CHAPTER VIII.

THE STATICS OF THE PROBLEM THUS EXPLAINED.

We have now obtained a clear, simple, and consistent theory of the

distribution of wealth, which accords with first principles and

existing facts, and which, when understood, will commend itself as

self-evident.

Before working out this theory, I have deemed it necessary to show

conclusively the insufficiency of current theories; for, in thought,

as in action, the majority of men do but follow their leaders, and a

theory of wages which has not merely the support of the highest names,

but is firmly rooted in common opinions and prejudices, will, until it

has been proved untenable, prevent any other theory from being even

considered, just as the theory that the earth was the center of the

universe prevented any consideration of the theory that it revolves on

its own axis and circles round the sun, until it was clearly shown that

the apparent movements of the heavenly bodies could not be explained in

accordance with the theory of the fixity of the earth.

There is in truth a marked resemblance between the science of political

economy, as at present taught, and the science of astronomy, as taught

previous to the recognition of the Copernican theory. The devices by

which the current political economy endeavors to explain the social

phenomena that are now forcing themselves upon the attention of the

civilized world may well be compared to the elaborate system of cycles

and epicycles constructed by the learned to explain the celestial

phenomena in a manner according with the dogmas of authority and the

rude impressions and prejudices of the unlearned. And, just as the

observations which showed that this theory of cycles and epicycles

could not explain all the phenomena of the heavens cleared the way for

the consideration of the simpler theory that supplanted it, so will a

recognition of the inadequacy of the current theories to account for

social phenomena clear the way for the consideration of a theory that

will give to political economy all the simplicity and harmony which the

Copernican theory gave to the science of astronomy.

But at this point the parallel ceases. That “the fixed and steadfast

earth” should be really whirling through space with inconceivable

velocity is repugnant to the first apprehensions of men in every

state and situation; but the truth I wish to make clear is naturally

perceived, and has been recognized in the infancy of every people,

being obscured only by the complexities of the civilized state, the

warpings of selfish interests, and the false direction which the

speculations of the learned have taken. To recognize it, we have but to

come back to first principles and heed simple perceptions. Nothing can

be clearer than the proposition that the failure of wages to increase

with increasing productive power is due to the increase of rent.

Three things unite to production—labor, capital, and land.

Three parties divide the produce—the laborer, the capitalist, and the

land owner.

If, with an increase of production the laborer gets no more and the

capitalist no more it is a necessary inference that the land owner

reaps the whole gain.

And the facts agree with the inference. Though neither wages nor

interest anywhere increase as material progress goes on, yet the

invariable accompaniment and mark of material progress is the increase

of rent—the rise of land values.

The increase of rent explains why wages and interest do not increase.

The cause which gives to the land holder is the cause which denies to

the laborer and capitalist. That wages and interest are higher in new

than in old countries is not, as the standard economists say, because

nature makes a greater return to the application of labor and capital,

but because land is cheaper, and, therefore, as a smaller proportion

of the return is taken by rent, labor and capital can keep for their

share a larger proportion of what nature does return. It is not the

total produce, but the net produce, after rent has been taken from it,

that determines what can be divided as wages and interest. Hence, the

rate of wages and interest is everywhere fixed, not so much by the

productiveness of labor as by the value of land. Wherever the value

of land is relatively low, wages and interest are relatively high;

wherever land is relatively high, wages and interest are relatively low.

If production had not passed the simple stage in which all labor is

directly applied to the land and all wages are paid in its produce, the

fact that when the land owner takes a larger portion the laborer must

put up with a smaller portion could not be lost sight of.

But the complexities of production in the civilized state, in which so

great a part is borne by exchange, and so much labor is bestowed upon

materials after they have been separated from the land, though they may

to the unthinking disguise, do not alter the fact that all production

is still the union of the two factors, land and labor, and that rent

(the share of the land holder) cannot be increased except at the

expense of wages (the share of the laborer) and interest (the share of

capital). Just as the portion of the crop, which in the simpler forms

of industrial organization the owner of agricultural land receives at

the end of the harvest as his rent, lessens the amount left to the

cultivator as wages and interest, so does the rental of land on which

a manufacturing or commercial city is built lessen the amount which can

be divided as wages and interest between the laborer and capital there

engaged in the production and exchange of wealth.

In short, the value of land depending wholly upon the power which its

ownership gives of appropriating wealth created by labor, the increase

of land values is always at the expense of the value of labor. And,

hence, that the increase of productive power does not increase wages,

is because it does increase the value of land. Rent swallows up the

whole gain and pauperism accompanies progress.

It is unnecessary to refer to facts. They will suggest themselves to

the reader. It is the general fact, observable everywhere, that as

the value of land increases, so does the contrast between wealth and

want appear. It is the universal fact, that where the value of land is

highest, civilization exhibits the greatest luxury side by side with

the most piteous destitution. To see human beings in the most abject,

the most helpless and hopeless condition, you must go, not to the

unfenced prairies and the log cabins of new clearings in the backwoods,

where man single-handed is commencing the struggle with nature, and

land is yet worth nothing, but to the great cities, where the ownership

of a little patch of ground is a fortune.

BOOK IV.

EFFECT OF MATERIAL PROGRESS UPON THE DISTRIBUTION OF WEALTH.

CHAPTER I.—THE DYNAMICS OF THE PROBLEM YET TO SEEK.

CHAPTER II.—EFFECT OF INCREASE OF POPULATION UPON THE DISTRIBUTION OF

WEALTH.

CHAPTER III.—EFFECT OF IMPROVEMENTS IN THE ARTS UPON THE DISTRIBUTION

OF WEALTH.

CHAPTER IV.—EFFECT OF THE EXPECTATION RAISED BY MATERIAL PROGRESS.

Hitherto, it is questionable if all the mechanical inventions yet made

have lightened the day’s toil of any human being.—_John Stuart Mill._

Do ye hear the children weeping, O my brothers,

Ere the sorrow comes with years?

They are leaning their young heads against their mothers,

And _that_ cannot stop their tears.

The young lambs are bleating in the meadows;

The young birds are chirping in the nest;

The young fawns are playing with the shadows;

The young flowers are blowing toward the west—

But the young, young children, O, my brothers,

They are weeping bitterly!

They are weeping in the playtime of the others,

In the country of the free.

—_Mrs. Browning._

CHAPTER I.

THE DYNAMICS OF THE PROBLEM YET TO SEEK.

In identifying rent as the receiver of the increased production which

material progress gives, but which labor fails to obtain; in seeing

that the antagonism of interests is not between labor and capital, as

is popularly believed, but is in reality between labor and capital

on the one side and land ownership on the other, we have reached a

conclusion that has most important practical bearings. But it is not

worth while to dwell on them now, for we have not yet fully solved the

problem which was at the outset proposed. To say that wages remain low

because rent advances is like saying that a steamboat moves because

its wheels turn around. The further question is, What causes rent to

advance? What is the force or necessity that, as productive power

increases, distributes a greater and greater proportion of the produce

as rent?

The only cause pointed out by Ricardo as advancing rent is the increase

of population, which by requiring larger supplies of food necessitates

the extension of cultivation to inferior lands, or to points of

inferior production on the same lands, and in current works of other

authors attention is so exclusively directed to the extension of

production from superior to inferior lands as the cause of advancing

rents that Mr. Carey (followed by Professor Perry and others) has

imagined that he has overthrown the Ricardian theory of rent by denying

that the progress of agriculture is from better to worse lands.[39]

Now, while it is unquestionably true that the increasing pressure of

population which compels a resort to inferior points of production

will raise rents, and does raise rents, I do not think that all the

deductions commonly made from this principle are valid, nor yet that

it fully accounts for the increase of rent as material progress goes

on. There are evidently other causes which conspire to raise rent, but

which seem to have been wholly or partially hidden by the erroneous

views as to the functions of capital and genesis of wages which have

been current. To see what these are, and how they operate, let us trace

the effect of material progress upon the distribution of wealth.

The changes which constitute or contribute to material progress are

three: (1) increase in population; (2) improvements in the arts of

production and exchange; and (3) improvements in knowledge, education,

government, police, manners, and morals, so far as they increase the

power of producing wealth. Material progress, as commonly understood,

consists of these three elements or directions of progression, in

all of which the progressive nations have for some time past been

advancing, though in different degrees. As, considered in the light

of material forces or economies, the increase of knowledge, the

betterment of government, etc., have the same effect as improvements

in the arts, it will not be necessary in this view to consider them

separately. What bearing intellectual or moral progress, merely as

such, has upon our problem we may hereafter consider. We are at present

dealing with material progress, to which these things contribute only

as they increase wealth-producing power, and shall see their effects

when we see the effect of improvements in the arts.

To ascertain the effects of material progress upon the distribution

of wealth, let us, therefore, consider the effects of increase of

population apart from improvement in the arts, and then the effect of

improvement in the arts apart from increase of population.

FOOTNOTES:

[39] As to this, it may be worth while to say: (1) That the general

fact, as shown by the progress of agriculture in the newer States of

the Union and by the character of the land left out of cultivation in

the older, is that the course of cultivation _is_ from the better to

the worse qualities of land. (2) That, whether the course of production

be from the absolutely better to the absolutely worse lands or the

reverse (and there is much to indicate that better or worse in this

connection merely relates to our knowledge, and that future advances

may discover compensating qualities in portions of the earth now

esteemed most sterile), it is always, and from the nature of the human

mind, _must_ always tend to be, from land under existing conditions

deemed better, to land under existing conditions deemed worse. (3)

That Ricardo’s law of rent does not depend upon the direction of the

extension of cultivation, but upon the proposition that if land of a

certain quality will yield something, land of a better quality will

yield more.

CHAPTER II.

THE EFFECT OF INCREASE OF POPULATION UPON THE DISTRIBUTION OF WEALTH.

The manner in which increasing population advances rent, as explained

and illustrated in current treatises, is that the increased demand

for subsistence forces production to inferior soil or to inferior

productive points. Thus, if, with a given population, the margin of

cultivation is at 30, all lands of productive power over 30 will pay

rent. If the population be doubled, an additional supply is required,

which cannot be obtained without an extension of cultivation that will

cause lands to yield rent that before yielded none. If the extension

be to 20, then all the land between 20 and 30 will yield rent and

have a value, and all land over 30 will yield increased rent and have

increased value.

It is here that the Malthusian doctrine receives from the current

elucidations of the theory of rent the support of which I spoke when

enumerating the causes that have combined to give that doctrine an

almost undisputed sway in current thought. According to the Malthusian

theory, the pressure of population against subsistence becomes

progressively harder as population increases, and although two hands

come into the world with every new mouth, it becomes, to use the

language of John Stuart Mill, harder and harder for the new hands to

supply the new mouths. According to Ricardo’s theory of rent, rent

arises from the difference in productiveness of the lands in use, and

as explained by Ricardo and the economists who have followed him, the

advance in rents which, experience shows, accompanies increasing

population, is caused by the inability of procuring more food except

at a greater cost, which thus forces the margin of population to lower

and lower points of production, commensurately increasing rent. Thus

the two theories, as I have before explained, are made to harmonize

and blend, the law of rent becoming but a special application of the

more general law propounded by Malthus, and the advance of rents with

increasing population a demonstration of its resistless operation. I

refer to this incidentally, because it now lies in our way to see the

misapprehension which has enlisted the doctrine of rent in the support

of a theory to which it in reality gives no countenance. The Malthusian

theory has been already disposed of, and the cumulative disproof which

will prevent the recurrence of a lingering doubt will be given when it

is shown, further on, that the phenomena attributed to the pressure

of population against subsistence would, under existing conditions,

manifest themselves were population to remain stationary.

The misapprehension to which I now refer, and which, to a proper

understanding of the effect of increase of population upon the

distribution of wealth, it is necessary to clear up, is the

presumption, expressed or implied in all the current reasoning upon

the subject of rent in connection with population, that the recourse

to lower points of production involves a smaller aggregate produce

in proportion to the labor expended; though that this is not always

the case is clearly recognized in connection with agricultural

improvements, which, to use the words of Mill, are considered “as

a partial relaxation of the bonds which confine the increase of

population.” But it is not involved even where there is no advance in

the arts, and the recourse to lower points of production is clearly

the result of the increased demand of an increased population. For

increased population, of itself, and without any advance in the arts,

implies an increase in the productive power of labor. The labor of 100

men, other things being equal, will produce much more than one hundred

times as much as the labor of one man, and the labor of 1,000 men much

more than ten times as much as the labor of 100 men; and, so, with

every additional pair of hands which increasing population brings,

there is a more than proportionate addition to the productive power of

labor. Thus, with an increasing population, there may be a recourse to

lower natural powers of production, not only without any diminution in

the average production of wealth as compared to labor, but without any

diminution at the lowest point. If population be doubled, land of but

20 productiveness may yield to the same amount of labor as much as land

of 30 productiveness could before yield. For it must not be forgotten

(what often _is_ forgotten) that the productiveness either of land

or labor is not to be measured in any one thing, but in all desired

things. A settler and his family may raise as much corn on land a

hundred miles away from the nearest habitation as they could raise were

their land in the center of a populous district. But in the populous

district they could obtain with the same labor as good a living from

much poorer land, or from land of equal quality could make as good

a living after paying a high rent, because in the midst of a large

population their labor would have become more effective; not, perhaps,

in the production of corn, but in the production of wealth generally—or

the obtaining of all the commodities and services which are the real

object of their labor.

But even where there is a diminution in the productiveness of labor at

the lowest point—that is to say, where the increasing demand for wealth

has driven production to a lower point of natural productiveness than

the addition to the power of labor from increasing population suffices

to make up for—it does not follow that the aggregate production, as

compared with the aggregate labor, has been lessened.

Let us suppose land of diminishing qualities. The best would naturally

be settled first, and as population increased production would take in

the next lower quality, and so on. But, as the increase of population,

by permitting greater economies, adds to the effectiveness of labor,

the cause which brought each quality of land successively into

cultivation would at the same time increase the amount of wealth that

the same quality of labor could produce from it. But it would also

do more than this—it would increase the power of producing wealth on

all the superior lands already in cultivation. If the relations of

quantity and quality were such that increasing population added to

the effectiveness of labor faster than it compelled a resort to less

productive qualities of land, though the margin of cultivation would

fall and rent would rise, the minimum return to labor would increase.

That is to say, though wages as a proportion would fall, wages as a

quantity would rise. The average production of wealth would increase.

If the relations were such that the increasing effectiveness of labor

just compensated for the diminishing productiveness of the land as it

was called into use, the effect of increasing population would be to

increase rent by lowering the margin of cultivation without reducing

wages as a quantity, and to increase the average production. If we now

suppose population still increasing, but, between the poorest quality

of land in use and the next lower quality, to be a difference so great

that the increased power of labor which comes with the increased

population that brings it into cultivation cannot compensate for

it—the minimum return to labor will be reduced, and with the rise of

rents, wages will fall, not only as a proportion, but as a quantity.

But unless the descent in the quality of land is far more precipitous

than we can well imagine, or than, I think, ever exists, the average

production will still be increased, for the increased effectiveness

which comes by reason of the increased population that compels resort

to the inferior quality of land attaches to all labor, and the gain

on the superior qualities of land will more than compensate for the

diminished production on the quality last brought in. The aggregate

wealth production, as compared with the aggregate expenditure of labor,

will be greater, though its distribution will be more unequal.

Thus, increase of population, as it operates to extend production to

lower natural levels, operates to increase rent and reduce wages as a

proportion, and may or may not reduce wages as a quantity; while it

seldom can, and probably never does, reduce the aggregate production of

wealth as compared with the aggregate expenditure of labor, but on the

contrary increases, and frequently largely increases it.

But while the increase of population thus increases rent by lowering

the margin of cultivation, it is a mistake to look upon this as the

only mode by which rent advances as population grows. Increasing

population increases rent, without reducing the margin of cultivation;

and notwithstanding the dicta of such writers as McCulloch, who assert

that rent would not arise were there an unbounded extent of equally

good land, increases it without reference to the natural qualities of

land, for the increased powers of co-operation and exchange which come

with increased population are equivalent to—nay, I think we can say

without metaphor, that they give—an increased capacity to land.

I do not mean to say merely that, like an improvement in the methods

or tools of production, the increased power which comes with increased

population gives to the same labor an increased result, which is

equivalent to an increase in the natural powers of land; but that

it brings out a superior power in labor, which is localized on

land—which attaches not to labor generally, but only to labor exerted

on particular land; and which thus inheres in the land as much as any

qualities of soil, climate, mineral deposit, or natural situation, and

passes, as they do, with the possession of the land.

An improvement in the method of cultivation which, with the same

outlay, will give two crops a year in place of one, or an improvement

in tools and machinery which will double the result of labor, will

manifestly, on a particular piece of ground, have the same effect

on the produce as a doubling of the fertility of the land. But the

difference is in this respect—the improvement in method or in tools

can be utilized on any land; but the improvement in fertility can be

utilized only on the particular land to which it applies. Now, in large

part, the increased productiveness of labor which arises from increased

population can be utilized only on particular land, and on particular

land in greatly varying degrees.

Here, let us imagine, is an unbounded savannah, stretching off in

unbroken sameness of grass and flower, tree and rill, till the traveler

tires of the monotony. Along comes the wagon of the first immigrant.

Where to settle he cannot tell—every acre seems as good as every other

acre. As to wood, as to water, as to fertility, as to situation, there

is absolutely no choice, and he is perplexed by the embarrassment of

richness. Tired out with the search for one place that is better than

another, he stops—somewhere, anywhere—and starts to make himself a

home. The soil is virgin and rich, game is abundant, the streams flash

with the finest trout. Nature is at her very best. He has what, were he

in a populous district, would make him rich; but he is very poor. To

say nothing of the mental craving, which would lead him to welcome the

sorriest stranger, he labors under all the material disadvantages of

solitude. He can get no temporary assistance for any work that requires

a greater union of strength than that afforded by his own family, or

by such help as he can permanently keep. Though he has cattle, he

cannot often have fresh meat, for to get a beefsteak he must kill a

bullock. He must be his own blacksmith, wagonmaker, carpenter, and

cobbler—in short, a “jack of all trades and master of none.” He cannot

have his children schooled, for, to do so, he must himself pay and

maintain a teacher. Such things as he cannot produce himself, he must

buy in quantities and keep on hand, or else go without, for he cannot

be constantly leaving his work and making a long journey to the verge

of civilization; and when forced to do so, the getting of a vial of

medicine or the replacement of a broken auger may cost him the labor of

himself and horses for days. Under such circumstances, though nature is

prolific, the man is poor. It is an easy matter for him to get enough

to eat; but beyond this, his labor will suffice to satisfy only the

simplest wants in the rudest way.

Soon there comes another immigrant. Although every quarter section of

the boundless plain is as good as every other quarter section, he is

not beset by any embarrassment as to where to settle. Though the land

is the same, there is one place that is clearly better for him than

any other place, and that is where there is already a settler and he

may have a neighbor. He settles by the side of the first comer, whose

condition is at once greatly improved, and to whom many things are now

possible that were before impossible, for two men may help each other

to do things that one man could never do.

Another immigrant comes, and, guided by the same attraction, settles

where there are already two. Another, and another, until around

our first comer there are a score of neighbors. Labor has now an

effectiveness which, in the solitary state, it could not approach.

If heavy work is to be done, the settlers have a log-rolling, and

together accomplish in a day what singly would require years. When

one kills a bullock, the others take part of it, returning when they

kill, and thus they have fresh meat all the time. Together they hire a

schoolmaster, and the children of each are taught for a fractional part

of what similar teaching would have cost the first settler. It becomes

a comparatively easy matter to send to the nearest town, for some one

is always going. But there is less need for such journeys. A blacksmith

and a wheelwright soon set up shops, and our settler can have his tools

repaired for a small part of the labor it formerly cost him. A store

is opened and he can get what he wants as he wants it; a post-office,

soon added, gives him regular communication with the rest of the world.

Then come a cobbler, a carpenter, a harness-maker, a doctor; and a

little church soon arises. Satisfactions become possible that in the

solitary state were impossible. There are gratifications for the social

and the intellectual nature—for that part of the man that rises above

the animal. The power of sympathy, the sense of companionship, the

emulation of comparison and contrast, open a wider, and fuller, and

more varied life. In rejoicing, there are others to rejoice; in sorrow,

the mourners do not mourn alone. There are husking bees, and apple

parings, and quilting parties. Though the ballroom be unplastered and

the orchestra but a fiddle, the notes of the magician are yet in the

strain, and Cupid dances with the dancers. At the wedding, there are

others to admire and enjoy; in the house of death, there are watchers;

by the open grave, stands human sympathy to sustain the mourners.

Occasionally, comes a straggling lecturer to open up glimpses of the

world of science, of literature, or of art; in election times, come

stump speakers, and the citizen rises to a sense of dignity and power,

as the cause of empires is tried before him in the struggle of John

Doe and Richard Roe for his support and vote. And, by and by, comes

the circus, talked of months before, and opening to children whose

horizon has been the prairie, all the realms of the imagination—princes

and princesses of fairy tale, mail-clad crusaders and turbaned Moors,

Cinderella’s fairy coach, and the giants of nursery lore; lions such

as crouched before Daniel, or in circling Roman amphitheater tore the

saints of God; ostriches who recall the sandy deserts; camels such

as stood around when the wicked brethren raised Joseph from the well

and sold him into bondage; elephants such as crossed the Alps with

Hannibal, or felt the sword of the Maccabees; and glorious music that

thrills and builds in the chambers of the mind as rose the sunny dome

of Kubla Khan.

Go to our settler now, and say to him: “You have so many fruit trees

which you planted; so much fencing, such a well, a barn, a house—in

short, you have by your labor added so much value to this farm. Your

land itself is not quite so good. You have been cropping it, and by

and by it will need manure. I will give you the full value of all your

improvements if you will give it to me, and go again with your family

beyond the verge of settlement.” He would laugh at you. His land yields

no more wheat or potatoes than before, but it does yield far more of

all the necessaries and comforts of life. His labor upon it will bring

no heavier crops, and, we will suppose, no more valuable crops, but it

will bring far more of all the other things for which men work. The

presence of other settlers—the increase of population—has added to

the productiveness, in these things, of labor bestowed upon it, and

this added productiveness gives it a superiority over land of equal

natural quality where there are as yet no settlers. If no land remains

to be taken up, except such as is as far removed from population as

was our settler’s land when he first went upon it, the value or rent

of this land will be measured by the whole of this added capability.

If, however, as we have supposed, there is a continuous stretch of

equal land, over which population is now spreading, it will not be

necessary for the new settler to go into the wilderness, as did the

first. He will settle just beyond the other settlers, and will get the

advantage of proximity to them. The value or rent of our settler’s

land will thus depend on the advantage which it has, from being at the

center of population, over that on the verge. In the one case, the

margin of production will remain as before; in the other, the margin of

production will be raised.

Population still continues to increase, and as it increases so do the

economies which its increase permits, and which in effect add to the

productiveness of the land. Our first settler’s land, being the center

of population, the store, the blacksmith’s forge, the wheelwright’s

shop, are set up on it, or on its margin, where soon arises a village,

which rapidly grows into a town, the center of exchanges for the people

of the whole district. With no greater agricultural productiveness

than it had at first, this land now begins to develop a productiveness

of a higher kind. To labor expended in raising corn, or wheat, or

potatoes, it will yield no more of those things than at first; but to

labor expended in the subdivided branches of production which require

proximity to other producers, and, especially, to labor expended in

that final part of production, which consists in distribution, it will

yield much larger returns. The wheat-grower may go further on, and

find land on which his labor will produce as much wheat, and nearly as

much wealth; but the artisan, the manufacturer, the storekeeper, the

professional man, find that their labor expended here, at the center

of exchanges, will yield them much more than if expended even at a

little distance away from it; and this excess of productiveness for

such purposes the landowner can claim just as he could an excess in its

wheat-producing power. And so our settler is able to sell in building

lots a few of his acres for prices which it would not bring for

wheat-growing if its fertility had been multiplied many times. With the

proceeds, he builds himself a fine house, and furnishes it handsomely.

That is to say, to reduce the transaction to its lowest terms, the

people who wish to use the land build and furnish the house for him,

on condition that he will let them avail themselves of the superior

productiveness which the increase of population has given the land.

Population still keeps on increasing, giving greater and greater

utility to the land, and more and more wealth to its owner. The town

has grown into a city—a St. Louis, a Chicago or a San Francisco—and

still it grows. Production is here carried on upon a great scale, with

the best machinery and the most favorable facilities; the division of

labor becomes extremely minute, wonderfully multiplying efficiency;

exchanges are of such volume and rapidity that they are made with the

minimum of friction and loss. Here is the heart, the brain, of the

vast social organism that has grown up from the germ of the first

settlement; here has developed one of the great ganglions of the human

world. Hither run all roads, hither set all currents, through all the

vast regions round about. Here, if you have anything to sell, is the

market; here, if you have anything to buy, is the largest and the

choicest stock. Here intellectual activity is gathered into a focus,

and here springs that stimulus which is born of the collision of mind

with mind. Here are the great libraries, the storehouses and granaries

of knowledge, the learned professors, the famous specialists. Here are

museums and art galleries, collections of philosophical apparatus, and

all things rare, and valuable, and best of their kind. Here come great

actors, and orators, and singers, from all over the world. Here, in

short, is a center of human life, in all its varied manifestations.

So enormous are the advantages which this land now offers for the

application of labor that instead of one man with a span of horses

scratching over acres, you may count in places thousands of workers to

the acre, working tier on tier, on floors raised one above the other,

five, six, seven and eight stories from the ground, while underneath

the surface of the earth engines are throbbing with pulsations that

exert the force of thousands of horses.

All these advantages attach to the land; it is on this land and

no other that they can be utilized, for here is the center of

population—the focus of exchanges, the market place and workshop of

the highest forms of industry. The productive powers which density

of population has attached to this land are equivalent to the

multiplication of its original fertility by the hundred fold and the

thousand fold. And rent, which measures the difference between this

added productiveness and that of the least productive land in use, has

increased accordingly. Our settler, or whoever has succeeded to his

right to the land, is now a millionaire. Like another Rip Van Winkle,

he may have lain down and slept; still he is rich—not from anything

he has done, but from the increase of population. There are lots from

which for every foot of frontage the owner may draw more than an

average mechanic can earn; there are lots that will sell for more than

would suffice to pave them with gold coin. In the principal streets are

towering buildings, of granite, marble, iron, and plate glass, finished

in the most expensive style, replete with every convenience. Yet they

are not worth as much as the land upon which they rest—the same land,

in nothing changed, which when our first settler came upon it had no

value at all.

That this is the way in which the increase of population powerfully

acts in increasing rent, whoever, in a progressive country, will look

around him, may see for himself. The process is going on under his

eyes. The increasing difference in the productiveness of the land in

use, which causes an increasing rise in rent, results not so much

from the necessities of increased population compelling the resort to

inferior land, as from the increased productiveness which increased

population gives to the lands already in use. The most valuable lands

on the globe, the lands which yield the highest rent, are not lands of

surpassing natural fertility, but lands to which a surpassing utility

has been given by the increase of population.

The increase of productiveness or utility which increase of population

gives to certain lands, in the way to which I have been calling

attention, attaches, as it were, to the mere quality of extension. The

valuable quality of land that has become a center of population is its

superficial capacity—it makes no difference whether it is fertile,

alluvial soil like that of Philadelphia; rich bottom land like that of

New Orleans; a filled-in marsh like that of St. Petersburg, or a sandy

waste like the greater part of San Francisco.

And where value seems to arise from superior natural qualities, such

as deep water and good anchorage, rich deposits of coal and iron, or

heavy timber, observation also shows that these superior qualities are

brought out, rendered tangible, by population. The coal and iron fields

of Pennsylvania, that to-day are worth enormous sums, were fifty years

ago valueless. What is the efficient cause of the difference? Simply

the difference in population. The coal and iron beds of Wyoming and

Montana, which to-day are valueless, will, in fifty years from now, be

worth millions on millions, simply because, in the meantime, population

will have greatly increased.

It is a well provisioned ship, this on which we sail through space. If

the bread and beef above decks seem to grow scarce, we but open a hatch

and there is a new supply, of which before we never dreamed. And very

great command over the services of others comes to those who as the

hatches are opened are permitted to say, “This is mine!”

To recapitulate: The effect of increasing population upon the

distribution of wealth is to increase rent, and consequently to

diminish the proportion of the produce which goes to capital and labor,

in two ways: First, By lowering the margin of cultivation. Second, By

bringing out in land special capabilities otherwise latent, and by

attaching special capabilities to particular lands.

I am disposed to think that the latter mode, to which little attention

has been given by political economists, is really the more important.

But this, in our inquiry, is not a matter of moment.

CHAPTER III.

THE EFFECT OF IMPROVEMENTS IN THE ARTS UPON THE DISTRIBUTION OF WEALTH.

Eliminating improvements in the arts, we have seen the effects of

increase of population upon the distribution of wealth. Eliminating

increase of population, let us now see what effect improvements in the

arts of production have upon distribution.

We have seen that increase of population increases rent, rather by

increasing the productiveness of labor than by decreasing it. If it

can now be shown that, irrespective of the increase of population, the

effect of improvements in methods of production and exchange is to

increase rent, the disproof of the Malthusian theory—and of all the

doctrines derived from or related to it—will be final and complete, for

we shall have accounted for the tendency of material progress to lower

wages and depress the condition of the lowest class, without recourse

to the theory of increasing pressure against the means of subsistence.

That this is the case will, I think, appear on the slightest

consideration.

The effect of inventions and improvements in the productive arts is to

save labor—that is, to enable the same result to be secured with less

labor, or a greater result with the same labor.

Now, in a state of society in which the existing power of labor served

to satisfy all material desires, and there was no possibility of new

desires being called forth by the opportunity of gratifying them,

the effect of labor-saving improvements would be simply to reduce

the amount of labor expended. But such a state of society, if it can

anywhere be found, which I do not believe, exists only where the human

most nearly approaches the animal. In the state of society called

civilized, and which in this inquiry we are concerned with, the very

reverse is the case. Demand is not a fixed quantity, that increases

only as population increases. In each individual it rises with _his_

power of getting the things demanded. Man is not an ox, who, when he

has eaten his fill, lies down to chew the cud; he is the daughter

of the horse leech, who constantly asks for more. “When I get some

money,” said Erasmus, “I will buy me some Greek books and afterward

some clothes.” The amount of wealth produced is nowhere commensurate

with the desire for wealth, and desire mounts with every additional

opportunity for gratification.

This being the case, the effect of labor-saving improvements will

be to increase the production of wealth. Now, for the production of

wealth, two things are required—labor and land. Therefore, the effect

of labor-saving improvements will be to extend the demand for land,

and wherever the limit of the quality of land in use is reached, to

bring into cultivation lands of less natural productiveness, or to

extend cultivation on the same lands to a point of lower natural

productiveness. And thus, while the primary effect of labor-saving

improvements is to increase the power of labor, the secondary

effect is to extend cultivation, and, where this lowers the margin

of cultivation, to increase rent. Thus, where land is entirely

appropriated, as in England, or where it is either appropriated or is

capable of appropriation as rapidly as it is needed for use, as in

the United States, the ultimate effect of labor-saving machinery or

improvements is to increase rent without increasing wages or interest.

It is important that this be fully understood, for it shows that

effects attributed by current theories to increase of population are

really due to the progress of invention, and explains the otherwise

perplexing fact that labor-saving machinery everywhere fails to benefit

laborers.

Yet, to grasp fully this truth, it is necessary to keep in mind what

I have already more than once adverted to—the interchangeability of

wealth. I refer to this again, only because it is so persistently

forgotten or ignored by writers who speak of agricultural production as

though it were to be distinguished from production in general, and of

food or subsistence as though it were not included in the term wealth.

Let me ask the reader to bear in mind, what has already been

sufficiently illustrated, that the possession or production of any

form of wealth is virtually the possession or production of any

other form of wealth for which it will exchange—in order that he may

clearly see that it is not merely improvements which effect a saving

in labor directly applied to land that tend to increase rent, but all

improvements that in any way save labor.

That the labor of any individual is applied exclusively to the

production of one form of wealth is solely the result of the division

of labor. The object of labor on the part of any individual is not the

obtainment of wealth in one particular form, but the obtainment of

wealth in all the forms that consort with his desires. And, hence, an

improvement which effects a saving in the labor required to produce

one of the things desired, is, in effect, an increase in the power of

producing all the other things. If it take half a man’s labor to keep

him in food, and the other half to provide him clothing and shelter,

an improvement which would increase his power of producing food would

also increase his power of providing clothing and shelter. If his

desires for more or better food, and for more or better clothing

and shelter, were equal, an improvement in one department of labor

would be precisely equivalent to a like improvement in the other. If

the improvement consisted in a doubling of the power of his labor in

producing food, he would give one-third less labor to the production

of food, and one-third more to the providing of clothing and shelter.

If the improvement doubled his power to provide clothing and shelter

he would give one-third less labor to the production of these things,

and one-third more to the production of food. In either case, the

result would be the same—he would be enabled with the same labor to get

one-third more in quantity or quality of all the things he desired.

And, so, where production is carried on by the division of labor

between individuals, an increase in the power of producing one of the

things sought by production in the aggregate adds to the power of

obtaining others, and will increase the production of the others, to

an extent determined by the proportion which the saving of labor bears

to the total amount of labor expended, and by the relative strength

of desires. I am unable to think of any form of wealth, the demand

for which would not be increased by a saving in the labor required to

produce the others. Hearses and coffins have been selected as examples

of things for which the demand is little likely to increase; but this

is true only as to quantity. That increased power of supply would lead

to a demand for more expensive hearses and coffins, no one can doubt

who has noticed how strong is the desire to show regard for the dead by

costly funerals.

Nor is the demand for food limited, as in economic reasoning is

frequently, but erroneously, assumed. Subsistence is often spoken of

as though it were a fixed quantity; but it is fixed only as having a

definite minimum. Less than a certain amount will not keep a human

being alive, and less than a somewhat larger amount will not keep a

human being in good health. But, above this minimum, the subsistence

which a human being can use may be increased almost indefinitely.

Adam Smith says, and Ricardo indorses the statement, that the desire

for food is limited in every man by the narrow capacity of the human

stomach; but this, manifestly, is true only in the sense that when

a man’s belly is filled, hunger is satisfied. His demands for food

have no such limit. The stomach of a Louis XIV., a Louis XV., or

a Louis XVI., could not hold or digest more than the stomach of a

French peasant of equal stature, yet, while a few rods of ground would

supply the black bread and herbs which constituted the subsistence

of the peasant, it took hundreds of thousands of acres to supply the

demands of the king, who, besides his own wasteful use of the finest

qualities of food, required immense supplies for his servants, horses

and dogs. And in the common facts of daily life, in the unsatisfied,

though perhaps latent, desires which each one has, we may see how every

increase in the power of producing any form of wealth must result in

an increased demand for land and the direct products of land. The man

who now uses coarse food, and lives in a small house, will, as a rule,

if his income be increased, use more costly food, and move to a larger

house. If he grows richer and richer he will procure horses, servants,

gardens and lawns, his demand for the use of land constantly increasing

with his wealth. In the city where I write, is a man—but the type of

men everywhere to be found—who used to boil his own beans and fry his

own bacon, but who, now that he has got rich, maintains a town house

that takes up a whole block and would answer for a first-class hotel,

two or three country houses with extensive grounds, a large stud of

racers, a breeding farm, private track, etc. It certainly takes at

least a thousand times, it may be several thousand times, as much land

to supply the demands of this man now as it did when he was poor.

And, so, every improvement or invention, no matter what it be, which

gives to labor the power of producing more wealth, causes an increased

demand for land and its direct products, and thus tends to force

down the margin of cultivation, just as would the demand caused by

an increased population. This being the case, every labor-saving

invention, whether it be a steam plow, a telegraph, an improved process

of smelting ores, a perfecting printing press, or a sewing machine, has

a tendency to increase rent.

Or to state this truth concisely:

_Wealth in all its forms being the product of labor applied to land or

the products of land, any increase in the power of labor, the demand

for wealth being unsatisfied, will be utilized in procuring more

wealth, and thus increase the demand for land._

To illustrate this effect of labor-saving machinery and improvements,

let us suppose a country where, as in all the countries of the

civilized world, the land is in the possession of but a portion of the

people. Let us suppose a permanent barrier fixed to further increase

of population, either by the enactment and strict enforcement of an

Herodian law, or from such a change in manners and morals as might

result from an extensive circulation of Annie Besant’s pamphlets.

Let the margin of cultivation, or production, be represented by 20.

Thus land or other natural opportunities which, from the application

of labor and capital, will yield a return of 20, will just give the

ordinary rate of wages and interest, without yielding any rent; while

all lands yielding to equal applications of labor and capital more

than 20 will yield the excess as rent. Population remaining fixed,

let there be made inventions and improvements which will reduce by

one-tenth the expenditure of labor and capital necessary to produce

the same amount of wealth. Now, either one-tenth of the labor and

capital may be freed, and production remain the same as before; or

the same amount of labor and capital may be employed, and production

be correspondingly increased. But the industrial organization, as

in all civilized countries, is such that labor and capital, and

especially labor, must press for employment on any terms—the industrial

organization is such that mere laborers are not in a position to demand

their fair share in the new adjustment, and that any reduction in the

application of labor to production will, at first, at least, take the

form, not of giving each laborer the same amount of produce for less

work, but of throwing some of the laborers out of work and giving them

none of the produce. Now, owing to the increased efficiency of labor

secured by the new improvements, as great a return can be secured at

the point of natural productiveness represented by 18, as before at 20.

Thus, the unsatisfied desire for wealth, the competition of labor and

capital for employment, would insure the extension of the margin of

production, we will say to 18, and thus rent would be increased by the

difference between 18 and 20, while wages and interest, in quantity,

would be no more than before, and, in proportion to the whole produce,

would be less. There would be a greater production of wealth, but land

owners would get the whole benefit, subject to temporary deductions,

which will be hereafter stated.

If invention and improvement still go on, the efficiency of labor

will be still further increased, and the amount of labor and capital

necessary to produce a given result further diminished. The same causes

will lead to the utilization of this new gain in productive power for

the production of more wealth; the margin of cultivation will be

again extended, and rent will increase, both in proportion and amount,

without any increase in wages and interest. And, so, as invention

and improvement go on, constantly adding to the efficiency of labor,

the margin of production will be pushed lower and lower, and rent

constantly increased, though population should remain stationary.

I do not mean to say that the lowering of the margin of production

would always exactly correspond with the increase in productive power,

any more than I mean to say that the process would be one of clearly

defined steps. Whether, in any particular case, the lowering of the

margin of production lags behind or exceeds the increase in productive

power, will depend, I conceive, upon what may be called the area of

productiveness that can be utilized before cultivation is forced to

the next lowest point. For instance, if the margin of cultivation be

at 20, improvements which enable the same produce to be obtained with

one-tenth less capital and labor will not carry the margin to 18, if

the area having a productiveness of 19 is sufficient to employ all the

labor and capital displaced from the cultivation of the superior lands.

In this case, the margin of cultivation would rest at 19, and rents

would be increased by the difference between 19 and 20, and wages and

interest by the difference between 18 and 19. But if, with the same

increase in productive power the area of productiveness between 20

and 18 should not be sufficient to employ all the displaced labor and

capital, the margin of cultivation must, if the same amount of labor

and capital press for employment, be carried lower than 18. In this

case, rent would gain more than the increase in the product, and wages

and interest would be less than before the improvements which increased

productive power.

Nor is it precisely true that the labor set free by each improvement

will all be driven to seek employment in the production of more wealth.

The increased power of satisfaction, which each fresh improvement gives

to a certain portion of the community, will be utilized in demanding

leisure or services, as well as in demanding wealth. Some laborers

will, therefore, become idlers and some will pass from the ranks of

productive to those of unproductive laborers—the proportion of which,

as observation shows, tends to increase with the progress of society.

But, as I shall presently refer to a cause, as yet unconsidered, which

constantly tends to lower the margin of cultivation, to steady the

advance of rent, and even carry it beyond the proportion that would be

fixed by the actual margin of cultivation, it is not worth while to

take into account these perturbations in the downward movement of the

margin of cultivation and the upward movement of rent. All I wish to

make clear is that, without any increase in population, the progress of

invention constantly tends to give a larger proportion of the produce

to the owners of land, and a smaller and smaller proportion to labor

and capital.

And, as we can assign no limits to the progress of invention, neither

can we assign any limits to the increase of rent, short of the whole

produce. For, if labor-saving inventions went on until perfection

was attained, and the necessity of labor in the production of wealth

was entirely done away with, then everything that the earth could

yield could be obtained without labor, and the margin of cultivation

would be extended to zero. Wages would be nothing, and interest would

be nothing, while rent would take everything. For the owners of the

land, being enabled without labor to obtain all the wealth that could

be procured from nature, there would be no use for either labor or

capital, and no possible way in which either could compel any share of

the wealth produced. And no matter how small population might be, if

anybody but the land owners continued to exist, it would be at the whim

or by the mercy of the land owners—they would be maintained either for

the amusement of the land owners, or, as paupers, by their bounty.

This point, of the absolute perfection of labor-saving inventions, may

seem very remote, if not impossible of attainment; but it is a point

toward which the march of invention is every day more strongly tending.

And in the thinning out of population in the agricultural districts

of Great Britain, where small farms are being converted into larger

ones, and in the great machine-worked wheat-fields of California and

Dakota, where one may ride for miles and miles through waving grain

without seeing a human habitation, there are already suggestions of the

final goal toward which the whole civilized world is hastening. The

steam plow and the reaping machine are creating in the modern world

latifundia of the same kind that the influx of slaves from foreign wars

created in ancient Italy. And to many a poor fellow as he is shoved

out of his accustomed place and forced to move on—as the Roman farmers

were forced to join the proletariat of the great city, or sell their

blood for bread in the ranks of the legions—it seems as though these

labor-saving inventions were in themselves a curse, and we hear men

talking of work, as though the wearying strain of the muscles were, in

itself, a thing to be desired.

In what has preceded, I have, of course, spoken of inventions and

improvements when generally diffused. It is hardly necessary to say

that as long as an invention or an improvement is used by so few that

they derive a special advantage from it, it does not, to the extent of

this special advantage, affect the general distribution of wealth. So,

in regard to the limited monopolies created by patent laws, or by the

causes which give the same character to railroad and telegraph lines,

etc. Although generally mistaken for profits of capital, the special

profits thus arising are really the returns of monopoly, as has been

explained in a previous chapter, and, to the extent that they subtract

from the benefits of an improvement, do not primarily affect general

distribution. For instance, the benefits of a railroad or similar

improvement in cheapening transportation are diffused or monopolized,

as its charges are reduced to a rate which will yield ordinary interest

on the capital invested, or kept up to a point which will yield an

extraordinary return, or cover the stealing of the constructors or

directors. And, as is well known, the rise in rent or land values

corresponds with the reduction in the charges.

As has before been said, in the improvements which advance rent, are

not only to be included the improvements which directly increase

productive power, but also such improvements in government, manners,

and morals as indirectly increase it. Considered as material forces,

the effect of all these is to increase productive power, and, like

improvements in the productive arts, their benefit is ultimately

monopolized by the possessors of the land. A notable instance of this

is to be found in the abolition of protection by England. Free trade

has enormously increased the wealth of Great Britain, without lessening

pauperism. It has simply increased rent. And if the corrupt governments

of our great American cities were to be made models of purity and

economy, the effect would simply be to increase the value of land, not

to raise either wages or interest.

CHAPTER IV.

EFFECT OF THE EXPECTATION RAISED BY MATERIAL PROGRESS.

We have now seen that while advancing population tends to advance rent,

so all the causes that in a progressive state of society operate to

increase the productive power of labor tend, also, to advance rent, and

not to advance wages or interest. The increased production of wealth

goes ultimately to the owners of land in increased rent; and, although,

as improvement goes on, advantages may accrue to individuals not land

holders, which concentrate in their hands considerable portions of the

increased produce, yet there is in all this improvement nothing which

tends to increase the general return either to labor or to capital.

But there is a cause, not yet adverted to, which must be taken into

consideration fully to explain the influence of material progress upon

the distribution of wealth.

That cause is the confident expectation of the future enhancement of

land values, which arises in all progressive countries from the steady

increase of rent, and which leads to speculation, or the holding of

land for a higher price than it would then otherwise bring.

We have hitherto assumed, as is generally assumed in elucidations

of the theory of rent, that the actual margin of cultivation

always coincides with what may be termed the necessary margin of

cultivation—that is to say, we have assumed that cultivation extends to

less productive points only as it becomes necessary from the fact that

natural opportunities are at the more productive points fully utilized.

This, probably, is the case in stationary or very slowly progressing

communities, but in rapidly progressing communities, where the

swift and steady increase of rent gives confidence to calculations

of further increase, it is not the case. In such communities, the

confident expectation of increased prices produces, to a greater or

less extent, the effects of a combination among land holders, and tends

to the withholding of land from use, in expectation of higher prices,

thus forcing the margin of cultivation farther than required by the

necessities of production.

This cause must operate to some extent in all progressive communities,

though in such countries as England, where the tenant system prevails

in agriculture, it may be shown more in the selling price of land than

in the agricultural margin of cultivation, or actual rent. But in

communities like the United States, where the user of land generally

prefers, if he can, to own it, and where there is a great extent of

land to overrun, it operates with enormous power.

The immense area over which the population of the United States is

scattered shows this. The man who sets out from the Eastern seaboard in

search of the margin of cultivation, where he may obtain land without

paying rent, must, like the man who swam the river to get a drink, pass

for long distances through half-tilled farms, and traverse vast areas

of virgin soil, before he reaches the point where land can be had free

of rent—_i.e._, by homestead entry or pre-emption. He (and, with him,

the margin of cultivation) is forced so much farther than he otherwise

need have gone, by the speculation which is holding these unused lands

in expectation of increased value in the future. And when he settles,

he will, in his turn, take up, if he can, more land than he can use, in

the belief that it will soon become valuable; and so those who follow

him are again forced farther on than the necessities of production

require, carrying the margin of cultivation to still less productive,

because still more remote points.

The same thing may be seen in every rapidly growing city. If the land

of superior quality as to location were always fully used before land

of inferior quality were resorted to, no vacant lots would be left as

a city extended, nor would we find miserable shanties in the midst of

costly buildings. These lots, some of them extremely valuable, are

withheld from use, or from the full use to which they might be put,

because their owners, not being able or not wishing to improve them,

prefer, in expectation of the advance of land values, to hold them for

a higher rate than could now be obtained from those willing to improve

them. And, in consequence of this land being withheld from use, or from

the full use of which it is capable, the margin of the city is pushed

away so much farther from the center.

But when we reach the limits of the growing city—the actual margin

of building, which corresponds to the margin of cultivation in

agriculture—we shall not find the land purchasable at its value for

agricultural purposes, as it would be were rent determined simply by

present requirements; but we shall find that for a long distance beyond

the city land bears a speculative value, based upon the belief that it

will be required in the future for urban purposes, and that to reach

the point at which land can be purchased at a price not based upon

urban rent, we must go very far beyond the actual margin of urban use.

Or, to take another case of a different kind, instances similar to

which may doubtless be found in every locality. There is in Marin

County, within easy access of San Francisco, a fine belt of redwood

timber. Naturally, this would be first used, before resorting for the

supply of the San Francisco market to timber lands at a much greater

distance. But it yet remains uncut, and lumber procured many miles

beyond is daily hauled past it on the railroad, because its owner

prefers to hold for the greater price it will bring in the future.

Thus, by the withholding from use of this body of timber, the margin

of production of redwood is forced so much farther up and down the

Coast Range. That mineral land, when reduced to private ownership,

is frequently withheld from use while poorer deposits are worked, is

well known, and in new States it is common to find individuals who

are called “land poor”—that is, who remain poor, sometimes almost to

deprivation, because they insist on holding land, which they themselves

cannot use, at prices at which no one else can profitably use it.

To recur now to the illustration we made use of in the preceding

chapter: With the margin of cultivation standing at 20, an increase

in the power of production takes place, which renders the same result

obtainable with one-tenth less labor. For reasons before stated, the

margin of production must now be forced down, and if it rests at 18,

the return to labor and capital will be the same as before, when the

margin stood at 20. Whether it will be forced to 18 or be forced lower

depends upon what I have called the area of productiveness which

intervenes between 20 and 18. But if the confident expectation of a

further increase of rents leads the land owners to demand 3 rent for

20 land, 2 for 19, and 1 for 18 land, and to withhold their land from

use until these terms are complied with, the area of productiveness

may be so reduced that the margin of cultivation must fall to 17 or

even lower; and thus, as the result of the increase in the efficiency

of labor, laborers would get less than before, while interest would be

proportionately reduced, and rent would increase in greater ratio than

the increase in productive power.

Whether we formulate it as an extension of the margin of production,

or as a carrying of the rent line beyond the margin of production, the

influence of speculation in land in increasing rent is a great fact

which cannot be ignored in any complete theory of the distribution of

wealth in progressive countries. It is the force, evolved by material

progress, which tends constantly to increase rent in a greater ratio

than progress increases production, and thus constantly tends, as

material progress goes on and productive power increases, to reduce

wages, not merely relatively, but absolutely. It is this expansive

force which, operating with great power in new countries, brings to

them, seemingly long before their time, the social diseases of older

countries; produces “tramps” on virgin acres, and breeds paupers on

half-tilled soil.

In short, the general and steady advance in land values in a

progressive community necessarily produces that additional tendency

to advance which is seen in the case of commodities when any general

and continuous cause operates to increase their price. As, during the

rapid depreciation of currency which marked the latter days of the

Southern Confederacy, the fact that whatever was bought one day could

be sold for a higher price the next, operated to carry up the prices of

commodities even faster than the depreciation of the currency, so does

the steady increase of land values, which material progress produces,

operate still further to accelerate the increase. We see this secondary

cause operating in full force in those manias of land speculation which

mark the growth of new communities; but though these are the abnormal

and occasional manifestations, it is undeniable that the cause steadily

operates, with greater or less intensity, in all progressive societies.

The cause which limits speculation in commodities, the tendency of

increasing price to draw forth additional supplies, cannot limit the

speculative advance in land values, as land is a fixed quantity,

which human agency can neither increase nor diminish; but there is

nevertheless a limit to the price of land, in the minimum required by

labor and capital as the condition of engaging in production. If it

were possible continuously to reduce wages until zero were reached,

it would be possible continuously to increase rent until it swallowed

up the whole produce. But as wages cannot be permanently reduced

below the point at which laborers will consent to work and reproduce,

nor interest below the point at which capital will be devoted to

production, there is a limit which restrains the speculative advance

of rent. Hence speculation cannot have the same scope to advance rent

in countries where wages and interest are already near the minimum, as

in countries where they are considerably above it. Yet that there is

in all progressive countries a constant tendency in the speculative

advance of rent to overpass the limit where production would cease, is,

I think, shown by recurring seasons of industrial paralysis—a matter

which will be more fully examined in the next book.

BOOK V.

THE PROBLEM SOLVED.

CHAPTER I.—THE PRIMARY CAUSE OF RECURRING PAROXYSMS OF INDUSTRIAL

DEPRESSION.

CHAPTER II.—THE PERSISTENCE OF POVERTY AMID ADVANCING WEALTH.

To whomsoever the soil at any time belongs, to him belong the fruits

of it. White parasols, and elephants mad with pride are the flowers

of a grant of land.—_Sir Wm. Jones’ translation of an Indian grant of

land, found at Tanna._

* * * * *

The widow is gathering nettles for her children’s dinner; a perfumed

seigneur, delicately lounging in the Œil de Bœuf, hath an alchemy

whereby he will extract from her the third nettle, and call it

rent.—_Carlyle._

CHAPTER I.

THE PRIMARY CAUSE OF RECURRING PAROXYSMS OF INDUSTRIAL DEPRESSION.

Our long inquiry is ended. We may now marshal the results.

To begin with the industrial depressions, to account for which so many

contradictory and self-contradictory theories are broached.

A consideration of the manner in which the speculative advance in

land values cuts down the earnings of labor and capital and checks

production leads, I think, irresistibly to the conclusion that this

is the main cause of those periodical industrial depressions to which

every civilized country, and all civilized countries together, seem

increasingly liable.

I do not mean to say that there are not other proximate causes. The

growing complexity and interdependence of the machinery of production,

which makes each shock or stoppage propagate itself through a widening

circle; the essential defect of currencies which contract when most

needed, and the tremendous alternations in volume that occur in the

simpler forms of commercial credit, which, to a much greater extent

than currency in any form, constitute the medium or flux of exchanges;

the protective tariffs which present artificial barriers to the

interplay of productive forces, and other similar causes, undoubtedly

bear important part in producing and continuing what are called

hard times. But, both from the consideration of principles and the

observation of phenomena, it is clear that the great initiatory cause

is to be looked for in the speculative advance of land values.

In the preceding chapter I have shown that the speculative advance in

land values tends to press the margin of cultivation, or production,

beyond its normal limit, thus compelling labor and capital to accept

of a smaller return, or (and this is the only way they can resist the

tendency) to cease production. Now, it is not only natural that labor

and capital should resist the crowding down of wages and interest

by the speculative advance of rent, but they are driven to this in

self-defense, inasmuch as there is a minimum of return below which

labor cannot exist nor capital be maintained. Hence, from the fact of

speculation in land, we may infer all the phenomena which mark these

recurring seasons of industrial depression.

Given a progressive community, in which population is increasing and

one improvement succeeds another, and land must constantly increase in

value. This steady increase naturally leads to speculation in which

future increase is anticipated, and land values are carried beyond the

point at which, under the existing conditions of production, their

accustomed returns would be left to labor and capital. Production,

therefore, begins to stop. Not that there is necessarily, or even

probably, an absolute diminution in production; but that there is

what in a progressive community would be equivalent to an absolute

diminution of production in a stationary community—a failure in

production to increase proportionately, owing to the failure of new

increments of labor and capital to find employment at the accustomed

rates.

This stoppage of production at some points must necessarily show itself

at other points of the industrial network, in a cessation of demand,

which would again check production there, and thus the paralysis would

communicate itself through all the interlacings of industry and

commerce, producing everywhere a partial disjointing of production

and exchange, and resulting in the phenomena that seem to show

overproduction or overconsumption, according to the standpoint from

which they are viewed.

The period of depression thus ensuing would continue until (1) the

speculative advance in rents had been lost; or (2) the increase in the

efficiency of labor, owing to the growth of population and the progress

of improvement, had enabled the normal rent line to overtake the

speculative rent line; or (3) labor and capital had become reconciled

to engaging in production for smaller returns. Or, most probably, all

three of these causes would co-operate to produce a new equilibrium,

at which all the forces of production would again engage, and a season

of activity ensue; whereupon rent would begin to advance again, a

speculative advance again take place, production again be checked, and

the same round be gone over.

In the elaborate and complicated system of production which is

characteristic of modern civilization, where, moreover, there is no

such thing as a distinct and independent industrial community, but

geographically or politically separated communities blend and interlace

their industrial organizations in different modes and varying measures,

it is not to be expected that effect should be seen to follow cause as

clearly and definitely as would be the case in a simpler development of

industry, and in a community forming a complete and distinct industrial

whole; but, nevertheless, the phenomena actually presented by these

alternate seasons of activity and depression clearly correspond with

those we have inferred from the speculative advance of rent.

Deduction thus shows the actual phenomena as resulting from the

principle. If we reverse the process, it is as easy by induction to

reach the principle by tracing up the phenomena.

These seasons of depression are always preceded by seasons of activity

and speculation, and on all hands the connection between the two is

admitted—the depression being looked upon as the reaction from the

speculation, as the headache of the morning is the reaction from the

debauch of the night. But as to the manner in which the depression

results from the speculation, there are two classes or schools of

opinion, as the attempts made on both sides of the Atlantic to account

for the present industrial depression will show.

One school says that the speculation produced the depression by causing

overproduction, and point to the warehouses filled with goods that

cannot be sold at remunerative prices, to mills closed or working on

half time, to mines shut down and steamers laid up, to money lying idly

in bank vaults, and workmen compelled to idleness and privation. They

point to these facts as showing that the production has exceeded the

demand for consumption, and they point, moreover, to the fact that when

government during war enters the field as an enormous consumer, brisk

times prevail, as in the United States during the civil war and in

England during the Napoleonic struggle.

The other school says that the speculation has produced the depression

by leading to overconsumption, and point to full warehouses, rusting

steamers, closed mills, and idle workmen as evidences of a cessation of

effective demand, which, they say, evidently results from the fact that

people, made extravagant by a fictitious prosperity, have lived beyond

their means, and are now obliged to retrench—that is, to consume less

wealth. They point, moreover, to the enormous consumption of wealth by

wars, by the building of unremunerative railroads, by loans to bankrupt

governments, etc., as extravagances which, though not felt at the time,

just as the spendthrift does not at the moment feel the impairment of

his fortune, must now be made up by a season of reduced consumption.

Now, each of these theories evidently expresses one side or phase of a

general truth, but each of them evidently fails to comprehend the full

truth. As an explanation of the phenomena, each is equally and utterly

preposterous.

For while the great masses of men want more wealth than they can get,

and while they are willing to give for it that which is the basis and

raw material of wealth—their labor—how can there be overproduction? And

while the machinery of production wastes and producers are condemned to

unwilling idleness, how can there be overconsumption?

When, with the desire to consume more, there co-exist the ability and

willingness to produce more, industrial and commercial paralysis cannot

be charged either to overproduction or to overconsumption. Manifestly,

the trouble is that production and consumption cannot meet and satisfy

each other.

How does this inability arise? It is evidently and by common consent

the result of speculation. But of speculation in what?

Certainly not of speculation in things which are the products of

labor—in agricultural or mineral productions, or manufactured goods,

for the effect of speculation in such things, as is well shown in

current treatises that spare me the necessity of illustration, is

simply to equalize supply and demand, and to steady the interplay

of production and consumption by an action analogous to that of a

fly-wheel in a machine.

Therefore, if speculation be the cause of these industrial depressions,

it must be speculation in things not the production of labor, but yet

necessary to the exertion of labor in the production of wealth—of

things of fixed quantity; that is to say, it must be speculation in

land.

That land speculation is the true cause of industrial depression is,

in the United States, clearly evident. In each period of industrial

activity land values have steadily risen, culminating in speculation

which carried them up in great jumps. This has been invariably followed

by a partial cessation of production, and its correlative, a cessation

of effective demand (dull trade), generally accompanied by a commercial

crash; and then has succeeded a period of comparative stagnation,

during which the equilibrium has been again slowly established, and the

same round been run again. This relation is observable throughout the

civilized world. Periods of industrial activity always culminate in a

speculative advance of land values, followed by symptoms of checked

production, generally shown at first by cessation of demand from the

newer countries, where the advance in land values has been greatest.

That this must be the main explanation of these periods of depression,

will be seen by an analysis of the facts.

All trade, let it be remembered, is the exchange of commodities for

commodities, and hence the cessation of demand for some commodities,

which marks the depression of trade, is really a cessation in the

supply of other commodities. That dealers find their sales declining

and manufacturers find orders falling off, while the things which they

have to sell, or stand ready to make, are things for which there is

yet a widespread desire, simply shows that the supply of other things,

which in the course of trade would be given for them, has declined. In

common parlance we say that “buyers have no money,” or that “money is

becoming scarce,” but in talking in this way we ignore the fact that

money is but the medium of exchange. What the would-be buyers really

lack is not money, but commodities which they can turn into money—what

is really becoming scarcer, is produce of some sort. The diminution

of the effective demand of consumers is therefore but a result of the

diminution of production.

This is seen very clearly by storekeepers in a manufacturing town when

the mills are shut down and operatives thrown out of work. It is the

cessation of production which deprives the operatives of means to make

the purchases they desire, and thus leaves the storekeeper with what,

in view of the lessened demand, is a superabundant stock, and forces

him to discharge some of his clerks and otherwise reduce his demands.

And the cessation of demand (I am speaking, of course, of general

cases and not of any alteration in relative demand from such causes as

change of fashion), which has left the manufacturer with superabundant

stock and compelled him to discharge his hands, must arise in the same

way. Somewhere, it may be at the other end of the world, a check in

production has produced a check in the demand for consumption. That

demand is lessened without want being satisfied, shows that production

is somewhere checked.

People want the things the manufacturer makes as much as ever, just

as the operatives want the things the storekeeper has to sell. But

they do not have as much to give for them. Production has somewhere

been checked, and this reduction in the supply of some things has

shown itself in cessation of demand for others, the check propagating

itself through the whole framework of industry and exchange. Now,

the industrial pyramid manifestly rests on the land. The primary and

fundamental occupations, which create a demand for all others, are

evidently those which extract wealth from nature, and, hence, if we

trace from one exchange point to another, and from one occupation to

another, this check to production, which shows itself in decreased

purchasing power, we must ultimately find it in some obstacle which

checks labor in expending itself on land. And that obstacle, it is

clear, is the speculative advance in rent, or the value of land, which

produces the same effects, as in fact, it is, a lock-out of labor and

capital by land owners. This check to production, beginning at the

basis of interlaced industry, propagates itself from exchange point to

exchange point, cessation of supply becoming failure of demand, until,

so to speak, the whole machine is thrown out of gear, and the spectacle

is everywhere presented of labor going to waste while laborers suffer

from want.

This strange and unnatural spectacle of large numbers of willing men

who cannot find employment is enough to suggest the true cause to

whomsoever can think consecutively. For, though custom has dulled us

to it, it _is_ a strange and unnatural thing that men who wish to labor,

in order to satisfy their wants, cannot find the opportunity—as, since

labor is that which produces wealth, the man who seeks to exchange

labor for food, clothing, or any other form of wealth, is like one who

proposes to give bullion for coin, or wheat for flour. We talk about

the supply of labor and the demand for labor, but, evidently, these are

only relative terms. The supply of labor is everywhere the same—two

hands always come into the world with one mouth, twenty-one boys to

every twenty girls; and the demand for labor must always exist as long

as men want things which labor alone can procure. We talk about the

“want of work,” but, evidently, it is not work that is short while want

continues; evidently, the supply of labor cannot be too great, nor the

demand for labor too small, when people suffer for the lack of things

that labor produces. The real trouble must be that supply is somehow

prevented from satisfying demand, that somewhere there is an obstacle

which prevents labor from producing the things that laborers want.

Take the case of any one of these vast masses of unemployed men, to

whom, though he never heard of Malthus, it to-day seems that there

are too many people in the world. In his own wants, in the needs of

his anxious wife, in the demands of his half-cared-for, perhaps even

hungry and shivering children, there is demand enough for labor, Heaven

knows! In his own willing hands is the supply. Put him on a solitary

island, and though cut off from all the enormous advantages which the

co-operation, combination, and machinery of a civilized community give

to the productive powers of man, yet his two hands can fill the mouths

and keep warm the backs that depend upon them. Yet where productive

power is as its highest development they cannot. Why? Is it not because

in the one case he has access to the material and forces of nature, and

in the other this access is denied?

Is it not the fact that labor is thus shut off from nature which can

alone explain the state of things that compels men to stand idle who

would willingly supply their wants by their labor? The proximate cause

of enforced idleness with one set of men may be the cessation of demand

on the part of other men for the particular things they produce, but

trace this cause from point to point, from occupation to occupation,

and you will find that enforced idleness in one trade is caused by

enforced idleness in another, and that the paralysis which produces

dullness in all trades cannot be said to spring from too great a supply

of labor or too small a demand for labor, but must proceed from the

fact that supply cannot meet demand by producing the things which

satisfy want and are the object of labor.

Now, what is necessary to enable labor to produce these things, is

land. When we speak of labor creating wealth, we speak metaphorically.

Man creates nothing. The whole human race, were they to labor forever,

could not create the tiniest mote that floats in a sunbeam—could not

make this rolling sphere one atom heavier or one atom lighter. In

producing wealth, labor, with the aid of natural forces, but works up,

into the forms desired, pre-existing matter, and, to produce wealth,

must, therefore, have access to this matter and to these forces—that

is to say, to land. The land is the source of all wealth. It is the

mine from which must be drawn the ore that labor fashions. It is the

substance to which labor gives the form. And, hence, when labor cannot

satisfy its wants, may we not with certainty infer that it can be from

no other cause than that labor is denied access to land?

When in all trades there is what we call scarcity of employment; when,

everywhere, labor wastes, while desire is unsatisfied, must not the

obstacle which prevents labor from producing the wealth it needs, lie

at the foundation of the industrial structure? That foundation is land.

Milliners, optical instrument makers, gilders, and polishers, are

not the pioneers of new settlements. Miners did not go to California

or Australia because shoemakers, tailors, machinists, and printers

were there. But those trades followed the miners, just as they are

now following the gold diggers into the Black Hills and the diamond

diggers into South Africa. It is not the storekeeper who is the cause

of the farmer, but the farmer who brings the storekeeper. It is not

the growth of the city that develops the country, but the development

of the country that makes the city grow. And, hence, when, through

all trades, men willing to work cannot find opportunity to do so, the

difficulty must arise in the employment that creates a demand for all

other employments—it must be because labor is shut out from land.

In Leeds or Lowell, in Philadelphia or Manchester, in London or New

York, it may require a grasp of first principles to see this; but

where industrial development has not become so elaborate, nor the

extreme links of the chain so widely separated, one has but to look

at obvious facts. Although not yet thirty years old, the city of San

Francisco, both in population and in commercial importance, ranks

among the great cities of the world, and, next to New York, is the

most metropolitan of American cities. Though not yet thirty years old,

she has had for some years an increasing number of unemployed men.

Clearly, here, it is because men cannot find employment in the country

that there are so many unemployed in the city; for when the harvest

opens they go trooping out, and when it is over they come trooping

back to the city again. If these now unemployed men were producing

wealth from the land, they would not only be employing themselves, but

would be employing all the mechanics of the city, giving custom to the

storekeepers, trade to the merchants, audiences to the theaters, and

subscribers and advertisements to the newspapers—creating effective

demand that would be felt in New England and Old England, and wherever

throughout the world come the articles that, when they have the means

to pay for them, such a population consumes.

Now, why is it that this unemployed labor cannot employ itself upon the

land? Not that the land is all in use. Though all the symptoms that

in older countries are taken as showing a redundancy of population

are beginning to manifest themselves in San Francisco, it is idle to

talk of redundancy of population in a State that with greater natural

resources than France has not yet a million of people. Within a few

miles of San Francisco is unused land enough to give employment to

every man who wants it. I do not mean to say that every unemployed man

could turn farmer or build himself a house, if he had the land; but

that enough could and would do so to give employment to the rest. What

is it, then, that prevents labor from employing itself on this land?

Simply, that it has been monopolized and is held at speculative prices,

based not upon present value, but upon the added value that will come

with the future growth of population.

What may thus be seen in San Francisco by whoever is willing to see,

may, I doubt not, be seen as clearly in other places.

The present commercial and industrial depression, which first

clearly manifested itself in the United States in 1872, and has

spread with greater or less intensity over the civilized world, is

largely attributed to the undue extension of the railroad system,

with which there are many things that seem to show its relation. I

am fully conscious that the construction of railroads before they

are actually needed may divert capital and labor from more to less

productive employments, and make a community poorer instead of richer;

and when the railroad mania was at its highest, I pointed this out

in a political tract addressed to the people of California;[40] but

to assign to this wasting of capital such a widespread industrial

dead-lock seems to me like attributing an unusually low tide to the

drawing of a few extra bucketfuls of water. The waste of capital

and labor during the civil war was enormously greater than it could

possibly be by the construction of unnecessary railroads, but without

producing any such result. And, certainly, there seems to be little

sense in talking of the waste of capital and labor in railroads as

causing this depression, when the prominent feature of the depression

has been the superabundance of capital and labor seeking employment.

Yet, that there is a connection between the rapid construction of

railroads and industrial depression, any one who understands what

increased land values mean, and who has noticed the effect which the

construction of railroads has upon land speculation, can easily see.

Wherever a railroad was built or projected, lands sprang up in value

under the influence of speculation, and thousands of millions of

dollars were added to the nominal values which capital and labor were

asked to pay outright, or to pay in installments, as the price of being

allowed to go to work and produce wealth. The inevitable result was to

check production, and this check to production propagated itself in a

cessation of demand, which checked production to the furthest verge of

the wide circle of exchanges, operating with accumulated force in the

centers of the great industrial commonwealth into which commerce links

the civilized world.

The primary operations of this cause can, perhaps, be nowhere more

clearly traced than in California, which, from its comparative

isolation, has constituted a peculiarly well-defined community.

Until almost its close, the last decade was marked in California by

the same industrial activity which was shown in the Northern States,

and, in fact, throughout the civilized world, when the interruption of

exchanges and the disarrangement of industry caused by the war and the

blockade of Southern ports is considered. This activity could not be

attributed to inflation of the currency or to lavish expenditures of

the General Government, to which in the Eastern States the comparative

activity of the same period has since been attributed; for, in spite

of legal tender laws, the Pacific Coast adhered to a coin currency,

and the taxation of the Federal Government took away very much more

than was returned in Federal expenditures. It was attributable solely

to normal causes, for, though placer mining was declining, the Nevada

silver mines were being opened, wheat and wool were beginning to take

the place of gold in the table of exports, and an increasing population

and the improvement in the methods of production and exchange were

steadily adding to the efficiency of labor.

With this material progress went on a steady enhancement in land

values—its consequence. This steady advance engendered a speculative

advance, which, with the railroad era, ran up land values in every

direction. If the population of California had steadily grown when

the long, costly, fever-haunted Isthmus route was the principal mode

of communication with the Atlantic States, it must, it was thought,

increase enormously with the opening of a road which would bring New

York harbor and San Francisco Bay within seven days’ easy travel, and

when in the State itself the locomotive took the place of stage coach

and freight wagon. The expected increase of land values which would

thus accrue was discounted in advance. Lots on the outskirts of San

Francisco rose hundreds and thousands per cent., and farming land was

taken up and held for high prices, in whichever direction an immigrant

was likely to go.

But the anticipated rush of immigrants did not take place. Labor

and capital could not pay so much for land and make fair returns.

Production was checked, if not absolutely, at least relatively. As the

transcontinental railroad approached completion, instead of increased

activity symptoms of depression began to manifest themselves; and, when

it was completed, to the season of activity had succeeded a period

of depression which has not since been fully recovered from, during

which wages and interest have steadily fallen. What I have called the

actual rent line, or margin of cultivation, is thus (as well as by the

steady march of improvement and increase of population, which, though

slower than it otherwise would have been, still goes on) approaching

the speculative rent line, but the tenacity with which a speculative

advance in the price of land is maintained in a developing community is

well known.[41]

Now, what thus went on in California went on in every progressive

section of the Union. Everywhere that a railroad was built or

projected, land was monopolized in anticipation, and the benefit of the

improvement was discounted in increased land values. The speculative

advance in rent thus outrunning the normal advance, production was

checked, demand was decreased, and labor and capital were turned back

from occupations more directly concerned with land, to glut those in

which the value of land is a less perceptible element. It is thus

that the rapid extension of railroads is related to the succeeding

depression.

And what went on in the United States went on in a greater or less

obvious degree all over the progressive world. Everywhere land values

have been steadily increasing with material progress, and everywhere

this increase begot a speculative advance. The impulse of the primary

cause not only radiated from the newer sections of the Union to the

older sections, and from the United States to Europe, but everywhere

the primary cause was acting. And, hence, a world-wide depression of

industry and commerce, begotten of a world-wide material progress.

There is one thing which, it may seem, I have overlooked, in

attributing these industrial depressions to the speculative advance

of rent or land values as a main and primary cause. The operation of

such a cause, though it may be rapid, must be progressive—resembling

a pressure, not a blow. But these industrial depressions seem to come

suddenly—they have, at their beginning, the character of a paroxysm,

followed by a comparative lethargy, as if of exhaustion. Everything

seems to be going on as usual, commerce and industry vigorous and

expanding, when suddenly there comes a shock, as of a thunderbolt

out of a clear sky—a bank breaks, a great manufacturer or merchant

fails, and, as if a blow had thrilled through the entire industrial

organization, failure succeeds failure, and on every side workmen

are discharged from employment, and capital shrinks into profitless

security.

Let me explain what I think to be the reason of this: To do so, we

must take into account the manner in which exchanges are made, for

it is by exchanges that all the varied forms of industry are linked

together into one mutually related and interdependent organization. To

enable exchanges to be made between producers far removed by space and

time, large stocks must be kept in store and in transit, and this, as

I have already explained, I take to be the great function of capital,

in addition to that of supplying tools and seed. These exchanges are,

perhaps necessarily, largely made upon credit—that is to say, the

advance upon one side is made before the return is received on the

other.

Now, without stopping to inquire as to the causes, it is manifest that

these advances are, as a rule, from the more highly organized and

later developed industries to the more fundamental. The West Coast

African, for instance, who exchanges palm oil and cocoanuts for gaudy

calico and Birmingham idols, gets his return immediately; the English

merchant, on the contrary, has to lay out of his goods a long while

before he gets his returns. The farmer can sell his crop as soon as it

is harvested, and for cash; the great manufacturer must keep a large

stock, send his goods long distances to agents, and, generally, sell on

time. Thus, as advances and credits are generally from what we may call

the secondary, to what we may call the primary industries, it follows

that any check to production which proceeds from the latter will not

immediately manifest itself in the former. The system of advances and

credits constitutes, as it were, an elastic connection, which will give

considerably before breaking, but which, when it breaks, will break

with a snap.

Or, to illustrate in another way what I mean: The great pyramid of

Gizeh is composed of layers of masonry, the bottom layer, of course,

supporting all the rest. Could we by some means gradually contract

this bottom layer, the upper part of the pyramid would for some

time retain its form, and then, when gravitation at length overcame

the adhesiveness of the material, would not diminish gradually and

regularly, but would break off suddenly, in large pieces. Now, the

industrial organization may be likened to such a pyramid. What is the

proportion which in a given stage of social development the various

industries bear to each other, it is difficult, and perhaps impossible,

to say; but it is obvious that there is such a proportion, just as

in a printer’s font of type there is a certain proportion between

the various letters. Each form of industry, as it is developed by

division of labor, springs from and rises out of the others, and all

rest ultimately upon land; for, without land, labor is as impotent

as would be a man in void space. To make the illustration closer to

the condition of a progressive country, imagine a pyramid composed

of superimposed layers—the whole constantly growing and expanding.

Imagine the growth of the layer nearest the ground to be checked. The

others will for a time keep on expanding—in fact, for the moment, the

tendency will be to quicker expansion, for the vital force which is

refused scope on the ground layer will strive to find vent in those

above—until, at length, there is a decided overbalance and a sudden

crumbling along all the faces of the pyramid.

That the main cause and general course of the recurring paroxysms of

industrial depression, which are becoming so marked a feature of modern

social life, are thus explained, is, I think, clear. And let the reader

remember that it is only the main causes and general courses of such

phenomena that we are seeking to trace or that, in fact, it is possible

to trace with any exactness. Political economy can deal, and has need

to deal, only with general tendencies. The derivative forces are so

multiform, the actions and reactions are so various, that the exact

character of the phenomena cannot be predicted. We know that if a tree

is cut through it will fall, but precisely in what direction will be

determined by the inclination of the trunk, the spread of the branches,

the impact of the blows, the quarter and force of the wind; and even a

bird lighting on a twig, or a frightened squirrel leaping from bough

to bough, will not be without its influence. We know that an insult

will arouse a feeling of resentment in the human breast, but to say how

far and in what way it will manifest itself, would require a synthesis

which would build up the entire man and all his surroundings, past and

present.

The manner in which the sufficient cause to which I have traced

them explains the main features of these industrial depressions is

in striking contrast with the contradictory and self-contradictory

attempts which have been made to explain them on the current theories

of the distribution of wealth. That a speculative advance in rent or

land values invariably precedes each of these sea sons of industrial

depression is everywhere clear. That they bear to each other the

relations of cause and effect, is obvious to whomsoever considers the

necessary relations between land and labor.

And that the present depression is running its course, and that, in the

manner previously indicated, a new equilibrium is being established,

which will result in another season of comparative activity, may

already be seen in the United States. The normal rent line and the

speculative rent line are being brought together: (1) By the fall in

speculative land values, which is very evident in the reduction of

rents and shrinkage of real estate values in the principal cities.

(2) By the increased efficiency of labor, arising from the growth of

population and the utilization of new inventions and discoveries,

some of which almost as important as that of the use of steam we seem

to be on the verge of grasping. (3) By the lowering of the habitual

standard of interest and wages, which, as to interest, is shown by the

negotiation of a government loan at four per cent., and as to wages is

too generally evident for any special citation. When the equilibrium

is thus re-established, a season of renewed activity, culminating in

a speculative advance of land values will set in.[42] But wages and

interest will not recover their lost ground. The net result of all

these perturbations or wave-like movements is the gradual forcing of

wages and interest toward their minimum. These temporary and recurring

depressions exhibit, in fact, as was noticed in the opening chapter,

but intensifications of the general movement which accompanies material

progress.

FOOTNOTES:

[40] The Subsidy Question and the Democratic Party, 1871.

[41] It is astonishing how in a new country of great expectations

speculative prices of land will be kept up. It is common to hear the

expression, “There is no market for real estate; you cannot sell it at

any price,” and yet, at the same time, if you go to buy it, unless you

find somebody who is absolutely compelled to sell, you must pay the

prices that prevailed when speculation ran high. For owners, believing

that land values must ultimately advance, hold on as long as they can.

[42] This was written a year ago. It is now (July, 1879) evident that

a new period of activity has commenced, as above predicted, and in New

York and Chicago real estate prices have already begun to recover.

CHAPTER II.

THE PERSISTENCE OF POVERTY AMID ADVANCING WEALTH.

The great problem, of which these recurring seasons of industrial

depression are but peculiar manifestations, is now, I think, fully

solved, and the social phenomena which all over the civilized world

appall the philanthropist and perplex the statesman, which hang with

clouds the future of the most advanced races, and suggest doubts of the

reality and ultimate goal of what we have fondly called progress, are

now explained.

_The reason why, in spite of the increase of productive power, wages

constantly tend to a minimum which will give but a bare living, is

that, with increase in productive power, rent tends to even greater

increase, thus producing a constant tendency to the forcing down of

wages._

In every direction, the direct tendency of advancing civilization

is to increase the power of human labor to satisfy human desires—to

extirpate poverty, and to banish want and the fear of want. All the

things in which progress consists, all the conditions which progressive

communities are striving for, have for their direct and natural result

the improvement of the material (and consequently the intellectual

and moral) condition of all within their influence. The growth of

population, the increase and extension of exchanges, the discoveries

of science, the march of invention, the spread of education, the

improvement of government, and the amelioration of manners, considered

as material forces, have all a direct tendency to increase the

productive power of labor—not of some labor, but of all labor; not in

some departments of industry, but in all departments of industry; for

the law of the production of wealth in society is the law of “each for

all, and all for each.”