II. On the subject of _wages_ diverse and contradictory opinions
prevail. A large proportion of the British economists hold the theory
that a low rate of wages is all that can be maintained, or is, on the
whole, desirable among ordinary unskilled laborers. That a man should
have compensation sufficient to furnish him with such food, raiment
and shelter as are essential to keep him in good working condition;
also, in addition, enough to enable him to support a wife (with what
she can herself earn), and to rear at least two children, themselves
prepared to become laborers; and to make some additional allowances for
probable periods of sickness and inability to labor. So much is deemed
absolutely essential even to the capitalist and employer, in order
that their interests may not suffer. The school of writers referred to
profess to find in the human constitution a law which prevents wages
from going much beyond this limit. It is said that if they do go much
beyond this, the population will multiply so rapidly, and the number
of laborers will so greatly increase, that wages will not only fall
back to their limit, but that great suffering will ensue.
Most American writers reject this view, though some of them appear
to hold opinions logically implying it. Henry C. Carey takes the
ground that there is not only no such law, but that there is one of
a diametrically opposite character, which as thoroughly coincides
with, as this antagonizes, the general provisions of an all-wise
and beneficent creator. This law, as developed by Mr. Carey, is
substantially that in any community where violence is not done
to natural principles in the relations between capitalists and
laborers, the share of the latter in the joint product to which
both are contributors, is constantly increasing. While at first the
capitalist receives much more than half, as time and the development
of society go on his proportion is steadily diminishing till it
becomes a small fraction of the whole, while that of the laborer is
steadily increasing. At the same time, though the _proportion_ of the
capitalist is always smaller, the _amount_ is always larger, owing to
the always increasing productiveness; and for the same reason both
the _proportion_ and the _amount_ received by the labor is enhanced.
Evidence of this might be made obvious by comparing the compensation
received by laborers in the earlier ages of almost any civilized race
as compared with that received in its most advanced stage; and this,
too, notwithstanding the vast imperfections under which society has
labored and the unnatural conditions to which the laboring classes in
all the earlier periods of history have been subjected. In the opinion
of some writers this law is one of the grandest and most important of
the recent discoveries in political economy.
III. Wages depend upon various considerations. Some of the chief
of these are physical ability, greater or less degree of skill,
agreeableness or disagreeableness of the work, greater or less
difficulty and cost of preparation, constancy or inconstancy of
employment, amount of trust involved, intellectual and moral qualities
required, social conditions, the character of the government, etc.
There is a distinction to be made between _nominal_ and _real_ wages.
The former is the amount of money received for a certain amount of
labor. The latter is the amount of useful commodities which that money
will purchase. Sometimes a dollar a day is better compensation than a
dollar and a half at other times, since in the latter case the dollar
and a half may purchase fewer of the necessaries of life than the
dollar in the former case.
Men fail sometimes to get a clear understanding of the terms _dear_
labor and _cheap_ labor. A Russian serf at fifty cents a day is dearer
than an ordinary American laborer at a dollar and a half, simply
because the labor of the latter would be about four or five times as
efficient as that of the former. In other words, that labor is the
cheapest which will produce the most at the least expense.
The interested and wise laborer will seek information wherever he can
find it on the effect of even moderate education on individual wages,
(and this he will find to be very considerable); on the sanitary
conditions which are best for laborers, the real and ultimate effects
of strikes and trades unions, and the advantages and disadvantages of
coöperative industry and trade, and the great benefit to be derived
from making the laborer a sharer in the profits of any business
in which he may be engaged. The employer also would receive great
benefit from a careful study of these same questions, as well as from
a consideration of the results of paying in all cases not the lowest
wages for which labor can be procured, but the highest which he can
really afford, since in many cases the quality and quantity of work
secured from this cause, more than compensates the extra outlay.
IV. _Profits_ are the share of the product which go to the proprietor
or employer. Very often the latter are confounded with the capitalist,
and hence arises a like confusion concerning the nature of profits.
Among more recent writers a distinct place is assigned to the
_employer_, whereas formerly he was practically lost sight of. But
in our modern system of industry he is one of the most important, if
not actually the most important factor in the system. The capitalist
is not necessarily an employer—more frequently than otherwise he is
incompetent for this office. Nor is the employer always a capitalist.
He is a man who must have the somewhat rare ability to organize and
superintend labor so as to get the most possible out of it, and at the
same time have such financial talent as will enable him to make the
best possible disposition of his means in buying material, etc., and
the best possible disposition of his goods in selling. Frequently the
capital which he uses is borrowed. Profits, then, are what remains
after paying all stipulated wages and salaries, including a fair
compensation to the employer himself, together with the material, rent,
interest on capital owned or borrowed, taxes, insurance, etc. Obviously
no one would assume all the care and responsibility, and incur the risk
implied in any considerable business unless something more was likely
to come from it to him than what his talent and ability would bring
in the way of salary. Sometimes the profit is very small; sometimes,
also, it is very great. Free competition will furnish the requisite
conditions usually, so that the profits will not be so large as to be
disadvantageous to the community generally.
V. _Interest_ depends upon various considerations. That the
compensation implied is proper is obvious from the fact that though
ostensibly money is that which is loaned, in most cases it is really
capital in some other form; and no one denies that when a man lends his
horse, or his mill, or his farm, he should receive something for the
use of it.
The rate of interest depends upon several conditions: 1. The amount of
money in circulation. 2. The amount of other capital. 3. The rate of
profit, which again depends upon the industrial system and the state
of society; as society develops the rate diminishes. 4. The security
or insecurity of property. 5. The facilities with which the securities
can be reconverted into money. 6. The promptness and regularity of the
payment of the interest. On these last two conditions rests in part the
low rate of interest on government bonds.
VI. _Rent_ is intimately connected with the value of land, and land
is the most important instrument and condition of wealth. In most
countries, other than ours, the land is principally in the possession
of a few owners who let it to other parties for agricultural and other
purposes, and receive compensation therefor. The amount of compensation
depends upon the value of the land. For this latter reason we may treat
the whole question of the value of land under the head of rent, though
on some accounts it should be considered in another place.
The theory respecting rent which has prevailed in England, and largely
in this country for the most of the present century, is that of
Ricardo; and closely connected with it is his theory of value. He held
that rent arises in this way: On the first settling of a new country,
where there is an abundance of more or less fertile land, none of the
land has any value. Every man takes as much as he wants, selecting,
of course, the most productive. As population increases the best land
will be all taken up. Then those who want land must have a poorer
quality, or a second grade. Now, one who gets this second quality would
rather pay something for the first quality than to have the former for
nothing. So when all the land of the second grade is all taken up, and
the third quality begins to be occupied, it is deemed more profitable
to pay something for the second quality, and still more for the first
quality than to have the third for nothing. Closely connected with
this theory of rent is that of Malthus concerning population, which
is, that there is a law of the uniform increase of population, so
that unless artificial checks are applied over-population must, at no
distant day, become the condition and bane of humanity. Another theory
closely related to both these is that of “diminishing returns,” as
stated by J. S. Mill. Substantially this is, that after a certain, not
very advanced period in the development of agriculture, a given amount
of land will produce less and less in proportion to the labor expended
upon it. That is, after a certain degree of culture, a given quantity
of land which yields a given quantity of product, while it will produce
more if the labor upon it is doubled, will not produce double the
former quantity. It follows from these theories, taken in combination,
that as men multiply and their wants increase, the provision for those
wants proportionately diminishes—a most unnatural and dismal theory,
and up to the present time quite contrary to human experience.
A more reasonable, more natural, and far more hopeful doctrine is
that developed by Mr. Carey. He declares it altogether untrue that
the most productive lands are those first occupied. On the contrary,
in the infancy of society men are wholly unable to subdue the richer
soils. These must wait till society becomes more numerous and capable
of combination. At first only the thinner soils can be cultivated,
on account of the feebleness of the inhabitants. Then, as the latter
increase in numbers and in the power and art of combination, the deeper
and heavier soils can be subdued, and finally, those which are covered
with gigantic forests or rich swamps and vast deposits of vegetable
mold. These are many times more productive than the soils first
cultivated, and thus for a long period proportionately _increasing_
instead of _diminishing_ returns are found to go with the increase of
population. There is scarcely any nation, the inhabitants of which have
even now cultivated its most productive soil, and it is likely to be
some time yet before the theoretical limit of diminishing returns is
reached.
The Malthusian doctrine of population is also widely, though not
universally rejected, and it is evident that various counteracting
principles prevail to affect the law of the uniform increase of
population, even if that were demonstrably or approximately true. It is
tolerably obvious that the fecundity of the human race diminishes as
its development and civilization increase. This, taken in connection
with the preceding statements, gives us great grounds, at least, for
dispensing with the more forbidding features of what has been called
“the dismal science.”
Mr. Carey’s theory of the occupancy of land, as he abundantly shows,
is consistent, and the only one consistent, not only with the great
fundamental principles of association, but with the facts reached in
the history of every civilized nation. He also holds that the value
of land depends upon the same principle as that of any other value,
namely, the labor that has been expended upon it. For, as he shows,
there is in general no land that has a value which exceeds that of the
labor which has been requisite to bring it and the property related to
it into its present condition.
VII. _Taxation_ furnishes the compensation paid to the government for
its protection. Government is simply the agent of society, and those
who are the individual constituents of this agency are entitled to a
share of the aggregate product proportionate to the amount and quality
of the labor bestowed.
The great economical question concerning taxation is how to secure the
greatest degree of protection to persons and property at the least
possible expense to the persons protected. Its decision depends partly
upon the expensiveness of the government agencies, and partly upon
the methods of levying and collecting the taxes. As to the former,
there is a great variety of usage in different nations, or in the same
nation at different periods. Not only is this difference seen in the
amount of compensation paid to personal agents directly concerned in
the administration of public affairs, but in the costliness of the
public buildings and other means for carrying out the purposes of
the government. It is evident a true economy does not demand either
parsimony or niggardliness in these respects. The _best_ agents can
only be secured by making the compensation to correspond to that paid
for the same grade of services in other employments. The edifices
and other structures and furniture should both correspond with the
purposes for which they are to be used, and with the general style of
expenditure prevailing in the community. But all expense for the mere
sake of show, all extravagance and prodigality, and all compensation
bestowed as a reason for partisan service or out of personal
favoritism, is not only uneconomical, but for the most part fraudulent.
In the levying and collecting of taxes for revenue two general methods
are pursued, namely, _direct_ and _indirect_. In the former the tax
is paid by the party upon whom it is levied. Such are taxes upon real
estate, tools, machinery, domestic animals, etc. In indirect taxation
the tax, though levied upon one person, is usually paid by another.
Thus, during our civil war, there was a stamp-tax of one cent on each
bunch of matches. The manufacturer paid the tax to the government, but
the consumer of matches paid a cent more for each bunch of matches than
it would have otherwise cost him. Duties on foreign imports are of this
character.
Direct taxes, though by far more just and equable than indirect, are
far less popular. The reason of this is doubtless to be found in the
fact that when the tax-payer meets his obligation in the former case he
does it consciously and with a clear sense that he is parting with so
much actual wealth. In the latter case it is often done unconsciously,
and almost always without realization of the fact. Yet, for this very
reason, it is better that the tax be direct than indirect.