Contemporary Socialism Part 16

These, among other things, are indications that we have been concluding too hastily that concentration of wealth is the characteristic tendency of the time, and ignoring the existence of many minor and less conspicuous forces which have been working in the contrary direction.

The real prospect at present is towards diffusion. The enormous acc.u.mulations that have marked the last hundred and fifty years have owed their existence largely to causes that cannot be expected to endure; in the case of land, to vicious laws directly favouring aggregations; and in the case of trade, to the unparalleled rapidity of the transformations and extensions industry has undergone during the period. Great inequalities are natural to such a time. Huge fortunes are made by pioneers, and will not be easily made by their successors.

Railway contracting will never produce again a millionaire like Mr.

Bra.s.sey, but it will continue to furnish the means of many moderate fortunes and competencies. So with every other new branch of industry, or new field of investment. The lucky person who is the first to occupy it may rise to great riches, but his successors will divide the custom, and instead of one large fortune, there will be a considerable number of small ones. Mr. George himself admits that the opportunities of making large fortunes are growing more limited, but oddly enough he considers the fact to be a signal evidence of "the march of concentration." In his "Social Problems" (p. 59) he writes: "An English friend, a wealthy retired Manchester manufacturer, once told me the story of his life. How he went to work at eight years of age, helping to make twine, when twine was made entirely by hand. How, when a young man, he walked to Manchester, and having got credit for a bale of flax, made it into twine and sold it. How, building up a little trade, he got others to work for him. How, when machinery began to be invented, and steam was introduced, he took advantage of them, until he had a big factory and made a fortune, when he withdrew to spend the rest of his days at ease, leaving his business to his son. 'Supposing you were a young man now,' said I, 'could you walk into Manchester and do that again?' 'No,' replied he, 'no one could. I couldn't with fifty thousand pounds in place of my five s.h.i.+llings.'" The true moral of this little story is of course that it is more difficult to ama.s.s a huge fortune in that particular line now than when machinery was young, and that a man with 50,000 to start with must now content himself with a much poorer figure than Mr. George's lucky friend made out of nothing. Would Mr. George compute what limit could be set to the sum his friend might have ama.s.sed, had he started in those golden days with 50,000 instead of five s.h.i.+llings? Even as things stood, his solitary success did not distribute the wealth of Manchester any the better among his fellow-spinners who were not fortunate enough to get credit for a bale of flax, or pus.h.i.+ng enough to ask for it, and were not in a position to take advantage of the first introduction of a new power, and rise with it to great wealth. That the stream of things is now making for more moderate fortunes, and more of them, is confirmed by the testamentary statistics of the previous ten years published some time ago by the _Spectator_ newspaper. These figures show that the number of fortunes of the first rank left during that period has been very much less than it was in the preceding ten years, but that the number of moderate fortunes has been very much larger.

What the future may hide in it I shall not venture to divine. It will no doubt bring upon industry fresh transformations, but we can hardly expect them to be so numerous or so rapid as in the brilliant era of industrial progress and colonial development we have pa.s.sed through, and some at least of the changes that are in store for us point, as I have shown in the introductory chapter of this book, to a greater diffusion rather than a greater concentration in the future. Mr. George says: "All the currents of the time run to concentration. To successfully resist it we must throttle steam and discharge electricity from human service" (p.

232). Now steam has undoubtedly been a great concentrator, but electricity, which is likely to take its place in the future, will to all appearance be as great a distributor. Mr. George is equally mistaken regarding the real effect of the other "currents of the time." "That concentration is the order of development," says he, "there can be no mistaking--the concentration of people in large cities, the concentration of handicrafts in large factories, the concentration of transportation by railroad and steams.h.i.+p lines, and of agricultural operations in large fields. The most trivial businesses are being concentrated in the same way--errands are run and carpet sacks are carried by corporations" (p. 232). The concentration of people in cities is not the same thing as the concentration of the wealth of those cities in the hands of a few individuals. The centralization of labour in cities has a.s.sisted the birth of the trade union and the co-operative society, which are among the best agencies for diffusing wealth; and the growth of joint-stock companies is a strange proof of a tendency to greater concentration of wealth, for the joint-stock company is really an instrument of the small capital, enabling it by combination to compete successfully with the larger; and as to agriculture, the real tendency, in this country at any rate, seems to be to lesser holdings.

When we complain of the inequalities of our time--and I am far from desiring to underrate their extent or to palliate their mischievousness--we are apt to forget how largely the real and natural process of evolution is after all one of distribution, how much the most conspicuous of the inequalities have been incidental to a transition period, and due to causes of a temporary nature, and how many indications we possess that they are not unlikely to be corrected and moderated in the future course of social development. Some of the official returns made in connection with the income tax show that the immense increase of wealth of the last thirty years has been far from being reaped by any single cla.s.s, but has been shared pretty evenly by all the cla.s.ses included in those returns. We possess detailed accounts of the number of persons paying income tax in each grade of income under Schedule D, from the year 1849, and if we compare the figures of that year with those of 1879, we shall obtain a fair index to the movement of distribution during those thirty years. Schedule D, it is true, includes only incomes derived from trades and professions, but these incomes may fairly enough be taken as sufficiently characteristic to afford a trustworthy indication of the general movement. While population increased in the thirty years by 22 per cent., the number of incomes liable to income-tax increased by 161 per cent., and of these, the incomes that have increased in much the largest proportion are precisely those middling or lower middling incomes which I have before shown to have unfortunately declined since 1688. While the number of incomes over 1,000 a year has increased by 165 per cent., the number of incomes between 150 and 400 a year has increased by 256 per cent. Mr. Goschen, in his inaugural address as President of the Royal Statistical Society in December, 1887, produced later evidence showing the continuance, and even growth of the same tendency. He showed from the Income Tax Returns that, in spite of the increase of population between 1877 and 1886, the number of incomes over 1,000 a year had decreased by 2.40 per cent., and the number of incomes between 500 and 1,000 had remained the same, while the number of incomes between 150 and 500 had increased 21.4 per cent. He showed from the statistics of certain selected public companies, that in the ten years from 1876 to 1886 the number of their shareholders had increased by 72 per cent., while the average capital per shareholder had decreased from 443 to 323. He drew similar conclusions from the probate and inhabited house duty figures, and from several other sources. (See _Journal of Statistical Society_, December, 1887.) These figures prove that the tendency of things, so far as it concerns the cla.s.ses above the labourers, is not to further and exclusive concentration, but rather towards a wider and beneficial diffusion; and in regard to the labouring cla.s.ses, it is admitted by all--even by the extremest social pessimists--that the upper and middle strata of them have partic.i.p.ated in the progress of wealth equally with their neighbours. There remains only the lowest cla.s.s of all, and their emanc.i.p.ation is the serious task of social reform in the immediate future; but that cla.s.s is even now not increasing in the ratio of population; its misery comes from many causes, most of them moral and physical rather than economic; and though it presents difficult and trying problems, there is no reason for renouncing the hope which alone can sustain social reformers to success.

II. _Mr. George's Explanation._

If there is any force in the foregoing observations, it is plain that there is no such problem as Mr. George has undertaken to explain, and we are therefore exempted from all necessity of examining his explanation.

But to Mr. George's own mind his explanation of the appearance that troubled him really const.i.tutes the demonstration of it; at any rate, he offers no other. The question of the increase of poverty is of course a question of fact, that cannot be settled by a _priori_ deduction alone; but Mr. George seems to think otherwise. He is too bent on proving it to be _necessary_ to think of asking whether it is _actual_, and even a man of science like Mr. A. R. Wallace, while regretting that Mr. George had not chosen to build his proposals on ground of fact, declares that he adopted an equally legitimate method in deducing his results "from the admitted principles and data of political economy." ("Land Nationalization," p. 19.) Moreover, most of the social pessimism of the present time draws its chief support, exactly like Mr. George's, from the supposed bearing of certain received economic doctrines; and our task would therefore be incomplete if we did not follow Mr. George on this "high _priori_ road" on which he so boldly fares forth, and performs, as will presently be seen, many a remarkable feat.

Before beginning his explanation, he throws the problem itself into what he conceives to be a more suitable scientific form. "The cause," says he, "which produces poverty in the midst of advancing wealth is evidently the cause which exhibits itself in the tendency everywhere recognised of wages to a minimum. Let us therefore put our inquiry into this compact form: Why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living?" (p. 10). The problem, as thus restated, is clearly, be it observed, one of quant.i.ty, not of proportion. A bare living is not a relative share, but a definite amount, of produce. But the tendency in wages to such a minimum, which he a.s.serts to be everywhere recognised, is really not recognised at all.

In alleging that it is so, Mr. George evidently alludes to the doctrine of wages taught by Ricardo and his school; but what they recognised in wages was a tendency, not to a minimum that would give but a bare living, but to a minimum that would give a customary living; in other words, that would sustain the labourers in the standard of comfort customary among their own cla.s.s. The economic minimum is not the absolute minimum of a bare living; it is, as Mr. George himself elsewhere puts it, "the lowest amount on which labourers will consent to live and reproduce,"--that is, not the lowest amount on which any individual labourer will do so, but the lowest amount which labouring people in general consider it necessary to earn before they will undertake the responsibility of marriage. If they were to get less than this, it was contended, they would refrain from marrying to an extent that would tell sufficiently on the supply of labour to force wages up again to their old level. This level was the minimum to which wages constantly tended, but then it was always higher than a bare living; it was determined by the standard of requirements current among the labouring cla.s.s at the time; and it was recognised to be capable of rising if that standard rose. True, Ricardo and the economists of his generation entertained very poor hopes of any such rise, because the working cla.s.ses of their time, being without the intelligence, the ideas of comfort, the higher wants that are powerfully operative among the working cla.s.ses of our day, were generally seen to "take out" their better wages when they chanced to get them in nothing but earlier marriages, which in the end brought their wages down again. We have happily now to do with a more aspiring and a less uniformly composed working cla.s.s. It is perhaps more aspiring in some measure because it is less uniformly composed. It contains many ranks and inequalities and standards of social refinement and comfort, and the presence of these side by side develops a more active tendency upward, which, by supplying a stronger check than before on improvident marriages, will enable the labourers, cla.s.s after cla.s.s of them, to appropriate securely more and more of the common domain of advancing civilization. We have had abundant experience of a rise in the standard of life, and a rise in the rate of wages, both remaining as permanent possessions of sections of the labouring cla.s.s. But if Ricardo and his school had less faith than they reasonably might have had in the possibility of a permanent upward tendency in wages, they certainly never dreamt of believing in any permanent downward tendency. According to their doctrine the rate of wages moved up and down within certain limits, but always tended to come back to a particular figure--the amount necessary to give the labourer the living customary among his cla.s.s. This figure was really no more a minimum than it was a maximum; wages were supposed to fall sometimes below it, as they were supposed to rise sometimes above it; and to speak of it as a minimum that would give but a bare living is completely to misrepresent its nature.

The a.s.sumption from which Mr. George starts is thus in no wise an admitted principle of political economy, and would therefore not answer the test of legitimacy laid down by Mr. Wallace. It has no ground outside of Mr. George's own imagination. Economists would solve his problem, "why in spite of increased productive power wages tend to a minimum that will give but a bare living?" by simply denying his fact, and having done with it. But Mr. George persuades himself that they would answer it otherwise, and devotes the next section of his book to an elaborate confutation of the false answers he supposes they would return to it. They would either explain it, he thinks, by their theory of the wages fund, or they would explain it by their theory of population; and so before confiding to us his own explanation, he considers it necessary to stop and clear these two venerable theories out of his way. I am not concerned to defend these theories; their truth would not make Mr. George's own view any the falser, nor their falsehood make it any the truer. One of them indeed was dead and buried before Mr.

George attacked it, though I am bound to say it would never have fallen before the particular line of attack he directs against it. The wages fund doctrine, which played a considerable _role_ both in its original form as taught by Senior, and in its subsequent form as modified by M'Culloch, was refuted by Mr. Thornton in 1869, was almost instantly abandoned by the candid mind of Mr. Mill, and is now rarely met with as a living economic doctrine. The wages fund is still regarded of course as having its limit in capital, and in the conditions which generate capital, but since these conditions include among other things the number and efficiency of the labourers, the amount of the wages fund is no longer represented as at any given moment a fixed and predetermined quant.i.ty susceptible of no possible alteration to meet the exigencies of the labour market, and when once this characteristic was given up, the wages fund doctrine was seen to have degenerated into little more than a stately truism. The Malthusian theory of population is not in the same way discredited, but it likewise is now generally stated with some reserve. It has become well understood that the earlier economists a.s.signed it too absolute and universal a validity, and that it is not, as they thought, a law for all ages, and especially and happily not a law for our own. It is true of an era of progressive population and diminis.h.i.+ng return from agriculture, but for our day it has been robbed of its terrors by free trade and steam navigation, which have connected our markets with continents of virgin soil, and carried us virtually into an era of increasing return of indefinite duration. The population question was one of serious practical import for our fathers, and as they saw people marrying and giving in marriage, while every fresh bushel of food was extracted with increasing difficulty from an exhaustible soil, they looked with a reasonable dread to the future, and saw no way of hope except in the practice of a heroic continence. But we live in another time. We find population increasing and yet bread cheapening, simply because the locomotive which alarmed Mr. George by taking the tramp to California has brought back plenty to the rest of the world. It is due to the material progress he preaches against that we are the first generation who can afford to make light of the population question, and leave our remote posterity to deal with the peril when it shall actually arrive.

Mr. George, however, is not content with disputing these doctrines; he insists on replacing them with others exactly opposite to them in purport, and for which he claims a like universal validity. He propounds a new population theory, and a new wages fund theory of his own. The more population abounds, the more will subsistence superabound, is his comfortable counter-proposition to Malthusianism. "I a.s.sert," says he, "that in any given state of civilization a greater number of people can collectively be better provided for than a smaller.... I a.s.sert that the new mouths which an increasing population calls into existence, require no more food than the old ones, while the hands they bring with them can in the natural order of things produce more. I a.s.sert that, other things being equal, the greater the population, the greater the comfort which an equitable distribution of wealth would give to each individual" (p.

99). In a word, his teaching is that "other things being equal"

over-population is a ridiculous impossibility. What may be all concealed under the reservation, "other things being equal," he does not enlighten us, but it avowedly contains at least one presupposition of decisive importance to the question, the presupposition of the unlimited productiveness of the soil. Mr. George denies the law of diminis.h.i.+ng return. We shall presently find him, in his doctrine about rent, basing his whole book on the operation of this law. But here in his doctrine about population it suits him to deny it, and he does so on singularly fantastical grounds (p. 93). He denies it on the ground that "matter is eternal, and force must for ever continue to act," as if the indestructibility of matter was the same thing as its infinite productiveness. "As the water that we take from the ocean must again return to the ocean, so the food we take from the reservoirs of nature is, from the moment we take it, on its way back to those reservoirs.

What we draw from a limited extent of land may temporarily reduce the productiveness of that land, because the return may be to other land or may be divided between that land and other land, or perhaps all land; but this possibility lessens with increasing area, and ceases when the whole globe is considered. That the earth could maintain a thousand billions of people as easily as a thousand millions is a necessary deduction from the manifest truths that at least, as far as our agency is concerned, matter is eternal and force must for ever continue to act.... And from this it follows that the limit to the population of the globe can only be the limit of s.p.a.ce. Now this limitation of s.p.a.ce--this danger that the human race may increase beyond the possibility of finding elbow-room--is so far off as to have for us no more practical interest than the recurrence of the glacial period or the final extinguishment of the sun" (p. 94-5). If this pa.s.sage means anything, it means that the race may go on multiplying as long as it finds room to stand on, and that even when that limit is reached it can only be squeezed to death and not starved. It can in no case apparently be starved. Subsistence cannot possibly run short, for the inherent powers of the soil are not permanently destructible. But he might as well argue that man must be omnipotent because he is immortal. The question is not one of the durability of the productive powers of the earth--it is one of their limited or unlimited productive capacity. Up to a certain point they may yield the same return at the same cost year after year in _saecula saeculorum_, but will they yield more? Manifestly not. Every bushel they give after that is got at continuously increasing cost. Now of course wherever population increases so much, compared with the land at its disposal, that this increasing cost must be incurred in order to find them food, the epoch of diminis.h.i.+ng return in agriculture has arrived, and the peril of over-population is already present. Happily, as we have said, that time is not yet, but it will come long, long before the human race fails to find elbow-room in this planet.

Mr. George himself admits that in a country of inconsiderable extent, or in a small island, such as Pitcairn's Island, over-population is quite possible before elbow-room is near exhausted--(p. 74)--and in making the admission he virtually surrenders his case. He admits in detail what he denies in gross. For is not the soil of a small island or an inconsiderable country as eternal as the soil of a continent? The only difference is that it is not so extensive, and therefore comes to the epoch of diminis.h.i.+ng return sooner. That is all. The reason why he makes an exception of such an island is because its inhabitants "are cut off from communication with the rest of the world, and consequently from the exchanges which are necessary to the improved modes of production resorted to as population becomes dense" (p. 74). But if density of population is such a sure improver of production as Mr. George represents it to be elsewhere, why should it fail here? And if it fail anywhere, how can he argue that it must succeed everywhere? Once he admits, as he does in this pa.s.sage, that subsistence has a definite limit in the modes of production that happen to be known in any age and country, and that population has a definite limit for such age and country in the amount of subsistence which the known modes of production are capable of extracting from the soil, he really admits all that Malthusians generally contend for, and coming to curse, he has really blessed them altogether. The limit of subsistence which he here recognises--the limit imposed by the state of the arts--is far within the limit which he has just been denying, the natural limit to the inherent fertility of the soil, on which economists base their law of diminis.h.i.+ng return. The former point is far sooner reached than the latter. Men will starve because they don't know how to make the best use of nature long before they will starve because nature is used up; and it is exactly that earlier limit on which Malthusians lay stress.

But except for this inconsistent admission in the case of a petty isolated island, Mr. George persistently refuses to recognise any kind of limit to subsistence, either in the productive capacity of the soil or in the state of the arts. He seems to fancy that land will go on yielding larger and larger harvests _ad infinitum_ to accommodate an increasing population, and that even if it failed to do so, new inventions or improved processes of production would be constantly discovered when they were needed, and keep the supply of food always equal to the demand. With these crude a.s.sumptions in his head, he arrives very easily at his own peculiar theory, which is, that subsistence tends to increase faster than population, because the growth of population itself affords the means of such economies and organization of labour as multiply immensely the productive capacity of each individual labourer. A hundred labourers, he is fond of arguing, will produce much more than a hundred times the amount that one will, and it is therefore clear folly to think of population as capable of encroaching on subsistence. On the contrary, it seems almost fitter to speak of it as a means of positively economizing subsistence. Mr.

George's mistake arises from ignoring the fact that subsistence depends on the productive capacity of land as well as on the productive capacity of labour, and the productive capacity of land is not indefinitely progressive.

Mr. George's new wages fund theory is based on a precisely a.n.a.logous misconception of the real conditions of the case, and is just as much in the air as his population theory. "Wages," he says, "cannot be diminished by the increase of labourers, but on the contrary, as the efficiency of labour manifestly increases with the number of labourers, the more labourers, other things being equal, the higher wages should be" (p. 62). Just as he has already argued that food can never run short before an advancing population, because the new hands can produce much more than the new mouths can consume, as if the hands span it out of their own finger nails; so he now argues that wages can never decline for want of capital to employ labourers, because the capital that employs them is made by the labourers themselves. They are paid, he declares, not out of the capital of their employers, but out of the product of their own labour. Mr. F. A. Walker, the eminent American economist, had already taught a similar doctrine, but with the reservation that while wages were really paid out of the produce of the labour they remunerated, they were usually advanced out of the employer's capital. But Mr. George throws aside this reservation, and declares boldly that wages are neither paid nor advanced out of capital, and that if any advance is made in the transaction at all, it is the labourer who makes it to the employer, not the employer to the labourer.

"In performing his labour, he (the labourer) is advancing in exchange; when he gets his wages, the exchange is completed. During the time he is earning the wages, he is advancing capital to his employer; but at no time, unless wages are paid before work is done, is the employer advancing capital to him" (p. 49).

In this contention Mr. George relies much on the a.n.a.logy of the "self-employing" labour of primitive society. When men live by gathering eggs, he tells us, the eggs they gather are their wages. No doubt; but in our complicated civilization we don't live by gathering eggs from day to day, but by sowing the seed in spring which is to yield us food only in harvest--by preparing work for the market which may take weeks, months, even years before it is marketable. The energetic Sir John Sinclair is said to have once danced at a ball in the evening dressed in a suit the wool of which was still growing on the sheep's back in the morning; but rapidity like that is naturally foreign to ordinary commerce. The successive operations of clipping, fulling, teasing, spinning, dying, weaving, cutting, sewing, occupy considerable time. So with other things. Houses, s.h.i.+ps, railways, are not built in a day, or by a single workman. The product of a single workman's work for a day at any of these things has no value apart from the product of the other workmen's work, nor has the work of them all any value unless the work is, or is to be, completed. The wages paid during the period of construction, therefore, cannot possibly have come out of the work for which they were paid, but must have been advanced otherwise. Who advances them? Clearly not the labourer himself, for he receives them.

And yet that is what Mr. George unhesitatingly a.s.serts, and his argument is as courageous as it is ingenious. He does not shrink from applying it to the extremest case you like to suggest--the Great Eastern, the Gothard Tunnel, the Suez Ca.n.a.l; even in these cases the labourers, who spent months and years in doing the work, were paid out of the work itself, out of the Great Eastern, out of the Gothard Tunnel, out of the Suez Ca.n.a.l. "For," says Mr. George, "a work that is incomplete is not valueless, it is not unexchangeable; money may be raised on it by mortgage or otherwise, and as this money is raised on the product of the labourer's work, the wages it is employed to pay are really paid out of that product." But this only s.h.i.+fts the question a little: it does not answer it. Where does this lent money come from? Certainly not from the work it is lent on. Perhaps not, Mr. George will rejoin, again s.h.i.+fting his ground, but it comes from the product of the contemporaneous work of other labourers. "It is not necessary to the production of things that cannot be used as subsistence or cannot be immediately utilized that there should have been a previous production of the wealth required for the maintenance of the labourers while the production is going on. It is only necessary that there should be, somewhere within the circle of exchange, a contemporaneous production of subsistence for the labourers, and a willingness to exchange this subsistence for the thing on which the labour is being bestowed" (p. 51). But this is only pa.s.sing round the dilemma. For this contemporaneous production has itself the same difficulty to face; it has to sustain its labourers during the time taken to complete their work; and it can only do so, according to Mr.

George's explanation, by raising the means through a mortgage on the unfinished work. It borrows to pay its own wages, but is apparently able to lend to pay other people's. Mr. George has a happy method of carrying on the affairs of society by mutual accommodation. Peter is a shoemaker who wants money to buy leather to make shoes and food to maintain him till the shoes are made. Paul is a carpenter who is in a like case, and wants money to buy food and timber. Peter borrows the money he needs from Paul on mortgage, and then Paul in turn borrows what he needs from Peter, on the same terms. Utopia is a pleasanter world than ours, and an IOU probably goes a long way in it; but here on this hard earth Peter would certainly make no shoes nor Paul any chairs, unless he had either himself saved enough to purchase the materials, or found a neighbour who had done so and was ready to make him an advance. Except for this neighbour he could not work at all, and could not therefore "create any wages," and the amount of work he got and wages he earned would manifestly depend greatly on the amount of capital this stranger possessed and was disposed to invest in such an enterprise.

It is true that the wages of labour will be guided in amount by the quant.i.ty of the product, but they are not on that account actually paid out of the product. And it is true that the labourer gives value for his wages--certainly he would not otherwise be employed--but that value is not usually marketable until some time, in many cases years, after the wages have been enjoyed, and therefore cannot have been the source whence these wages came. The wages were paid out of the saved results of previous labour--that is, out of capital--and Mr. George has absolutely no conception of the amount of capital that is necessary to carry on the work of industry. He says we live from hand to mouth, and so in a sense we do. Our capital is being constantly consumed and constantly reproduced again, and economists are fond of showing, from the speedy recovery of a civilized state after a devastating war, how short a time it would really take to replace it entirely. But until it is replaced every inhabitant undergoes considerable privations, which simply means that the rate of wages has fallen for want of it. There are some trades, like the baker's, where the product is actually sold before the wages are paid; and there are many, like the whaler's mentioned by Mr. George, where the labourers can afford to wait long terms for part at least of their remuneration (no great sign, by the way, of the minimum of a bare living); but even in these much capital must be set aside before a single hand is engaged. The whalers, for example, must be furnished with a s.h.i.+p to start with, and be provisioned for the voyage; and if these requisites are not forthcoming, they must go without work and wages altogether, or take work at inferior terms in a market glutted by their own arrival in it. Mr. George speaks lightly of the labourers who excavated the Suez Ca.n.a.l advancing value to the company who employed them, and yet before a single pick or spade was stuck into the sand of the Isthmus the company had laid out, in preliminary expenses and machinery, as much as six millions sterling--more than a third of the whole cost of the Ca.n.a.l. They had then to pay other five or six millions in wages before the work fetched a single fee; and yet Mr. George will have us believe that those five or six millions actually came out of the profits, merely because the projectors hoped and believed they might eventually come out of them. Labourers give an equivalent to the capitalists for their wages, but their wages are really paid out of the capital which their employers have saved for the purpose of purchasing that equivalent. I may have bought a cow in the hope of recouping myself by selling her milk, but I did not therefore pay her price out of the milk money--for n.o.body would have sold her to me if he had to wait for that; I bought her out of money I had previously saved, and from the same source exactly, and no other, do capitalists buy labour.

But, objects Mr. George, that cannot be; wages cannot be paid out of capital, because they are often lowest when, as shown by the low rate of interest, capital is most abundant. But Mr. George here confounds existent capital with employed capital. It is only the capital actually employed that tells on wages; the low rate of interest merely shows that there has been an increase in unemployed capital, and since that is generally a correlative of a diminution of employed capital, it is but natural that low interest should be attended by low wages. Low wages are a consequence of unemployed labour, unemployed labour a consequence of unemployed capital, and unemployed capital a consequence of unfavourable industrial conditions which labour, either with capital or without it, cannot evade or reverse.

So far then of Mr. George's views on population and the wages fund, for which much value, as well as originality, has been claimed. The chapters in which he states them are certainly among the most impressive and characteristic in his book. Nowhere else does he display more strikingly his remarkable acuteness, fertility, and literary power, and nowhere else are these high qualities employed more fruitlessly from sheer want of grasp of the elements of the problems he discusses. These chapters are after all, however, something of a digression from the main business of the book, and they have perhaps detained us too long from Mr.

George's own explanation of the supposed growth of poverty.

His explanation is this: "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" (p. 199). "Rent swallows up the whole gain, and pauperism accompanies progress" (p. 158). "The magic of property," it seems, has an unsuspected malignancy; but, in the present case, its spell is really exercised only over Mr. George's own vision. For who, with his eyes open, would believe for a moment what Mr. George so gravely a.s.serts, that of the whole gain won by our multiplied productive power, none whatever has gone to the great bankers, and brewers, and cotton spinners, and ironmasters, and corn factors, and s.h.i.+pbuilders, and stockbrokers, and railway contractors; that our Rothschilds, and Bra.s.seys, and Barings, and Bairds, the great plutocrats of the time, the possessors of the largest fortunes in the country, the very men and cla.s.ses who have been most conspicuously enriched through the material progress of the nation, have all the while been conducting a hard struggle against a fatal tendency in their incomes to sink to a bare living, and had to feed, exactly like the manual labourers, from the crumbs that fall from the landowners' table. The a.s.sertion is too violent and preposterous to merit serious refutation. Everybody knows that the greatest part of the wealth of modern society is not concentrated in the hands of the landlords at all, that it has not accrued from rent and that it would not be a farthing the less though private property in land were abolished to-morrow.

But violent and preposterous as Mr. George's conclusion is, it has not been arrived at without the exercise of much perverse ingenuity. Having been brought by his examination of the wages fund and population theories to the conviction that the key to his riddle was not to be discovered in the conditions that regulated production, he concludes that it must, therefore, be sought in the conditions that regulate distribution. His problem is thus one in the distribution of wealth, and it must be explained, if it is to be explained at all, by the laws of distribution. To investigate these laws, therefore, becomes now his object, and the first step he takes is a truly amazing one. At the very outset he throws the most important cla.s.s of partic.i.p.ators in the distribution--the cla.s.s that appropriates the largest share--out of court altogether, and he proceeds to settle the whole question as if they never got a penny, and as if the entire spoil were divided among their neighbours. People who live on profits, it seems, have no _locus standi_ in a question of distribution, and the case must be considered as if the parties exclusively concerned were the people who live on wages, the people who live on interest, and the people who live on rent.

"With profits," he says, "this inquiry has manifestly nothing to do. We want to find what it is that determines the division of their joint produce between land, labour, and capital, and profits is not a term that refers exclusively to any one of these three divisions. Of the three parts into which profits are divided by political economists, namely compensation for risk, wages of superintendence, and returns for the use of capital, the latter falls under the term interest, which includes all the returns for the use of capital and excludes everything else; wages of superintendence falls under the term wages, which includes all returns for human exertions and excludes everything else; and compensation for risk has no place whatever, as risk is eliminated when all the transactions of a community are taken together" (pp.

113-4).

Now we have to do here with no mere difference of terminology. Profits may be employers' wages, if you like to call them so; but it is a fatal confusion to suppose that, because you have called them employers'

wages, you are therefore ent.i.tled to treat them as if they were governed by the same laws and conditions as labourers' wages. The truth is that they are governed by opposite conditions, and that the pith of the labour question is just the conflict between these two kinds of wages for the better share in the distribution. The battle of labour is not against the employer receiving fair interest on his capital in proportion to its quant.i.ty, but against the amount of additional profit which the employer claims as wages of superintendence, and which he also rates in proportion to capital invested instead of rating it in proportion to his own trouble or efficiency. One of the chief hopes of the workman resides in the possibility of breaking down this erroneous criterion of fair remuneration for superintendence, and so getting the employers to content themselves with smaller profits than they have been in the habit of considering indispensable. Profits and wages have thus opposite and conflicting interests in the distribution, but Mr. George, having once disguised the one in the garb of the other, is imposed on by the disguise himself, and treats them in his subsequent speculations as if they were the same thing, or at any rate--what in the present connection is equally pernicious in its effects--as if their respective shares in the distribution were determined by precisely the same conditions. The result is, as might be expected, a series of singular _contretemps_ springing from mistaken ident.i.ty, like those we are familiar with on the comic stage. The manufacturing millionaire appears before us as the victim of the same harsh destiny as the penniless crossing-sweeper, and the banker of Lombard Street is overshadowed by the same blighting poverty as the lumper of Wapping. Proudhon, in a powerful pa.s.sage, describes pauperism as invading modern society at both extremes; it invaded the poor in the positive form of natural hunger; it invaded the rich in the unnatural but more devouring form of insatiable voracity. The burden of Mr. George's prophetic vision contains no such refinements. He sees a huge wedge driven through the middle of society; and on the underside of that enchanted wedge he sees the merchant princes of the world eating the bread of poverty with their lowest dependents. Mr. George's cla.s.sification of profits under wages therefore involves much more than a mere change of nomenclature, for it has led him to pa.s.s off this absurd vision as a literal description of things as they are. By that cla.s.sification he has really put out of his own sight the most important factor in the settlement of the question he is discussing, and so he begins playing Hamlet by leaving the part of Hamlet out.

Having simplified matters by throwing profits out of the cast, Mr.

George's next step is to a.s.sign the leading _role_ to rent. In the whole drama of the modern distribution of wealth, no part is more striking or more often misunderstood than the part played by rent. Wages never cease to cost much and to be worth little, but rent seems to have the property of going on growing while the landlords themselves sleep or play. This fact has impressed Mr. George so profoundly that, losing sight of things in their true connection and proportions, he declares that the growth of rent is the key to the whole situation, and that neither wages nor any other kind of income, not derived from land, can ever draw any advantage from the increase of prosperity, because rent always steps in before them and runs off with the spoil. He professes to found this conclusion on Ricardo's theory of rent, which he accepts, not only as being absolutely true, but as being too self-evident to need discussion.

Indeed, he seems disposed, like some others, to have his fling at Mill for calling it the _pons asinorum_ of political economy; but we shall presently discover various grounds for suspecting that he has not crossed the bridge successfully himself, and that here, as elsewhere, he has been led seriously astray by looking at things through the mist of doctrines he has only imperfectly mastered. Anyhow, he offers his theory as a deduction from Ricardo's law of rent, and this deduction claims particular attention because it is the corner-stone of his speculations, and const.i.tutes what he would consider his most original and important contribution to economic science. He says that the law of rent itself "has ever since the time of Ricardo ... been clearly apprehended and fully recognised. But not so its corollaries. Plain as they are, the accepted doctrine of wages ... has. .h.i.therto prevented their recognition.

Yet, is it not as plain as the simplest geometrical demonstration that the corollary of the law of rent is the law of wages, when the division of the produce is simply between rent and wages; or the law of wages and interest together, when the division is into rent, wages, and interest"

(p. 120). It is really plainer. It is a mere truism. In any simple division, if you know how much one of the factors gets, you know how much is left for the others, and if you like to dignify your conclusion by the name of corollary, you are free to do so. But the real point is this, whether the share obtained by rent is fixed irrespectively of the share obtained by wages and interest, or whether, on the contrary, it does not presuppose the previous determination of the latter. There is no doubt, at any rate, as to how Ricardo--Mr. George's own authority--regarded the matter. According to his celebrated theory, wages and interest are satisfied first, and then rent is just what is over. Rent is simply surplus profit. In hiring land, the farmer hires a productive machine, and under the influence of compet.i.tion gives, for the use of that productive machine for a year, the whole amount of its annual produce which remains as a surplus after paying the wages of his labourers, and allowing interest on his capital, and what he considers a fair profit for his own work of superintendence. A certain current rate of wages and a certain current rate of profit are presupposed, and after these demands are met, then if the land has yielded anything more, that surplus is what is paid as rent. Ricardo always presumes that land that cannot produce enough to meet these demands will not be cultivated at all, and that the poorest land actually under cultivation is land that meets them and does no more; in other words, that leaves nothing over for rent. Let us take Ricardo's law as it is stated by Mr. George himself (p. 118): "The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use." The standard by which, according to this law, the amount of rent is supposed to be determined, is the produce of the least productive land in use. Now, what is the least productive land in use? It is land that produces just enough to pay the wages the labourers upon it are content to work for, and the profits the farmer of it is content to farm for. How that rate of wages and that rate of profits are fixed is no matter here; but one thing is clear--and it is enough for our present purpose--that they cannot be determined, as Mr. George represents them as being, by a law of rent which presumes and is conditioned by their operation. Ricardo's law virtually explains rent in terms of wages and profits, and it would therefore be the height of absurdity to re-explain wages and profits in terms of rent. And if that is so, the circ.u.mstance which excites Mr. George's surprise, that economists have always so clearly apprehended the law of rent itself, and yet failed so completely to recognise the corollaries which he plumes himself on being the first to deduce from it, admits of a very simple explanation: the economists understood the law they expounded, and were better reasoners than to employ it as a demonstration of its own postulates.

This will become still plainer, if we look more closely at the fact which has struck Mr. George so much--the constant rise of rent in modern society. He attributes that rise to many causes; in fact, there are few things that will not, in his opinion, raise rent. Progress of population will do so; but if population is stationary, it will be done all the same by progress in the arts; the spread of education will do it; retrenchment of public expenditure will do it; extending the margin of cultivation will do it; and so will artificial contraction of that margin by speculation. In short, he is so haunted by the idea, that he seems to believe that so long as rent is suffered to survive at all, whatever we do will only conduce to its increase. Every step of progress we take extends its evil reign, and if progress were to reach perfection, rent would drive wages and interest completely off the field and appropriate "the whole produce" (p. 179). These fears are not sober, but they could never have risen had Mr. George first mastered the theory of rent he founds them on. For rent, being the price paid by producers for the use of a productive machine, cannot rise unless the price of the product rises first (or its quant.i.ty, if so be that it does not increase so much as to reduce its price), for unless the price of agricultural produce rises, the farmer cannot afford to pay a higher rent for the land than he paid before. No part of Ricardo's theory is more elementary or more unchallenged than this, that the rent of land const.i.tutes no part of the price of bread, and that high rent is not the cause of dear bread, but dear bread the cause of high rent. Rent cannot rise further or faster than the price of bread (or meat, of course) will allow it, and the price of bread is beyond the landowner's control. He cannot raise it, but once it rises, he can easily raise rent in a corresponding degree. If a rise of rent depends on a rise in the price of bread, what does a rise in the price of bread depend on? On two things which Mr.

George ignores or misunderstands--the progress of population and the diminis.h.i.+ng return in agricultural production. The growth of population increases the demand for food so much as to raise its price, and renders it profitable to resort to more difficult soils or more expensive methods for additional supplies. The price will then remain at the figure fixed by the cost of the costliest portion that is brought to market.

Now Mr. George laughs at the idea of increase of population causing any difficulty about the supply of food--population, which he is never tired of telling us, is the very thing most wanted to multiply that supply, and possesses a power of multiplying it in even a progressive ratio to its numbers. "The labour of 100 men," he says, "other things being equal, will produce much more than one hundred times as much as the labour of one man" (p. 163). And he laughs in the same way at the idea of a diminis.h.i.+ng return in agriculture, as if, says he, matter were not eternal, and as if an increasing population did not of itself increase the productive capacity of the land through increasing the productive capacity of the labour upon it. These two misunderstandings lie at the bottom of all Mr. George's vagaries about rent, and they are perhaps natural to a speculator, resident in a rich new colony, which, as he describes it himself, "with greater natural resources than France, has not yet a million people." No doubt in a country at that particular stage of its historical development, increase of population may involve an increase, and even a more than proportional increase, of food as well as of other commodities; but that particular stage is a temporary and fleeting one, and the world in general is very differently situated from the State of California thirty years ago. Where there is plenty of good land, the increase of population occasions no increase in the cost of producing food, because there is no need to resort to poorer land for the purpose; and while food is got as cheaply as before, other things are got much more easily and abundantly in consequence of the economies of labour and the many mutual services which result from the increased numbers of the community. But that state of matters only continues so long as there remains no occasion to resort to poorer soils for the production of food, and that time is long past in most countries of the world. Mr. George no doubt contends that in all countries it is just the same as in California, because even though it may have become more difficult in some places to produce food, it has become everywhere much easier to produce other commodities, and (so he argues) the production of any kind of commodity is practically equivalent to the production of food, for it can always be exchanged for food. So it can, if food is there to exchange for it; but the very question is whether food is there, or is there in the same relative quant.i.ty. If I say it is more difficult to get food, it is no answer to tell me that it is much easier to get other things. And because other things may be multiplied indefinitely at the same cost, that is no reason for denying that food can only be multiplied indefinitely at increasing cost. Yet Mr. George reasons as if it were. This confusion is repeated again and again in the course of his book, and has evidently had much influence on his whole speculations. He describes the advantages which the colonist derives from the arrival of other settlers. "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 labour 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" (p. 168). That is true, but it is not to the purpose. The new settler required a market, and population brought it; but although population up to a certain point is beneficial, you cannot for that reason declare that beyond that point it cannot possibly become embarra.s.sing; for on Mr. George's own hypothesis the ground yields no more wheat and potatoes than before, and the limit to convenient population is prescribed by the amount of food the ground yields, and not by the quant.i.ty of other commodities which skilled labour can produce. If population were to exceed what that stock of food would adequately serve, then new-comers would find little comfort in Mr.

George's rhetorical commonplace that they had two hands and only one mouth. His simple confidence, that they never can be at a loss, because they can get food by exchange as well as by direct production, is a mere dream, because he forgets that the people they are to exchange with are in the same case as themselves. They can only give food in exchange for other things so long as they raise more food than serves their own numbers, and when their numbers increase beyond that point, they will have no food to sell. The limit to subsistence is not the productive capacity of labour, but the productive capacity of land.

Mr. George's argument rests on another very curious fallacy. He builds his whole theory of distribution on the fact of the extension of the margin of cultivation from better to worse soils, but in the same breath he denies the existence of the very conditions that alone make that fact possible. n.o.body would resort to worse land unless the better were unable to furnish indefinite supplies at the old cost, _i.e._, unless the principle of diminis.h.i.+ng return prevailed in agriculture. Nor would any one resort to worse land until it paid him to do so, _i.e._, until the produce of this worse land became, through a rise in its price or through improvements in the art of agriculture, equal in net value to the produce previously yielded by the worst land then in cultivation.

Mr. George denies the principle of diminis.h.i.+ng return. He denies "that the recourse to lower points of production involves a smaller aggregate of produce in proportion to the labour expended." He denies this, "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," says he, "increased population of itself, and without any advance of the arts, implies an increase in the productive power of labour" (p. 163). But the question is, does it imply any increase in the productive power of the soil? Mr. George contends that it does, but only on the superior soils, not on the inferior.

Increasing population, in his opinion, renders all labour so much more effective that "the gain in the superior qualities of land will more than compensate for the diminished production on the land last brought in" (p. 165). Now to all this there is one simple answer: why then resort to inferior soils at all? If crowding on the superior soils can make those soils indefinitely productive, why go farther and fare worse?

There can be no reason for having recourse to worse land, but that the better has ceased to yield enough at the old cost. Organization and economy of labour are excellent things, but they cannot press from the udder more milk than it contains, or rear on the meadow more sheep than it will carry, or grow on a limited area available for cultivation more than a definite store of food.

But while Mr. George denies that there is anything to force people to poorer soils, he supposes at the same time that they go freely in order to get a less profit. He holds the amount of return obtained from cultivating the least productive land in use to be the lowest rate of return for which anybody will invest his capital, and therefore to serve in some sense as a standard rate of remuneration for all applications of capital and labour. n.o.body, he declares, will work for less than he can make on land that pays no rent. But will any one work such land for less than he can make in other industries? That is what Mr. George supposes to be done every day, although he laughs at the idea of there being any necessity for doing it. It need not be said that men are not such lunatics. They are really forced to go to worse soils because the better cannot increase their yield indefinitely at the same cost, and they never go till they possess a reasonable expectation of making as much out of the worse land as they did before out of the better.

From all these remarkable misconceptions of the working of rent, and of the theory of Ricardo on the subject, which he professes to follow, he draws his first law of distribution, which is nevertheless, so far as it goes, undoubtedly correct: "Rent depends on the margin of cultivation, rising as it falls and falling as it rises" (p. 155).

To find the law of rent, he has told us, is to find at the same time its correlatives, the laws of wages and interest, and these laws accordingly he states thus: "Wages depend on the margin of cultivation, falling as it falls and rising as it rises. Interest (its ratio with wages being fixed by the net power of increase which attaches to capital) depends on the margin of cultivation, falling as it falls and rising as it rises"

(p. 156). He is not content, however, with merely inferring these two laws as corollaries from the law of rent, but thinks it necessary to construct for wages and interest a certain independent connection with the movement of the margin of cultivation. To do so, he first reduces interest, as he had already reduced profits, to a form of wages; he then erects all the different forms of wages (_i.e._, every form of income except rent) into a single hierarchical system, in which there are many different rates of remuneration, occasioned by the necessity of compensating different risks and exertions, but all moving up and down concurrently with a certain general rate of wages at the bottom of the scale; and he finally connects this general or standard rate of wages with the margin of cultivation, by saying that no one would work at anything else for less than he can make on land open to him free of rent, and that therefore the income made by cultivating such land must be the lowest going.

Mr. George's view of the nature of interest is peculiar. He considers it to be the natural increase of capital, the fruit of inherent reproductive powers, like the increase of a calf into a cow, or of a hen into a hen and chickens; and because interest comes in this way freely from nature, he believes the private appropriation of it to be thoroughly just, although he presently gives precisely the same reason for declaring rent to be theft. It is unnecessary to discuss either the truth or the consistency of this doctrine here, and I refer to it now merely to explain that although Mr. George thus justifies interest as being the price of a natural force, he introduces it into his theory of the origin of poverty, as the price of human labour. "The primary division of wealth," he says, "is dual, not tripart.i.te. Capital is but a form of labour, and its distinction from labour is in reality but a subdivision, just as the division of labour into skilled and unskilled would be. In our examination we have reached the same point as would have been attained had we simply treated capital as a form of labour, and sought the law which divides the produce between rent and wages; that is to say between the possessors of the two factors, natural substance and powers and human exertion--which two factors, by their union, produce all wealth" (p. 144). The difference between interest and wages is but as the difference between the wages of skilled labour and the wages of unskilled; the wages of skilled labour is only the wages of unskilled, _plus_ some consideration for the skill, or for the time spent in training, or for drawbacks of various kinds; and the wages of unskilled labour is fixed by the amount that can be made on land that pays no rent. Profits, salaries, stipends, fees are, in the same way as interest, declared to be modes of wages. The 50,000 a year of the merchant prince, it seems, is just the 50 of the day-labourer, with 49,950 added to compensate him for the additional perils or drawbacks or discomforts of his life. All incomes, except the landowner's, row in the same boat, and the day-labourer's sets the stroke. When the margin of cultivation descends, he is the first to suffer, and then all the rest suffer with him. If he loses 10 a year, they successively lose 10 too; the doctor or bank-agent will have 490, instead of 500; the railway chairman, 4,990, instead of 5,000; the merchant prince, 49,990, instead of 50,000; and their loss is the landlord's gain. Here then we see the whole mystery of iniquity as Mr. George professes to unravel it. "The wealth produced in every community is divided into two parts by what may be termed the rent line, which is fixed by the margin of cultivation, or the return which labour and capital could obtain from such natural opportunities as are free to them without payment of rent.

From the part of produce below this line, wages and interest must be paid. All that is above goes to the owners of land" (p. 121).

Mr. George here confounds the margin of cultivation with the margin of appropriation. When economists speak of an extension of the margin of cultivation, they mean a resort to less productive land, and that is always accompanied by a rise of rent; but an extension of the margin of appropriation may be a resort to more productive land, and may occasion a fall of rent, as has been done in Europe to-day through appropriation in America. But what in reality he builds his argument on is neither the movement of the margin of cultivation, nor the movement of the margin of appropriation, but simply the existence of abundance of unappropriated land. Where that exists, rent will, of course, be low, and wages will be high, for n.o.body will give much for land when he can get plenty for nothing at a little distance off, and n.o.body will work at anything else for less than he can make on land that he may have for nothing. For such land supplies labourers with an alternative. It is not the best of alternatives, for it needs capital before one can make use of it, and it takes time before any return is made from it. A diversity of national industries, for example, is better, and raises wages more effectively. Agricultural wages are higher in the manufacturing counties of England than in the purely agricultural; and they are higher in the manufacturing Eastern States of Mr. George's own country than in the purely agricultural States of the West, which possess the largest amount of unappropriated land. The reason of this is twofold: other industries increase the compet.i.tion for labour generally, and create, at the same time, a better market for farm produce. Unoccupied land would act--though less effectually--in the same way as an alternative; but few countries are fortunate enough to possess much of it, and as Mr. George does not propose to interfere with the occupation of land, but only to tax the occupi