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PEOGRESS AND POVERTY
Make for thjrself 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 sub- stance, 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 pro- ductive of elevation of mind as to be able to ex- amine methodically and truly every object which is presented to thee in 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 refer- ence 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 thing to endure. —Marcus Aurelius Antoninus.
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THE COMPLEX OF "tNRY
PROGRES POVERTY
AN INQUIRY INTO THE CAUSE OF INDUSTRIAL DEPRESSIONS AND OF INCREASE OF WANT WITH IN- CREASE OF WEALTH
THE REMEDY
♦
MlW YORK: D PAGE & COMPAi%
P rj^A
THE COMPLETE WORKS OF HENRY GEORGE
PROGRESS AND POVERTY
AN INQUIRY INTO THE CAUSE OF INDUSTRIAL DEPRESSIONS AND OF INCREASE OF WANT WITH IN- CREASE OF WEALTH
THE REMEDY
NEW YORK: DOUBLEDAY PAGE & COMPANY 5 1904
Copyright, 1891, by Henbt George
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TO THOSE WHO,
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OP WEALTH AND PRIVILEGE, to FEEL THE POSSIBILITY^oFa HIGHER SOCIAL STATE ^ AND WOULD STRIVE FOR ITS ATTAINILENT
San Fbancisco, March, 1878.
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There must be refuge ! 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 Prom search and strife and loving sacrifice f
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, Beap the harvests yellow.
WhitUer.
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 fxilly, but the opportunity did not for a long time occur. In the meanwhUe I became even more firmly convinced of their truth, and saw more completely and clearly their relations; and I also saw how many false ideas and erroneous habits of thought stood in the way of their recognition, and how necessary it was to go over the whole ground.
This I have here tried to do, as thoroughly as space would permit. 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 reason- ings; and, so great is the scope of the argument that it has been impossible to treat with the fullness they deserve many of the ques- tions raised. What I have most endeavored 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 previous read- ing 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 observation 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
Ylll PBEFACE.
doctrine which is the foundation and center of most important economic theories, and which has powerfully influenced thought in all directions — the Malthusian doctrine, that population tends to increase faster than subsistence. Examination, however, shows that this doctrine has no real support either in fact or in analogy, and that when brought to a decisive test it is utterly disproved.
Thus far the results of the inquiry, though extremely important, are mainly negative. They show that current theories do not satis- factorily 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 dis- tribution must necessarily correlate with each other, which as laid down by the current political economy they fail to do, and an ex- amination 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 of 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 produce shall go to the land owner necessarily determining what part shall be left for labor and capital. Without resting here, I pro- ceed to an independent deduction of the laws of interest and wages. I have stopped to determine the real cause and justification of in- terest, and to point out a source of much misconception — the con- founding of what are really the profits of monopoly with the legiti- mate 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 har- monious 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 improvements in the arts, it is first seen that increase in population tends constantly, not merely
FBEFACE. iX
by reducing the margin of cultivation, but by localizing the econ- omies and powers which come with increased 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 production 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 private 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 depressions, and induction proves the conclusion; while from the analysis which has thus been made it is seen that the necessary result of material progress, land being private property, is, no matter what the in- crease in population, to force laborers to wages which give but a bare living.
This identification of the cause that associates poverty with prog- ress 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 in examination the measures and tendencies currently advocated or trusted in for the improvement of the condi- tion 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 starvation 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 irreconcil- able difference between property in things which are the product of labor and property in land; that the one has a natural basis and sanction while the other has none, and that the recognition of ex- clusive property in land is necessarily a denial of the right of prop- erty in the products of labor. Further investigation shows that private property in land always has, and always must, as develop- ment 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
,-Z PREFACE.
!s true, and that in the United States we are already beginning to feel the effects of having admitted this erroneous and destructive principle.
The inquiry then passes to the field of practical statesmanship. It is seen that private property in land, instead of being necessary to its improvement and use, stands in the way of improvement and use, and entails an enormous waste of productive forces; that the recog- nition of the common right to land involves no shock or dispossession, but is to be reached by the simple and easy method of abolishing uU taxation save that upon 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 secure 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 into collision with the widespread idea that social prog- ress is possible only by slow race improvement, but the conclusions we have arrived at assert certain laws which, if they are really nat- ural laws, must be manifest in universal history. 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 subject, seem utterly inconsistent with what is now the current theory. This inquiry shows that dif- ferences in 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 destroyed all previous civilizations are beginning to manifest themselves, 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 previous 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 completely change the character of political economy, give it the coherence and certitude of a true science, and bring it into full sympathy with the aspirations of the masses of men, from which it has long been &h
PBEFACE. 3d
tranged. What I have done in this book, if I have correctly solved the great problem I have sought to investigate, 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 laiasez faira (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 elevat- ing perceptions.
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 agita- tion— 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 except that some verbal errors have been corrected and a preface added, this edition is the same as previous ones.
Hbnbt Gbobok.
New York, November, 1880.
CONTENTS.
iNTBODUOTOaT.
PAGE
The Problem 3
Book I.— Waoes akd Capital.
Chapter I. —The current doctrine of wages— Its insufficiency 17
IL— The meaning of the terms 80
IIL— Wages not drawn from capital, but produced by the labor 49
IV.— The maintenance of laborers not drawn from capital 70
v.— The real functions of capital 79
Book II.— Population and Subsistence.
Chapter I.— The Malthusian theory, its genesis and support 91
II.— Inferences from facts 103
IIL— Inferences from analogy 129
IV.— Disproof of the Malthusian theory 140
Book in.— The Laws of Distribution. Chapter I.— The inquiry narrowed to the laws of distribution- necessary
relation of these laws 153
n.— Rent and the law of rent 165
III.— Interest and the cause of Interest 173
rv.— Of spurious capital and of profits often mistaken for interest. . 189
v.— The law of interest 195
VI.— Wages and the law of wages 304
Vn.— Correlation and co-ordination of these laws 217
Vni.— The statics of the problem thus explained 219
Book IV.— Ebtect of Material Progress upon the DiSTBiairrioN of Wealth.
Chapter I.— The dynamics of the problem yet to seek 225
n.— Effect of increase of population upon the distribution of wealth 228 IIL— Elffect of improvements in the arts upon the distribution of
wealth 242
IV.— Effect of the expectation raised by material progress 253
Book V.— The Probleh Solved. Chapter I.— The primary cause of recurring paroxysms of industrial
depression 861
n.— The persistence of poverty amid advancing wealth. 280
xiT CONTENTS.
Book VI.— Ths Boudt.
CSttpter I.— iDniffldency of remedies currently advooated 907
II.— Ilie true remedy. , 896
Book VII.— Justick or trx Bkmbdt.
Chapter L—Injostlce of private property In land 881
n.— Enslavement of laborers the ultimate result of private property
inland 845
m.— Claim of land owners to compensation 356
IV.— Property in land historically considered 8fl6
▼.—Property in land in the United States 88S
Book vni.— Application or tbb Rbiocdt. Chaptw L— Private property in land inconsistent with the best use of land. 89S
n.— How equal rights to the land may be asserted and secured 401
m.— The proposition tried by the canons of taxation 406
IV.— Indorsements and objections 490
Book IX.— Effects of trx Rkmxdt.
Ch^>ter L— Of the effect upon the production of wealth 431
U.— Of the ^ect upon distribution and thence upon production. ... 438
in.— Of the effect upon individuals and classes 445
IV.— Of the changes that would be wrought in social organization
and sodal life 462
Book X.— Thb Law of HtiKAM Proorkss.
Chapter I.— The current theory of human progress— Its InRufllciency 473
n.— Differences in civilization— to what due 487
m.— The law of human progress 608
IV.— How modem civilization may decline 584
v.— The central truth 541
OOMCLUSIOH.
IheproUanoCfaidiyldttalllfe BE8
INTRODUCTORY.
THE PBOBLEH.
Ye bufldi ye build! but ye enter not In,
Like the tribes whom the desert devoured In their sin;
Prom the land of promise ye fade and die,
Ere its verdure gleams forth on your wearied eye.
— Mr». 8igoumey.
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 subdivision and grander scale of production, the wonderful facilita- tion of exchanges, have multiplied enormously the effect- iveness 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 lumber — into doors, sashes, blinds, boxes or barrels, with hardly the touch of a human hand; the great work- shops where boots and shoes are turned out by the case with less labor than the old-fashioned cobbler could have
4 INTRODUCTORY.
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- looms; could he have seen steam hammers shaping mam- moth shafts and mighty anchors, and delicate machinery 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 com- munication— 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 hundred thousand improvements which these only suggest, what would he have inferred as to the social condition of man- kind?
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 tradi- tional 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
THE PBOBLEM. 5
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 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 pov- erty 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 displace 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 ia true that disappointment has followed disappoint- ment, and that discovery upon discovery, and invention 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 conld be laid, that up to our time the new faith has hardly weakened. We have better appreciated 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 depression; of labor condemned to involuntary idleness; of capital massed and wasting; of pecuniary distress among busi- ness 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
• IHTBODrCTOBT.
are inTolred in the vordB *1iard times," afflict the world to-daj. This state of things, common to commnnities differing bo widely in situation, in political institntions, in fiscal and financial systems, in density of population and in soci^ organization, can hardly be accounted for hj loeal caoses. There is distress where large standing armies are maintuned, bnt there is also distress where tiie standing annies are nominal; there is distress where pnitectiTe tariffis stupidly and wastefnlly hamper trade, bot there is also distress where trade is nearly free; there is distzesB where autocratic government yet prevails, bnt iiiev» is also distress where political power is wholly in tibe hands of the people; in countries where paper is money, and in countries where gold and silver are the only currency. Evidently, beneath all such things as ibeee, we must infer a common cause.
That there is a common cause, and that it is either what we call material progress or something closely con- nected 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 bnt 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 everywhere tends are most fuDy realized — ^that is to say, where popu- lation 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 idleness.
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 ia in the older counfoies — that is to say, the countries where material ffogreas has reached later stages — ^that widespread desti-
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8 IHTEODUCTORT.
ress tends — proves that the social diflficulties 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 existence more intense. The march of invention has clothed mankind with powers of which a century ago the boldest imagination could not have dreamed. But in factories where labor-saving machinery has reached its most won- derful 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 the 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 de- barred, but that does not prove the condition of the city beggar better than that of the independent farmer.
THE PROBLEM. 0
condition of the lowest class has nowhere nor in anything been improved ; but that there is nowhere any improve- ment which can be credited to increased productive power. I mean that the tendency of what we call material prog- ress 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 depress 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 be- lieved, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through soci- ety. 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, every- where increase as the village grows to the city, and the march of development brings the advantages of the im- proved 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 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
10 IHTBODrCTOBY.
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 diflficulties 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 modem 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 re- ceived 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 be- tween those who avow the same general theories 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-consumption; upon equally high authority, that it is due to over-pro- duction; while the wastes of war, the extension of rail-
THE PROBLEM. 11
roads, 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 separately 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 gov- ernment to furnish capital or to furnish work, are rapidly making way among the great body of the people, 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 certain phenomena, seeks to trace mutual relations and to iden- tify 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 sanc- tion; axioms which we all recognize; upon which we safely base the reasoning and actions of every-day life, and which may be reduced to the metaphysical expres- sion of the physical law that motion seeks the line of least resistance — viz., that men seek to gratify their de- sires with the least exertion. Proceeding from a basis
12 INTRODUCTORY.
thus assnred, 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 conclu- sions by similar means, and its conclusions when valid should be as self-apparent. And although in the domain of political economy we cannot test our theories by arti- ficially 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, separat- ing, 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 percep- tions 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 con- trary, after a century of cultivation, during which it has
THB PBOBLEX. 13
engrossed the attention of some of the most subtle and powerful intellects, it should be spurned by the statsman, 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 is fixed or can be fixed — must, it seems to me, be due not to any inability 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 concealed by the re- spect 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 chal- lenge 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 INSHT-
FICIENCT. CHAPTER II. — THE MEANING OP THE TERMS. CHAPTER III. — WAGES NOT DRAWN FROM CAPITAL, B«T
PRODUCED BY THE LABOR. CHAPTER IT. — ^THB MAINTENANCE OF LABORERS NOT
DRAWN FROM CAPITAL. CHAPTER V. — ^THB REAL FUNCTIONS OF CAPITAL.
He that Is to follow philosophj must be a freeman in mind.
—PtaUmf.
CHAPTER I.
THE CUBRBNT 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 ad- vancing wealth is evidently the cause which exhibits it- self 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 hare living f
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 aro
18 WAGES AND CAPITAIm Book L
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 text- books which aim at leading the masses to reason correctly 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 permeating 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 decrease 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. L THE CURRENT DOCTRIIO;. 19
And yet, widely accepted and deeply rooted as it is, it seems to me that this theory does not tally with obvious facts. For, if wages depend upon the ratio between the amount of labor seeking employment and the amount of capital devoted to its employment, the relative 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 rela- tively scarce where wages are low. Now, as the capital used in paying wages must largely consist of the capital constantly seeking investment, the current rate of inter- est must be the measure of its relative abundance or scar- city. So, if it be true that wages depend upon the ratio between the amount of labor seeking employment and the capital devoted to its employment, then high wages, the mark of the relative scarcity of labor, must \ie ac- companied by low interest, the mark of the relative abundance of capital, and reversely, low 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 inter- est have in California gone down together. When com- mon wages were $5 a day, the ordinary bank rate of in- terest was twenty-four per cent, per annum. Now that
30 WAGES AND CAPITAL. Booh L
common wages are $2 or 12.50 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 abundant, is too glaring to be ignored. And although very lightly touched upon, it is noticed by the expounders of the cur- rent political economy. The manner in which it is noticed proves what I say, that it is utterly inconsistent with the accepted theory of wages. For in explaining it such 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 tb^ 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 propor- tionate production, is clearly to make the ratio with pro- duction, 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 expounders of the current political economy. Professor Cairnes* endeavors in a very ingenious way to reconcile the fact with the theory, by assuming that in new countries, where industry is generally directed to the production of food and what in manufactures is called raw material, a
* Some Leading Principles of Political Economy Newly Ex- pounded, Chapter 1, Part 3.
Chnp. I. THE CUREENT DOCTRINE. 21
much larger proportion of the capital used in production is devoted to the payment of wages than in older coun- tries where a greater part must be expended in machinery and material, and thus, in the new country, though cap- ital is scarcer, and interest is higher, the amount deter- mined 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 prob- ably be expended for buildings, machinery and the pur- chase 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., leaving $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 stifE 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 marked by want of employment and distress among the working classes than by the accumulation of unemployed capital in all the great centers, and by nominal rates of interest
* 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 L
on undoubted security. Thus, under conditions which admit of no explanation consistent 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 de- duction from a previously assumed theory — viz., that wages are drawn from capital. It being assumed that capital is the source of wages, it necessarily follows that the gross amount of wages must be limited by the amount of capital devoted to the employment of labor, and hence that the amount individual laborers can re- ceive must be determined by the ratio between their number and the amount of capital existing for their rec- ompense.* This reasoning is valid, but the conclusion,
• For instance McCuUoch (Note VI to Wealth of Nations) says: " That portion of the capital or wealth of a country which the em ployers 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 what- ever may be its absolute magnitude, it obviously forms the only source from which any portion of the wages of labor can be derived. No other fund is in existence from which the laborer, as such, can draw a single shilling. And hence it follows that the average rate
Chap. I. THE CURRENT DOCTRINE. 23
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 prac- tical conclusions. This demonstration I am about to attempt. It is necessary that it should be clear and con- clusive, 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 lia- ble 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 draiun from capital, are in reality drawn from the product of the labor for which they are paid.*
Now, inasmuch as the current theory that wages are 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,
of wages, or the share of the national capital appropriated to the employment of labor falling, at an average, 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 standard 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.
24 WAGES AND CAPITAL. Book I.
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 axiomatic, 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 accu- mulated; the doctrine that every increase of capital gives or is capable of giving additional employment to indus-. try; the doctrine that the conversion of circulating car ital into fixed capital lessens the fund applicable to th. • 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 maybe increased in cost by a reduction 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-
Chap. I. THE CURRENT DOCTRINE. 25
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 dis- tributed 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 mercan- tile 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 commod- ities for commodities, there may seem no real difference when it is remembered that the adherents of the mercan- tile theory did not assume that money had any other use than as it could be exchanged for commodities. Yet, in the practical application of these two theories, there arises all the difference between rigid governmental pro- tection 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 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
^6 WAGES AND CAPITAL. Book L
in truth based upon a foundation which has been merely taken for granted, without the slightest attempt to dis- tinguish the apparent from the real. Because wages are generally paid in money, and in many of the operations of production are paid before the product is fully com- pleted, or can be utilized, it is inferred that wages are drawn from pre-existing capital, and, therefore, that in- dustry is limited by capital — that is to say that labor can- not 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 propo- sition 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 com- plex operation.
But the fundamental truth, that in all economic rea- soning must be firmly grasped, and never let go, is that society in its most highly developed form is but an elab- oration of society in its rudest beginnings, and that prin- ciples 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
Chap. I. THE CURRENT DOCTRINE. 27
grist mill, with its complicated machinery exhibiting 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 pre-historic 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 com- plex operations of modern production, we see that each individual who takes part in this infinitely subdivided and intricate network of production and exchange 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 various 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 be- come apparent, and one digs bait while the others fish. Yet evidently the one who digs bait is in reality doing as much toward the catching of fish as any of those who actually take the fish. So when the advantages 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
28 WAGES AND CAPITAL. Book I.
when the division of labor is fairly inaugurated, and in- stead 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 powers; 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 which labor is exchanged for commodities, 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, 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 uses 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.
Chap. 1. THE CUREENT DOCTRINE. ' 29
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 pro- duction 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 effectually pro- ducing 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 exchanges, harvesting crops in valleys five thousand feet nearer the earth's center; chas- ing 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 he has done these things — the primary ex- change 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.
CHAPTEK II.
THE MEANING OP 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 ambigui^^^y and inde- terminateness 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 definitions, 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 lan- guage 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 otherwise I cannot hope to make myself properly understood. I shall not attempt to attach arbitrary meanings to words, or to coin terms, even when
Chap,n. THE MEANING OF THE TEEMS. 31
it would be convenient 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 pre- liminary, let us settle what we mean by wages and what we mean by capital. To the former word a suflBciently 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 exami- nation.
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 contradistinc- tion to another who is "working for himself." The use of the term is still further narrowed by the habit of ap- plying it solely to compensation paid for manual labor. We do not speak of the wages of professional men, man- agers or clerks, but of their fees, commissions, or sala- ries. 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 exer- tion. For, as political economists explain, the three agents or factors in production are land, labor, and capi- tal, and that part of the produce which goes to the sec- ond 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-eco- nomic sense of the term wages no distinction as to the kind of labor, or as to whether its reward is received through an employer or not, but wages means the return received for the exertion of labor, as distinguished from
32 WAGES AND CAPITAL. Booh I.
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 ex- ertion 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 sub- sequently ignored.
But it is more diflScult 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 defini- tions 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 abridge labor;
* This was recognized 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.
Chap.n. THE MEANING OF THE TERMS. 33
(2) buildings, not mere dwellings, but which may be con- sidered instruments of trade — such as shops, farmhouses, etc.; (3) improvements of land which better fit it for tillage or culture; (4) the acquired 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 circulat- ing capital, a distinction of which it is not necessary to our purpose to take any note. Kicardo'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 dealers; and includes some things he excludes — such as food, clothing, etc., in the possession of the consumer.
McCuUoch'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 employed either to support human existence or to facilitate production." — Ifotea on Wealth of Nations, Book II, Chap. I.
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, accord- ing to McCulloch's view, as he expressly states, as much
d4 WAGES AND CAPITAL. Book L
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 Eicardo 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 requires, and to feed and otherwise maintain the laborer during the process, are capital." — Principles of Political JSconomy, Book I, Chap. IV.
These quotations sufiSciently illustrate the divergence of the masters. Among minor authors the variance is still greater, as a few examples will suflBce 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 re- lation to industry, the material on which industry is about to confer value, that on which it has conferred value; the instruments which are used for the conferring of value, as well as the means of suste- nance by which the being is supported while he is engaged in per- forming 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 capi- tal and labor, and then himself hopelessly confuses the boundaries between capital and land by defining capital as "any valuable thing outside of man himself from whose use springs a pecuniary increase or profit." An
Chap.n THE MEANING OF THE TERMS. 35
English economic writer of high standing, Mr. Wm. Thornton, begins an elaborate examination of the rela- tions 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 consider the signs plus and minus as meaning the same thing and having the same value. An American writer, also of high standing. Pro- fessor Francis A. Walker, makes the same declaration in his elaborate book on "The Wages Question." Another English writer, N. A. Nicholson ("The Science of Ex- changes," London, 1873), seems to cap the climax of absurdity by declaring 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 accu- mulated 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 subject among the professors of political economy may find it in any library where the works of these professors are ranged side by side.
Now, it makes little difference what name we give to
36 WAGES AND CAPITAL. Book L
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 peculiar sense as- signed 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 com- monly understood and definite 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 understood 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 part 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 the number of head he could keep for their increase.
The difficulties which beset the use of the word capi- tal, as an exact term, and which are even more strikingly exemplified in current political and social discussions
Chap. II. THE MEANING OF THE TERMS. 37
than in the definitions of economic writers, arise from two facts — first, that certain classes of things, the pos- session of which to the individual is precisely equivalent 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 pur- pose 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 fall- ing 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, 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,
X > r:- r^.*->r'/Tk
38 WAGES AND CAPITAL. Book I.
skill, or industry as constituting his capital; but this is evidently a metaphorical use of language that must be eschewed in reasoning that aims at exactness. Superi- ority 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 eftect 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 be- tween individuals, or between sets of individuals, the power of obtaining wealth; but they are not truly wealth, inasmuch as their increase or decrease 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
Chap.lL THE MEANING OF THE TERMS. 39
the power of one class to appropriate the earnings of another class. Such are lands, or other natural oppor- tunities, the value of which is but the result of the ac- knowledgment 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 in- cludes 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. In- crease 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 com- mon thought and speech, in legislation and law, is un- distinguished 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 property 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 creation of wealth when Elizabeth Tudor enriched her favorite courtiers by the grant of mo- nopolies, or when Boris Godoonof made Bussian peasants merchantable property. -
All things which have an exchange value are, therefore, 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 destruc- tion of which decreases the aggregate of wealth. If we
40 WAGES AND CAPITAL. Book I
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 territory — 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 ^ish 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 in- crease of certain tangible things, having an actual and not merely a relative value — such as buildings, cattle, tools, machinery, agricultural and mineral products, 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 community. 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 aver- age would be required to produce things of like kind.
Thus wealth, as alone the term can be used in political economy, consists of natural products that have been se- cured, 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
Chap. II. THE MEANING OF THE TERMS. 41
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 purpose, 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 pop- ular thought, and have led into mazes of contradiction even acute thinkers.
But though all capital is wealth, all wealth is not capi- tal. Capital is only a part of wealth — that part, namely, which is devoted to the aid of production. It is in draw- ing 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 countries as England and the United States mold and guide public opinion, make the laws in Parliaments, Congresses 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 dark- ened 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. Neverthless, they are only vulgar errors, inasmuch as they receive no countenance from the best writers on political economy. By one of those lapses
42 WAGES AND CAPITAL. Book L
which flaw his great work and strikingly evince the im- perfections 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 involved. Neither in their defini- tions nor in that of Smith is involved the vulgar error which confounds as real capital things which are only rela- tively 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 tlie 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, 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 facil- itate production,'* there are obvious objections. One may pass along any principal street in a thriving town
Chap.n. THE MEANING OF THE TERMS. 43
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 tlie capital of the store- keepers and part of the capital of the community. And he can also see products of industry capable of support- ing human existence or facilitating production being consumed in ostentation or useless luxury. Surely these, though they might, do not constitute part of capital.
Eicardo'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 McOulloch's. If only wealth that may be, or that is, or that is destined to be, used in supporting producers, or assisting production, is capital, then the stocks of jewelers, toy dealers, tobacconists, 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 omnisicence 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 common is that they include what clearly cannot be ac- counted capital, if any distinction is to be made between laborer and capitalist. For they bring into the category of capital the food, clothing, etc., in the possession 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
44 WAGES AND CAPITAL. Boole I.
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 capi- tal, or as depending upon the ratio between labor and capital, or in any of the ways in which the term is gen- erally 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 propose to use directly for their own gratification, but for the purpose of obtain- ing more wealth. In short, by political economists, in everything except their definitions 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 ex- pects 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 situation in which, save as the result of exceptional circumstances, human beings have never yet been found. It seems to me that the variance and inexactitude in these definitions arise from the fact that the idea of what capital is has been deduced from a preconceived idea of how capital assists production. Instead of determining 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 includes all things which do or may perform those functions. 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 necessary to do, is to fix, as it were, the metes and bounds of a term that in
Chap.n. THE MEANING OF THE TERMS. 46
the main is well apprehended — to make definite, that is, sharp and clear on its verges, a common 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 accounted capi- tal or not. Money which its owner holds for use in his business or in speculation would be accounted capital; money set aside for household or personal 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 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 work- man. 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."
46 WAGES AND CAPITAL. Book I.
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 condensed.
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 destina- tion of the things themselves, as has been vainly at- tempted to draw it; bi^t it seems to me that we shall find it to be as to whether they are or are not in the posses- sion of the consumer.* Such articles of wealth as in themselves, in their uses, or in their products, are 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 exchange, understand- ing exchange to include not merely the passing from hand to hand, but also such transmutations 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 defini- tion, 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 capital or merely an article of wealth.
* 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 classifi- cation would be covered by this distinction, and would be substan- tially 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.
Chap.U. THE MEAITINQ OF THE TERMS. 47
Thus, the lathe of a manufacturer used in making things which are to be exchanged is capital, while the lathe kept by a gentleman for his own 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 ex- change is not effected all at once, but little by little, with an indefinite number of people. Yet there is an ex- change, and the "consumers" of the railroad, the tele- graph 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 con- fines it merely to the making of things. Production in- cludes not merely the making of things, but the bringing of them to the consumer. The merchant or storekeeper is thus as truly a producer as is the manufacturer, 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 the definition of capital I have suggested of any importance. I am not writing a text-book, but only attempting 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
48 WAGES AND CAPITAL. Booh L
being an abstract term, the idea of wealth, it must be remembered, involves the idea of exchange ability. 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 DBAWN 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 in- quiry, 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 meaning of the term wages is lost sight of, and attention is con- centrated 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 gather- ing 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 sho^s 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 become the wages; and in obtaining this pair of shoes as the wages of my labor, capital is not even momentarily less-
60 WAGES AND CAPITAL. BooTcI.
ened 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 aijd the shoes. In obtaining 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 theories of the relation between wages and capital, recognized 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 of labor constitutes tTie 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 obvious in the simple modes of production as a clew through the perplexities of the more complicated forms, he momentarily 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 independent," he recommences the inquiry from a point of view in which the master is con- sidered as providing from his capital the wages of his workmen.
It is evident that in thus placing the proportion of
Chap. in. WAGES NOT DRAWS' FKOM CAPITAL. 51
self-employing workmen as but one in twenty, Adam Smith had in mind but the mechanic arts, and that, in- cluding all laborers, the proportion who take their earn- ings directly, without the intervention of an employer, must, even in Europe a hundred years ago, have been much greater than this. For, besides the independent laborers who in every community exist in considerable 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 re- ceives 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 manufac- tures a very large part of the people are yet self-employ- ing farmers, the proportion of laborers who get their wages through an employer must be comparatively small. But it is not necessary to discuss the ratio in which self- amploying laborers anywhere stand to hired laborers, 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 employer, 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 em- ployer, are drawn from capital. This restriction of the major premise at once invalidates all the deductions that are made from it; but without resting here, let us see whether even in this restricted sense it accords with the facts, Liet us pick up the clew where Adam Smith
58 WAGES AND CAPITAL. Poo* 7.
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 ar- rangement 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 tenancy, treated of with such perspicuity by Sir Henry Maine in his "Early History of Institutions," and which so clearly involved the relation of employer and employed as to render the acceptor 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 employing 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 superin- tendents, salesmen, etc., are paid by a percentage of prof- its, 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- 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
Chap. in. WAGES NOT DRAWK FROM CAPITAL. 53
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 Fran- cisco 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, in- stead of dividing up between the crew their proportion of the oil and bone, the value of each man's share is esti- mated at the market price, and he is paid for it in money. The money is but the equivalent of the real wages, the oil and bone. In no way is there any advance of capital in this payment. The obligation to pay 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 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 re-
64 WAGES AND CAPITAL. Book L
main 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 trans- action amount to the same thing as if, instead of being paid in coin, the stipulated wages were paid in an equiva- lent 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 posses- sion 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 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 thia differenoe-—
Chap. in. WAGES KOT DRAWN FROM CAPITAL. 65
where a man works for himself, or where, when working for an employer, he takes his wages in 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 evidently 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 employer, 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, although the contract be for wages certain and not contingent. For the maxim of admiralty law is, that "freight is the mother of wages," and though the seaman may have performed his part, the disaster which prevents the ship from earning freight deprives him of claim for his wages.
In this 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.
Wherever we analyze the facts this will be found to be true. For labor always precedes wages. This is as uni- versally 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
66 WAGES AND CAPITAL. BoOc L
in the other, reward is conditioned upon exertion. Paid sometimes by the day, oftener by the week or month, occasionally by the year, and in many branches of pro- duction by the piece, the payment of wages by an em- ployer to an employee always implies the previous ren- dering of labor by the employee for the benefit of the employer, for the few cases in which advance payments are made for personal services are evidently referable either to charity or to guarantee and purchase. The name "retainer," given to advance payments to lawyers, shows the true character of the transaction, 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 purchase money — both English and American law considering a sailor as much a chattel as a pig.
I dwell on this obvious fact that labor always precedes wages, because it is all-important to an understanding 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 deductions — 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 productive power unless sup- plied by capital with maintenance.* The unwary reader
* Industry is limited by capital. . . There can be no more in- dustry than is supplied with materials to work up and food to eat. Self-evident as the thing is, it is often forgotten that the people of a country are maintained and have their wants supplied not by the produce of present labor, but of past. They consume what has been produced, not what is about to be produced. Now, of what has been produced a part only is allotted to the support of pro- ductive labor, and there will not and cannot be more of that labor
Chap. in. WAGES NOT DBAWK FROM CAPITAL. 6/
at once recognizes the fact that the laborer must hafe food, clothing, etc., in order 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 nec- essary to the application of labor, and from this it is but an obvious deduction 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 be- tween 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 rea- soning— 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 understood as in- cluding 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 desire, but to the pro- curement of more wealth — of wealth in the hands of em- ployers 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 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
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, Principlea of Political Economy, Book I, Chap. Y, Bee. I.
58 WAGES AND CAPITAL. Book T.
capital (in the sense in which the word is used in distinc- tion to labor) in exceptional cases sometimes may, but is never compelled to make advances to labor before the work begins. 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 em- ployed without any advance of wages. A great propor- tion 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 render- ing of labor in production imply? Evidently the produc- tion of wealth, which, if it is to be exchanged or used in production, is capital. Therefore, the payment of capi- tal in wages pre-supposes a production of capital by the labor for which the wages are paid. And as the em- ployer 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 pro- duced. As the value paid in the wages is thus exchanged for a value brought into being by the labor, how can it be said that wages are drawn from capital or advanced by capital? As in the exchange of labor for wages the em- ployer always gets the capital created by the labor before
Chap.ni. WAGES XOT DRATVK FROM CAPITAL. 59
he pays out capital 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. Sup- pose, 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 inven- tory 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 remuner- ative business, which must 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
* I 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 in which nothing 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 satisfaction. 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.
60 WAGES AND CAPITAL. Book L
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 the primitive man, when, long "before the appropriation of land and the accumulation of stock,*' he obtained an oyster by knocking 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 deposi- tors 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 depositor re- ceives 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 re- markable 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
Chap.m. WAGES NOT DRAWK FROM CAPITAL. 61
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 sometimes easier to exchange money for any other form of wealth than it is to ex- change 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 exchange. And so a producing em- ployer who has paid out his money in wages may some- times find it difiicult 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 ad- vanced 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 been changed in form, but not lessened.
There is one branch of production in regard to which the confusions of thought which arise from the habit of estimating capital in money are least likely to occur, in- asmuch as its product is the general material and stand- ard of money. And it so happens that this business fur- nishes us, almost side by side, with illustrations of pro- duction passing from the simplest to most complex forms.
In the early days of California, as afterward in Aus- tralia, the placer miner, who found in river bed or sur- face deposit the glittering particles which the slow proc- esses of nature had for ages been accumulating, picked up or washed out his ''wages** (so, too, h« 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
62 WAGES AND CAPITAL. Booh I.
capital or not. They were manifestly 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 obtained 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, in- stead of selling his gold dust at the nearest store and paying a dealer's profit, he retained it until he got eneugh to take a trip, or send by express to San Fran- cisco, 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 man- ufacturer, 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 expensive machinery put up. These works could not be con- structed without capital. Sometimes their construction required years, during which no return could 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 payment! Surely here.
Chap.ni. WAGES KOT DRAWN" FEOM CAPITAL. 63
at least, industry is limited by capital, for without capi- tal 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 ob- tained, or is finished — as in agriculture, where plowing and sowing must precede by several months the harvest- ing of the crop; as in the erection of buildings, the con- struction of ships, railroads, canals, etc. — it is clear that the owners of the capital paid in wages cannot 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 wiK 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 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
64 WAGES AND CAPITAL. Boole t
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 engaged, 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 instrument of pro- duction, 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 other, 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 the habit of estimating the amount of value which the labor ex- pended in any preparatory stage of production has created. And a moment's 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 products. But they were not produced at one operation or by one set of pro-
Chap.m. WAGES NOT DEAWN FROM CAPITAL. 65
ducers. And this being the case, we readily distinguish different points or stages in the creation of the value which as completed articles they represent. 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 decom- posed many times, exhibiting as many clearly defined steps in the creation of the final value. At each of these steps we habitually estimate a creation of value, an ad- dition 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. Iroti in the form of pigs is very far from being a com- pleted product. It must yet pass through several, or, perhaps, through many, stages of production before it results in the finished articles that were the ultimato ob- jects for which the iron ore was extracted from the mine. Yet, is not pig iron capital? And so the process of pro- duction is not really completed when a crop of cotton is gathered, nor yet when it is ginned and pressed; nor yet when it arrives at Lowell or Manchester; nor yet when it is converted into yarn; nor yet when it becomes cloth; but only when it is finally placed in the hands of the consumer. 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- 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 possi- bility 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
66 WAGES AND CAPITAL. Book I
in the boll, as surely as so much spinning 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 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
Chap. in. WAGES NOT DEAWN FROM CAPITAL. 67
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 ma- chinery. It is tangible in the case of orchards and vine- yards 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 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 largequantity of wood can be more readily and more advantageously exchanged
68 WAGES AND CAPITAL. Book I
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 wages, 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 undertakers wish to accumulate capital in the shape of a tunnel that they will need capital. To recur to 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.
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— ^hat is, sold on credit. But the capital thus required is
Chap.ni. WAGES NOT DRAWN FKOM CAPITAL. 69
not required for the payment of wages, nor for advances to labor, as it is always represented in the produce of the labor. It is never as an employer of labor that any pro- ducer needs capital; when he does need capital, it is be- cause he is not only an employer of labor, but a merchant or speculator in, or an accumulator 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 wages 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 perform- ing 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 produce in ex- change for the wages immediately re-exchanges it, or keeps it for awhile, no more alters the character of the transaction than does the final disposition of the product made by the ultimate receiver, who may, perhaps, be in another quarter of the globe and at the end of a series of exchanges numbering hundreds.
CHAPTER IVc
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 when 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 assumption that it is so self-evident that labor must be subsisted from capital that the proposition has but to be stated to com- pel recognition — runs through the whole fabric of cur. rent political economy. And so confidently is it held that the maintenance of labor is drawn from capital that
* Political Economy for Beginners, by Millicent Garrett Fawcett, Chap. Ill, p. 25.
Chap.rr. LABORERS NOT MAINTAINED BY CAPITAL. 71
the proposition that "population regulates itself by the funds which are to employ it, and, therefore, always in- creases or diminishes with the increase or diminution 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 capital. To say that a man must have his breakfast before going to work is not to say that he cannot go to work unless a capitalist furnishes him with a breakfast, for his break- fast 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 articles of wealth — are only capital so long as they remain in the possession of those who propose, not to consume, *but to exchange them for other commodities or for productive services, and cease to be capital when they pass into the posses- sion of those who will consume them; for in that trans- action 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 gratification, irre- spective of whether their consumption will aid in the production of wealth or not. Unless this distinction is preserved it is impossible to draw the line between the
* The words quoted are Ricardo's (Chap. II); but the idea is com- mon iu standard works.
72 WAGES AND CAPITAL. Book 1.
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 distinction 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 philosopher of the Eicardo- Mill school to tell. Nor yet can 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 suflScient, 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, manifestly, 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 immedi- ately result in wealth available for subsistence 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 Eobinson Crusoe made with such in- finite toil and pains was a production in which his labor could not yield an immediate return. Bat was it neces-
Chap.JV. LABOREBS NOT MAINTAINED BY CAPITAL. 73
sary that, before he commenced, he should accumulate 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 dev.ote part of his time to the procurement of food while he was devoting part of his time to the build- ing and launching of the canoe. Or supposing a hun- dred men to be landed, without any stock of provisions, in a new country. Will it be necessary for them to ac- cumulate a season's stock of provisions before they can begin to cultivate the soil? Not at all. It will be neces- sary only that fish, game, berries, etc., shall be so abun- dant that the labor of a part of the hundred may suffice to furnish daily enough of these for the maintenance 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 4iyected tp, .future recompense. , slri -i^ib .y,,-
What is true in these cases 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 or 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 aupported by contemporaneous production? n frf .,a,i
Here is a luxurious idler, who does no productive work either with head or hand, but lives, we say, upon wealth which his father left him securely invested in govern-
74 WAGES AND CAPITAL. BtxJcl.
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 distributors 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 maybe 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 contemporaneous pro- duction that his subsistence is drawn.
The fifty square miles of London undoubtedly contain more wealth than within the same space anywhere else exists. Yet were productive labor in London absolutely to cease, within a few hours people would begin to die like rotten sheep, and within a few weeks, 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 around Jerusalem, which would pre- vent the constant incoming of the supplies on which 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 it is the daily labor of the community that supplies the community with its daily bread.
Chap. IV. LABORERS NOT MAINTAINED BY CAPITAL. 75
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 undertakes a great work of years does not appropriate to it wealth already produced, but wealth yet to be produced, 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 subsistence 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:
The demand for consumption determines the direction in which labor will be expended in production.
76 WAGES AND CAPITAL. Bw^ L
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 intri- cacies 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 exertions 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 ex- changed 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 production, 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 exchanges to the pro- duction 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.
Chap. IV. LABORERS NOT MAINTAINED BY CAPITAL. 77
And 80 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. And 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 ?
As 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 agreement to cultivate on shares, a common method in some parts of the United States, in which case the laborers, if they are without means of subsistence, will, on the strength of the work they are doing, obtain credit at the nearest store; or, if he prefers to pay wages, the farmer will him- self 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
78 WAGES AND CAPITAL. SoohL
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 anyhow), it will be the re- serve capital drawn out by the prospect of replacement, and which is in fact replaced by 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 every 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 iden- tically 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 prod- uce of their labor.
CHAPTER V.
THE REAL FUNCTIONS OP CAPITAL.
It may now be asked. If capital is not required for the payment of wages or the support of labor during produc- tion, what, then, are 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 oi 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 shoveling coal into a furnace, instead of tugging at an oar. (2) By en- abling labor to avail itself of the reproductive forces of nature, as to obtain corn by sowing it, or animals by breeding them. (3) By permitting the division of labor, and thus, on the one hand, increasing the eflBciency of the human factor of wealth, by the utilizatioa 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 situation, so as to ob- tain each particular species of wealth where nature is most favorable to its production.
Capital does not supply the materials which labor works up into wealth, as is erroneously taught; the ma-
80 WAGES AND CAPITAL. BookL
terials of wealth are supplied by nature. But such ma- terials 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 erro- neouly 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 sewing 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 want 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, 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 when 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 imper- ceptible beginnings, nor the exchanges which make it possible extend beyond the nearest neighbors, unless a portion of the things produced were constantly kept in stock or in transit. Even the pursuits of hunting.
Chap. V. THE REAL FUNCTIONS OF CAPITAL. 81
fishing, gathering nuts, and making weapons could not be specialized so that an individual could devote himself to any one, unless some part of what was procured by each was reserved from immediate consumption, 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 short- comings of the next. While to permit the minute sub- division of labor that is characteristic of, and necessary to, high civilization, a great amount of wealth of all descrip- tions 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 labor 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 in- dustry," means not that capital limits the form of labor or the productiveness of labor, but that it limits the ex- ertion of labor. This proposition derives its plausibility from the assumption that capital supplies labor with ma- terials 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 industry; but this is not to say that there could be no industry without capi- tal, any more than it is to say that without the power
^ WAGES AND CAPITAL. Book I.
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 Eobinson Crusoe, there could be no labor because 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 which it can be truly said that the form of productiveness of the industry of a community is limited by its capital, will, I think, appear upon examination to be more theoretical than real. It is evident that in such a country 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 want 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, conflagra- tion, 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 reproduced in a community that has been swept by war, has long been noticed, while the rapid production of the capital it can.
Chap. V. THE BEAL FUNCTIONS OF CAPITAL. 83
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 unjust 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 limitation 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 accustomed 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 produc- tively 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 as they do want
84 WAGES AND CAPITAL. Bodk L
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 production 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 with 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 warm 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 European 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 themselves rude and inefficient, but when the conditions of such
•New Zealand and its Inhabitants. Rev. Richard Taylor. Lon- don, 1855. Chap. XXI.
Chap.V. THE REAL FUNCTIONS OF CAPITAL. 85
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 required, 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 ma- chine. To carry occasionally two 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, gener- ally, it will be found that the rude devices of production and exchange which obtain among the sparse populations of new countries result not so much from the want of capital as from inability profitably to employ it.
As, no matter how much water is poured in, there can never be in a bucket more than a bucketful, so no greater amount of wealth will be used as capital than is required by the machinery of production and exchange that under all the existing conditions — intelligence, habit, security, density of population, etc. — best suit the people. And I am inclined to think that as a general rule this amount will be had — that the social organism secretes, as it were, the necessary amount of capital just as the human organism in a healthy condition secretes the requisite fat.
But whether the amount of capital ever does limit the productiveness of industry, and thus fix a maximum which wages cannot exceed, it is evident that it is not
86 WAGES AND CAPITAL. Booh I
from any scarcity of capital that the poverty of the masses in civilized countries proceeds. For not only do wages nowhere reach the limit fixed by the productive- ness of industry, but wages are relatively the lowest where capital is most abundant. The tools and machin- ery of production are in all the most progressive coun- tries evidently in excess of the use made of them, and any prospect of remunerative employment brings out more than the capital needed. The bucket is not only full; it is overflowing. So evident is this, that not only among the ignorant, but by men of high economic repu- tation, is industrial depression attributed to the abun- dance of machinery and the accumulation of capital; and war, which is the destruction of capital, is looked upon as the cause of brisk trade and high wages — an idea strangely enough, so great is the confusion of thought on such matters, countenanced by many who hold that capital employs labor and pays wages.
Our purpose in this inquiry is to solve the problem to which so many self-contradictory answers are given. In ascertaining clearly what capital really is and what capi- tal really does, we have made the first, and an all-impor- tant step. But it is only a first step. Let us recapitulate and proceed.
We have seen that the current theory that wages de- pend upon the ratio between the number of laborers and the amount of capital devoted to the employment of labor is inconsistent with the general fact that wages and interest do not rise and fall inversely, but conjointly.
This discrepancy having led us to an examination of the grounds of the theory, we have seen, further, that, contrary to the current idea, wages are not drawn from capital at all, but come directly from the produce of the labor for which they are paid. We have seen that capi-
autp. V. EECAPITULATIOlir. 87
tal does not advance wages or subsist laborers, but that its functions are to assist labor in production with tools, seed, etc., and with the wealth required to carry on ex- changes.
We are thus irresistibly led to practical conclusions so important as amply to justify the pains taken to make sure of them.
For if wages aro drawn, not from capital, but from the produce of labor, the current theories as to the relations of capital and labor are invalid, and all remedies, whether proposed by professors of political economy or working- men, which look to the alleviation of poverty either by the increase of capital or the restriction of the number of laborers or the efficiency of their work, must be con- demned.
If each laborer in performing the labor really creates the fund from which his wages are drawn, then wages cannot be diminished by the increase of laborers, but, on the contrary, as the efficiency of labor manifestly increases with the number of laborers, the more laborers, other things being equal, the higher should wages be.
But this necessary proviso, *'other things being equal," brings us to a question which must be considered and disposed of before we can further proceed. That ques- tion is. Do the productive powers of nature tend to diminish with the increasing drafts made upon them by increasing population?
BOOK II.
POPULATION AND SUBSISTENCE.
CHAPTER I. — ^THB MALTHUSIAN THEORY, ITS GENESIS
AND SUPPORT. CHAPTER II. — INFERENCES FROM FACTS. CHAPTER III. — INFERENCES FROM ANALOGY. CHAPTER IV. — DISPROOF OF THE MALTHUSIAN THEORY.
Are God and Nature then at strife, That Nature lends such evil dreams? So careful of the type she seems,
80 careless of the single life.
— Tennya&n.
CHAPTER I.
THE MALTHUSIAN THEORY, ITS GENESIS AND SUPPORT.
Behind the theory we have been considering lies a theory we have yet to consider. The current doctrine as to the derivation and law of wages finds its strongest support in a doctrine as generally accepted — the doctrine to which Malthus has given his name — that population naturally tends to increase faster than subsistence. These two doctrines, fitting in with each other, frame the answer which the current political economy gives to the great problem we are endeavoring to solve.
In what has preceded, the current doctrine that wages are determined by the ratio between capital and laborers has, I think, been shown to be so utterly baseless as to excite surprise as to how it could so generally and so long obtain. It is not to be wondered at that such a theory should have arisen in a state of society where the great body of laborers seem to depend for employment and wages upon a separate class of capitalists, nor yet that under these conditions it should have maintained itself among the masses of men, who rarely take the trouble to separate the real from the apparent. But it is surprising that a theory which on examination appears to be so groundless could have been successively accepted by so many acute thinkers as have during the present century devoted their powers to the elucidation and development of the science of political economy.
The explanation of this otherwise unaccountable fact is to be found in the general acceptance of the Malthu- sian theory. The current theory of wages has never been fairly put upon its trial, because, backed by the
92 POPULATION AND SUBSISTENCE. Book U.
Malthusian theory, it has seemed in the minds of polit- ical economists a self-evident truth. These two theories mutually blend with, strengthen, and defend each other, while they both derive additional support from a princi- ple brought prominently forward in the discussions of the theory of rent — viz., that past a certain point the application of capital and labor to land yields a diminish- ing return. Together they give such an explanation of the phenomena presented in a highly organized and advancing society as seems to fit all the facts, and which has thus prevented closer investigation.
Which of these two theories is entitled to historical precedence it is hard to say. The theory of population was not formulated in such a way as to give it the stand- ing of a scientific dogma until after that had been done for the theory of wages. But they naturally spring up and grow with each other, and were both held in a form more or less crude long prior to any attempt to construct a system of political economy. It is evident, from several passages, that though he never fully developed it, the Malthusian theory was in rudimentary form present in the mind of Adam Smith, and to this, it seems to me, must be largely due the misdirection which on the sub- ject of wages his speculations took. But, however this may be, so closely are the two theories connected, so completely do they complement each other, that Buckle, reviewing the history of the development of political economy in his ''Examination of the Scotch Intellect during the Eighteenth Century," attributes mainly to Malthus the honor of "decisively proving" the current theory of wages by advancing the current theory of the pressure of population upon subsistence. He says in his "History of Civilization in England," Vol. 3, Chap. 5:
" Scarcely had the Eighteenth Century passed away when it was decisively proved that the reward of labor depends solely on two tilings; namely, the magnitude of that national fund out of which
Chap. 1. THE MALTHUSIAN THEORY. 93
all labor is paid, and the number of laborers among whom the fund is to be divided. This vast step in our knowledge is due, mainly, though not entirely, to Malthiis. whose work on population, besides marking an epoch in the history of speculative thought, has already produced considerable practical results, and will probably give rise to others more considerable still. It was published in 1798; so that Adam Smith, who died in 1790, missed what to him would have been the intense pleasure of seeing how, in it, his own views were expanded rather than corrected. Indeed, it is certain that without Smith there would have been no Mai thus; that is, unless Smith had laid the foundation, Malthus could not have raised the super- structure."
The famous doctrine which ever since its enunciation has so powerfully influenced thought, not alone in the province of political economy, but in regions of even higher speculation, was formulated by Malthus in the proposition that, as shown by the growth of the North American colonies, the natural tendency of population is to double itself at least every twenty-five years, thus increasing in a geometrical ratio, while the subsistence that can be obtained from land "under circumstances the most favorable to human industry could not possibly be made to increase faster than in an arithmetical ratio, or by an addition every twenty-five years of a quantity equal to what it at present produces." "The necessary effects of these two different rates of increase, when brought together," Mr. Malthus naively goes on to say, "will be very striking." And thus (Chap. I) he brings them together:
"Let us call the population of this island eleven millions; and suppose the present produce equal to the easy support of such a number. In the first twenty-five years the population would be twenty-two millions, and the food being also doubled, the means of subsistence would be equal to this increase. In the next twenty-five years the population would be forty-four millions, and the means of subsistance only equal to the support of thirty-three millions. In the next period the population would be equal to eighty-eight mil- lions, and the means of subsistence just equal to the support of hftif
94 POPULATION AND SUBSISTENCE. Book H.
that number. And at the conclusion of the first century, the popu- lation would be a hundred and seventy-six millions, and the means of subsistence only equal to the support of fifty-five millions; leaving a population of a hundred and twenty-one millions totally unprovided for.
•'Taking the whole earth instead of this island, emigration would of course be excluded; and supposing the present population equal to a thousand millions, the human species would increase as the numbers 1, 2, 4, 8, 16, 32, 64, 128, 256, and subsistence as 1, 2, 3, 4, 5, 6, 7, 8, 9. In two centuries the population would be to the means of subsistence as 256 to 9; in three centuries, 4,096 to 13, and in 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 is, that this ten- dency of population to indefinite increase must be held back either by moral restraint upon the reproductive faculty, or by the various causes which increase mortality, which he resolves into vice and misery. Such causes as prevent propagation he styles the preventive check; such causes as increase mortality he styles the positive check. This is the famous Malthusian doctrine, as promulgated by Malthus himself in the *' Essay on Popu- lation."
It is not worth while to dwell upon the fallacy in- Yolved in the assumption of geometrical and arithmetical rates of increase, a play upon proportions which hardly rises to the dignity of that in the familiar puzzle of the hare and the tortoise, in which the hare is made to chase the tortoise through all eternity without coming up with him. For this assumption is not necessary to the Mal- thusian doctrine, or at least is expressly repudiated by some of those who fully accept that doctrine; as, for in- stance, John Stuart Mill, who speaks of it as "an un- lucky attempt to give precision to things which do not admit of it, which every person capable of reasoning
Chap. I. THE MALTHUSIAN THEORY. 95
must see is wholly superfluous to the argument." * The essence of the Malthusian doctrine is, that population tends to increase faster than the power of providing food, and whether this difference be stated as a geometrical ratio for population and an arithmetical ratio for subsist- ence, as by Malthus; or as a constant ratio for popula- tion and a diminishing ratio for subsistence, as by Mill, is only a matter of statement. The vital point, on which both agree, is, to use the words of Mathus, "that there is a natural tendency and constant effort in popu- lation to increase beyond the means of subsistence."
The Malthusian doctrine, as at present held, may be thus stated in its strongest and least objectionable form:
That population, constantly tending to increase, must, when unrestrained, ultimately press against the limits of subsistence, not as against a fixed, but as against an elastic barrier, which makes the procurement of subsist- ence progressively more and more difficult, And thus, wherever reproduction has had time to assert its power, and is unchecked by prudence, there must exist that de- gree of want which will keep population within the bounds of subsistence.
Although in reality not more repugnant to the sense of harmonious adaptation by creative beneficence and wis- dom than the complacent no-theory which throws the responsibility for poverty and its concomitants upon the inscrutable decrees of Providence, without attempting to trace them, this theory, in avowedly making vice and suffering the necessary results of a natural instinct with
•Principles of Political Economy, Book II, Chap. IX., Sec. VI. — Yet notwithstanding what Mill says, it is clear that Malthus him- self lays great stress upon his geometrical and arithmetical ratios, and it is also probable that it is to these ratios that Malthus is largely indebted for his fame, as they supplied one of those high-sounding formulas that with many people carry far more weight than the clearest reasoning.
9$ POPTJLATIOX AND SUBSISTElfCE. Book D.
which are linked the purest and sweetest affections, comes rudely in collision with ideas deeply rooted in the hnman mind, and it was, as soon as formally promul- gated, fought with a bitterness in which zeal was often more manifest than logic. But it has triumphantly withstood the ordeal, and in spite of the refutations of the Godwins, the denunciations of the Cobbetts, and all the shafts that argument, sarcasm, ridicule, and senti- ment could direct against it, to-day it stands in the world of thought as an accepted truth, which compels the recognition even of those who would fain disbelieve it.
The causes of its triumph, the sources of its strength, are not obscure. Seemingly backed by an indisputable arithmetical truth — that a continuously increasing popu- lation must eventually exceed the capacity of the earth to furnish food or even standing room, the Malthusian theory is supported by analogies in the animal and vege- table kingdoms, where life everywhere beats wastefully against the barriers that hold its different species in check — analogies to which the course of modem thought, in leveling distinctions between different forms of life, has given a greater and greater weight; and it is appar- ently corroborated by many obvious facts, such as the prevalence of poverty, vice, and misery amid dense pop- ulations; the general effect of material progress in in- creasing population without relieving pauperism; the rapid growth of numbers in newly settled countries and the evident retardation of increase in more densely set- tled countries by the mortality among the class con- demned to want.
The Malthusian theory furnishes a general principle which accounts for these and similar facts, and accounts for them in a way which harmonizes with the doctrine that wages are drawn from capital, and with all the prin- ciples that are deduced from it. According to the cur- rent doctrine of wages, wages fall as increase in the num-
Chap.L^ THE MALTHUSIAN THEORY. 97
ber of laborers necessitates a more minute division of capital; according to the Malthusian theory, poverty appears as increase in population necessitates the more minute division of subsistence. It requires but the identification of capital with subsistence, and number of laborers with population, an identification made in the current treatises on political economy, where the terms are often converted, to make the two propositions as identical formally as they are substantially.* And thus it is, as stated by Buckle in the passage previously quoted, that the theory of population advanced by Mal- thus has appeared to prove decisively the theory of wages advanced by Smith.
Ricardo, who a few years subsequent to the publica- tion of the "Essay on Population'* corrected the mistake into which Smith had fallen as to the nature and cause of rent, furnished the Malthusian theory an additional support by calling attention to the fact that rent would increase as the necessities of increasing population forced cultivation to less and less productive lands, or to less and less productive points on the same lands, thus ex- plaining the rise of rent. In this way was formed a triple combination, by which the Malthusian theory has been buttressed on both sides — the previously received doctrine of wages and the subsequently received doctrine of rent exhibiting in this view but special examples of the operation of the general principle to which the name of Malthus has been attached — the fall in wages and the rise in rents which come with increasing population being but modes in which the pressure of population upon subsistence shows itself.
Thus taking its place in the very framework of polit-
* The effect of the Malthusian doctrine upon the definitions of capital may, I think, be seen by comparing (see pp. 33, 33, 34) the defi- nition of Smith, who wrote prior to Malthus, with the definitions of Ricardo, McCulloch and Mill, who wrote subsequently.
98 POPULATION AND SUBSISTENCE. Book U.
ical economy (for the science as currently accepted has undergone no material change or improvement since the time of Eicardo, though in some minor points it has been cleared and illustrated), the Malthusian theory, though repugnant to sentiments before alluded to, is not repug- nant to other ideas, which, in older countries at least, generally prevail among the working classes; but, on the contrary, like the theory of wages by which it is supported and in turn supports, it harmonizes with them. To the mechanic or operative the cause of low wages and of the inability to get employment is obviously the competition caused by the pressure of numbers, and in the squalid abodes of poverty what seems clearer than that there are too many people?
But the great cause of the triumph of this theory is, that, instead of menacing any vested right or antagoniz- ing any powerful interest, it is eminently soothing and reassuring to the classes who, wielding the power of wealth, largely dominate thought. At a time when old supports were falling away, it came to the rescue of the special privileges by which a few monopolize so much of the good things of this world, proclaiming a natural cause for the want and misery which, if attributed to political institutions, must condemn every government under which they exist. The "Essay on Population" was avowedly a reply to William Godwin's "Inquiry con- cerning Political Justice," a work asserting the principle of human equality; and its purpose was to justify exist- ing inequality by shifting the responsibility for it from human institutions to the laws of the Creator. There was nothing new in this, for Wallace, nearly forty years before, had brought forward the danger of excessive multiplication as the answer to the demands of justice for an equal distribution of wealth; but the circum- stances of the times were such as to make the same idea, when brought forward by Malthus, peculiarly grateful
Chap.l. THE MALTHUSIAN THEORY. 99
to a powerful class, in whom an intense fear of any ques- tioning of the existing state of things had been generated by the outburst of the French Revolution.
Now, as then, the Malthusian doctrine parries the de- mand for reform, and shelters selfishness from question and from conscience by the interposition of an inevitable necessity. It furnishes a philosophy by which Dives as he feasts can shut out the image of Lazarus who faints with hunger at his door; by which wealth may complacently but- ton up its pocket when poverty asks an alms, and the rich Christian bend on Sundays in a nicely upholstered pew to implore the good gifts of the All Father without any feeling of responsibility for the squalid misery that is festering but a square away. For poverty, want, and starvation are by this theory not chargeable either to in- dividual greed or to social mal-adjustments; they are the inevitable results of universal laws, with which, if it were not impious, it were as hopeless to quarrel as with the law of gravitation. In this view, he who in the midst of want has accumulated wealth, has but fenced in a little oasis from the driving sand which else would have overwhelmed it. He has gained for himself, but has hurt nobody. And even if the rich were literally to obey the injunctions of Christ and divide their wealth among the poor, nothing would be gained. Population would be increased, only to press again upon the limits of subsistence or capital, and the equality that would be produced would be but the equality of common misery. And thus reforms which would interfere with the inter- ests 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 a tendency to increase potent enough to pack the surface of the globe with human beings as sardines are packed in a box, nothing can really be done, either by individual or by combined
100 POPULATION AND SUBSISTENCE. Book II.
effort, to extirpate poverty, save to trust to the efiBcacy 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 th6 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, who, to the day of his death, was a strenuous opponent of the new philosophy, spoke of Darwinism as "Malthus all over," * and Darwin himself says the struggle for existence "is the doctrine of Mal- thus applied with manifold force to the whole animal and vegetable kingdoms."!
♦Address before Massachusetts State Board of Agriculture^ 18721 Report U. S. Department of Agriculture, 1873. t Origin of Species, Chap. III.
Oiap. L THE MALTHUSIAN THEORY. 101
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. McCulloch* attributes to the ''prin- ciple of increase" social improvement and the progress of the arts, and declares that the poverty that it engen- ders acts as a powerful stimulus to the development of industry, 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 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
•Note IV. to Wealth of Nations.
103 POPULATION AND SUBSISTENCE. Book U.
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 day may be seen cropping out in every direction. It is indorsed by economists and by statesmen, by historians and by natural investigators; by social science congresses and by trade unions; by churchmen and by materialists; by conservatives of the strictest sect and by the most radical of radicals. It is held and habitually reasoned from by 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 Antaeus from the earth.
CHAPTER II.
INFERENCES FEOM 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 sparseness of population, as in new 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 repro- duce is at a rate which would, were it to go on un- checked, some time exceed subsistence. But it is not a legitimate inference from this that the tendency to re- produce would show itself in the same force where popu-
104 POPULATION AND SUBSISTENCE. Book II.
lation was sufficiently dense and wealth distributed with sufficient evenness to lift a whole community above the necessity of devoting their energies to a struggle for mere existence. Nor can it be assumed that the tendency to reproduce, by causing poverty, must prevent the exist- ence of such a community; for this, manifestly, would be assuming the very point at issue, and reasoning 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 poverty 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, mani- festly 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 geomet- ric progression of tail and an arithmetical progression of weight. And, the inference from the assumption is
Chap, a INFEEENCES FROM FACTS. 105
just such as Swift in satire might have credited to the savans of a previously dogless island, who, by bringing 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.*
♦Malthus' other works, though written after he became famous, made no mark, and are treated with contempt even by those who find in the Essay a great discovery. The Encyclopaedia Britannica, for instance, though fully accepting the Malthusian theory, says of Mai thus' 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. Eicardo's peculiar doctrines, and with an inquiry into the nature and
106 POPULATION AND SUBSISTENCE. Book JI
The main body of the book is taken up with what is in reality a refutation of the theory which the book ad- vances, for Malthus' review of what he calls the positive checks to population is simply the showing that the re- sults which he attributes to over -population actually arise from other causes. Of all the cases cited, and pretty much the whole globe is passed over in the survey, in which vice and misery check increase by limiting mar- riages or shortening the term of human life, there is not a single case in which the vice and misery can be traced to an actual increase in the number of mouths over the power of the accompanying hands to feed them; but in every case the vice and misery are shown to spring either from unsocial ignorance and rapacity, or from bad gov- ernment, unjust laws or destructive warfare.
Nor what Malthus failed to show has any one since him shown. The globe may be surveyed and history may be reviewed in vain for any instance of a considera- ble country* in which poverty and want can be fairly attributed to the pressure of an increasing population. Whatever be the possible dangers involved in the power of human increase, they have never yet appeared. What- ever may some time be, this never yet has been the evil that has afflicted mankind. Population always tending
causes of value. Nothing, however, can be more unsatisfactory than these discussions. In truth Mr. Malthus never had any clear or accurate perception of Mr. Ricardo's theories, or of the principles which determine the value in exchange of different articles."
* I say considerable country, because there may be small islands, such as Pitcairn's Island, cut off from communication with the rest of the world and consequently from the exchanges which are nec- essary to the improved modes of production resorted to as population becomes dense, which may seem to offer examples in point. A moment's reflection, however, will show that these exceptional cases are not in point.
Chap. II. INFEKENCES FKOM FACTS. 107
to overpass the limit of subsistence! How is it, then, that this globe of ours, after all the thoHsands, and it is now thought millions, of years that man has been upon the earth, is yet so thinly populated? How is it, then, that so many of the hives of human life are now deserted — that once cultivated fields are rank with jungle, and the wild beast licks her cubs where once were busy haunts of men?
It is a fact, that, as we count our increasing millions, Ave are apt to lose sight of — nevertheless it is a fact — that in what we know of the world's history decadence of population is as common as increase. Whether the aggregate population of the earth is now greater than at any previous epoch is a speculation which can deal only with guesses. Since Montesquieu, in the early part of the last century, asserted, what was then probably the prevailing impression, that the population of the earth had, since the Christian era, greatly declined, opinion has run the other way. But the tendency of recent in- vestigation and exploration has been to give greater credit to what have been deemed the exaggerated accounts of ancient historians and travelers, and to reveal indica- tions of denser populations and more advanced civiliza- tions than had before been suspected, as well as of a higher antiquity in the human race. And in basing our estimates of population upon the development of trade, the advance of the arts, and the size of cities, we are apt to underrate the density of population which the inten- sive cultivations, characteristic of the earlier civiliza- tions, are capable of maintaining — especially where irri- gation is resorted to. As we may see from the closely cultivated districts of China and Europe a very great population of simple habits can readily exist with very little commerce and a much lower stage of those arts in which modern progress has been most marked, and with-
108 POPULATION AND SUBSISTENCE. Book IL
out that tendency to concentrate in cities which modern populations show.*
Be this as 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 Turkey in Europe, probably Italy, and possibly Spain, have con- tained larger populations than now, and this may be likewise true of NorthweBtern 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 discovery 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 civilization; amid the tropical forests of Yucatan and Central America are the remains of great cities forgotten ere the Spanish conquest; Mexico, as Cortez found it, showed the superimposition of barbarism upon a higher social development, while through a great
* As may be seen from the map in H. H. Bancroft's "Native Races," the State of Vera Cruz is not one of those parts of Mexico noticeable for its antiquities. Yet Hugo Fink, of Cordova, writing to the Smithsonian Institute (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 pottery is not found; that the whole country is intersected with parallel lines of stones intended to keep the earth from washing away