§ 1. Exchange and money make no Difference in the law of Wages.
The division of the produce among the three classes, laborers,
capitalists, and landlords, when considered without any reference to
exchange, appeared to depend on certain general laws. It is fit that we
should now consider whether these same laws still operate, when the
distribution takes place through the complex mechanism of exchange and
money; or whether the properties of the mechanism interfere with and
modify the presiding principles.
The primary division of the produce of human exertion and frugality is, as
we have seen, into three shares—wages, profits, and rents; and these
shares are portioned out, to the persons entitled to them, in the form of
money and by a process of exchange; or, rather, the capitalist, with whom
in the usual arrangements of society the produce remains, pays in money,
to the other two sharers, the market value of their labor and land. If we
examine on what the pecuniary value of labor and the pecuniary value of
the use of land depend, we shall find that it is on the very same causes
by which we found that wages and rent would be regulated if there were no
money and no exchange of commodities.
It is evident, in the first place, that the law of wages is not affected
by the existence or non-existence of exchange or money. Wages depend on
the ratio between population and capital [taking into account the nature
of a country’s industries]; and would do so if all the capital in the
world were the property of one association, or if the capitalists among
whom it is shared maintained each an establishment for the production of
every article consumed in the community, exchange of commodities having no
existence. As the ratio between capital and population, everywhere but in
new colonies, depends on the strength of the checks by which the too rapid
increase of population is restrained, it may be said, popularly speaking,
that wages depend on the checks to population; that, when the check is not
death by starvation or disease, wages depend on the prudence of the
laboring people; and that wages in any country are habitually at the
lowest rate to which in that country the laborer will suffer them to be
depressed rather than put a restraint upon multiplication.
What is here meant, however, by wages, is the laborer’s real scale of
comfort; the quantity he obtains of the things which nature or habit has
made necessary or agreeable to him: wages in the sense in which they are
of importance to the receiver. In the sense in which they are of
importance to the payer, they do not depend exclusively on such simple
principles. Wages in the first sense, the wages on which the laborer’s
comfort depends, we will call real wages, or wages in kind. Wages in the
second sense we may be permitted to call, for the present, money wages;
assuming, as it is allowable to do, that money remains for the time an
invariable standard, no alteration taking place in the conditions under
which the circulating medium itself is produced or obtained. If money
itself undergoes no variation in cost, the money price of labor is an
exact measure of the cost of labor, and may be made use of as a convenient
symbol to express it [if the efficiency of labor also be supposed to
remain the same].
The money wages of labor are a compound result of two elements: first,
real wages, or wages in kind, or, in other words, the quantity which the
laborer obtains of the ordinary articles of consumption; and, secondly,
the money prices of those articles. In all old countries—all countries in
which the increase of population is in any degree checked by the
difficulty of obtaining subsistence—the habitual money price of labor is
that which will just enable the laborers, one with another, to purchase
the commodities without which they either can not or will not keep up the
population at its customary rate of increase. Their standard of comfort
being given (and by the standard of comfort in a laboring class is meant
that rather than forego which they will abstain from multiplication),
money wages depend on the money price, and therefore on the cost of
production, of the various articles which the laborers habitually consume:
because, if their wages can not procure them a given quantity of these,
their increase will slacken and their wages rise. Of these articles, food
and other agricultural produce are so much the principal as to leave
little influence to anything else.
It is at this point that we are enabled to invoke the aid of the
principles which have been laid down in this Third Part. The cost of
production of food and agricultural produce has been analyzed in a
preceding chapter. It depends on the productiveness of the least fertile
land, or of the least productively employed portion of capital, which the
necessities of society have as yet put in requisition for agricultural
purposes. The cost of production of the food grown in these least
advantageous circumstances determines, as we have seen, the exchange value
and money price of the whole. In any given state, therefore, of the
laborers’ habits, their money wages depend on the productiveness of the
least fertile land, or least productive agricultural capital: on the point
which cultivation has reached in its downward progress—in its
encroachments on the barren lands, and its gradually increased strain upon
the powers of the more fertile. Now, the force which urges cultivation in
this downward course is the increase of people; while the counter-force,
which checks the descent, is the improvement of agricultural science and
practice, enabling the same soil to yield to the same labor more ample
returns. The costliness of the most costly part of the produce of
cultivation is an exact expression of the state, at any given moment, of
the race which population and agricultural skill are always running
against each other.
It will be noted, in this exposition, that Mr. Mill has in view an
old country, with a population so dense that numbers are always
pressing close upon subsistence; that their wages are so low as to
give the laborers little more than the necessary wants of life.
That these are not the economic conditions in the United States
goes without saying. First of all, the margin of cultivation is
high: only soils of high productiveness are in cultivation, and
the returns to labor and capital are, consequently, very large.
High wages are found together with low prices of food. The
existing population is not so numerous as to require for the
cultivation of food any but lands of a very high grade of
fertility. The ability to command a high reward for labor (as
compared with European industries), owing to the general
prevalence of high returns in the United States, has resulted in
the establishment of a higher standard for our laborers. The
standard being relatively so high, there is no intimate connection
between the increase of population here and the price of food;
for, as a rule, wages are not so low that any change in the cost
of producing food would require checks upon population. There is a
considerable margin above necessaries, in the laborer’s real wages
in the United States, which may go for comforts, decencies, and
amusements.
§ 2. In the law of Rent.
The degree of productiveness of this extreme margin is an index to the
existing state of the distribution of the produce among the three classes,
of laborers, capitalists, and landlords. When the demand of an increasing
population for more food can not be satisfied without extending
cultivation to less fertile land, or incurring additional outlay, with a
less proportional return, on land already in cultivation, it is a
necessary condition of this increase of agricultural produce that the
value and price of that produce must first rise. The price of food will
always on the average be such that the worst land, and the least
productive installment of the capital employed on the better lands, shall
just replace the expenses with the ordinary profit. If the least favored
land and capital just do thus much, all other land and capital will yield
an extra profit, equal to the proceeds of the extra produce due to their
superior productiveness; and this extra profit becomes, by competition,
the prize of the landlords. Exchange and money, therefore, make no
difference in the law of rent: it is the same as we originally(293) found
it. Rent is the extra return made to agricultural capital when employed
with peculiar advantages; the exact equivalent of what those advantages
enable the producers to economize in the cost of production: the value and
price of the produce being regulated by the cost of production to those
producers who have no advantages; by the return to that portion of
agricultural capital the circumstances of which are the least favorable.
§ 3. —Nor in the law of Profits.
Wages and rent being thus regulated by the same principles when paid in
money, as they would be if apportioned in kind, it follows that Profits
are so likewise. For the surplus, after replacing wages and paying rent,
constitutes Profits.
We found, in the last chapter of the Second Book, that the advances of the
capitalist, when analyzed to their ultimate elements, consist either in
the purchase or maintenance of labor, or in the profits of former
capitalists; and that, therefore, profits in the last resort depend upon
the Cost of Labor, falling as that rises, and rising as it falls. Let us
endeavor to trace more minutely the operation of this law.
There are two modes in which the Cost of Labor, which is correctly
represented (money being supposed invariable as well as efficiency) by the
money wages of the laborer, may be increased. The laborer may obtain
greater comforts; wages in kind—real wages—may rise. Or the progress of
population may force down cultivation to inferior soils and more costly
processes; thus raising the cost of production, the value, and the price,
of the chief articles of the laborer’s consumption. On either of these
suppositions the rate of profit will fall.
If the laborer obtains more abundant commodities only by reason of their
greater cheapness, if he obtains a greater quantity, but not on the whole
a greater cost, real wages will be increased, but not money wages, and
there will be nothing to affect the rate of profit. But, if he obtains a
greater quantity of commodities of which the cost of production is not
lowered, he obtains a greater cost; his money wages are higher. The
expense of these increased money wages falls wholly on the capitalist.
There are no conceivable means by which he can shake it off. It may be
said—it used formerly to be said—that he will get rid of it by raising his
price. But this opinion we have already, and more than once, fully
refuted.(294)
The doctrine, indeed, that a rise of wages causes an equivalent rise of
prices, is, as we formerly observed, self-contradictory: for, if it did
so, it would not be a rise of wages; the laborer would get no more of any
commodity than he had before, let his money wages rise ever so much; a
rise of real wages would be an impossibility. This being equally contrary
to reason and to fact, it is evident that a rise of money wages does not
raise prices; that high wages are not a cause of high prices. A rise of
general wages falls on profits. There is no possible alternative.
Having disposed of the case in which the increase of money wages, and of
the Cost of Labor, arises from the laborer’s obtaining more ample wages in
kind, let us now suppose it to arise from the increased cost of production
of the things which he consumes, owing to an increase of population
unaccompanied by an equivalent increase of agricultural skill. The
augmented supply required by the population would not be obtained, unless
the price of food rose sufficiently to remunerate the farmer for the
increased cost of production. The farmer, however, in this case sustains a
twofold disadvantage. He has to carry on his cultivation under less
favorable conditions of productiveness than before. For this, as it is a
disadvantage belonging to him only as a farmer, and not shared by other
employers, he will, on the general principles of value, be compensated by
a rise of the price of his commodity; indeed, until this rise has taken
place, he will not bring to market the required increase of produce. But
this very rise of price involves him in another necessity, for which he is
not compensated. He must pay higher money wages to his laborers [if they
retain the same quantity of real wages]. This necessity, being common to
him with all other capitalists, forms no ground for a rise of price. The
price will rise, until it has placed him in as good a situation, in
respect of profits, as other employers of labor; it will rise so as to
indemnify him for the increased labor which he must now employ in order to
produce a given quantity of food; but the increased wages of that labor
are a burden common to all, and for which no one can be indemnified. It
will be paid wholly from profits.
Thus we see that increased wages, when common to all descriptions of
productive laborers, and when really representing a greater Cost of Labor,
are always and necessarily at the expense of profits. And by reversing the
cases, we should find in like manner that diminished wages, when
representing a really diminished Cost of Labor, are equivalent to a rise
of profits. But the opposition of pecuniary interest thus indicated
between the class of capitalists and that of laborers is to a great extent
only apparent. Real wages are a very different thing from the Cost of
Labor, and are generally highest at the times and places where, from the
easy terms on which the land yields all the produce as yet required from
it, the value and price of food being low, the cost of labor to the
employer, notwithstanding its ample remuneration, is comparatively cheap,
and the rate of profit consequently high, as at present in the United
States. We thus obtain a full confirmation of our original theorem that
Profits depend on the Cost of Labor: or, to express the meaning with still
greater accuracy, the rate of profit and the cost of labor vary inversely
as one another, and are joint effects of the same agencies or causes.
BOOK IV. INFLUENCE OF THE PROGRESS OF SOCIETY ON PRODUCTION AND
DISTRIBUTION.
Chapter I. Influence Of The Progress Of Industry And Population On Values
And Prices.
§ 1. Tendency of the progress of society toward increased Command over the
powers of Nature; increased Security, and increased Capacity of
Co-Operation.
In the leading countries of the world, and in all others as they come
within the influence of those leading countries, there is at least one
progressive movement which continues with little interruption from year to
year and from generation to generation—a progress in wealth; an
advancement in what is called material prosperity. All the nations which
we are accustomed to call civilized increase gradually in production and
in population: and there is no reason to doubt that not only these nations
will for some time continue so to increase, but that most of the other
nations of the world, including some not yet founded, will successively
enter upon the same career. It will, therefore, be our first object to
examine the nature and consequences of this progressive change, the
elements which constitute it, and the effects it produces on the various
economical facts of which we have been tracing the laws, and especially on
wages, profits, rents, values, and prices.
Of the features which characterize this progressive economical movement of
civilized nations, that which first excites attention, through its
intimate connection with the phenomena of Production, is the perpetual,
and, so far as human foresight can extend (1), the unlimited, growth of
man’s power over nature. Our knowledge of the properties and laws of
physical objects shows no sign of approaching its ultimate boundaries: it
is advancing more rapidly, and in a greater number of directions at once,
than in any previous age or generation, and affording such frequent
glimpses of unexplored fields beyond as to justify the belief that our
acquaintance with nature is still almost in its infancy.
Another change, which has always hitherto characterized, and will
assuredly continue to characterize, the progress of civilized society, is
(2) a continual increase of the security of person and property. Of this
increased security, one of the most unfailing effects is a great increase
both of production and of accumulation. Industry and frugality can not
exist where there is not a preponderant probability that those who labor
and spare will be permitted to enjoy.
One of the changes which most infallibly attend the progress of modern
society is, (3) an improvement in the business capacities of the general
mass of mankind. I do not mean that the practical sagacity of an
individual human being is greater than formerly. What is lost in the
separate efficiency of each is far more than made up by the greater
capacity of united action. Works of all sorts, impracticable to the savage
or the half-civilized, are daily accomplished by civilized nations, not by
any greatness of faculties in the actual agents, but through the fact that
each is able to rely with certainty on the others for the portion of the
work which they respectively undertake. The peculiar characteristic, in
short, of civilized beings, is the capacity of co-operation; and this,
like other faculties, tends to improve by practice, and becomes capable of
assuming a constantly wider sphere of action.
[This progress affords] space and scope for an indefinite increase of
capital and production, and for the increase of population which is its
ordinary accompaniment. That the growth of population will overpass the
increase of production, there is not much reason to apprehend. It is,
however, quite possible that there might be a great progress in industrial
improvement, and in the signs of what is commonly called national
prosperity; a great increase of aggregate wealth, and even, in some
respects, a better distribution of it; that not only the rich might grow
richer, but many of the poor might grow rich, that the intermediate
classes might become more numerous and powerful, and the means of
enjoyable existence be more and more largely diffused, while yet the great
class at the base of the whole might increase in numbers only, and not in
comfort nor in cultivation. We must, therefore, in considering the effects
of the progress of industry, admit as a supposition, however greatly we
deprecate as a fact, an increase of population as long-continued, as
indefinite, and possibly even as rapid, as the increase of production and
accumulation.
§ 2. Tendency to a Decline of the Value and Cost of Production of all
Commodities.
The changes which the progress of industry causes or presupposes in the
circumstances of production are necessarily attended with changes in the
values of commodities.
The permanent values of all things which are neither under a natural nor
under an artificial monopoly depend, as we have seen, on their cost of
production. (1.) But the increasing power which mankind are constantly
acquiring over nature increases more and more the efficiency of human
exertion, or, in other words, diminishes cost of production. All
inventions by which a greater quantity of any commodity can be produced
with the same labor, or the same quantity with less labor, or which
abridge the process, so that the capital employed needs not be advanced
for so long a time, lessen the cost of production of the commodity. As,
however, value is relative, if inventions and improvements in production
were made in all commodities, and all in the same degree, there would be
no alteration in values.
As for prices, in these circumstances they would be affected or not,
according as the improvements in production did or did not extend to the
precious metals. If the materials of money were an exception to the
general diminution of cost of production, the values of all other things
would fall in relation to money—that is, there would be a fall of general
prices throughout the world. But if money, like other things, and in the
same degree as other things, were obtained in greater abundance and
cheapness, prices would be no more affected than values would.
As regards the precious metals, it is to be said that since 1850
there has been a vast increase in their amount, and probably in
greater proportion than the need arising from increased
transactions. This is certainly true of silver; and it is admitted
to be true of gold as late as about 1865. It has been asserted by
Mr. Goschen that since then, especially since 1873, gold has not
existed in a quantity that would permit it to keep its former
proportions to commodities, and that it had appreciated. An
appreciation, of course, would show itself in lower gold prices.
On the other hand, gold has, as I think, not appreciated. Prices,
even in the collapse of credit after the panic of 1873 down to
1879, were not quite so low as in 1845-1850, as is seen by the
following table taken from the London “Economist”—2,200 indicating
the price of a given number of articles in 1845-1850, as the basis
of the table with which the prices of other years are compared:
Year. Index numbers.
1845-1850 2,200
1857, July 1 2,996
1858, January 1 2,612
1865 3,575
1866 3,564
1867 3,024
1868 2,682
1869 2,666
1870 2,689
1871 2,590
1872 2,835
1873 2,947
1874 (Depression) 2,891
1875 (Depression) 2,778
1876 (Depression) 2,711
1877 (Depression) 2,723
1878 (Depression) 2,529
1879 (Depression) 2,202
1880 2,538
1881 2,376
1882 2,435
1883 2,343
But the progress of society, particularly in the direction of
improved and cheapened processes of manufacturing, has vastly
lowered the cost of a great number of articles of common
consumption. The process has been already seen in the diminished
charge for railway transportation (see Chart No. V). Moreover, the
years of a depression are exactly those in which there is always a
forced economy, and generally form a period in which cheapening
goes on at its best. Hence, if prices have had a tendency to fall,
owing to the lowered cost of production consequent on
improvements—and if they are not, as a rule, lower than in 1850—it
shows that they are still supported by the high tide of the great
gold production of this century. And even the access to more
fertile land in the world has acted to prevent an increase in the
prices of agricultural products such as would offset the fall of
manufactured goods. That is, the fact that prices have not fallen
as much as might be expected, indicates that the gold has
prevented the lower costs due to the progress of industry from
being fully seen.
Improvements in production are not the only circumstance accompanying the
progress of industry, which tends to diminish the cost of producing, or at
least of obtaining, commodities. (2.) Another circumstance is the increase
of intercourse between different parts of the world. As commerce extends,
and the ignorant attempts to restrain it by tariffs become obsolete,
commodities tend more and more to be produced in the places in which their
production can be carried on at the least expense of labor and capital to
mankind. (3.) Much will also depend on the increasing migration of labor
and capital to unoccupied parts of the earth, of which the soil, climate,
and situation are found, by the ample means of exploration now possessed,
to promise not only a large return to industry, but great facilities of
producing commodities suited to the markets of old countries. Much as the
collective industry of the earth is likely to be increased in efficiency
by the extension of science and of the industrial arts, a still more
active source of increased cheapness of production will be found,
probably, for some time to come, in the gradually unfolding consequences
of Free Trade, and in the increasing scale on which Emigration and
Colonization will be carried on.
From the causes now enumerated, unless counteracted by others, the
progress of things enables a country to obtain, at less and less of real
cost, not only its own productions but those of foreign countries. Indeed,
whatever diminishes the cost of its own productions, when of an exportable
character, enables it, as we have already seen, to obtain its imports at
less real cost.
§ 3. —except the products of Agriculture and Mining, which have a tendency
to Rise.
Are no causes of an opposite character, brought into operation by the same
progress, sufficient in some cases not only to neutralize but to overcome
the former, and convert the descending movement of cost of production into
an ascending movement? We are already aware that there are such causes,
and that, in the case of the most important classes of commodities, food,
and materials, there is a tendency diametrically opposite to that of which
we have been speaking. The cost of production of these commodities tends
to increase.
This is not a property inherent in the commodities themselves. If
population were stationary, and the produce of the earth never needed to
be augmented in quantity, there would be no cause for greater cost of
production.(295) The only products of industry which, if population did
not increase, would be liable to a real increase of cost of production,
are those which, depending on a material which is not renewed, are either
wholly or partially exhaustible, such as coal, and most if not all metals;
for even iron, the most abundant as well as most useful of metallic
products, which forms an ingredient of most minerals and of almost all
rocks, is susceptible of exhaustion so far as regards its richest and most
tractable ores.
When, however, population increases, as it has never yet failed to do,
then comes into effect that fundamental law of production from the soil on
which we have so frequently had occasion to expatiate, the law that
increased labor, in any given state of agricultural skill, is attended
with a less than proportional increase of produce. The cost of production
of the fruits of the earth increases, _cæteris paribus_, with every
increase of the demand.
Mr. Cairnes has made some essential contributions to the
discussion of changes of value arising from the progress of
society:(296) “When a colony establishes itself in a new country,
the course of its industrial development naturally follows the
character of the opportunities offered to industrial enterprise by
the environment. These will, of course, vary a good deal,
according to the part of the world in which the new society
happens to be placed; but, speaking broadly, they will be such as
to draw the bulk of the industrial activity of the new people into
some one or more of those branches of industry which have been
conveniently designated ‘extractive.’ Agriculture, pastoral and
mining pursuits, and the cutting of lumber, are among the
principal of such industries.” To these pursuits apply “that law
of Political Economy, or, more properly, of physical nature, which
Mr. Mill has rightly characterized as the most important
proposition in economic science—the law, as he phrased it, of
‘diminishing productiveness.’ It may be thus briefly stated: In
any given state of the arts of production, the returns to human
industry employed upon natural agents will, up to a certain point,
be the maximum which those natural agents, cultivated with the
degree of skill brought to bear upon them, are capable of
yielding; but, after this point has been passed, though an
increased application of labor and capital will obtain an
increased return, it will not obtain a proportionally increased
return; on the contrary, every further increase of outlay—always
assuming that the skill employed in applying it continues the same
as before—will be attended with a return constantly
diminishing.... What I am now concerned to show is the manner in
which, with the progress of society, the law in question affects
the course of normal(297) values in all commodities coming under
its influence.
“The class of commodities in the production of which the
facilities possessed by new communities, as compared with old,
attain their greatest height, are those of which timber and meat
may be taken as the type, and comprises such articles as wool,
game, furs, hides, horns, pitch, resin, etc. The circumstance
which most powerfully affects the course of values in the products
of extractive industry, and in the commodities just referred to
among the rest, is the degree in which they admit of being
transported from place to place—that is to say, their
_portableness_—depending, as it does, partly on their durability
and partly on their bulk.” It is found that, taking timber and
meat as a type—one possessing portableness in a vastly greater
degree than the other—in the early settlement of a new country,
the portable article, like timber, at once rises in price “to a
level lower than that prevailing in old countries only by the cost
of transport”; on the other hand, perishable articles like meat
are “confined for a market, if not to the immediate locality where
it is produced, at least to the bordering countries; and, being
raised in new countries at very low cost, their value during the
early stages of their growth is necessarily low. But, as
population advances, and agriculture encroaches on the natural
pasture-lands originally available for the rearing of cattle,
still more as it becomes necessary to cultivate land for the
purpose of pasture, the cost of meat constantly rises.” As
population increases there will be an increased demand for
dairy-products, eggs, small fruits, fresh vegetables, milk, etc.,
and thereby it becomes more profitable to employ land near
populous centers for such perishable products than for the
products of large farming. Almost every one, who knows the high
prices of butter, eggs, and vegetables in large cities as compared
with their prices in country districts, is familiar with the
phenomena which illustrate this principle. Moreover, as a denser
population settles on our Western prairies, now given over to
ranches and vast pasturing-grounds for cattle—since cattle in
general require a large extent of land—the cost of meat will rise.
The prices of perishable articles, therefore, will rise without
any limit except that set by increasing numbers, and can not be
kept down by the force of competition from other distant places,
as is the case with such easily transportable things as timber and
wool. What has been said of the transportableness of meat,
however, is to be modified somewhat by the introduction of
improved processes of transporting meat in refrigerator-cars; but
there still exist commodities of which meat was only taken as a
type.
No tendency of a like kind exists with respect to manufactured articles.
The tendency is in the contrary direction. The larger the scale on which
manufacturing operations are carried on, the more cheaply they can in
general be performed. As manufactures, however, depend for their materials
either upon agriculture, or mining, or the spontaneous produce of the
earth, manufacturing industry is subject, in respect of one of its
essentials, to the same law as agriculture. But the crude material
generally forms so small a portion of the total cost that any tendency
which may exist to a progressive increase in that single item is much
overbalanced by the diminution continually taking place in all the other
elements; to which diminution it is impossible at present to assign any
limit.
It follows that the exchange values of manufactured articles, compared
with the products of agriculture and of mines, have, as population and
industry advance, a certain and decided tendency to fall. Money being a
product of mines, it may also be laid down as a rule that manufactured
articles tend, as society advances, to fall in money price. The industrial
history of modern nations, especially during the last hundred years, fully
bears out this assertion.
In regard to manufactures, as opposed to raw products, it is to be
remarked “that, as the course of price in the field of raw
products is, on the whole, upward, so in that of manufactured
goods the course is, not less strikingly, in the opposite
direction. The reasons of this are exceedingly plain. In the first
place, _division of labor_—the first and most powerful of all
cheapeners of production, but for which there is in extractive
industry but very limited scope—finds in manufacturing industry an
almost unbounded range for its application; and, secondly, it is
in manufacturing industry also that _machinery_, the other great
cheapener of production, admits of being employed on the largest
scale, and has, in fact, been employed with the most signal
success. It follows at once from these facts, taken in connection
with the further fact that industrial invention does not take
place _per saltum_, but gradually—one invention ever treading on
the heels of another—and that its advance seems to be subject to
no limitation; it follows, I say, from these considerations, that
that portion of the cost of manufactured goods which properly
belongs to the manufacturing process must, with the progress of
society, undergo constant diminution.... In all the great branches
of manufacturing industry the portion of the cost incurred in the
manufacturing process bears in general a large proportion to that
represented by the raw material, while the influence of industrial
invention, in reducing this portion of the cost, is, as every one
knows, great and unremitting in its action.”
As has been said, “the two great cheapeners of production are
division of labor and machinery, and the degree in which these
admit of being applied to manufacture is mainly dependent upon the
scale on which the manufacturing process is carried on. Those
manufactures, therefore, that are produced upon a large scale are
the sort of manufactures in which we may expect the greatest
reduction in cost; in which, therefore, the fall in price, with
the progress of society, will be most marked. But the manufactures
which are produced upon the largest scale are those for which
there exists the largest demand—that is to say, are those which
enter most extensively into the consumption of the great mass of
people. They are also, I may add, those in which a fall in price
is apt to stimulate a great increase of demand. All the common
kinds of clothing, furniture, and utensils fall within the scope
of this remark; and it is in these, rather than in the commodities
consumed exclusively or mainly by the richer classes, that we
should, accordingly, expect to find the greatest marvels of
cheapening.” But the articles of common consumption are those in
which “the amount of manufacture bestowed upon them bears a
smaller proportion to the raw material than is the case with the
more elaborate manufactures. Such coarser manufactures, therefore,
would feel the effects of the advancing cost of the raw material
more sensibly than the refined sorts. Nevertheless, it can not be
supposed to compensate the advantages due to the causes I have
pointed out which fall to the share of the commoner sorts. It is
in this class of goods that the most remarkable reductions in
price have been accomplished in the past, and it is in them,
probably, that we shall witness in the future the greatest results
of the same kind.”
§ 4. —that tendency from time to time Counteracted by Improvements in
Production.
Whether agricultural produce increases in absolute as well as comparative
cost of production depends on the conflict of the two antagonist
agencies—increase of population and improvement in agricultural skill. In
some, perhaps in most, states of society (looking at the whole surface of
the earth), both agricultural skill and population are either stationary,
or increase very slowly, and the cost of production of food, therefore, is
nearly stationary. In a society which is advancing in wealth, population
generally increases faster than agricultural skill, and food consequently
tends to become more costly; but there are times when a strong impulse
sets in toward agricultural improvement. Such an impulse has shown itself
in Great Britain during the last fifteen or twenty years [before 1847]. In
England and Scotland agricultural skill has of late increased considerably
faster than population, insomuch that food and other agricultural produce,
notwithstanding the increase of people, can be grown at less cost than
they were thirty years ago; and the abolition of the Corn Laws has given
an additional stimulus to the spirit of improvement. In some other
countries, and particularly in France, the improvement of agriculture
gains ground still more decidedly upon population, because though
agriculture, except in a few provinces, advances slowly, population
advances still more slowly, and even with increasing slowness, its growth
being kept down, not by poverty, which is diminishing, but by prudence.
Moreover, the cheapened cost of transportation has admitted to
England and the Continent the wheat supplies of our Western States
at a low price even after having been carried to transatlantic
markets. New methods of getting food-supplies from foreign
countries act equally with improvements at home.
§ 5. Effect of the Progress of Society in moderating fluctuations of
Value.
Thus far, of the effect of the progress of society on the permanent or
average values and prices of commodities. It remains to be considered in
what manner the same progress affects their fluctuations. Concerning the
answer to this question there can be no doubt. It tends in a very high
degree to diminish them.
In poor and backward societies, as in the East, and in Europe during the
middle ages, extraordinary differences in the price of the same commodity
might exist in places not very distant from each other, because the want
of roads and canals, the imperfection of marine navigation, and the
insecurity of communications generally, prevented things from being
transported from the places where they were cheap to those where they were
dear. The things most liable to fluctuations in value, those directly
influenced by the seasons, and especially food, were seldom carried to any
great distances. In most years, accordingly, there was, in some part or
other of any large country, a real dearth; while a deficiency at all
considerable, extending to the whole world, is [now] a thing almost
unknown. In modern times, therefore, there is only dearth, where there
formerly would have been famine, and sufficiency everywhere when anciently
there would have been scarcity in some places and superfluity in others.
The same change has taken place with respect to all other articles of
commerce. The safety and cheapness of communications, which enable a
deficiency in one place to be supplied from the surplus of another, at a
moderate or even a small advance on the ordinary price, render the
fluctuations of prices much less extreme than formerly. This effect is
much promoted by the existence of large capitals, belonging to what are
called speculative merchants, whose business it is to buy goods in order
to resell them at a profit. These dealers naturally buying things when
they are cheapest, and storing them up to be brought again into the market
when the price has become unusually high, the tendency of their operations
is to equalize price, or at least to moderate its inequalities. The prices
of things are neither so much depressed at one time, nor so much raised at
another, as they would be if speculative dealers did not exist.
Mr. Mill uses the term “speculative” in a different sense from
that which is customary in this country. Merchants who buy
outright and store up grain are not speculators in the sense in
which the word is used with us; but those gamblers who purchase,
“for future delivery,” grain which they never see, and which they
sell in the same way, are here known as speculators.
It appears, then, that the fluctuations of values and prices arising from
variations of supply, or from alterations in real (as distinguished from
speculative) demand, may be expected to become more moderate as society
advances. With regard to those which arise from miscalculation, and
especially from the alternations of undue expansion and excessive
contraction of credit, which occupy so conspicuous a place among
commercial phenomena, the same thing can not be affirmed with equal
confidence. Such vicissitudes, beginning with irrational speculation and
ending with a commercial crisis, have not hitherto become either less
frequent or less violent with the growth of capital and extension of
industry. Rather they may be said to have become more so, in consequence,
as is often said, of increased competition, but, as I prefer to say, of a
lower rate of profits and interest, which makes capitalists dissatisfied
with the ordinary course of safe mercantile gains. The connection of this
low rate of profit with the advance of population and accumulation is one
of the points to be illustrated in the ensuing chapters.
Mr. Cairnes also adds some investigations as to the fluctuations
of value: “Hitherto I have examined the derivative laws of value
in so far only as they are exemplified in the movements of
_normal_ prices. It will be interesting now to consider whether it
is possible to discover in the movements of _market_ prices any
corresponding phenomena.
“Taking manufactures first, it is evident at once that, as regards
conditions of protection, the circumstances of the case are such
as to secure, in general, (1.) great rapidity and great certainty
in bringing commodities to market. A deal table may be made in a
few hours, a piece of cloth in a few weeks, and a moderate-sized
house in a month or little more. Tables, cloth, and houses may be
produced with certainty in any quantity required. It results from
this that it is scarcely possible that, under ordinary
circumstances, the selling price of a product of manufacture
should for any long time much exceed its normal price. (2.) The
nature of manufactures is, in general, such as to fit them
admirably for distant transport. Any considerable elevation of
price, therefore, is pretty certain to attract supplies from
remote sources. (3.) Further, considered in their relation to
human needs, I think it may be said of manufactured goods, that
either the need for them is not very urgent, or, where it happens
to be so, substitutes ... may easily be found. From all these
circumstances it results that an advance in the price ... either
attracts supplies, or deters purchasers, ... preventing any great
departure from the usual terms of the market.
“Turning now to the products of agricultural, pastoral, or, more
generally, ‘extractive’ industry, we find the circumstances under
which this class of goods is brought to market in all respects
extremely different from those which we have just examined, and
such as to permit a much wider margin of deviation for the market
from the normal price. Here the period of production is longer,
the result of the process much more uncertain, the commodity at
once more perishable and less portable, and human requirements in
relation to it are mostly of a more urgent kind: (1.) The shortest
period within which additions can be made to the supply of food
and raw material of the vegetable kind is in general a year, and,
if the commodity be of animal origin, the minimum is considerably
larger. (2.) Again, the farmer may decide upon the breadth of
ground to be devoted to a particular crop, or upon the number of
cattle he will maintain; but the actual returns will vary
according to the season, and may prove far in excess or far in
defect of his calculations. These circumstances all present
obstacles to the adjustment of supply and demand, and consequently
tend to produce frequent and extensive deviations of the market
from the normal price. Nor are the other conditions of the case
such as to neutralize the influence of such disturbing agencies.
(3.) The nature, indeed, of some of the principal agricultural
products fits them sufficiently well for distant transport, and so
far tends to correct fluctuations of price. But, on the other
hand, (4.) the relation of these products to human wants is such
as greatly to enhance that tendency to violent fluctuation
incident to the conditions of their production. More especially is
this the case with the commodity, whatever it may be, which forms
the staple food of a people. For observe the peculiar nature of
human requirements with reference to such a commodity. They are of
this kind, that, given the number of a population, the quantity of
the staple food required is nearly a fixed quantity, and this
almost irrespective of price. Except among the poorest, increased
cheapness will not stimulate a larger consumption; while, on the
other hand, all, at any cost within the range of their means, will
obtain their usual supply. The consequence is that, when even a
moderate deficiency or excess occurs in the supply of the staple
food of a people, in the one case (_a_), the competition of
consumers for their usual quantum of food rapidly forces up the
price far out of proportion to the diminution in the supply; in
the other (_b_), no one being inclined to increase his usual
consumption, the competition of sellers, in their eagerness to
find a market for the superfluous portion of the supply, is
equally powerful to depress it.”
Chapter II. Influence Of The Progress Of Industry And Population On Rents,
Profits, And Wages.
§ 1. Characteristic features of industrial Progress.
Continuing the inquiry into the nature of the economical changes taking
place in a society which is in a state of industrial progress, we shall
next consider what is the effect of that progress on the distribution of
the produce among the various classes who share in it. We may confine our
attention to the system of distribution which is the most complex, and
which virtually includes all others—that in which the produce of
manufactures is shared between two classes, laborers and capitalists, and
the produce of agriculture among three, laborers, capitalists, and
landlords.
The characteristic features of what is commonly meant by industrial
progress resolve themselves mainly into three, increase of capital,
increase of population, and improvements in production; understanding the
last expression, in its widest sense, to include the process of procuring
commodities from a distance, as well as that of producing them. It will be
convenient to set out by considering each of the three causes, as
operating separately; after which we can suppose them combined in any
manner we think fit.(298)
§ 2. First two cases, Population and Capital increasing, the arts of
production stationary.
For the sake of clearness we will form two general groups of these
causes:
A. _The Influence of Population and Capital_ (_Improvements
remaining stationary_).
B. _The Influence of Improvements_ (_Population and Capital
remaining stationary_).
We will first take up A, and under this division make for
convenience two separate suppositions:
I. The first is that, while Population is advancing, Capital is
stationary. By this means we can study separately the operation of
one of the factors of societary progress, Population, and see its
influence on rents, profits, and wages. There being only the same
given quantity of wealth in the form of capital to be now
distributed among more laborers (1), real wages must fall;
whereupon, if the same capital purchases more labor, and obtains
more produce (2), profits rise. Now, if the laborers were so well
off before as to suffer the reduction of wages to take place not
in their food, but in their other comforts, then, if each laborer
uses as much food as before, and if, as by the supposition, there
are more laborers, an increased quantity of food will be required
from the soil. This supply can be produced only at a greater cost,
and, as inferior soils are called into cultivation (3), rents will
rise. This last action (3), however, will have an influence on the
rise of profits (2). For it was only by a reduction of real wages
that profits rose; but if the cost of food, that is, the real
wages, have since risen, then one of the elements entering into
cost of labor has risen, and in so far will offset the fall of
real wages; so that profits will not gain so much as if rents had
not risen. The result of this first supposition, then, is, that
the landlord is the chief gainer:
I. (1.) Wages fall.
(2.) Profits rise (less if rents rise).
(3.) Rents rise.
II. We will now take up the second supposition under A, that while
Capital is advancing Population remains stationary. Then, of
course (1), wages will rise; and, as there is no improvement to
cheapen the cost of their real wages, there will be an increase in
cost of labor to the capitalist, and (2) profits will fall. If,
now, the laborers, being better off, demand more food, the new
food would cost more, as the margin of cultivation was pushed
down, and (3) rents would inevitably rise. But not only have the
laborers received more real wages, but since that change the cost,
as just described, of these real wages has increased. Therefore
(2), profits would fall still more than by the rise of real wages.
In this supposition, consequently, while the laborer gains, so
does the landlord:
II. (1.) Wages rise.
(2.) Profits fall (more if rents rise).
(3.) Rents rise.
A. It is easy for us now to take into our view the total effects
under A, and see what the combined action of I and II would be.
That is, if both Capital and Population (improvements remaining
stationary) increase, what will be the effect on Wages, Profits,
and Rent? Of course, we must suppose that Capital and Population
just keep pace with each other; and in that case (1) real wages
remain the same, each laborer receiving the same quantity and same
quality of commodities as before. Hence, if each laborer receives
the same quantity as before, and there are many more laborers,
there will be an increased demand put upon the soil for food,
poorer soils will be cultivated, and the cost of the products will
rise. So (3) rents rise. But if each laborer receives the same
quantity of real wages as before, and the cost of them has risen,
as just explained, an increased cost of labor will result which
must come out of profits. (2) Profits will fall. So that the
results of A upon distribution, taken separately from B, are that
the owner of capital loses; but the owner of land again gains.
A. (1.) Wages the same.
(2.) Profits fall.
(3.) Rents rise.
§ 3. The arts of production advancing, capital and population stationary.
Now, let us go back to our first general group of causes, B—an
advance in the arts of production (while capital and population
remain stationary). We can now study by themselves the effect of
improvements on wages, profits, and rent. The general effects
arising from the extended introduction of machinery into
agriculture and manufactures, the lowered cost of transportation
by steam, have been to lessen the value of articles consumed
chiefly by the laboring-classes. For the sake of clearness,
imagine that the improvement comes suddenly. The first effect will
be to lower the value and price of articles entering into the real
wages of the laborers; and, if those consist mostly of food, there
will be a rise in the margin of cultivation and a fall in rents
(3). It has been previously shown(299) that improvements retard,
or put back, the law of diminishing returns from land (or in
manufactures compensate for it), and so lower rents. The poorest
soil cultivated is now of a better grade than before, and the
produce is yielded at a less cost and value; so that the land with
which the best grades are compared, to determine the rent, is not
separated from the best grades by so wide a gap. It would at first
blush seem, then, that the interests of the landlord were
antagonistic to improvements, since they lower rents; but, in
practice, it is not so, as we shall soon see.
We have seen that improvements cheapen the price of articles
entering into the real wages of the laborer. Having had a given
sum as money wages before the change, then, when the sudden change
of improvements came, it lowered prices to the laborer, and the
same money wages bought more (1) real wages. If nothing more
happened, we could see that improvements raised real wages—without
lowering (2) profits (because cost of labor remains the same,
since the lowered cost of the articles consumed was exactly in
proportion to the increase of real wages). And, if the laborers
chose to retain this higher standard, this would be the situation.
Sadly enough, however, in practice they are apt to be satisfied
with the old standard; and the amount of real wages to give the
old standard of living can be had now for less money wages. While
only the same number, without any increase, can live at the new
(higher) standard, a larger number can live at the old (lower)
standard. In short, the obstacles to an increase of population
will be removed by the possession of higher money wages. After a
generation, it is very probable that a larger number of laborers
will be in existence living at the same (or possibly a slightly
higher) standard of real wages, and money wages will have fallen.
Now we can understand better than before what would be the
practical result of the causes under B. (3.) Rent has fallen;
money wages have fallen (even if (2) real wages have not); and,
since real wages have not fallen in the proportion that their cost
has been reduced, (2) profits will have risen. The general result
of the causes under B alone, acting as just described, will then
be:
B. (1.) Real wages remain the same; money wages less.
(2.) Profits rise.
(3.) Rents fall.
§ 4. Theoretical results, if all three Elements progressive.
We have considered, on the one hand, under A, the manner in which
the distribution of the produce into rent, profits, and wages is
affected by the ordinary increase of Population and Capital; and
on the other, under B, how it is affected by improvements in
production, and more especially in agriculture, as follows:
A. (1.) Wages the same. B. (1.) Real wages the same, money wages
less.
A. (2.) Profits fall. B. (2.) Profits rise.
A. (3.) Rents rise. B. (3.) Rents fall.
The effects are clearly contrasted. Under A, we see a tendency to
a rise of rents (3), an increased cost of labor, and a fall of
profits (2); under B, a fall of rents (3), a diminished cost of
labor, and a rise of profits (2). We have, therefore, analyzed the
forces belonging to the progress of industry, and found two
distinct and antagonistic forces, working against each other. If,
at any period, improvements (B) advance faster than population and
capital (A), rent and money wages will tend downward and profits
upward. If, on the other hand, population advances faster than
improvements (B) either the laborers will submit to a reduction in
the quantity or quality of their food, or, if not, rent and money
wages will progressively rise, and profits will fall.
§ 5. Practical Results.
This, however, is not the final and practical result. We have
hitherto supposed that improvements, B, come suddenly. In point of
fact, agricultural skill is slowly diffused, and inventions and
discoveries are, in general, only occasional, not continuous in
their action, as is the increase of capital and population.
Inasmuch as it seldom happens that improvement has so much the
start of population and capital as actually to lower rent, or
raise the rate of profits, population almost everywhere “treads
close on the heels of agricultural improvement,” and effaces its
effects as fast as they are produced.
The reason why agricultural improvement seldom lowers rent is, that it
seldom cheapens food, but only prevents it from growing dearer; and
seldom, if ever, throws land out of cultivation, but only enables worse
and worse land to be taken in for the supply of an increasing demand. What
is sometimes called the natural state of a country which is but half
cultivated, namely, that the land is highly productive, and food obtained
in great abundance by little labor, is only true of unoccupied countries
colonized by a civilized people. In the United States the worst land in
cultivation is of a high quality (except sometimes in the immediate
vicinity of markets or means of conveyance, where a bad quality is
compensated by a good situation); and even if no further improvements were
made in agriculture or locomotion, cultivation would have many steps yet
to descend, before the increase of population and capital would be brought
to a stand; but in Europe five hundred years ago, though so thinly peopled
in comparison to the present population, it is probable that the worst
land under the plow was, from the rude state of agriculture, quite as
unproductive as the worst land now cultivated, and that cultivation had
approached as near to the ultimate limit of profitable tillage in those
times as in the present. What the agricultural improvements since made
have really done is, by increasing the capacity of production of land in
general, to enable tillage to extend downward to a much worse natural
quality of land than the worst which at that time would have admitted of
cultivation by a capitalist for profit; thus rendering a much greater
increase of capital and population possible, and removing always a little
and a little further off the barrier which restrains them; population
meanwhile always pressing so hard against the barrier that there is never
any visible margin left for it to seize, every inch of ground made vacant
for it by improvement being at once filled up by its advancing columns.
Agricultural improvement may thus be considered to be not so much a
counter-force conflicting with increase of population as a partial
relaxation of the bonds which confine that increase.
Now, since improvements enable a much poorer quality of land to be
ultimately cultivated, under the constant pressure of the increase
of population and capital, improvements enable rent (3) in the end
to rise gradually to a much higher limit than it could otherwise
have attained.
If a great agricultural improvement were suddenly introduced, it might
throw back rent for a considerable space, leaving it to regain its lost
ground by the progress of population and capital, and afterward to go on
further. But taking place, as such improvement always does, very
gradually, it causes no retrograde movement of either rent or cultivation;
it merely enables the one to go on rising, and the other extending, long
after they must otherwise have stopped.
Inasmuch as, in point of fact, B never gets the start of A, but
follows along with A, the general result will be that which we
found true under A—a rise of rents (3), and increased cost of
labor to the capitalist, arising from an increased cost of
laborers’ subsistence and a fall of profits (2). The effect of a
more rapid advance of improvements, at any one time, will
temporarily better the condition of the laborers and also raise
profits; but, if it is followed immediately by an increase of
population, the land-owners will reap the benefits of the
improvement in the rise of rent. The final result, then, is as
follows:
(1.) Real wages, probably higher.
(2.) Profits fall.
(3.) Rents rise.
It is possible that a different combination from the above may
sometimes occur in the causes which underlie the progress of
society: (1.) There may be a period in which capital is increasing
more rapidly than population, and when there seems to be an era of
industrial improvements also. Then both wages and profits will be
high, and it will be a period of general satisfaction. (2.) If
capital goes on increasing, but improvements are few, wages will
rise; but profits must suffer a fall. In this country, where
population has not yet increased so as to press seriously against
subsistence, and where capital increases with incredible
swiftness, these cases are often exemplified. The extraordinary
resources of the newer States have permitted an unlimited increase
of population, and capital has found no difficulty in finding an
investment. But yet those States which have been burdened with the
disabilities of the old slave _régime_ are far behind the others.
The changes in the rank of the States, in respect of population,
at each decade, as seen in Chart No. XVI, are suggestive.
[Illustration: Chart XVI.]
Chart XVI. _Changes of the Rank of the States in the Scale of
Relative Population, from 1790 to 1880._
Chapter III. Of The Tendency Of Profits To A Minimum.
§ 1. Different Theories as to the fall of Profits.
The tendency of profits to fall as society advances, which has been
brought to notice in the preceding chapter, was early recognized by
writers on industry and commerce; but, the laws which govern profits not
being then understood, the phenomenon was ascribed to a wrong cause. Adam
Smith considered profits to be determined by what he called the
competition of capital. In Adam Smith’s opinion, the manner in which the
competition of capital lowers profits is by lowering prices; that being
usually the mode in which an increased investment of capital in any
particular trade lowers the profits of that trade. But, if this was his
meaning, he overlooked the circumstance that the fall of price, which, if
confined to one commodity, really does lower the profits of the producer,
ceases to have that effect as soon as it extends to all commodities;
because, when all things have fallen, nothing has really fallen, except
nominally; and, even computed in money, the expenses of every producer
have diminished as much as his returns. Unless, indeed, labor be the one
commodity which has not fallen in money price, when all other things have:
if so, what has really taken place is a rise of wages; and it is that, and
not the fall of prices, which has lowered the profits of capital. There is
another thing which escaped the notice of Adam Smith; that the supposed
universal fall of prices, through increased competition of capitals, is a
thing which can not take place. Prices are not determined by the
competition of the sellers only, but also by that of the buyers; by demand
as well as supply. The demand which affects money prices consists of all
the money in the hands of the community destined to be laid out in
commodities; and, as long as the proportion of this to the commodities is
not diminished, there is no fall of general prices. Now, howsoever capital
may increase, and give rise to an increased production of commodities, a
full share of the capital will be drawn to the business of producing or
importing money, and the quantity of money will be augmented in an equal
ratio with the quantity of commodities. For, if this were not the case,
and if money, therefore, were, as the theory supposes, perpetually
acquiring increased purchasing power, those who produced or imported it
would obtain constantly increasing profits; and this could not happen
without attracting labor and capital to that occupation from other
employments. If a general fall of prices and increased value of money were
really to occur, it could only be as a consequence of increased cost of
production, from the gradual exhaustion of the mines.
It is not tenable, therefore, in theory, that the increase of capital
produces, or tends to produce, a general decline of money prices. Neither
is it true that any general decline of prices, as capital increased, has
manifested itself in fact. The only things observed to fall in price with
the progress of society are those in which there have been improvements in
production, greater than have taken place in the production of the
precious metals; as, for example, all spun and woven fabrics. Other
things, again, instead of falling, have risen in price, because their cost
of production, compared with that of gold and silver, has increased. Among
these are all kinds of food, comparison being made with a much earlier
period of history. The doctrine, therefore, that competition of capital
lowers profits by lowering prices, is incorrect in fact, as well as
unsound in principle.
Mr. Wakefield, in his Commentary on Adam Smith, and his important writings
on Colonization, takes a much clearer view of the subject, and arrives,
through a substantially correct series of deductions, at practical
conclusions which appear to me just and important. Mr. Wakefield’s
explanation of the fall of profits is briefly this: Production is limited
not solely by the quantity of capital and of labor, but also by the extent
of the “field of employment.” The field of employment for capital is
twofold: the land of the country, and the capacity of foreign markets to
take its manufactured commodities. On a limited extent of land, only a
limited quantity of capital can find employment at a profit. As the
quantity of capital approaches this limit, profit falls; when the limit is
attained, profit is annihilated, and can only be restored through an
extension of the field of employment, either by the acquisition of fertile
land, or by opening new markets in foreign countries, from which food and
materials can be purchased with the products of domestic capital.(300)
§ 2. What determines the minimum rate of Profit?
There is at every time and place some particular rate of profit which is
the lowest that will induce the people of that country and time to
accumulate savings, and to employ those savings productively. This minimum
rate of profit varies according to circumstances. It depends on two
elements: One is the strength of the effective desire of accumulation; the
comparative estimate, made by the people of that place and era, of future
interests when weighed against present. This element chiefly affects the
inclination to save. The other element, which affects not so much the
willingness to save as the disposition to employ savings productively, is
the degree of security of capital engaged in industrial operations. In
employing any funds which a person may possess as capital on his own
account, or in lending it to others to be so employed, there is always
some additional risk over and above that incurred by keeping it idle in
his own custody. This extra risk is great in proportion as the general
state of society is insecure: it may be equivalent to twenty, thirty, or
fifty per cent, or to no more than one or two; something however, it must
always be; and for this the expectation of profit must be sufficient to
compensate.
There would be adequate motives for a certain amount of saving, even if
capital yielded no profit. There would be an inducement to lay by in good
times a provision for bad; to reserve something for sickness and
infirmity, or as a means of leisure and independence in the latter part of
life, or a help to children in the outset of it. Savings, however, which
have only these ends in view, have not much tendency to increase the
amount of capital permanently in existence. The savings by which an
addition is made to the national capital usually emanate from the desire
of persons to improve what is termed their condition in life, or to make a
provision for children or others, independent of their exertions. Now, to
the strength of these inclinations it makes a very material difference how
much of the desired object can be effected by a given amount and duration
of self-denial; which again depends on the rate of profit. And there is in
every country some rate of profit below which persons in general will not
find sufficient motive to save for the mere purpose of growing richer, or
of leaving others better off than themselves. Any accumulation, therefore,
by which the general capital is increased, requires as its necessary
condition a certain rate of profit—a rate which an average person will
deem to be an equivalent for abstinence, with the addition of a sufficient
insurance against risk.
I have already observed that this minimum rate of profit, less than which
is not consistent with the further increase of capital, is lower in some
states of society than in others; and I may add that the kind of social
progress characteristic of our present civilization tends to diminish it:
(1.) In the first place, one of the acknowledged effects of that progress
is an increase of general security. Destruction by wars and spoliation by
private or public violence are less and less to be apprehended. The risks
attending the investment of savings in productive employment require,
therefore, a smaller rate of profit to compensate for them than was
required a century ago, and will hereafter require less than at present.
(2.) In the second place, it is also one of the consequences of
civilization that mankind become less the slaves of the moment, and more
habituated to carry their desires and purposes forward into a distant
future. This increase of providence is a natural result of the increased
assurance with which futurity can be looked forward to; and is, besides,
favored by most of the influences which an industrial life exercises over
the passions and inclinations of human nature. In proportion as life has
fewer vicissitudes, as habits become more fixed, and great prizes are less
and less to be hoped for by any other means than long perseverance,
mankind become more willing to sacrifice present indulgence for future
objects. But, though the minimum rate of profit is liable to vary, and
though to specify exactly what it is would at any given time be
impossible, such a minimum always exists; and, whether it be high or low,
when once it is reached, no further increase of capital can for the
present take place. The country has then attained what is known to
political economists under the name of the stationary state.
§ 3. In old and opulent countries, profits habitually near to the minimum.
We now arrive at the fundamental proposition which this chapter is
intended to inculcate. When a country has long possessed a large
production, and a large net income to make savings from, and when,
therefore, the means have long existed of making a great annual addition
to capital (the country not having, like America, a large reserve of
fertile land still unused), it is one of the characteristics of such a
country that the rate of profit is habitually within, as it were, a hand’s
breadth of the minimum, and the country, therefore, on the very verge of
the stationary state. My meaning is, that it would require but a short
time to reduce profits to the minimum, if capital continued to increase at
its present rate, and no circumstances having a tendency to raise the rate
of profit occurred in the mean time.
In England, the ordinary rate of interest on government securities, in
which the risk is next to nothing, may be estimated at a little more than
three per cent: in all other investments, therefore, the interest or
profit calculated upon (exclusively of what is properly a remuneration for
talent or exertion) must be as much more than this amount as is equivalent
to the degree of risk to which the capital is thought to be exposed. Let
us suppose that in England even so small a net profit as one per cent,
exclusive of insurance against risk, would constitute a sufficient
inducement to save, but that less than this would not be a sufficient
inducement. I now say that the mere continuance of the present annual
increase of capital, if no circumstance occurred to counteract its effect,
would suffice in a small number of years to reduce the rate of net profit
to one per cent.
To fulfill the conditions of the hypothesis, we must suppose an entire
cessation of the exportation of capital for foreign investment. We must
suppose the entire savings of the community to be annually invested in
really productive employment within the country itself, and no new
channels opened by industrial inventions, or by a more extensive
substitution of the best-known processes for inferior ones.
The difficulty in finding remunerative employment every year for so much
new capital would not consist in any want of a market. If the new capital
were duly shared among many varieties of employment, it would raise up a
demand for its own produce, and there would be no cause why any part of
that produce should remain longer on hand than formerly. What would really
be, not merely difficult, but impossible, would be to employ this capital
without submitting to a rapid reduction of the rate of profit.
As capital increased, population either would also increase, or it would
not. If it did not, wages would rise, and a greater capital would be
distributed in wages among the same number of laborers. There being no
more labor than before, and no improvements to render the labor more
efficient, there would not be any increase of the produce; and, as the
capital, however largely increased, would only obtain the same gross
return, the whole savings of each year would be exactly so much subtracted
from the profits of the next and of every following year.
[Illustration.]
This can be illustrated by supposing that the whole capital is
handed out to the producers in a vessel which is returned full at
the end of the period of production with the original outlay, plus
an advance called profit. B C represents the total outlay, A C the
total produce, and A B the profit on B C. Now, since the
conditions of production remain the same, the same number of
laborers can produce, as before, no more than A C; even though in
the second year some of last year’s profit, represented by D B, is
saved and added to the outlay by the capitalist. If D C is now the
outlay of capital, the profit can only be A C, minus D C, or A D;
that is, the profit of the second year is diminished by D B,
exactly the amount of savings of the year before. And this would
be repeated each successive year, each saving added to B C being
“exactly so much subtracted from the profits of the next and of
every following year.”
It is hardly necessary to say that in such circumstances profits would
very soon fall to the point at which further increase of capital would
cease. An augmentation of capital, much more rapid than that of
population, must soon reach its extreme limit, unless accompanied by
increased efficiency of labor (through inventions and discoveries, or
improved mental and physical education), or unless some of the idle
people, or of the unproductive laborers, became productive.
If population did increase with the increase of capital and in proportion
to it, the fall of profits would still be inevitable. Increased population
implies increased demand for agricultural produce. In the absence of
industrial improvements, this demand can only be supplied at an increased
cost of production, either by cultivating worse land, or by a more
elaborate and costly cultivation of the land already under tillage. The
cost of the laborer’s subsistence is therefore increased, and, unless the
laborer submits to a deterioration of his condition, profits must fall. In
an old country like England, if, in addition to supposing all improvement
in domestic agriculture suspended, we suppose that there is no increased
production in foreign countries for the English market, the fall of
profits would be very rapid. If both these avenues to an increased supply
of food were closed, and population continued to increase, as it is said
to do, at the rate of a thousand a day, all waste land which admits of
cultivation in the existing state of knowledge would soon be cultivated,
and the cost of production and price of food would be so increased that,
if the laborers received the increased money wages necessary to compensate
for their increased expenses, profits would very soon reach the minimum.
The fall of profits would be retarded if money wages did not rise, or rose
in a less degree; but the margin which can be gained by a deterioration of
the laborers’ condition is a very narrow one: in general, they _can not_
bear much reduction; when they can, they have also a higher standard of
necessary requirements, and _will_ not. On the whole, therefore, we may
assume that in such a country as England, if the present annual amount of
savings were to continue, without any of the counteracting circumstances
which now keep in check the natural influence of those savings in reducing
profit, the rate of profit would speedily attain the minimum, and all
further accumulation of capital would for the present cease.
Mr. Carey, on the other hand, asserts the existence of a law of
increasing returns from land, and that, while wages are constantly
increasing with the progress of society, there is a diminution in
the rate of profit, although the increasing returns permit an
increase of absolute, if not of proportional, profit. That is,
although wages increase more in proportion than profit, there is
still a larger gross amount to be divided among capitalists as
profit, out of a larger product.
§ 4. —prevented from reaching it by commercial revulsions.
What, then, are these counteracting circumstances which, in the existing
state of things, maintain a tolerably equal struggle against the downward
tendency of profits, and prevent the great annual savings which take place
in this country from depressing the rate of profit much nearer to that
lowest point to which it is always tending, and which, left to itself, it
would so promptly attain? The resisting agencies are of several kinds.
First among them is the waste of capital in periods of overtrading and
rash speculation, and in the commercial revulsions by which such times are
always followed. Mines are opened, railways or bridges made, and many
other works of uncertain profit commenced, and in these enterprises much
capital is sunk which yields either no return, or none adequate to the
outlay. Factories are built and machinery erected beyond what the market
requires, or can keep in employment. Even if they are kept in employment,
the capital is no less sunk; it has been converted from circulating into
fixed capital, and has ceased to have any influence on wages or profits.
Besides this, there is a great unproductive consumption of capital during
the stagnation which follows a period of general overtrading.
Establishments are shut up, or kept working without any profit. Such are
the effects of a commercial revulsion; and that such revulsions are almost
periodical is a consequence of the very tendency of profits which we are
considering. By the time a few years have passed over without a crisis, so
much additional capital has been accumulated that it is no longer possible
to invest it at the accustomed profit; all public securities rise to a
high price, the rate of interest on the best mercantile security falls
very low, and the complaint is general among persons in business that no
money is to be made. But the diminished scale of all safe gains inclines
persons to give a ready ear to any projects which hold out, though at the
risk of loss, the hope of a higher rate of profit; and speculations ensue,
which, with the subsequent revulsions, destroy, or transfer to foreigners,
a considerable amount of capital, produce a temporary rise of interest and
profit, make room for fresh accumulations, and the same round is
recommenced.
This, doubtless, is one considerable cause which arrests profits in their
descent to the minimum, by sweeping away from time to time a part of the
accumulated mass by which they are forced down. But this is not, as might
be inferred from the language of some writers, the principal cause. If it
were, the capital of the country would not increase; but in England it
does increase greatly and rapidly. This is shown by the increasing
productiveness of almost all taxes, by the continual growth of all the
signs of national wealth, and by the rapid increase of population, while
the condition of the laborers certainly is not on the whole
declining.(301)
§ 5. —by improvements in Production.
This brings us to the second of the counter-agencies, namely, improvements
in production. These evidently have the effect of extending what Mr.
Wakefield terms the field of employment, that is, they enable a greater
amount of capital to be accumulated and employed without depressing the
rate of profit; provided always that they do not raise, to a proportional
extent, the habits and requirements of the laborer. If the laboring-class
gain the full advantage of the increased cheapness, in other words, if
money wages do not fall, profits are not raised, nor their fall retarded.
But, if the laborers people up to the improvement in their condition, and
so relapse to their previous state, profits will rise. All inventions
which cheapen any of the things consumed by the laborers, unless their
requirements are raised in an equivalent degree, in time lower money
wages, and, by doing so, enable a greater capital to be accumulated and
employed, before profits fall back to what they were previously.
Improvements which only affect things consumed exclusively by the richer
classes do not operate precisely in the same manner. The cheapening of
lace or velvet has no effect in diminishing the cost of labor; and no mode
can be pointed out in which it can raise the rate of profit, so as to make
room for a larger capital before the minimum is attained. It, however,
produces an effect which is virtually equivalent; it lowers, or tends to
lower, the minimum itself. In the first place, increased cheapness of
articles of consumption promotes the inclination to save, by affording to
all consumers a surplus which they may lay by, consistently with their
accustomed manner of living. In the next place, whatever enables people to
live equally well on a smaller income inclines them to lay by capital for
a lower rate of profit. If people can live on an independence of [$1,000]
a year in the same manner as they formerly could on one of [$2,000], some
persons will be induced to save in hopes of the one, who would have been
deterred by the more remote prospect of the other. All improvements,
therefore, in the production of almost any commodity tend in some degree
to widen the interval which has to be passed before arriving at the
stationary state.
§ 6. —by the importation of cheap Necessaries and Implements.
Equivalent in effect to improvements in production is the acquisition of
any new power of obtaining cheap commodities from foreign countries. If
necessaries are cheapened, whether they are so by improvements at home or
importation from abroad, is exactly the same thing to wages and profits.
Unless the laborer obtains and, by an improvement of his habitual
standard, keeps the whole benefit, the cost of labor is lowered and the
rate of profit raised. As long as food can continue to be imported for an
increasing population without any diminution of cheapness, so long the
declension of profits through the increase of population and capital is
arrested, and accumulation may go on without making the rate of profit
draw nearer to the minimum. And on this ground it is believed by some that
the repeal of the corn laws has opened to [England] a long era of rapid
increase of capital with an undiminished rate of profit.
Before inquiring whether this expectation is reasonable, one remark must
be made, which is much at variance with commonly received notions. Foreign
trade does not necessarily increase the field of employment for capital.
When foreign trade makes room for more capital at the same profit, it is
by enabling the necessaries of life, or the habitual articles of the
laborer’s consumption, to be obtained at smaller cost. It may do this in
two ways: by the importation either of those commodities themselves, or of
the means and appliances for producing them. Cheap iron has, in a certain
measure, the same effect on profits and the cost of labor as cheap corn,
because cheap iron makes cheap tools for agriculture and cheap machinery
for clothing. But a foreign trade, which neither directly nor by any
indirect consequence increases the cheapness of anything consumed by the
laborers, does not, any more than an invention or discovery in the like
case, tend to raise profits or retard their fall; it merely substitutes
the production of goods for foreign markets in the room of the home
production of luxuries, leaving the employment for capital neither greater
nor less than before.
It must, of course, be supposed that, with the increase of capital,
population also increases; for, if it did not, the consequent rise of
wages would bring down profits, in spite of any cheapness of food.
Suppose, then, that the population of Great Britain goes on increasing at
its present rate, and demands every year a supply of imported food
considerably beyond that of the year preceding. This annual increase in
the food demanded from the exporting countries can only be obtained either
by great improvements in their agriculture, or by the application of a
great additional capital to the growth of food. The former is likely to be
a very slow process, from the rudeness and ignorance of the agricultural
classes in the food-exporting countries of Europe, while the British
colonies and the United States are already in possession of most of the
improvements yet made, so far as suitable to their circumstances. There
remains, as a resource, the extension of cultivation. And on this it is to
be remarked that the capital by which any such extension can take place is
mostly still to be created. In Poland, Russia, Hungary, Spain, the
increase of capital is extremely slow. In America it is rapid, but not
more rapid than the population. The principal fund at present available
for supplying this country with a yearly increasing importation of food is
that portion of the annual savings of America which has heretofore been
applied to increasing the manufacturing establishments of the United
States, and which free trade in corn may possibly divert from that purpose
to growing food for our market. This limited source of supply, unless
great improvements take place in agriculture, can not be expected to keep
pace with the growing demand of so rapidly increasing a population as that
of Great Britain; and, if our population and capital continue to increase
with their present rapidity, the only mode in which food can continue to
be supplied cheaply to the one is by sending the other abroad to produce
it.
Chart XVII. _Grain-Crops of the United States._
Year. Bushels.
1865 1,127,499,187
1866 1,343,027,868
1867 1,329,729,400
1868 1,450,789,000
1869 1,491,412,100
1870 1,629,027,600
1871 1,528,776,100
1872 1,664,331,600
1873 1,538,892,891
1874 1,455,180,200
1875 2,032,235,300
1876 1,962,821,600
1877 2,178,934,646
1878 2,302,254,950
1879 2,434,884,541
1880 2,448,079,181
1881 2,699,394,496
1882 2,699,394,496
1883 2,623,319,089
Not even Americans have any adequate knowledge of the productive
capacity of the United States. The grain-fields are not yet all
occupied; and we can easily produce the total cotton consumption
of the world on that quantity of land in Texas alone by which the
whole cultivable area of that State exceeds the corresponding area
of the empire of Austria-Hungary (see Chart No. XVIII, which shows
the remarkable proportion of land possessed by the United States
as compared with European countries); and the exports of
agricultural food from the United States are now six times what
they were in 1850, about the time when Mr. Mill made the above
statements. Immense areas of our soil have not yet been broken by
the plow, and the quantities of cereals grown in the United States
seem to be steadily increasing. In fact, the greatest grain-crop
yet grown in this country was that of 1882. The comparison of the
crops of late years with those just succeeding the war (as seen in
Chart No. XVII) shows a very suggestive increase; since it
indicates where employment has been given to vast numbers of
laborers, and where investment has been found for our rapidly
growing capital.(302)
§ 7. —by the emigration of Capital.
This brings us to the last of the counter-forces which check the downward
tendency of profits in a country whose capital increases faster than that
of its neighbors, and whose profits are therefore nearer to the minimum.
This is, the perpetual overflow of capital into colonies or foreign
countries, to seek higher profits than can be obtained at home. I believe
this to have been for many years one of the principal causes by which the
decline of profits in England has been arrested. It has a twofold
operation: In the first place, it does what a fire, or an inundation, or a
commercial crisis would have done—it carries off a part of the increase of
capital from which the reduction of profits proceeds; secondly, the
capital so carried off is not lost, but is chiefly employed either in
founding colonies, which become large exporters of cheap agricultural
produce, or in extending and perhaps improving the agriculture of older
communities.
In countries which are further advanced in industry and population, and
have therefore a lower rate of profit, than others, there is always, long
before the actual minimum is reached, a practical minimum, viz., when
profits have fallen so much below what they are elsewhere that, were they
to fall lower, all further accumulations would go abroad. As long as there
are old countries where capital increases very rapidly, and new countries
where profit is still high, profits in the old countries will not sink to
the rate which would put a stop to accumulation: the fall is stopped at
the point which sends capital abroad.
Chapter IV. Consequences Of The Tendency Of Profits To A Minimum, And The
Stationary State.
§ 1. Abstraction of Capital not necessarily a national loss.
The theory of the effect of accumulation on profits must greatly abate, or
rather, altogether destroy, in countries where profits are low, the
immense importance which used to be attached by political economists to
the effects which an event or a measure of government might have in adding
to or subtracting from the capital of the country. We have now seen that
the lowness of profits is a proof that the spirit of accumulation is so
active, and that the increase of capital has proceeded at so rapid a rate,
as to outstrip the two counter-agencies, improvements in production and
increased supply of cheap necessaries from abroad. A sudden abstraction of
capital, unless of inordinate amount, [would not] have any real effect in
impoverishing the country. After a few months or years, there would exist
in the country just as much capital as if none had been taken away. The
abstraction, by raising profits and interest, would give a fresh stimulus
to the accumulative principle, which would speedily fill up the vacuum.
Probably, indeed, the only effect that would ensue would be that for some
time afterward less capital would be exported, and less thrown away in
hazardous speculation.
In the first place, then, this view of things greatly weakens, in a
wealthy and industrious country, the force of the economical argument
against the expenditure of public money for really valuable, even though
industriously unproductive, purposes. In poor countries, the capital of
the country requires the legislator’s sedulous care; he is bound to be
most cautious of encroaching upon it, and should favor to the utmost its
accumulation at home, and its introduction from abroad. But in rich,
populous, and highly cultivated countries, it is not capital which is the
deficient element, but fertile land; and what the legislator should desire
and promote, is not a greater aggregate saving, but a greater return to
savings, either by improved cultivation, or by access to the produce of
more fertile lands in other parts of the globe.
The same considerations enable us to throw aside as unworthy of regard one
of the common arguments against emigration as a means of relief for the
laboring-class. Emigration, it is said, can do no good to the laborers,
if, in order to defray the cost, as much must be taken away from the
capital of the country as from its population. If one tenth of the
laboring people of England were transferred to the colonies, and along
with them one tenth of the circulating capital of the country, either
wages, or profits, or both, would be greatly benefited, by the diminished
pressure of capital and population upon the fertility of the land. The
landlords alone would sustain some loss of income; and even they, only if
colonization went to the length of actually diminishing capital and
population, but not if it merely carried off the annual increase.
§ 2. In opulent countries, the extension of machinery not detrimental but
beneficial to Laborers.
From the same principles we are now able to arrive at a final conclusion
respecting the effects which machinery, and generally the sinking of
capital for a productive purpose, produce upon the immediate and ultimate
interests of the laboring-class. The characteristic property of this class
of industrial improvements is the conversion of circulating capital into
fixed: and it was shown in the first book(303) that, in a country where
capital accumulates slowly, the introduction of machinery, permanent
improvements of land, and the like, might be, for the time, extremely
injurious; since the capital so employed might be directly taken from the
wages fund, the subsistence of the people and the employment for labor
curtailed, and the gross annual produce of the country actually
diminished. But in a country of great annual savings and low profits no
such effects need be apprehended. It merely draws off at one orifice what
was already flowing out at another; or, if not, the greater vacant space
left in the reservoir does but cause a greater quantity to flow in.
Accordingly, in spite of the mischievous derangements of the money market
which have been occasioned by the great sums in process of being sunk in
railways, I can not agree with those who apprehend any mischief, from this
source, to the productive resources of the country. Not on the absurd
ground (which to any one acquainted with the elements of the subject needs
no confutation) that railway expenditure is a mere transfer of capital
from hand to hand, by which nothing is lost or destroyed. This is true of
what is spent in the purchase of the land; a portion too of what is paid
to agents, counsels, engineers, and surveyors, is saved by those who
receive it, and becomes capital again: but what is laid out in the _bona
fide_ construction of the railway itself is lost and gone; when once
expended, it is incapable of ever being paid in wages or applied to the
maintenance of laborers again; as a matter of account, the result is, that
so much food and clothing and tools have been consumed, and the country
has got a railway instead.
It already appears, from these considerations, that the conversion of
circulating capital into fixed, whether by railways, or manufactories, or
ships, or machinery, or canals, or mines, or works of drainage and
irrigation, is not likely, in any rich country, to diminish the gross
produce or the amount of employment for labor. There is hardly any
increase of fixed capital which does not enable the country to contain
eventually a larger circulating capital than it otherwise could possess
and employ within its own limits; for there is hardly any creation of
fixed capital which, when it proves successful, does not cheapen the
articles on which wages are habitually expended.
As regards the effects upon the material condition of the
wages-receiving class, since it seems clear that capital increases
faster than improvements, and probably faster even than
population, it follows that in countries where the
laboring-classes are evidently growing in intelligence, they gain
in wages with the progress of society. Such certainly seems to be
the teaching of Mr. Giffen’s late studies (see Book IV, Chap. III,
§ 5).
§ 3. Stationary state of wealth and population dreaded by some writers,
but not in itself undesirable.
Toward what ultimate point is society tending by its industrial progress?
When the progress ceases, in what condition are we to expect that it will
leave mankind?
It must always have been seen, more or less distinctly, by political
economists, that the increase of wealth is not boundless; that at the end
of what they term the progressive state lies the stationary state, that
all progress in wealth is but a postponement of this, and that each step
in advance is an approach to it. We have now been led to recognize that
this ultimate goal is at all times near enough to be fully in view; that
we are always on the verge of it, and that, if we have not reached it long
ago, it is because the goal itself flies before us. The richest and most
prosperous countries would very soon attain the stationary state, if no
further improvements were made in the productive arts, and if there were a
suspension of the overflow of capital from those countries into the
uncultivated or ill-cultivated regions of the earth. Adam Smith always
assumes that the condition of the mass of the people, though it may not be
positively distressed, must be pinched and stinted in a stationary
condition of wealth, and can only be satisfactory in a progressive state.
The doctrine that, to however distant a time incessant struggling may put
off our doom, the progress of society must “end in shallows and in
miseries,” far from being, as many people still believe, a wicked
invention of Mr. Malthus, was either expressly or tacitly affirmed by his
most distinguished predecessors, and can only be successfully combated on
his principles.
Even in a progressive state of capital, in old countries, a conscientious
or prudential restraint on population is indispensable, to prevent the
increase of numbers from outstripping the increase of capital, and the
condition of the classes who are at the bottom of society from being
deteriorated. Where there is not, in the people, or in some very large
proportion of them, a resolute resistance to this deterioration—a
determination to preserve an established standard of comfort—the condition
of the poorest class sinks, even in a progressive state, to the lowest
point which they will consent to endure. The same determination would be
equally effectual to keep up their condition in the stationary state, and
would be quite as likely to exist.
I can not, therefore, regard the stationary state of capital and wealth
with the unaffected aversion so generally manifested toward it by
political economists of the old school. I am inclined to believe that it
would be, on the whole, a very considerable improvement on our present
condition.
It is only in the backward countries of the world that increased
production is still an important object; in those most advanced, what is
economically needed is a better distribution, of which one indispensable
means is a stricter restraint on population. On the other hand, we may
suppose this better distribution of property attained, by the joint effect
of the prudence and frugality of individuals, and of a system of
legislation favoring equality of fortunes, so far as is consistent with
the just claim of the individual to the fruits, whether great or small, of
his or her own industry. We may suppose, for instance (according to the
suggestion thrown out in a former chapter(304)), a limitation of the sum
which any one person may acquire by gift or inheritance, to the amount
sufficient to constitute a moderate independence. Under this twofold
influence, society would exhibit these leading features: a well-paid and
affluent body of laborers; no enormous fortunes, except what were earned
and accumulated during a single lifetime; but a much larger body of
persons than at present, not only exempt from the coarser toils, but with
sufficient leisure, both physical and mental, from mechanical details, to
cultivate freely the graces of life, and afford examples of them to the
classes less favorably circumstanced for their growth. This condition of
society, so greatly preferable to the present, is not only perfectly
compatible with the stationary state, but, it would seem, more naturally
allied with that state than with any other.
There is room in the world, no doubt, and even in old countries, for a
great increase of population, supposing the arts of life to go on
improving, and capital to increase. But even if innocuous, I confess I see
very little reason for desiring it. The density of population necessary to
enable mankind to obtain, in the greatest degree, all the advantages both
of co-operation and of social intercourse, has, in all the most populous
countries, been attained. If the earth must lose that great portion of its
pleasantness which it owes to things that the unlimited increase of wealth
and population would extirpate from it, for the mere purpose of enabling
it to support a larger but not a better or a happier population, I
sincerely hope, for the sake of posterity, that they will be content to be
stationary, long before necessity compels them to it.
It is scarcely necessary to remark that a stationary condition of capital
and population implies no stationary state of human improvement. Even the
industrial arts might be as earnestly and as successfully cultivated, with
this sole difference, that instead of serving no purpose but the increase
of wealth, industrial improvements would produce their legitimate effect,
that of abridging labor. Hitherto it is questionable if all the mechanical
inventions yet made have lightened the day’s toil of any human being. They
have enabled a greater population to live the same life of drudgery and
imprisonment, and an increased number of manufacturers and others to make
fortunes. They have increased the comforts of the middle classes.
The statement that inventions have not “lightened the day’s toil
of any human being” has been persistently misquoted by many
persons and has been taken out of its connection. Mr. Mill
distinctly holds that the laborer’s lot could have been improved
had there been any limitation of population; that it is the
constant growth of population as society progresses which destroys
the gains afforded to the laboring-classes by improvements. But it
is quite certain that the material facts of Mr. Mill’s statement
are no longer true. In the United States wages have risen, with an
additional gain in lower prices; and Mr. Giffen shows the same
progress in England. Moreover, travelers on the Continent speak of
a similar movement already noticeable there. Mr. Giffen’s
statement in his comparison(305) with fifty years ago, is as
follows:
“While the money wages have increased as we have seen, the hours
of labor have diminished. It is difficult to estimate what the
extent of this diminution has been, but collecting one or two
scattered notices I should be inclined to say very nearly 20 per
cent. There has been at least this reduction in the textile,
engineering, and house-building trades. The workman gets from 50
to 100 per cent more money for 20 per cent less work; in round
figures he has gained from 70 to 120 per cent in fifty years in
money return. It is just possible, of course, that the workman may
do as much, or nearly as much, in the shorter period as he did in
his longer hours. Still, there is the positive gain in his being
less time at his task, which many of the classes still tugging
lengthily day by day at the oar would appreciate.”
Chapter V. On The Possible Futurity Of The Laboring-Classes.
§ 1. The possibility of improvement while Laborers remain merely receivers
of Wages.
There has probably never been a time when more attention has been
called to the material and social conditions of the
working-classes than in the last few years. The great increase of
literature and the extension of the newspaper has brought to every
reader, even where public and private charities have not sent
eye-witnesses into direct contact with distress, a more explicit
knowledge of the working-classes than ever before. The revelation
of existing poverty and misery is, often wrongly, taken to be a
proof of the increasing degradation of the working-men, and the
cause has been ascribed to the grasping cruelty of capitalists.
Instances of injustice arising from the relations of employers and
employed will occur so long as human nature remains imperfect. But
the world hopes that some other relation than that of master and
workman may be evolved in which not only many admitted wrongs may
be avoided, but also new forces may be applied to raise the
laborer out of his dependence on other classes in the community.