chap. /.
This definition follows the line of Ricardo’s, but is
wider. While it excludes everything that is not capable
of aiding production, it includes everything that is so
capable, without reference to actual use or necessity for
use— -the horse drawing a pleasure carriage being, ao-
Chap, //•
THE MEANING OF THE TERMS
cording to McCulloch’s view, as he expressly states,
as much capital as the horse drawing a plow, because he
may, if need arises, be used to draw a plow.
John Stuart Mill, following the same general line as
Ricardo and McCulloch, makes neither the use nor the
capability of use, but the determination to use, the test
of capital. He says:
“Whatever things are destined .to supply productive labor with
the shelter, protection, tools and materials which the work re-
quires, and to feed and otherwise maintain the laborer during the
process, are capital.” — Principles of Political Economy, Book I,
Chap. IV.
These quotations sufficiently illustrate the divergence
of the masters. Among minor authors the variance is
still greater, as a few examples will suffice to show.
Professor Wayland, whose “Elements of Political
Economy” has long been a favorite text-book in Amer-
ican educational institutions, where there has been any
pretense of teaching political economy, gives this lucid
definition:
“The word capital is used in two senses. In relation to product
it means any substance on which industry is to be exerted. In
relation to industry, the material on which industry is about to
confer value, that on which it has conferred value; the instru-
ments which are used for the conferring of value, as well as the
means of sustenance by which the being is supported while he is
engaged in performing the operation.” — Elements of Political
Economy, Book I, Chap. I.
Henry C. Carey, the American apostle of protection-
ism, defines capital as “the instrument by which man
obtains mastery over nature, including in it the physical
and mental powers of man himself.” Professor Perry,
a Massachusetts free trader, very properly objects to
this that it hopelessly confuses the boundaries between
capital and labor, and then himself hopelessly con-
fuses the boundaries between capital and land by de-
36
WAGES AND CAPITAL
Bookl.
fining capital as “any valuable thing outside of man
himself from whose use springs a pecuniary increase or
profit.” An English economic writer of high standing,
Mr. Wm. Thornton, begins an elaborate examination
of the relations of labor and capital (“On Labor”) by
stating that he will include land with capital, which is
very much as if one who proposed to teach algebra
should begin with the declaration that he would con-
sider the signs plus and minus as meaning the same
thing and having the same value. An American writer,
also of high standing, Professor Francis A. Walker,
makes the same declaration in his elaborate book on
“The Wages Question.” Another English writer, N.
A. Nicholson (“The Science of Exchanges,” London,
1873), seems to cap the climax of absurdity by declar-
ing in one paragraph (p. 26) that “capital must of
course be accumulated by saving,” and in the very next
paragraph stating that “the land which produces a crop,
the plow which turns the soil, the labor which secures
the produce, and the produce itself, if a material profit
is to be derived from its employment, are all alike
capital.” But how land and labor are to be accumu-
lated by saving them he nowhere condescends to ex-
plain. In the same way a standard American writer,
Professor Amasa Walker (p. 66, “Science of Wealth”),
first declares that capital arises from the net savings of
labor and then immediately afterward declares that
land is capital.
I might go on for pages, citing contradictory and
self-contradictory definitions. But it would only weary
the reader. It is unnecessary to multiply quotations.
Those already given are sufficient to show how wide a
difference exists as to the comprehension of the term
capital. Any one who wants further illustration of the
“confusion worse confounded” which exists on this sub-
ject among the professors of political economy may find
Chap. II.
THE MEANING OF THE TERMS
37
it in any library where the works of these professon
are ranged side by side.
Now, it makes little difference what name we give to
things, if when we use the name we always keep in
view the same things and no others. But the difficulty
arising in economic reasoning from these vague and
varying definitions of capital is that it is only in the
premises of reasoning that the term is used in the pe-
culiar sense assigned by the definition, while in the
practical conclusions that are reached it is always used,
or at least it is always understood, in one general and
definite sense. When, for instance, it is said that wages
are drawn from capital, the word capital is understood
in the same sense as when we speak of the scarcity or
abundance, the increase or decrease, the destruction or
increment, of capital — a commonly understood and defi-
nite sense which separates capital from the other factors
of production, land and labor, and also separates it
from like things used merely for gratification. In fact,
most people understand well enough what capital is
until they begin to define it, and I think their works
will show that the economic writers who differ so widely
in their definitions use the term in this commonly un-
derstood sense in all cases’ except in their definitions
and the reasoning based on them.
This common sense of the term is that of wealth de-
voted to procuring more wealth. Dr. Adam Smith cor-
rectly expresses this common idea when he says: “That
nart of a man’s stock which he expects to afford him
revenue is called his capital.” And the capital of a
community is evidently the sum of such individual
stocks, or that part of the aggregate stock which is ex-
pected to procure more wealth. This also is the deriva-
tive sense of the term. The word capital, as philologists
trace it, comes down to us from a time when wealth was
estimated in cattle, and a man’s income depended upon
Bmokl.
38 WAGES AND CAPITAL
the number of head he could keep for their increase.
The difficulties which beset the use of the word capital,
as an exact term, and which are even more strik-
ingly exemplified in current political and social discus-
sions than in the definitions of economic writers, arise
from two facts — first, that certain classes of things, the
possession of which to the individual is precisely equiva-
lent to the possession of capital, are not part of the
capital of the community; and, second, that things of
the same kind may or may not be capital, according to
the purpose to which they are devoted.
With a little care as to these points, there should be
no difficulty in obtaining a sufficiently clear and fixed
idea of what the term capital as generally used properly
includes; such an idea as will enable us to say what
things are capital and what are not, and to use the
word without ambiguity or slip.
Land, labor, and capital are the three factors of pro-
duction. If we remember that capital is thus a term
used in contradistinction to land and labor, we at once
see that nothing properly included under either one of
these terms can be properly classed as capital. The
term land necessarily includes, not merely the surface
of the earth as distinguished from the water and the
air, but the whole material universe outside of man
himself, for it is only by having access to land, from
which his very body is drawn, that man can come in
contact with or use nature. The term land embraces, in
short, all natural materials, forces, and opportunities,
and, therefore, nothing that is freely supplied by nature
can be properly classed as capital. A fertile field, a
rich vein of ore, a falling stream which supplies power,
may give to the possessor advantages equivalent to the
possession of capital, but to class such things as capital
would be to put an end to the distinction between land
and capital, and, so far as they relate to each other.
Chap. //.
THE MEANING OF THE TERMS
39
to make the two terms meaningless. The term labor,
in like manner, includes all human exertion, and hence
human powers whether natural or acquired can never
properly be classed as capital. In common parlance
we often speak of a man’s knowledge, skill, or industry
as constituting his capital; but this is evidently a meta-
phorical use of language that must be eschewed in rea-
soning that aims at exactness. Superiority in such
qualities may augment the income of an individual
just as capital would, and an increase in the knowledge,
skill, or industry of a community may have the same
effect in increasing its production as would an increase
of capital; but this effect is due to the increased power
of labor and not to capital. Increased velocity may
give to the impact of a cannon ball the same effect as
increased weight, yet, nevertheless, weight is one thing
and velocity another.
Thus we must exclude from the category of capital
everything that may be included either as land or labor.
Doing so, there remain only things which are neither
land nor labor, but which have resulted from the union
of these two original factors of production. Nothing
can be properly capital that does not consist of these —
that is to say, nothing can be capital that is not wealth.
But it is from ambiguities in the use of this inclusive
term wealth that many of the ambiguities which beset
the term capital are derived.
As commonly used the word “wealth” is applied to
anything having an exchange value. But when used as
a term of political economy it must be limited to a
much more definite meaning, because many things are
commonly spoken of as wealth which in taking account
of collective or general wealth cannot be considered as
wealth at all. Such things have an exchange value,, and
are commonly spoken of as wealth, insomuch as they
represent as between individuals, or between sets of
WAGES AND CAPITAL
Book I.
40
individuals, the power of obtaining wealth; but they
are not truly wealth, inasmuch as their increase or de-
crease does not affect the sum of wealth. Such are
bonds, mortgages, promissory notes, bank bills, or other
stipulations for the transfer of wealth. Such are slaves,
whose value represents merely the power of one class
to appropriate the earnings of another class. Such are
lands, or other natural opportunities, the value of which
is but the result of the acknowledgment in favor of
certain persons of an exclusive right to their use, and
which represents merely the power thus given to the
owners to demand a share of the wealth produced by
those who use them. Increase in the amount of bonds,
mortgages, notes, or bank bills cannot increase the
wealth of the community that includes as well those who
promise to pay as those who are entitled to receive.
The enslavement of a part of their number could not
increase the wealth of a people, for what the enslavers
gained the enslaved would lose. Increase in land values
does not represent increase in the common wealth, for
what land owners gain by higher prices, the tenants
or purchasers who must pay them will lose. And all this
relative wealth, which, in common thought and speech,
in legislation and law, is undistinguished from actual
wealth, could, without the destruction or consumption
of anything more than a few drops of ink and a piece of
paper, be utterly annihilated. By enactment of the
sovereign political power debts might be canceled, slaves
emancipated, and land resumed as the common prop-
erty of the whole people, without the aggregate wealth
being diminished by the value of a pinch of snuff, for
what some would lose others would gain. There would
be no more destruction of wealth than there was crea-
tion of wealth when Elizabeth Tudor enriched her
favorite courtiers by the grant of monopolies, or when
Chap. II.
THE MEANING OF THE TEEMS
41
Boris Godoonof made Russian peasants merchantable
property.
All things which have an exchange value are, there-
fore, not wealth, in the only sense in which the term
can be used in political economy. Only such things
can be wealth the production of which increases and
the destruction of which decreases the aggregate of
wealth. If we consider what these things are, and what
their nature is, we shall have no difficulty in defining
wealth.
When we speak of a community increasing in wealth
— as when we say that England has increased in wealth
since the accession of Victoria, or that California is a
wealthier country than when it was a Mexican terri-
tory — we do not mean to say that there is more land, or
that the natural powers of the land are greater, or that
there are more people, for when we wish to express that
idea we speak of increase of population; or that the
debts or dues owing by some of these people to others
of their number have increased ; but we mean that there
is an increase of certain tangible things, having an ac-
tual and not merely a relative value — such as buildings,
cattle, tools, machinery, agricultural and mineral prod-
ucts, manufactured goods, ships, wagons, furniture, and
the like. The increase of such things constitutes an
increase of wealth; their decrease is a lessening of
wealth; and the community that, in proportion to its
numbers, has most of such things is the wealthiest com-
munity. The common character of these things is that
they consist of natural substances or products which
have been adapted by human labor to human use or
gratification, their value depending on the amount of
labor which upon the average would be required to
produce things of like kind.
Thus wealth, as alone the term can be used in politi-
cal economy, consists of natural products that have
42
WAGES AND CAPITAL
Btokl
been secured, moved, combined, separated, or in other
ways modified by human exertion, so as to fit them for
the gratification of human desires. It is, in other words,
labor impressed upon matter in such a way as to store
up, as the heat of the sun is stored up in coal, the
power of human labor to minister to human desires.
Wealth is not the sole object of labor, for labor is also
expended in ministering directly to desire; but it is the
object and result of what we call productive labor —
that is, labor which gives value to material things.
Nothing which nature supplies to man without his labor
is wealth, nor yet does the expenditure of labor result
in wealth unless there is a tangible product which has
and retains the power of ministering to desire.
Now, as capital is wealth devoted to a certain pur-
pose, nothing can be capital which does not fall within
this definition of wealth. By recognizing and keeping
this in mind, we get rid of misconceptions which vitiate
all reasoning in which they are permitted, which befog
popular thought, and have led into mazes of contra-
diction even acute thinkers.
But though all capital is wealth, all wealth is not
capital. Capital is only a part of wealth — that part,
namely, w’hich is devoted to the aid of production. It
is in drawing this line between the wealth that is and
the wealth that is not capital that a second class of
misconceptions are likely to occur.
The errors which I have been pointing out, and which
consist in confounding with wealth and capital things
essentially distinct, or which have but a relative exist-
ence, are now merely vulgar errors. They are wide-
spread, it is true, and have a deep root, being held, not
merely by the less educated classes, but seemingly by
a large majority of those who in such advanced coun-
tries as England and the United States mold and guide
public opinion, make the laws in Parliaments, Con-
Chap. II.
THE MEANING OF THE TERMS
43
grasses and Legislatures, and administer them in the
courts. They crop out, moreover, in the disquisitions
of many of those flabby writers who have burdened the
press and darkened counsel by numerous volumes which
are dubbed political economy, and which pass as text-
books with the ignorant and as authority with those who
do not think for themselves. Nevertheless, they are
only vulgar errors, inasmuch as they receive no counte-
nance from the best writers on political economy. By
one of those lapses which flaw his great work and strik-
ingly evince the imperfections of the highest talent,
Adam Smith counts as capital certain personal qualities,
an inclusion which is not consistent with his original
definition of capital as stock from which revenue is
expected. But this error has been avoided by his most
eminent successors, and in the definitions, previously
given, of Ricardo, McCulloch, and Mill, it is not in-
volved. Neither in their definitions nor in that of
Smith is involved the vulgar error which confounds
as real capital things which are only relatively capital,
such as evidences of debt, land values, etc. But as to
things which are really wealth, their definitions differ
from each other, and widely from that of Smith, as to
what is and what is not to be considered as capital.
The stock of a jeweler would, for instance, be included
as capital by the definition of Smith, and the food or
clothing in possession of a laborer would be excluded.
But the definitions of Ricardo and McCulloch would ex-
clude the stock of the jeweler, as would also that of
Mill, if understood as most persons would understand
the words I have quoted. But as explained by him, it
is neither the nature nor the destination of the things
themselves which determines whether they are or are
not capital, but the intention of the owner to devote
either the things or the value received from their sale
to the supply of productive labor with tools, materials,
44 WAGES AND CAPITAL Book /.
and maintenance. All these definitions, however, agree
in including as capital the provisions and clothing of the
laborer, which Smith excludes.
Let us consider these three definitions, which repre-
sent the best teachings of current political economy:
To McCulloch’s definition of capital as “all those por-
tions of the produce of industry that may be directly
employed either to support human existence or to facili-
tate production,” there are obvious objections. One
may pass along any principal street in a thriving town
or city and see stores filled with all sorts of valuable
things, which, though they cannot be employed either
to support human existence or to facilitate production,
undoubtedly constitute part of the capital of the store-
keepers and part of the capital of the community. And
he can also see products of industry capable of sup-
porting human existence or facilitating production being
consumed in ostentation or useless luxury. Surely these,
though they might, do not constitute part of capital.
Ricardo’s definition avoids including as capital things
which might be but are not employed in production, by
covering only such as are employed. But it is open to
the first objection made to McCulloch’s. If only wealth
that may be, or that is, or that is destined to be, used
in supporting producers, or assisting production, is cap-
ital, then the stocks of jewelers, toy dealers, tobacco-
nists, confectioners, picture dealers, etc. — in fact, all
stocks that consist of, and all stocks in so far as they
consist of articles of luxury, are not capital.
If Mill, by remitting the distinction to the mind of
the capitalist, avoids this difficulty (which does not
seem to me clear), it is by making the distinction so
vague that no power short of omniscience could tell in
any given country at any given time what was and
what was not capital.
But the great defect which these definitions have in
Chap. II.
THE MEANING OF THE TERMS
45
common is that they include what clearly cannot be
accounted capital, if any distinction is to be made be*
tween laborer and capitalist. For they bring into the
category of capital the food, clothing, etc., in the pos-
session of the day laborer, which he will consume
whether he works or not, as well as the stock in the
hands of the capitalist, with which he proposes to pay
the laborer for his work.
Yet, manifestly, this is not the sense in which the
term capital is used by these writers when they speak of
labor and capital as taking separate parts in the work
of production and separate shares in the distribution of
its proceeds; when they speak of wages as drawn from
capital, or as depending upon the ratio between labor
and capital, or in any of the ways in which the term
is generally used by them. In all these cases the term
capital is used in its commonly understood sense, as
that portion of wealth which its owners do not pro-
pose to use directly for their own gratification, but foi
the purpose of obtaining more wealth. In short, by
political economists, in everything except their defini-
tions and first principles, as well as by the world at
large, “that part of a man’s stock,” to use the words of
Adam Smith, “which he expects to afford him revenue
is called his capital.” This is the only sense in which
the term capital expresses any fixed idea — the only
sense in which we can with any clearness separate it
from wealth and contrast it with labor. For, if we
must consider as capital everything which supplies the
laborer with food, clothing, shelter, etc., then to find a
laborer who is not a capitalist we shall be forced to
hunt up an absolutely naked man, destitute even of a
sharpened stick, or of a burrow in the ground — a situa-
tion in which, save as the result of exceptional circum-
stances, human beings have never yet been found.
It seems to me that the variance and inexactitude m
*6 WAGES AND CAPITAL Book J.
these definitions arise from the fact that the idea oi
what capital is has been deduced from a preconceived
idea of how capital assists production. Instead of de-
termining what capital is, and then observing what
capital does, the functions of capital have first been
assumed, and then a definition of capital made which in-
cludes all things which do or may perform those func-
tions. Let us reverse this process, and, adopting the
natural order, ascertain what the thing is before settling
what it does. All we are trying to do, all that it is neces-
sary to do, is to fix, as it were, the metes and bounds of
* term that in the main is well apprehended — to make
definite, that is, sharp and clear on its verges, a com-
mon idea.
If the articles of actual wealth existing at a given
time in a given community were presented in situ to a
dozen intelligent men who had never read a line of
political economy, it is doubtful if they would differ in
respect to a single item, as to whether it should be ac-
counted capital or not. Money which its owner holds
for use in his business or in speculation would be ac-
counted capital; money set aside for household or per-
sonal expenses would not. That part of a farmer’s crop
held for sale or for seed, or to feed his help in part
payment of wages, would be accounted capital; that
held for the use of his own family would not be. The
horses and carriage of a hackman would be classed as
capital, but an equipage kept for the pleasure of its
owner would not. So no one would think of counting
as capital the false hair on the head of a woman, the
cigar in the mouth of a smoker, or the toy with which
a child is playing; but the stock of a hair dealer, of a
tobacconist, or of the keeper of a toy store, would be
unhesitatingly set down as capital. A coat which a
tailor had made for sale would be accounted capital,
but not the coat he had made for himself. Food in the
Chap. II.
THE MEANING OF THE TERMS
47
possession of a hotel-keeper or a restaurateur would be
accounted capital, but not the food in the pantry of a
housewife, or in the lunch basket of a workman. Pig
iron in the hands of the smelter, or founder, or dealer,
would be accounted capital, but not the pig iron used
as ballast in the hold of a yacht. The bellows of a
blacksmith, the looms of a factory, would be capital,
but not the sewing machine of a woman who does only
her own work; a building let for hire, or used for busi-
ness or productive purposes, but not a homestead. In
short, I think we should find that now, as when Dr.
Adam Smith wrote, “that part of a man’s stock which
he expects to yield him a revenue is called his capital.”
And, omitting his unfortunate slip as to personal quali-
ties, and qualifying somewhat his enumeration of
money, it is doubtful if we could better list the different
articles of capital than did Adam Smith in the passage
which in the previous part of this chapter I have con-
densed.
Now, if, after having thus separated the wealth that
is capital from the wealth that is not capital, we look
for the distinction between the two classes, we shall not
find it to be as to the character, capabilities, or final
destination of the things themselves, as has been vainly
attempted to draw it; but it seems to me that we shall
find it to be as to whether they are or are not in the
possession of the consumer.* Such articles of wealth
as in themselves, in their uses, or in their products, are
* Money may be said to be in the hands of the consumer when
devoted to the procurement of gratification, as, though not in
itself devoted to consumption, it represents wealth which is; and
thus what in the previous paragraph I have given as the common
classification would be covered by this distinction, and would b«
substantially correct. In speaking of money in this connection,
I am of course speaking of coin, for although paper money may
perform all the functions of coin, it is not wealth, and cannot
therefore be capital.
48
WAGES AND CAPITAL
Booth
yet to be exchanged are capital ; such articles of wealth
as are in the hands of the consumer are not capital.
Hence, if we define capital as wealth in course of ex -
change, understanding exchange to include not merely
the passing from hand to hand, but also such transmu-
tations as occur when the reproductive or transforming
forces of nature are utilized for the increase of wealth,
we shall, I think, comprehend all the things that the
general idea of capital properly includes, and shut out
all it does not. Under this definition, it seems to me, for
instance, will fall all such tools as are really capital.
For it is as to whether its services or uses are to be
exchanged or not which makes a tool an article of capi-
tal or merely an article of wealth. Thus, the lathe of
a manufacturer used in making things which are to be
exchanged is capital, while the lathe kept by a gentle-
man for his ow r n amusement is not. Thus, wealth used
in the construction of a railroad, a public telegraph line,
a stage coach, a theater, a hotel, etc., may be said to
be placed in the course of exchange. The exchange is
not effected all at once, but little by little, with an in-
definite number of people. Yet there is an exchange,
and the “consumers” of the railroad, the telegraph line,
the stage coach, theater or hotel, are not the owners, but
the persons who from time to time use them.
Nor is this definition inconsistent with the idea that
capital is that part of wealth devoted to production.
It is too narrow an understanding of production which
confines it merely to the making of things. Production
includes not merely the making of things, but the bring-
ing of them to the consumer. The merchant or
storekeeper is thus as truly a producer as is the manufac-
turer, or farmer, and his stock or capital is as much
devoted to production as is theirs. But it is not worth
while now to dwell upon the functions of capital, which
we shall be better able to determine hereafter. Nor is
Chap. II.
THE MEANING OF THE TEBMS
49
the definition of capital I have suggested of any impor-
tance. I am not writing a text-book, but only attempt-
ing to discover the laws which control a great social
problem, and if the reader has been led to form a clear
idea of what things are meant when we speak of capital
my purpose is served.
But before closing this digression let me call attention
to what is often forgotten — namely, that the terms
"wealth,” “capital,” “wages,” and the like, as used in
political economy are abstract terms, and that nothing
can be generally affirmed or denied of them that cannot
be affirmed or denied of the whole class of things they
represent. The failure to bear this in mind has led to
much confusion of thought, and permits fallacies, other'
wise transparent, to pass for obvious truths. Wealth
being an abstract term, the idea of wealth, it must be
remembered, involves the idea of exchangeability. The
possession of wealth to a certain amount is potentially
the possession of any or all species of wealth to that
equivalent in exchange. And, consequently, so of'
capital.
CHAPTER III
WAGES NOT DRAWN FROM CAPITAL, BUT PRODUCED BY THE
LABOR
The importance of this digression will, I think, be-
come more and more apparent as we proceed in our
inquiry, but its pertinency to the branch we are now
engaged in may at once be seen.
It is at first glance evident that the economic mean-
ing of the term wages is lost sight of, and attention is
concentrated upon the common and narrow meaning
of the word, when it is affirmed that wages are drawn
from capital. For, in all those cases in which the
laborer is his own employer and takes directly the
produce of his labor as its reward, it is plain enough
that wages are not drawn from capital, but result
directly as the product of the labor. If, for instance, I
devote my labor to gathering birds’ eggs or picking
wild berries, the eggs or berries I thus get are my wages.
Surely no one will contend that in such a case wages are
drawn from capital. There is no capital in the case.
An absolutely naked man, thrown on an island where
no human being has before trod, may gather birds’ eggs
or pick berries.
Or if I take a piece of leather and work it up into a
pair of shoes, the shoes are my wages — the reward of
my exertion. Surely they are not drawn from capital —
either my capital or any one else’s capital — but are
brought into existence by the labor of which they be-
come the wages; and in obtaining this pair of shoes as
50
Chap. III.
WAGES NOT DRAWN FROM CAPITAL
51
the wages of my labor, capital is not even momentarily
lessened one iota. For, if we call in the idea of capital,
my capital at the beginning consists of the piece of
leather, the thread, etc. As my labor goes on, value is
steadily added, until, when my labor results in the
finished shoes, I have my capital plus the difference in
value between the material and the shoes. In obtain-
ing this additional value — my wages — how is capital at
any time drawn upon?
Adam Smith, who gave the direction to economic
thought that has resulted in the current elaborate the-
ories of the relation between wages and capital, recog-
nized the fact that in such simple cases as I have
instanced, wages are the produce of labor, and thus
begins his chapter upon the wages of labor (Chapter
VIII) :
“The produce oj labor constitutes the natural recompense or
wages of labor. In that original state of things which precedes
both the appropriation of land and the accumulation of stock,
the whole produce of labor belongs to the laborer. He has
neither landlord nor master to share with him.”
Had the great Scotchman taken this as the initial
point of his reasoning, and continued to regard the
produce of labor as the natural wages of labor, and the
landlord and master but as sharers, his conclusions
would have been very different, and political economy
to-day would not embrace such a mass of contradictions
and absurdities; but instead of following the truth obvi-
ous in the simple modes of production as a clew through
the perplexities of the more complicated forms, he mo-
mentarily recognizes it, only immediately to abandon
it, and stating that “in every part of Europe twenty
workmen serve under a master for one that is inde-
pendent, n he recommences the inquiry from a point of
view in which the master is considered as providing
from his capital the wages of his workmen.
Mft
WAGES AND CAPITAL
Booki:
It is evident that in thus placing the proportion of
self-employing workmen as but one in twenty, Adam
Smith had in mind but the mechanic arts, and that,
including all laborers, the proportion who take their
earnings directly, without the intervention of an em-
ployer, must, even in Europe a hundred years ago, have
been much greater than this. For, besides the indepen-
dent laborers who in every community exist in consider-
able numbers, the agriculture of large districts of
Europe has, since the time of the Roman Empire, been
carried on by the metayer system, under which the
capitalist receives his return from the laborer instead
of the laborer from the capitalist. At any rate, in the
United States, where any general law of wages must
apply as fully as in Europe, and where in spite of the
advance of manufactures a very large part of the people
are yet self-employing farmers, the proportion of la-
borers who get their wages through an employer must be
comparatively small.
But it is not neeessarv to discuss the ratio in which
*
self-employing laborers anywhere stand to hired labor-
ers, nor is it necessary to multiply illustrations of the
truism that where the laborer takes directly his wages
they are the product of his labor, for as soon as it is
realized that the term wages includes all the earnings
of labor, as well when taken directly by the laborer in
the results of his labor as when received from an em-
ployer, it is evident that the assumption that wages are
drawn from capital, on which as a universal truth such
a vast superstructure is in standard politico-economic
treatises so unhesitatingly built, is at least in large part
untrue, and the utmost that can with any plausibility
be affirmed is that some wages (i. e., wages received by
the laborer from an employer) are dr^wn from capital.
This restriction of the major premise at once invalidates
all the deductions that are made from it; but without
Chap. Ill .
WAGES NOT DRAWN FROM CAPITAL
53
resting here, let us see whether even in this restricted
sense it accords with the facts. Let us pick up the clew
where Adam Smith dropped it, and advancing step by
step, see whether the relation of facts which is obvious
in the simplest forms of production does not run through
the most complex.
Next in simplicity to “that original state of things,”
of which many examples may yet be found, where the
whole produce of labor belongs to the laborer, is the
arrangement in which the laborer, though working for
another person, or with the capital of another person,
receives his wages in kind — that is to say, in the things
his labor produces. In this case it is as clear as in the
case of the self-employing laborer that the wages are
really drawn from the product of the labor, and not
at all from capital. If I hire a man to gather eggs, to
pick berries, or to make shoes, paying him from the eggs,
the berries, or the shoes that his labor secures, there
can be no question that the source of the wages is the
labor for which they are paid. Of this form of hiring
is the saer-and-daer stock tenancv, treated of with such
perspicuity by Sir Henry Maine in his “Early History
of Institutions,” and which so clearly involved the rela-
tion of employer and employed as to render the ac-
ceptor of cattle the man or vassal of the capitalist who
thus employed him. It was on such terms as these
that Jacob worked for Laban, and to this day, even in
civilized countries, it is not an infrequent mode of em-
ploying labor. The farming of land on shares, which
prevails to a considerable extent in the Southern States
of the Union and in California, the metayer system of
Europe, as well as the many cases in which superinten-
dents, salesmen, etc., are paid by a percentage of profits,
what are they but the employment of labor for wages
which consist of part of its produce?
The next step in the advance from simplicity to com-
54
WAGES AND CAPITAL
Book h
plexity is where the wages, though estimated in kind,
are paid in an equivalent of something else. For in-
stance, on American whaling ships the custom is not to
pay fixed wages, but a “lay,” or proportion of the catch,
which varies from a sixteenth to a twelfth to the captain
down to a three-hundredth to the cabin-boy. Thus,
when a whaleship comes into New Bedford or San
Francisco after a successful cruise, she carries in her
hold the wages of her crew, as well as the profits of
her owners, and an equivalent which will reimburse
them for all the stores used up during the voyage. Can
anything be clearer than that these wages — this oil and
bone which the crew of the whaler have taken — have
not been drawn from capital, but are really a part of
the produce of their labor? Nor is this fact changed or
obscured in the slightest degree where, as a matter of
convenience, instead of dividing up between the crew
their proportion of the oil and bone, the value of each
man's share is estimated at the market price, and he
is paid for it in money. The money is but the equiva-
lent of the real wages, the oil and bone. In no way
is there any advance of capital in this payment. The
obligation tc Day wages does not accrue until the value
from which they are to be paid is brought into port.
At the moment when the owner takes from his capital
money to pay the crew he adds to his capital oil and
bone.
So far there can be no dispute. Let us now take
another step, which will bring us to the usual method of
employing labor and paying wages.
The Farallone Islands, off the Bay of San Francisco,
are a hatching ground of sea-fowl, and a company who
claim these islands employ men in the proper season to
collect the eggs. They might employ these men for a
proportion of the eggs they gather, as is done in the
whale fishery, and probably would do so if there were
Chap . Ill*
WAGES NOT DRAWN FROM CAPITAL
55
much uncertainty attending the business; but as the
fowl are plentiful and tame, and about so many eggs
can be gathered by so much labor, they find it more
convenient to pay their men fixed wages. The men go
out and remain on the islands, gathering the eggs and
bringing them to a landing, whence, at intervals of a
few days, they are taken in a small vessel to San
Francisco and sold. When the season is over the men
return and are paid their stipulated wages in coin. Does
not this transaction amount to the same thing as if,
instead of being paid in coin, the stipulated wages were
paid in an equivalent of the eggs gathered? Does not
the coin represent the eggs, by the sale of which it was
obtained, and are not these wages as much the product
of the labor for which they are paid as the eggs would
be in the possession of a man who gathered them for
himself without the intervention of any employer?
To take another example, which shows by reversion
the identity of wages in money with wages in kind. In
San Buenaventura lives a man who makes an excellent
living by shooting for their oil and skins the common
hair seals which frequent the islands forming the Santa
Barbara Channel. When on these sealing expeditions
he takes two or three Chinamen along to help him,
whom at first he paid wholly in coin. But it seems that
the Chinese highly value some of the organs of the seal,
which they dry and pulverize for medicine, as well as
the long hairs in the whiskers of the male seal, which,
when over a certain length, they greatly esteem for
some purpose that to outside barbarians is not very
clear. And this man soon found that the Chinamen
were very willing to take instead of money these parts
of the seals killed, so that now, in large part, he thus
pays them their wages.
Now, is not what may be seen in all these cases — the
identity of wages in money with wages in kind — true
56
WAGHS AND CAPITAL
BotkL
of all cases in which wages are paid for productive
labor? Is not the fund created by the labor really the
fund from which the wages are paid?
It may, perhaps, be said: “There is this difference —
where a man works for himself, or where, when working
for an employer, he takes his wages m kind, his wages
depend upon the result of his labor. Should that, from
any misadventure, prove futile, he gets nothing. When
he works for an employer, however, he gets his wages
anyhow — they depend upon the performance of the
labor, not upon the result of the labor.” But this is evi-
dently not a real distinction. For on the average, the
labor that is rendered for fixed wages not only yields
the amount of the wages, but more; else employers could
make no profit. When wages are fixed, the employer
takes the whole risk and is compensated for this assur-
ance, for wages when fixed are always somewhat less
than wages contingent. But though when fixed wages
are stipulated the laborer who has performed his part
of the contract has usually a legal claim upon the em-
ployer, it is frequently, if not generally, the case that
the disaster which prevents the employer from reaping
benefit from the labor prevents him from paying the
wages. And in one important department of industry
the employer is legally exempt in case of disaster, al-
though the contract be for wages certain and not con-
tingent. For the maxim of admiralty law is, that
“freight is the mother of wages,” and though the sea-
man may have performed his part, the disaster which
prevents the ship from earning freight deprives him of
claim for his wages.
In thiB legal maxim is embodied the truth for which I
am contending. Production is always the mother of
wages. Without production, wages would not and could
not be. It is from the produce of labor, not from the
advances of capital that wages come
Chap. III. WAGES NOT DRAWN FROM CAPITAL ST
Wherever we analyze the facts this will be found to
be true. For labor always precedes wages. This is as
universally true of wages received by the laborer from
an employer as it is of wages taken directly by the
laborer who is his own employer. In the one class of
cases as in the other, reward is conditioned upon exer-
tion. Paid sometimes by the day, oftener by the week
or month, occasionally by the year, and in many
branches of production by the piece, the payment of
wages by an employer to an employee always implies
the previous rendering of labor by the employee for the
benefit of the employer, for the few cases in which ad-
vance payments are made for personal services are evi-
dently referable either to charity or to guarantee and
purchase. The name “retainer,” given to advance pay-
ments to lawyers, shows the true character of the trans-
action, as does the name “blood money” given in
longshore vernacular to a payment which is nominally
wages advanced to sailors, but which in reality is pur-
chase money — both English and American law consider-
ing a sailor as much a chattel as a pig.
I dwell on this obvious fact that labor always pre-
cedes wages, because it is all-important to an under-
standing of the more complicated phenomena of wages
that it should be kept in mind. And obvious as it is, as
I have put it, the plausibility of the proposition that
wages are drawn from capital — a proposition that is
made the basis for such important and far-reaching de-
ductions — comes in the first instance from a statement
that ignores and leads the attention away from this truth.
That statement is. that labor cannot exert its produc-
tive power unless supplied by capital with mainte-
nance.* The unwary reader at once recognizes the fact
that the laborer must have food, clothing, etc., in order
* Industry is limited by capital. . . . There cam be no more
industry than is supplied with materials to work up and food to
58
WAGES AND CAPITAL
Book I.
to enable him to perform the work, and having been
told that the food, clothing, etc., used by productive
laborers are capital, he assents to the conclusion that
the consumption of capital is necessary to the applica-
tion of labor, and from this it is but an obvious de-
duction that industry is limited by capital — that the
demand for labor depends upon the supply of capital,
and hence that wages depend upon the ratio between
the number of laborers looking for employment and
the amount of capital devoted to hiring them.
But' I think the discussion in the previous chapter
will enable any one to see wherein lies the fallacy of this
reasoning — a fallacy which has entangled some of the
most acute minds in a web of their own spinning. It is
in the use of the term capital in two senses. In the
primary proposition that capital is necessary to the
exertion of productive labor, the term “capital” is un-
derstood as including all food, clothing, shelter, etc.;
•whereas, in the deductions finally drawn from it, the
term is used in its common and legitimate meaning of
wealth devoted, not to the immediate gratification of de-
sire, but to the procurement of more wealth — of wealth
in the hands of employers as distinguished from
laborers. The conclusion is no more valid than it would
be from the acceptance of the proposition that a laborer
cannot go to work without his breakfast and some
clothes, to infer that no more laborers can go to work
eat. Self-evident as the thing is, it is often forgotten that the
people of a country are maintained and have their wants sup-
plied not by the produce of present labor, but of past. They
consume what has been produced, not what is about to be pro-
duced. Now, of what has been produced a part only is allotted
to the support of productive labor, and there will not and can-
not be more of that labor than the portion so allotted (which
is the capital of the country) can feed and provide with the
materials and instruments of production . — John Stuart Mill, Prin-
ciple* of Political Economy, Book 1, Chap . V, Sec. 1.
Chap. hi.
WAGES NOT DRAWN FROM CAPITAL
59
than employers first furnish with breakfasts and clothes.
Now, the fact is that laborers generally furnish their
own breakfasts and the clothes in which they go to
work; and the further fact is, that capital (in the sense
in which the word is used in distinction to labor) in
exceptional cases sometimes may, but is never com-
pelled to make advances to labor before the work be-
gins. Of all the vast number of unemployed laborers
in the civilized world to-day, there is probably not a
single one willing to work who could not be employed
without any advance of wages. A great proportion,
would doubtless gladly go to work on terms which did
not require the payment of wages before the end of a
month; it is doubtful if there are enough to be called a
class who would not go to work and wait for their
wages until the end of the week, as most laborers habit-
ually do; while there are certainly none who would not
wait for their wages until the end of the day, or if you
please, until the next meal hour. The precise time of
the payment of wages is immaterial; the essential point
— the point I lay stress on — is that it is after the per-
formance of work.
The payment of wages, therefore, always implies the
previous rendering of labor. Now, what does the ren-
dering of labor in production imply? Evidently the
production of wealth, which, if it is to be exchanged or
used in production, is capital. Therefore, the payment
of capital in wages pre-supposes a production of capital
by the labor for which the wages are paid. And as the
employer generally makes a profit, the payment of
wages is, so far as he is concerned, but the return to
the laborer of a portion of the capital he has received
from the labor. So far as the employee is concerned, it
is but the receipt of a portion of the capital his labor
has previously produced. As the value paid in the
wages is thus exchanged for a value brought into being
30
WAGES AND CAPITAL
Book I.
by the labor, how can it be said that wages are drawn
from capital or advanced by capital? As in the ex-
change of labor for wages the employer always gets
the capital created by the labor before he pays out capi-
tal in the wages, at what point is his capital lessened
even temporarily? #
Bring the question to the test of facts. Take, for in-
stance, an employing manufacturer who is engaged in
turning raw material into finished products — cotton
into cloth, iron into hardware, leather into boots, or so
on, as may be, and who pays his hands, as is generally
the case, once a week. Make an exact inventory of his
capital on Monday morning before the beginning of
work, and it will consist of his buildings, machinery,
raw materials, money on hand, and finished products in
stock. Suppose, for the sake of simplicity, that he
neither buys nor sells during the week, and after work
has stopped and he has paid his hands on Saturday
night, take a new inventory of his capital. The item of
money will be less, for it has been paid out in wages;
there will be less raw material, less coal, etc., and a
proper deduction must be made from the value of the
buildings and machinery for the week’s wear and tear.
But if he is doing a remunerative business, whicn must
*1 speak of labor producing capital for the sake of greater
clearness. What labor always procures is either wealth, which
may or may not be capital, or services, the cases m which noth-
ing is obtained being merely exceptional cases of misadventure.
Where the object of the labor is simply the gratification of the
employer, as where I hire a man to black my boots, I do not pay
the wages from capital, but from wealth which I have devoted,
not to reproductive uses, but to consumption for my own satis-
faction. Even if wages thus paid be considered as drawn from
capital, then by that act they pass from the category of capital
to that of wealth devoted to the gratification of the possessor,
as when a cigar dealer takes a dozen cigars from the stock he has
for sale and puts them in his pocket for his own use.
/- ^ J, w
Chap. 111.
WAGES NOT DRAWN FROM CAPITAL
61
on the average be the case, the item of finished products
will be so much greater as to compensate for all these
deficiencies and show in the summing up an increase of
capital. Manifestly, then, the value he paid his hands
in wages was not drawn from his capital, or from any
one else’s capital. It came, not from capital, but from
the value created by the labor itself. There was no
more advance of capital than if he had hired his hands
to dig clams, and paid them with a part of the clams
they dug. Their wages were as truly the produce of
their labor as were the wages of x he primitive man,
when, long “before the appropriation of land and the
accumulation of stock,” he obtained an oyster by knock-
ing it with a stone from the rocks.
As the laborer who works for an employer does not
get his wages until he has performed the work, his case
is similar to that of the depositor in a bank who cannot
draw money out until he has put money in. And as by
drawing out what he has previously put in, the bank de-
positor does not lessen the capital of the bank, neither
can laborers by receiving wages lessen even temporarily
either the capital of the employer or the aggregate capi-
tal of the community. Their wages no more come from
capital than the checks of depositors are drawn against
bank capital. It is true that laborers in receiving wages
do not generally receive back wealth in the same form
in which they have rendered it, any more than bank de-
positors receive back the identical coins or bank notes
they have deposited, but they receive it in equivalent
form, and as we are justified in saying that the deposi-
tor receives from the bank the money he paid in, so are
we justified in saying that the laborer receives in wages
the wealth he has rendered in labor.
That this universal truth is so often obscured, is
largely due to that fruitful source of economic obscuri-
ties, the confounding of wealth with money; and it is
62
WAGES AND CAPITAL
Book i.
remarkable to see so many of those who, since Dr.
Adam Smith made the egg stand on its head, have
copiously demonstrated the fallacies of the mercantile
system, fall into delusions of the very same kind in
treating of the relations of capital and labor. Money
being the general medium of exchanges, the common
flux through which all transmutations of wealth from
one form to another take place, whatever difficulties
may exist to an exchange will generally show themselves
on the side of reduction to money, and thus it is some-
times easier to exchange money for any other form of
wealth than it is to exchange wealth in a particular
form into money, for the reason that there are more
holders of wealth who desire to make some exchange
than there are who desire to make any particular ex-
change. And so a producing employer who has paid
out his money in wages may sometimes find it difficult
to turn quickly back into money the increased value
for which his money has really been exchanged, and is
spoken of as having exhausted or advanced his capital
in the payment of wages. Yet, unless the new value
created by the labor is less than the wages paid, which
can be only an exceptional case, the capital which he
had before in money he now has in goods — it has beep
changed in form, but not lessened.
There is one branch of production in regard to whicl
the confusions of thought which arise from the habit
of estimating capital in money are least likely to occur,
inasmuch as its product is the general material and
standard of money. And it so happens that this busi-
ness furnishes us, almost side by side, with illustrations
of production passing from the simplest to most com-
plex forms.
In the early days of California, as afterward in
Australia, the placer miner, who found in river bed or
surface deposit the glittering particles which the slow
cA ap. ///.
WAGES NOT DRAWN FROM CAPITAL
63
processes of nature had for ages been accumulating,
picked up or washed out his “wages” (so, too, he called
them) in actual money, for coin being scarce, gold
dust passed as currency by weight, and at the end of
the day had his wages in money in a buckskin bag in
his pocket. There can be no dispute as to whether
these wages came from capital or not. They were mani-
festly the produce of his labor. Nor could there be any
dispute when the holder of a specially rich claim hired
men to work for him and paid them off in the identical
money which their labor had taken from gulch or bar.
As coin became more abundant, its greater convenience
in saving the trouble and loss of weighing assigned gold
dust to the place of a commodity, and with coin ob-
tained by the sale of the dust their labor had procured,
the employing miner paid off his hands. Where he had
coin enough to do so, instead of selling his gold dust
at the nearest store and paying a dealer’s profit, he
retained it until he got enough to take a trip, or send
by express to San Francisco, where at the mint he could
have it turned into coin without charge. While thus
accumulating gold dust he was lessening his stock of
coin; just as the manufacturer, while accumulating a
stock of goods, lessens his stock of money. Yet no
one would be obtuse enough to imagine that in thus
taking in gold dust and paying out coin the miner was
lessening his capital.
But the deposits that could be worked without pre-
liminary labor were soon exhausted, and gold mining
rapidly took a more elaborate character. Before claims
could be opened so as to yield any return deep shafts
had to be sunk, great dams constructed, long tunnels
cut through the hardest rock, water brought for miles
over mountain ridges and across deep valleys, and ex-
pensive machinery put up. These works could not be
constructed without capital. Sometimes their construe-
WAGES AND CAPITAL
Book/
tion required years, during which no return co^ild be
hoped for, while the men employed had to be paid their
wages every week, or every month. Surely, it will be
said, in such cases, even if in no others, that wages do
actually come from capital; are actually advanced by
capital; and must necessarily lessen capital in their pay-
ment! Surely here, at least, industry is limited by capi-
tal, for without capital such works could not be carried
on! Let us see:
It is cases of this class that are always instanced as
showing that wages are advanced from capital. For
where wages are paid before the object of the labor is
obtained, or is finished — as in agriculture, where plow-
ing and sowing must precede by several months tht
harvesting of the crop; as in the erection of buildings,
the construction of ships, railroads, canals, etc. — it is
clear that the owners of the capital paid in wages can-
not expect an immediate return, but, as the phrase is,
must “outlay it,” or “lie out of it” for a time, which
sometimes amounts to many years. And hence, if first
principles are not kept in mind, it is easy to jump to
the conclusion that wages are advanced by capital.
But such cases will not embarrass the reader to whom
in what has preceded I have made myself clearly under-
stood. An easy analysis will show that these instances
where wages are paid before the product is finished, or
even produced, do not afford any exception to the rule
apparent where the product is finished before wages are
paid.
If I go to a broker to exchange silver for gold, I lay
down my silver, which he counts and puts away, and
then hands me the equivalent in gold, minus his com-
mission. Does the broker advance me any capital?
Manifestly not. What he had before in gold he now has
in silver, plus his profit. And as he got the silver before
Chap. 111.
WAGES NOT DRAWN FROM .CAPITAL
65
he paid out the gold, there is on his part not even mo-
mentarily an advance of capital.
Now, this operation of the broker is precisely analo-
gous to what the capitalist does, when, in such cases as
we are now considering, he pays out capital in wages. As
the rendering of labor precedes the payment of wages,
and as the rendering of labor in production implies the
creation of value, the employer receives value before he
pays out value — he but exchanges capital of one form
for capital of another form. For the creation of value
does not depend upon the finishing of the product; it
takes place at every stage of the process of production,
as the immediate result of the application of labor, and
hence, no matter how long the process in which it is en-
gaged, labor always adds to capital by its exertion
before it takes from capital in its wages.
Here is a blacksmith at his forge making picks.
Clearly he is making capital — adding picks to his em-
ployer’s capital before he draws money from it in
wages. Here is a machinist or boilermaker working on
the keel-plates of a Great Eastern. Is not he also just
as clearly creating value — making capital? The giant
steamship, as the pick, is an article of wealth, an instru-
ment of production, and though the one may not be
completed for years, while the other is completed in a
few minutes, each day’s work, in the one case as in the
^ther, is as clearly a production of wealth — an addition
to capital. In the case of the steamship, as in the case
of the pick, it is not the last blow, any more than the
first blow, that creates the value of the finished product
— the creation of value is continuous, it immediately
results from the exertion of labor.
We see this very clearly wherever the division of
labor has made it customary for different parts of the
full process of production to be carried on by different
sets of producers — that is to say, wherever we are in
56
IMAGES AND CAPITAL
Book 1.
the habit of estimating the amount of value which the
labor expended in any preparatory stage of production
has created. And a momenta reflection will show that
this is the case as to the vast majority of products.
Take a ship, a building, a jack-knife, a book, a lady’s
thimble or a loaf of bread. They are finished prod-
ucts. But they were not produced at one operation or
by one set of producers. And this being the case, we
readily distinguish different points or stages in the crea-
tion of the value which as completed articles they repre-
sent. When we do not distinguish different parts in
the final process of production we do distinguish the
value of the materials. The value of these materials
may often be again decomposed many times, exhibiting
as many clearly defined steps in the creation of the
final value. At each of these steps we habitually esti-
mate a creation of value, an addition to capital. The
batch of bread which the baker is taking from the oven
has a certain value. But this is composed in part of
the value of the flour from which the dough was made.
And this again is composed of the value of the wheat, the
value given by milling, etc. Iron in the form of pigs
is very far from being a completed product. It must
yet pass through several, or, perhaps, through many,
stages of production before it results in the finished
articles that were the ultimate objects for which the
iron ore was extracted from the mine. Yet, is not pig
iron capital? And so the process of production is not
really completed when 'a crop of cotton is gathered, nor
yet when it is ginned and pressed; nor yet when it ar-
rives at Lowell or Manchester; nor yet when it is con-
verted into yarn; nor yet when it becomes cloth; but
only when it is finally placed in the hands of the con-
sumer. Yet at each step in this progress there is clearly
enough a creation of value — an addition to capital.
Why, therefore, although we do not so habitually dis-
Chap. III.
WAGES NOT DRAWN FROM CAPITAL
67
tinguish and estimate it, is there not a creation of
value — an addition to capital — when the ground is
plowed for the crop? Is it because it may possibly be
a bad season and the crop may fail? Evidently not;
for a like possibility of misadventure attends every one
of the many steps in the production of the finished
article. On the average a crop is sure to come up, and
so much plowing and sowing will on the average result
in so much cotton in the boll, as surely as so much spin-
ning of cotton yarn will result in so much cloth.
In short, as the payment of wages is always condi-
tioned upon the rendering of labor, the payment of
wages in production, no matter how long the process,
never involves any advance of capital, or even tempo-
rarily lessens capital. It may take a year, or even
years, to build a ship, but the creation of value of which
the finished ship will be the sum goes on day by day,
and hour by hour, from the time the keel is laid or
even the ground is cleared. Nor by the payment of
wages before the ship is completed, does the master
builder lessen either his capital or the capital of the
community, for the value of the partially completed
ship stands in place of the value paid out in wages.
There is no advance of capital in this payment of
wages, for the labor of the workmen during the week
or month creates and renders to the builder more
capital than is paid back to them at the end of the
week or month, as is shown by the fact that if the
builder were at any stage of the construction asked to
sell a partially completed ship he would expect a profit.
And so, when a Sutro or St. Gothard tunnel or a
Suez canal is cut, there is no advance of capital. The
tunnel or canal, as it is cut, becomes capital as much as
the money spent in cutting it — or, if you please, the
powder, drills, etc., used in the work, and the food,
clothes, etc., used by the workmen — as is shown by the
68
WAGES AND CAPITAL
BookL
fact that the value of the capital stock of the company
is not lessened as capital in these forms is gradually
changed into capital in the form of tunnel or canal. On
the contrary, it probably, and on the average, increases
as the work progresses, just as the capital invested in a
speedier mode of production would on the average
increase.
And this is obvious in agriculture also. That the
creation of value does not take place all at once when
the crop is gathered, but step by step during the whole
process which the gathering of the crop concludes, and
that no payment of wages in the interim lessens the
farmer’s capital, is tangible enough when land is sold or
rented during the process of production, as a plowed field
will bring more than an unplowed field, or a field that
has been sown more than one merely plowed. It is
tangible enough when growing crops are sold, as is some-
times done, or where the farmer does not harvest him-
self, but lets a contract to the owner of harvesting
machinery. It is tangible in the case of orchards and
vineyards which, though not yet in bearing, bring prices
proportionate to their age. It is tangible in the case of
horses, cattle and sheep, which increase in value as they
grow toward maturity. And if not always tangible be-
tween what may be called the usual exchange points in
production, this increase of value as surely takes place
with every exertion of labor. Hence, where labor is
rendered before wages are paid, the advance of capital is
really made by labor, and is from the employed to the
employer, not from the employer to the employed.
“Yet,” it may be said, “in such cases as we have been
considering capital is required!” Certainly; I do not
dispute that. But it is not required in order to make
advances to labor. It is required for quite another pur-
pose. What that purpose is we may readily see.
When wages are paid in kind — that is to say, in wealth
Chap. III.
WAGES NOT DRAWN FROM CAPITAL
69
of the same species as the labor produces; as, for in-
stance, if I hire men to cut wood, agreeing to give them
as wages a portion of the wood they cut, a method some-
times adopted by the owners or lessees of woodland, it
is evident that no capital is required for the payment of
wages. Nor yet when, for the sake of mutual conven-
ience, arising from the fact that a large quantity of wood
can be more readily and more advantageously exchanged
than a number of small quantities, I agree to pay wages
in money, instead of wood, shall I need any capital,
provided I can make the exchange of the wood for money
before the wages are due. It is only when I cannot
make such an exchange, or such an advantageous ex-
change as I desire, until I accumulate a large quantity
of wood that I shall need capital. Nor even then shall
I need capital if I can make a partial or tentative ex-
change by borrowing on my wood. If I cannot, or do
not choose, either to sell the wood or to borrow upon' it,
and yet wish to go ahead accumulating a large stock of
wood, I shall need capital. But manifestly, I need this
capital, not for the payment of w’ages, but for the accu-
mulation of a stock of wood. Likewise in cutting a
tunnel. If the workmen were paid in tunnel (which, if
convenient, might easily be done by paying them in
stock of the company), no capital for the payment of
wages would be required. It is only when the under-
takers wish to accumulate capital in the shape of a tun-
nel that they will need capital. To recur tc our first
illustration: The broker to whom I sell my silver cannot
carry on his business without capital. But he does not
need this capital because he makes any advance of
capital to me when he receives my silver and hands me
gold. He needs it because the nature of the business
requires the keeping of a certain amount of capital on
hand, in order that when a customer comes he may be
prepared to make the exchange the customer desires.
70
WAGES AND CAPITAL
BookL
And so we shall find it in every branch of production.
Capital has never to be set aside for the payment of
wages when the produce of the labor for which the wages
are paid is exchanged as soon as produced; it is only
required when this produce is stored up, or what is to
the individual the same thing, placed in the general cur-
rent of exchanges without being at once drawn against
— that is, sold on credit. But the capital thus required
is not required for the payment of wages, nor for ad-
vances to labor, as it is always represented in the prod-
uce of the labor. It is never as an employer of labor
that any producer needs capital; when he does need
capital, it is because he is not only an employer of
labor, but a merchant or speculator in, or an accumula-
tor of, the products of labor. This is generally the case
with employers.
To recapitulate: The man who works for himself gets
his wages in the things he produces, as he produces them,
and exchanges this value into another form whenever
he sells the produce. The man who works for another
for stipulated w r ages in money works under a contract
of exchange. He also creates his wages as he renders
his labor, but he does not get them except at stated
times, in stated amounts, and in a different form. In
performing the labor he is advancing in exchange; when
he gets his wages the exchange is completed. During
the time he is earning the wages he is advancing capital
to his employer, but at no time, unless wages are paid
before work is done, is the employer advancing capital
to him. Whether the employer who receives this prod-
uce in exchange for the wages immediately re-exchanges
it, or keeps it for awhile, no more alters the charactei
of the transaction than does the final disposition of the
product made by the ultimate receiver, who may, per-
haps, be in another quarter of the globe and at the end
of a series of exchanges numbering hundreds.
CHAPTER IV
THE MAINTENANCE OF LABORERS NOT DRAWN FROM
CAPITAL
But a stumbling block may yet remain, or may recur,
in the mind of the reader.
As the plowman cannot eat the furrow, nor a partially
completed steam engine aid in any way in producing the
clothes the machinist wears, have I not, in the words of
John Stuart Mill, “forgotten that the people of a coun-
try are maintained and have their wants supplied, not
by the produce of present labor, but of past?” Or, to
use the language of a popular elementary work — that
of Mrs. Fawcett — have I not “forgotten that many
months must elapse between the sowing of the seed and
the time wdien the produce of that seed is converted into
a loaf of bread,” and that “it is, therefore, evident that
laborers cannot live upon that which their labor is assist-
ing to produce, but are maintained by that wealth which
their labor, or the labor of others, has previously pro-
duced, which wealth is capital?” *
The assumption made in these passages — the assump-
tion that it is so self-evident that labor must be subsisted
from capital that the proposition has but to be stated
to compel recognition — runs through the whole fabric
of current political economy. And so confidently is it
held that the maintenance of labor is drawn from capi-
* Political Economy for Beginners, by Millicent Garrett Faw-
cett, Chap. Ill, p. 25.
71
72
WAGES AND CAPITAL
Book I.
tal that the proposition that “population regulates itself
by the funds which are to employ it, and, therefore, al-
ways increases or diminishes with the increase or diminu-
tion of capital,” * is regarded as equally axiomatic, and
in its turn made the basis of important reasoning.
Yet being resolved, these propositions are seen to be,
not self-evident, but absurd; for they involve the idea
that labor cannot be exerted until the products of labor
are saved — thus putting the product before the producer.
And being examined, they will be seen to derive their
apparent plausibility from a confusion of thought.
I have already pointed out the fallacy, concealed by
an erroneous definition, which underlies the proposition
that because food, raiment and shelter are necessary to
productive labor, therefore industry is limited by capi-
tal. To say that a man must have his breakfast before
going to w T ork is not to say that he cannot go to work
unless a capitalist furnishes him with a breakfast, for
his breakfast may, and in point of fact in any country
where there is not actual famine will, come not from
wealth set apart for the assistance of production, but
from wealth set apart for subsistence. And, as has been
previously shown, food, clothing, etc. — in short, all ar-
ticles of wealth — are only c apital so long as they remain
in the possession of those who propose, not to consume,
but to exchange them for other commodities or for pro-
ductive services, and cease to be capital when they pass
into the possession of those who will consume them; for
in that transaction they pass from the stock of wealth
held for the purpose of procuring other wealth, and pass
into the stock of wealth held for purposes of gratifica-
tion, irrespective of whether their consumption will aid
in the production of wealth or not. Unless this distinc-
*Thc words quoted are Ricardo's (Chap. II); but the idea if
common in standard works.
tkap. IV. LABORERS NOT MAINTAINED BT CAPITAL
73
tion is preserved it is impossible to draw the line be-
tween the wealth that is capital and the wealth that is
not capital, even by remitting the distinction to the
“mind of the possessor,” as does John Stuart Mill. For
men do not eat or abstain, wear clothes or go naked, as
they propose to engage in productive labor or not. They
eat because they are hungry, and wear clothes because
they would be uncomfortable without them. Take the
food on the breakfast table of a laborer who will work
or not that day as he gets the opportunity. If the dis-
tinction between capital and non-capital be the support
of productive labor, is this food capital or not? It is
as impossible for the laborer himself as for any philoso-
pher of the Ricardo-Mill school to tell. Nor yet car
it be told when it gets into his stomach; nor, supposing
that he does not get work at first, but continues the
search, can it be told until it has passed into the blood
and tissues. Yet the man will eat his breakfast all the
same.
But, though it "would be logically sufficient, it is hardly
safe to rest here and leave the argument to turn on the
distinction between wealth and capital. Nor is it neces-
sary. It seems to me that the proposition that present
labor must be maintained by the produce of past labor
will upon analysis prove to be true only in the sense
that the afternoon's labor must be performed by the
aid of the noonday meal, or that before you eat the
hare he must be caught and cooked. And this, mani-
festly, is not the sense in which the proposition is used
to support the important reasoning that is made to
hinge upon it. That sense is, that before a work which
will not immediately result in wealth available for sub-
sistence can be carried on, there must exist such a stock
of subsistence as will support the laborers during the
process. Let us see if this be true:
The canoe which Robinson Crusoe made with such
74
WAGES AND CAPITAL
Book I.
infinite toil and pains was a production in which his
labor could not j f ield an immediate return. But was it
necessary that, before he commenced, he should accumu-
late a stock of food sufficient to maintain him while he
felled the tree, hewed out the canoe, and finally launched
her into the sea? Not at all. It was necessary only
that he should devote part of his time to the procure-
ment of food while he was devoting part of his time to
the building and launching of the canoe. Or supposing
a hundred men to be landed, without any stock of pro-
visions, in a new country'. Will it be necessary for them
to accumulate a season’s stock of provisions before they
can begin to cultivate the soil? Not at all. It will be
necessary only that fish, game, berries, etc., shall be so
abundant that the labor of a part of the hundred may
suffice to furnish daily enough of these for the mainte-
nance of all, and that there shall be such a sense of
mutual interest, or such a correlation of desires, as shall
lead those who in the present get the food to divide (ex-
change) with those whose efforts are directed to future
recompense.
What is true in these case** is true in all cases. It is
not necessary to the production of things that cannot be
used as subsistence, or cannot be immediately utilized,
that there should have been a previous production of
the wealth required for the maintenance of the laborers
while the production is going on. It is only necessary
that there should be, somewhere within the circle of ex-
change, a contemporaneous production of sufficient sub-
sistence for the laborers, and a willingness to exchange
this subsistence for the thing on which the labor is being
bestowed.
And as a matter of fact, is it not true, in any normal
condition of things, that consumption is supported by
contemporaneous production?
Here is a luxurious idler, who docs no productive work
Chap. IV. LABORERS NOT MAINTAINED BY CAPITAL
75
either with head or hand, but lives, we say, upon wealth
which his father left him securely invested in govern-
ment bonds. Does his subsistence, as a matter of fact,
come from wealth accumulated in the past or from the
productive labor that is going on around him? On his
table are new-laid eggs, butter churned but a few days
before, milk which the cow gave this morning, fish which
twenty-four hours ago were swimming in the sea, meat
which the butcher boy has just brought in time to be
cooked, vegetables fresh from the garden, and fruit from
the orchard — in short, hardly anything that has not re-
cently left the hand of the productive laborer (for in
this category must be included transporters and distribu-
tors as well as those who are engaged in the first stages
of production), and nothing that has been produced for
any considerable length of time, unless it may be some
bottles of old wine. What this man inherited from his
father, and on which we say he lives, is not actually
wealth at all, but only the power of commanding wealth
as others produce it. And it is from this contemporane-
ous production that his subsistence is drawn.
The fifty square miles of London undoubtedly contain
more wealth than within the same space anywhere else
exists. Yet w'ere productive labor in London absolutely
to cease, within a few- hours people would begin to die
like rotten sheep, and within a few w r eeks, or at most
a few months, hardly one would be left alive. For an
entire suspension of productive labor would be a disaster
more dreadful than ever yet befell a beleaguered city.
It would not be a mere external wall of circumvallation,
such as Titus drew r around Jerusalem, which w T ould pre-
vent the constant incoming of the supplies on winch a
great city lives, but it would be the drawing of a similar
wall around each household. Imagine such a suspension
of labor in any community, and you will see how true it
is that mankind really live from hand to mouth; that
76
WAGES AND CAPITAL
Book I,
it is the daily labor of the community that supplies the
community with its daily bread.
Just as the subsistence of the laborers who built the
Pyramids was drawn not from a previously hoarded
stock, but from the constantly recurring crops of the
Nile Valley; just as a modern government when it un-
dertakes a great work of years does not appropriate to
it wealth already produced, but wealth’ yet to be pro-
duced, which is taken from producers in taxes as the
work progresses; so it is that the subsistence of the
laborers engaged in production which does not directly
yield subsistence comes from the production of sub-
sistence in which others are simultaneously engaged.
If we trace the circle of exchange by which work done
in the production of a great steam engine secures to the
worker bread, meat, clothes and shelter, we shall find
that though between the laborer on the engine and the
producers of the bread, meat, etc., there may be a thou-
sand intermediate exchanges, the transaction, when re-
duced to its lowest terms, really amounts to an exchange
of labor between him and them. Now the cause which
induces the expenditure of the labor on the engine is
evidently that some one who has power to give what is
desired by the laborer on the engine wants in exchange
an engine — that is to say, there exists a demand for an
engine on the part of those producing bread, meat, etc.,
or on the part of those who are producing what the pro-
ducers of the bread, meat, etc., desire. It is this demand
which directs the labor of the machinist to the produc-
tion of the engine, and hence, reversely, the demand of
the machinist for bread, meat, etc., really directs an
equivalent amount of labor to the production of these
things, and thus his labor, actually exerted in the pro-
duction of the engine, virtually produces the things in
which he expends his wages.
Or, to formularize this principle:
?iap. IV. LABORERS NOT MAINTAINED BY CAPITAL
71
The demand ]or consumption determines the direction
in which labor will be expended in production.
This principle is so simple and obvious that it needs
no further illustration, yet in its light all the complexi-
ties of our subject disappear, and we thus reach the
same view of the real objects and rewards of labor in
the intricacies of modern production that we gained by
observing in the first beginnings of society the simpler
forms of production and exchange. We see that now,
as then, each laborer is endeavoring to obtain by his ex-
ertions the satisfaction of his own desires; we see that
although the minute division of labor assigns to each
producer the production of but a small part, or perhaps
nothing at all, of the particular things he labors to get,
yet, in aiding in the production of what other producers
want, he is directing other labor to the production of
the things he wants — in effect, producing them himself.
And thus, if he make jack-knives and eat wheat, the
wheat is really as much the produce of his labor as if
he had grown it for himself and left wheat-growers to
make their own jack-knives.
We thus see how thoroughly and completely true it
is, that in whatever is taken or consumed by laborers
in return for labor rendered, there is no advance of
capital to the laborers. If I have made jack-knives,
and with the wages received have bought wheat, I have
simply exchanged jack-knives for wheat — added jack-
knives to the existing stock of wealth and taken wheat
from it. And as the demand for consumption determines
the direction in which labor will be expended in produc-
tion, it cannot even be said, so long as the limit of wheat
production has not been reached, that I have lessened
the stock of wheat, for, by placing jack-knives in the
exchangeable stock of wealth and taking wheat out, I
have determined labor at the other end of a series of
78'
WAGES AND CAPITAL
book /.
exchanges to the production of wheat, just as the wheat
grower, by putting in wheat and demanding jack-knives,
determined labor to the production of jack-knives, as
the easiest way by which wheat could be obtained.
And so the man who is following the plow — though
the crop for which he is opening the ground is not yet
sown, and after being sown will take months to arrive at
maturity — he is yet, by the exertion of his labor in plow-
ing, virtually producing the food he eats and the wages
he receives. For, though plowing is but a part of the
operation of producing a crop, it is a part, and as neces-
sary a part as harvesting. The doing of it is a step to-
ward procuring a crop, which, by the assurance which it
gives of the future crop, sets free from the stock con-
stantly held the subsistence and wages of the plowman.
This is not merely theoretically true, it is practically and
literally true. At the proper time for plowing, let plow-
ing cease. Would not the symptoms of scarcity at once
manifest themselves without waiting for the time of the
harvest? Let plowing cease, and would not the effect at
once be felt in counting-room, and machine shop, and
factory? Would not loom and spindle soon stand as idle
as the plow? That this would be so, we see in the effect
which immediately follows a bad season. Anri if this
would be so, is not the man who plows really producing
his subsistence and wages as much as though during the
day or week his labor actually resulted in the things for
which his labor is exchanged?
A3 a matter of fact, where there is labor looking for
employment, the want of capital does not prevent the
owner of land which promises a crop for which there is
a demand from hiring it. Either he makes an agree-
ment to cultivate on shares, a common method in
some parts of the United States, in which case the labor-
ers, if they are without moans of subsistence, will, on the
strength of the work they are doing, obtain credit at the
79
Chap. IV. LABORERS NOT MAINTAINED BY CAPITAL
nearest store; or, if he prefers to pay wages, the fanner
will himself obtain credit, and thus the work done in
cultivation is immediately utilized or exchanged as it
is done. If anything more will be used up than would
be used up if the laborers were forced to beg instead of
to work (for in any civilized country during a normal
condition of things the laborers must be supported any-
how), it will be the reserve capital drawn out by the
prospect of replacement, and which is in fact replaced
bv the work as it is done. For instance, in the purely
agricultural districts of Southern California there was
in 1877 a total failure of the crop, and of millions of
sheep nothing remained but their bones. In the great
San Joaquin Valley were many farmers without food
enough to support their families until the next harvest
time, let alone to support any laborers. But the rains
came again in proper season, and these very farmers
proceeded to hire hands to plow and to sow. For even’
here and there was a farmer who had been holding back
part of his crop. As soon as the rains came he was
anxious to sell before the next harvest brought lower
prices, and the grain thus held in reserve, through the
machinery of exchanges and advances, passed to the
use of the cultivators — set free, in effect produced, by
the work done for the next crop.
The series of exchanges which unite production and
consumption may be likened to a curved pipe filled with
water. If a quantity of water is poured in at one end,
a like quantity is released at the other. It is not identi-
cally the same water, but is its equivalent. And so
they who do the work of production put in as they take
out — they receive in subsistence and wages but the
produce of their labor.
CHAPTER V
THE REAL FUNCTIONS OF CAPITAL
It may now be asked, If capital is not required for
the payment of wages or the support of labor during
production, what, then, arc its functions?
The previous examination has made the answer clear.
Capital, as we have seen, consists of wealth used for the
procurement of more wealth, as distinguished from
wealth used for the direct satisfaction of desire; or, as
I think it may be defined, of wealth in the course of
exchange.
Capital, therefore, increases the power of labor to pro-
duce wealth: (1; By enabling labor to apply itself in
more effective ways, as by digging up clams with a
spade instead of the hand, or moving a vessel by shovel-
ing coal into a furnace, instead of tugging at an oar.
(2) By enabling labor to avail itself of the reproductive
forces of nature, as to obtain com by sowing it, or ani-
mals by breeding them. (3) By permitting the division
of labor, and thus, on the one hand, increasing the
efficiency of the human factor of wealth, by the utiliza-
tion of special capabilities, the acquisition of skill, and
the reduction of waste; and, on the other, calling in the
powers of the natural factor at their highest, by taking
advantage of the diversities of soil, climate and situa-
tion, so as to obtain each particular species of wealth
where nature is most favorable to its production.
Capital does not supply the materials which labor
works uo into wealth, as is erroneously taught; the
80
Chap. V.
THE BEAL FUNCTIONS OF CAPITAL
81
materials of wealth are supplied by nature. But such
materials partially worked up and in the course of
exchange are capital.
Capital does not supply or advance wages, as is erro-
neously taught. Wages are that part of the produce of
his labor obtained by the laborer.
Capital does not maintain laborers during the progress
of their work, as is erroneously taught. Laborers are
maintained by their labor, the man who produces, in
whole or in part, anything that will exchange for articles
of maintenance, virtually producing that maintenance.
Capital, therefore, does not limit industry, as is er-
roneously taught, the only limit to industry being the
access to natural material. But capital may limit the
form of industry and the productiveness of industry, by
limiting the use of tools and the division of labor.
That capital may limit the form of industry is clear.
Without the factory, there could be no factory opera-
tives; without the sewmg machine, no machine sewing;
without the plow*, no plowman ; and without a great capi-
tal engaged in exchange, industry could not take the
many special forms which are concerned with exchanges.
It is also as clear that the wrant of tools must greatly
limit the productiveness of industry. If the farmer
must use the spade because he has not capital enough
for a plow r , the sickle instead of the reaping machine,
the flail instead of the thresher; if the machinist must
rely upon the chisel for cutting iron; the weaver on the
hand loom, and so on, the productiveness of industry
cannot be a tithe of what it is w r hen aided by capital in
the shape of the best tools now’ in use. Nor could the
division of labor go further than the very rudest and
almost imperceptible beginnings, nor the exchanges which
make it possible extend beyond the nearest neighbors,
unless a portion of the things produced w f ere constantly
kept in stock or in transit. Even the pursuits of hunt-
82
WAGES AND CAPITAL
Book l
ing y fishing, gathering nuts, and making weapons could
not be specialized so that an individual could devote
himself to any one, unless some part of w T hat was pro-
cured by each was reserved from immediate consump-
tion, so that he who devoted himself to the procurement
of things of one kind could obtain the others as he
wanted them, and could make the good luck of one day
supply the shortcomings of the next. While to permit
the minute subdivision of labor that is characteristic of,
and necessary to, high civilization, a great amount of
wealth of all descriptions must be constantly kept in
stock or in transit. To enable the resident of a civilized
community to exchange his labor at option with the
labor of those around him and with the laber of men in
the most remote parts of the globe, there must be stocks
of goods in warehouses, in stores, in the holds of ships,
and in railway cars, just as to enable the denizen of a
great city to draw at will a cupful of water, there must
be thousands of millions of gallons stored in reservoirs
and moving through miles of pipe.
But to say that capital may limit the form of industry
or the productiveness of industry is a very different
thing from saying that capital limits industry. For the
dictum of the current political economy that ‘‘capital
limits industry,” means not that capital limits the form
of labor or the productiveness of labor, but that it limits
the exertion of labor. This proposition derives its
plausibility from the assumption that capital supplies
labor with materials and maintenance — an assumption
that we have seen to be unfounded, and which is indeed
transparently preposterous the moment it is remembered
that capital is produced by labor, and hence that there
must be labor before there can be capital. Capital may
limit the form of industry and the productiveness of in-
dustry; but this is not to say that there could be no
industry without capital, any more than it is to say
Chap. V.
THE REAL FUNCTIONS OF CAPITAL
83
that without the power loom there could be no weaving;
without the sewing machine no sewing; no cultivation
without the plow; or that in a community of one, like
that of Robinson Crusoe, there could be no labor be-
cause there could be no exchange.
And to say that capital may limit the form and pro-
ductiveness of industry is a different thing from saying
that capital does. For the cases in wdiieh it can be truly
said that the form of productiveness of the industry of
a community is limited by its capital, will, I think, ap-
pear upon examination to be more theoretical than real.
It is evident that in such a countrv as Mexico or Tunis
the larger and more general use of capital would greatly
change the forms of industry and enormously increase
its productiveness; and it is often said of such countries
that they need capital for the development of their re-
sources. But is there not something back of this — a
want which includes the want of capital? Is it not the
rapacity and abuses of government, the insecurity of
property, the ignorance and prejudice of the people, that
prevent the accumulation and use of capital? Is not
the real limitation in these things, and not in the w^ant
of capital, which would not be used even if placed
there? We can, of course, imagine a community in which
the want of capital would be the only obstacle to an
increased productiveness of labor, but it is only by
imagining a conjunction of conditions that seldom, if
ever, occurs, except by accident or as a passing phase.
A community in which capital has been swept away by
war, conflagration, or convulsion of nature, and, possibly,
a community composed of civilized people just settled
in a new land, seem to me to furnish the only examples.
Yet how quickly the capital habitually used is repro-
duced in a community that has been swept by w f ar, has
long been noticed, while the rapid production of the
84
WAGES AND CAPITAL
Book L
capital it q an, or is disposed to use, is equally noticeable
in the case of a new community.
I am unable to think of any other than such rare and
passing conditions in which the productiveness of labor
is really limited by the want of capital. For, although
there may be in a community individuals who from want
of capital cannot apply their labor as efficiently as they
would, yet so long as there is a sufficiency of capital in
the community at large, the real limitation is not the
want of capital, but the want of its proper distribution.
If bad government rob the laborer of his capital, if un-
just laws take from the producer the wealth with which
he would assist production, and hand it over to those
who are mere pensioners upon industry, the real limita-
tion to the effectiveness of labor is in misgovernment.
and not in want of capital. And so of ignorance, or
custom, or other conditions which prevent the use of
capital. It is they, not the want of capital, that really
constitute the limitation. To give a circular saw to a
Terra del Fuegan, a locomotive to a Bedouin Arab, or
a sewing machine to a Flathead squaw, would not be to
add to the efficiency of their labor. Neither does it
seem possible by giving anything else to add to their
capital, for any wealth beyond what they had been ac-
customed to use as capital would be consumed or suffered
to waste. It is not the want of seeds and tools that
keeps the Apache and the Sioux from cultivating the
soil. If provided with seeds and tools they would not
use them productively unless at the same time restrained
from wandering and taught to cultivate the soil. If all
the capital of a London were given them in their present
condition, it would simply cease to be capital, for they
would only use productively such infinitesimal part as
might assist in the chase, and would not even use that
until all the edible part of the stock thus showered upon
them had been consumed. Yet such capital a3 they do
Chap . V. THE REAL FUNCTIONS OF CAPITAL Kb
want they manage to acquire, and in some forms in spite
of the greatest difficulties. These wild tribes hunt and
fight with the best weapons that American and English
factories produce, keeping up with the latest improve-
ments. It is only as they became civilized that they
would care for such other capital as the civilized state
requires, or that it would be of any use to them.
In the reign of George IV, some returning mission-
aries took with them to England a New Zealand chief
called Hongi. His noble appearance and beautiful
tatooing attracted much attention, and when about to
return to his people he was presented by the monarch
and some of the religious societies with a considerable
stock of tools, agricultural instruments, and seeds. The
grateful New Zealander did use this capital in the pro-
duction of food, but it was in a manner of which his
English entertainers little dreamed. In Sydney, on his
way back, he exchanged it all for arms and ammunition,
with which, on getting home, he began war against an-
other tribe wdth such success that on the first battle field
three hundred of his prisoners were cooked and eaten,
Hongi having preluded the main repast by scooping out
and swallowing the eyes and sucking the w r arm blood of
his mortally wounded adversary, the opposing chief.*
But now’ that their once constant wars have ceased, and
the remnant of the Maoris have largely adopted Euro-
pean habits, there are among them many who have and
use considerable amounts of capital.
Likewise it would be a mistake to attribute the simple
modes of production and exchange which are resorted
to in new communities solely to a want of capital*
These modes, which require little capital, are in them-
selves rude and inefficient, but w’hen the conditions of
* New Zealand and its Inhabitants. Rev. Richard Taylor*
London, 1855. Chap. XXI.
86
WAGES AND CAPITAL
Book I.
such communities are considered, they will be found in
reality the most effective. A great factory with all the
latest improvements is the most efficient instrument
that has yet been devised for turning wool or cotton
into cloth, but only so where large quantities are to
be made. The cloth required for a little village could
be made with far less labor by the spinning wheel and
hand loom. A perfecting press will, for each man re-
quired, print many thousand impressions while a man
and a boy would be printing a hundred with a Stanhope
or Franklin press; yet to work off the small edition of
a country newspaper the old-fashioned press is by far
the most efficient machine. To carry occasionally two
V V
or three passengers, a canoe is a better instrument than
a steamboat; a few sacks of flour can be transported
with less expenditure of labor by a pack horse than by
a railroad train; to put a great stock of goods into a
cross-roads store in the backwoods would be but to
waste capital. And. generally, it will be found that the
rude devices of production and exchange which obtain
among the sparse populations of new countries result
not -
sistence as 1 . 2, 3, 4, 5, 6, 7, 8 , 9 In two cent lines the popula-
tion would be to the means of subsistence as 256 to 9, m three
centuries, 4,096 to 13, and m two thousand years the difference
would be almost incalculable. ”
Such a result is of course prevented by the physical
fact that no more people can exist than can find subsist-
ence, and hence Malthus’ conclusion K that this tend-
ency of population to indefinite increase imwt be held
back either by moral restraint upon the reproductive
faculty', or by the various causes which increase mor-
tality, which he resolves into vice and misery. Such
causes as prevent propagation he styles the preventive
check; such causes as increase mortalitv he erv. And thus reforms which would
interfere with the interests of any powerful class are
discouraged as hopeless. As the moral law' forbids any
forestalling of the methods by which the natural law
gets rid of surplus population and thus holds in check
iOO
POPULATION AND SUBSISTENCE
Book 11
a tendency to increase potent enough to pack the sur-
face of the globe with human beings as sardines are
packed in a box, nothing can really be done, either by
individual or by combined effort, to extirpate poverty,
save to trust to the efficacy of education and preach the
necessity of prudence.
A theory that, falling in with the habits of thought of
the poorer classes, thus justifies the greed of the rich
and the selfishness of the powerful, will spread quickly
and strike its roots deep. This has been the case with
the theory advanced by Malthus.
And of late years the Malthusian theory has received
new support in the rapid change of ideas as to the origin
of man and the genesis of species. That Buckle was
right in saying that the promulgation of the Malthusian
theory marked an epoch in the history of speculative
thought could, it seems to me, be easily shown; yet to
trace its influence in the higher domains of philosophy,
of which Buckle’s own work is an example, would,
though extremely interesting, carry us beyond the scope
of this investigation. But how much be reflex and how
much original, the support which is given to the Malthu-
sian theory by the new' philosophy of development, now
rapidly spreading in every direction, must be noted in
any estimate of the sources from which this theory de-
rives its present strength. As in political economy, the
support received from the doctrine of wages and the
doctrine of rent combined to raise the Malthusian theory
to the rank of a central truth, so the extension of similar
ideas to the development of life in all its forms has the
effect of giving it a still higher and more impregnable
position. Agassiz, W'ho, to the day of his death, was a
strenuous opponent of the new' philosophy, spoke of
Darwinism a« “Malthus all over,” # and Darw'in himself
* Addreaa before MaiwachusetU Stale Board of Agriculture,
1872. Rej»ort U S. Department of Agriculture, 1873.
Chap. /.
THE MALTHUSIAN THEORY
101
says the struggle for existence “is the doctrine of Mal-
thus applied with manifold force to the whole animal
and vegetable kingdoms.” #
It does not, however, seem to me exactly correct to
say that the theory of development by natural selection
or survival of the fittest is extended Malthusianism, for
the doctrine of Malthus did not originally and does not
necessarily involve the idea of progression. But this was
soon added to it. McCullochf attributes to the “prin-
ciple of increase” social improvement and the progress
of tiie arts, and declares that the poverty that it engen-
ders acts as a powerful stimulus to the development of
industrv, the extension of science and the accumulation
of wealth by the upper and middle classes, without which
stimulus society would quickly sink into apathy and de-
cay. What is this but the recognition in regard to
human society of the developing effects of the “struggle
for existence” and “survival of the fittest,” which we
are now told on the authority of natural science have
been the means which Nature has employed to bring
forth all the infinitely diversified and wonderfully
* *
adapted forms which the teeming life of the globe as-
sumes? What is it but the recognition of the force,
which, seemingly cruel and remorseless, has yet in the
course of unnumbered ages developed the higher from
the lower type, differentiated the man and the monkey,
and made the Nineteenth Century succeed the age of
stone?
Thus commended and seemingly proved, thus linked
and buttressed, the Malthusian theory — the doctrine
that poverty is due to the pressure of population against
subsistence, or, to put it in its other form, the doctrine
that the tendency to increase in the number of laborers
must always tend to reduce wages to the minimum on
* Origin of Spocioa. Chap. Ill
t Not* JV to Wealth of Nations
102
POPULATION AND SUBSISTENCE
BotkIT.
which laborers can reproduce — is now generally accepted
as an unquestionable truth, in the light of which social
phenomena are to be explained, just as for ages the
phenomena of the sidereal heavens were explained upon
the supposition of the fixity of the earth, or the facts of
geology upon that, of the literal inspiration of the Mosaic
record. If authority were alone to be considered, for-
mally to deny this doctrine would require almost as much
audacity as that of the colored preacher who recently
started out on a crusade against the opinion that the
earth moves around the sun, for in one form or another,
the Malthusian doctrine has received in the intellectual
world an almost universal indorsement, and in the best
as in the most common literature of the dav mav be seen
•> «
cropping out in every direction. It is indorsed by econo-
mists and bv statesmen, bv historians and bv natural
+ • »
investigators; by social science congresses and by trade
unions; bv churchmen and bv materialists; bv conferva-
tives of the strictest sect and by the most radical of
radicals. It is held and habitiiallv reasoned from bv
* %
many who never heard of Malthus and who have not
the slightest idea of what his theory is.
Nevertheless, as the grounds of the current theory of
wages have vanished when subjected to a candid exami-
nation, so, do I believe, will vanish the grounds of this,
its twin. In proving that wages are not drawn from
capital we have raised this Anteus from the earth.
CHAPTER II
INFERENCES FROM FACTS
The general acceptance of the Malthusian theory and
the high authority by which it is* indorsed have seemed
to me to make it expedient to review its grounds and
the causes which have conspired to give it such a domi-
nating influence in the discussion of social questions.
But when we subject the theory itself to the test of
straightforward analysis, it will, I think, be found as
utterly untenable as the current theory of wages.
In the first place, the facts which are marshaled in
support of this theory do not prove it, and the analogies
do not countenance it.
And in the second place, there are facts which con-
clusively disprove it.
I go to the heart of the matter in saying that there is
no warrant, either in experience or analogy, for the as-
sumption that there is any tendency in population to
increase faster than subsistence. The facts cited to
show this simply show that where, owing to the sparse-
ness of population, as in new r countries, or where, owing
to the unequal distribution of wealth, as among the
poorer classes in old countries, human life is occupied
with the physical necessities of existence, the tendency
to reproduce is at a rate which would, were it to go on
unchecked, some time exceed subsistence. But it is
not a legitimate inference from this that the tendency
to reproduce would show itself in the same force where
population was sufficiently dense and wealth distributed
with sufficient evenness to lift a whole community above
103
104 POPULATION AND SUBSISTENCE Baak It
the necessity of devoting their energies to a struggle foi
mere existence. Nor can it be assumed that the tend-
ency to reproduce, by causing poverty, must prevent
the existence of such a community; for this, manifestly,
would be assuming the very point at issue, and reason-
ing in a circle. And even if it be admitted that the
tendency to multiply must ultimately produce poverty,
it cannot from this alone be predicated of existing pov-
erty that it is due to this cause, until it be shown that
there are no other causes which can account for it — a
thing in the present state of government, laws, and
customs, manifestly impossible.
This is abundantly shown in the “Essay on Popula-
tion” itself. This famous book, which is much oftener
spoken of than read, is still well worth perusal, if only
as a literary curiosity. The contrast between the merits
of the book itself and the effect it has produced, or is at
least credited with (for though Sir James Stewart, Mr.
Townsend, and others, share with Malthus the glory of
discovering "the principle of population,” it was the
publication of the “Essay on Population” that brought
it prominently forward), is, it seems to me, one of the
most remarkable things in the history of literature; and
it is easy to understand how Godwin, whose “Political
Justice” provoked the “Essay on Population,” should
until his old age have disdained a reply. It begins with
the assumption that population tends to increase in a
geometrical ratio, while subsistence can at best be made
to increase only in an arithmetical ratio — an assumption
just as valid, and no more so, than it would be, from the
fact that a puppy doubled the length of his tail while
he added so many pounds to his weight, to assert a geo-
metric progression of tail and an arithmetical progres-
sion of weight. And, the inference from the assumption
is just such as Swift in satire might have credited to the
savans of a previously dagless island, who. by bringing
Chop, II.
INFERENCES FROM FACTS
105
these two ratios together, might deduce the very “strik-
ing consequence” that by the time the dog grew to a
weight of fifty pounds his tail would be over a mile long,
and extremely difficult to wag, and hence recommend
the prudential check of a bandage as the only alterna-
tive to the positive check of constant amputations.
Commencing with such an absurdity, the essay includes
a long argument for the imposition of a duty on the im-
portation, and the payment of a bounty for the exporta-
tion of corn, an idea that has long since been sent to the
limbo of exploded fallacies. And it is marked through-
out the argumentative portions by passages which show
on the part of the reverend gentleman the most ridicu-
lous incapacity for logical thought — as, for instance,
that if wages were to be increased from eighteen pence
or two shillings per day to five shillings, meat would
necessarily increase in price from eight or nine pence to
two or three shillings per pound, and the condition of
the laboring classes would therefore not be improved, a
statement to which I can think of no parallel so close as
a proposition I once heard a certain printer gravely ad-
vance — that because an author, whom he had known,
was forty years old when he was twenty, the author
must now be eighty years old because he (the printer)
was forty. This confusion of thought does not merely
crop out here and there; it characterizes the whole
work.* The main body of the book is taken up with
what is in reality a refutation of the theory which the
*Malthus’ other works, though written after he became fam-
ous, made no mark, and are treated with contempt even by
those who find in the Essay a great discovery. The Encyclo-
paedia Britannica, for instance, though fully accepting the Mal-
thusian theory, says of Malthus’ Political Economy: “It is very
ill arranged, and is in no respect either a practical or a scientific
exposition of the subject. It is in great part occupied with an
examination of parts of Mr. Ricardo’s peculiar doctrines, and
with an inquiry into tbs nature and causes of value. Nothing.
108 * POPULATION AND SUBSISTENCE Boat //.
Be this S3 it may, the only continent which we can be
sure now contains a larger population than ever before
is Europe. But this is not true of all parts of Europe.
Certainly Greece, the Mediterranean Islands, and Tur-
key in Europe, probably Italy, and possibly Spain, have
contained larger populations than now, and this may be
likewise true of Northwestern and parts of Central and
Eastern Europe.
America also has increased in population during the
time we know of it ; but this increase is not so great as is
popularly supposed, some estimates giving to Peru alone
at the time of the discovery a greater population than
now exists on the whole continent of South America.
And all the indications are that previous to the discov-
ery the population of America had been declining
What great nations have run their course, what empires
have arisen and fallen in “that new world which is the
old,” we can only imagine. But fragments of massive
ruins yet attest a grander pre-Incan civilisation; amid
the tropical forests of Yucatan and Central America are
the remains of great cities forgotten ere the Spanish
conquest; Mexico, as Cortes found it, showed the super-
imposition of barbarism upon a higher social develop-
ment, while through a great part of what is now the
United States are scattered mounds which prove a once
relatively dense population, and here and there, as in
the Lake Superior copper mines, are traces of higher arts
Mexico noticeable for its antiquities. Yet Hugo Fink, of Cor-
dova, writing to the 8mithsonian Institution (Reports 1870), says
there is hardly a foot in the whole State in which by excavation
either a broken obsidian knife or a broken piece of (lottery is
not found; that the whole country is intersected with parallel
lines of stones intended to keep the earth from washing away
m the rainy season, which show that even the very poorest land
was put into requisition, and that it is impossible to resist the
conclusion that the ancient population was at least as dense as
it is at present in the most populous districts of Europe.
Chap. 11. INFERENCES FROM FACTS 109
than were known to the Indians with whom the whites
came in contact.
As to Africa there can be no question. Northern
Africa can contain but a fraction of the population that
it had in ancient times; the Nile Valley once held an
enormously greater population than now, while south
of the Sahara there is nothing to show increase within
historic times, and widespiead depopulation was cer-
tainly caused by the slave trade.
As for Asia, which even now contains more than half
the human race, though it is not much more than hali
as densely populated as Europe, there are indications
that both India and China once contained larger popu-
lations than now, while that great breeding ground of
men from which issued swarms that overran both coun-
tries and sent great waves of people rolling upon Europe
must have been once far more populous. But the most
marked change is in Asia Minor, Syria, Babylonia, Per-
sia, and in short that vast district which yielded to the
conquering arms of Alexander. Where were once great
cities and teeming populations are now squalid villages
and barren wastes.
It is somewhat strange that among all the theories
that have been raised, that of a fixed quantity to human
life on this earth has not been broached. It would at
least better accord with historical facts than that of the
constant tendency of population to outrun subsistence.
It is clear that population has here ebbed and there
flowed; its centers have changed; new nations have
arisen and old nations declined ; sparsely settled districts
have become populous and populous districts have lost
their population; but as far back as we can go without
abandoning ourselves wholly to inference, there is noth-
ing to show continuous increase, or even clearly to show
an aggregate increase from time to time. The advance
of the pioneers of peoples has, so far as can discerxv
110
POPULATION AND SUBSISTENCE
Book ilm
never been into uninhabited lands — their inarch has
always been a battle with some other people previously
in possession; behind dim empires vaguer ghosts of em-
pire loom. That the population of the world must have
had its small beginnings we confidently infer, for we
know that there was a geologic era when human life
could not have existed, and we cannot believe that men
sprang up all at once, as from the dragon teeth sowed
by Cadmus; yet through long vistas, where history, tra-*
dition and antiquities shed a light that is lost in faint
glimmers, we may discern large populations. And dur-
ing these long periods the principle of population has not
been strong enough fully to settle the world, or even so
far as we can clearly see materially to increase its ag-
gregate population. Compared with its capacities to
support human life the earth as a whole is yet most
sparsely populated.
There is another broad, general fact which cannot fail
to strike any one who, thinking of this subject, extends
his view beyond modern society. Malthusianism predi-
cates a universal law — that the natural tendency of
•
population is to outrun subsistence. If there be such a
law, it must, wherever population has attained a certain
density, become as obvious as any of the great natural
laws which have been everywhere recognized. How is
it, then, that neither in classical creeds and codes, nor
in those of the Jews, the Egyptians, the Hindoos* the
Chinese, nor any of the peoples who have lived in close
association and have built up creeds and codes, do we
find any injunctions to the practice of the prudential re-
straints of Malthus; but that, on the contrary, the wis-
dom of the centuries, the religions of the world, have
always inculcated ideas of civic and religious duty the
very reverse of those which the current political econ-
omy enjoins, and which Annie Besant is now trying
to popularise in England?
Chap. II. INFERENCES FROM FACTS ill
And it must be remembered that there have been so-
cieties in which the community guaranteed to every
member employment and subsistence. John Stuart Mill
says (Book II, Chap. XII, Sec. 2), that to do this with-
out state regulation of marriages and births, would be
to produce a state of general misery and degradation.
“These consequences,” he says, “have been so often and
so clearly pointed out by authors of reputation that ig-
norance of them on the part of educated persons is no
longer pardonable.” Yet in Sparta, in Peru, in Para-
guay, as in the industrial communities which appear
almost everywhere to have constituted the primitive
agricultural organization, there seems to have been an
utter ignorance of these dire consequences of a natural
tendency.
Besides the broad, general facts I have cited, there
are facts of common knowledge which seem utterly in-
consistent with such an overpowering tendency to mul-
tiplication. If the tendency to reproduce be so strong
as Malthusianism supposes, how is it that families so
often become extinct — families in which want is un-
known? How is it, then, that when every premium is
offered by hereditary titles and hereditary possessions,
not alone to the principle of increase, but to the pres-
ervation of genealogical knowledge and the proving up
of descent, that in such an aristocracy as that of Eng-
land, so many peerages should lapse, and the House of
Lords be kept up from century to century only by fresh
creations?
For the solitary example of a family that has sur-
vived any great lapse of time, even though assured of
subsistence and honor, we must go to unchangeable
China. The descendants of Confucius still exist there,
and enjoy peculiar privileges and consideration, form-
ing, m fact, the only hereditary aristocracy. On the
presumption that population tends to double every
112 POPULATION AND SUBSISTENCE Book II
twenty-five years, they should, in 2,150 years after the
death of Confucius, have amounted to 859,559,193,106,-
709,670,198,710,528 souls. Instead of any such unimag-
inable number, the descendants of Confucius, 2,150
years after his death, in the reign of Kanghi numbered
11,000 males, or say 22,000 souls. This is quite a dis-
crepancy, and is the more striking when it is remem-
bered that the esteem in which this family is held on
account of their ancestor, “the Most Holy Ancient
Teacher,” has prevented the operation of the positive
check, while the maxims of Confucius inculcate any-
thing but the prudential check.
Yet, it may be said, that even this increase is a great
one. Twenty-two thousand persons descended from a
single pair in 2,150 years is far short of the Malthusian
rate. Nevertheless, it is suggestive of possible over-
crowding.
But consider. Increase of descendants does not show
increase of population. It could only do this when the
breeding was in and in. Smith and his wife have a son
and daughter, who marry respectively some one else’s
daughter and son, and eafch have two children. Smith
and his wife would thus have four grandchildren; but
there would be in the one generation no greater number
than in the other — each child would have four grand-
parents. And supposing this process were to go on, the
line of descent might constantly spread out into hun-
dreds, thousands and millions; but in each generation of
descendants there would be no more individuals than in
any previous generation of ancestors. The web of gen-
erations is like lattice-work or the diagonal threads in
cloth. Commencing at any point at the top, the eye
follows lines which at the bottom widely diverge; but
beginning at any point at the bottom, the lines dn erge
in the same way to the top. How many children a man
may have is problematical. But that he had two par-
Chap. 11.
INFERENCES FROM FACTS
113
ents is certain, and that these again had two parents
each is also certain. Follow this geometrical progres-
sion through a few generations and see if it does not lead
to quite as “striking consequences” as Mr. Malthus’
peopling of the solar systems.
Bnt from such considerations as these let us advance
'o a more definite inquiry. I assert that the cases com-
monly cited as instances of over-population will not
bear investigation. India, China, and Ireland furnish
the strongest of these cases. In each of these countries,
large numbers have perished by starvation and large
classes are reduced to abject misery or compelled to
emigrate. But is this really due to over-population?
Comparing total population with total area, India and
China are far from being the most densely populated
countries of the world. According to the estimates of
MM. Behm and Wagner, the population of India is but
132 to the squ&re mile and that of China 119, whereas
Saxony has a population of 442 to the square mile; Bel-
gium 441; England 422; the Netherlands 291; Italy 234
and Japan 233.* There are thus in both countries large
areas unused or not fully used, but even in their more
densely populated districts there can be no doubt that
either could maintain a much greater population in a
much higher degree of comfort, for in both countries is
labor applied to production in the rudest and most in-
efficient ways, and in both countries great natural re-
sources are wholly neglected. This arises from no
*1 take these figures from the Smithsonian Report for 1873,
leaving out decimals. MM. Behm and Wagner put the popular
tion of China at 446,500,000, though there are some who contend
that it does not exceed 150,000,000. They put the population of
Hither India at 206,225,580, giving 132.29 to the square mile; of
Ceylon at 2,405,287 or 9736 to the square mile; of Further India
at 21,018,062, or 27.94 to the square mile. They estimate the
population of the world at 1,377,000,000, an average of 26.64 to
the square mile.
114
POPULATION AND SUBSISTENCE
Book Ih
innate deficiency in the people, for the Hindoo, as com-
parative philology has shown, is of our own blood, and
China possessed a high degree of civilization and the
rudiments of the most important modem inventions
when our ancestors were wandering savages. It arises
from the form which the social organization has in both
countries taken, which has shackled productive power
and robbed industry of its reward.
In India from time immemorial, the working classes
have been ground down by exactions and oppressions
into a condition of helpless and hopeless degradation.
For ages and ages the cultivator of the soil has esteemed
himself happy if, of his produce, the extortion of the
strong hand left him enough to support life and furnish
seed; capital could nowhere be safely accumulated or to
any considerable extent be used to assist production ; all
wealth that could be wrung from the people was in the
possession of princes who were little better than robber
chiefs quartered on the country, or in that of their
fanners or favorites, and was wasted in useless or worse
than useless luxury, while religion, sunken into an elab-
orate and terrible superstition, tyrannized over the mind
as physical force did over the bodies of men. Under
these conditions, the only arts that could advance were
those that ministered to the ostentation and luxury of
the great. The elephants of the rajah blazed with gold
of exquisite workmanship, and +he umbrellas that sym-
bolized his regal power glittered with gems; but the
plow of the ryot was only a sharpened stick. The ladies
of the rajah's harem wrapped themselves in muslins so
fine as to take the name of woven wind, but the tools of
the artisan were of the poorest and rudest description
and commerce could only be carried on, as it were, by
stealth.
Is it not clear that this tyranny and insecurity have
produced the want and starvation of India; and not, as
Chap. II.
INFERENCES FROM FACTS
115
according to Buckle, the pressure of population upon
subsistence that has produced the want, and the want
the tyranny.* Says the Rev. William Tennant, a chap-
lain in the service of the East India Company, writing
in 1796, two years before the publication of the “Essay
on Population : 9 '
"When we reflect upon the great fertility of Hindostan, it is
amazing to consider the frequency of famine. It is evidently not
owing to any stenlity of soil or climate; the evil must be traced
to some political cause, and it requires but little penetration to
discover it in the avarice and extortion of the various govern-
ments. The great spur to industry, that of security, is taken
away. Hence no man raises more grain than is barely sufficient
for himself, and the first unfavorable season produces a famine.
"The Mogul government at no period offered full security to
the prince, still less to his vassals; and to peasants the most
scanty protection of all. It was a continued tissue of violence
and insurrection, treachery and punishment, under which neither
commerce nor the arts could prosper, nor agriculture assume the
appearance of a system. Its downfall gave rise to a state still
more afflictive, since anarchy is worse than misrule. The Mo-
hammedan government, wretched as it was, the European na-
tions have not the merit of overturning. It fell beneath the
weight of its own corruption, and had already been succeeded
by the multifarious tyranny of petty chiefs, whose rignt to
govern consisted in their treason to the state, and whose exac-
tions on the peasants were as boundless as their avarice. The
rents to government were, and, where natives rule, still are,
levied twice a year by a merciless banditti, under the semblance
of an army, who wantonly destroy or carry off whatever part
of the produce may satisfy their caprice or satiate their avidity,
after having hunted the ill-fated peasants from the villages to
the woods. Any attempt of the peasants to defend their per*
sons or property within the mud walls of their villages only
i — — - - - - - - - — — - --- — — - — - — — ■ —
♦History of Civilization. Vol. I, Chap. 2. In this chapter
Buckle has collected a great deal of evidence of the oppression
and degradation of the people of India from the most remote
times, a condition which, blinded by the Malthusian doctrine
he has accepted and made the cornerstone of his theory of the
development of civilization, he attributes to the ease with which
food can there be produced.
A 16
POPULATION AND SUBSISTENCE
Book II
calls for the more signal vengeance on those useful, but ill-
fated mortals. They are then surrounded and attacked with
musketry and field pieces till resistance ceases, when the sur-
vivors are sold, and their habitations burned and leveled with
the ground. Hence you will frequently meet with the ryots
gathering up the scattered remnants of what had yesterday
been their habitation, if fear has permitted them to return;
but oftener the ruins are seen smoking, after a second visitation
of this kind, without the appearance of a human being to inter-
rupt the awful silence of destruction. This description does not
apply to the Mohammedan chieftains alone; it is equally appli-
cable to the Rajahs in the districts governed by Hindoos.”*
To this merciless rapacity, which would have pro-
duced want and famine were the population but one to
a square mile and the land a Garden of Eden, suc-
ceeded, in the first era of British rule in India, as merci-
less a rapacity, backed by a far more irresistible
power. Says Macaulay, in his essay on Lord Clive:
“Enormous fortunes were rapidly accumulated at Calcutta,
while millions of human beings were reduced to the extremity
of wretchedness. They had been accustomed to live under
tyranny, but never under tyranny like this. They found the
little finger of the Company thicker than the loins of Surajah
Dowlah. * * * It resembled the government of evil genii,
rather than the government of human tyrants. Sometimes they
submitted in patient misery. Sometimes they fled from the white
man as their fathers had been used to fly from the Maharatta,
and the palanquin of the English traveler was often
tarried through silent villages and towns that the report of his
approach had made desolate.”
Upon horrors that Macaulay thus but touches, the
vivid eloquence of Burke throws a stronger light — whole
districts surrendered to the unrestrained cupidity of the
worst of human kind, poverty-stricken peasants fiend-
ishly tortured to compel them to give up their little
hoards, and once populous tracts turned into deserts.
* Indian Recreations. By Rev. Wm. Tennant. London, 1804,
Vol. L Sec. XXXIX.
Chap. 11.
INFERENCES FROM FACTS
117
But the lawless license of early English rule has been
long restrained. To all that vast population the strong
hand of England has given a more than Roman peace;
the just principles of English law have been extended by
an elaborate system of codes and law officers designed to
secure to the humblest of these abject peoples the rights
of Anglo-Saxon freemen; the whole peninsula has been
intersected- by railways, and great irrigation works hav*'
been constructed. Yet, with increasing frequency
famine has succeeded famine, 'raging with greater in-
tensity over wider areas.
Is not this a demonstration of the Malthusian theory?
Does it not show that no matter how much the possibili-
ties of subsistence are increased, population still con-
tinues to press upon it? Does it not show, as Malthus
contended, that, to shut up the sluices by which super-
abundant population is carried off, is but to compel
nature to open .new ones, and that unless the sources of
human increase are checked by prudential regulation,
the alternative of war is famine? This has been the
orthodox explanation. But the truth, as may be seen in
the facts brought forth in recent discussions of Indian
affairs in the English periodicals, is that these famines,
which have been, and are now, sweeping away their mil-
lions, are no more due to the pressure of population
upon the natural limits of subsistence than was the deso-
lation of the Carnatic when Hyder Ali’s horsemen burst
upon it in a whirlwind of destruction.
The millions of India have bowed their necks beneath
the yokes of many conquerors, but worst of all is the
steady, grinding weight of English domination — a weight
which is literally crushing millions out of existence, and,
as shown by English writers, is inevitably tending to a
most frightful and widespread catastrophe. Other con-
querors have lived in the land, and, though bad and
tyrannous in their rule, have understood and been un-
118 POPULATION AND SUBSISTENCE Book II.
derstood by the people; but India now is like a great
estate owned by an absentee and alien landlord. A
most expensive military and civil establishment is kept
up, managed and officered by Englishmen who regard
India as but a place of temporary exile; and an enor-
mous sum, estimated as at least £20,000,000 annually,
raised from a population where laborers are in many
places glad in good times to work for l^fed. to 4d. a day,
is drained away to England in the shape of remittances,
pensions, home charges of the government, etc. — a trib-
ute for which there is no return. The immense sums
lavished on railroads have, as shown by the returns,
been economically unproductive; the great irrigation
works are for the most part costly failures. In large
parts of India the English, in their desire to create a
class of landed proprietors, turned over the soil in abso-
lute possession to hereditary tax-gatherers, wlfo rack-
rent the cultivators most mercilessly. In other parts,
where the rent is still taken by the State in the shape
of a land tax, assessments are so high, and taxes are
collected so relentlessly, as to drive the ryots, who get
but the most scanty living in good seasons, into the
claws of money lenders, who are, if possible, even more
rapacious than the zemindars. Upon salt, an article of
prime necessity everywhere, and of especial necessity
where food is almost exclusively vegetable, a tax of
nearly twelve hundred per cent, is imposed, so that its
various industrial uses are prohibited, and large bodies
of the people cannot get enough to keep either them-
selves or their cattle in health. Below the English offi-
cials are a horde of native employees who oppress and
extort. The effect of English law, with its rigid rules,
and, to the native, mysterious proceedings, has been
but to put a potent instrument of plunder into the hands
of the native money lenders, from whom .the peasants
are compelled to borrow on the most extravagant terms
Chap. II.
INFERENCES FROM FACTS
119
to meet their taxes, and to whom they are easily induced
to give obligations of which they know not the meaning.
“We do not care for the people of India,” writes Flor-
ence Nightingale, *with what seems like a sob. “The
saddest sight to be seen in the East — nay, probably in
the world — is the peasant of our Eastern Empire.” And
she goes on to show the causes of the terrible famines,
in taxation which takes from the cultivators the very
means of cultivation, and the actual slavery to which
the ryots are reduced as “the consequences of our own
law's;” producing in “the most fertile country in the
world, a grinding, chronic semi-starvation in many places
where what is called famine does not exist.” * “The
famines which have been devastating India,” says H. M.
Hyndman,t “are in the main financial famines. Men
and women cannot get food, because they cannot save
the money to buy it. Yet we are driven, so we say, to
tax these people more.” And he shows how, even from
famine stricken districts, food is exported in payment
of taxes, and how the whole of India is subjected to a
steady and exhausting drain, which, combined with the
enormous expenses of government, is making the popu-
lation year by year poorer. The exports of India con-
*Miss Nightingale (The People of India, in “Nineteenth
Century” for August, 1878) gives instances, which she says
represent millions of cases, of the state of peonage to which the
cultivators of Southern India have been reduced through the
facilities afforded by the Civil Courts to the frauds and oppres-
sions of money lenders and minor native officials. “Our Civil
Courts are regarded as institutions for enabling the rich to grind
the faces of the poor, and many are fain to seek a refuge from
their jurisdiction within native territory,” says Sir David Wed-*
derbum, in an article on Protected Princes in India, in a pre-
vious (July) number of the same magazine, in which he also
gives a native State, where taxation is* comparatively light, as
an instance of the most prosperous population of India.
t See articles in “Nineteenth Century” for October, 1878, ami
March, 1879.
120 POPULATION AND SUBSISTENCE Book II.
gist almost exclusively of agricultural products. For at
least one-third of these, as Mr. Hyndman shows, no re-
turn whatever is received; they represent tribute — re-
mittances made by Englishmen in India, or expenses
of the English branch of the Indian government.* And
for the rest, the return is for the most part government
stores, or articles of comfort and luxury used by the
English masters of India. He shows that the expenses
of government have been enormously increased under
Imperial rule; that the relentless taxation of a popula-
tion so miserably poor that the masses are not more
than half fed, is robbing them of their scanty means for
cultivating the soil; that the number of bullocks (the
Indian draft animal) is decreasing, and the scanty im-
plements of culture being given up to money lenders,
from whom “we, a business people, are forcing the culti-
vators to borrow at 12, 24, 60 per cent.t to build and
pay the interest on the cost of vast public works, which
have never paid nearly five per cent.” Says Mr. Hynd-
man: “The truth is that Indian society as a whole has
been frightfully impoverished under our rule, and that
the process is now going on at an exceedingly rapid
rate” — a statement which cannot be doubted, in view
of the facts presented not only by such writers as I have
referred to, but by Indian officials themselves. The very
efforts made by the government to alleviate famines
do, by the increased taxation imposed, but intensify and
extend their real cause. Although in the recent famine
♦Prof. Fawcett, in a recent article on the Proposed Loans to
India, calls attentions to such items aa £1,200 for outfit and
passage of a member of the Governor General’s Council; £2,450
for outfit and passage of Bishops of Calcutta and Bomba> .
t Florence Nightingale says 100 per cent, is common, and even
then the cultivator is robbed in ways which she illustrates. It
is hardly necessary to say that these rates, like those of the
pawnbroker, are not interest in the economic sense of the term.
Chap. II.
INFERENCES FROM FACTS
121
in Southern India six millions of people, it is estimated,
perished of actual starvation, and the great mass of
those who survived were actually stripped, yet the taxes
were not remitted and the salt tax, already prohibitory
to the great bulk of these poverty stricken people, was
increased forty per cent., just as after the terrible Ben-
gal famine in 1770 the revenue was actually driven up,
by raising assessments upon the survivors and rigor-
ously enforcing collection.
In India now, as in India in past times, it is only the
most superficial view that can attribute want and star-
vation to pressure of population upon the ability of the
land to produce subsistence. Could the cultivators re-
tain their little capital — could they be released from the
drain which, even in non-famine years, reduces great
masses of them to a scale of living not merely below
what is deemed necessary for the sepoys, but what Eng-
lish humanity gives to the prisoners in the jails — reviv-
ing industry, assuming more productive forms, would
undoubtedly suffice to keep a much greater population.
There are still in India great areas uncultivated, vast
mineral resources untouched, and it is certain that the
population of India does not reach, as within historical
times it never has reached, the real limit of the soil to
furnish subsistence, or even the point where this power
begins to decline with the increasing drafts made upon
it. The real cause of want in India has been, and yet
i§, the rapacity of man, not the niggardliness of nature.
What is true of India is true of China. Densely
populated as China is in many parts, that the extreme
poverty of the lower classes is to be attributed to causes
similar to those which have operated in India, and not
to too great population, is shown by many facts. In-
security prevails, production goes on under the greatest
disadvantages, and exchange is closely fettered. Where
the government is a succession of squeezings, and secu-
122
POPULATION AND SUBSISTENCE
Book It
rity for capital of any sort must be purchased of a man-
darin; where men’s shoulders are the great reliance for
inland transportation; where the junk is obliged to be
constructed so as to unfit it for a sea-boat; where piracy
is a regular trade, and robbers often march in regi-
ments, poverty would prevail and the failure of a crop
result in famine, no matter how sparse the population.*
That China is capable of supporting a much greater
population is shown not only by the great extent of un-
cultivated land to which all travelers testify, but by the
immense unworked mineral deposits which are there
known to exist. China, for instance, is said to contain
the largest and finest deposit of coal yet anywhere dis-
covered. How much the working of these coal beds
would add to the ability to support a greater popula-
tion, may readily be imagined. Coal is not food, it is
true; but its production is equivalent to the production
of food. For, not only may coal be exchanged for food,
as is done in all mining districts, but the force evolved
by its consumption may be used in the production of
food, or may set labor free for the production of food.
• Neither in India nor China, therefore, can poverty
and starvation be charged to the pressure of population
against subsistence. It is not dense population, but the
causes which prevent social organization from taking
its natural development and labor from securing its full
return, that keep millions just on the verge of starva-
tion, and every now and again force millions beyond it.
That the Hindoo laborer thinks himself fortunate to get
a handful of rice, that the Chinese eat rats and puppies,
is no more due to the pressure of population than it is
due to the pressure of population that the Digger In-
dians live on grasshoppers, or the aboriginal inhabitants
of Australia eat the worms found in rotten wood.
* The seat of recent famine ix\ China was not the most thickly
settled districts.
Chap. II,
INFERENCES FROM FACTS
123
Let me be understood. I do not mean merely to say
that India or China could, with a more highly developed
civilization, maintain a greater population, for to this
any Malthusian would agree. The Malthusian doctrine
does not deny that an advance in the productive arts
would permit a greater population to find subsistence.
But the Malthusian theory affirms — and this is its es-
sence — that, whatever be the capacity for production,
the natural tendency of population is to come up with
it, and, in the endeavor to press beyond it, to produce*
to use the phrase of Malthus, that degree of vice and
misery which is necessary to prevent further increase;
so that as productive power is increased, population will
correspondingly increase, and in a little time produce
the same Results as before. What I say is this: that no-
where is there any instance which will support this the-
ory; that nowhere can want be properly attributed to
the pressure of population against the power to procure*
subsistence in the then existing degree of human knowl-
edge; that everywhere the vice and misery attributed to
over-population can be traced to the warfare, tyranny,
and oppression which prevent knowledge from being
utilized and deny the security essential to production.
The reason why the natural increase of population does
not produce want, we shall come to hereafter. The fac
that it has not yet anywhere done so, is what we are
now concerned with. This fact is obvious with regard
to India and China. It will be obvious, too, wherever
we trace to their causes the results which on superficial
view are often taken to proceed from over-population.
Ireland, of all European countries, furnishes the great
stock example of over-population. The extreme pov-
erty of the peasantry and the low rate of wages there
prevailing, the Irish famine, and Irish emigration, are
constantly referred to as a demonstration of the Mal-
thusian theory worked out under the eyes of the civil-
124
POPULATION AND SUBSISTENCE
Book It
used world. I doubt if a more striking instance can be
cited of the power of a preaccepted theory to blind men
as to the true relations of facts. The truth is, and it
lies on the surface, that Ireland has never yet had a
population which the natural powers of the country, in
the existing state of the productive arts, could not have
maintained in ample comfort. At the period of her
greatest population (1840-45) Ireland contained some-
thing over eight millions of people. But a very large
proportion of them managed merely to exist — lodging in
miserable cabins, clothed with miserable rags, and with
but potatoes for their staple food. When the potato
blight came, they died by thousands. But was it the
inability of the soil to support so large a population
that compelled so many to live in this miserable way,
and exposed them to starvation on the failure of a
single root crop? On the contrary, it was the same re-
morseless rapacity that robbed the Indian ryot of the
fruits of his toil and left him to starve where nature
offered plenty. A merciless banditti of tax-gatherers
did not march through the land plundering and tortur-
•og, but the laborer was just as effectually stripped by
as merciless a horde of landlords, among whom the soil
had been divided as their absolute possession, regardless
of any rights of those who lived upon it.
Consider the conditions of production under which
this eight million managed to live until the potato
blight came. It was a condition to which the words
used by Mr. Tennant in reference to India may as ap-
propriately be applied — “the great spur to industry, that
of security, was taken away.” Cultivation was for the
most part carried on by tenants at will, who, even if the
rack-rents which they were forced to pay had per-
mitted them, did not dare to make improvements which
would have been but the signal for an increase of rent.
Labor was thus applied in the most inefficient and
Zknp. U .
INFERENCES FROM FACTS
125
wasteful manner, and labor was dissipated in aimless
idleness that, with any security for its fruits, would
have been applied unremittingly. But even under these
conditions, it is a matter of fact that Ireland did more
than support eight millions. For when her population
was at its highest, Ireland was a food exporting coun-
try. Even during the famine, grain and meat and
butter and cheese were carted for exportation along
roads lined with the starving, and past trenches into
which the dead were piled. For these exports of food,
or at least for a great part of them, there was no return.
So far as the people of Ireland were concerned, the food
thus exported might as well have been burned up or
thrown into the sea, or never produced. It went not as
an exchange, but as a tribute — to pay the rent of ab-
sentee landlords; a levy wrung from producers by those
who in no wise contributed to production.
Had this food been left to those who raised it; had
the cultivators of the soil been permitted to retain and
use the capital their labor produced ; had security stimu-
lated industry and permitted the adoption of economical
methods, there would have been enough to support in
bounteous comfort the largest population Ireland ever
had, and the potato blight might have come and gone
without stinting a single human being of a full meal.
For it was not the imprudence “of Irish peasants,” as
English economists coldly say, which induced them to
make the potato the staple of their food. Irish emi-
grants, when they can get other things, do not live upon
the potato, and certainly in the United States the pru-
dence of the Irish character, in endeavoring to lay by
something for a rainy day, is remarkable. They lived
on the potato, because rack-rents stripped everything
else from them. The truth is, that the poverty and
misery of Ireland have never been fairly attributable
to over-population.
126 POPULATION AND SUBSISTENCE Book II.
McCulloch, writing in 1838, says, in Note IV to
"Wealth of Nations:”
“The wonderful density of population in Ireland* is the im-
mediate cause of the abject poverty and depressed condition
of the great bulk of the people. It is not too much to say that
there are at present more than double the persons in Ireland it
is, with its existing means of production, able either fully to
employ or to maintain in a moderate state of comfort.”
As in 1841 the population of Ireland was given as
8,175,124, we may set it down in 1838 as about eight
millions. Thus, to change McCulloch's negative into an
affirmative, Ireland would, according to the over-popu-
lation theory, have been able to employ fully and main-
tain in a moderate state of comfort something less than
four million persons. Now, in the early part of the
preceding century, when Dean Swift wrote his "Modest
Proposal,” the population of Ireland was about two
millions. As neither the means nor the arts of produc-
tion had perceptibly advanced in Ireland during the
interval, then — if the abject poverty and depressed con-
dition of the Irish people in 1838 were attributable to
over-population — there should, upon McCulloch's own
admission, have been in Ireland in 1727 more than full
employment, and much more than a moderate state of
comfort, for the whole two millions. Yet, instead of
this being the case, the abject poverty and depressed
condition of the Irish people in 1727 were such, that,
with burning, blistering irony, Dean Swift proposed to
relieve surplus population by cultivating a taste tor
roasted babies, and bringing yearly to the shambles, as
dainty food for the rich, 100,000 Irish infants!
It is difficult for one who has been looking over the
literature of Irish misery, as while writing this chapter
I have been doing, to speak in decorous terms of the
complacent attribution of Irish want and suffering to
over-population which is to be found even in the works
Chap. II,
INFERENCES FROM FACTS
127
of such high-minded men as Mill and Buckle. I know
of nothing better calculated to make the blood boil
than the cold accounts of the grasping, grinding tyranny
to which the Irish people have been subjected, and to
which, and not to any inability of the land to support
its population, Irish pauperism and Irish famine are
to be attributed; and were it not for the enervating ef-
fect which the history of the World proves to be every-
where the result of abject poverty, it would be difficult
to resist something like a feeling of contempt for a race
who, stung by such wrongs, have only occasionally mur-
dered a landlord!
Whether over-population ever did cause pauperism
and starvation, may be an open question; but the
pauperism and starvation of Ireland can no more be at-
tributed to this cause than can the slave trade be attrib-
uted to the over-population of Africa, or the destruction
of Jerusalem, to the inability of subsistence to keep pace
with reproduction. Had Ireland been by nature a grove
of bananas and bread-fruit, had her coasts been lined
by the guano-deposits of the Chinchas, and the sun of
lower latitudes warmed into more abundant life her
moist soil, the social conditions that have prevailed
there would still have brought forth poverty and star-
vation. How could there fail to be pauperism and
famine in a country where rack-rents wrested from the
cultivator of the soil all the produce of his labor except
just enough to maintain life in good seasons; where
tenure at will forbade improvements and removed in-
centive to any but the most wasteful and poverty-
stricken culture; where the tenant dared not accumulate
capital, even if he could get it, for fear the landlord
would demand it in the rent; where in fact he was an
abject slave, who, at the nod of a human being like him-
self, might at any time be driven from his miserable
mud cabin, a houseless, homeless, starving wanderer,
128
POPULATION AND SUBSISTENCE
Boot//,
forbidden even to pluck the spontaneous fruits of the
earth, or to trap a wild hare to satisfy his hunger? No
matter how sparse the population, no matter what the
natural resources, are not pauperism and starvation
necessary consequences in a land where the producers
of wealth are compelled to work under conditions which
deprive them of hope, of self-respect, of energy, of
thrift; where absentee landlords drain away without
return at least a fourth of the net produce of the soil, and
when, besides them, a starving industry must support
resident landlords, with their horses and hounds, agents,
jobbers, middlemen and bailiffs, an alien state church
to insult religious prejudices, fend an army of policemen
and soldiers to overawe and hunt down any opposition
to the iniquitous system? Is it not impiety far worse
than atheism to charge upon natural laws misery so
causetj?
What is true in these three cases will be found upon
examination true of all cases. So far as our knowledge
of facts goes, we may safely deny that the increase of
population has ever yet pressed upon subsistence in
such a way as to produce vice and misery ; that increase
of numbers has ever yet decreased the relative produc-
tion of food. The famines of India, China, and Ireland
can no more be credited to over-population than the
famines of sparsely populated Brazil. The vice and
misery that come of want can no more be attributed to
the niggardliness of Nature than can the six millions
slain by the sword of Genghis Khan, Tamerlane’s pyra-
mid of skulls, or the extermination of the ancient
Britons or of the aboriginal inhabitants of the West
Indies.
CHAPTER III
INFERENCES FROM ANALOGY
If we turn from an examination of the facts brought
forward in illustration of the Malthusian theory to con-
sider the analogies by which it is supported, we shall
find the same inconclusiveness.
The strength of the reproductive force in the animal
and vegetable kingdoms — such facts as that a single
pair of salmon might, if preserved from their natural
enemies for a few years, fill the ocean; that a pair of
rabbits would, under the same circumstances, soon over-
run a continent; that many plants scatter their seeds by
the hundred fold, and some insects deposit thousands
of eggs; and that everywhere through these kingdoms
each species constantly tends to press, and when not
limited by the number of its enemies, evidently does
press, against the limits of subsistence — is constantly
cited, from Malthus down to the text-books of the
present day, as showing that population likewise tends
to press against subsistence, and, when unrestrained by
other means, its natural increase must necessarily result
in such low wages and want, or, if that will not suffice,
and the increase still goes on, in such actual starvation,
as will keep it within the limits of subsistence.
But is this analogy valid? It is from the vegetable
and animal kingdoms that man’s food is drawn, and
hence the greater strength of the reproductive force in
the vegetable and animal kingdoms than in man simply
proves the power of subsistence to increase faster than
129
130
POPULATION AND SUBSISTENCE
Book JL
population. Does not the fact that all of the things
which furnish man’s subsistence have the power to mul-
tiply many fold — some of them many thousand fold,
and some of them many million or even billion fold —
while he is only doubling his numbers, show that, let
human beings increase to the full extent of their re-
productive power, the increase of population can never
exceed subsistence? This is clear when it is remem-
bered that though in the vegetable and animal king-
doms each species, by virtue of its reproductive power,
naturally and necessarily presses against the conditions
which limit its further increase, yet these conditions
are nowhere fixed and final. No species reaches the
ultimate limit of soil, water, air, and sunshine; but the
actual limit of each is in the existence of other species,
its rivals, its enemies, or its food. Thus the conditions
which limit the existence of such of these species as
afford him subsistence man can extend (in some cases
his mere appearance will extend them), and thus the
reproductive forces of the species which supply his
wants, instead of wasting themselves against their for-
mer limit, start forward in his service at a pace which
his powers of increase cannot rival. If he but shoot
hawks, food-birds will increase; if he but trap foxes
the wild rabbits will multiply; the honey bee moves
with the pioneer, and on the organic matter with which
man’s presence fills the rivers, fishes feed.
Even if any consideration of final causes be excluded;
even if it be not permitted to suggest that the high and
constant reproductive force in vegetables and animals
has been ordered to enable them to subserve the uses
of man, and that therefore the pressure of the lower
forms of life against subsistence does not tend to show
that it must likewise be so with man, “the roof and
crown of things;” yet there still remains a distinction
between man and all other forms of life that destroys
Chap. 111.
INFERENCES FROM ANALOGY
131
the analogy. Of all living things, man is the only
who can give play to the reproductive forces, more
powerful than his own, which supply him with food.
Beast, insect, bird, and fish take only what they find.
Their increase is at the expense of their food, and when
they have reached the existing limits of food, their food
must increase before they can increase. But unlike that
of any other living thing, the increase of man involves
the increase of his food. If bears instead of men had
been shipped from Europe to the North American con-
tinent, there would now be no more bears than in the
time of Columbus, and possibly fewer, for bear food
would not have been increased nor the conditions of
bear life extended, by the bear immigration, but prob-
ably the reverse. But within the limits of the United
States alone, there are now forty-fivq millions of men
where then there were only a few hundred thousand,
and yet there is now within that territory much more
food per capita for the forty-five millions than there
was then for the few hundred thousand. It is not the
increase of food that has caused this increase of men;
but the increase of men that has brought about the in-
crease of food. There is more food, simply because
there are more men.
Here is a difference between the animal and the man.
Both the jay-hawk and the man eat chickens, but the
more jay-hawks the fewer chickens, while the more men
the more chickens. Both the seal and the man eat
salmon, but when a seal takes a salmon there is a
salmon the less, and were seals to increase past a certain
point salmon must diminish ; while by placing the
spawn of the salmon under favorable conditions man
can so increase the number of salmon as more than to
make up for all he may take, and thus, no matter how
much men may increase, their increase need never out-
run the supply of salmon.
132
POPULATION AND SUBSISTENCE
Book II.
In short, while all through the vegetable and animal
kingdoms the limit of subsistence is independent of the
thing subsisted, with man the limit of subsistence is,
within the final limits of earth, air, water, and sunshine,
dependent upon man himself. And this being the case,
the analogy which it is sought to draw between the
lower forms of life and man manifestly fails. While
vegetables and animals do press against the limits of
subsistence, man cannot press against the limits of his
subsistence until the limits of the globe are reached.
Observe, this is not merely true of the whole, but of
all the parts. As we cannot reduce the level of the
smallest bay or harbor without reducing the level not
merely of the ocean with which it communicates, but
of all the seas and oceans of the world, so the limit of
subsistence in any particular place is not the ph sica >
limit of that place, but the physical limit of the globe.
Fifty square miles of soil will in the present state of the
productive arts yieH subsistence for only s~me thou-
sands of people, but on the fifty square n les which
comprise the city of London some three and a half
millions of people are maintained, and subsistence in-
creases as population increases. So far as the limit of
subsistence is concerned, London may grow to a popu-
lation of a hundred millions, or five hundred millions, or
a thousand millions, for she draws for subsistence upon
the whole globe, and the limit which subsistence sets to
her growth in population is the limit of the globe to
furnish food for its inhabitants.
But here will arise another idea from which the Mal-
thusian theory derives great support — that of the di-
minishing productiveness of land. As conclusively
proving the law ot diminishing productiveness it is said
in the current treatises that were it not true that be-
yond a certain point land yields less and less to addi-
tional applications of labor and capital, increasing
Chap. III.
INFERENCES FROM ANALOGY
133
population would not cause any extension of cultiva-
tion, but that all the increased supplies needed could
and would be raised without taking into cultivation any
fresh ground. Assent to this seems to involve assent to
the doctrine that the difficulty of obtaining subsistence
must increase with increasing population.
But I think the necessity is only in seeming. If the
proposition be analyzed it will be seen to belong to a
class that depend for validity upon an implied or sug-
gested qualification — a truth relatively, which taken ab-
solutely becomes a non-truth. For that man cannot
exhaust or lessen the powers of nature follows from the
indestructibility of matter and the persistence of force.
Production and consumption are only relative terms.
Speaking absolutely, man neither produces nor con-
sumes. The whole human race, were they to labor to
infinity, could not make this rolling sphere one atom
heavier or one atom lighter, could not add to or dimin-
ish by one iota the sum of the forces whose everlasting
circling produces all motion and sustains all life. As
the water that we take from the ocean must again re-
turn to the ocean, so the food we take from the reser-
voirs of nature is, from the moment we take it, on its
way back to those reservoirs. What we draw from a
limited extent of land may temporarily reduce the pro-
ductiveness of that land, because the return may be
to other land, or may be divided between that land and
other land, or, perhaps, all land; but this possibility
lessens with increasing area, and ceases when the whole
globe is considered. That the earth could maintain a
thousand billions of people as easily as a thousand mil-
lions is a necessary deduction from the manifest truths
that, at least so far as our agency is concerned, matter
is eternal and force must forever continue to act. Life
does not use up the forces that maintain life. We come
into the material universe bringing nothing; we take
134
POPULATION AND SUBSISTENCE
Book II.
Qothing away when we depart. The human being,
physically considered, is but a transient form of mat-
ter, a changing mode of motion. The matter remains
and the force persists. Nothing is lessened, nothing is
weakened. And from this it follows that the limit to
the population of the globe can be only the limit of
space. %
Now this limitation of space — this danger that the
human race may increase beyond the possibility of find-
ing elbow room — is so far off as to have for us no more
practical interest than the recurrence of the glacial
period or the final extinguishment of the sun. Yet re-
mote and shadowy as it is, it is this possibility which
gives to the Malthusian theory its apparently self-evi-
dent character. But if we follow it, even this shadow
will disappear. It, also, springs from a false analogy.
That vegetable and animal life tend to press against the
limits of space does not prove the same tendency in
human life.
Granted that man is only a more highly developed
animal ; that the ring-tailed monkey is a distant relative
who has gradually developed acrobatic tendencies, and
the hump-backed whale a far-off connection who in
early life took to the sea — granted that back of these
he is kin to the vegetable, and is still subject to the
same laws as plants, fishes, birds, and beasts. Yet there
is still this difference between man and all other animals
— he is the only animal whose desires increase as they
are fed; the only animal that is never satisfied. The
wants of every other living thing are uniform and fixed.
The ox of to-day aspires to no more than did the ox
when man first yoked him. The sea gull of the English
Channel, who poises himself above the swift steamer,
wants no better food or lodging than the gulls who
circled round as the keels of Caesar's galleys first grated
on a British beach. Of all that nature offers them, be
Chap . III.
INFERENCES FROM ANALOGY
135
it ever so abundant, all living things save man can take,
and care for, only enough to supply wants which are
definite and fixed. The only use they can make of addi-
tional supplies or additional opportunities is to mul-
tiply.
But not so with man. No sooner are Lis animal wants
satisfied than new wants arise. Food he wants first,
as does the beast; shelter next, as does the beast; and
these given, his reproductive instincts assert their sway,
as do those of the beast. But here man and beast
part company. The beast never goes further; the man
has but set his feet on the first step of an infinite pro-
gression — a progression upon which the beast never
enters; a progression away from and above the beast.
The demand for quantity once satisfied, he seeks
quality. The very desires that he has in common with
the beast become extended, refined, exalted. It is not
merely hunger, "but taste, that seeks gratification in
food; in clothes, he seeks not merely comfort, but
adornment; the rude shelter becomes a house; the un-
discriminating sexual attraction begins to transmute
itself into subtile influences, and the hard and common
stock of animal life to blossom and to bloom into shapes
of delicate beauty. As power to gratify his wants in-
creases, so does aspiration grow. Held down to lower
levels of desire, Lucullus will sup with Lucullus; twelve
boars turn on spits that Antony’s mouthful of meat may
be done to a turn; every kingdom of Nature be ran-
sacked to add to Cleopatra’s charms, and marble colon-
nades and hanging gardens and pyramids that rival the
hills arise. Passing into higher forms of desire, that
which slumbered in the plant and fitfully stirred in the
beast, awakes in the man. The eyes of the mind are
opened, and he longs to know. He Braves the scorch-
ing heat of the desert and the icy blasts of the polar
sea, but not for food; he watches all night, but it is to
136
POPULATION AND SUBSISTENCE
Book It
trace the circling of the eternal stars. He adds toil to
toil, to gratify a hunger no animal has felt; to assuage
a thirst no beast can know.
Out upon nature, in upon himself, back through the
mists that shroud the past, forward into the darkness
that overhangs the future, turns the restless desire that
arises when the animal wants slumber in satisfaction.
Beneath things, he seeks the law; he would know how
the globe was forged and the stars were hung, and
trace to their origins the springs of life. And, then, as
the man develops his nobler nature, there arises the
desire higher yet — the passion of passions, the hope of
hopes — the desire that he, even he, may somehow aid
in making life better and brighter, in destroying want
and sin, sorrow and shame. He masters and curbs the
animal; he turns his back upon the feast and renounces
the place of power; he leaves it to others to accumulate
wealth, to gratify pleasant tastes, to bask themselves
in the warm sunshine of the brief day. He works for
those he never saw and never can see; for a fame, or
maybe but for a scant justice, that can only come long
After the clods have rattled upon his coffin lid. He toils
in the advance, where it is cold, and there is little cheer
from men, and tKe stones are sharp and the brambles
thick. Amid the scoffs of the present and the sneers
that stab like knives, he builds for the future; he cuts
the trail that progressive humanity may hereafter
broaden into a highroad. Into higher, grander spheres
desire mounts and beckons, and a star that rises in the
east leads him on. Lo! the pulses of the man throb with
the yearnings of the god — he would aid in the process
of the suns!
Is not the gulf too wide for the analogy to span?
Give more food, open fuller conditions of life, and the
vegetable or animal can but multiply; the man will de-
velop. In the one the expansive force can but extend
Chap. 111.
INFERENCES FROM ANALOGY
137
existence in new numbers; in the other, it will inevi-
tably tend to extend existence in higher forms and wider
powers. Man is an animal; but he is an animal plus
something else. He is the mythic earth-tree, whose
roots are in the ground, but whose topmost branches
may blossom in the heavens 1
Whichever way it be turned, the reasoning by which
this theory of the constant tendency of population to
press against the limits of subsistence is supported shows
an unwarranted assumption, an undistributed middle,
as the logicians would say. Facts do not warrant it,
analogy does not countenance it. It is a pure chimera
of the imagination, such as those that for a long time
prevented men from recognizing the rotundity and mo-
tion of the earth. It is just such a theory as that under-
neath us everything not fastened to the earth must fall
off; as that a ball dropped from the mast of a ship in
motion must f$ll behind the mast; as that a live fish
placed in a vessel full of water will displace no water.
It is as unfounded, if not as grotesque, as an assump-
tion we can imagine Adam might have made had he
been of an arithmetical turn of mind and figured on
the growth of his first baby from the rate of its early
months. From the fact that at birth it weighed ten
pounds and in eight months thereafter twenty pounds,
he might, with the arithmetical knowledge which some
sages have supposed him to possess, have ciphered out
a result quite as striking as that of Mr. Malthus;
namely, that by the time it got to be ten years old it
would be as heavy as an ox, at twelve as heavy as an
elephant, and at thirty would weigh no less than
175,716,339,548 tons.
The fact is, there is no more reason for us to trouble
ourselves about the pressure of population upon sub-
sistence than there was for Adam to worry himself
about the rapid growth of his baby. So far as an in-
138
POPULATION AND SUBSISTENCE
Book II.
ference is really warranted by facts and suggested by
analogy, it is that the law of population includes such
beautiful adaptations as investigation has already
shown in other natural laws, and that we are no more
warranted in assuming that the instinct of reproduc-
tion, in the natural development of society, tends to
produce misery and vice, than we should be in assuming
that the force of gravitation must hurl the moon to the
earth and the earth to the sun, or than in assuming from
the contraction of water with reductions of tempera-
ture down to thirty-two degrees that rivers and lakes
must freeze to the bottom with every frost, and the
temperate regions of earth be thus rendered uninhabit-
able by even moderate winters. That, besides the posi-
tive and prudential checks of Malthus, there is a third
check which comes into play with the elevation of the
standard of comfort and the development of the intel-
lect, is pointed to by many well-known facts. The
proportion of births is notoriously greater in new settle-
ments, where the struggle with nature leaves little
opportunity for intellectual life, and among the poverty-
bound classes of older countries, who in the midst of
wealth are deprived of all its advantages and reduced
to all but an animal existence, than it is among the
classes to whom the increase of wealth has brought
independence, leisure, comfort, and a fuller and more
varied life. This fact, long ago recognized in the
homely adage, “a rich man for luck, and a poor man
for children,” was noted by Adam Smith, who says it
is not uncommon to find a poor half -starved Highland
woman has been the mother of twenty-three or twenty-
four children, and is everywhere so clearly perceptible
that it is only necessary to allude to it.
If the real law of population is thus indicated, as I
think it must be, then the tendency to increase, instead
of being always uniform, is strong where a greater popu-
Chap. III.
INFERENCES FROM ANALOGY
139
lation would give increased comfort, and where the
perpetuity of the race is threatened by the mortality
induced by adverse conditions; but weakens just as the
higher development of the individual becomes possible
and the perpetuity of the race is assured. In other
words, the law of population accords with and is sub-
ordinate to the law of intellectual development, and any
danger that human beings may be brought into a world
where they cannot be provided for arises not from the
ordinances of nature, but from ‘social mal-adjustments
that in the midst of wealth condemn men to want. The
truth of this will, I think, be conclusively demonstrated
when, after having cleared the ground, we trace out the
true laws of social growth. But it would disturb the
natural order of the argument to anticipate them now.
If I have succeeded in maintaihing a negative — in show-
ing that the Malthusian theory is not proved by the
reasoning by which it is supported — it is enough for
the present. In the next chapter I propose to take the
affirmative and show that it is disproved by facts.
CHAPTER IV
DISPROOF OF THE MALTHUSIAN THEORY
So deeply rooted and thoroughly entwined with th(,
reasonings of the current political economy is this doc^
trine that increase of population tends to reduce wage*?
and produce poverty, go completely does it harmonize?
with many popular notions, and so liable is it to recur
in different shapes, that I have thought it necessary to
meet and show in some detail the insufficiency of the
arguments by which it is supported, before bringing it
to the test of facts; for the general acceptance of this
theory adds a most striking instance to the many which
the history of thought affords of how easily men ignore
facts when blindfolded by a preaccepted theory.
To the supreme and final test of facts we can easily
•bring this theory. Manifestly the question whether in-
crease of population necessarily tends to reduce waged
and cause want, is simply the question whether it tends
to reduce the amount of wealth that can be produced by
a given amount of labor.
This is what the current doctrine holds. The ac-
cepted theory is, that the more that is required from
nature the less generously does she respond, so that
doubling the application of labor will not double the
product; and hence, increase of population must tend
to reduce wages and deepen poverty, or, in the phrase
of Malthus, must result in vice and misery. To quote
the language of John Stuart Mill:
"A greater number of people cannot, in any given state oi
civilisation, be collectively so well provided for as a smaller.
140
Chap. IV. DISPROOF OF THE MALTHUSIAN THEORY 141
The niggardliness of nature, not the injustice of society, is the
cause of the penalty attached to over-population. An unjust
distnbution of wealth does not aggravate the evil, but, at most,
causes it to be somewhat earlier felt. It is in vain to say that all
mouths which the increase of mankind calls into existence bring
with them hands. The new mouths require as much food as
the old ones, and the hands do not produce as much. If all in-
struments of production were held in joint property by the
whole people, and the produce divided with perfect equality
among them, and if in a society thus constituted, industry were
as energetic and the produce as ample as at the present time,
there would be enough to make "all the existing population
extremely comfortable; but when that population had doubled
itself, as, with existing habits of the people, under such an
encouragement, it undoubtedly would in little more than twenty
years, what would then be their condition? Unless the arts
of production were in the same time improved in an almost un-
exampled degree, the inferior soils ffhich must be resorted to,
and the more laborious and scantily remunerative cultivation
which must be employed on the superior soils, to procure food
for so much larger a population, would, by an insuperable
necessity, render every individual in the community poorer than
oefore. If the population continued to increase at the same rate,
a time would soon arrive when no one would have more than
mere necessaries, and, soon after, a time when no one would have
a sufficiency of those, and the further increase of population
would be arrested by death.” *
All this I deny. I assert that the very reverse of
these propositions is true. I assert that in any given
state of civilization a greater number of people can col-
lectively be better provided for than a smaller. I assert
that the injustice of society, not the niggardliness of
nature, is the cause of the want and misery which the
current theory attributes to over-population. I assert
that the new mouths which an increasing population
calls into existence require no more food than the old
ones, while the hands they bring with them can in the
natural order of things produce more. I assert that,
other things being equal, the greater the population, the
* Principles of Political Economy, Book I, Chap. XIII, Sec. 2.
142
POPULATION AND SUBSISTENCE
Book 11.
greater the comfort which an equitable distribution of
wealth would give to each individual. I assert that in
a state of equality the natural increase of population
would constantly tend to make every individual richer
instead of poorer.
I thus distinctly join issue, and submit the question
to the test of facts.
But observe (for even at the risk of repetition I wish
to warn the reader against a confusion of thought that
is observable even in writers of great reputation), that
the question of fact into which this issue resolves itself
is not in what stage of population is most subsistence
produced? but in what stage of population is there ex-
hibited the greatest power of producing wealth? For
the power of producing wealth in any form is the power
of producing subsistence — and the consumption of
wealth in any form, or of wealth-producing power, is
equivalent to the consumption of subsistence. I have,
for instance, some money in my pocket. With it I may
buy either food or cigars or jewelry or theater tickets,
and just as I expend my money do I determine labor to
the production of food, of cigars, of jewelry, or of
theatrical representations. A set of diamonds has a
value equal to so many barrels of flour — that is to
say, it takes on the average as much labor to produce
the diamonds as it would to produce so much flour. If
I load my wife with diamonds, it is as much an exertion
of subsistence-producing power as though I had devoted
so much food to purposes of ostentation. If I keep a
footman, I take a possible plowman from the plow. The
breeding and maintenance of a race-horse require care
and labor which would suffice for the breeding and
maintenance of many work-horses. The destruction
of wealth involved in a general illumination or the firing
of a salute is equivalent to the burning up of so much
food; the keeping of a regiment of soldiers, or of a war-
Chap, IV. DISPROOF OF THE MALTHUSIAN THEORY
143
ship and her crew, is the diversion to unproductive uses
of labor that could produce subsistence for many thou-
sands of people. Thus the power of any population to
produce the necessaries of life is not to be measured by
the necessaries of life actually produced, but by the
expenditure of power in all modes.
There is no necessity for abstract reasoning. The
question is one of simple fact. Does the relative power
of producing wealth decrease with the increase of popu-
lation?
The facts are so patent that it is only necessary to
call attention to them. We have, in modern times, seen
many communities advance in population. Have they
not at the same time advanced even more rapidly in
wealth? We see many communities still increasing in
population. Are they not also increasing their wealth
still faster? Is there any doubt that while England has
been increasing her population at the rate of two per
cent, per annum, her wealth has been growing in still
greater proportion? Is it not true that while the popu-
lation of the United States has been doubling every
twenty-nine* years her wealth has been doubling at
much shorter intervals? Is it not true that under sim-
ilar conditions — that is to say, among communities of
similar people in a similar stage of civilization — the
most densely populated community is also the richest?
Are not the more densely populated Eastern States
richer in proportion to population than the more
sparsely populated Western or Southern States? Is not
England, where population is even denser than in the
Eastern States of the Union, also richer in proportion?
Where will you find wealth devoted with the most
lavishness to non-productive use — costly buildings, fine
furniture, luxurious equipages, statues, pictures, pleasure
144 POPULATION ANJ) SUBSISTENCE Book IL
gardens and yachts? Is it not where population is
densest rather than where it is sparsest? Where will
you find in largest proportion those whom the general
production suffices to keep without productive labor on
their part — men of income and of elegant leisure,
thieves, policemen, menial servants, lawyers, men of
letters, and the like? Is it not where population is
dense rather than where it is sparse? Whence is it that
capital overflows for remunerative investment? Is it
not from densely populated countries to sparsely popu-
lated countries? These things conclusively show that
wealth is greatest where population is densest; that the
production of wealth to a given amount of labor in-
creases as population increases. These things are ap-
parent wherever we turn our eyes. On the same level
of civilization, the same stage of the productive arts,
government, etc., the most populous countries are al-
ways the most wealthy.
Let us take a particular case, and that a case which
of all that can be cited seems at first blush best to sup-
port the theory we are considering — the case of a com-
munity where, while population has largely increased,
wages have greatly decreased, and it is not a matter of
dubious inference but of obvious fact that the gener-
osity of nature has lessened. That community is Cali-
fornia. When upon the discovery of gold the first wave
of immigration poured into California it found al country
in which nature was in the most generous mood. From
the river banks and bars the glittering deposits of thou-
sands of years could be taken by the most primitive
appliances, in amounts which made an ounce ($ 16 ) per
day only ordinary wages. The plains, covered with
nutritious grasses, were alive with countless herds of
horses and cattle, so plenty that any traveler was at
liberty to shift his saddle to a fresh steed, or to kill
a bullock if he needed a steak, leaving the hide, its
Chop. IV. DISPROOF OF THE MALTHUSIAN THEORY 145
only valuable part, for the owner. From the rich soil
which came first under cultivation, the mere plowing
and sowing brought crops that in older countries, if pro*
cured at all, can only be procured by the most thorough
manuring and cultivation. In early California, amid
this profusion of nature, wages and interest were higher
than anywhere else in the world.
This virgin profusion of nature has been steadily giv-
ing way before the greater and greater demands which
an increasing population has made upon it. Poorer and
poorer diggings have been worked, until now no dig-
gings worth speaking of can be found, and gold mining
requires much capital, large skill, and elaborate machin-
ery, and involves great risks. “Horses cost money,”
and cattle bred on the sage-brush plains of Nevada are
brought by railroad across the mountains and killed in
San Francisco shambles, while fanners are beginning to
save their straw and look for manure, and land is in cul-
tivation which will hardly yield a crop three years out
of four without irrigation. At the same time wages and
interest have steadily gone down. Many men are now
glad to work for a week for less than they once de-
manded for the day, and money is loaned by the year
for a rate which once would hardly have been thought
extortionate by the month. Is the connection between
the reduced productiveness of nature and the reduced
rate of wages that of cause and effect? Is it true that
wages are lower because labor yields less wealth? On
the contrary! Instead of the wealth-producing powei
of labor being less in California in 1879 than in 1849,
I am convinced that it is greater. And, it seems to me,
that no one who considers how enormously during these
years the efficiency of labor in California has been in-
creased by roads, wharves, flumes, railroads, steamboats,
telegraphs, and machinery of all kinds; by a closer con-
nection with the rest of the world; and by the number-
146
POPULATION AND SUBSISTENCE}
Book II.
less economies resulting from a larger population, can
doubt that the return which labor receives from nature
in California is on the whole much greater now than it
was in the days of unexhausted placers and virgin soil
— the increase in the power of the human factor having
more than compensated for the decline in the power of
the natural factor. That this conclusion is the correct
one is proved by many facts which show that the con-
sumption of wealth is now much greater, as compared
with the number of laborers, than it was then. Instead
of a population composed almost exclusively of men in
the prime of life, a large proportion of women and chil-
dren are now supported, and' other non-producers have
increased in much greater ratio than the population;
luxury has grown far more than wages have fallen;
where the best houses were cloth and paper shanties-
are now mansions whose magnificence rivals Europeai*
palaces; there are liveried carriages on the streets of
San Francisco and pleasure yachts on her bay; the class
who can live sumptuously on their incomes has steadily
grown; there are rich men beside whom the richest of
the earlier years would seem little better than paupers
— in short, there are on every hand the most striking and
conclusive evidences that the production and consump-
tion of wealth have increased with even greater rapid-
ity than the increase of population, and that if any
class obtains less it is solely because of the greater in-
equality of distribution.
What is obvious in this particular instance is obvious
where the survey is extended. The richest countries
are not those where nature is most prolific; but those
where labor is most efficient — not Mexico, but Massa-
chusetts; not Brazil, but England. The countries where
population is densest and presses hardest upon the capa-
bilities of nature, are, other things being equal, the
countries where the largest proportion of the produce
can J>e devoted to luxury and the support of non-pro-
Chap IV. DISPROOF OF THE MALTHUSIAN THEORY
147
ducers, the countries where capital overflows, the coun-
tries that upon exigency, such as war, can stand the
greatest drain. That the production of wealth must, in
proportion to the labor employed, be greater in a densely
populated country like England than in new countries
where wages and interest are higher, is evident from
the fact that, though a much smaller proportion of the
population is engaged in productive labor, a much larger
surplus is available for other purposes than that of sup-
plying physical needs. In a new country the whole
available force of the community is devoted to produc-
tion — there is no well man who does not do productive
work of some kind, no well woman exempt from house-
hold tasks. There are no paupers or beggars, no idle
rich, no class whose labor is devoted to ministering to
the convenience or caprice of the rich, no purely literary
or scientific class, no criminal class who live by preying
upon society, no large class maintained to guard society
against them. Yet with the whole force of the com-
munity thus devoted to production, no such consumption
of wealth in proportion to the whole population takes
place, or can be afforded, as goes on in the old country;
for, though the condition of the lowest class is better, and
there is no one who cannot get a living, there is no one
who gets much more — few or none who can live in any-
thing like what would be called luxury, or even comfort,
in the older country. That is to say, that in the older
country the consumption of wealth in proportion to
population is greater, although the proportion of labor
devoted to the production of wealth is less — or that
fewer laborers produce more wealth; for wealth must
be produced before it can be consumed.
It may, however, be said, that the superior wealth of
older countries is due not to superior productive power,
but to the accumulations of wealth which the new coun-
try has not yet had time to make.
It will be well for a moment to consider this idea of
l48 POPULATION AND SUBSISTENCE Book II
Accumulated wealth. The truth is, that wealth can be
accumulated but to a slight degree, and that communi-
ties really live, as the vast majority of individuals live,
from hand to mouth. Wealth will not bear much ac-
cumulation; except in a few unimportant forms it will
not keep. The matter of the universe, which, when
worked up by labor into desirable forms, constitutes
wealth, is constantly tending back to its original state.
Some forms of wealth will last for a few hours, some
for a few days, some for a few months, some for a few
years; and there are very few forms of wealth that can
be passed from one generation to another. Take wealth
in some of its most useful and permanent forms — ships,
houses, railways, machinery. Unless labor is constantly
exerted in preserving and renewing them, they will al-
most immediately become useless. Stop labor in any
community, and wealth would vanish almost as the jet
of a fountain vanishes when the how of water is shut
off. Let labor again exert itself, and wealth will almost
as immediately reappear. This has been long noticed
where war or other calamity has swept away wealth,
leaving population unimpaired. There is not less wealth
in London to-day because of the great fire of 1666; nor
yet is there less wealth in Chicago because of the great
fire jn 1870. On those fire-swept acres have arisen,
under the hand of labor, more magnificent buildings,
filled with greater stocks of goods; and the stranger
who, ignorant of the history of the city, passes along
those stately avenues would not dream that a few years
ago all lay so black and bare. The same principle —
that wealth is constantly re-created — is obvious in every
new city. Given the same population and the same
efficiency of labor, and the town of yesterday will pos-
sess and enjoy as much as the town founded by the
Romans. No one who has seen Melbourne or San
Francisco can doubt that if the population of England
Chap. IV. DISPROOF OF THE MALTHUSIAN THEORY
149
were transported to New Zealand, leaving all accumu-
lated wealth behind, New Zealand would soon be as
rich as England is now; or, conversely, that if the
population of England were reduced to the sparseness
of the present population of New Zealand, in spite of
accumulated wealth, they would soon be as poor. Ac-
cumulated wealth seems to play just about such a part
in relation to the social organism as accumulated nutri-
ment does to the physical organism. Some accumulated
wealth is necessary, and to a certain extent it may be
drawn upon in exigencies; but the wealth produced by
past generations can no more account for the consump-
tion of the present than the dinners he ate last year
can supply a man with present strength.
But without these considerations, which I allude to
more for their general than for their special bearing, it
is evident that superior accumulations of wealth can
account for greater consumption of wealth only in cases
where accumulated wealth' is decreasing, and that wher-
ever the volume of accumulated wealth is maintained,
and even more obviously where it is increasing, a greater
consumption of wealth must imply a greater production
of wealth. Now, whether we compare different com-
munities with each other, or the same community at
different times, it is obvious that the progressive state,
which is marked by increase of population, is also
marked by an increased consumption and an increased
accumulation of wealth, not merely in the aggregate,
but per capita. And hence, increase of population, so
far as it has yet anywhere gone, does not mean a reduc-
tion, but an increase in the average production of wealth.
And the reason of this is obvious. For, even if the
increase of population does reduce the power of the
natural factor of wealth, by compelling a resort to poorer
soils, etc., it yet so vastly increases the power of the
human factor as more than to compensate. Twenty
150
POPULATION AND SUBSISTENCE
Book //.
men working together will, where nature is niggardly (
produce more than twenty times the wealth that one
man can produce where nature is most bountiful. The
denser the population the more miaftite becomes the sub-
division of labor, the greater the economies of produc-
tion and distribution, and, hence, the very reverse of the
Malthusian doctrine is true; and, within the limits in
which we have reason to suppose increase would still go
on, in any given state of civilization a greater number
of people can produce a larger proportionate amount
of wealth, and more fully supply their wants, than can
a smaller number.
Look simply at the facts. Can anything be clearer
than that the cause of the poverty which festers in the
centers of civilization is not in the weakness of the pro-
ductive forces? In countries where poverty is deepest,
the forces of production are evidently strong enough, if
fully employed, to provide for the lowest not merely
comfort but luxury. The industrial paralysis, the com-
mercial depression which curses the civilized world to-
day, evidently springs from no lack of productive power.
Whatever be the trouble, it is clearly not in the want of
ability to produce wealth.
It is this very fact — that want appears where produc-
tive power is greatest and the production of wealth is
largest — that constitutes the enigma which perplexes the
civilized world, and which we are trying to unravel.
Evidently the Malthusian theory, which attributes want
to the decrease of productive power, will not explain it.
That theory is utterly inconsistent with all the facts.
It is really a gratuitous attribution to the laws of God
of results which, even from this examination, we may
infer really spring from the mal-adjustments of men —
an inference which, as we proceed, will become a demon-
stration. For we have yet to find what does produce
poverty amid advancing wealth.
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
CHAPTER
BOOK III
THE LAWS OF DISTRIBUTION
I.— THE INQUIRY NARROWED TO THE LAWS OF DIS**
TRIBUTION — NECESSARY RELATION OF THESE
LAWS
H.— RENT AND THE LAW OF RENT
IIL— INTEREST AND THE CAUSE OF INTEREST
IV.tOF SPURIOUS CAPITAL AND OF PROFITS OFTEN
MISTAKEN FOR INTEREST
V.— THE LAW OF INTEREST
VL— WAGES AND THE LAW OF WAGES
VII.— CORRELATION AND CO-ORDINATION OF THESE
LAWS
CHAPTER VIH.— THE STATICS OF THE PROBLEM THUS EXPLAINER
The machines that are first invented to perform any particular
movement are always the most complex, and succeeding artists
generally discover that with fewer wheels, with fewer principles
of motion than had originally been employed, the same effects
may be more easily produced. The first philosophical systems,
in the same manner, are always the most complex, and a par-
ticular connecting chain, or principle, is generally thought
necessary to unite every two seemingly disjointed appearances,
but it often happens that one great connecting principle is
afterward found to be sufficient to bind together all the discord-
ant phenomena that occur in a whole species of things. — Adam
Smith , Essay on the Principles Which Lead and Direct Philo-
sophical Inquiries, as Illustrated by the History of Astronomy.
CHAPTER I
THE INQUIRY NARROWED TO THE LAWS OF DISTRIBUTION — *
THE NECESSARY RELATION OF THESE LAWS
The preceding examination has, I think, conclusively
shown that the explanation currently given, in the name
of political economy, of the problem we are attempting
to solve, is no explanation at all.
That with material progress wages fail to increase,
but rather tend to decrease, cannot be explained by the
theory that the increase of laborers constantly tends to
divide into smaller portions the capital sum from which
wages are paid. For, as we have seen, wages do not
come from capital, but are the direct produce of labor.
Each productive laborer, as he works, creates his wages,
and with every additional laborer there is an addition
to the true wages fund — an addition to the common
stock of wealth, which, generally speaking, is consid-
erably greater than the amount be* draws in wages.
Nor, yet, can it be explained by the theory that nature
yields less to the increasing drafts which an increasing
population make upon her; for the increased efficiency
of labor makes the progressive state a state of continu-
ally increasing production per capita, and the countries
of densest population, other things being equal, are al-
ways the countries of greatest wealth.
So far, we have only increased the perplexities of the
problem.* We have overthrown a theory whicn did, in
Borne sort of fashion, explain existing facts ; but in doing
$o have only made existing facts seem more inexplicable.
153
154
THE LAWS 07 DISTRIBUTION
Book 111
It is as though, while the Ptolemaic theory was yet in
its strength, it had been proved simply that the sun and
stars do not revolve about the earth. The phenomena
of day and night, and of the apparent motion of the
celestial bodies, would yet remain unexplained, inevi-
tably to reinstate the old theory unless a better one took
its place. Our reasoning has led us to the conclusion
that each productive laborer produces his own wages,
and that increase in the number of laborers should in-
crease the wages of each; whereas, the apparent facts
are that there are many laborers who cannot obtain
remunerative employment, and that increase in the num-
ber of laborers brings diminution of wages. We have,
in short, proved that wages ought to be highest where
in reality they are lowest.
Nevertheless, even in doing this we have made some
progress. Next to finding what we look for, is to dis •
cover where it is useless to look. We have at least nar-
rowed the field of inquiry. For this, at least, is now
clear — that the cause which, in spite of the enormous
increase of productive power, confines the great body of
producers to the least share of the product upon which
they will consent to live, is not the limitation of capita',
nor yet the limitation of the powers of nature which
respond to labor. As it is not, therefore, to be found in
the laws which bound the production of wealth, it must
be sought in the laws which govern distribution. To
them let us turn.
It will be necessary to review in its main branches the
whole subject of the distribution of wealth. To discover
the cause which, as population increases and the pro-
ductive arts advance, deepens the poverty of the lowest
class, we must find the law which determines what part
of the produce is distributed to labor as wages. To find
the law of wages, or at least to make sure when we have
Chap. 1. THEIR NECESSARY RELATION 155
found it, we must also determine the laws which fix the
part of the produce which goes to capital and the part
which goes to land owners, for as land, labor, and capi-
tal join in producing wealth, it is between these three
that the produce must be divided. What is meant by
the produce or production of a community is the sum
of the wealth produced by that community — the general
fund from which, as long as previously existing stock is
not lessened, all consumption must be met and all reve-
nues drawn. As I have already explained, production
does not merely mean the making of things, but includes
the increase of value gained by transporting or exchang-
ing things. There is a produce of wealth in a purely
commercial community, as there is in a purely agricul-
tural or manufacturing community ; and in the one case,
as in the others, some part of this produce will go to
capital, some part to labor, and some part, if land have
any value, to the owners of land. As a matter of fact,
a portion of the wealth produced is constantly going to
the replacement of capital, which is constantly consumed
and constantly replaced. But it is not necessary to take
this into account, as it is eliminated by considering capi-
tal as continuous, which, in speaking or thinking of it,
we habitually do. When we speak of the produce, we
mean, therefore, that part of the wealth produced above
what is necessary to replace the capital consumed in
production; and when we speak of interest, or the return
to capital, we mean what goes to capital after its re-
placement or maintenance.
It is, further, a matter of fact, that in every com-
munity which has passed the most primitive stage some
portion of the produce is taken in taxation and con-
sumed by government. But it is not necessary, in
seeking the laws of distribution, to take this into con-
sideration. We may consider taxation either as not
existing, or as by so much reducing the produce. And
156
THE LAWS OF DISTRIBUTION
Book III.
so, too, of what is taken from the produce by certain
forms of monopoly, which will be considered in a subse-
quent chapter (Chap. TV), and which exercise powers
analogous to taxation. After we have discovered the
laws of distribution we can then see what bearing, if
any, taxation has upon them.
We must discover these laws of distribution for our-
selves — or, at least, two out of the three. For, that they
are not, at least as a whole, correctly apprehended by
the current political economy, may be seen, irrespective
of our preceding examination of one of them, in any of
the standard treatises.
This is evident, in the first place, from the terminol-
ogy employed.
In all politico-economic works we are told that the
three factors in production are land, labor, and capital,
and that the whole produce is primarily distributed into
three corresponding parts. Three terms, therefore, are
needed, each of which shall clearly express one of these
parts to the exclusion of the others. Rent, as defined,
clearly enough expresses the first of these parts — that
which goes to the owners of land. Wages, as defined,
clearly enough expresses the second — that part which
constitutes the return to labor'. But as to the third
term — that which should express the return to capital —
there is in the standard works a most puzzling ambiguity
and confusion.
Of words in common use, that which comes nearest
to exclusively expressing the idea of return for the use
of capital, is interest, which, as commonly used, implies
the return for the use of capital, exclusive of any ’labor
in its use or management, and exclusive of any risk, ex-
cept such as may be involved in the security. The word
profits, as commonly used, is almost synonymous with
revenue; it means a gain, an amount received in excess
of an amount expended, and frequently includes receipts
Chap. 1.
THEIR NECESSARY RELATION
157
that are properly rent; while it nearly always includes
receipts which are properly wages, as well as compensa-
tions for the risk peculiar to the various uses of capital.
Unless extreme violence is done to the meaning of the
word, it cannot, therefore, be used in political economy
to signify that share of the produce which goes to capi-
tal, in contradistinction to those parts which go to labor
and to land owners.
Now, all this is recognized in the standard works on
political economy. Adam Smith well illustrates how
wages and compensation for risk largely enter into
profits, pointing out how the large profits of apothe-
caries and small retail dealers are in reality wages for
their labor, and not interest on their capital; and how
the great profits sometimes made in risky businesses,
such as smuggling and the lumber trade, are really but
compensations for risk, which, in the long run, reduce
the returns to capital so used to the ordinary, or below
the ordinary, rate. Similar illustrations are given in
most of the subsequent works, where profit is formally
defined in its common sense, with, perhaps, the exclusion
of rent. In all these works, the reader is told that profits
are made up of three elements — wages of superintend-
ence, compensation for risk, and interest, or the return
for the use of capital.
Thus, neither in its common meaning nor in the mean-
ing expressly assigned to it in the current political econ-
omy, can profits have any place in the discussion of the
distribution of wealth between the three factors of pro-
duction. Either in its common meaning or in the mean-
ing expressly assigned to it, to talk about the distribution
of wealth into rent, wages, and profits is like talking of
the division of mankind into men, women, and human
beings.
Yet this, to the utter bewilderment of the reader, is
what is done in all the standard works. After formally
158
THE LAWS OF DISTRIBUTION
B*ok III
decomposing profits into wages of superintendence, com-
pensation for risk, and interest — the net return for the
use of capital — they proceed to treat of the distribution
of wealth between the rent of land, the wages of labor,
and the profits of capital.
I doubt not that there are thousands of men who have
vainly puzzled their brains over this confusion of terms,
and abandoned the effort in despair, thinking that as
the fault could not be in such great thinkers, it must be
in their own stupidity. If it is any consolation to such
men they may turn to Buckled “History of Civiliza-
tion,” and see how a man who certainly got a marvel-
ously clear idea of what he read, and who had read
carefully the principal economists from Smith down,
was inextricably confused by this jumble of profits and
interest. For Buckle (Vol. I, Chap. II, and notes) per-
sistently speaks of the distribution of wealth into rent,
wages, interest, and profits.
And this is not to be wondered at. For, after
formally decomposing profits into wages of superintend-
ence, insurance, and interest, these economists, m as-
signing causes which fix the general rate of profit, speak
of things which evidently affect only that part of profits
which they have denominated interest; and then, in
speaking of the rate of interest, either give the meaning-
less formula of supply and demand, or speak, of causes
which affect the compensation for risk; evidently using
the word in its common sense, and not in the economic
sense they have assigned to it, from which compensation
for risk is eliminated. If the reader will take up John
Stuart Mill's “Principles of Political Economy,” and
compare the chapter on Profits (Book II, Chap. 15) with
the chapter on Interest (Book III, Chap. 23), he will
see the confusion thus arising exemplified in the case of
the most logical of English economists, in a more strik-
ing manner than I would like to characterize,
Chap. I.
THEIR NECESSARY RELATION
150
Now, such men have not been led into such confusion
of thought without a cause. If they, one after another,
have followed Dr. Adam Smith, as boys play “follow
my leader,” jumping where he jumped, and falling where
he fell, it has been that there was a fence where he
jumped and a hole where he fell.
The difficulty from which this confusion has sprung
is in the preaccepted theory of wages. For reasons
which I have before assigned, it Jias seemed to them a
self-evident truth that the wages of certain classes of
laborers depended upon the ratio between capital and
the number of laborers. But there are certain kinds of
reward for exertion to which this theory evidently will
not apply, so the term wages has in use been contracted
to include only wages in the narrow common sense.
This being the case, if the term interest were used, as
consistently with their definitions it should have been
used, to represent the third part of the division of the
produce, all rewards of personal exertion, save those of
what are commonly called wage-workers, would clearly
have been left out. But by treating the division of
wealth as between rent, wages, and profits, instead of
between rent, wages, and interest, this difficulty is
glossed over, all wages which will not fall under the
preaccepted law of wages being vaguely grouped under
profits, as wages of superintendence.
To read carefully what economists say about the dis-
tribution of wealth is to see that, though they correctly
define it, wages, as they use it in this connection, is what
logicians would call an undistributed term — it does not
mean all wages, but only some wages — viz., the wages
of manual labor paid by an employer. So other wages
are thrown over with the return to capital, and included
under the term profits, and any clear distinction between
the returns to capital and the returns to human exertion
thus avoided. The fact is that the current political
THE LAWS OF DISTRIBUTION
Book III.
economy fails to give any clear and consistent account
of the distribution of wealth. The law of rent is clearly
stated, but it stands unrelated. The rest is a confused
and incoherent jumble.
The very arrangement of these works shows this con-
fusion and inconclusiveness of thought. In no politico-
economic treatise that I know of are these laws of
distribution brought together, so that the reader can
take them in at a glance and recognize their relation
to each other; but what is said about each one is en-
veloped in a mass of political and moral reflections and
dissertations. And the reason is not far to seek. To
bring together the three laws of distribution as they are
now taught, is to show at a glance that they lack neces-
sary relation.
The laws of the distribution of wealth are obviously
laws of proportion, and must be so related to each other
that any two being given the third may be inferred.
For to say that one of the three parts of a whole is in-
creased or decreased, is to say that one or both of the
other parts is, reversely, decreased or increased. If
Tom, Dick, and Harry are partners in business, the
agreement which fixes the share of one in the profits
must at the same time fix either the separate or the
joint shares of the other two. To fix Tom’s share at
forty per cent, is to leave but sixty per cent, to be di-
vided between Dick and Harry. To fix Dick’s share at
forty per cent, and Harry’s share at thirty-five per cent,
is to fix Tom’s share at twenty-five per cent.
But between the laws of the distribution of wealth, as
laid down in the standard works, there is no such rela-
tion. If we fish them out and bring them together, we
find them to be as follows:
Wages are determined by the ratio between the
amount of capital devoted to the payment and subsist-
Chip. 1 . THEIR NECBSSABY E ELATION 161
ence of labor and the number of laborers seeking on*
ployment. '
Rent is determined by the margin of cultivation; all
lands yielding as rent that part of their produce which
exceeds what an equal application of labor and capital
could procure from the poorest land in use.
Interest is determined by the equation between the
demands of borrowers and the supply of capital offered
by lenders. Or, if we take what is given as the law of
profits, it is determined by wages, falling as wages rise
and rising as wages fall — or, to use the phrase of Mill,
oy the cost of labor to the capitalist.
The bringing together of these current statements
of the laws of the distribution of wealth shows at a
glance that they lack the relation to each other which
the true laws of distribution must have. They do not
correlate and co-ordinate. Hence, at least two of these
three laws are either wrongly apprehended or wrongly
stated. This tallies with what we have already seen,
that the current apprehension of the law of wages, and,
inferentially, of the law of interest, will not bear exami-
nation. Let us, then, seek the true laws of the distribu-
tion of the produce of labor into wages, rent, and
interest. The proof that we have found them will be
in their correlation — that they meet, and relate, and
mutually bound each other.
With profits this inquiry has manifestly nothing to
do. We want to find what it is that determines the
division 6f their joint produce between land, labor, and
capital; and profits is not a term that refers exclusively
to any one of these three divisions. Of the three parts
into which profits are divided by political economist*
— namely, compensation for risk, wages of superintend-
ence, and return for the use of capital — the latter falls
under the term interest, which includes all the returns
for the use of capital, and excludes everything else;
162
THE LAWS OF DISTRIBUTION
Book JIL
wages of superintendence falls under the term wages,
which includes all returns for human exertion, and ex-
cludes everything else; and compensation for risk has
no place whatever, as risk is eliminated when all the
transactions of a community are taken together. I shall,
therefore, consistently with the definitions of political
economists, use the term interest as signifying that part
of the produce which goes to capital.
To recapitulate:
Land, labor, and capital are the factors of produc-
tion. The term land includes all natural opportunities
or forces; the term labor, all human exertion; and the
term capital, all wealth used to produce more wealth.
In returns to these three factors is the whole produce
distributed. That part which goes to land owners a?
payment for the use of natural opportunities is called
rent; that part which constitutes the reward of human
exertion is called wages; and that part which consti-
tutes the return for the use of capital is called interest.
These terms mutually exclude each other. The income
of any individual may be made up from any one, two,
or all three of these sources; but in the effort to discover
the laws of distribution we must keep them separate.
Let me premise the inquiry which we are about to
undertake by saying that the miscarriage of political
economy, which I think has now been abundantly
shown, can, it seems to me, be traced to the, adoption
of an erroneous standpoint. Living and making their
observations in a state of society in which a capitalist
generally rents land and hires labor, and thus seems to
be the undertaker or first mover in production, the great
cultivators of the science have been led to look upon
capital as the prime factor in production, land as its
instrument, and labor as its agent or tool. This is ap-
parent on every page — in the form and course of their
Thap. J.
THEIR NECESSARY RELATION
163
reasoning, in the character of their illustrations, and
even in their choice of terms. Everywhere capital is the
starting point, the capitalist the central figure. So far
does this go that both Smith and Ricardo use the term
“natural wages” to express the minimum upon which
laborers can live; whereas, unless injustice is natural, all
that the laborer produces should rather be held as his
natural wages. This habit of looking upon capital as
the employer of labor has led both to the theory that
wages depend upon the relative abundance of capital,
and to the theory that interest varies inversely with
wages, while it has led away from truths that but for
this habit would have been apparent. In short, the
misstep which, so far as the great laws of distribution
are concerned, has led political economy into the jun-
gles, instead of upon the mountain tops, was taken
when Adam Smith, in his first book, left the standpoint
indicated in the sentence, “The produce of labor consti-
tutes the natural recompense of wages of labor,” to
take that in which capital is considered as employing
labor and paying wages.
But when we consider the origin and natural se-
quence of things, this order is reversed; and capital in-
stead of first is last; instead of being the employer of
labor, it is in reality employed by labor. There must
be land before labor can be exerted, and labor must
be exerted before capital can be produced. Capital
is a result of labor, and is used by labor to assist it in
further production. Labor is the active and initial force,
and labor is therefore the employer of capital. Labor
can be exerted only upon land, and it is from land that
the matter which it transmutes into wealth must be
drawn. Land therefore is the condition precedent, the
field and material of labor. The natural order is land,
labor, capital; and, instead of starting from capital
as our initial point, we should start from land.
164
THE LAWS OF DISTRIBtmOTi
Book 111.
There is another thing to be observed. Capital is
not a necessary factor in production. Labor exerted upon
land can produce wealth without the aid of capital, and
in the necessary genesis of things must so produce
wealth before capital can exist. Therefore the law of
rent and the law of wages must correlate each other and
form a perfect whole without reference to the law of
capital, as otherwise these laws would not fit the cases
which can readily be imagined, and which to some de-
gree actually exist, in which capital takes no part in
production. And as capital is, as is often said, but
storcd-up labor, it is but a form of labor, a subdivision
of the general term labor; and its law must be sub-
ordinate to, and independently correlate with, the law
of wages, so as to fit cases in which the whole produce
is divided between labor and capital, without any de-
duction for rent. To resort to the illustration before
used: The division of the produce between land, labor
and capital must be as it would be between Tom,
Dick, and Harry, if Tom and Dick were the original
partners, and Harry came in but as an assistant to and
sharer with Dick.
CHAPTER II
RENT AND THE LAW OF RENT
The term rent, in its economic sense — that is, when
used, as I am using it, to distinguish that part of the
produce which accrues to the owners of land or other
natural capabilities by virtue of their ownership — differs
in meaning from the word rent as commonly used. In
some respects this economic meaning is narrower than
the common meaning; in other respects it is wider.
It is narrower in this: In common speech, we apply
the word rent to payments for the use of buildings, ma-
chinery, fixtures," etc., as well as to payments for the
use of land or other natural capabilities; and in speak-
ing of the rent of a house oi the rent of a farm, we do
not separate the price for the use of the improvements
from the price for the use of the bare land. But in the
economic meaning of rent, payments for the use of any
of the products of human exertion are excluded, and of
the lumped payments for the use of houses, farms, etc.,
only that part is rent which constitutes the consideration
for the use of the land — that part paid for the use of
buildings or other improvements being properly interest,
as it is a consideration for the use of capital.
It is wider in this: In common speech we speak of
rent only when owner and user are distinct persons.
But in the economic sense there is also rent where the
same person is both owner and user. Where owner and
user are thus the same person, whatever part of his
income he might obtain by letting the land to another
166
166
THE LAWS OP DISTRIBUTION
Book III.
is rent, while the return for his labor and capital are
that part of his income which they would yield him
did he hire instead of owning the land. Rent is also
expressed in a selling price. When land is purchased,
the payment which is made for the ownership, or right
to perpetual use, is rent commuted or capitalized. If
I buy land for a small price and hold it until I can
sell it for a large price, I have become rich, not by wages
for my labor or by interest upon my capital, but by the
increase of rent. Rent, in short, is the share in the
wealth produced which the exclusive right to the use of
natural capabilities gives to the owner. Wherever land
has an exchange value there is rent in the economic
meaning of the term. Wherever land having a value
is used, either by owner or hirer, there is rent actual;
wherever it is not used, but still has a value, there is
rent potential. It is this capacity of yielding rent which
gives value to land. Until its ownership will confer
some advantage, land has no value.*
Thus rent or land value does not arise from the pro-
ductiveness or utility of land. It in no wise represents
any help or advantage given to production, but simply
the power of securing a part of the results of production.
No matter what are its capabilities, land can yield no
rent and have no value until some one is willing to give
labor or the results of labor for the privilege of using it;
and what any one will thus give depends not upon the
capacity of the land, but upon its capacity as compared
with that of land that can be had for nothing. I may
have very rich land, but it will yield no rent and have
no value so long as there is other land as good to be
had without cost. But when this other land is appro-
* In speaking of the value of land I use and shall use the
words as referring to the value of the bare land. When I wish
to speak of the value of land and improvements I shail use those
words.
Chap. II. RENT AND THE LAW OF RENT l67
priated, and the best land to be had for nothing is
inferior, either in fertility, situation, or other quality,
my land will begin to have a value and yield rent. And
though the productiveness of my land may decrease,
yet if the productiveness of the land to be had without
charge decreases in greater proportion, the rent I can
get, and consequently the value of my land, will steadily
increase. Rent, in short, is the price of monopoly, aris-
ing from the reduction to individual ownership of
natural elements which human exertion can neither
produce nor increase.
If one man owned all the land accessible to any com-
munity, he could, of course, demand any price or condi-
tion for its use that he saw fit; and, as long as his
ownership was acknowledged, the other members of the
community would have but death or emigration as the
alternative to submission to his terms. This has been
the case in many communities; but in the modem form
of society, the land, though generally reduced to indi-
vidual ownership, is in the hands of too many different
persons to permit the price which can be obtained for its
use to be fixed by mere caprice or desire. While each
individual owner tries to get all he can, there is a limit
to what he can get, which constitutes the market price
or market rent of the land, and which varies with differ-
ent lands ana at different times. The law, or relation,
which, under these circumstances of free competition
among all parties (the condition which in tracing out the
principles of political economy is always to be assumed) ,
determines what rent or price can be got by the owner,
is styled the law of rent. This fixed with certainty, we
have more than a starting point from which the laws
which regulate wages and interest may be traced. For,
as the distribution of wealth is a division, in ascertain-
ing what fixes the share of the produce which goes as
rent, we also ascertain what fixes the share which is left
168
THE LAWS OF DISTRIBUTION
BookllL
for wages, where there is no co-operation of capital; and
what fixes the joint share left for wages and interest,
where capital does co-operate in production.
Fortunately, as to the law of rent there is no necessity
for discussion. Authority here coincides with common
sense,* and the accepted dictum of the current political
economy has the self-evident character of a geometric
axiom. This accepted law of rent, which John Stuart
Mill denominates the pons asinorum of political econ-
omy, is sometimes styled “Ricardo’s law of rent,” from
the fact that, although not the first to announce it, he
first brought it prominently into notice.f It is:
The rent of land is determined by the excess of its
produce over that which the same application can secure
from the least productive land in use .
This law, which of course applies to land used for
other purposes than agriculture, and to all natural
agencies, such as mines, fisheries, etc., has been exhaust-
ively explained and illustrated by all the leading econo-
mists since Ricardo. But its mere statement has all the
force of a self-evident proposition, for it is clear that the
effect of competition is to make the lowest reward for
* I do not mean to say that the accepted law of rent has never
been disputed. In all the nonsense that m the present dis-
jointed condition of the science has been printed as political
economy, it would be hard to find anything that has not been
disputed. But I mean to say that it has the sanction of
all economic writers who are really to be regarded as authority.
As John Stuart Mill says (Book II, Chap. XVI), “there are
few persons who have refused their assent to it, except from not
having thoroughly understood it. The loose and inaccurate way
in which it is often apprehended by those who affect to refute
it is very remarkable. 11 An observation which has received
many later exemplifications.
t According to McCulloch the law of rent was first stated in
a pamphlet by Dr. James Anderson of Edinburgh in 1777, and
simultaneously in the beginning of this century by Sir Edward
West, Mr. Malthus, and Mr. Ricardo.
Chap. II.
KENT AND THE LAW OF BENT
169
which labor and capital will engage in production, the
highest that they can claim; and hence to enable the
owner of more productive land to appropriate in rent all
the return above that required to recompense labor and
capital at the ordinary rate — that is to say, what they
can obtain upon the least productive land in use, or at
the least productive point, where, of course, no rent is
paid.
Perhaps it may conduce to a fuller understanding of
the law of rent to put it in this form: The ownership
of a natural agent of production will give the power
of appropriating so much of the wealth produced by
the exertion of labor and capital upon it as exceeds the
return which the same application of labor and capital
could secure in the least productive occupation in which
they freely engage.
This, however, amounts to precisely the same thing,
for there is no occupation in which labor and capital
ean engage which does not require the use of land; and,
furthermore, the cultivation or other use of land will
always be carried to as low a point of remuneration,
all things considered, as is freely accepted in any other
pursuit. Suppose, for instance, a community in which
part of the labor and capital is devoted to agriculture
and part to manufactures. The poorest land cultivated
yields an average return which we will call 20, and 20
therefore will be the average return to labor and capital,
as well in manufactures as in agriculture. Suppose that
from some permanent cause the return in manufactures
is now reduced to 15. Clearly, the labor and capital
engaged in manufactures will turn to agriculture; and
the process will not stop until, either by the extension of
cultivation to inferior lands or to inferior points on the
same land, or by an increase in the relative value of
manufactured products, owing to the diminution of pro-
duction — or, as a matter of fact, by both processes — the
170
THE LAWS 07 DISTRIBUTION
Book XXL
yield to labor and capital in both pursuits has, all
things considered, been brought again to the same level,
so that whatever be the final point of productiveness at
which manufactures are still carried on, whether it be
18 or 17 or 16, cultivation will also be extended to that
point. And, thus, to say that rent will be the excess
in productiveness over the yield at the margin, or low-
est point, of cultivation, is the same thing as to say
that it will be the excess of produce over what the
same amount of labor and capital obtains in the least
remunerative occupation.
The law of rent is, in fact, but a deduction from the
law of competition, and amounts simply to the assertion
that as wages and interest tend to a common level, all
that part of the general production of wealth which
exceeds what the labor and capital employed could
have' secured for themselves, if applied to the poorest
natural agent in use, will go to land owners in the shape
of rent. It rests, in the last analysis, upon the funda-
mental principle, which is to political economy what the
attraction of gravitation is to physics — that men will
seek to gratify their desires with the least exertion.
This, then, is the law of rent. Although many stand-
ard treatises follow too much the example of Ricardo,
who seems to view it merely in its relation to agricul-
ture, and in several places speaks of manufactures yield-
ing no rent (when, in truth, manufactures and exchange
yield the highest rents, as is evinced by the greater
value of land in manufacturing and commercial cities),
thus hiding the full importance of the law, yet, ever
since the time of Ricardo, the law itself has been clearly
apprehended and fully recognized. But not so its corol-
laries. Plain as they are, the accepted doctrine of wages
(backed and fortified not only as has been hitherto.ex-
plained, but by considerations whose enormous weight
will be seen when the logical conclusion toward which
Chap, II,
RENT AND THE LAW OF RENT
171
we are tending is reached) has hitherto prevented their
recognition.* Yet, is it not as plain as the simplest
geometrical demonstration, that the corollary of the
law of rent is the law of wages, where the division of
the produce is simply between rent and wages; or the
law of wages and interest taken together, where the
division is into rent, wages, and interest? Stated re-
versely, the law of rent is necessarily the law of wages
and interest taken together, for it is the assertion, that
no matter what the production which results from the
application of labor and capital, these two factors will
receive in wages and interest only such part of the prod-
uce as they could have produced on land free to them
without the payment of rent — that is, the least produc-
tive land or point in use. For, if, of the produce, all
•wer the amount which 'labor and capital could secure
^‘rom land for which no rent is paid must go to land
owners as rent, then all that can be claimed by labor
and capital as wages and interest is the amount which
they could have secured from land yielding no rent.
Or to put it in algebraic form:
As Produce=Rent+Wages+ Interest,
Therefore, Produce— Rent<«Wages-)- Interest.
• Thus wages and interest do not depend upon the
produce of labor and capital, but upon what is left
after rent is taken out; or, upon the produce which they
could obtain without paying rent — that is, from the
poorest land in use. And hence, no matter what be the
increase in productive power, if the increase in rent
keeps pace with it, neither wages nor interest can in-
crease.
The moment this simple relation is recognized, a
* Buckle (Chap. II, History of Civilization) recognizes the
necessary relation between rent, interest, and wages, but evi-
dently never worked it out.
172 THE LAWS OF DISTRIBUTION Book III.
flood of light streams in upon what was before inex-
plicable, and seemingly discordant facts range them-
selves under an obvious law. The increase of rent
which goes on in progressive countries is at once seen to
be the key which explains why wages and interest fail
to increase with increase of productive power. For
the wealth produced in every community is divided
into two parts by what may be called the rent line,
which *is fixed by the margin of cultivation, or the
return which labor and capital could obtain from such
natural opportunities as are free to them without the
payment of rent. From the part of the produce below
this line wages and interest must be paid. All that is
above goes to the owners of land. Thus, where the
value of land is low, there may be a small production
of wealth, and yet a high rate' of wages and interest,
as we see in new countries. And, where the value of
land is high, there may be a very large production
wealth, and yet a low rate of wages and interest, as we
see in old countries. And, where productive power
increases, as it is increasing in all progressive countries,
wages and interest will be affected, not by the increase,
but by the manner in which rent is affected. If the
value of land increases proportionately, all the increased
production will be swallowed up by rent, and wages and
interest will remain as before. If the value of land in-
creases in greater ratio than productive power, rent
will swallow up even more than the increase; and while
the produce of labor and capital will be much larger,
wages and interest will fall. It is only when the value
of land fails to increase as rapidly as productive power,
that wages and interest can increase with the increase of
productive power. All this is exemplified in actual
fact
CHAPTER III
OP INTEREST AND THE CAUSE OP INTEREST
Having made sure of the law of rent, we have ob-
tained as its necessary corollary the law of wages,
where the division is between rent and wages; and the
law of wages and interest taken together, where the
division is between the three factors. What proportion
of the produce is taken as rent must determine what
proportion is left for wages, if but land and labor are
concerned; or to be divided between wages and interest,
if capital joins in the production.
But without Reference to this deduction, let us seek
each of these laws separately and independently. If,
when obtained in this way, we find that they correlate,
our conclusions will have the highest certainty.
And, inasmuch as the discovery of the law of wages
is the ultimate purpose of our inquiry, let us take up
first the subject of interest.
I have already referred to the difference in meaning
between the terms profits and interest. It may be worth
while, further, to say that interest, as an abstract
term in the distribution of wealth, differs in meaning
from the word as commonly used, in this: That it in-
cludes all returns for the use of capital, and not merely
those that pass from borrower to lender; and that it
excludes compensation for risk, which forms so great
a part of what is commonly called interest. Compensa-
tion for risk is evidently only an equalization of return
between different employments of capital. What we
173
174
THE LAWS OF DISTRIBUTION
Book III
want to find is, what fixes the general rate of interest
proper? The different rates of compensation for risk
added to this will give the current rates of commercial
interest.
Now, it is evident that the greatest differences in
what is ordinarily called interest are due to differences
in risk; but it is also evident that between different
countries and different times there are also considerable
variations in the rate of interest proper. In California
at one time two per cent, a month would not have been
considered extravagant interest on security on which
loans could now be effected at seven or eight per cent,
per annum, and though some part of the difference
may be due to an increased sense of general stability,
the greater part is evidently due to some other general
cause. In the United States generally the rate of inter-
est has been higher than in England; and in the newer
States of the Union higher than in the older States;
and the tendency of interest to sink as society progresses
is well marked and has long been noticed. What is the
law which will bind all these variations together and
exhibit their cause?
It is not worth while to dwell more than has hitherto
incidentally been done upon the failure of the current
political economy to determine the true law of interest.
Its speculations upon this subject have not the definite-
ness and coherency which have enaDled the accepted
doctrine of wages to withstand the evidence of fact,
and do not require the same elaborate review. That
they run counter to the facts is evident. That interest
does not depend on the productiveness of labor and
capital is proved by the general fact that where labor
and capital are most productive interest is lowest. That
it does not depend reversely upon wages (or the cost of
labor), lowering as wages rise, and increasing as wages
fall, is proved by the general fact that interest is high
Chap. III.
INTEREST AND THE CAUSE OF INTEREST 17b
when and where wages are high, and low when and
where wages are low.
Let us begin at the beginning. The nature and func-
tions of capital have already been sufficiently shown,
but even at the risk of something like a digression, let
us endeavor to ascertain the cause of interest before
considering its law. For in addition to aiding our
inquiry by giving us a firmer and clearer grasp of the
subject now in hand, it may lead to conclusions whose
practical importance will be hereafter apparent.
What is the reason and justification of interest? Why
should the borrower pay back to the lender more than
he received? These questions are worth answering, not
merely from their speculative, but from their practical
importance. The feeling that interest is the robbery of
industry is widespread and growing, and on both sides
of the Atlantic shows itself more and more in popular
literature and in popular movements. The expounders
of the current political economy say that there is no
conflict between labor and capital, and oppose as injuri-
ous to labor, as well as to capital, all schemes for re-
stricting the reward which capital obtains; yet in the
same works the doctrine is laid down that wages and
interest bear to each other an inverse relation, and that
interest will be low or high as wages are high or low.*
Clearly, then, if this doctrine is correct, the only objec-
tion that from the standpoint of the laborer can be
logically made to any scheme for the reduction of in-
terest is that it will not work, which is manifestly very
weak ground while ideas of the omnipotence of legisla-
tures are yet so widespread; and though such an objec-
tion may lead to the abandonment of any one particular
scheme, it will not prevent the search for another.
* This is really said of profits, but with the evident meaning
of returns to capital.
176
THE LAWS OF DISTRIBUTION
Book III.
Why should interest be? Interest, we are told, in all
the standard works, is the reward of abstinence. But,
manifestly, this does not sufficiently account for it. Ab-
stinence is not an active, but a passive quality ; it is not
a doing — it is simply a not doing. Abstinence in itself
produces nothing. Why, then, should any part of what
is produced be claimed for it? If I have a sum of
money which I lock up for a year, I have exercised as
much abstinence as though I had loaned it. Yet,
though in the latter case I will expect it to be returned
to me with an additional sum by way of interest, in
the former I will have but the same sum, and no in-
crease. But the abstinence is the same. If it be said that
in lending it I do the borrower a service, it may be re-
plied that he also does me a service in keeping it safely
— a service that under some conditions may be very
valuable, and for which I would willingly pay, rather
than not have it; and a service which, as to some forms
of capita], may be even more obvious than as to money.
For there are many forms of capital which will not
keep, but must be constantly renewed; and many which
are onerous to maintain if one has no immediate use
for them. So, if the accumulator of capital helps the
user of capital by loaning it to him, does not the user
discharge the debt in full when he hands it back?
Is not the secure preservation, the maintenance, the
re-creation of capital, a complete offset to the use?
Accumulation is the end and aim of abstinence.
Abstinence can go no further and accomplish no more;
nor of itself can it even do this. If we were merely
to abstain from using it, how much wealth would disap-
pear in a year! And how little would be left at the
end of two years! Hence, if more is demanded for
abstinence than the safe return of capital, is not labor
wronged? Such ideas as these underlie the widespread
opinion that interest can accrue only at the expense 0/
Chap* III •
INTEREST AND THE CAUSE OF INTEREST 17?
labor, and is in fact a robbery of labor which in a
social condition based on justice would be abolished.
The attempts to refute these views do not appear to
me always successful. For instance, as it illustrates
the usual reasoning, take Bastiat’s oft-quoted illustra-
tion of the plane. One carpenter, Jatnes, at the expense
of ten days* labor, makes himself a plane, which will
last in use for 290 of the 300 working days of the year.
William, another carpenter, proposes to borrow the
plane for a year, offering to give back at the end of
that time, when the plane will be worn out, a new plane
equally as good. James objects to lending the plane on
these terms, urging that if he merely gets back a plane
he will have nothing to compensate him for the loss of
the advantage which the use of the plane during the
year would give him. William, admitting this, agrees
not merely to return a plane, but, in addition, to give
James a new pfank. The agreement is carried out to
mutual satisfaction. The plane is used up during the
year, but at the end of the year James receives as good
a one, land a plank in addition. He lends the new plane
again and again, until finally it passes into the hands of
his son, “who still continues to lend it,” receiving a
plank each time. This plank, which represents interest,
is said to be a natural and equitable remuneration, as
by giving it in return for the use of the plane, William
“obtains the power which exists in the tool to increase
the productiveness of labor,” and is no worse off than
he would have been had he not borrowed the plane;
while James obtains no more than he would have had if
he had retained and used the plane instead of lending it.
Is this really so? It will be observed that it is not
affirmed that James could make the plane and William
could not, for that would be to make the plank the
reward of superior skill. It is only that James had
abstained from consuming the result of his labor until
178
THE LAWS OF DISTRIBUTION
Book III.
he had accumulated it in the form of a plane — which is
the essential idea of capital.
Now, if James had not lent the plane he could have
used it for 290 days, when it would have been worn out,
and he would have been obliged to take the remaining
ten days of the working year to make a new plane. If
William had not borrowed the plane he would have
taken ten days to make himself a plane, which he could
have used for the remaining 290 days. Thus, if we
take a plank to represent the fruits of a day’s labor
with the aid of a plane, at the end of the year, had no
borrowing taken place, each would have stood with
reference to the plane as he commenced, James with
a plane, and William with none, and each would have
had as the result of the year’s work 290 planks. If
the condition of the borrowing had been what William
first proposed, the return of a new plane, the same
relative situation would have been secured. William
would have worked for 290 days, and taken the last
ten days to make the new plane to return to James,
lames would have taken the first ten days of the year
to make another plane which would have lasted for
290 days, when he would have received a new plane
from William. Thus, the simple return of the plane
would have put each in the same position at the end
of the year as if no borrowing had taken place. James
would have lost nothing to the gain of William, and
William would have gained nothing to the loss of James.
Each would have had the return his labor would other-
wise have yielded — viz., 290 planks, and James would
have had the advantage with which he started, a new
plane.
But when, in addition to the return of a plane, a
plank is given, James at the end of the year will be in
a better position than if there had been no borrowing:
William in a worse. James will have 291 plank*
Chap. III. INTEREST AND THE CAUSE OF INTEREST 179
and a new plane, and William 289 planks and no plane.
If William now borrows the plank as well as the plane
on the same terms as before, he will at the end of the
year have to return to James a plane, two planks and
a fraction of a plank; and if this difference be again
borrowed, and so on, is it not evident that the income
of the one will progressively decline, and that of the
other will progressively increase, until at length, if the
operation be continued, the time will come when, as
the result of the original lending of a plane, James will
obtain the whole result of William’s labor — that is to
say, William will become virtually his slave?
Is interest, then, natural and equitable? There is
nothing in this illustration to show it to be. Evidently
what Bastiat (and many others) assigns as the basis of
interest, “the power which exists in the tool to increase
the productiveness of labor,*’ is neither in justice nor in
fact the basis 6f interest. The fallacy which makes
Bastiat’s illustration pass as conclusive with those who
do not stop to analyze it, as we have done, is that with
the loan of the plane they associate the transfer of the
increased productive power which a plane gives to labor.
But this is really not involved. The essential thing
which James loaned to William was not the increased
power which labor acquires from using planes. To sup-
pose this, we should have to suppose that the making
and using of planes was a trade secret or a patent right,
when the illustration would become one of monopoly,
not of capital. The essential thing which James loaned
to William was not the privilege of applying his labor
in a more effective way, but the use of the concrete
result of ten days’ labor. If “the power which exists in
tools to increase the productiveness of labor” were the
cause of interest, then the rate of interest would in-
crease with the march of invention. This is not so. Nor
yet will I be expected to pay more interest if I borrow
THE LAWS OF DISTRIBUTION
Botkin.
a fifty-dollar sewing machine than if I borrow fifty
dollars’ worth of needles; if I borrow a steam engine
than if I borrow a pile of bricks of equal value. Capi-
tal, like wealth, is interchangeable. It is not one thing;
it is anything to that value within the circle of exchange.
Nor yet does the improvement of tools add to the repro-
ductive power of capital; it adds to the productive power
of labor.
And I am inclined to think that if all wealth con-
sisted of such things as planes, and all production was
such as that of carpenters — that is to say, if wealth con-
sisted but of the inert matter of the universe, and pro-
duction of working up this inert matter into different
shapes, that interest would be but the robbery of
industry, and could not long exist. This is not to say
that there would be no accumulation, for though the
hope of increase is a motive for turning wealth into
capital, it is not the motive, or, at least, not the main
motive, for accumulating. Children will save their
pennies for Christmas; pirates will add to their buried
treasure; Eastern princes will accumulate hoards of coin;
and men like Stewart or Vanderbilt, having become
once possessed of the passion of accumulating, would
continue as long as they could to add to their millions,
even though accumulation brought no increase. Nor
yet is it to say that there would be no borrowing or
lending, for this, to a large extent, would be prompted
by mutual convenience. If William had a job of work
to be immediately begun and James one that would
not commence until ten days thereafter, there might
be a mutual advantage in the loan of the plane, though
no plank should be given.
But all wealth is not of the nature of planes, oi
planks, or money, which has no reproductive power;
nor is all production merely the turning into other forms
of this inert matter of the universe. It is true that
Chap, HI.
INTEREST AND THE CAUSE OF INTEREST 181
if I put away money, it will not increase. But suppose,
instead, I put away wine. At the end of a year I will
have an increased value, for the wine will have improved
in quality. Or supposing that in a country adapted
to them, I set out bees; at the end of a year I will have
more swarms of bees, and the honfey which they have
made. Or, supposing, where there is a range, I turn
out sheep, or hogs, or cattle; at the end of the year I
will, upon the average, also have an increase.
Now what gives the increase in these cases is some-
thing which, though it generally requires labor to
utilize it, is yet distinct and separable from labor — the
active power of nature; the principle of growth, of re-
production, which everywhere characterizes all the forms
of that mysterious thing or condition which we call
life. And it seems to me that it is this which is the
cause of interest, or the increase of capital over and
above that due to labor. There are, so to speak, in
the movements which make up the everlasting flux of
nature, certain vital currents, which will, if we use
them, aid us, with a force independent of our own
efforts, in turning matter into the forms we desire —
that is to say, into wealth.
While many things might be mentioned which, like
money, or planes, or planks, or engines, or clothing,
have no innate power of increase, yet other things are
included in the terms wealth and capital which, like
wine, mil of themselves increase in quality up to a cer-
tain point; or, like bees or cattle, will of themselves
increase in quantity; and certain other things, such as
seeds, which, though the conditions which enable them
to increase may not be maintained without labor, yet
will, when these conditions are maintained, yield an in-
crease, or give a return over and above that which is to
be attributed to labor.
Now the interchangeability of wealth necessarily in-
182
THE LAWS OF DISTRIBUTION
Book III.
volves an average between all the species of wealth of
any special advantage which accrues from the possession
of any particular species, for no one would keep capital
in one form when it could be changed into a more ad-
vantageous form. No one, for instance, would grind
wheat into flour and 'keep it on hand for the convenience
of those who desire from time to time to exchange
wheat or its equivalent for flour, unless he could by
such exchange secure an increase equal to that which,
all things considered, he could secure by planting his
wheat. No one, if he could keep them, would exchange
a flock of sheep now for their net weight in mutton
to be returned next year; for by keeping the sheep he
would not only have the same amount of mutton next
year, but also the lambs and the fleeces. No one would
dig an irrigating ditch, unless those who by its aid are
enabled to utilize the reproductive forces of nature would
give him such a portion of the increase they receive
as to make his capital yield him as much as theirs.
And so, in any circle of exchange, the power of increase
which the reproductive or vital force of nature gives to
some species of capital must average with all; and he
who lends, or uses in exchange, money, or planes, or
bricks, or clothing, is not deprived of the power to
obtain an increase, any more than if he had lent or put
to a reproductive use so much capital in a form capable
of increase.
There is also in the utilization of the variations in the
powers of nature and of man which is effected by ex-
change, an increase which somewhat resembles that
produced by the vital forces of nature. In one place,
for instance, a given amount of labor will secure 200 in
vegetable food or 100 in animal food. In another place,
these conditions are reversed, and the same amount of
labor will produce 100 in vegetable food or 200 in ani-
mal. In the one place, the relative value of vegetable
Chap. Ill •
INTEREST AND THE CAUSE OF INTEREST 183
10 animal food will be as two to one, and in the other
as one to two; and, supposing equal amounts of each
to be required, the same amount of labor will in either
place secure 160 of both. But by devoting labor in the
one place to the procurement of vegetable food, and
in the other, to the procurement of animal food, and
exchanging to the quantity required, the people of each
place will be enabled by the given amount of labor to
procure 200 of both, less the Josses and expenses of
exchange; so that in each place the produce which is
taken from use and devoted to exchange brings back an
increase. Thus Whittington’s cat, sent to a far country
where cats are scarce and rats are plenty, returns
in bales of goods and bags of gold.
Of course, labor is necessary to exchange, as it is to
the utilization of the reproductive forces of nature, and
the produce of exchange, as the produce of agriculture,
is clearly the produce of labor; but yet, in the one case
as in the other, there is a distinguishable force co-operat-
ing with that of labor, which makes it impossible to
measure the result solely by the amount of labor ex-
pended, but renders the amount of capital and the time
it is in use integral parts in the sum of forces. Capital
aids labor in all of the different modes of production,
but there is a distinction between the relations of the
two in such modes of production as consist merely of
changing the form or place of matter, as planing boards
or mining coal; and such modes of production as avail
themselves of the reproductive forces of nature, or of
the power of increase arising from differences in the
distribution of natural and human powers, such as the
raising of grain or the exchange of ice for sugar. In
production of the first kind, labor alone is the efficient
cause; when labor stops, production stops. When the
carpenter drops his plane as the sun sets, the increase
of value, which he with his plane is producing, ceases
284 THE LAWS OF DISTRIBUTION Book Ul .
until he begins his labor again the following morning .
When the factory bell rings for closing, when the mine
is shut down, production ends until work is resumed.
The intervening time, so far as regards production,
might as well be blotted out. The lapse of days, the
change of seasons, is no element in the production that
depends solely upon the amount of labor expended. But
in the other modes of production to which I have re-
ferred, and in which the part of labor may be likened
to the operations of lumbermen who throw their logs
into the stream, leaving it to the current to carry them
to the boom of the sawmill many miles below, time is
an element. The seed in the ground germinates and
grows while the farmer sleeps or plows new fields, and
the everflowing currents of air and ocean bear Whitting-
ton’s cat toward the rat-tormented ruler in the regions
of romance.
To recur now to Bastiat’s illustration. It is evident
that if there is any reason why William at the end of
the year should return to James more than an equally
good plane, it does not spring, as Bastiat has it, from
the increased power which the tool gives to labor, for
that, as I have shown, is not an element; but it springs
from the element of time — the difference of a year be-
tween the lending and return of the plane. Now, if the
view is confined to the illustration, there is nothing to
suggest how this element should operate, for a plane at
the end of the year has no greater value than a plane
at the beginning. But if we substitute for the plane a
calf, it is clearly to be seen that to put James in as good
a position as if he had not lent, William at the end
of the year must return, not a calf, but a cow. Or, if
we suppose that the ten days’ labor had been devoted to
planting com, it is evident that James would not have
been fully recompensed if at the end of the year he had
received simply so much planted com, for during the
year the planted com would have germinated and grown
Chap, III .
INTEREST AND THE CAUSE OF INTEREST 185
and multiplied; and so if the plane had been devoted to
exchange, it might during the year have been turned
over several times, each exchange yielding an increase
to James. Now, therefore, as James’ labor might have
been applied in any of those ways— or what amounts to
the same thing, some of the labor devoted to making
planes might have been thus transferred — he will not
make a plane for William to use for the year unless he
gets back more than a plane. And William can afford
to give back more than a plane, because the same gen-
eral average of the advantages of labor applied in dif-
ferent modes will enable him to obtain from his labor
an advantage from the element of time. It is this
general averaging, or as we may say, “pooling” of ad-
vantages, which necessarily takes place where the exi-
gencies of society require the simultaneous carrying on
of the different modes of production, which gives to
the possession of wealth incapable in itself of increase an
advantage similar to that which attaches to wealth
used in such a way as to gain from the element of time*
And, in the last analysis, the advantage which is given
by the lapse of time springs from the generative force
of nature and the varying powers of nature and of
man.
Were the quality and capacity of matter everywhere
uniform, and all productive power in man, there would
be no interest. The advantage of superior tools might
at times be transferred on terms resembling the pay-
ment of interest, but such transactions would be irregular
and intermittent — the exception, not the rule. For the
power of obtaining such returns would not, as now, in-
here in the possession of capital, and the advantage of
time would operate only in peculiar circumstances.
That I, having a thousand dollars, can certainly let it
out at interest, does not arise from the fact that there
are others, not having a thousand dollars, who will
gladly pay me for the use of it, if they can get it no
186
THE LAWS OF DISTRIBUTION
Book III.
other way ; but from the fact that the capital which my
thousand dollars v represents has the power of yielding
an increase to whomsoever has it, even though he be a
millionaire. For the price which anything will bring
does not depend upon what the buyer would be willing
to give rather than go without it, so much as upon
what the seller can otherwise get. For instance, a manu-
facturer who wishes to retire from business has ma-
chinery to the value of $100,000. If he cannot, should
he sell, take this $100,000 and invest it so that it will
yield him interest, it will be immaterial to him, risk
being eliminated, whether he obtains the whole price at
once or in installments, and if the purchaser has the
requisite capital, which we must suppose in order that
the transaction may rest on its own merits, it will be
immaterial whether he pay at once or after a time. If
the purchaser has not the required capital, it may be
to his convenience that payments should be delayed,
but it would be only in exceptional circumstances that
the seller would ask, or the buyer would consent, to
pay any premium on this account; nor in such cases
would this premium be properly interest. For interest
is not properly a payment made for the use of capital,
but a return accruing from the increase of capital. If
the capital did not yield an increase, the cases would be
few and exceptional in which the owner would get a
premium. William would soon find out if it did not pay
him to give a plank for the privilege of deferring pay-
ment on James’ plane.
In short, when we come to analyze production we find
it to fall into three modes — viz:
Adapting, or changing natural products either in
form or in place so as to fit them for the satisfaction of
human desire.
Growing, or utilizing the vital forces of nature, as
by raising vegetables or animals.
Chap. III.
INTEREST AND THE CAUSE OF INTEREST 187
Exchanging, or utilizing, so as to add to the general
sum of wealth, the higher powers of those natural forces
which vary with locality, or of those human forces which
vary with situation, occupation, or character.
In each of these three modes of production capital
may aid labor — or, to speak more precisely, in the first
mode capital may aid labor, but is not absolutely neces-
sary; in the others capital must aid labor, or is neces-
sary.
Now, while by adapting capital in proper forms we
may increase the effective power of labor to impress
upon matter the character of wealth, as when we adapt
wood and iron to the form and use of a plane; or iron,
coal, water, and oil to the form and use of a steam
engine; or stone, clay, timber, and iron to that of a
building, yet the characteristic of this use of capital is,
that the benefit is in the use. When, however, we em-
ploy capital in £he second of these modes, as when we
plant grain in the ground, or place animals on a stock
farm, or put away wine to improve with age, the benefit
arises, not from the use, but from the increase. And so,
when we employ capital in the third of these modes, and
instead of using a thing we exchange it, the benefit is in
the increase or greater value of the things received in
return.
Primarily, the benefits which arise from use go to
labor, and the benefits which arise from increase, to
capital. But, inasmuch as the division of labor and
the interchangeability of wealth necessitate and imply
an averaging of benefits, in so far as these different
modes of production correlate with each other, the bene-
fits that arise from one will average with the benefits
that arise from the others, for neither labor nor capital
will be devoted to any mode of production while any
other mode which is open to them will yield a greater
return. That is to say, labor expended in the first mode
- 188
THE LAWS OF DISTRIBUTION
Book III.
of production will get, not the whole return, but the
return minus such part as is necessary to give to capital
such an increase as it could have secured in the other
modes of production, and capital engaged in the second
and third modes will obtain, not the whole increase,
but the increase minus what is sufficient to give to labor
such reward as it could have secured if expended in the
first mode.
Thus interest springs from the power of increase
which the reproductive forces of nature, and the in
effect analogous capacity for exchange, give to capital.
It is not an arbitrary, but a natural thing; it is not the
result of a particular social organization, but of laws
of the universe which underlie society. It is, therefore,
just.
They wh6 talk about abolishing interest fall into an
-error similar to that previously pointed out as giving
its plausibility to the doctrine that wages are drawn
from capital. When they thus think of interest, they
think only of that which is paid by the user of capital
to the owner of capital. But, manifestly, this is not all
interest, but only some interest. Whoever uses capital
and obtains the increase it is capable of giving receives
interest. If I plant and care for a tree until it comes
to maturity, I receive, in its fruit, interest upon the
capital I have thus accumulated — that is, the labor I
have expended. If I raise a cow, the milk which she
yields me, morning and evening, is not merely the re-
ward of the labor then exerted; but interest upon the
capital which my labor, expended in raising her, has ac-
cumulated in the cow. And so, if I use my own capital
in directly aiding production, as by machinery, or in
indirectly aiding production, in exchange, I receive a
special and distinguishable advantage from the repro-
ductive character of capital, which is as real, though
perhaps not as clear, as though I had lent my capital
to another and he had paid me interest.
CHAPTER IV
OF BPTJBIOTJS CAPITAL AND OF PROFITS OFTEN MISTAKEN
FOR INTEREST
The belief that interest is th§ robbery of industry is,
I am persuaded, in large part due to a failure to dis-
criminate between what is really capital and what is not,
and between profits which are properly interest and
profits which arise from other sources than the use of
capital. In the speech and literature of the day every
one is styled a capitalist who possesses what, independ-
ent of his labor, will yield him a return, while what-
ever is thus received is spoken of as the earnings or
takings of capital, and we everywhere hear of the conflict
of labor and capital. Whether there is, in reality, any
conflict between labor and capital, I do not yet ask
the reader to make up his mind ; but it will be well here
to clear away some misapprehensions which confuse
the judgment.
Attention has already been called to the fact that
land values, which constitute such an enormous part
of what is commonly called capital, are not capital at
all; and that rent, which is as commonly included in the
receipts of capital, and which takes an ever-increasing
portion of the produce of an advancing community, is
not the earnings of capital, and must be carefully sepa-
rated from interest. It is not necessary now to dwell
further upon this point. Attention has likewise been
called to the fact that the stocks, bonds, etc., which
constitute another great part of what is commonly
called capital, are not capital at all; but, in some of
189
THE LAWS OF DISTRIBUTION
Book I 1 1.
their shapes, these evidences of indebtedness so closely
resemble capital and in some cases actually perform, or
seem to perform, the functions of capital, while they
yield a return to their owners which is not only spoken
of as interest, but has every semblance of interest, that
it is worth while, before attempting to clear the idea
of interest from some other ambiguities that beset it, to
speak again of these at greater length.
Nothing can be capital, let it always be remembered,
that is not wealth — that is to say, nothing can be capital
that does not consist of actual, tangible things, not the
spontaneous offerings of nature, which have in them-
selves, and not by proxy, the power of directly or in-
directly ministering to human desire.
Thus, a government bond is not capital, nor yet is it
the representative of capital. The capital that was once
received for it by the government has been consumed
unproductively — blown away from the mouths of can-
non, used up in war ships, expended in keeping men
marching and drilling, killing and destroying. The bond
cannot represent capital that has been destroyed. Io
does not represent capital at all. It is simply a solemn
declaration that the government will, some time or
other, take by taxation from the then existing stock of
the people, so much wealth, which it will turn over to
the holder of the bond; and that, in the meanwhile, it
will, from time to time, take, in the same way, enough
to make up to the holder the increase which so much
capital as it some day promises to give him would
yield him were it actually in his possession. The im-
mense sums which are thus taken from the produce
of every modern country to pay interest on public
debts are not the earnings or increase of capital — are
not really interest in the strict sense of the term, but
are taxes levied on the produce of labor and capital,
leaving so much less for wages and so much less for real
interest.
Chap. nr. OF SPURIOUS CAPITAL AND INTEREST
191
Put, supposing the bonds have been issued for the
deepening of a river bed, the construction of lighthouses,
or the erection of a public market; or supposing, to em-
body the same idea while changing the illustration, they
have been issued by a railroad company. Here they
do represent capital, existing and applied to productive
uses, and like stock in a dividend paying company may
be considered as evidences of the ownership of capital.
But they can be so considered -only in so far as they
actually represent capital, and not as they have been
issued in excess of the capital used. Nearly all .our
railroad companies and other incorporations are loaded
down in this way. Where one dollar’s worth of capital
hits been really used, certificates for two, three, lour, i, * . ,
or even ten, have been issued, and upon this fictitious
amount interest or dividends are paid with more or less
regularity. Now, what, in excess of the amount due as
interest to the real capital invested, is thus earned by
these companies and thus paid out, as well as the large
sums absorbed by managing rings and never accounted
for, is evidently not taken from the aggregate produce
of the community on account of the services rendered
by capital — it is not interest. If we are restricted to
the terminology of economic writers who decompose
profits into interest, insurance, and wages of superin-
tendence, it must fall into the category of wages of
superintendence.
But while wages of superintendence clearly enough
include the income derived from such personal qualities
as skill, tact, enterprise, organizing ability, inventive
power, character, etc., to the profits we are speaking
of there is another contributing element, which can only
arbitrarily be classed with these — the element of mo-
nopoly.
When James I granted to his minion the exclusive
privilege of making gold and silver thread, and prohib-
ited, under severe penalties, every one else from making
192
THE LAWS OF DISTRIBUTION
Book III.
such thread, the income which Buckingham enjoyed in
consequence did not arise from the interest upon the
capital invested in the manufacture, nor from the skill,
etc., of those who really conducted the operations, but
from what he got from the king — viz., the exclusive
privilege — in reality the power to levy a tax for his own
purposes upon all the users of such thread. From a
similar source comes a large part of the profits which
are commonly confounded with the earnings of capital.
Receipts from the patents granted for a limited term of
years for the purpose of encouraging invention are
clearly attributable to this source, as are the returns
derived from monopolies created by protective tariffs
under the pretense of encouraging home industry. But
there is another far more insidious and far more general
form of monopoly. In the aggregation of large masses
of capital under a common control there is developed a
new and essentially different power from that power of
increase which is a general characteristic of capital
and which gives rise to interest. While the latter is,
so to speak, constructive in its nature, the power which,
as aggregation proceeds, rises upon it is destructive. It
is a power of the same kind as that which James granted
to Buckingham, and it is often exercised with as reck-
less a disregard, not only of the industrial, but of the
personal rights of individuals. A railroad company ap-
proaches a small town as a highwayman approaches
his victim. The threat, “If you do not accede to our
terms we will leave your town two or three miles to one
side! ,, is as efficacious as the “Stand and deliver,” when
backed by a cocked pistol. For the threat of the rail-
road company is not merely to deprive the town of the
benefits which the railroad might give; it is to put it
in a far worse position than if no railroad had been
built. Or if, where there is water communication, an
opposition boat is put on; rates are reduced until she is
forced off, and then the public are compelled to pay the
Chap. IV. OF SPURIOUS CAPITAL AND INTEREST
193
cost of the operation, just as the Rohillas were obliged
to pay the forty lacs with which Sura j ah Dowlah hired
of Warren Hastings an English force to assist him in
desolating their country and decimating their people.
And just as robbers unite to plunder in concert and
divide the spoil, so do the trunk lines of railroad unite
to raise rates and pool their earnings, or the Pacific
roads form a combination with the Pacific Mail Steam-
ship Company by which toll gates are virtually estab-
lished on land and ocean. And just as Buckingham’s
creatures, under authority of the gold thread patent,
searched private houses, and seized papers and persons
for purposes of lust and extortion, so does the great tel-
egraph company which, by the power of associated capi-
tal, deprives the people of the United States of the full
benefits of a beneficent invention, tamper with corre-
spondence and crush out newspapers which offend it.
It is necessary- only to allude to these things, not to
dwell on them. Every one knows the tyranny and
rapacity with which capital when concentrated in large
amounts is frequently wielded to corrupt, to rob, and to
destroy. What I wish to call the reader’s attention to
is that profits thus derived are not to be confounded
with the legitimate returns of capital as an agent of pro-
duction. They are for the most part to be attributed
to a maladjustment of forces in the legislative depart-
ment of government and to a blind adherence to ancient
barbarisms and the superstitious reverence for the
technicalities of a narrow profession in the adminis-
tration of law; while the general cause which in ad-
vancing communities tends, with the concentration of
wealth, to the concentration of power, is the solution
of the great problem we are seeking for, but have not
yet found.
Any analysis will show that much of the profits which
are, in common thought, confounded with interest are
in reality due, not to the power of capital, but to the
194 THE LAWS OF DISTRIBUTION Book lit.
power of concentrated capital, or of concentrated capi-
tal acting upon bad social adjustments. And it will also
show that what are clearly and properly wages of
superintendence are very frequently confounded with
the earnings of capital.
And, so, profits properly due to the elements of risk
are frequently confounded with interest. Some people
acquire wealth by taking chances which to the ma-
jority of people must necessarily bring loss. Such are
many forms of speculation, and especially that mode of
gambling known as stock dealing. Nerve, judgment,
the possession of capital, skill in what in lower forms
of gambling are known as the arts of the confidence
man and blackleg, give advantage to the individual;
but, just as at a gaming table, whatever one gains some
one else must lose.
Now, taking the great fortunes that are so often re-
ferred to as exemplifying the accumulative power of
capital — the Dukes of Westminster and Marquises of
Bute, the Rothschilds, Astors, Stewarts, Vanderbilts,
Goulds, Stanfords, and Floods — it is upon examination
readily seen that they have been built up, in greater
or less part, not by interest, but by elements such as
we have been reviewing.
How necessary it is to note the distinctions to which
I have been calling attention is shown in current dis-
cussions, where the shield seems alternately white or
black as the standpoint is shifted from one side to
the other. On the one hand we are called upon to
see, in the existence of deep poverty side by side with
lrast accumulations of wealth, the aggressions of capital
on labor, and in reply it is pointed out that capital aids
labor, and hence we are asked to conclude that there is
nothing unjust or unnatural in the wide gulf between
rich and poor; that wealth is but the reward of industry,
intelligence, and thrift; and poverty but the punish-
ment of indolence, ignorance, and imprudence.
CHAPTER V
THE LAW OP INTEREST
Let us turn now to the law jof interest, keeping in
mind two things to which attention has heretofore been
called — viz:
First — That it is not capital which employs labor,
but labor which employs capital.
Second — That capital is not a fixed quantity, but can
always be increased or decreased, (1) by the greater
or less application of labor to the production of capita^
and (2) by the conversion of wealth into capital, 01
capital into wealth, for capital being but wealth applied
in a certain way, wealth is the larger and inclusive
term
It is manifest that under conditions of freedom the
maximum that can be given for the use of capital will be
the increase it will biing, and the minimum or zero
will be the replacement of capital; for above the one
point the borrowing of capital would involve a loss, and
below the other, capital could not be maintained.
Observe, again: It is not, as is carelessly stated by
some writers, the increased efficiency given to labor by
the adaptation of capital to any special form or use
which fixes this maximum, but the average power of
increase which belongs to capital generally. The power
of applying itself in advantageous forms is a power of
labor, which capital as capital cannot claim nor share.
A bow and arrows will enable an Indian to kill, let us
say, a buffalo everv day, while with sticks and stones
195
196 * THE LAWS OF DISTRIBUTION Book III.
he could hardly kill one in a week; but the weapon
maker of the tribe could not claim from the hunter
six out of every seven buffaloes killed as a return for
the use of a bow and arrows; nor will capital invested
in a woolen factory yield to the capitalist the difference
between the produce of the factory and what the same
amount of labor could have obtained with the spinnings
wheel and handloom. William when he borrows a plane
from James does not in that obtain the advantage of
the increased efficiency of labor when using a plane for
the smoothing of boards over what it has when smooth-
ing them with a shell or flint. The progress of knowl-
edge has made the advantage involved in the use of
planes a common property and power of labor. What
he gets from James is merely such advantage as the
element of a year's time will give to the possession of
so much capital as is represented by the plane.
Now, if the vital forces of nature which give an ad-
vantage to the element of time be the cause of interest,
it would seem to follow that this maximum rate of inter-
est would be determined by the strength of these forces
and the extent to which they are engaged in production.
But while the reproductive force of nature seems to vary
enormously, as, for instance, between the salmon, which
spawns thousands of eggs, and the whale, which brings
forth a single calf at intervals of years; between the
rabbit and the elephant, the thistle and the gigantic
redwood, it appears from the way the natural balance
is maintained that there is an equation between the
reproductive and destructive forces of nature, which
in effect brings the principle of increase to a uniform
point. This natural balance man has within narrow
limits the power to disturb, and by the modification of
natural conditions may avail himself at will of the vary-
ing strength of the reproductive force in nature. But
when he does so, there arises from the wide scope of hi*
Chop. V. THE LAW OF INTEREST 19i"
desires another principle which brings about in the in-
crease of wealth a similar equation and balance to that
which is effected in nature between the different forms
of life. This equation exhibits itself through values.
If, in a country adapted to both, I go to raising rabbits
and you to raising horses, my rabbits may, until the
natural limit is reached, increase faster than your
horses. But my capital will not increase faster, for
the effect of the varying rates of increase will be to
lower the value of rabbits as compared with horses,
and to increase the value of horses as compared with
rabbits.
Though the varying strength of the vital forces of
nature is thus brought to uniformity, there may be a
difference in the different stages of social development
as to the proportionate extent to which, in the aggre-
gate production of wealth, these vital forces are enlisted.
But as to this, there are two remarks to be made. In
the first place, although in such a country as England
the part taken by manufactures in the aggregate wealth
production has very much increased as compared with
the part taken by agriculture, yet it is to be noticed that
to a very great extent this is true only of the political
or geographical division, and not of the industrial com-
munity. For industrial communities are not limited by
political divisions, or bounded by seas or mountains.
They are limited only by the scope of their exchanges,
and the proportion which in the industrial economy of
England agriculture and stock-raising bear to manu-
factures is averaged with Iowa and Illinois, with Texas
and California, with Canada and India, with Queens-
land and the Baltic — in short, with every country to
which the world-wide exchanges of England extend. In
the next place, it is to be remarked that although in
Ihe progress of civilization the tendency is to the rela-
tive increase of manufactures, as compared with agri-
198
THE LAWS OF DISTRIBUTION
Book 111.
culture, and consequently to a proportionately less
reliance upon the reproductive forces of nature, yet this
is accompanied by a corresponding extension of ex-
changes, and hence a greater calling in of the power
of increase which thus arises. So these tendencies, to a
great extent, and, probably, so far as we have yet gone,
completely, balance each other, and preserve the equi-
librium which fixes the average increase of capital, or
the normal rate of interest.
Now, this normal point of interest, which lies be-
tween the necessary maximum and the necessary mini-
mum of the return to capital, must, wherever it rests,
be such that all things (such as the feeling of security,
desire for accumulation, etc.) considered, the reward
of capital and the reward of labor will be equal — that is
to say, will give an equally attractive result for the exer-
tion or sacrifice involved. It is impossible, perhaps, to
formulate this point, as wages are habitually estimated
in quantity, and interest in a ratio; but if we suppose
a given quantity of wealth to be the produce of a given
amount of labor, co-operating for a stated time with a
certain amount of capital, the proportion in which the
produce would be divided between the labor and the
capital would afford a comparison. There must be
such a point at, or rather, about, which the rate of
interest must tend to settle; since, unless such an equi-
librium were effected, labor would not accept the use of
capital, or capital would not be placed at the disposal
of labor. For labor and capital are but different forms
of the same thing — human exertion. Capital is pro-
duced by labor; it is, in fact, but labor impressed upon
matter — labor stored up in matter, to be released again
as needed, as the heat of the sun stored up in coal is
released in the furnace. The use of capital in produc-
tion is, therefore, but a mode of labor. As capital can
be used only by being consumed, its use is the expendi-
Chap. V. THE LAW OF INTEREST 109
ture of labor, and for the maintenance of capital, its
production by labor must be commensurate with its
consumption in aid of labor. Hence the principle that,
under circumstances which permit free competition, oper-
ates to bring wages to a common standard and profits
to a substantial equality — the principle that men will
seek to gratify their desires with the least exertion —
operates to establish and maintain this equilibrium
between wages and interest.
This natural relation between interest and wages —
this equilibrium at which both will represent equal re-
turns to equal exertions — may be stated in a form which
suggests a relation of opposition; but this opposition is
only apparent. In a partnership between Dick and
Harry, the statement that Dick receives a certain pro-
portion of the profits implies that the portion of Harry
is less or greater as Dick’s is greater or less; but where,
as in this case, each gets only what he adds to the com-
mon fund, the increase of the portion of the one does
not decrease what the other receives.
And this relation fixed, it is evident that interest and
wages must rise and fall together, and that interest
cannot be increased without increasing wages; nor wages
lowered without depressing interest. For if wages fall,
interest must also fall in proportion, else it becomes
more profitable to turn labor into capital than to apply
it directly; while, if interest falls, wages must likewise
proportionately fall, or else the increment of capital
would be checked.
We are, of course, not speaking of particular wages
and particular interest, but of the general rate of wages
and the general rate of interest, meaning always by
interest the return which capital can secure, less insur-
ance and wages of superintendence. In a particular
case, or a particular employment, the tendency of wages
and interest to an equilibrium may be impeded; but
a n
Af A
• 1
THE LAWS OF DISTRIBUTION
Book III.
between the general rate of wages and the general rate
of interest, this tendency must be prompt to act. For
though in a particular branch of production the line
may be clearly drawn between those who furnish labor
and those who furnish capital, yet even in communities
where there is the sharpest distinction between the gen-
eral class laborers and the general class capitalists,
these two classes shade off into each other by imper-
ceptible gradations, and on the extremes where the two
classes meet in the same persons, the interaction which
restores equilibrium, or rather prevents its disturbance,
can go on without obstruction, whatever obstacles may
exist where the separation is complete. And, further-
more, it must be remembered, as has before been stated,
that capital is but a portion of wealth, distinguished
from wealth generally only by the purpose to which it
is applied, and, hence, the whole body of wealth has
upon the relations of capital and labor the same equaliz-
ing effect that a fly-wheel has upon the motion of ma-
chinery, taking up capital when it is in excess and
giving it out again when there is a deficiency, just as
a jeweler may give his wife diamonds to wear when he
has a superabundant stock, and put them in his show-
case again when his stock becomes reduced. Thus any
tendency on the part of interest to rise above the equi-
librium with wages must immediately beget not only
a tendency to direct labor to the production of capital,
but also the application of wealth to the uses of capital;
while any tendency of wages to rise above the equilib-
rium with interest must in like manner beget not only a
tendency to turn labor from the production of capital,
but also to lqssen the proportion of capital by diverting
from a productive to a non-productive use some of the
articles of wealth of which capital is composed.
To recapitulate: There is a certain relation or ratio
between wages and interest, fixed by causes, which, if
Chap. V.
THE LAW OF INTEREST
201
not absolutely permanent, slowly change, at which
enough labor will be turned into capital to sup-
ply the capital which, in the degree of knowledge, state
of the arts, density of population, character of occupa-
tions, variety, extent and rapidity of exchanges, will be
demanded for production, and this relation or ratio the
interaction of labor and capital constantly maintains;
hence interest must rise and fall with the rise and fall
of wages.
To illustrate: The price of flour is determined by the
price of wheat and cost of milling. The cost of milling
varies slowly and but little, the difference being, even
at long intervals, hardly perceptible; while the price of
wheat varies frequently and largely. Hence we correctly
say that the price of flour is governed by the price of
wheat. Or, to put the proposition in the same form as
the preceding: There is a certain relation or ratio be-
tween the value of wheat and the value of flour, fixed
by the cost of milling, which relation or ratio the inter-
action between the demand for flour and the supply of
wheat constantly maintains; hence the price of flour
must rise and fall with the rise and fall of the price of
wheat.
Or, as, leaving the connecting link, the price of wheat,
to inference, we say that the price of flour depends upon
the character of the seasons, wars, etc., so may we put
the law of interest in a form which directly connects
it with the law of rent, by saying that the general rate
of interest will be determined by the return to capital
upon the poorest land to which capital is freely applied
— that is to say, upon the best land open to it without
the payment of rent. Thus we bring the law of interest
into a form which shows it to be a corollary of the law
of rent.
We may prove this conclusion in another way: For
that interest must decrease as rent increases, we can
302
THE LAWS OF DISTRIBUTION
Book III,
plainly see if we eliminate wages. To do this, we must,
to be sure, imagine a universe organized on totally dif-
ferent principles. Nevertheless, we may imagine what
Carlyle would call a fool’s paradise, where the produc-
tion of wealth went on without the aid of labor, and
solely by the reproductive force of capital — where sheep
bore ready-made clothing on their backs, cows presented
butter and cheese, and oxen, when they got to the proper
point of fatness, carved themselves into beefsteaks and
Toasting ribs; where houses grew from the seed, and a
jackknife thrown upon the ground would take root and
in due time bear a crop of assorted cutlery. Imagine
certain capitalists transported, with their capital in ap-
propriate forms, to such a place. Manifestly, they would
get, as the return for their capital, the whole amount of
wealth it produced only so long as none of its produce
was demanded as rent. When rent arose, it would come
out of the produce of capital, and as it increased, the
return to the owners of capital must necessarily dimin-
ish. If we imagine the place where capital possessed
this power of producing wealth without the aid of labor
to be of limited extent, say an island, we shall see that
as soon as capital had increased to the limit of the
island to support it, the return to capital must fall to
i trifle above its minimum of mere replacement, and the
!and owners would receive nearly the whole produce as
rent, for the only alternative capitalists would have
would be to throw their capital into the sea. Or, if we
imagine such an island to be in communication with
the rest of the world, the return to capital would settle
at the rate of return in other places. Interest there
•rould be neither higher nor lower than anywhere else.
Aent would obtain the whole of the superior advantage,
and the land of such an island would have a great
value.
To sum up, the law of interest is this:
Chap. V. THE LAW OF INTEREST 203
The relation between wages and interest is determined
by the average power of increase which attaches to capi-
tal from its use in reproductive modes. As rent arises,
interest will fall as wages fall, or wiU be determined by
the margin of cultivation.
I have endeavored at this length to trace out and
illustrate the law of interest more in deference to the
existing terminology and modes .of thought than from
the real necessities of our inquiry, were it unembar-
rassed by befogging discussions. In truth, the primary
division of wealth in distribution is dual, not tripartite.
Capital is but a form of labor, and its distinction from
labor is in reality but a subdivision, just as the division
of labor into skilled and unskilled would be. In our
examination we have reached the same point as would
have been attained had we simply treated capital as
a form of labor, and sought the law which divides the
produce between rent and wages; that is to say, be-
tween the possessors of the two factors, natural sub-
stances and powers, and human exertion — which two
factors by their union produce all wealth.
CHAPTER VI
WAGES AND THE LAW OF WAGES
We have by inference already obtained the law of
wages. But to verify the deduction and to strip the
subject of all ambiguities, let us seek the law from an
independent starting point.
There is, of course, no such thing as a common rate
of wages, in the sense that there is at any given time
and place a common rate of interest. Wages, which in-
clude all returns received from labor, not only vary
with the differing powers of individuals, but, as the
organization of society becomes elaborate, vary largely
as between occupations. Nevertheless, there is a cer-
tain general relation between all wages, so that we ex-
press a clear and well-understood idea when we say
that wages are higher or lower in one time or place than
in another. In their degrees, wages rise and fall in
obedience to a common law. What is this law?
The fundamental principle of human action — the law
that is to political economy what the law of gravita-
tion r to physics — is that men seek to gratify their
desires with the least exertion. Evidently, this principle
must bring to an equality, through the competition it
induces, the reward gained by equal exertions under
similar circumstances. When men work for themselves,
this equalization will be largely effected by the equa-
tion oi prices; and between those who work for them-
selves and those who work for others, the same tendency
to equalization will operate. Now, under this principle,
204
Chap. VI.
WAGES AND THE LAW OF WAGES
205
what, in conditions of freedom, will be the terms at
which one man can hire others to work for him? Evi-
dently, they will be fixed by what the men could make
if laboring for themselves. The principle which will
prevent him from having to give anything above this,
except what is necessary to induce the change, will alse
prevent them from taking less. Did they demand more,
the competition of others would prevent them from
getting employment. Did he offer less, noiie would ac-
cept the terms, as they could obtain greater results by
working for themselves. Thus, although the employer
wishes to pay as little as possible, and the employee
to receive as much as possible, wages will be fixed by
the value or produce of such labor to the laborers them-
selves. If wages are temporarily carried either above
or below this line, a tendency to carry them back at
once arises.
But the result/ or the earnings of labor, as is readily
seen in those primary and fundamental occupations hi
which labor first engages, and which, even in the most
highly developed condition of society, still form the base
of production, does not depend merely upon the inten-
sity or quality of the labor itself. Wealth is the prod-
uct of two factors, land and labor, and what a given
amount of labor will yield will vary with the powers
of the natural opportunities to which it is applied. This
being the case, the principle that men seek to gratify
their desires with the least exertion will fix wages at
the produce of such labor at the point of highest natural
productiveness open to it. Now, by virtue of the same
principle, the highest point of natural productiveness
open to labor under existing conditions will be the low-
est point at which production continues, for men, im-
pelled by a supreme law of the human mind to seek
the satisfaction of their desires with the least exertion,
will not expend labor at a lower point of productiveness
206
THE LAWS OP DISTRIBUTION
BoOt III
while a higher is open to them. Thus the wages which
an employer must pay will be measured by the lowest
point of natural productiveness to which production
extends, and wages will rise or fall as this point rises
or falls.
To illustrate: In a simple state of society, each man,
as is the primitive mode, works for himself — some in
hunting, let us say, some in fishing, some in cultivating
the ground. Cultivation, we will suppose, has just be-
gun, and the land in use is all of the same quality,
yielding a similar return to similar exertions. Wages,
therefore — for, though there is neither employer nor
employed, there are yet wages — will be the full produce
of labor, and, making allowance for the difference of
agreeableness, risk, etc., in the three pursuits, they
will be on the average equal in each — that is to say,
equal exertions will yield equal results. Now, if one of
their number wishes to employ some of his fellows to
work for him instead of for themselves, he must pay
wages fixed by this full, average produce of labor.
Let a period of time elapse. Cultivation has ex-
tended, and, instead of land of the same quality, em-
braces lands of different qualities. Wages, now, will
not be as before, the average produce of labor. They
will be the average produce of labor at the margin of
cultivation, or the point of lowest return. For, as men
seek to satisfy their desires with the least possible exer-
tion, the point of lowest return in cultivation must yield
lo labor a return equivalent to the average return in
hunting and fishing * Labor will i ]p longer yield equal
returns to equal exertions, but those who expend their
labor on the superior land will obtain a greater produce
for the same exertion than those who cultivate the in-
ferior land. Wages, however, will still be equal, for this
* This equalisation will be effected by the equation of price*
Chap. VI.
WAGES AND THE LAW OF WAGES
207
excess which the cultivators of the superior land receive
is in reality rent, and if land has been subjected to indi-
vidual ownership will give it a value. Now, if, under
these changed circumstances, one member of this com-
munity wishes to hire others to work for him, he will
have to pay only what the labor yields at the lowest
point of cultivation* If thereafter the margin of culti-
vation sinks to points of lower and lower productiveness,
so must wages sink; if, on the contrary, it rises, so also
must wages rise; for, just as a free body tends to take
the shortest route to the earths center, so do men seek
the easiest mode to the gratification of their desires.
Here, then, we have the law of wages, as a deduction
from a principle most obvious and most universal. That
wages depend upon the margin of cultivation — that they
will be greater or less as the produce which labor can
obtain from the highest natural opportunities open to
it is greater or less, flows from the principle that men
will seek to satisfy their wants with the least exertion.
Now, if we turn from simple social states to the com-
plex phenomena of highly civilized societies, we shall
find upon examination that they also fall under this law.
In such societies, wages differ widely, but they still
bear a more or less definite and obvious relation to each
other. This relation is not invariable, as at one time a
philosopher of repute may earn by his lectures many fold
the wages of the best mechanic, and at another can
hardly hope for the pay of a footman; as in a great
city occupations may yield relatively high wages, which
in a new settlement would yield relatively low wages;
yet these variations between wages may, under all con-
ditions, and in spite of arbitrary divergences caused by
'custom, law, etc., be traced to certain circumstances. In
one of his most interesting chapters Adam Smith thus
enumerates the principal circumstances “which make
up for a small pecuniary gain in some employments
208
THE LAWS OF DISTRIBUTION
Book III.
and counter-balance a great one in others: First, the
agreeableness or disagreeableness of the employments
themselves. Secondly, the easiness and cheapness, or the
difficulty and expense of learning them. Thirdly, the
constancy or inconstancy of employment in them.
Fourthly, the small or great trust which must be re-
posed in them. Fifthly, the probability or improbability
of success in them.” * It is not necessary to dwell in
detail on these causes of variation in wages between
different employments. They have been admirably ex-
plained and illustrated by Adam Smith and the econo-
mists who have followed him, who have well worked
out the details, even if they have failed to apprehend
the main law.
The effect of all the circumstances which give rise to
the differences between wages in different occupations
may be included as supply and demand, and it is per-
fectly correct to say that the wages in different occupa-
tions will vary relatively according to differences in the
supply and demand of labor — meaning by demand the
call which the community as a whole makes for services
of the particular kind, and by supply the relative amount
of labor which, under the existing conditions, can be
determined to the performance of those particular serv-
ices. But though this is true as to the relative differ-
ences of wages, when it is said, as is commonly said,
that the general rate of wages is determined by supply
and demand, the words are meaningless. For supply
and demand are but relative terms. The supply of labor
can only mean labor offered in exchange for labor or
the produce of labor, and the demand for labor can only
mean labor or the produce of labor offered in exchange
for labor. Supply is thus demand, and demand supply,
* This last, which is analogous to the element of risk in profits,
accounts for the high wages of successful lawyers, physicians,
contractors, actors, etc.
Chap . VI .
WAGES AND THE LAW OF WAGES
209
and, in the whole community, one must be co-extensive
with the other. This is clearly apprehended by the cur-
rent political economy in relation to sales, and the rea-
soning of Ricardo, Mill, and others, which proves that
alterations in supply and demand cannot produce a gen-,
eral rise or fall of values, though they may cause a rise
or fall in the value of a particular thing, is as applicable
to labor. What conceals the absurdity of speaking gen-
erally of supply and demand in* reference to labor is
the habit of considering the demand for labor as spring-
ing from capital and as something distinct from labor;
but the analysis to which this idea has been heretofore
subjected has sufficiently shown its fallacy. It is in-
deed evident from the mere statement, that wages can
never permanently exceed the produce of labor, and
hence that there is no fund from which wages can for
any time be drawn, save that which labor constantly
creates.
But, though all the circumstances which produce the
differences in wages between occupations may be con-
sidered as operating through supply and demand, they,
or rather, their effects, for sometimes the same cause
operates in both ways, may be separated into two
classes, according as they tend only to raise apparent
wages or as they tend to raise real wages — that is, to
increase the average reward for equal exertion. The
high wages of some occupations much resemble what
Adam Smith compares them to, the prizes of a lottery,
in which the great gain of one is made up from the
losses of many others. This is not only true of the
professions by means of which Dr. Smith illustrates
the principle, but is largely true of the wages of superin-
tendence in mercantile pursuits, as shown by the fact
that over ninety per cent, of the mercantile firms that
commence business ultimately fail. The higher wages
of those occupations which can be prosecuted only in
210
THE LAWS OF DISTRIBUTION
Book I II,
certain states of the weather, or are otherwise inter-
mittent and uncertain, are also of this class; while
differences that arise from hardship, discredit, unhealthi-
ness, etc., imply differences of sacrifice, the increased
compensation for which only preserves the level of
equal returns for equal exertions. All these differences
are, in fact, equalizations, arising from circumstances
which, to use the words of Adam Smith, “make up for
a small pecuniary gain in some employments and
counterbalance a great one in others.” But, besides
these merely apparent differences, there are real differ-
ences in wages between occupations, which are caused
by the greater or less rarity of the qualities required
— greater abilities or skill, whether natural or acquired,
commanding on the average greater wages. Now, these
qualities, whether natural or acquired, are essentially
analogous to differences in strength and quickness in
manual labor, and as in manual labor the higher wages
paid the man who can do more would be based upon
wages paid to those who can do only the average
amount, so wages in the occupations requiring superior
abilities and skill must depend upon the common wages
paid for ordinary abilities and skill.
It is, indeed, evident from observation, as it must be
from theory, that whatever be the circumstances which
produce the differences of wages in different occupa-
tions, and although they frequently vary in relation
to each other, producing, as between time and time,
and place and place, greater or less relative differences,
yet the rate of wages in one occupation is always de-
pendent on the rate in another, and so on, down, until
the lowest and widest stratum of wages is reached, in
occupations where the demand is more nearly uniform
and in which there is the greatest freedom to engage.
For, although barriers of greater or less difficulty may
exist, the amount of labor which can be determined
Chap . V/.
WAGES AND THE LAW OF WAGES
211
to any particular pursuit is nowhere absolutely fixed.
All mechanics could act as* laborers, and many laborers
could readily become mechanics; all storekeepers could
act as shopmen, and many shopmen could easily become
storekeepers; many farmers* would, upon inducement,
become hunters or miners, fishermen or sailors, and many
hunters, miners, fishermen, and sailors know enough of
farming to turn their hands to it on demand. In each
occupation there are men who unite it with others, or
who alternate between occupations, while the young men
who are constantly coming in to fill up the ranks of
labor are drawn in the direction of the strongest induce-
ments and least resistances. And further than this, all
the gradations of wages shade into each other by im-
perceptible degrees, instead of being separated by
clearly defined gulfs. The wages, even of the poorer
paid mechanics, are generally higher than the wages of
simple laborers, but there are always some mechanics
who do not, on the whole, make as much as some labor-
ers; the best paid lawyers receive much higher wages
than the best paid clerks, but the best paid clerks make
more than some lawyers, and in fact the worst paid clerks
make more than the worst paid lawyers. Thus, on the
verge of each occupation, stand those to whom the in-
ducements between one occupation and another are so
nicely balanced that the slightest change is sufficient to
determine their labor in one direction or another. Thus,
any increase or decrease in the demand for labor of a
certain kind cannot, except temporarily, raise wages in
that occupation above, nor depress them below, the
relative level with wages in other occupations, which is
determined by the circumstances previously adverted
to, such as relative agreeableness or continuity of em-
ployment, etc. Even, as experience shows, where arti-
ficial barriers are imposed to this interaction, such as
limiting laws, guild regulations, the establishment of
212
THE LAWS OF DISTRIBUTION
Book 111.
caste, etc., they may interfere with, but cannot prevent,
the maintenance of this equilibrium. They operate
only as dams, which pile up the water of a stream above
its natural level, but cannot prevent its overflow.
Thus, although they may from time to time alter in
relation to each other, as the circumstances which deter-
mine relative levels change, yet it is evident that wages
in all strata must ultimately depend upon wages in the
lowest and widest stratum — the general rate of wages
rising or falling as these rise or fall.
Now, the primary and fundamental occupations, upon
which, so to speak, all others are built up, are evidently
those which procure wealth directly from nature; hence
the law of wages in them must be the general law of
wages. And, as wages in such occupations clearly de-
pend upon what labor can produce at the lowest point
of natural productiveness to which it is habitually ap-
plied; therefore, wages generally depend upon the margin
of cultivation, or, to put it more exactly, upon the high-
est point of natural productiveness to which labor is
free to apply itself without the payment of rent.
So obvious is this law that it is often apprehended
without being recognized. It is frequently said of such
countries as California and Nevada that cheap labor
would enormously aid their development, as it would en-
able the working of the poorer but most extensive
deposits of ore. A relation between low wages and a
low point of production is perceived by those who talk
in this way, but they invert cause and effect. It is not
low wages which will cause the working of low-grade
ore, but the extension of production to the lower point
which will diminish wages. If wages could be arbi-
trarily forced down, as has sometimes been attempted
by statute, the poorer mines would not be worked so
long as richer mines could be worked. But if the mar-
gin of production were arbitrarily forced down, as it
Chap. VI.
WAGES AND THE LAW OF WAGES
213
might be, were the superior natural opportunities in the
ownership of those who chose rather to wait for future
increase of value than to permit them to be used now,
wages would necessarily fall.
The demonstration is complete. The law of wages
we have thus obtained is that which we previously
obtained as the corollary of the law of rent, and it
completely harmonizes with the law of interest. It
is, that:
Wages depend upon the margin of production , or upon
the produce which labor can obtain at the highest point
of natural productiveness open to it without the pay-
ment of rent .
This law of wages accords with and explains uni-
versal facts that without its apprehension seem un-
related and contradictory. It shows that:
Where land is T free and labor is unassisted by capital,
the whole produce will go to labor as w&ges.
Where land is free and labor is assisted by capital,
wages will consist of the whole produce, less that part
necessary to induce the storing up of labor as capital.
Where land is subject to ownership and rent arises,
wages will be fixed by what labor could secure from the
highest natural opportunities open to it without the
payment of rent.
Where natural opportunities are all monopolized,
wages may be forced by the competition among labor-
ers to the minimum at which laborers will consent to
reproduce.
This necessary minimum of wages (which by Smith
and Ricardo is denominated the point of “natural
wages,” and by Mill supposed to regulate wages, which
will be higher or lower as the working classes consent
to reproduce at a higher or lower standard of comfort)
is, however, included in the law of wages as previously
214
THE LAWS OF DISTRIBUTION
Book 111
stated, as it is evident that the margin of production
cannot fall below that point at which enough will be
left as wages to secure the maintenance of labor.
Like Ricardo’s law of rent, of which it is the corollary,
this law of wages carries with it its own proof and be-
comes self-evident by mere statement. For it is but an
application of the central truth that is the foundation of
economic reasoning — that men will seek to satisfy their
desires with the least exertion. The average man will
not work for an employer for less, all things considered,
than he can earn by working for himself; nor yet will
he work for himself for less than he can earn by work-
ing for an employer, and hence the return which labor
can secure from such natural opportunities as are free
to it must fix the wages which labor everywhere gets.
That is to say, the line of rent is the necessary measure
of the line of wages. In fact, the accepted law of rent
depends for its recognition upon a previous, though in
many cases it*seems to be an unconscious, acceptance
of this law of wages. What makes it evident that land
of a particular quality will yield as rent the surplus of
its produce over that of the least productive land in use,
is the apprehension of the fact that the owner of the
higher quality of land can procure the labor to work
his land by the payment of what that labor could pro-
duce if exerted upon land of the poorer quality.
In its simpler manifestations, this law of wages is
recognized by people who do not trouble themselves
about political economy, just as the fact that a heavy
body would fall to the earth was long recognized by
those who never thought of the law of gravitation. It
does not require a philosopher to see that if in any
country natural opportunities were thrown open which
would enable laborers to make for themselves wages
higher than the lowest now paid, the general rate of
wages would rise; while the most ignorant and stupid
Char- VI.
WAGES AND THE LAW OF WAGES
215
of the placer miners of early California knew that aii the
placers gave out or were monopolized, wages must fall.
It requires no fine-spun theory to explain why wages
are so high relatively to production in new countries
where land is yet unmonopolized. The cause is on the
surface. One man will not work for another for less
than his labor will realty yield, when he can go upon
the next quarter section and take up a farm for him-
self. It is only as land becomes monopolized and these
natural opportunities are shut off from labor, that
laborers are obliged to compete with each other for
employment, and it becomes possible for the farmer to
hire hands to do his work while he maintains himself
on the difference between what their labor produces
and what he pays them for it.
Adam Smith himself saw the cause of high wages
where land was yet open to settlement, though he failed
to appreciate the -importance and connection of the fact.
In treating of the Causes of the Prosperity of New
Colonies (Chapter VII, Book IV, “Wealth of Na-
tions”) he says:
“Every colonist gets more land than he can possibly cultivate.
He has no rent and scarce any taxes to pay. * * He is eager,
therefore, to collect laborers from every quarter and to pay
them the most liberal wages. But these liberal wages, joined
to the plenty and cheapness of land, soon make these laborera
leave him in order to become landlords themselves, and to
reward with equal liberality other laborers who soon leave them
for the same reason they left their first masters.”
This chapter contains numerous expressions which,
like the opening sentence in the chapter on The Wages
of Labor, show that Adam Smith failed to appreciate
the true laws of the distribution of wealth only because
he turned away from the more primitive forms of so-
ciety to look for first principles amid complex social
manifestations, where he was blinded by a pre-accepted
216
THE LAWS OF DISTRIBUTION
Book 111.
theory of the functions of capital, and, as it seems to
me, by a vague acceptance of the doctrine which, two
years after his death, was formulated by Malthus,
And it is impossible to read the works of the econo-
mists who since the time of Smith have endeavored to
build up and elucidate the science of political economy
without seeing how, over and over again, they stumble
over the law of wages without once recognizing it. Yet,
"if it were a dog it would bite them!” Indeed, it is
difficult to resist the impression that some of them really
saw this law of wages, but, fearful of the practical con-
clusions to which it would lead, preferred to ignore and
cover it up, rather than use it as the key to problems
which without it are so perplexing. A great truth to
an age which has rejected and trampled on it, is not a
word of peace, but a sword!
Perhaps it may be well to remind the reader, before
closing this chapter, of what has been before stated —
that I am using the word wages not in the sense of a
quantity, but in the sense of a proportion. When I say
that wages fall as rent rises, I do not mean that the
quantity of wealth obtained by laborers as wages is
necessarily less, but that the proportion which it bears
to the whole produce is necessarily less. The propor-
tion may diminish while the quantity remains the same
or even increases. If the margin of cultivation descends
from the productive point which we will call 25, to the
productive point we will call 20, the rent of all lands
that before paid rent will increase by this difference,
and the proportion of the whole produce which goes
to laborers as wages will to the same extent diminish;
but if, in the meantime, the advance of the arts or
the economies that become possible with greater popula-
tion have so increased the productive power of labor
that at 20 the same exertion will produce as much wealth
as before at 25, laborers will get as wages as great a
Chap , VI,
WAGES AND THE LAW 07 WAGES
21?
quantity as before, and the relative fall of wages will
not be noticeable in any diminution of the necessaries
or comforts of the laborer, but only in the increased
value of land and the greater incomes and more lavish
expenditure of the rent-receiving class.
CHAPTER VII
THE CORRELATION AND CO-ORDINATION OF THESE LAWS
The conclusions we have reached as to the laws which
govern the distribution of wealth recast a large and
most important part of the science of political economy,
as at present taught, overthrowing some of its most
highly elaborated theories and shedding a new light on
some of its most important problems. Yet, in doing
this, no disputable ground has been occupied; not a
single fundamental principle advanced that is not al-
ready recognized.
The law of interest and the law of wages which we
have substituted for those now taught are necessary
deductions from the great law which alone makes any
science of political economy possible — the all-compel-
ling law that is as inseparable from the human mind as
attraction is inseparable from matter, and without which
it would be impossible to previse or calculate upon any
human action, the most trivial or the most important.
This fundamental law, that men seek to gratify their
desires with the least exertion, becomes, when viewed
in its relation to one of the factors of production, the
law of rent; in relation to another, the law of interest;
and in relation to a third, the law of wages. And in
accepting the law of rent, which, since the time of
Ricardo, has been accepted by every economist of
standing, and which, like a geometrical axiom, has but
to be understood to compel assent, the law of interest
and law of wages, as I have stated them, are inferen-
218
Chap. VII. COREELATION AND CO-ORDINATION OF LAWS 219
tially accepted, as its necessary sequences. In fact, it
is only relatively that tjiey can be called sequences, as
in the recognition of the law of rent they too must be
recognized. For on what depends the recognition of the
law of rent? Evidently upon the recognition of the
fact that the effect of competition is to prevent the re-
turn to labor and capital being anywhere greater than
upon the poorest land in use. It is in seeing this that
we see that the owner of land will be able to claim as
rent all of its produce which exceeds what would be
yielded to an equal application of labor and capital on
the poorest land in use.
The harmony and correlation of the laws of distribu-
tion as we have now apprehended them are in striking
contrast with the want of harmony which characterizes
these laws as presented by the current political econ-
omy. Let us state them side by side:
The Current Statement The True Statement
Rent depends on the mar- Rent depends on the mar-
gin of cultivation, rising gin of cultivation, rising
as it falls and falling as as it falls and falling as
it rises. it rises.
Wages depend upon the Wages depend on the mar-
ratio between the num- gin of cultivation, fall*
ber of laborers and the ing as it falls and rising
amount of capital de- as it rises,
voted to their employ-
ment.
Interest depends upon Interest (its ratio with
the equation between wages being fixed by the
the supply of and de- net power of increase
mand for capital; or, as which attaches to cap-
is stated of profits, upon ital) depends on the
wages (or the cost of margin of cultivation,
labor), rising as wages falling as it falls and
fall, and falling as wages rising as it rises,
rise.
220
THE LAWS OF DISTRIBUTION
Book 211.
In the current statement the laws of distribution have
no common center, no mutual relation; they are not
the correlating divisions of a whole, but measures of
different qualities. In the statement we have given,
they spring from one point, support and supplement
each other, and form the correlating divisions of a com-
plete whole.
CHAPTER VIII
THE STATICS OF THE PROBLEM THUS EXPLAINED
We have now obtained a clear, simple, and consistent
theory of the distribution of wealth, which accords with
first principles and existing facts, and which, when
understood, will commend itself as self-evident.
Before working out this theory, I have deemed it
necessary to show conclusively the insufficiency of cur-
rent theories; for, in thought, as in action, the majority
of men do but follow their leaders, and a theory of
wages which has not merely the support of the highest
names, but is firmly rooted in common opinions and
prejudices, will, until it has been proved untenable, pre-
vent any other theory from being even considered, just
as the theory that the earth was the center of the uni-
verse prevented any consideration of the theory, that
it revolves on its own axis and circles round the sun,
until it was clearly shown that the apparent movements
of the heavenly bodies could not be explained in ac-
cordance with the theory of the fixity of the earth.
There is in truth a marked resemblance between the
science of political economy, as at present taught, and
the science of astronomy, as taught previous to the
recognition of the Copernican theory. The devices by
which the current political economy endeavors to ex-
plain the social phenomena that are now forcing them-
selves upon the attention of the civilized world may
well be compared to the elaborate system of cycles and
aoicycles constructed by the learned to explain tho
221
222
THE LAWS OF DISTRIBUTION
BotHII
celestial phenomena in a manner according with the
dogmas of authority and the rude impressions and
prejudices of the unlearned. And, just as the observa-
tions which showed that this theory of cycles and epi-
cycles could not explain all the phenomena of the
heavens cleared the way for the consideration of the
simpler theory that supplanted it, so will a recognition
of the inadequacy of the current theories to account for
social phenomena clear the way for the consideration of
a theory that will give to political economy all the sim-
plicity and harmony which the Copemican theory gave
to the science of astronomy.
But at this point the parallel ceases. That "the fixed
and steadfast earth’’ should be really whirling through
space with inconceivable velocity is repugnant to the
first apprehensions of men in every state and situation;
but the truth I wish to make clear is naturally per-
ceived, and has been recognized in the infancy of every
people, being obscured only by the complexities of the
civilized state, the warpings of selfish interests, and the
false direction which the speculations of the learned
have taken. To recognize it, we have but to come back
to first principles and heed simple perceptions. Nothing
can be clearer than the proposition that the failure of
wages to increase with increasing productive power is
due to the increase of rent.
Three things unite to production — labor, capital, and
land.
Three parties divide the produce — the laborer, the
capitalist, and the land owner.
If, with an increase of production the laborer gets no
more and the capitalist no more, it is a necessary infer-
ence that the land owner reaps the whole gain.
And the facts agree with the inference. Though
neither wages nor interest anywhere increase as material
progress goes on, yet the invariable accompaniment and
Chap* VIII. STATICS OF THE PROBLEM EXPLAINED
223
mark of material progress is the increase of rent — the
rise of land values.
The increase of rent explains why wages and interest
do not increase. The cause which gives to the land
holder is the cause which denies to the laborer and capi-
talist. That wages and interest are higher in new than
in old countries is not, as the standard economists say,
because nature makes a greater return to the applica-
tion of labor and capital, but because land is cheaper,
and, therefore, as a smaller proportion of the return is
taken by rent, labor and capital can keep for their
•share a larger proportion of what nature does return.
It is not the total produce, but the net produce, after
rent has been taken from it, that determines what can
be divided as wages and interest. Hence, the rate of
wages and interest is everywhere fixed, not so much by
the productiveness of labor as by the value of land.
Wherever the value of land is relatively low, wages
and interest are relatively high; wherever land is rela-
tively high, wages and interest are relatively low.
If production had not passed the simple stage in
which all labor is directly applied to the land and all
wages are paid in its produce, the fact that when tfye
land owner takes a larger 'portion the laborer must put
up with a smaller portion could not be lost sight of.
But the complexities of production in the civilized
state, in which so great a part is borne by exchange,
and so much labor is bestowed upon materials after
they have been separated from the land, though they
may to the unthinking disguise, do not alter the fact
that all production is still the union of the two factors,
land and labor, and that rent (the share of the land
holder) cannot be increased except at the expense of
wages (the share of the laborer) and interest (the share
of capital). Just as the portion of the crop, which in
the simpler forms of industrial organization the owner
THE LAWS OF DISTRIBUTION
Book 111.
agricultural land receives at the end of the harvest
as his rent, lessens the ^amount left to the cultivator as
wages and interest, so does the rental of land on which
a manufacturing or commercial city is built lessen the
amount which can be divided as wages and interest
between the laborer and capital there engaged in the
production and exchange of wealth.
In short, the value of land depending wholly upon
the power which its ownership gives of appropriating
wealth created by labor, the increase of land values
is always at the expense of the value of labor. And,
hence, that the increase of productive power does not
increase wages, is because it does increase the value of
land. Rent swallows up the whole gain and pauperism
accompanies progress.
It is unnecessary to refer to facts. They will suggest
themselves to the reader. It is the general fact, observ-
able everywhere, that as the value of land increases, so
does the contrast between wealth and want appear. It
is the universal fact, that where the value of land is
highest, civilization exhibits the greatest luxury side by
side with the most piteous destitution. To see human
beings in the most abject, the most helpless and hope-
less condition, you must go, not to the unfenced prairies
and the log cabins of new clearings in the backwoods,
where man single-handed is commencing the struggle
with nature, and land is yet worth nothing, but to the
great cities, where the ownership of a little patch of
ground is a fortune.
BOOK IV
EFFECT OF MATERIAL PROGRESS UPON THE
DISTRIBUTION OF WEALTH
CHAPTER I.— THE DYNAMICS OF THE PROBLEM YET TO SEEK
CHAPTER II.— EFFECT OF INCREASE OF POPULATION UPON THE
*
DISTRIBUTION OF WEALTH
CHAPTER in.— EFFECT OF IMPROVEMENTS IN THE ARTS UPON
THE DISTRIBUTION OF WEALTH
CHAPTER IV.— EFFECT OF THE EXPECTATION RAISED BY Ml
TERIAL PROGRESS
Hitherto, it is questionable if all the mechanical inventions
yet made have lightened the day’s toil of any human being. —
John Stuaart Mill.
Do ye hear the children weeping, 0 my brothers,
Ere the sorrow comes with years?
They are leaning their young heads against their mothers,
And that cannot stop their tears.
The young lambs are bleating in the meadows;
The young birds are chirping in the nest;
The young fawns are playing with the shadows;
The young flowers are blowing toward the west —
But the young, young children, O, my brothers,
They are weeping bitterly!
They are weeping in the playtime of the others,
In the country of the free.
Browning
x CHAPTER I
THE DYNAMIC^ OF THE PROBLEM YET TO SEEK
In identifying rent as the receiver of the increased
production which material progress gives, but which
labor fails to obtain; in seeing that the antagonism of
interests is not between labor and capital, as is popu-
larly believed, but is in reality between labor and
capital on the one side and land ownership on the
other, we have reached a conclusion that has most im-
portant practical bearings. But it is not worth while
to dwell on them now, for we have not yet fully solved
the problem which was at the outset proposed. To say
that wages remain low because rent advances is like
saying that a steamboat moves because its wheels turn
around. The further question is, What causes rent to
advance? What is the force or necessity that, as pro-
ductive power increases, distributes a greater and
greater proportion of the produce as rent?
The only cause pointed out by Ricardo as advancing
rent is the increase of population, which by requiring
larger supplies of food necessitates the extension of
cultivation to inferior lands, or to points of inferior pro-
duction on the same lands, and in current works ol
other authors attention is so exclusively directed to the
extension of production from superior to inferior lands
as the cause of advancing rents that Mr. Carey (fol-
lowed by Professor Perry and others) has imagined
that he has overthrown the Ricardian theory of rent
227
228
EFFECTS OF MATERIAL PROGRESS
Book IV,
by denying that the progress of agriculture is from bet-
ter to worse lands.*
Now, while it is unquestionably true that the increas-
ing pressure of population which compels a resort to
inferior points of production will raise rents, and does
raise rents, I do not think that all the deductions com-
monly made from this principle are valid, nor yet that
it fully accounts for the increase of rent as material
progress goes on. There are evidently other causes
which conspire to raise rent, but which seem to have
been wholly or partially hidden by the erroneous views
as to the functions of capital and genesis of wages
which have been current. To see what these are, and
how they operate, let us trace the effect of material
progress upon the distribution of wealth.
The changes which constitute or contribute to ma-
terial progress are three: (1) increase in population;
(2) improvements in the arts of production and ex-
change; and (3) improvements in knowledge, education,
government, police, manners, and morals, so far as they
increase the power of producing wealth. Material
♦As to this, it may be worth while to say: (1) That the
general fact, as shown by the progress of agriculture in the
newer States of the Union and by the character of the land left
out of cultivation in the older, is that the course of cultivation
is from the better to the worse qualities of land. (2) That,
whether the course of production be from the absolutely better
to the absolutely worse lands or the reverse (and there is much
to indicate that better or worse in this connection merely
relates to our knowledge, and that future advances may discover
compensating qualities in portions of the earth now esteemed
most sterile), it is always, and from the nature of the human
mind, must always tend to be, from land under existing condi-
tions deemed better, to land under existing conditions deemed
warst. (3) That Ricardo’s law of rent does not depend upon
the direction of the extension of cultivation, but upon the propo-
sition that if land of a certain quality will yield something,
land of a better quality will yield more.
Char- t. DYNAMICS OF THE PROBLEM YET TO SEEK 229
progress, as commonly understood, consists of these
three elements or directions of progression, in all of
which the progressive nations have for some time past
been advancing, though in different degrees. As, con-
sidered in the light of material forces or economies, the
increase of knowledge, the betterment of government,
etc., have the same effect as improvements in the arts,
it will not be necessary in this view to consider them
separately. What bearing intellectual or moral prog-
ress, merely as such, has upon our' problem we may
hereafter consider. We are at present dealing with
material progress, to which these things contribute only
as they increase wealth-producing power, and shall see
their effects when we see the effect of improvements in
the arts.
To ascertain the effects of material progress upon
the distribution of wealth, let us, therefore, consider
the effects of increase of population apart from improve-
ment in the arts, and then the effect of improvement in
the arts apart from increase of population.
CHAPTER II
THE EFFECT OF INCREASE OF POPULATION UPON THE
DISTRIBUTION OF WEALTH
The manner in which increasing population advances
rent, as explained and illustrated in current treatises,
is that the increased demand for subsistence forces pro-
duction to inferior soil or to inferior productive points.
Thus, if, with a given population, the margin of culti-
vation is at 30, all lands of productive power over 30 will
pay rent. If the population be doubled, an additional
supply is required, which cannot be obtained without
an extension of cultivation that will cause lands to
yield rent that before yielded none. If the extension
be to 20, then all the land between 20 and 30 will yield
rent and have a value, and all land over 30 will yield
increased rent and have increased value.
It is here that the Malthusian doctrine receives from
the current elucidations of the theory of rent the sup-
port of which I spoke when enumerating the causes that
have combined to give that doctrine an almost undis-
puted sway in current thought. According to the
Malthusian theory, the pressure of population against
subsistence becomes progressively harder as population
increases, and although two hands come into the world
with every new mouth, it becomes, to use the language
of John Stuart Mill, harder and harder for the new
hands to supply the new mouths. According to
Ricardo’s theory of rent, rent arises from the difference
in productiveness of the lands in use, and as explained
230
Chap. II.
INCBEASE OF POPULATION
231
by Ricardo and the economists who have followed him,
the advance in rents which, experience shows, accom-
panies increasing population, is caused by the inability
of procuring more food except at a greater cost, which
thus forces the margin of pppulation to lower and lower
points of production, commensurately increasing rent.
Thus the two theories, as I have before explained, are
made to harmonize and blend, Ihe law of rent becoming
but a special application of the more general law pro-
pounded by Malthus, and the advance of rents with
increasing population a demonstration of its resistless
operation. I refer to this incidentally, because it now
lies in our way to see the misapprehension which has
enlisted the doctrine of rent in the support of a theory to
which it in reality gives no countenance. The Mal-
thusian theory has been already disposed of, and the
cumulative disproof which will prevent the recurrence
of a lingering doubt will be given when it is shown,
further on, that the phenomena attributed to the pres-
sure of population against subsistence would, under
existing conditions, manifest themselves were popula-
tion to remain stationary.
The misapprehension to which I now refer, and
which, to a proper understanding of the effect of in-
crease of population upon the distribution of wealth, it
is necessary to clear up, is the presumption, expressed or
implied in all the current reasoning upon the subject of
rent in connection with population, that the recourse to
lower points of production involves a smaller aggregate
produce in proportion to the labor expended; though
that this is not always the case is clearly recognized in
connection with agricultural improvements, which, to
use the words of Mill, are considered “as a partial re-
laxation of the bonds which confine the increase of popu*
lation.” But it is not involved even where there is no
advance in the arts, and the recourse to lower point*
232
EFFECTS OF MATERIAL PROGRESS
Book IV*
of production is clearly the result of the increased de-
mand of an increased population. For increased popu-
lation, of itself, and without any advance in the arts,
implies an increase in the productive power of labor.
The labor of 100 men, other things being equal, will
produce much more than one hundred times as much as
the labor of one man, and the labor of 1,000 men much
more than ten times as^much as the labor of 100 men;
and, so, with every additional pair of hands which in-
creasing population brings, there is a more than pro-
portionate addition to the productive power of labor.
Thus, with an increasing population, there may be a
recourse to lower natural powers of production, not
only without any diminution in the average production
of wealth as compared to labor, but without any diminu^
tion at the lowest point. If population be doubled, land
of but 20 productiveness may yield to the same amount
of labor as much as land of 30 productiveness could
before yield. For it must not be forgotten (what often
is forgotten) that the productiveness either of land or
labor is not to be measured in any one thing, but in all
desired things. A settler and his family may raise as
much corn on land a hundred miles away from the near-
est habitation as they could raise were their land in the
center of a populous district. But in the populous dis-
trict they could obtain with the same labor as good a
living from much poorer land, or from land of equal
quality could make as good a living after paying a
high rent, because in the midst of a large population
their labor would have become more effective; not,
perhaps, in the production of corn, but in the produc-
tion of wealth generally — or the obtaining of all the
commodities and services which are the real object of
their labor.
But even where there is a diminution in the produc-
tiveness of labor at the lowest point — that is to say,
Chap . //. INCREASE OF POPULATION 233
where the increasing demand for wealth has driven pro-
duction to a lower point of natural productiveness than
the addition to the power of labor from increasing popu-
lation suffices to make up for — it does not follow that
the aggregate production, as compared with the aggre-
gate labor, has been lessened.
Let us suppose land of diminishing qualities. The
best would naturally be settled first, and as population
increased production would take* in the next lower
quality, and so on. But, as the increase of population,
by permitting greater economies, adds to the effective-
ness of labor, the cause which brought each quality of
land successively into cultivation would at the same
time increase the amount of wealth that the same quan-
tity of labor could produce from it. But it would also
do more than this — it would increase the power of pro-
ducing wealth on all the superior lands already in
cultivation. If the relations of quantity and quality
were such that increasing population added to the ef-
fectiveness of labor faster than it compelled a resort
to less productive qualities of land, though the margin
of cultivation would fall and rent would rise, the mini-
mum return to labor would increase. That is to say,
though wages as a proportion would fall, wages as a
quantity would rise. The average production of wealth
would increase. If the relations were such that the in-
creasing effectiveness of labor just compensated for the
diminishing productiveness of the land as it was called
into use, the effect of increasing population would be
to increase rent by lowering the margin of cultivation
without reducing wages as a quantity, and to* increase
the average production. If we now suppose population
still increasing, but, between the poorest quality of
land in use and the next lower quality, to be a differ-
ence so great that the increased power of labor which
comes with the increased population that brings it into
234
EFFECTS OF MATERIAL PROGRESS
Book. IV.
cultivation cannot compensate for it — the minimum
return to labor will be reduced, and with the rise of
rents, wages will fall, not only as a proportion, but as
a quantity. But unless the descent in the quality of
land is far more precipitous than we can well imagine,
or than, I think, ever exists, the average production
will still be increased, for the increased effectiveness
which comes by reason of the increased population that
compels resort to the inferior quality of land attaches
tc all labor, and the gain on the superior qualities of
land will more than compensate for the diminished pro-
duction on the quality last brought in. The aggregate
wealth production, as compared with the aggregate ex-
penditure of labor, will be greater, though its distribution
will be more unequal.
Thus, increase of population, as it operates to extend
production to lower natural levels, operates to increase
rent and reduce wages as a proportion, and may or may
not reduce wages as a quantity ; while it seldom can, and
. probably never does, reduce the aggregate production
of wealth as compared with the aggregate expenditure
of labor, but on the contrary increases, and frequently
largely increases it.
But while the increase of population thus increases
rent by lowering the margin of cultivation, it is a mis-
take to look upon this as the only mode by which rent
advances as population grows. Increasing population
increases rent, without reducing the margin of cultiva-
tion; and notwithstanding the dicta of such writers as
McCulloch, who assert that rent would not arise were
there an unbounded extent of equally good land, in-
creases it without reference to the natural qualities of
land, for the increased powers of co-operation and ex-
change which come with increased population are equiva-
lent to — nay, I think we can say without metaphor,
that they give — an increased capacity to land.
Chap, 11. INCREASE OF POPULATION 235
I do not mean to say merely that, like an improve*
ment in the methods or tools cf production, the increased
power which comes with increased population gives to
the same labor an increased result, which is equivalent
to an increase in the natural powers of land; but that
it brings out a superior power in labor, which is local-
ized on land — which attaches not to labor generally, but
only to labor exerted on particular land; and which thus
inheres in the land as much as any qualities of soil,
climate, mineral deposit, or natural situation, and
passes, as they do, with the possession of the land.
An improvement in the method of cultivation which,
with the same outlay, will give two crops a year iw
place of one, or an improvement in tools and machinery
Tyhich will double the result of labor, will manifestly;
on a particular piece of ground, have the same effect
on the produce as a doubling of the fertility of the land.
But the difference is in this respect — the improvement
in method or in tools can be utilized on any land; but
the improvement in fertility can be utilized only on the
particular land to which it applies. Now, in large part,
the increased productiveness of labor which arises from
increased population can be utilized only on particular
land, and on particular land in greatly varying degrees.
Here, let us imagine, is an unbounded savannah,
stretching off in unbroken sameness of grass and flower,
tree and rill, till the traveler tires of the monotony.
Along comes the wagon of the first immigrant. Where
to settle he cannot tell- -every acre seems as good as
every other acre. As to wood, as to water, as to fer-
tility, as to situation, there is absolutely no choice, and
he is perplexed by the embarrassment of richness. Tired
out with the search for one place that is better than
another, he stops — somewhere, anywhere — and starts to
make himself a home. The soil is virgin and rich, game
is abundant, the streams flash with the finest trout.
236
EFFECTS OF MATERIAL PROGRESS
Book IV.
Nature is at her very best. He has what, were he in a
populous district, would make him rich; but he is very
poor. To say nothing of the mental craving, which
would lead him to welcome the sorriest stranger, he
labors under all the material disadvantages of solitude.
He can get no temporary assistance for any work that
requires a greater union of strength than that afforded
by his own family, or by such help as he can per-
manently keep. Though he has cattle, he cannot often
have fresh meat, for to get a beefsteak he must kill a
bullock. He must be his own blacksmith, wagonmaker,
carpenter, and cobbler — in short, a “jack of all trades
and master of none.” He cannot have his children
schooled, for, to do so, he must himself pay and main-
tain a teacher. Such things as he cannot produce him-
self, he must buy in quantities and keep on hand, or
else go without, for he cannot be constantly leaving his
work and making a long journey to the verge of civili-
zation; and when forced to do so, the getting of a vial
of medicine or the replacement of a broken auger may
cost him the labor of himself and horses for days.
Under such circumstances though nature is prolific, the
man is poor. It is an easy matter for him to get enough
to eat; but beyond this, his labor will suffice to satisfy
only the simplest wants in the rudest way.
Soon there comes another immigrant. Although every
quarter section of the boundless plain is as good as every
other quarter section, he is not beset by any embarrass-
ment as to where to settle. Though the land is the same,
there is one place that is clearly better for him than
any other place, and that is where there is already a
settler and he may have a neighbor. He settles by the
side of the first comer, whose condition is at once greatly
improved, and to whom many things are now possible
that were before impossible, for two men may help
each other to do things that one man could never do.
Chap, II.
IN CREASE OF POPULATION
237
Another immigrant comes, and, guided by the same
attraction, settles where there are already two. Another,
and another, until around our first comer there are a
score of neighbors. Labor has now an effectiveness
which, in the solitary state, it could not approach. If
heavy work is to be done, the settlers have a log-rolling,
and together accomplish in a day what singly would
require years. When one kills a bullock, the others take
part of it, returning when they kill, and thus they have
fresh meat all the time. Together they hire a school-
master, and the children of each are taught for a frac-
tional part of what similar teaching would have cost
the first settler. It becomes a comparatively easy mat-
ter to send to the nearest town, for some one is always
going. But there is less need for such journeys. A
blacksmith and a wheelwright soon set up shops, and
our settler can have his tools repaired for a small part
of the labor it formerly cost him. A store is opened
and he can get what he wants as he wants it; a post-
office, soon added, gives him regular communication
with the rest of the world. Then come a cobbler, a
carpenter, a harness-maker, a doctor; and a little church
soon arises. Satisfactions become possible that in the
solitary state were impossible. There are gratifications
for the social and the intellectual nature — for that part
of the man that rises above the animal. The power of
sympathy, the sense of companionship, the emulation
of comparison and contrast, open a wider, and fuller,
and more varied life. In rejoicing, there are others to
rejoice; in sorrow, the mourners do not mourn alone.
There are husking bees, and apple parings, and quilting
parties. Though the ballroom be unplastered and the
orchestra but a fiddle, the notes of the magician are
yet in the strain, and Cupid dances with the dancers.
At the wedding, there are others to admire and enjoy;,
in the house of death, there are watchers; by the open-
238
EFFECTS OF MATERIAL PROGRESS
Both iV.
grave, stands human sympathy to sustain the mourners.
Occasionally, comes a straggling lecturer to open up
glimpses of the world of science, of literature, or of
art; in election times, come stump speakers, and the
citizen rises to a sense of dignity and power, as the
cause of empires is tried before him in the struggle of
John Doe and Richard Roe for his support and vote:
And, by and by, comes the circus, talked of months
before, and opening to children whose horizon has been
the prairie, all the realms of the imagination — princes
and princesses of fairy tale, mail-clad crusaders and
turbaned Moors, Cinderella’s fairy coach, and the giants
of nursery lore; lions such as crouched before Daniel,
or in circling Roman amphitheater tore the saints of
God; ostriches who recall the sandy deserts; camels such
as stood around when the wicked brethren raised Joseph
from the well and sold him into bondage; elephants
such as crossed the Alps with Hannibal, or felt the
sword of the Maccabees; and glorious music that thrills
and builds in the chambers of the mind as rose the
sunny dome of Kubla Khan.
Go to our settler now, and say to him: “You have
so many fruit trees which you planted; so much fenc-
ing, such a well, a barn, a house — in short, you have
by your labor added so much value to this farm. Your
land itself is not quite so good. You have been cropping
it, and by and by it will need manure. I will give you
the full value of all your improvements if you will give
it to me, and go again with your family beyond the
verge of settlement.” He would laugh at you. His
land yields no more wheat or potatoes than before, but
it does yield far more of all the necessaries and com-
forts of life. His labor upon it will bring no heavier
crops, and, we will suppose, no more valuable crops,
but it will bring far more of all the other tilings for
which men work. The presence of other settlers — the
Chap, II,
INCREASE OF POPULATION
increase of population — has added to the productive-
ness, in these things, of labor bestowed upon it, and
this added productiveness gives it a superiority over
land of equal natural quality where there are as yet no
settlers. If no land remains to be taken up, except such
as is as far removed from population as was our set-
tler’s land when he first went upon it, the value or rent
of this land will be measured by the whole of this added
capability. If, however, as we have supposed, there is
a continuous stretch of equal land, over which popula-
tion is now spreading, it will not be necessary for the
new settler to go into the wilderness, as did the first.
He will settle just beyond the other settlers, and will get
the advantage of proximity to them. The value or rent
of our settler’s land will thus depend on the advantage
which it has, from being at the center of population,
over that on the verge. In the one case, the margin of
production will remain as before ; in the other, the mar-
gin of production will be raised.
Population still continues to increase, and as it in-
creases so do the economies which its increase permits,
and which in effect add to the productiveness of the
land. Our first settler’s land, being the center of popu-
lation, the store, the blacksmith’s forge, the wheel-
wright’s shop, are set up on it, or on its margin, where
soon arises a village, which rapidly grows into a town,
the center of exchanges for the people of the whole
district. With no greater agricultural productiveness
than it had at first, this land now begins to develop a
productiveness of a higher kind. To labor expended in
raising corn, or wheat, or potatoes, it will yield no more
of those things than at first; but to labor expended in
the subdivided branches of production which require
proximity to other producers, and, especially, to labor
expended in that final part of production, which con-
sists in distribution, it will yield much larger returns.
240
EFFECTS OF MATERIAL PROGRESS
Blok IV.
The wheat-grower may go further on, and find land on
which his labor will produce as much wheat, and nearly
as much wealth; but the artisan, the manufacturer, the
storekeeper, the professional man, find that their labor
expended here, at the center of exchanges, will yield
them much more than if expended even at a little dis-
tance away from it; and this excess of productiveness
for such purposes the land owner can claim just as he
could an excess in its wheat-producing power. And
so our settler is able to sell in building lots a few of his
acres for prices which it would not bring for wheat-
growing if its fertility had been multiplied many times.
With the proceeds, he builds himself a fine house, and
furnishes it handsomely. That is to say, to reduce the
transaction to its lowest terms, the people who wish to
use the land build and furnish the house for him, on
condition that he will let them avail themselves of the
superior productiveness which the increase of popula-
tion has given the land.
Population still keeps on increasing, giving greater
and greater utility to the land, and more and more
wealth to its owner. The town has grown into a city —
a St. Louis, a Chicago or a San Francisco — and still it
grows. Production is here carried on upon a great scale,
with the best machinery and the most favorable facil-
ities; the division of labor becomes extremely minute,
wonderfully multiplying efficiency; exchanges are of
such volume and rapidity that they are made with the
minimum of friction and loss. Here is the heart, the
brain, of the vast social organism that has grown up
from the germ of the first settlement; here has developed
one of the great gan'glions of the human world. Hither
run all roads, hither set all currents, through all the
vast regions round about. Here, if you have anything
to sell, is the market; here, if you have anything to
buy, is the largest and the choicest stock. Here intel-
Chap*
INCREASE OF POPULATION
211
lectual activity is gathered into a focus, and here springs
that stimulus which is born of the collision of mind with
mind. Here are the great libraries, the storehouses
and granaries of knowledge, the learned professors, the
famous specialists. Here are museums and art gal-
leries, collections of philosophical apparatus, and all
things rare, and valuable, and best of their kind. Here
come great actors, and orators, and singers, from all
over the world. Here, in short, is a center of human
life, in all its varied manifestations.
So enormous are the advantages which this land now
offers for the application of labor, that instead of one
man with a span of horses scratching over acres, you
may count in places thousands of workers to the acre,
working tier on tier, on floors raised one above the other,
five, six, seven and eight stories from the ground, while
underneath the surface of the earth engines are throb-
bing with pulsations that exert the force of thousands o f
horses.
All these advantages attach to the land; it is on this
land and no other that they can be utilized, lor here is
the center of population — the focus of exchanges, the
market place and workshop of the highest forms of
industry. The productive powers which density of
population has attached to this land are equivalent to
the multiplication of its original fertility by the hum
dred fold and the thousand fold. And rent, which
measures the difference between this added produc-
tiveness and that of the least productive land in use,
has increased accordingly. Our settler, or whoever
has succeeded to his right to the land, is now a mil-
lionaire. Like another Rip Van Winkle, he may have
lain down and slept; still he is rich — not from anything
he has done, but from the increase of population.
There are lots from which for every foot of frontage
the owner may draw more than an average mechanic
242
EFFECTS OF MATERIAL PROGRESS
Book tV.
can earn; there are lots that will sell for more than
would suffice to pave them with gold coin. In the prin-
cipal streets are towering buildings, of granite, marble,
iron, and plate glass, finished in the most expensive
style, replete with every convenience. Yet they are
not worth as much as the land upon which they rest
— the same land, in nothing changed, which when our
first settler came upon it had no value at all.
That this is the way in which the increase of popu-
lation powerfully acts in increasing rent, whoever, in a
progressive country, will look around him, may see for
himself. The process is going on under his eyes. The
increasing difference in the productiveness of the land
in use, which causes an increasing rise in rent, results
not so much from the necessities of increased popula-
tion compelling the resort to inferior land, as from the
increased productiveness which increased population
gives to the lands already in use. The most valuable
lands on the globe, the lands which yield the highest
tent, are not lands of surpassing natural fertility, but
lands to which a surpassing utility has been given by
the increase of population.
The increase of productiveness or utility which in-
crease of population gives to certain lands, in the way
to which I have been calling attention, attaches, as it
Were, to the mere quality of extension. The valuable
quality of land that has become a center of population
is its superficial capacity — it makes no difference
whether it is fertile, alluvial soil like that of Philadel-
phia; rich bottom land like that of New Orleans; a
filled-in marsh like that of St. Petersburg, or a sandy
waste like the greater part of San Francisco.
And where value seems to arise from superior natural
qualities, such as deep water and good anchorage, rich
deposits of coal and iron, or heavy timber, observation
•Iso shows that these superior qualities are brought out.
Chap . II.
INCREASE OF POPULATION
rendered tangible, by population. The coal and iron
fields of Pennsylvania, that to-day are worth enormous
sums, were fifty years ago valueless. What is the
efficient cause of the difference? Simply the difference
in population. The coal and iron beds of Wyoming
and Montana, which to-day are valueless, will, in fifty
years from now, be worth millions on millions, simply
because, in the meantime, population will have greatly
increased.
It is a well provisioned ship, this on which we sail
through space. If the bread and beef above decks seem
to grow scarce, we but open a hatch and there is a new
supply, of which before we never dreamed. And very
great command over the services of others comes ta
those who as the hatches are opened are permitted to
say, “This is minel”
To recapitulate: The effect of increasing population
upon the distribution of wealth is to increase rent, and
consequently to diminish the proportion of the produce
which goes to capital and labor, in two ways: First,
By lowering the margin of cultivation. Second, By
bringing out in land special capabilities otherwise latent^
and by attaching special capabilities to particular lands.
I am disposed to think that the latter mode, to which
little attention has been given by political economists,
is really the more important But this, in our inquiry,
iB not a matter of moment.
CHAPTER III
THE EFFECT OF IMPROVEMENTS IN THE ARTS UPON THE
DISTRIBUTION OF WEALTH
Eliminating improvements in the arts, we have seen
the effects of increase of population upon the distribu-
tion of wealth. Eliminating increase of population, let
us now see what effect improvements in the arts of
production have upon distribution.
We have seen that increase of population increases
rent, rather by increasing the productiveness of labor
than by decreasing it. If it can now be shown that, irre-
spective of the increase of population, the effect of im-
provements in methods of production and exchange is
to increase rent, the disproof of the Malthusian theory
— and of all the doctrines derived from or related to it
—will be final and complete, for we shall have accounted
for the tendency of material progress to lower wages
and depress the condition of the lowest class, without
recourse to the theory of increasing pressure against
the means of subsistence.
That this is the case will, I think, appear on the
slightest consideration.
The effect of inventions and improvements in the
productive arts is to save labor — that is, to enable the
same result to be secured with less labor, or a greater
result with the same labor.
Now, in a state of society in which the existing powei
of labor served to satisfy all material desires, and there
r r as no possibility of new desires being called forth by
244
Chap. II I.
IMPROVEMENTS IN THE ARTS
245
the opportunity of gratifying them, the effect of labor-
saving improvements would be simply to reduce the
amount of labor expended. But such a state of society,
if it can anywhere be found, which I do not believe*
exists only where the human most nearly approaches
the animal. In the state of society called civilized, and
which in this inquiry we are concerned with, the very
reverse is the case. Demand is not a fixed quantity,
that increases only as population increases. In each
individual it rises with his power of getting the things
demanded. Man is not an ox, who, when he has eaten
his fill, lies down to chew the cud; he is the daughter '
of the horse leech, who constantly asks for more.
“When I get some money,” said Erasmus, “I will buy
me some Greek books and afterward some clothes.”
The amount of wealth produced is nowhere commensu-
rate with the desire for wealth, and desire mounts with
every additional opportunity for gratification.
This being the case, the effect of labor-saving im-
provements will be to increase the production of wealth.
Now, for the production of wealth, two things are
required — labor and land. Therefore, the effect of labor-
saving improvements will be to extend the demand for
land, and wherever the limit of the quality of land in
use is reached, to bring into cultivation lands of less
natural productiveness, or to extend cultivation on the
same lands to a point of lower natural productiveness.
And thus, while the primary effect of labor-saving im-
provements is to increase the power of labor, the sec-
ondary effect is to extend cultivation, and, where this
lowers the margin of cultivation, to increase rent. Thus,
where land is ontirely appropriated, as in England, or
where it is either appropriated or is capable of appro-
priation as rapidly as it is needed for use, as in the
United States, the ultimate effect of labor-saving ma-
AI-AB JUNG BAMADUtl
EFFECTS OF MATERIAL PROGRESS
Book IT.
chinery or improvements is to increase rent without
increasing Wages or interest.
It is important that this be fully understood, for it
shows that effects attributed by current theories to in-
crease of population are really due to the progress of
invention, and explains the otherwise perplexing fact
that labor-saving machinery everywhere fails to bene-
fit laborers.
Yet, to grasp fully this truth, it is necessary to keep
in mind what I have already more than once adverted
to — the interchangeability of wealth. I refer to this
again, only because it is so persistently forgotten or
ignored by writers who speak of agricultural production
as though it were to be distinguished from production
in general, and of food or subsistence as though it were
not included in the term wealth.
Let me ask the reader to bear in mind, what has
already been sufficiently illustrated, that the possession
or production of any form of wealth is virtually the
possession or production of any other form of wealth
for which it will exchange — in order that he may clearly
see that it is not merely improvements which effect a
saving in labor directly applied to land that tend to
increase rent, but all improvements that in any way
save labor.
That the labor of any individual is applied exclu-
sively to the production of one form of wealth is solely
the result of the division of labor. The object of labor
on the part of any individual is not the obtainment of
wealth in one particular form, but the obtainment of
wealth in all the forms that consort with his desires.
And, hence, an improvement which effects a saving in
the labor required to produce one of the things desired,
Is, in effect, an increase in the power of producing all
the other things. If it take half a man’s labor to keep
him in food, and the other half to provide him clothing
Chap* III.
IMPROVEMENTS IN THE ARTS
24 ?
and shelter, an improvement which would increase his
power of producing food would also increase his power
of providing clothing and shelter. If his desires for
more or better food, and for more or better clothing
and shelter, were equal, an improvement in one depart-
ment of labor would be precisely equivalent to a like im-
provement in the other. If the improvement consisted
m a doubling of the power of his labor in producing
food, he would give one-third less labor to the pro-
duction of food, and one-third more to the providing of
dothiug and shelter. If the improvement doubled his
jower to provide clothing and shelter, he would give one-
third less labor to the production of these things, and
one-third more to the production of food. In either
case, the result would be the same — he would be enabled
with the same labor to get one-third more in quantity
or quality of all the things he desired.
And, so, where production is carried on by the divi-.
sion of labor between individuals, an increase in the
power of producing one of the things sought by pro-
duction in the aggregate adds to the power of obtaining
others, and will increase the production of the others, to
an extent determined by the proportion which the sav-
ing of labor bears to the total amount of labor expended,
and by the relative strength of desires. I am unable
to think of any form of wealth, the demand for which
would not be increased by a saving in the labor required
to produce the others. Hearses and coffins have been
selected as examples of things for which the demand is
little likely to increase; but this is true only as to
quantity. That increased power of supply would lead
to a demand for more expensive hearses and coffins, no
one can doubt who has noticed how strong is the desire
to show regard for the dead by costly funerals.
Nor is the demand for food limited, as in economic
Reasoning is frequently, but erroneously, assumed. Sub-
EFFECTS OF MATERIAL PROGRESS
Book IV.
sistence is often spoken of as though it were a fixed
quantity; but it is fixed only n having a definite mini-
mum. Less than a certain amount will not keep a
human being alive, and les3 than a somewhat larger
amount will not keep a human being in good health.
But, above this minimum, the subsistence which a
human being can use may be increased almost indefi-
nitely. Adam Smith says, and Ricardo indorses the
statement, that the desire for food is limited in every
man by the narrow capacity of the human stomach;
but this, manifestly, is true only in the sense that when
a man’s belly is filled, hunger is satisfied. His demands
for food have no such limit. The stomach of a Louis
XIV, a Louis XV, or a Louis XVI, could not hold or
digest more than the stomach of a French peasant of
equal stature, yet, while a few rods of ground would
supply the black bread and herbs which constituted
the subsistence of the peasant, it took hundreds of
thousands of acres to supply the demands of the king,
who, besides his own wasteful use of the finest qualities
of food, required immense supplies for his servants,
horses and dogs. And in the common facts of daily
life, in the unsatisfied, though perhaps latent, desireB
which each one has, we may see how every increase in
the power of producing any form of wealth must result
in an increased demand for land and the direct products
of land. The man who now uses coarse food, and
lives in a small house, will, as a rule, if his income be
increased, use more costly food, and move to a larger
house. If he grows richer and richer he will procure
horses, servants, gardens and lawns, his demand for the
use of land constantly increasing with his wealth. In
the city where I write, is a man — but the type of men
everywhere to be found — who used to boil his own beans
and fry his own bacon, but who, now that he has got
rich, maintains a town house that takes up a whole'
Chap. III.
249
UIPB 9 VEMENTS m THE ARTS
block and would answer for a first-class hotel, two or
three country houses with extensive grounds, a large
stud of racers, a breeding farm, private track, etc. It
certainly takes at least a thousand times, it may be
several thousand times, as much land to supply the de-
mands of this man now as it did when he was poor.
And, so, every improvement or invention, no matter
what it be, which gives to labor the power of producing
more wealth, causes an increased, demand for land and
its direct products, and thus tends to force down the
margin of cultivation, just as would the demand caused
by an increased population. This being the case, every
labor-saving invention, whether it be a steam plow, a
telegraph, an improved process of smelting ores, a per-
fecting printing press, or a sewing machine, has a ten-
dency to increase rent.
Or, to state this truth concisely:
♦
Wealth in all its forms being the product of labor
applied to land or the products of land, any increase in
the power of labor, the demand for wealth being unsat-
isfied, will be utilized in procuring more wealth, and
thus increase the demand for land.
To illustrate this effect of labor-saving machinery
and improvements, let us suppose a country where, as
m all the countries of the civilized world, the land is in
the possession of but a portion of the people. Let us
suppose a permanent barrier fixed to further increase
of population, either by the enactment and strict en-
forcement of an Herodian law, or from such a change
in manners and morals as might result from an exten-
sive circulation of Annie Besant’s pamphlets. Let the
margin of cultivation, or production, be represented by
20. Thus land or other natural opportunities which,
from the application of labor and capital, will yield a
return of 20, will just give the ordinary rate of wages
250
EFFECTS OF MATERIAL PROGRESS
Boot IV.
and interest, without yielding any rent; 'while all lands
yielding to equal applications of labor and capital more
than 20 will yield the excess as rent. Population re-
maining fixed, let there be made inventions and improve-
ments which will reduce by one-tenth the expenditure
of labor and capital necessary to produce the same
amount of wealth. Now, either one-tenth of the labor
and capital may be freed, and production remain the
same as before; or the same amount of labor and capital
may be employed, and production be correspondingly
increased. But the industrial organization, as in all
civilized countries, is such that labor and capital, and
especially labor, must press for employment on any
terms — the industrial organization is such that mere
laborers are not in a position to demand their fair share
in the new adjustment, and that any reduction in the
application of labor to production will, at first, at least,
take the form, not of giving each laborer the same
amount of produce for less work, but of throwing some
of the laborers out of work and giving them none of the
produce. Now, owing to the increased efficiency of
labor ' secured by the new improvements, as great a
return can be secured at the point of natural produc-
tiveness represented by 18, as before at 20. Thus, the
unsatisfied desire for wealth, the competition of labor
and capital for employment, would insure the exten-
sion of the margin of production, we will say to 18, and
thus rent would be increased by the difference between
18 and 20, while wages and interest, in quantity, would
be no more than before, and, in proportion to the whole
produce, would be less. There would be a greater pro-
duction of wealth, but land owners would get the whole
benefit, subject to temporary deductions, which will be
hereafter stated.
If invention and improvement still go on, the efficiency
of labor will be still further increased, and the amount
Chap. III.
IMPROVEMENTS IN THE ARTS
of labor and capital necessary to produce a given result
further diminished. The same causes will lead to the
utilization of this new gain in productive power for the
production of more wealth; the margin of cultivation
will be again extended, and rent will increase, both in
proportion and amount, without any increase in wages
and interest. And, so, as invention and improvement
go on, constantly adding to the efficiency of labor, the
margin of production will be pushed lower and lower,
and rent constantly increased, though population should
remain stationary.
I do not mean to say that the lowering of the margin
of production would always exactly correspond with the 1
increase in productive power, any more than I mean to*
say that the process would be one of clearly defined'
steps. Whether, in any particular case, the lowering of
the margin of production lags behind or exceeds the
increase in productive power, will depend, I conceive;
upon what may be called tbe area of productiveness
that can be utilized before cultivation is forced to the
next lowest point. For instance, if the margin of cul-
tivation be at 20, improvements which enable the same
produce to be obtained with one-tenth less capital and
labor will not carry the margin to 18, if the area having
a productiveness of 19 is sufficient to employ all the
labor and capital displaced from the cultivation of the
superior lands. In this case, the margin of cultivation
would rest at 19, and rents would be increased by the
difference between 19 and 20, and wages and interest
by the difference between 18 and 19. But if, with the
same increase in productive power the area Of produc-
tiveness between 20 and 18 should not be sufficient to
employ all the displaced labor and capital, the margin
of cultivation must, if the same amount of labor and
capital press for employment, be carried lower than 18.
|n this case, rent would gain ttore than the increase in
252
EFFECTS OF MATERIAL PROGRESS
Book IV
the product, and wages and interest would be less than
before the improvements which increased productive
power.
Nor is it precisely true that the labor set free by each
improvement will all be driven to seek employment in
the production of more wealth. The increased power of
satisfaction, which each fresh improvement gives to a
certain portion of the community, will be utilized in
demanding leisure or services, as well as in demanding
wealth. Some laborers will, therefore, become idlers
and some will pass from the ranks of productive to those
of unproductive laborers — the proportion of which, as
observation shows, tends to increase with the progress
of society.
But, as I shall presently refer to a cause, as yet un-
considered, which constantly tends to lower the margiu
of cultivation, to steady the advance of rent, and even
carry it beyond the proportion that would be fixed by
the actual margin of cultivation, it is not worth while
to take into account these perturbations in the down-
ward movement of the margin of cultivation and the
upward movement of rent. All I wish to make clear
is that, without any increase in population, the progress
of invention constantly tends to give a larger propor-
tion of the produce to the owners of land, and a smaller
and smaller proportion to labor and capital.
And, as we can assign no limits to the progress of
invention, neither can we assign any limits to the in-
crease of rent, short of the whole produce. For, if labor-
saving inventions went on until perfection was attained,
and the necessity of labor in the production of wealth
was entirely done away with, then everything that the
earth could yield could be obtained without labor, and
the margin of cultivation would be extended to zero.
Wages would be nothing, and interest would be nothing,
while rent would take everything. For the owners of
Chap. III.
IMPROVEMENTS IN THE ARTS
253
the land, being enabled without labor to obtain all the
wealth that could be procured from nature, there would
be no use for either labor or capital, and no possible
way in which either could compel any share of the
wealth produced. And no matter how small population
might be, if anybody but the land owners continued to
exist, it would be at the whim or by the mercy of the
land owners — they would be maintained either for the
amusement of the land owners, or, $s paupers, by their
bounty.
This point, of the absolute perfection of labor-saving
inventions, may seem very remote, if not impossible of
attainment; but it is a point toward which the march
of invention is every day more strongly tending. And
in the thinning out of population in the agricultural
districts of Great Britain, where small farms are being
converted into larger ones, and in the great machine-
worked wheat-fields of California and Dakota, where
one may ride for miles and miles through waving grain
without seeing a human habitation, there are already
suggestions of the final goal toward which the whole
civilized world is hastening. The steam plow and the
reaping machine are creating in the modern world lati-
fundia of the same kind that the influx of slaves from
foreign wars created in ancient Italy. And to many a
poor fellow as he is shoved out of his accustomed place
and forced to move on — as the Roman farmers were
forced to join the proletariat of the great city, or sell
their blood for bread in the ranks of the legions — it
seems as though these labor-saving inventions were in
themselves a curse, and we hear men talking of work,
as though the wearying strain of the muscles were, in
itself, a thing to be desired.
In what has preceded, I have, of course, spoken of
inventions and improvements when generally diffused.
It is hardly necessary to say that as long as an inven-
EFFECTS OF MATERIAL PROGRESS
Book IV.
tion or an improvement is used by so few that they
derive a special advantage from it, it does not, to the
extent of this special advantage, affect the general dis-
tribution of wealth. So, in regard to the limited monop-
olies created by patent laws, or by the causes which
give the same character to railroad and telegraph lines,
etc. Although generally mistaken for profits of capital,
the special profits thus arising are really the returns
of monopoly, as has been explained in a previous chap-
ter, and, to the extent that they subtract from the bene-
fits of an improvement, do not primarily affect general
distribution. For instance, the benefits of a railroad
or similar improvement in cheapening transportation
are diffused or monopolized, as its charges are reduced
to a rate which will yield ordinary interest on the
capital invested, or kept up to a point which will yield
an extraordinary return, or cover the stealing of the
constructors or directors. And, as is well known, the
rise in rent or land values corresponds with the reduc-
tion in the charges.
As has before been said, in the improvements which
advance rent are not only to be included the improve-
ments which directly increase productive power, but also
such improvements in government, manners, and morals
as indirectly increase it. Considered as material forces,
the effect of all these is to increase productive power,
and, like improvements in the productive arts, their
benefit is ultimately monopolized by the possessors of
the land. A notable instance of this is to be found in
the abolition of protection by England. Free trade has
enormously increased the wealth of Great Britain, with-
out lessening pauperism. It has simply increased rent.
And if the corrupt governments of our great American
cities were to be made models of purity and economy,
the effect would simply be to increase the value of land,
not to raise either wages or interest.
CHAPTER IV
EFFECT OF THE EXPECTATION BAISED BY MATERIAL
PROGRESS
We have now seen that while advancing population
tends to advance rent, so all the causes that in a pro-
gressive state of society operate to increase the produc-
tive power of labor tend, also, to advance rent, and not
to advance wages or interest. The increased produc-
tion of wealth goes ultimately to the owners of land in
increased rent; and, although, as improvement goes
on, advantages may accrue to individuals not land hold-
ers, which concentrate in their hands considerable por-
tions of the increased produce, yet there is in all this
improvement nothing which tends to increase the general
return either to labor or to capital.
But there is a cause, not yet adverted to, which must
be taken into consideration fully to explain the influence
of material progress upon the distribution of wealth.
That cause is the confident expectation of the future
enhancement of land values, which arises in all pro-
gressive countries from the steady increase of rent, and
which leads to speculation, or the holding of land for a
higher price than it would then otherwise bring.
We have hitherto assumed, as is generally assumed in
elucidations of the theory of rent, that the actual mar-
gin of cultivation always coincides with what may be
termed the necessary margin of cultivation — that is to
say, we have assumed that cultivation extends to less
productive points only as it becomes necessary from
255
256
EFFECTS OF MATERIAL PROGRESS
Book nr.
the fact that natural opportunities are at the more pro-
ductive points fully utilized.
This, probably, is the case in stationary or very slowly
progressing communities, but in rapidly progressing com-
munities, where the swift and steady increase of rent
gives confidence to calculations of further increase, it
is not the case. In such communities, the confident
expectation of increased prices produces, to a greater
or less extent, the effects of a combination among land
holders, and tends to the withholding of land from use,
in expectation of higher prices, thus forcing the margin
of cultivation farther than required by the necessities
of production.
This cause must operate to some extent in all pro-
gressive communities, though in such countries as Eng-
land, where the tenant system prevails in agriculture,
it may be shown more in the selling price of land than
in the agricultural margin of cultivation, or actual rent.
But in communities like the United States, where the
user of land generally prefers, if he can, to own it, and
where there is a great extent of land to overrun, it
operates with enormous power.
The immense area over which the population of the
United States is scattered shows this. The man who
sets out from the Eastern seaboard in search of the mar-
gin of cultivation, where he may obtain land without
paying rent, must, like the man who swam the river to
get a drink, pass for long distances through half-tilled
farms, and traverse vast areas of virgin soil, before he
reaches the point where land can be had free of rent —
i. e., by homestead entry or pre-emption. He (and, with
him, the margin of cultivation) is forced so much
farther than he otherwise need have gone, by the specu-
lation which is holding these unused lands in expectation
of increased value in the future. And when he settles
he will, in his turn, take up, if he can, more land than
Chap. tV.
EXPECTATION RAISED •
257
he can use, in the belief that it will soon become valu-
able; and so those who follow him are again forced
farther on than the necessities of production require,
carrying the margin of cultivation to still less produc-
tive, because still more remote points.
The same thing may be seen in every rapidly growing
city. If the land of superior quality as to location were
always fully used before land of inferior quality were
resorted to, no vacant lots would be. left as a city ex-
tended, nor would we find miserable shanties in the
midst of costly buildings. These lots, some of them
extremely valuable, are withheld from use, or from the
full use to which they might be put, because their
owners, not being able or not wishing to improve them,
prefer, in expectation of the advance of land values, to
hold them for a higher rate than could now be obtained
from those willing to improve them. And, in conse-
quence of this land being withheld from use, or from
the full use of which it is capable, the margin of the
city is pushed away so mtich farther from the center.
But when we reach the limits of the growing city —
the actual margin of building, which corresponds to the
margin of cultivation in agriculture — we shall not find
the land purchasable at its value for agricultural pur-
poses, as it would be were rent determined simply by
present requirements; but we shall find that for a long
distance beyond the city, land bears a speculative value,
based upon the belief that it will be required in the
future for urban purposes, and that to reach the point
at which land can be purchased at a price not based
upon urban rent, we must go very far beyond the actual
margin of urban use.
Or, to take another case of a different kind, inH tannpa
similar to which may doubtless be found in every local-
ity. There is in Marin County, within easy access of
San Francisco, a fine belt of redwood timber. Nat-
758
EF FECTS OF MATERIAL PROGRESS
Book IV.
urally, this would be first used, before resorting for the
supply of the San Francisco market to timber lands at
a much greater distance. But it yet remains uncut,
and lumber procured many miles beyond is daily hauled
past it on the railroad, because its owner prefers to
hold for the greater price it will bring in the future.
Thus, by the withholding from use of this body of tim-
ber, the margin of production of redwood is forced so
much farther up and down the Coast Range. That
mineral land, when reduced to private ownership, is
frequently withheld from use while poorer deposits are
worked, is well known, and in new States it is common
to find individuals who are called “land poor” — that is,
who remain poor, sometimes almost to deprivation, be-
cause they insist on holding land, which they themselves
cannot use, at prices at which no one else can profitably
use it.
To recur now to the illustration we made use of in the
preceding chapter: With the margin of cultivation
standing at 20, an increase in the power of production
takes place, which renders the same result obtainable
with one-tenth less labor. For reasons before stated,
the margin of production must now be forced down, and
if it rests at 18, the return to labor and capital will
be the same as before, when the margin stood at 20.
Whether it will be forced to 18 or be forced lower
depends upon what 1 have called the area of produc-
tiveness which intervenes between 20 and 18. But if the
confident expectation of a further increase of rents
leads the land owners to demand 3 rent for 20 land,
2 for 19, and 1 for 18 land, and to withhold their land
from use until these terms are complied with, the area
of productiveness may be so reduced that the margin
of cultivation must fall to 17 or even lower; and thus,
as the result of the increase in the efficiency of labor,
laborers would get less than before, while interest would
Chap. IV. EXPECTATION RAISED 259
be proportionately reduced, and rent would increase in
greater ratio than the increase in productive power.
Whether we formulate it as an extension of the margin
of production, or as a carrying of the rent line beyond
the margin of production, the influence of speculation
in land in increasing rent is a great fact which cannot
be ignored in any complete theory of the distribution of
wealth in progressive countries. It is the force, evolved
by material progress, which tends constantly to increase
rent in a greater ratio than progress increases produc-
tion, and thus constantly tends, as material progress
goes on and productive power increases, to reduce wages,
not merely relatively, but absolutely. It is this expan-
sive force which, operating with great power in new
countries, brings to them, seemingly long before their
time, the social diseases of older countries; produces
“tramps” on virgin acres, and breeds paupers on half-
tilled soil.
In short, the general and steady advance in land
values in a progressive community necessarily produces
that additional tendency to advance which is seen in
the case of commodities when any general and continu-
ous causQ operates to increase their price. As, during
the rapid depreciation of currency which marked the
latter days of the Southern Confederacy, the fact that
whatever was bought one day could be sold for a higher
price the next, operated to carry up the price of com-
modities even faster than the depreciation of the cur-
rency, so does the steady increase of land values, which
material progress produces, operate still further to
accelerate the increase. We see this secondary cause
operating in full force in those manias of land specula-
tion which mark the growth of new communities; but
though these are the abnormal and occasional mani-
festations, it is undeniable that the cause steadily oper-
260
EFFECTS OF MATERIAL PROGRESS
Boot/P
ates, with greater or less intensity, in all progressive
societies.
The cause which limits speculation in commodities,
the tendency of increasing price to draw forth additional
supplies, cannot limit the speculative advance in land
values, as land is a fixed quantity, which human agency
can neither increase nor diminish; but there is never-
theless a limit to the price of land, in the minimum
required by labor and capital as the condition of en-
gaging in production. If it were possible continuously
to reduce wages until zero were reached, it would be
possible continuously to increase rent until it swallowed
up the whole produce. But as wages cannot be per-
manently reduced below the point at which laborers
will consent to work and reproduce, nor interest below
the point at which capital will be devoted to production,
there is a limit which restrains the speculative advance
of rent. Hence speculation cannot have the same scope
to advance rent in countries where wages and interest
are already near the minimum, as in countries where
they are considerably above it. Yet that there is in all
progressive countries a constant tendency in the specu-
lative advance of rent to overpass the limit where pro-
duction would cease, is, I think, shown by recurring
seasons of industrial paralysis — a matter which will be
more fully examined in the next book.
BOOK V
THE PROBLEM SOLVED
CHAPTER L— THE PRIMARY CAUSE OF RECURRING PAROXYSMS
OF INDUSTRIAL DEPRESSION
CHAPTER IL— THE PERSISTENCE OF POVERTY AMID ADVANCING
WEALTH
To whomsoever the soil at any time belongs, to him belong
the fruits of it. White parasols, and elephants mad with pride
are the flowers of a grant of land. — Sir Wm. Jones * translation
of an Indian grant of land, found at Tanna.
The widow is gathering nettles for her children’s dinner; a
perfumed seigneur, delicately lounging m the CEil de Bceuf,
hath an alchemy whereby he will extract from her the third
nettle, and call it rent. — Carlyle.
CHAPTER I
THE PRIMARY CAUSE OF RECURRING PAROXYSMS OF
INDUSTRIAL DEPRESSION
*
Our long inquiry is ended. We may now marshal the
results.
To begin with the industrial depressions, to account
for which so many contradictory and self-contradictory
theories are broached.
A consideration of the manner in which the specula-
tive advance in land values cuts down the earnings of
labor and capital and checks production leads, I think,
irresistibly to the conclusion that this is the main cause
of those periodical industrial depressions to which every
civilized country, and all civilized countries together,
seem increasingly liable.
I do not mean to say that there are not other proxi-
mate causes. The growing complexity and interde-
pendence of the machinery of production, which makes
each shock or stoppage propagate itself through a widen-
ing circle; the essential defect of currencies which
contract when most needed, and the tremendous alterna-
tions in volume that occur in the simpler forms of com-
mercial credit, which, to a much greater extent than
currency in any form, constitute the medium or flux of
exchanges; the protective tariffs which present artificial
barriers to the interplay of productive forces, and other
similar causes, undoubtedly bear important part in pro-
ducing and continuing what are called hard times. But,
both from the consideration of principles and the obser-
263
264
THE PROBLEM SOLVED
Book V.
vation of phenomena, it is clear that the great initiatory
cause is to be looked for in the speculative advance of
land values.
In the preceding chapter I have shown that the specu-
lative advance in land values tends to press the margin
of cultivation, or production, beyond its normal limit,
thus compelling labor and capital to accept of a smaller
return, or (and this is the only way they can resist the
tendency) to cease production. Now, it is not only
natural that labor and capital should resist the crowding
down of wages and interest by the speculative advance
of rent, but they are driven to this in self-defense, inas-
much as there is a minimum of return below which
labor cannot exist nor capital be maintained. Hence,
from the fact of speculation in land, we may infer all
the phenomena which mark these recurring seasons of
industrial depression.
Given a progressive community, in which population
is increasing and one improvement succeeds another,
and land must constantly increase in value. This
steady increase naturally leads to speculation in which
future increase is anticipated, and land values are car-
ried beyond the point at which, under the existing con-
ditions of production, their accustomed returns would
be left to labor and capital. Production, therefore,
begins to stop. Not that there is necessarily, or even
probably, an absolute diminution in production; but
that there is what in a progressive community would be
equivalent to an absolute diminution of production in a
stationary community — a failure in production to
increase proportionately, owing to the failure of new
increments of labor and capital to find employment at
the accustomed rates.
This stoppage of production at some points must
necessarily show itself at other points of the industrial
network, in a cessation of demand, which would again
CZo} uJ.
CAUSE OF INDUSTRIAL DEPRESSION
265
check production there, and thus the paralysis would
co mmun icate itself through all the interlacings of indus-
try and commerce, producing everywhere a partial dis-
jointing of production and exchange, and resulting in
the phenomena that seem to show over-production or
over-consumption, according to the standpoint from
which they are viewed.
The period of depression thus ensuing would continue
until (1) the speculative advance in. rents had been
lost; or (2) the increase in the efficiency of labor, owing
to the growth of population and the progress of improve-
ment, had enabled the normal rent line to overtake the
speculative rent line; or (3) labor and capital had be-
come reconciled to engaging in production for smaller
returns. Or, most probably, all three of these causes
would co-operate to produce a new equilibrium, at which
all the forces of production would again engage, and a
season of activity ensue; whereupon rent would begin
to advance again, a speculative advance again take
place, production again be checked, and the same round
be gone over.
In the elaborate and complicated system of production
which is characteristic of modem civilization, where,
moreover, there is no such thing as a distinct and inde-
pendent industrial community, but geographically or
politically separated communities blend and interlace
their industrial organizations in- different modes and
varying measures, it is not to be expected that effect
should be seen to follow cause as clearly and definitely
as would be the case in a simpler development of indus-
try, and in a community forming a complete and dis-
tinct industrial whole; but, nevertheless, the phenomena
actually presented by these alternate seasons of activity
and depression clearly correspond with those we have
inferred from the speculative advance of rent.
Deduction thus shows the actual phenomena as result-
266
THE PROBLEM SOLVED
Book V.
mg from the principle. If we reverse the process, it is
as easy by induction to reach the principle by traciqg
up the phenomena.
These seasons of depression are always preceded by
seasons of activity and speculation, and on all hands
the connection between the two is admitted — the depres-
sion being looked upon as the reaction from the specu-
lation, as the headache of the morning is the reaction
from the debauch of the night. But as to the manner
in which the depression results from the speculation,
there are two classes or schools. of opinion, as the at*
tempts made on both sides of the Atlantic to account for
the present industrial depression will show.
One school says that the speculation produced the
depression by causing over-production, and point to the
warehouses filled with goods that cannot be sold at
remunerative prices, to mills closed or working on half
time, to mines shut down and steamers laid up, to
money lying idly in bank vaults, and workmen com-
pelled to idleness and privation. They point to these
facts as showing that the production has exceeded the
demand for consumption, and they point, moreover, to
the fact that when government during war enters the
field as an enormous consumer, Jbrisk times prevail, as
in the United States during the civil war and in Eng-
land during the Napoleonic struggle.
The other school says that the speculation has pro-
duced the depression by leading to over-consumption,
and point to full warehouses, rusting steamers, closed
mills, and idle workmen as evidences of a cessation of
effective demand, which, they say, evidently results
from the fact that people, made extravagant by a fic-
titious prosperity, have lived beyond their means, and
are now obliged to retrench — that is, to consume less
wealth. They point, moreover, to the enormous con-
sumption of wealth by wars, by the building of unre-
Chap. /.
. CAUSE OF INDUSTRIAL DEPRESSION
26 ?
munerative railroads, by loans to bankrupt govern-
ments, etc., as extravagances which, though not felt at
the time, just as the spendthrift does not at the molnent
feel the impairment of his fortune, must now be made
up by a season of reduced consumption.
Now, each of these theories evidently expresses one
side or phase of a general truth, but each of them evi-
dently fails to comprehend the full truth. As an ex-
planation of the phenomena, each is equally and utterly
preposterous.
For while the great masses of men want more wealth
than they can get, and while they are willing to give
for it that which is the basis and raw material of wealth
— then* labor — how can there be over-production? And
while the machinery of production wastes and producers
are condemned to unwilling idleness, how can there be
over-consumption?
When, with the desire to consume more, there co-
exist the ability and willingness to produce more, indus-
trial and commercial paralysis cannot be charged either
to over-production or to over-consumption. Manifestly,
the trouble is that production and consumption cannot
meet and satisfy each other.
How does this inability arise? It is evidently and
by common consent the result of speculation. But of
speculation in what?
Certainly not of speculation in things which are the
products of labor — in agricultural or mineral produc-
tions, or manufactured goods, for the effect of specula-
tion in such things, as is well shown in current treatises
that spare me the necessity of illustration, is simply to
equalize supply and demand, and to steady the inter-
play of production and consumption by an action anal-
ogous to that of a fly-wheel in a machine.
Therefore, if speculation be the cause of these indus-
trial depressions, it must be speculation in things not
268
THU FBOBLEM SOLVED
ft
Boot V,
the production of labor, but yet necessary to the exertion
of labor in the production of wealth— of things of fixed
quantity; that is to say, it must be speculation in land.
That land speculation is the true cause of industrial
depression is, in the United States, clearly evident. In
each period of industrial activity land values have
steadily risen, culminating in speculation which carried
them up in great jumps. This has been invariably fol-
lowed by a partial cessation of production, and its cor-
relative, a cessation of effective demand (dull trade),
generally accompanied by a commercial crash; and then
has succeeded a period of comparative stagnation, dur-
ing which the equilibrium has been again slowly estab-
lished, and the same round been run again. This
relation is observable throughout the civilized world.
Periods of industrial activity always culminate in a
speculative advance of land values, followed by symp-
toms of checked production, generally shown at first
by cessation of demand from the newer countries, where
the advance in land values has been greatest.
That this must be the main explanation of these
periods of depression, will be seen by an analysis of the
facts.
All trade, let it be remembered, is the exchange of
commodities for commodities, and hence the cessation
of demand for some commodities, which marks the de-
pression of trade, is really a cessation in the supply of
other commodities. That dealers find their sales de-
clining and manufacturers find orders falling off, while
the things which they have to sell, or stand ready to
make, are things for which there is yet a widespread
desire, simply shows that the supply of other things,
which in the course of trade would be given for them,
has declined. In common parlance we say that “buyers
have no money,” or that “money is becoming scarce,”
but in talking in this way we ignore the fact that money
Chap, /•
CAUSE OF INDUSTRIAL DEPRESSION
269
is but the medium of exchange. What the would-bc
buyers really lack is not money, but commodities which
they <;an turn into money — what is really becoming
scarcer is produce of some sort. The diminution of the
effective demand of consumers is therefore but a result
of the diminution of production.
This is seen very clearly by storekeepers in a manu-
facturing town when the mills are shut down and opera-
tives thrown out of work. It is the cessation ol
production which deprives the operatives of means to
make the purchases they desire, and thus leaves the
storekeeper with what, in view of the lessened demand, is
a superabundant stock, and forces him to discharge some
of his clerks and otherwise reduce his demands. And
the cessation of demand (I am speaking, of course, of
general cases and not of any alteration in relative de-
mand from such causes as change of fashion), which
has left the manufacturer with superabundant stock and
compelled him to discharge his hands, must arise in the
same way. Somewhere, it may be at the other end of
the world, a check in production has produced a check
in the demand for consumption. That demand is les-
sened without want being satisfied, shows that produc-
tion is somewhere checked.
People want the things the manufacturer makes as
much as ever, just as the operatives want the things the
storekeeper has to sell. But they do not have as much
to give for them. Production has somewhere been
checked, and this reduction in the supply of some things
has shown itself in cessation of demand for others, the
check propagating itself through the whole framework
of industry and exchange. Now, the industrial pyramid
manifestly rests on the land. The primary and funda-
mental occupations, which create a demand for all
others, are evidently those which extract wealth from
nature, and, hence, if we trace from one exchange point
270
THE PROBLEM SOLVED
Book V
to another, and from one occupation to another, this
check to production, which shows itself in decreased
purchasing power, we must ultimately find it in some
obstacle which checks labor in expending itself on land.
And that obstacle, it is clear, is the speculative advance
in rent, or the value of land, which produces the same
effects as (in fact, it is) a lock-out of labor and capital
by land owners. This check to production, beginning at
the basis of interlaced industry, propagates itself from
exchange point to exchange point, cessation of supply
becoming failure of demand, until, so to speak, the
whole machine is thrown out of gear, and the spectacle
is everywhere presented of labor going to waste while
laborers suffer from want.
This strange and unnatural spectacle of large num-
bers of willing men who cannot find employment is
enough to suggest the true cause to whomsoever can
think consecutively. For, though custom has dulled us
to it, it is a strange and unnatural thing that men who
wish to labor, in order to satisfy their wants, cannot
find the opportunity — as, since labor is that which pro-
duces wealth, the man who seeks to exchange labor for
food, clothing, or any other form of wealth, is like one
who proposes to give bullion for coin, or wheat for flour.
We talk about the supply of labor and the demand for
labor, but, evidently, these are only relative terms. The
supply of labor is everywhere the same — two hands al-
ways come into the world with one mouth, twenty-one
boys to every twenty girls; and the demand for labor
must always exist as long as men want things which
labor alone can procure. We talk about the “want of
work,” but, evidently, it is not work that is short while
want continues; evidently, the supply of labor cannot
be too great, nor the demand for labor too small, when
people suffer for the lack of things that labor produces.
The real trouble must be that supply is somehow pre-
Chap. 1.
CAUSE OF INDUSTRIAL DEPRESSION
271
vented from satisfying demand, that somewhere there
is an obstacle which prevents labor from producing the
things that laborers want.
Take the case of any one of these vast masses of un-
employed men, to whom, though he never heard of Mal-
thus, it to-day seems that there are too many people in
the world. In his own wants, in the needs of his anx-
ious wife, in the demands of his half-cared-for, perhaps
even hungry and shivering children, there is demand
enough for labor, Heaven knows! In his own willing
hands is the supply. Put him on a solitary island, and
though cut off from all the enormous advantages which
the co-operation, combination, and machinery of a civil-
ized community give to the productive powers of man,
yet his two hands can fill the mouths and keep warm
the backs that depend upon them. Yet where produc-
tive power is at its highest development they cannot.
Why? Is it not because in the one case he has access
to the material and forces of nature, and in the other
this access is denied?
Is it not the fact that labor is thus shut off from
nature which can alone explain the state of things that
compels men to stand idle who would willingly supply
their wants by their labor? The proximate cause of en-
forced idleness with one set of men may be the cessation
of demand on the part of other men for the particular
things they produce, but trace this cause from point to
point, from occupation to occupation, and you will find
that enforced idleness in one trade is caused by enforced
idleness in another, and that the paralysis which pro-
duces dullness in all trades cannot be said to spring
from too great a supply of labor or too small a demand
for labor, but must proceed from the fact that supply
cannot meet demand by producing the things which
satisfy want and are the object of labor.
Now, what is necessary to enable labor to produce
Th* . BOBLEM SOLVED
Book V
these things, is land. When we speak of labor creating
wealth, we speak metaphorically. Man creates nothing.
The whole human race, were they to labor forever, could
not create the tiniest mote that floats in a sunbeam —
could not make this rolling sphere one atom heavier or
erne atom lighter. In producing wealth, labor, with ths
aid of natural forces, but works up, into the forms de-
sired, pre-existing matter, and, to produce wealth, must,
therefore, have access to this matter and to these forces
— that is to say, to land. The land is the source of all
wealth. It is the mine from which must be drawn the
ore that labor fashions. It is the substance to which
labor gives the form. And, hence, wnen labor cannot
satisfy its wants, may we not with certainty infer that
it can be from no other cause than that labor is denied
access to land?
When in all trades there is what we call scarcity of
employment; when, everywhere, labor wastes, while de-
sire is unsatisfied, must not the obstacle which prevents
labor from producing the wealth it needs, lie at the
foundation of the industrial structure? That founda-
tion is land. Milliners, optical instrument makers,
gilders, and polishers, are not the pioneers of new settle-
ments. Miners did not go to California or Australia be-
cause shoemakers, tailors, machinists, and printers were
there. But those trades followed the miners, just as
they are now following the gold diggers into the Black
Hills and the diamond diggers into South Africa. It io
not the storekeeper who is the cause of the farmer, but
the farmer who brings the storekeeper. It is not the
growth of the city that develops the country, but the
development of the country that makes the city grow.
And, hence, when, through all trades, men willing to
work cannot find opportunity to do so, the difficulty
must arise in the employment that creates a demand
Oof- /. cause or industrial depression 273
for all other employments — it must be because labor is
shut out from land.
In Leeds or Lowell, in Philadelphia or Manchester, in
London or New York, it may require a grasp of first
principles to see this; but where industrial development
has not become so elaborate, nor the extreme links of
the chain so widely separated, one has. but to look at
obvious facts. Although not yet thirty years old, the
city of San Francisco, both in population and in com-
mercial importance, ranks among the great cities of the
world, and, next to New York, is the most metropolitan
of American cities. Though not yet thirty years old,
she has had for some years an increasing number of un-
employed men. Clearly, here, it is because men cannot
find employment in the country that there are so many
unemployed in the city ; for when the harvest opens they
go trooping out, and when it is over they come trooping
back to the city again. If these now unemployed men
were producing wealth from the land, they would not
only be employing themselves, but would be employing
all the mechanics of the city, giving custom to the store-
keepers, trade to the merchants, audiences to the the-
aters, and subscribers and advertisements to the
newspapers — creating effective demand that would be
felt in New England and Old England, and wherever
throughout the world come the articles that, when they
have the means to pay for them, such a population con-
sumes.
Now, why is it that this unemployed labor cannot
employ itself upon the land? Not that the land is all
in use. Though all the symptoms that in older coun-
tries are taken as showing a redundancy of population
are beginning to manifest themselves in San Francisco,
it is idle to talk of redundancy of population in a State
that with greater natural resources than France has not
yet a million of people. Within a few miles of San
274
THE PROBLEM SOLVED
BookV.
Francisco is unused land enough to give employment to
every man who wants it. I do not mean to say that
every unemployed man could turn farmer or build him-
self a house, if he had the land; but that enough could
and would do so to give employment to the rest. What
is it, then, that prevents labor from employing itself on
this land? Simply, that it has been monopolized and is
held at speculative prices, based not upon present value,
but upon the added value that will come with the future
growth of population.
What may thus be seen in San Francisco by whoever
is willing to see, may, I doubt not, be seen as clearly in
other places.
The present commercial and industrial depression,
which first clearly manifested itself in the United States
in 1872, and has spread with greater or less intensity
over the civilized world, is largely attributed to the un-
due extension of the railroad system, with which there
are many things that seem to show its relation. I am
fully conscious that the construction of railroads be-
fore they are actually needed may divert capital and
labor from more to less productive employments, and
make a community poorer instead of richer; and when
the railroad mania was at its highest, I pointed this out
in a political tract addressed to the people of Califor-
nia;* but to assign to this wasting of capital such a
widespread industrial dead-lock seems to me like at-
tributing an unusually low tide to the drawing of a few
extra bucketfuls of water. The waste of capital and la-
bor during the civil war was enormously greater than it
could possibly be by the construction of unnecessary
railroads, but without producing any such result. And,
certainly, there seems to be little sense in talking of the
waste of capital and labor in railroads as causing this
* — - —
* The Subsidy Question and the Democratic Party, 1871.
Chap, /.
CAUSE OF INDUSTRIAL DEPRESSION
279
depression, when the prominent feature of the depres-
sion has been the superabundance of capital and labor
seeking employment.
Yet, that there is a connection between the rapid con-
struction of railroads and industrial depression, any one
who understands what increased land values mean, and
who has noticed the effect which the construction of
railroads has upon land speculation, can easily see.
Wherever a railroad was built or projected, lands sprang
up in value under the influence of speculation, and thou-
sands of millions of dollars were added to the nominal
values which capital and labor were asked to pay out-
right, or to pay in installments, as the price of being
allowed to go to work and produce wealth. The inevi-
table result was to check production, and this check to
production propagated itself in a cessation of demand,
which checked production to the furthest verge of the
wide circle of exchanges, operating with accumulated
force in the centers of the great industrial common-
wealth into which commerce links the civilized world.
The primary operations of this cause can, perhaps, be
nowhere more clearly traced than in California, which,
from its comparative isolation, has constituted a pecu-
liarly well-defined community.
Until almost its close, the last decade was marked in
California by the same industrial activity which was
shown in the Northern States, and, in fact, throughout
the civilized world, when the interruption of exchanges
and the disarrangement of industry caused by the war
and the blockade of Southern ports is considered. This
activity could not be attributed to inflation of the cur-
rency or to lavish expenditures of the General Govern-
ment, to which in the Eastern States the comparative
activity of the same period has since been attributed;
for, in spite of legal tender laws, the Pacific Coast ad-
hered to a coin currency, and the taxation of ' the Federal
276
THE PROBLEM SOLVED
Boot V
Government took away very much more than was re-
turned in Federal expenditures. It was attributable
solely to normal causes, for, though placer mining was
declining, the Nevada silver mines were being opened,
wheat and wool were beginning to take the place of gold
in the table of exports, and an increasing population and
the improvement in the methods of production and ex-
change were steadily adding to the efficiency of labor.
With this material progress went on a steady en-
hancement in land values — its consequence. This steady
advance engendered a speculative advance, which, with
the railroad era, ran up land values in every direction.
If the population of California had steadily grown when
the long, costly, fever-haunted Isthmus route was the
principal mode of communication with the Atlantic
States, it must, it was thought, increase enormously with
the opening of a road which would bring New York
harbor and San Francisco Bay within seven days’ easy
travel, and when in the State itself the locomotive took
the place of stage coach and freight wagon. The ex-
pected increase of land values which would thus accrue
was discounted in advance. Lots on the outskirts of
San Francisco rose hundreds and thousands per cent.,
and fanning land was taken up and held for high prices,
in whichever direction an immigrant was likely to go.
But the anticipated rush of immigrants did not take
place. Labor and capital could not pay so much for
land and make fair returns. Production was checked,
if not absolutely, at least relatively. As the transcon-
tinental railroad approached completion, instead of in-
creased activity symptoms of depression began to
manifest themselves; and, when it was completed, to
the season of activity had succeeded a period of depres-
sion which has not since been fully recovered from, dur-
ing which wages and interest have steadily fallen. What
I have called the actual rent line, or margin of cultiva-
Chap. I. CAUSE OF INDUSTRIAL DEPRESSION 277
tion, is thus (as well as by the steady march of im-
provement and increase of population, which, though
slower than it otherwise would have been, still goes on)
approaching the speculative rent line, but the tenacity
with which a speculative advance in the price of land is
maintained in a developing community is well known.*
Now, what thus went on in California went on in
every progressive section of the Union. Everywhere
that a railroad was built or projected, land was mo-
nopolized in anticipation, and the benefit of the im-
provement was discounted in increased land values.
The speculative advance in rent thus outrunning the
normal advance, production was checked, demand was
decreased, and labor and capital were turned back from
occupations more directly concerned with land, to glut
those in which the value of land is a less perceptible
element. It is thus that the rapid extension of railroads
is related to the succeeding depression.
And what went on in the United States went on in a
greater or less obvious degree all over the progressive
world. Everywhere land values have been steadily in-
creasing with material progress, and everywhere this
increase begot a speculative advance. The impulse of
the primary cause not only radiated from the newer
sections of the Union to the older sections, and from the
United States to Europe, but everywhere the primary
cause was acting. And, hence, a world-wide depression
of industry and commerce, begotten of a world-wide
material progress.
* It is astonishing how in a new country of great expectations
speculative pnces of land will be kept up. It is common to
hear the expression, “There is nonmarket for real estate; you
cannot sell it at any price/’ and yet, at the same time, if you go
to buy it, unless you find somebody who is absolutely com-
pelled to sell, you must pay the prices that prevailed when
speculation ran high. For owners, believing that land values
must ultimately advance, hold on as long as they can.
278
THE PROBLEM SOLVED
Book V.
There is one thing which, it may seem, I have over-
looked, in attributing these industrial depressions to the
speculative advance of rent or land values as a main
and primary cause. The operation of such a cause,
though it may be rapid, must be progressive — resem-
bling a pressure, not a blow. But these industrial
depressions seem to come suddenly — they have, at their
beginning, the character of a paroxysm, followed by a
comparative lethargy, as if of exhaustion. Everything
seems to be going on as usual, commerce and industry
vigorous and expanding, when suddenly there comes a
shock, as of a thunderbolt out of a clear sky — a bank
breaks, a great manufacturer or merchant fails, and, as
if a blow had thrilled through the entire industrial or-
ganization, failure succeeds failure, and on every side
workmen are discharged from employment, and capital
shrinks into profitless security.
Let me explain what I think to be the reason of this:
To do so, we must take into account the manner in
which exchanges are made, for it is by exchanges that
all the varied forms of industry are linked together into
one mutually related and interdependent organization.
To enable exchanges to be made between producers far
removed by space and time, large stocks must be kept
in store and in transit, and this, as I have already ex-
plained, I take to be the great function of capital, in
addition to that of supplying tools and seed. These ex-
changes are, perhaps necessarily, largely made upon
credit — that is to say, the advance upon one side is
made before the return is received on the other.
Now, without stopping to inquire as to the causes, it
is manifest that these advances are, as a rule, from
the more highly organized and later developed indus-
tries to the more fundamental. The West Coast Afri-
can, for instance, who exchanges palm oil and cocoanuts
ior gaudy calico and Birmingham idols, gets his return
Chap. 1.
CAUSE OF INDUSTRIAL DEPRESSION
m
immediately; the English merchant, on the contrary,
has to lay out of his goods a long while before he gets
his returns. The farmer can sell his crop as soon as it is
harvested, and for cash; the great manufacturer must
keep a large stock, send his goods long distances to
agents, and, generally, sell on time. Thus, as advances
and credits are generally from what we may call the
secondary, to what we may call the primary industries,
it follows that any check to production which proceeds
from the latter will not immediately manifest itself in
the former. The system of advances and credits con-
stitutes, as it were, an elastic connection, which will give
considerably before breaking, but which, when it breaks,
will break with a snap.
Or, to illustrate in another way what I mean: The
great pyramid of Gizeh is composed of layers of
masonry, the bottom layer, of course, supporting all the
rest. Could we by some means gradually contract this
bottom layer, the upper part of the pyramid would for
some time retain its form, and then, when gravitation
at length overcame the adhesiveness of the material,
would not diminish gradually and regularly, but would
break off suddenly, in large pieces. Now, the industrial
organization may be likened to such a pyramid. What
is the proportion which in a given stage of social de-
velopment the various industries bear to each other, it
is difficult, and perhaps impossible, to say; but it is ob-
vious that there is such a proportion, just as in a print-
er’s font of type there is a certain proportion between
the various letters. Each form of industry, as it is de-
veloped by division of labor, springs from and rises out
of the others, and all rest ultimately upon land; for,
without land, labor is as impotent as would be a man
in void space. To make the illustration closer to the
condition of a progressive country, imagine a pyramid
composed of superimposed layers — the whole constantly
280
THE PROBLEM SOLVED
Book V.
growing and expanding. Imagine the growth of the
layer nearest the ground to be checked. The others will
for a time keep on expanding — in fact, for the moment,
the tendency will be to quicker expansion, for the vital
force which is refused scope on the ground layer will
strive to find vent in those above — until, at length, there
is a decided overbalance and a sudden crumbling along
all the faces of the pyramid.
That the main cause and general course of the recur-
ring paroxysms of industrial depression, which are be-
coming so marked a feature of modern social life, are
thus explained, is, I think, clear. And let the reader
remember that it is only the main causes and general
courses of such phenomena that we are seeking to trace
or that, in fact, it is possible to trace with any exact-
ness. Political economy can deal, and has need to deal,
only with general tendencies. The derivative forces are
so multiform, the actions and reactions are so various,
that the exact character of the phenomena cannot be
predicted. We know that if a tree is cut through it
will fall, but precisely in what direction will be deter-
mined by the inclination of the trunk, the spread of the
branches, the impact of the blows, the quarter and force
of the wind; and even a bird lighting on a twig, or a
frightened squirrel leaping from bough to bough, will
not be without its influence. We know that an insult
will arouse a feeling of resentment in the human breast,
but to say how far and in what way it will manifest it-
self, would require a synthesis which would build up the
entire man and all his surroundings, past and present.
The manner in which the sufficient cause to which I
have traced them explains the main features of these
industrial depressions is in striking • contrast with the
contradictory and self-contradictory attempts which
have been made to explain them on the current theories
of the distribution of wealth. That a speculative ad-
Chop. /.
CAUSE OF INDUSTRIAL DEPRESSION
281
vance in rent or land values invariably precedes each
of these seasons of industrial depression is everywhere
clear. That they bear to each other the relations of
cause and effect, is obvious to whomsoever considers
the necessary relations between land and labor.
And that the present depression is running its course,
and that, in the manner previously indicated, a new
equilibrium is being established, which will result in an-
other season of comparative activity, may already be
seen in the United States.
