Rent, wages and capital, a book for the times

Preface

Should the reader of this volume decide that it is only "one more" added to the great catalogue of books, he is at least asked to remember that there has been an effort to avoid the footsteps of those economists whose theories make one class the creature of another. It has been the desire, herein, to show that all the elements that constitute the State, are inter-dependent, and may, and must advance together. It has been the endeavor to take a hopeful view, and to look at things from their brighter side. The object has been to discourage the arbitrary antagonisms that exist between employers and employed.

But, as will be perceived, the principal object has been a discussion of some phases of the Land Question, special reference being had to Henry George's proposition to make land common property. Given the essence, there is, perhaps, little in "Progress and Poverty" that has not previously, been advanced in some form. But the author of that work is elaborate and plausible and has generally avoided the muscular recommendations that have made Socialism disreputable.

The writer will be considered heterodox on the subject of Rent, and by none, more so, than the Social Revolutionists, who must be supremely orthodox on the subject of Rent, for, if no Rent, no confiscation thereof. And the schools, from behind the fortification of authorities, are indisposed to receive innovations upon their accepted dogmas.

The subjects of Labor and Capital are considered only in their necessary relations to the Land Question ; that will answer for what may appear to be important omissions on those subjects.

Chapter I

The- uncertainty of Economic Theories. — The strength of Socialism. — The present distribution not unassailable. — The proposition to make Land common property. — What is Rent? — How Rent arises. — Population. — The efficiency of Labor and improvements in the Arts.

Chapter II

Francis A. Walker and Henry George. — The amount of Rent not permanently fixed. — The Ricardian theory modified. — The effect of modern methods. — Rents have not increased. — The effects of transportation. — The selling price of Land does not effect Rent. — The effect of the diminishing productiveness of Land. — Virginia an example.— H. C. Cary's theory. — Land draws its principal value from its surroundings. — The susceptibility of Land to improvement.

Chapter III

Improvements in the Arts. — Labor saving Machinery. — Rent is reduced as a proportion. — Capital more effective. — Labor is a partaker of the benefits of modern progress. — Speculation in Land.

Chapter IV

Land holding not a monopoly. — The number the United States may subsist. — Land holders cannot withhold Land from use. — The testamentary divisions of Estates. — Large holdings of Land do not represent the accumulative power of Rent. — The Patrons of Husbandry.

Chapter V

The effects of modern distribution. — All classes dependent. — The proposition to confiscate Rent. — Taxation. — Capital largely represented in Land. — Land is reduced to a Capital basis. — Withholding Land from use. — The proposition to confiscate improvements.

Chapter VI

The law of Wages. — Natural Wages. — No inflexible Law. — The division of the joint produce of Labor and Capital. — The relation of machinery to production. — No distinct remuneration for superintendence. — No extra compensation for risk. — No overproduction of Labor. — The benefits of machinery go to the community. — Labor the principle consumer.

Chapter VII

The condition of Labor greatly improved. — The Wages fund Theory. — The return to Capital, or interest a declining per cent. — Labor not the servant of Capital. — The permanent tendency is toward an improvement in the condition of Labor.

Chapter VIII

Some disadvantages of modern methods. — Actual overproduction impossible. — Disproportioned effort a cause of "hard times." — Natural laws of trade disregarded. — The influence of Strikes. — How the government may contribute to depression. — Money. — Restrictions upon production no Remedy. — The effects of extravagance not important. — No heroic remedy for "hard times."

Chapter IX

Capital and Labor. — Capital a necessity. — The disadvantages of Capital. — The cost of a loaf of Bread. — The power of Capital. — But Labor assured of its Reward.

Chapter X

Utopian Dreams. — The Materialism of Socialism. — Inequality is fundamental.

Chapter I

The adjustment of social forces remains a complex and half-solved problem. Writers in the field of economic science have multiplied in recent years. Their beliefs have been presented, apparently, in mathematical lines, that, for the moment, seemed conclusive. The opinions of the early writers have, many of them, been cast aside and are valued, mostly, as the avenues to more correct thought; they have only given the key-note. The modern economist has laboriously wrought out theories, that, to himself seem as indisputable as the multiplication table; but when he has looked up from the finished page, it is to behold that other thinkers, as learned, as profound, and as diligent as himself, are presenting ideas the very opposite to his own. In the meantime, the great multitudes jostle each other with an utter disregard of the economy contained in the books.

We cannot put from us the fact, that that great element, designated as " Labor " is inoculated with discontent. It is quick to note the unequal distribution of material advantages. It sees the distance between the rich and the poor becoming greater each day. Believing in equal political rights, and being taught that one man's gain is another's loss, it infers a natural antagonism between those who have wealth and those who have not.

The discontent of the masses is the opportunity of Socialism. Never, until the present, have the theories of Community of property had respectful audience. Earlier, its efforts were spasmodic and revolutionary. It has learned wisdom, and now appeals to reason and not to passion. It attaches itself to current forms and popular opinions, and while its influence is felt, its presence creates no apprehension, but while it learns conservatism, it remains aggressive. Its advocates advance boldly into the council chambers of the strongest government of civilization, and in the face of its Bismarck demand revolution and a re-organization of economic society from its foundations. It is significant that in the German Empire where power approaches the absolute, and political organization and discipline seem complete, that there, the opposition to the established order of society has its most determined advocates. And it is not less significant that in France, where the efforts to establish the liberties of Republicanism might be supposed to pacify discontent, that there Socialism has its most enthusiastic adherents.

The strength of Socialism is under-estimated by its opponents. Current estimates of the system are based upon the rabid utterances of agitators, who would violate every principle of law and order, thereby to overthrow the existing State. Popular opinions of Socialism are formed by the violent action of those who look upon secret murder and dynamite, as legitimate methods of warfare against property-holders. But these are not the representatives. There are advocates, who bring talent and learning, and research to bear, and who thereby command respect. They recognize the danger, as well as the impossibility of a sudden overthrow of society as constituted. The conservative advocates of Community cannot be charged with the attempt to appropriate the property of others, because they only expect, in their day, to establish the beginning of a system they believe better than the present.

Socialists of force and learning command recognition from the highest places. Of Lassalle, Bismarck thus speaks: "Lassalle was one of the most gifted and amiable men with whom I have ever associated. * * * Our conversations have lasted for hours, and [ have always regretted their close. * * * It would have given me great pleasure to have had a similarly gifted man for a neighbor in my country home." {French and German Socialism, by R. T. Ely.) Praise of this kind, by the German Chancellor, is exceptional, and the individual upon whom it was bestowed was unreservedly a Socialist. He demanded State interference and the abolition, not only of private property in land, but also, in Capital and the products of Labor.

The violent type of European Communists has been represented in the United States by such characters as Herr Most, whose incendiary utterances disgusted the nation; but we cannot judge of the whole by such as he; he was repudiated by his party at home, and at a Socialist congress held in Switzerland, was, by an almost unanimous vote, expelled from his party.

The abuses of present society are many. It requires no great skill to bring together a long array of indictments against it. If the evils of the present were placed side by side with the prospective ones of the Socialist period, it would not be at all certain that the latter would be the most formidable. What with our wealth, poverty; our thieves, robbers, tramps; our alms-houses and prisons: our "Maiden tributes;" can we look with scorn upon the fancies of the dreamers ?

The greatest strength of the present economic distribution is, after all, in the fact that it is in possession. With the great majority, the fact that things are, and for a long time have been, is the best reason why they should continue to be. Generations ago the people of Ireland were dispossessed of their lands, and the wrong is considered sanctified by the lapse of time. Perhaps those Englishmen, who so greatly admire Henry George's Semi-Socialism, will still adhere to the existing conditions, lest, in the confiscation of Rent, tardy justice would prevail on the Emerald Isle. But we must confess that society is vulnerable in the heart as well as in the heel, and the Political Economy that justifies all, is a doubtful, as well as a '"dismal" Science.

But I do not desire to limit myself to the generalities of the subject. The strength and merits of Socialism we may admit, but that it is a better system is not thereby proven.

The deductions of that analytical, though erratic Socalist, Henry George, as set forth in his " Progress and Poverty," are unique in this, that the unequal distribution of wealth, and all the evils that attend, are attributed to a single

RENT, WAGES AND CAPITAL. II

cause ; namely, to Rent paid for natural forces ; principally for the natural qualities of land. In illustration I quote as follows: — "We have traced the unequal distribution of wealth, which is the curse and menace of modern civilization, to the institution of private property in land. We have seen that as long as this institution exists no increase in productive power can permanently benefit the masses; but, on the contrary, must tend to still further depress their condition. We have examined all the remedies, short of the abolition of private property in land, which are currently relied on or proposed for the relief of poverty and the better distribution of wealth, and have found them all inefficacious or impracticable."

" There is but one way to remove an evil — and that is, to remove its cause. Poverty deepens as wealth increases, and Wages are forced down while productive power grows ; because land, which is the source of all wealth and the field of all labor, is monopolized. To extirpate poverty, to make Wages what justice commands they should be, the full earnings of the laborer, we must therefore substitute for the individual ownership of land a common ownership. Nothing else will go to the cause of the evil — in nothing else is there the slightest hope."

Of his theory he further says that, " Every step has been proved and secured," and " In the chain of reasoning no link is wanting and no link is weak."

He states his opinions with the courage of a Napoleon. But when we remember the innumerable forces and circumstances that unite to mould the conditions of human existence, to be told that a single one of them contains all the others is incredible.

The proposition is to confiscate Rent, which is equivalent to the confiscation of Land. To correctly understand the effect of this proposition it is necessary to know how Rent arises; and, also, whether the amount of it is sufficient to allow the prominence that has been given it in the distribution of wealth. For the information of those who have not made themselves familiar with economic studies, it is sufficient to say that Rent, proper, is the amount paid for the natural qualities of land or for natural forces. All improvements, houses, barns, fences, stores, manufactories; all fertilizing, irrigation, ditching; all plowing, sowing and reaping — in fact, all improvements whatsoever, represent the expenditure of Capital and Labor; and the nominal Rent paid for these is not Rent in fact, but interest on Capital and Wages for Labor. Economic Rent is equal to that portion of the product that remains after the cost of production, including Wages and interest, has been deducted.

Rent arises from a combination of three causes: ist, The difference in qu ality and productiveness of land : 2d, The difference in the susceptibility of land to the re-production of exhausted fertility: 3rd, The increase of population. The first and last of these causes arise in the first instance and are held generally to contain the entire phenomena of Rent. The influence of the second is felt last, and I shall, therefore, leave it to assert itself in its proper connection.

The illustration following is similar to the one that most writers on this subject have adopted: — We shall say that land is of three grades of productiveness, yielding twenty for the first, fifteen for the second, and ten for the third grade. With the settlement of a country it is assumed that the land yielding twenty will be occupied first. It is further assumed that the occupation will be confined to the land yielding twenty until that grade is all taken. If population still increases it will be compelled to resort to the second grade of land, the product of which is fifteen. At this point Rent arises, and the amount of it will be determined by the difference between twenty, the product of the first, and fifteen, the product of the second; the latter being the margin of cultivation. It will be a matter of indifference to the settler whether he occupies the second grade that yields fifteen, and pays no Rent, or whether he leases a portion of the first grade, producing twenty, and pays five as Rent to the owner: in either case he would have fifteen as the product of his labor, and the owner of the first grade cannot command more than five for Rent until the second grade is all taken.

If population still increases until the second grade is all occupied, the same process will be repeated and production forced down to the third grade, yielding ten. The margin of cultivation is now reduced from land yielding fifteen, to land yielding ten, the last paying no Rent. By a repetition of the same process the second grade will now yield five in Rent and the first will yield ten. It will again be a matter of indifference to the settler whether he occupies the third, which yields ten and pays no Rent, or again whether he occupies the second, yielding fifteen, and surrenders five of the product as Rent; or, still again, whether he leases the first, and pays the owner ten, as Rent; in either case he will have ten as the product of his labor.

I have divided land into three grades of quality for simplicity of illustration. There are many more grades, however, and there is no regular gradation. It will be perceived that, as population increases, production will be forced upon poorer, and again upon* poorer land, until the poorest is occupied, and which may yield a bare subsistence. As population increases and is compelled to occupy the poor lands, there arises the phenomena known in political economy as a "press upon subsistence." This is the substance of the Malthusian theory, that population may increase to its own injury, or beyond the means of subsistence.

From the foregoing, Rent appears a prominent factor in distribution, and if this prominence can be maintained to the last, it is evident that the law of Rent must be to a considerable degree the law of Wages. As production is lowered to the poorer lands, the predisposition of Wages is to fall until they are the equivalent of the return of labor on the poorest land in use, which pays no Rent. If the Wages paid by the owners of the good lands, or those obtainable in industrial pursuits, were greater than the return to labor on the margin of cultivation, then, the working of the poor lands would be abandoned, and labor would gradually find its way to where it is better paid. If the Wages paid in the industries were less than the return to labor on the margin of cultivation, then the course of labor would be to the lands that pay no Rent. If there are no circumstances that incline to abrogate this seemingly large portion of Rent, then, as increasing population necessitates the lowering of the margin of cultivation, it will be impossible for Wages to go higher, and there must,, on the contrary, be a leveling down to uniformity with the smallest return.

The law of Rent as outlined above, is known as the Ricardian law, and is generally accepted. The law of Wages here shown, which is the parallel of the law of Rent, is not common, and it is thus formulated by Mr. George: — "Wages depend upon the margin of production, or upon the produce which labor can obtain at the highest point of natural productiveness open to it without the payment of Rent." I shall show hereafter that there are conditions which greatly modify that which now seems the overshadowing power of Rent, if, in fact it is not made to disappear as a controlling factor in distribution. If this is shown, then Wages must seek some other law or combination of circumstances by which they are controlled.

The author of "Progress and Poverty," having elevated Rent to the position of supreme dictator in distribution, thereupon proceeds to show that it is the prolific source of vice, crime, and ignorance — that it creates periodical depressions, enslaves laborers; and, finally, ends in want and starvation. As a remedy for these cumulative evils, the proposition is, that Rent shall be appropriated by the State and equally distributed, or expended for the public good. The well known theories of Malthus, that population may increase beyond the means of subsistence, are entirely repudiated, only, as Rent and the alleged monopoly oi land contribute to that end.

The effect of an increase of population beyond a certain point, is, undoubtedly, toward a press upon subsistence, although this tendency is neutralized by opposing influences. Mr. George allows the Malthusian theory full force if Rent is appropriated by land-owners, but none at all if paid to the State. It is impossible to conceive how the confiscation of Rent can arrest the effects of an increase of population, and it does not. In a former illustration we have divided land into three grades, yielding ten, fifteen, and twenty. Let us suppose that Rent is paid to the State and equally distributed among the people, or expended for the public benefit. When only the first grade of land is occupied the average return would, of course, be twenty, but when cultivation is forced upon the second grade the average falls to seventeen and one-half; and again when increasing population necessitates the taking of the third grade, yielding ten, the average again falls, and is fifteen, and thus, while Rent increases in amount, it is, compared with population, reduced as a proportion. As cultivation is forced upon still poorer lands the proportion is still further reduced. The equal distribution of Rent cannot prevent this; it only distributes the disadvantage upon the whole community.

But to disprove the Malthusian theory and affirm his own, Mr. George makes the astonishing assertion that an increase of population and the increasing efficiency of labor have the same effect as increasing the fertility of land — that with equal distribution, an increase of population should make every man richer, instead of poorer. It is thus expressed: — "For the increased powers of co-operation and exchange which come with increased population are equivalent to — nay, I think we can say without metaphor, that they give — an increased capacity to land," and that "an improvement in tools and machinery, which will double the result of labor, will manifestly, on a particular piece of ground, have the same effect on the produce as a doubling of the fertility of the land." And again: — "For the power of producing wealth in any form is the power of producing subsistence."

He evidently confounds the natural productiveness of land with the increasing efficiency of labor, and makes them subject to the same law. Population, efficiency of labor, and improvement in the arts, may increase indeffinitely, but there is a limit to the possible return and fertility of land beyond which it cannot be carried. The limit to the productiveness of land is two-fold — it is limited in amount, the earth being a fixed quantity, and it is limited in resource; but its resources may be increased, though not indefinitely. To illustrate: The average product of land may be fifteen bushels of wheat per acre, but with improved methods of agriculture it may be raised to forty bushels or more; but, it does not follow that, as population and improvement in the arts increase, the product of an acre can be increased likewise and made to yield a hundred, or two or three hundred bushels.

There is an absolute limit to the capacity of land that cannot be exceeded. When that point is reached and population still increases, then there is a diminishing per capita return and a "press upon subsistence" — not necessarily to the starvation point, but to the lessening of enjoyments. The largest per capita return may be reached before land reaches its largest possible production, for the reason that, as the limit draws nearer, the rate of approach will be slower; just, as when a ball is thrown into the air it will at first rise rapidly, and then slower. When the rate of increase of population passes the rate of increase in the productiveness of land, the effect will be the same as a decrease in the productiveness of the land.

But, do the improvements in the arts, in machinery, and the methods of cultivation have the "same effect on the produce as doubling of the fertility of the land?" Is Mr. George right when he says, "The power of producing wealth in any form is the power of producing subsistence?" Utility must not be confounded with value and wealth. Subsistence holds in the direct or indirect life sustaining power of a product, and not in the cost of its production, or in its exchange value. Things of great usefulness are sometimes of small value, while others of great value do not contribute much to subsistence. The fine plate on the tables of the wealthy may be of great value, but they contribute no more, perhaps not as much, to the sustaining of life as the earthenware upon the poor man's board. An artizan may carve a fine table and thereby create an article of much value: by so doing he has added to the amount of its value, to the wealth of the country, but he has not added, to that amount, to the subsistence present; nor again, does it represent to the amount of its value, the productiveness of land.

An agriculturalist raises one hundred bushels of wheat and becomes the producer of that much wealth and subsistence; an artizan produces a musical instrument of the same value — do we say that subsistence to the equivalent of two hundred bushels of wheat has been produced? No, because the instrument is a contribution to enjoyment, to refinement and culture, and no more life is sustained on account of it. Its use cannot be classed with that of food and shelter. The instrument is the equivalent of the wheat in value, and an equal contribution to wealth, but not in utility to subsistence. An exchange is made, the wheat for the instrument, do we now say that the artizan has produced the subsistence in his possession? No, because the agriculturalist has been credited with having produced it and it cannot be twice accounted for. We see, therefore, that wealth has been produced to the equal of two hundred bushels of wheat, but subsistence only to the amount of one hundred bushels. The confusion arises from the fact that the artizan, having produced an instrument of value, with which he commands subsistence, is held as having produced it. He commands subsistence, not because the instrument he has produced contains that element, or quality, but because his production contains the element of value, which is everywhere a similar quality, and exchangable. When the instrument was exchanged for the wheat, it was not an exchange of utilities, or an exchange of subsistence, but an exchange of values. There were no estimates made to discover whether the usefulness of the one was equal to that of the other, but simply to find whether their values were the same. As the commercial world estimates, there are no exchanges of utilities, or the means of existence but only an exchange of values.

The following will illustrate: A house is being built; to that end it is necessary that timber shall be brought from the forest and placed in position in the most substantial and servicable manner. The workmen, who do this, contribute to subsistence, because the house is necessary for shelter and protection, and, in fact, for the very existence of the man who occupies it. But, suppose that the builder is a man of wealth — that he is not satisfied, simply, that the timber is placed in position to do its greatest service, but that the workmen are employed to multiply their labors upon it until it becomes an elegantly wrought and finely finished mansion — can we say that in all this there has been a contribution to subsistence? Certainly not ; the labor done to place it in the position of its greatest utility was that, but from that point, the character and object of their labor changed — from that point it becomes a contribution to the taste, or perhaps the vanity, of the builder — from that point it brings no greater shelter, nor does it turn more rain or storm.

But to further illustrate: A thousand persons have settled upon an island, all available space being occupied. By the adoption of the best methods of cultivation, the land yields its highest possible production, and all of its product is necessary for the support of its population. Let it be supposed that the population remains stationary and that there is no communication with the outside world — that invention and the increasing intelligence of the people increase the efficiency of labor by gradual process — how will this greater efficiency and power of production exert itself ? Not by increasing the product of land, or the means of subsistence, for that limit has been reached. The natural course would be to refined pursuits; to the refinement of the product now stationary in amount. Using the same materials, houses might be more finely finished; furniture of ordinary workmanship might be made more luxurious; their clothing, though not made more substantial, might be of finer fabrics. In innumerable ways their increasing capacity to labor may employ itself. Thus it is that more labor, and consequently more wealth, would be represented in their products, but not more subsistence, or greater quantity, or greater utility. I deny therefore that the power of producing wealth in any form, is the power of producing subsistence.

In the foregoing, it is shown, I think, satisfactorily, that there is a limit to the productiveness of land; that to double the efficiency of labor does not in effect double the capacity of land, and that to produce wealth is not always to produce subsistence. It now remains to be shown that another proposition of Mr. George's made in the same connection, is, at least, only partly true.

He says in substance that, with increasing population the productiveness and efficiency of labor is greatly enhanced. In support of his theories he finds it necessary to give this proposition the largest possible importance. To this end, he draws an elaborate picture of the pioneer settler, who goes beyond civilization, to make himself a home in the wilderness. It is shown that away from easy communication with his fellows the pioneer has many disadvantages — that he has long distances to go to get necessary supplies — that he has no neighbors to whom he can go in case of need — that if he raises more grain than he can use he has no market — that he is without schools, churches, or postoffice. But now comes another settler, and another, and another, and he has neighbors with whom he can co-operate; soon they have a store, a postoffice, then a railroad, and a market for his surplus. A town is started and he has churches and schools. As a result of this increase of population his labor becomes much more profitable, and his products more valuable, although his land is not more fertile or productive.

Upon an argument similar to the above he relies to show that increasing population creates no press upon subsistence, but ought with equal distribution enhance the enjoyments of life.