4. Of various minor schemes, Communistic and Socialistic.
[Of the schemes to be tried within a state], the two elaborate forms of
non-communistic Socialism known as Saint-Simonism and Fourierism are
totally free from the objections usually urged against Communism. The
Saint-Simonian(155) scheme does not contemplate an equal, but an unequal
division of the produce; it does not propose that all should be occupied
alike, but differently, according to their vocation or capacity; the
function of each being assigned, like grades in a regiment, by the choice
of the directing authority, and the remuneration being by salary,
proportioned to the importance, in the eyes of that authority, of the
function itself, and the merits of the person who fulfills it. But to
suppose that one or a few human beings, howsoever selected, could, by
whatever machinery of subordinate agency, be qualified to adapt each
person’s work to his capacity, and proportion each person’s remuneration
to his merits, is a supposition almost too chimerical to be reasoned
against.(156)
The most skillfully combined, and with the greatest foresight of
objections, of all the forms of Socialism is that commonly known as
Fourierism.(157) This system does not contemplate the abolition of private
property, nor even of inheritance: on the contrary, it avowedly takes into
consideration, as an element in the distribution of the produce, capital
as well as labor. It proposes that the operations of industry should be
carried on by associations of about two thousand members, combining their
labor on a district of about a square league in extent, under the guidance
of chiefs selected by themselves (the “phalanstery”). In the distribution
a certain minimum is first assigned for the subsistence of every member of
the community, whether capable or not of labor. The remainder of the
produce is shared in certain proportions, to be determined beforehand,
among the three elements, Labor, Capital, and Talent. The capital of the
community may be owned in unequal shares by different members, who would
in that case receive, as in any other joint-stock company, proportional
dividends. The claim of each person on the share of the produce
apportioned to talent is estimated by the grade or rank which the
individual occupies in the several groups of laborers to which he or she
belongs, these grades being in all cases conferred by the choice of his or
her companions. The remuneration, when received, would not of necessity be
expended or enjoyed in common; there would be separate _menages_ for all
who preferred them, and no other community of living is contemplated than
that all the members of the association should reside in the same pile of
buildings; for saving of labor and expense, not only in building, but in
every branch of domestic economy; and in order that, the whole buying and
selling operations of the community being performed by a single agent, the
enormous portion of the produce of industry now carried off by the profits
of mere distributors might be reduced to the smallest amount possible.
Fourierism was tried in West Virginia by American disciples, and
it was advocated by Horace Greeley. A modified form appeared in
the famous community at Brook Farm (near Dedham, Massachusetts),
which drew there George Ripley, Margaret Fuller, and even George
William Curtis and Nathaniel Hawthorne.
There have been many smaller communities established in the United
States, but it can not be said that they have been successful from
the point of view either of numbers or material prosperity. The
followers of Rapp, or the Harmonists, in Pennsylvania and Indiana;
the Owenites,(158) in Indiana; the community of Zoar, in Ohio; the
Inspirationists, in New York and Iowa; the Perfectionists, at
Oneida and Wallingford—are all evidently suffering from the
difficulties due to the absence of family life, from the
increasing spirit of personal independence which carries away the
younger members of the organizations,(159) and the want of that
executive ability which distinguishes the successful manager in
private enterprises.
§ 5. The Socialist objections to the present order of Society examined.
“The attacks(160) on the present social order are vigorous and earnest,
but open to the charge of exaggeration.
“In the first place, it is unhappily true that the wages of ordinary
labor, in all the countries of Europe, are wretchedly insufficient to
supply the physical and moral necessities of the population in any
tolerable measure. But when it is further alleged that even this
insufficient remuneration has a tendency to diminish; that there is, in
the words of M. Louis Blanc, _une baisse continue des salaires_; the
assertion is in opposition to all accurate information, and to many
notorious facts. It has yet to be proved that there is any country in the
civilized world where the ordinary wages of labor, estimated either in
money or in articles of consumption, are declining; while in many they
are, on the whole, on the increase; and an increase which is becoming, not
slower, but more rapid. There are, occasionally, branches of industry
which are being gradually superseded by something else, and in those,
until production accommodates itself to demand, wages are depressed.
“M. Louis Blanc appears to have fallen into the same error which was at
first committed by Malthus and his followers, that of supposing because
population has a greater power of increase than subsistence, its pressure
upon subsistence must be always growing more severe. It is a great point
gained for truth when it comes to be seen that the tendency to
over-population is a fact which Communism, as well as the existing order
of society, would have to deal with. However this may be, experience shows
that in the existing state of society the pressure of population on
subsistence, which is the principal cause of low wages, though a great, is
not an increasing evil; on the contrary, the progress of all that is
called civilization has a tendency to diminish it, partly by the more
rapid increase of the means of employing and maintaining labor, partly by
the increased facilities opened to labor for transporting itself to new
countries and unoccupied fields of employment, and partly by a general
improvement in the intelligence and prudence of the population. It is, of
course, open to discussion what form of society has the greatest power of
dealing successfully with the pressure of population on subsistence, and
on this question there is much to be said for Socialism; but it has no
just claim to be considered as the sole means of preventing the general
and growing degradation of the mass of mankind through the peculiar
tendency of poverty to produce over-population.
“Next, it must be observed that Socialists generally, and even the most
enlightened of them, have a very imperfect and one-sided notion of the
operation of competition. They see half its effects, and overlook the
other half. They forget that competition is a cause of high prices and
values as well as of low; that the buyers of labor and of commodities
compete with one another as well as the sellers; and that, if it is
competition which keeps the prices of labor and commodities as low as they
are, it is competition which keeps them from falling still lower. To meet
this consideration, Socialists are reduced to affirm that, when the
richest competitor has got rid of all his rivals, he commands the market
and can demand any price he pleases. But in the ordinary branches of
industry no one rich competitor has it in his power to drive out all the
smaller ones. Some businesses show a tendency to pass out of the hands of
small producers or dealers into a smaller number of larger ones; but the
cases in which this happens are those in which the possession of a larger
capital permits the adoption of more powerful machinery, more efficient by
more expensive processes, or a better organized and more economical mode
of carrying on business, and this enables the large dealer legitimately
and permanently to supply the commodity cheaper than can be done on the
small scale; to the great advantage of the consumers, and therefore of the
laboring-classes, and diminishing, _pro tanto_, that waste of the
resources of the community so much complained of by Socialists, the
unnecessary multiplication of mere distributors, and of the various other
classes whom Fourier calls the parasites of industry.
“Another point on which there is much misapprehension on the part of
Socialists, as well as of trades-unionists and other partisans of labor
against capital, relates to the proportion in which the produce of the
country is really shared and the amount of what is actually diverted from
those who produce it, to enrich other persons. When, for instance, a
capitalist invests ￡20,000 in his business, and draws from it an income of
(suppose) ￡2,000 a year, the common impression is as if he were the
beneficial owner both of the ￡20,000 and of the ￡2,000, while the laborers
own nothing but their wages. The truth, however, is that he only obtains
the ￡2,000 on condition of applying no part of the ￡20,000 to his own use.
He has the legal control over it, and might squander it if he chose, but
if he did he would not have the ￡2,000 a year also. For all personal
purposes they have the capital and he has but the profits, which it only
yields to him on condition that the capital itself is employed in
satisfying not his own wants, but those of laborers. Even of his own share
a small part only belongs to him as the owner of capital. The portion of
the produce which falls to capital merely as capital is measured by the
interest of money, since that is all that the owner of capital obtains
when he contributes to production nothing except the capital itself.
“The result of our review of the various difficulties of Socialism has led
us to the conclusion that the various schemes for managing the productive
resources of the country by public instead of private agency have a case
for a trial, and some of them may eventually establish their claims to
preference over the existing order of things, but that they are at present
workable only by the _elite_ of mankind, and have yet to prove their power
of training mankind at large to the state of improvement which they
presuppose.”
§ 6. Property in land different from property in Movables.
It is next to be considered what is included in the idea of private
property and by what considerations the application of the principle
should be bounded.
The institution of property, when limited to its essential elements,
consists in the recognition, in each person, of a right to the exclusive
disposal of what he or she have produced by their own exertions, or
received either by gift or by fair agreement, without force or fraud, from
those who produced it. The foundation of the whole is, the right of
producers to what they themselves have produced. Nothing is implied in
property but the right of each to his (or her) own faculties, to what he
can produce by them, and to whatever he can get for them in a fair market:
together with his right to give this to any other person if he chooses,
and the right of that other to receive and enjoy it.
It follows, therefore, that although the right of bequest, or gift after
death, forms part of the idea of private property, the right of
inheritance, as distinguished from bequest, does not. That the property of
persons who have made no disposition of it during their lifetime should
pass first to their children, and, failing them, to the nearest relations,
may be a proper arrangement or not, but is no consequence of the principle
of private property. I see no reason why collateral inheritance should
exist at all. Mr. Bentham long ago proposed, and other high authorities
have agreed in the opinion, that, if there are no heirs either in the
descending or in the ascending line, the property, in case of intestacy,
should escheat to the state. The parent owes to society to endeavor to
make the child a good and valuable member of it, and owes to the children
to provide, so far as depends on him, such education, and such appliances
and means, as will enable them to start with a fair chance of achieving by
their own exertions a successful life. To this every child has a claim;
and I can not admit that as a child he has a claim to more.
The essential principle of property being to assure to all persons what
they have produced by their labor and accumulated by their abstinence,
this principle can not apply to what is not the produce of labor, the raw
material of the earth. If the land derived its productive power wholly
from nature, and not at all from industry, or if there were any means of
discriminating what is derived from each source, it not only would not be
necessary, but it would be the height of injustice, to let the gift of
nature be engrossed by individuals. [But] the use of the land in
agriculture must indeed, for the time being, be of necessity exclusive;
the same person who has plowed and sown must be permitted to reap.
But though land is not the produce of industry, most of its valuable
qualities are so. Labor is not only requisite for using, but almost
equally so for fashioning, the instrument. Considerable labor is often
required at the commencement, to clear the land for cultivation. In many
cases, even when cleared, its productiveness is wholly the effect of labor
and art. One of the barrenest soils in the world, composed of the material
of the Goodwin Sands, the Pays de Waes in Flanders, has been so fertilized
by industry as to have become one of the most productive in Europe.
Cultivation also requires buildings and fences, which are wholly the
produce of labor. The fruits of this industry can not be reaped in a short
period. The labor and outlay are immediate, the benefit is spread over
many years, perhaps over all future time. A holder will not incur this
labor and outlay when strangers and not himself will be benefited by it.
If he undertakes such improvements, he must have a sufficient period
before him in which to profit by them; and he is in no way so sure of
having always a sufficient period as when his tenure is perpetual.
These are the reasons which form the justification, in an economical point
of view, of property in land. It is seen that they are only valid in so
far as the proprietor of land is its improver. Whenever, in any country,
the proprietor, generally speaking, ceases to be the improver, political
economy has nothing to say in defense of landed property, as there
established.
When the “sacredness of property” is talked of, it should always be
remembered that any such sacredness does not belong in the same degree to
landed property. No man made the land. It is the original inheritance of
the whole species. Its appropriation is wholly a question of general
expediency. When private property in land is not expedient, it is unjust.
The reverse is the case with property in movables, and in all things the
product of labor: over these, the owner’s power both of use and of
exclusion should be absolute, except where positive evil to others would
result from it; but, in the case of land, no exclusive right should be
permitted in any individual which can not be shown to be productive of
positive good. To be allowed any exclusive right at all, over a portion of
the common inheritance, while there are others who have no portion, is
already a privilege. No quantity of movable goods which a person can
acquire by his labor prevents others from acquiring the like by the same
means; but, from the very nature of the case, whoever owns land keeps
others out of the enjoyment of it. When land is not intended to be
cultivated, no good reason can in general be given for its being private
property at all. Even in the case of cultivated land, a man whom, though
only one among millions, the law permits to hold thousands of acres as his
single share, is not entitled to think that all this is given to him to
use and abuse, and deal with as if it concerned nobody but himself. The
rents or profits which he can obtain from it are at his sole disposal; but
with regard to the land, in everything which he does with it, and in
everything which he abstains from doing, he is morally bound, and should,
whenever the case admits, be legally compelled to make his interest and
pleasure consistent with the public good.
Chapter II. Of Wages.
§ 1. Of Competition and Custom.
Political economists generally, and English political economists above
others, have been accustomed to lay almost exclusive stress upon the first
of [two] agencies [competition and custom]; to exaggerate the effect of
competition, and to take into little account the other and conflicting
principle. They are apt to express themselves as if they thought that
competition actually does, in all cases, whatever it can be shown to be
the tendency of competition to do. This is partly intelligible, if we
consider that only through the principle of competition has political
economy any pretension to the character of a science. So far as rents,
profits, wages, prices, are determined by competition, laws may be
assigned for them. Assume competition to be their exclusive regulator, and
principles of broad generality and scientific precision may be laid down,
according to which they will be regulated. The political economist justly
deems this his proper business: and, as an abstract or hypothetical
science, political economy can not be required to do, and indeed can not
do, anything more. But it would be a great misconception of the actual
course of human affairs to suppose that competition exercises in fact this
unlimited sway. I am not speaking of monopolies, either natural or
artificial, or of any interferences of authority with the liberty of
production or exchange. Such disturbing causes have always been allowed
for by political economists. I speak of cases in which there is nothing to
restrain competition; no hindrance to it either in the nature of the case
or in artificial obstacles; yet in which the result is not determined by
competition, but by custom or usage; competition either not taking place
at all, or producing its effect in quite a different manner from that
which is ordinarily assumed to be natural to it.
As stated by Mr. Cairnes,(161) political economy is a science just
as is any recognized physical science—astronomy, chemistry,
physiology. The economic “facts we find existing are the results
of causes, between which and them the connection is constant and
invariable. It is, then, the constant relations exhibited in
economic phenomena that we have in view when we speak of the laws
of the phenomena of wealth; and in the exposition of these laws
consists the science of political economy.” It is to be remembered
that economic laws are _tendencies_, not actual descriptions of
any given conditions in this or that place.
Competition, in fact, has only become in any considerable degree the
governing principle of contracts, at a comparatively modern period. The
further we look back into history, the more we see all transactions and
engagements under the influence of fixed customs. The relations, more
especially between the land-owner and the cultivator, and the payments
made by the latter to the former, are, in all states of society but the
most modern, determined by the usage of the country. The custom of the
country is the universal rule; nobody thinks of raising or lowering rents,
or of letting land, on other than the customary conditions. Competition,
as a regulator of rent, has no existence.
Prices, whenever there was no monopoly, came earlier under the influence
of competition, and are much more universally subject to it, than rents.
The wholesale trade, in the great articles of commerce, is really under
the dominion of competition. But retail price, the price paid by the
actual consumer, seems to feel very slowly and imperfectly the effect of
competition; and, when competition does exist, it often, instead of
lowering prices, merely divides the gains of the high price among a
greater number of dealers. The influence of competition is making itself
felt more and more through the principal branches of retail trade in the
large towns.
All professional remuneration is regulated by custom. The fees of
physicians, surgeons, and barristers, the charges of attorneys, are nearly
invariable. Not certainly for want of abundant competition in those
professions, but because the competition operates by diminishing each
competitor’s chance of fees, not by lowering the fees themselves.
These observations must be received as a general correction to be applied
whenever relevant, whether expressly mentioned or not, to the conclusions
contained in the subsequent portions of this treatise. Our reasonings
must, in general, proceed as if the known and natural effects of
competition were actually produced by it, in all cases in which it is not
restrained by some positive obstacle. Where competition, though free to
exist, does not exist, or where it exists, but has its natural
consequences overruled by any other agency, the conclusions will fail more
or less of being applicable. To escape error, we ought, in applying the
conclusions of political economy to the actual affairs of life, to
consider not only what will happen supposing the maximum of competition,
but how far the result will be affected if competition falls short of the
maximum.
§ 2. The Wages-fund, and the Objections to it Considered.
Under the head of Wages are to be considered, first, the causes which
determine or influence the wages of labor generally, and secondly, the
differences that exist between the wages of different employments. It is
convenient to keep these two classes of considerations separate; and in
discussing the law of wages, to proceed in the first instance as if there
were no other kind of labor than common unskilled labor, of the average
degree of hardness and disagreeableness.
Competition, however, must be regarded, in the present state of society,
as the principal regulator of wages, and custom or individual character
only as a modifying circumstance, and that in a comparatively slight
degree.
Wages, then, depend mainly upon the demand and supply of labor; or, as it
is often expressed, on the proportion between population and capital. By
population is here meant the number only of the laboring-class, or rather
of those who work for hire; and by capital, only circulating capital, and
not even the whole of that, but the part which is expended in the direct
purchase of labor. To this, however, must be added all funds which,
without forming a part of capital, are paid in exchange for labor, such as
the wages of soldiers, domestic servants, and all other unproductive
laborers. There is unfortunately no mode of expressing, by one familiar
term, the aggregate of what may be called the wages-fund of a country:
and, as the wages of productive labor form nearly the whole of that fund,
it is usual to overlook the smaller and less important part, and to say
that wages depend on population and capital. It will be convenient to
employ this expression, remembering, however, to consider it as
elliptical, and not as a literal statement of the entire truth.
With these limitations of the terms, wages not only depend upon the
relative amount of capital and population, but can not, under the rule of
competition, be affected by anything else. Wages (meaning, of course, the
general rate) can not rise, but by an increase of the aggregate funds
employed in hiring laborers, or a diminution in the number of the
competitors for hire; nor fall, except either by a diminution of the funds
devoted to paying labor, or by an increase in the number of laborers to be
paid.
[Illustration: Pie chart of Fixed Capital, Raw Materials, and
Wages Fund.]
This is the simple statement of the well-known Wages-Fund Theory,
which has given rise to no little animated discussion. Few
economists now assent to this doctrine when stated as above, and
without changes. The first attack on this explanation of the rate
of wages came from what is now a very scarce pamphlet, written by
F. D. Longe, entitled “A Refutation of the Wage-Fund Theory of
Modern Political Economy” (1866). Because laborers do not really
compete with each other, he regarded the idea of average wages as
absurd as the idea of an average price of ships and cloth; he
declared that there was no predetermined wages-fund necessarily
expended on labor; and that “demand for commodities” determined
the amount of wealth devoted to paying wages (p. 46). While the
so-called wages-fund limits the total amount which the laborers
_can_ receive, the employer would try to get his workmen at as
much less than that amount as possible, so that the aggregate fund
would have no bearing on the actual amount paid in wages. The
quantity of work to be done, he asserts, determines the quantity
of labor to be employed. About the same time (but unknown to Mr.
Longe), W. T. Thornton was studying the same subject, and
attracted considerable attention by his publication, “On Labor”
(1868), which in Book II, Chap. I, contained an extended argument
to show that demand and supply (i.e., the proportion between
wages-fund and laborers) did not regulate wages, and denied the
existence of a predetermined wages-fund fixed in amount. His
attack, however, assumes a very different conception of an
economic law from that which we think right to insist upon. The
character of mankind being what it is, it will be for their
interest to invest so much and no more in labor, and we must
believe that in this sense there is a predetermination of wealth
to be paid in wages. In order to make good investments, a certain
amount must, if capitalists follow their best interests, go to the
payment of labor.(162) Mr. Thornton’s argument attracted the more
attention because Mr. Mill(163) admitted that Mr. Thornton had
induced him to abandon his Wages-Fund Theory. The subject was,
however, taken up, re-examined by Mr. Cairnes,(164) and stated in
a truer form. (1.) The total wealth of a country (circle A in the
diagram) is the outside limit of its capital. How much capital
will be saved out of this depends upon the effective desire of
accumulation in the community (as set forth in Book I, Chap.
VIII). The size of circle B within circle A, therefore, depends on
the character of the people. The wages-fund, then, depends
ultimately on the extent of A, and proximately on the extent of B.
It can never be larger than B. So far, at least, its amount is
“predetermined” in the economic sense by general laws regarding
the accumulation of capital and the expectation of profit. Circle
B contracts and expands under influences which have nothing to do
with the immediate bargains between capitalists and laborers. (2.)
Another influence now comes in to affect the amount of capital
actually paid as wages, one also governed by general causes
outside the reach of laborer or capitalist, that is, the state of
the arts of production. In production, the particular conditions
of each industry will determine how much capital is to be set
apart for raw material, how much for machinery, buildings, and all
forms of fixed capital, and how many laborers will be assigned to
a given machine for a given amount of material. With some kinds of
hand-made goods the largest share of capital goes to wages, a less
amount for materials, and a very small proportion for machinery
and tools. In many branches of agriculture and small farming this
holds true. The converse, however, is true in many manufactures,
where machinery is largely used. No two industries will maintain
the same proportion between the three elements. The nature of the
industry, therefore, will determine whether a greater or a less
share of capital will be spent in wages. It is needless to say
that this condition of things is not one to be changed at the
demand of either of the two parties to production, Labor and
Capital; it responds only to the advance of mechanical science or
general intelligence. It is impossible, then, to escape the
conclusion that general causes restrict the amount which will,
under any normal investment, go to the payment of wages. Only
within the limits set by these forces can any further expansion or
contraction take place. (3.) Within these limits, of course, minor
changes may take place, so that the fund can not be said to be
“fixed” or “absolutely predetermined”; but these changes must take
place within such narrow limits that they do not much affect the
practical side of the question. How these changes act, may be seen
in a part of the following illustration of the above principles:
Suppose a cotton-mill established in one of the valleys of
Vermont, for the management of which the owner has $140,000 of
capital. Of this, $100,000 is given for buildings, machinery, and
plant. If he turns over his remaining capital ($40,000) each
month, we will suppose that $28,000 spent in raw materials will
keep five hundred men occupied at a monthly expenditure of
$12,000. The present state of cotton-manufacture itself settles
the relation between a given quantity of raw cotton and a certain
amount of machinery. A fixed amount of cotton, no more, no less,
can be spun by each spindle and woven by each loom; and the nature
of the process determines the number of laborers to each machine.
This proportion is something which an owner must obey, if he
expects to compete with other manufacturers: the relationship is
fixed for, not by, him. Now, each of the five hundred laborers
being supposed to receive on an average $1.00 a day, imagine an
influx of a body of French Canadians who offer to work, on an
average, for eighty cents a day.(165) The five hundred men will
now receive but $9,600 monthly instead of $12,000, as before, as a
wages-fund; the monthly payment for wages now is nearly seven per
cent, while formerly it was nearly nine per cent of the total
capital invested ($140,000). Thus it will be seen that the
wages-fund can change with a change in the supply of labor: but
the point to be noticed is that it is a change in the subdivision,
$12,000, of the total $140,000. That is, this alteration can take
place only within the limits set by the nature of the industry.
Now, if this $2,400 (i.e., $12,000 less $9,600) saved out of the
wages-fund were to be reinvested, it must necessarily be divided
between raw materials, fixed capital, and wages in the existing
relations, that is, only seven per cent of the new $2,400 would be
added to the wages-fund. It is worth while calling attention to
this, if for no other reason than to show that in this way a
change can be readily made in the wages-fund by natural movements;
and that no one can be so absurd as to say that it is absolutely
fixed in amount. But it certainly is “predetermined” in the
economic sense, in that any reinvestments, as well as former
funds, must necessarily be distributed according to the above
general principles, independent of the “higgling” in the labor
market. The following is Mr. Cairnes’s statement of the amount and
“predetermination” of the wages-fund:
“I believe that, in the existing state of the national wealth, the
character of Englishmen being what it is, a certain prospect of
profit will ‘determine’ a certain proportion of this wealth to
productive investment; that the amount thus ‘determined’ will
increase as the field for investment is extended, and that it will
not increase beyond what this field can find employment for at
that rate of profit which satisfies English commercial
expectation. Further, I believe that, investment thus taking
place, the form which it shall assume will be ‘determined’ by the
nature of the national industries—‘determined,’ not under acts of
Parliament, or in virtue of any physical law, but through the
influence of the investor’s interests; while this, the form of the
investment, will again ‘determine’ the proportion of the whole
capital which shall be paid as wages to laborers.”(166) In this
excellent and masterly conception, the doctrine of a wages-fund is
not open to the objections usually urged against it. Indeed, with
the exception of Professor Fawcett, scarcely any economist
believes in an absolutely fixed wages-fund. In this sense, then,
and in view of the above explanation, it will be understood what
is meant by saying that wages depend upon the proportion of the
wages-fund to the number of the wage-receivers.(167)
In applying these principles to the question of strikes, it is
evident enough that if they result in an actual expansion of the
whole circle B, by forcing saving from unproductive expenditure, a
real addition, of some extent, may be made to the wages-fund; but
only by increasing the total capital. If, however, they attempt to
increase one of the elements of capital, the wages-fund, without
also adding to the other elements, fixed capital and materials, in
the proportion fixed by the nature of the industry, they will
destroy all possibility of continuing that production in the
normal way, and the capitalist must withdraw from the enterprise.
Francis A. Walker(168) has also offered a solution of this problem
in his “Wages Question” (1876), in which he holds that “wages are,
in a philosophical view of the subject, paid out of the product of
present industry, and hence that production furnishes the true
measure of wages” (p. 128). “It is the prospect of a profit in
production which determines the employer to hire laborers; it is
the anticipated value of the product which determines how much he
can pay him” (p. 144). No doubt wages _can_ be (and often are)
paid out of the current product; but _what_ amount? What is the
principle of distribution? Wherever the incoming product is a
moral certainty (and, unless this is true, in no case could wages
be paid out of the future product), saving is as effective upon it
as upon the actual accumulations of the past; and the amount of
the coming product which will be saved and used as capital is
determined by the same principles which govern the saving of past
products. An increase of circle A by a larger production makes
possible an increase of circle B, but whether it will be enlarged
or not depends on the principle of accumulation. The larger the
total production of wealth, the greater the _possible_ wages, all
must admit; but it does not seem clear that General Walker has
given us a solution of the real question at issue. The larger the
house you build, the larger the rooms may be; but it does not
follow that the rooms will be necessarily large—as any inmate of a
summer hotel will testify.
§ 3. Examination of some popular Opinions respecting Wages.
There are, however, some facts in apparent contradiction to this [the
Wages-Fund] doctrine, which it is incumbent on us to consider and explain.
1. For instance, it is a common saying that wages are high when trade is
good. The demand for labor in any particular employment is more pressing,
and higher wages are paid, when there is a brisk demand for the commodity
produced; and the contrary when there is what is called a stagnation: then
work-people are dismissed, and those who are retained must submit to a
reduction of wages; though in these cases there is neither more nor less
capital than before. This is true; and is one of those complications in
the concrete phenomena which obscure and disguise the operation of general
causes; but it is not really inconsistent with the principles laid down.
Capital which the owner does not employ in purchasing labor, but keeps
idle in his hands, is the same thing to the laborers, for the time being,
as if it did not exist. All capital is, from the variations of trade,
occasionally in this state. A manufacturer, finding a slack demand for his
commodity, forbears to employ laborers in increasing a stock which he
finds it difficult to dispose of; or if he goes on until all his capital
is locked up in unsold goods, then at least he must of necessity pause
until he can get paid for some of them. But no one expects either of these
states to be permanent; if he did, he would at the first opportunity
remove his capital to some other occupation, in which it would still
continue to employ labor. The capital remains unemployed for a time,
during which the labor market is overstocked, and wages fall. Afterward
the demand revives, and perhaps becomes unusually brisk, enabling the
manufacturer to sell his commodity even faster than he can produce it; his
whole capital is then brought into complete efficiency, and, if he is
able, he borrows capital in addition, which would otherwise have gone into
some other employment. These, however, are but temporary fluctuations: the
capital now lying idle will next year be in active employment, that which
is this year unable to keep up with the demand will in its turn be locked
up in crowded warehouses; and wages in these several departments will ebb
and flow accordingly: but nothing can permanently alter general wages,
except an increase or a diminution of capital itself (always meaning by
the term, the funds of all sorts, destined for the payment of labor)
compared with the quantity of labor offering itself to be hired.
2. Again, it is another common notion that high prices make high wages;
because the producers and dealers, being better off, can afford to pay
more to their laborers. I have already said that a brisk demand, which
causes temporary high prices, causes also temporary high wages. But high
prices, in themselves, can only raise wages if the dealers, receiving
more, are induced to save more, and make an addition to their capital, or
at least to their purchases of labor. Wages will probably be temporarily
higher in the employment in which prices have risen, and somewhat lower in
other employments: in which case, while the first half of the phenomenon
excites notice, the other is generally overlooked, or, if observed, is not
ascribed to the cause which really produced it. Nor will the partial rise
of wages last long: for, though the dealers in that one employment gain
more, it does not follow that there is room to employ a greater amount of
savings in their own business: their increasing capital will probably flow
over into other employments, and there counterbalance the diminution
previously made in the demand for labor by the diminished savings of other
classes.
A clear distinction must be made between real wages and money
wages; the former is of importance to the laborer as being his
real receipts. The quantity of commodities satisfying his desires
which the laborer receives for his exertion constitutes his real
wages. The mere amount of money he receives for his exertions,
irrespective of what the money will exchange for, forms his money
wages. Since the functions of money have not yet been explained,
it is difficult to discuss the relation between prices and money
wages here. But, as the total value of the products in a certain
industry is the sum out of which both money wages and profits are
paid, this total will rise or fall (efficiency of labor remaining
the same) with the price of the particular article. If the price
rises, profits will be greater than elsewhere, and more capital
will be invested in that one business; that is, the capital will
be a demand for more labor, and, until equalization is
accomplished in all trades between wages and profits, money wages
will be higher in some trades than in others.(169)
When reference is had to the connection between real wages and
prices, the question is a different one. General high prices would
not change general _real wages_. But if high prices cause higher
money wages in particular branches of trade, then, because the
movement is not general, there will accrue, to those receiving
more money, the means to buy more of real wages. And, as in
practice, changes in prices which arise from an increased demand
are partial, and not general, it often happens that high prices
produce high real wages (not general high wages) in some, not in
all employments. (For a further study of this relation between
prices and wages the reader is advised to recall this discussion
in connection with that in a later part of the volume, Book III,
Chaps. XX and XXI.)
3. Another opinion often maintained is, that wages (meaning of course
money wages) vary with the price of food; rising when it rises, and
falling when it falls. This opinion is, I conceive, only partially true;
and, in so far as true, in no way affects the dependence of wages on the
proportion between capital and labor: since the price of food, when it
affects wages at all, affects them through that law. Dear or cheap food
caused by variety of seasons does not affect wages (unless they are
artificially adjusted to it by law or charity): or rather, it has some
tendency to affect them in the contrary way to that supposed; since in
times of scarcity people generally compete more violently for employment,
and lower the labor market against themselves. But dearness or cheapness
of food, when of a permanent character, and capable of being calculated on
beforehand, may affect wages. (1.) In the first place, if the laborers
have, as is often the case, no more than enough to keep them in working
condition and enable them barely to support the ordinary number of
children, it follows that, if food grows permanently dearer without a rise
of wages, a greater number of the children will prematurely die; and thus
wages will ultimately be higher, but only because the number of people
will be smaller, than if food had remained cheap. (2.) But, secondly, even
though wages were high enough to admit of food’s becoming more costly
without depriving the laborers and their families of necessaries; though
they could bear, physically speaking, to be worse off, perhaps they would
not consent to be so. They might have habits of comfort which were to them
as necessaries, and sooner than forego which, they would put an additional
restraint on their power of multiplication; so that wages would rise, not
by increase of deaths but by diminution of births. In these cases, then,
wages do adapt themselves to the price of food, though after an interval
of almost a generation.(170) If wages were previously so high that they
could bear reduction, to which the obstacle was a high standard of comfort
habitual among the laborers, a rise of the price of food, or any other
disadvantageous change in their circumstances, may operate in two ways:
(_a_) it may correct itself by a rise of wages, brought about through a
gradual effect on the prudential check to population; or (_b_) it may
permanently lower the standard of living of the class, in case their
previous habits in respect of population prove stronger than their
previous habits in respect of comfort. In that case the injury done to
them will be permanent, and their deteriorated condition will become a new
minimum, tending to perpetuate itself as the more ample minimum did
before. It is to be feared that, of the two modes in which the cause may
operate, the last (_b_) is the most frequent, or at all events
sufficiently so to render all propositions, ascribing a self-repairing
quality to the calamities which befall the laboring-classes, practically
of no validity.
The converse case occurs when, by improvements in agriculture, the repeal
of corn laws, or other such causes, the necessaries of the laborers are
cheapened, and they are enabled with the same [money] wages to command
greater comforts than before. Wages will not fall immediately: it is even
possible that they may rise; but they will fall at last, so as to leave
the laborers no better off than before, unless during this interval of
prosperity the standard of comfort regarded as indispensable by the class
is permanently raised. Unfortunately this salutary effect is by no means
to be counted upon: it is a much more difficult thing to raise, than to
lower, the scale of living which the laborers will consider as more
indispensable than marrying and having a family. According to all
experience, a great increase invariably takes place in the number of
marriages in seasons of cheap food and full employment.
This is to be seen by some brief statistics of marriages in
Vermont and Massachusetts.
Year. Vermont Massachusetts
1860 2,179 12,404
1861 2,188 10,972
1862 1,962 11,014
1863 2,007 10,873
1864 1,804 12,513
1865 2,569 13,052
1866 3,001 14,428
1867 2,857 14,451
In Vermont, while the average number of marriages was reached in
1860 and 1861, it fell off on the breaking out of the war; rose in
1863, under the fair progress of the Northern arms; again fell off
in 1864, during the period of discouragement; and since 1865 has
kept a steadily higher average. In manufacturing Massachusetts the
number fell earlier than in agricultural Vermont, at the beginning
of the difficulties.
1856, July to Jan. 6,418
1857, Jan. to July 5,803
1857, July to Jan. 5,936
1858, Jan. to July 4,917
1858, July to Jan. 5,610
The effects of the financial panic of 1857, in Massachusetts, show
a similar movement in the number of marriages. The crisis came in
October, 1857. In the three months following that date there were
400 less marriages.
To produce permanent advantage, the temporary cause operating upon them
must be sufficient to make a great change in their condition—a change such
as will be felt for many years, notwithstanding any stimulus which it may
give during one generation to the increase of people. When, indeed, the
improvement is of this signal character, and a generation grows up which
has always been used to an improved scale of comfort, the habits of this
new generation in respect to population become formed upon a higher
minimum, and the improvement in their condition becomes permanent.
§ 4. Certain rare Circumstances excepted, High Wages imply Restraints on
Population.
Wages depend, then, on the proportion between the number of the laboring
population and the capital or other funds devoted to the purchase of
labor; we will say, for shortness, the capital. If wages are higher at one
time or place than at another, if the subsistence and comfort of the class
of hired laborers are more ample, it is for no other reason than because
capital bears a greater proportion to population. It is not the absolute
amount of accumulation or of production that is of importance to the
laboring-class; it is not the amount even of the funds destined for
distribution among the laborers; it is the proportion between those funds
and the numbers among whom they are shared. The condition of the class can
be bettered in no other way than by altering that proportion to their
advantage: and every scheme for their benefit which does not proceed on
this as its foundation is, for all permanent purposes, a delusion.
In countries like North America and the Australian colonies, where the
knowledge and arts of civilized life and a high effective desire of
accumulation coexist with a boundless extent of unoccupied land, the
growth of capital easily keeps pace with the utmost possible increase of
population, and is chiefly retarded by the impracticability of obtaining
laborers enough. All, therefore, who can possibly be born can find
employment without overstocking the market: every laboring family enjoys
in abundance the necessaries, many of the comforts, and some of the
luxuries of life; and, unless in case of individual misconduct, or actual
inability to work, poverty does not, and dependence need not, exist. [In
England] so gigantic has been the progress of the cotton manufacture since
the inventions of Watt and Arkwright, that the capital engaged in it has
probably quadrupled in the time which population requires for doubling.
While, therefore, it has attracted from other employments nearly all the
hands which geographical circumstances and the habits or inclinations of
the people rendered available; and while the demand it created for infant
labor has enlisted the immediate pecuniary interest of the operatives in
favor of promoting, instead of restraining, the increase of population;
nevertheless wages in the great seats of the manufacture are still so high
that the collective earnings of a family amount, on an average of years,
to a very satisfactory sum; and there is as yet no sign of decrease, while the effect has also been felt in raising the general standard of agricultural wages in the counties adjoining. |
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