Science of value; solving it

Preface

If the world is to advance to a larger civilization, that advance must come from new paths in solving labor and capital problems, come with the discovery of new truth, but new ideas are difficult to follow when the mind is called upon to go in the opposite direction from accepted theory.

Socialism and other systems of reform for labor are based upon false theories and false beliefs, having a false starting point, and no right conclusions can come from a wrong beginning. No true solution from a false premise.

The false starting point, accepted without debate or question, asserts that Labor is the Cause of Value, that labor creates the value of goods and property, and therefore the only valid title to goods or property rests with

4 PREFACE

labor, that any profit above labor cost is a robbery of labor. If this foundation is false that fact should be self evident, new paths should appear and correct solutions should follow from new discoveries in a new science.

The true starting point is exactly the reverse of the accepted theory. Labor is NOT the cause of Value but Value is the Cause of labor. Value, when attaching to goods in the market, forces labor to work at tasks of every kind, creating food and shelter in every variety and quantity, building great systems of railways, electric lines and manufacturing.

Value is a great inscrutable creative power of the Almighty. It is not created by labor, but it creates labor and directs labor in the way it must go to bring about civilization. Labor and capital is directed by natural laws of value, and is so directed by and through the circulation of money. Such laws

PREFACE 5

constitute a science of value, which science when known will solve all our labor, capital and other distressing social problems.

The manufacturer or merchant is held firmly to his business by the market price of the goods he sells; by the value that will attach to goods after they reach the market.

The employer of labor is guided by the market price, his labor cost and the wages he pays must leave a margin of price above labor cost or he will not employ labor or bring goods to market. The natural laws which set values to different lines of goods in the market are laws that control, not only the wages of labor and profits of merchants but at the same time direct the forces of production in the way they shall go for the benefit of all mankind.

Chapter 1

If you tell a sensible man you understand the " Labor Question" and knowhow to solve it, he will turn and run away because theories of government have become like tales of an Albatross with thousands of crazy Ancient Mariners stopping every one to tell him the story. The whole civilized world seems to have gone mad with an insane desire to change our present civilization by some new and untried experiment.

A sensible man will run in terror from the theorist who demands power to change the ownership of property, because he will know that for five thousand years of history the same kind of promise was followed by the most bloody results, making bad conditions worse.

Notwithstanding the failure of war to solve social problems; failures to relieve poverty and distress among the underpaid millions, notwithstanding the fact that within a hundred years the advance of science has given the vast majority of labor a higher standard of living than was ever dreamed about in olden times, in spite of progress and great wealth, the great majority of people are more discontented than ever before in the history of the world.

The news coming out of Russia at this time, January, 1920, concerning the change of ownership in property, is such that any man whose opinion is based upon the facts, is forced to conclude that Russia is suffering what no great population ever before endured. Instead of the theories of Lenine bringing a new and better order, conditions have for a long time been at the limit of human endurance, half the population is being rapidly killed off by disease, starvation and murder.

In face of what appears to be the undoubted facts about Russia, in spite of the cold murder of thousands of property owners because they own property, millions of people in other lands, workers and educators, uphold and support the Russian rule of murder, notably so in Great Britain, France, Italy and the United States.

Lenine, in carrying Socialism to its logical conclusions, found he could not destroy the prevailing system of owning property unless he murdered and exterminated the property owners who might oppose his rule, and he is said to have ruthlessly carried out his theory of blood.

According to that fatal theory the remedy is very simple, just abolish the ownership of property, and if the owner refuses to be abolished, if the small owner would combine with the rich owner, then every property owner must be exterminated to root out a system called Capitalism by Russian and other fanatics.

According to theory, when property ownership has been abolished, then government, free from the evil influence of so called capitalism, will automatically give labor its natural rights and a paradise on earth must follow.

Lenine destroyed the rich as a class, but included so many small owners that they could not combine to oppose his power, and his devoted followers all over the world, seeing the completeness of his work of murder, seeing there was no longer a rich class, find his theory carried out in actual practice, and believe a paradise for labor must necessarily follow, in spite of all the facts to the contrary.

So anxious are the people of the world to finally solve the problem of unjust wealth, that no cost of blood is held too great a price to pay. Great numbers of people will not only sacrifice their own lives to carry out a theory they believe will bring justice to labor, but will not hesitate at killing whole populations of men, women and children that would oppose them.

No matter in what form government changed in the past, each revolution, and each advance or fall had the same underlying cause in the ownership of property, changing it from one class in power to another class who sought power. Modern discontent has the same tap root, the same desire to change ownership for the power wealth confers, but the modern world now demands a vaster change than ever before, demands that ownership must either be entirely abolished or that wealth be justly distributed according to the services of labor for the benefit of mankind.

The same economic cause is at the base of every war and revolution in the history of government, and it must result from some great natural law at its base seeking a way by which wealth will at last be justly distributed to each as each contributes to the general welfare.

Nature makes it plain to every man that he can live with the least work where the land is most fertile and where the climate is most favorable; tens of millions of animals, birds and fishes live on the free bounty of nature and millions of savages live without work.

The fact that millions of men must work to the limit of endurance every day for a mere living which savages and animals get without work, and must do so after labor has created billions of property values, is the cause of modern world-wide discontent.

When populations of savages were forced into slavery by conquering tribes the work of cultivating the soil with slave labor was confined to the most fertile lands, because the least work would produce the most supplies. It soon became apparent that one half of the working population could supplyall the people with an abundant living, and abandon the poor lands to savages, or to become wild land.

When fertile lands become private property, the owners became a rich class getting their power from the fertility of soil by which they were able not only to control the labor that must work upon the land, but also the labor cut off from the land that must have other work and live from the surplus of the fertile soil.

The introduction of money took away this power over labor from the mere land-owner and forced a division of that power with merchants, with other employers and with the banker and money lender. Gains arising to all employers of labor, out of the fertility of soil, from the circulation of money, made the factors of production and wages most perplexing, because the use of money increased occupation of labor from the few that provided simply food and shelter to thousands of new divisions of labor that called for great cities for factories and railway systems, and for millions of consumers for factory products.

In the modern world the organization of labor to better its condition became a vast system of education about markets, prices, wages, profits, machinery and capital, millions of working people, for the first time, became aware of the connection between wage money and the things it bought, and it was soon discovered there was a gap between wage money and prices of goods the money must buy.

Labor organizations were forced to keep accounts of the cost of labor in many lines, to learn the cost of capital and machinery, the cost of getting supplies to market, and to separate profits from all such costs.

An elemental truth was being made clearer and clearer to organized labor as modern civilization advanced by leaps and bounds, and this truth culminated in a doctrine that the wages of labor must, in some way balance with the money the labor product sells for, and when this balance has been secured labor will be getting its full reward.

Let us accept the doctrine that — The Wages of Labor Must Buy Back the Entire Product at the Market Price — and follow it as a fundamental truth, to see what the actual facts have to say, and how wages may arrive at that place.

Here is the place where theories and disputes have their origin, for on one side it seems impossible to pay the entire selling price of goods in wages, because, looking at any one product, it is quite impossible to pay the labor of that product its entire market price.

This fact brings about the utmost confusion of theory. It is taken for granted that a condition for a part of the total price for goods must effect the whole price list in the same way, but such is not the case. Because it rains today does not decide that it must rain every day. The law for living things is a law of great classes and is not a law for each unit of any class as it is in material things.

It is true the wages of labor must balance with the selling price of the whole product, but such a balance would be impossible if the producing labor was paid the market price for each product and no account was taken of the other labor that must buy what it does not produce.

The wages of all labor must balance with the market prices of the total product, which will include the wages for about half of total labor never counted as part of the cost of goods in the market.

The wages of lawyers, government servants of all kinds, teachers, writers, printers, actors, preachers, doctors, and the like, must buy goods and this helps create the market price of goods and they must have their wages carried by that market price, although their work is never calculated as a part of the cost of any of the goods they consume.

When special classes of labor, like railway and factory workers claim the whole money income of railways, or factory belongs to them and that profit is a robbery, such a claim ignores the money that must be distributed to other labor and which cannot circulate and be distributed unless it is carried in the price of goods all the people buy. Total wages must equal total prices each year.

When history records the failure of Lenine, the chief cause of quick ruin in Russia will be found in his radical method of trying to pay factory wages equal to the selling price, to include profit while ignoring an equal claim of other labor in the same market price.

Lenine's wage theory brought about a paralysis in the employment of secondary labor; it destroyed the circulation of money and the market in which the peasant sold the surplus from fertile lands. Business must fail and barter must replace the use of money in Russia until a sane government will establish a circulation of money that obeys its natural laws.

Seeing the utter collapse of his theories, Lenine was driven to print billions in rubles, for his barbarism required some sort of money to hold even its short lease of government power. Facing a coming disaster with one billion of rubles from the printing press "treading upon the heels of other billions so fast they follow/ ' he now asserts he is destroying money because it is the chief cause of the slavery of labor.

Demanding impossible wages, a labor organization may paralyze the transportation, or the basic industry of a nation and threaten its whole existence upon a fatal theory that the whole sum collected belongs to railway or factory workers, following on the heels of disaster in Russia.

Labor organizations do not get their great power from the power of numbers as they suppose, but get it from society tamely submitting to a small fraction of labor taking absolute control over vast systems of machinery which are doing nine-tenths of our total work, permitting labor leaders to assert a power like Feudal Barons of other times but of a lower civilization.

It will be well for labor leaders to learn the truth in time, for if they are successful in their outrageous demands they will as certainly destroy civilization in the United States as has been the case in Russia, and no government calling itself Democratic may long submit to the strike power now held by organized labor. Sooner or later such labor leaders must be treated as enemies and traitors to civilization and be punished accordingly, or our modern civilization will pass away in another period of dark ages and a new civilization arise from new generations of barbarians.

CHAPTER 2 Cost of Living

A natural law declares that wages must balance the market price of the entire labor product, at two times its cost in a cash market. A natural law declares that all the goods and capital labor can send to market will meet their supply of money to buy them at two times the cost if we do not interfere with the natural order.

The natural wage rate is much greater than ever a Lenine or Socialist philosophy dare claim, and it will not be difficult to prove how wages may rise to the natural limit, by a simple plan, without the murder of a single property owner, without disturbing existing governments, and do so by creating the most prosperous period of industry the world has ever witnessed, and make that prosperity permanent.

Wages will not rise to the natural limit unless the demand for labor will send the rate to that limit, and force employers to pay the rate. The natural demand for labor will come from the expenditure of billions of dollars producing something for which there will always be found a profitable market and for which the supply can never equal the demand.

What is it that labor may produce where the supply can never equal demand? The answer is Wealth that pays an income and which allows the owner to live without work.

An insatiable demand for labor will arise by giving it a free field to build capital that buys a living without work. As the demand to live without work can never be satisfied it follows that having a free field to build the capital that will enable its owner to live without work the demand for labor in this field must be so much greater than the supply as to force wages to the highest point wealth can be made to pay.

The production of capital must be made profitable, not only must capital collect its required rent to make the investment a good one, but it must also sell for more than it cost to build, which is to say that buildings must be manufactured and sold in quantity just like goods are sold; that dilapidated buildings in cities, which . now collect high rents on the best locations must be torn down and be replaced with the kind of building each location demands.

New profit in building must come by getting the best locations for great buildings, in the heart of cities, without cost for land. It is the present cost of land in cities that prevents labor from now buying back its entire product. Money must now be spent to buy land, and since land is not a labor product the money taken to buy land unsettles the money market and makes that market just that sum short of its natural supply, debts are thereby created to offset the loss of money paid for land.

In getting at the foundation of wages the first fact to get to the light is the fact that factory products must be sold to a vastly greater number of consumers than the mere workers whose wages make up the cost of such products, how is the extra money to reach the hands of extra buyers unless the price of that product carries the money with it from the market?

Factories and railways represent vast expenditure of past labor and material in great systems of plants, how is a city consumer who produces none of the goods he consumes to get money to buy unless the price of such goods carries that money around its circle, from the market to labor of every description?

The selling price of any labor product must be high enough above its wage cost so as to include the money other labor must spend to buy it. In buying back its entire product it is necessary that the price of each product must balance with the money labor must spend in the market. The fact that land commands a price, but pays no money to labor to balance that price, is what now throws our markets and prices in confusion. Order and harmony between labor and capital can never be established until what is now a price for land becomes a price of a labor product which will be balanced by the money labor spends in all markets.

If it is true that each labor product must carry in its market price the money that returns to labor to buy it, where does capital come in? What part of the purchase money for commodities does capital supply and what part of the wage that buys a living, is the capitalist expected to pay?

If goods distribute all the money to pay for goods, why need capital employ labor? This was Lenine's proposition and it seems logical. Capital does not now and never can employ labor in producing goods. Labor employs labor by dividing into two great classes each class becoming the employer of the other. Capital brings labor from the past into the present market to assist and cooperate with living labor and brings into the market an enormous supply of money earned by past labor which we call credit money that should increase the wages of present labor, but fails to do so and that failure creates the trouble between labor and capital.

Consider a moment the vast sums that have been spent for railway systems, factory systems, building cities and towns, improving farms and the like that we now use as past labor and need not produce. Capital represents a sum in the United States of about two hundred and fifty billion dollars earned by past labor that should now cooperate to increase the wages of present labor but fails to do so. A sum of two hundred and fifty billion dollars worth of past labor we use every day with only a hundred million dollars cost for present labor each day to buy the living.

The owner of capital, while not in fact an employer of labor, is expected somehow to pay for the capital he owns, to pay present labor because present labor supplies the living-without-working, that gives capital its value in money.

Capital is expected to pay just as any buyer in the market will pay by buying at a price above cost, but labor should be the main buyer of capital, as it is the main buyer of goods, here again it fails.

Speaking of labor as a total, and not the mere labor that directly produces goods, there comes from labor a vast daily product to sell in our markets and a natural law forces that product to sell at a price of two times labor cost because only half the labor is paid to produce goods — leaving capital to create its own market.

Labor, speaking for total labor, sends a quantity of capital to market each year and the price of capital is fixed by natural law at two times its cost where land cost is omitted, and this capital must carry money to buy capital for labor like goods must carry money for labor to buy goods.

The failure in the circulation of money will be found in the cost of land taking money belonging to the market for capital which money would bring past labor into the market as profit from the production of capital. The money to buy capital must come from a market price of capital the same as the money to buy goods comes from the market price of goods, and debts that supply money to pay for land, destroys the circulation of past-labor-money or capital money.

Labor is entitled to a vastly greater sum in wages than any socialist or government ownership theory asserts but this greater sum is credit money earned by past labor which must cooperate with the cash earned by present labor. The solution of this problem demands a different treatment of industry than present theories advocate. Profits must be preserved above all things; while socialist and other theories are bent on destroying profits.

How does it happen that a few laborers operating machines are so prolific, or fertile, in producing goods that one worker, with the help of capital or past labor, will supply the needs of a hundred families?

The productiveness of machines, steam and electricity, is said to come from capital and from the superior brains of the capitalist, but that is no answer because it is apparent that capital and its organization has been intelligently directed for centuries of the past, to supply new classes of goods to meet new stages of civilizations and has been a continuous evolution.

What we call profit is but another name for the fertility of soil, or fertility of production given free by nature above cost of living for labor. The low unit of cost from machines is not to be credited to the labor that operate them or to capital but to fertility of nature the same as a ten thousand barrel oil well is not credited to the drillers or to the cost of an oil well.

There must be enough shoes, for example, to supply all the people, and money must be distributed to the people to buy them. If one laborer, working in a shoe factory, turns out a hundred times as many shoes as he buys back it is plain that wages in shoemaking, spent only for shoes, would leave the market with most of its shoes without buyers.

The price in the market must not fall below the labor cost of production, and before other classes may buy shoes the price must rise high enough above cost of production to supply money for all consumers of shoes.

The reader should get the fact clear in his mind that every labor product in the market must carry a price, that will not alone pay its own labor cost but a price that supplies other labor with money to buy the surplus. Oil must carry and distribute money to the whole population; all the money required to buy oil, and when one well will produce ten thousand barrels at fifty thousand times less cost than another well giving only one barrel in five days, it simply means that such fertility in an oil well is used by Nature to carry the extra supply of money consumers must get, and can get in no other way.

It is necessary to look upon the body politic as being one great Mass-Man who daily consumes vast supplies of food, clothing, coal, steel, lumber, copper and other goods, requiring cities, towns and farms connected with railway and factory systems. The demand for a living by the Mass-Man is an organic demand higher than the demands of unit workers for their own living and includes all raw material for capital.

To hold each product, in its due proportion, to supply the multiple needs of the Mass-Man, each class of goods is given its proportionate share in a fixed supply of money to buy what the whole mass needs and this money must render profit. The limit in quantity of money, to buy the daily living for all the people will buy only an exact proportion of each line of goods, and as the social organism needs more of one special class its price will rise leaving less money to spend for something else, the price of which must therefore fall.

It is utterly impossible for any human brain to estimate the cost of any article in the market, where fertility of soil makes a barrel of oil cost fifty thousand times more at one oil well than another. What is true of fertility mixing up costs for oil is equally true for wheat, coal, and for all soil products, and for most machine made goods.

While it is utterly beyond human power to estimate production cost for any class of goods in the market, it is quite a simple matter to establish a cost basis for all goods, and to make each class confine its cost to that base, by making the cost of living for all the people the base for total cost of supplies.

It is easy to discover that wages paid, in any case, is labor cost, and the money spent for living by all the people is cost of living for the body politic. Wages must balance with a certain standard of living based upon our degree of civilization, which is based upon the species of social organism our civilization has achieved.

Each class of goods must carry its own supply of money in its price, collect the money from consumers and return it to channels of circulation to again buy the same supplies in greater or less quantity as the whole organism may direct.

There are two costs to everything sold for money in the consumers market, both are labor costs, one is cost of labor producing the total living, and the other is cost of all other labor which is advancing the standard of living. These two labor costs establish a standard market price of two times cost of production, but allows any class of goods to rise or fall.

The most necessary product is the food supply which must be distributed every day and cannot be postponed, and to have the most abundant supplies for an increase of population the natural law confines labor to the most fertile lands by only allowing the quantity of money a government may coin to circulate as the cost of living, thereby forcing all other payments to be made with credit money.

If the labor that produces all the food received all the money to buy it back, he could use less than half of it and half the people would have no money for a living and half the supplies would rot for lack of a market. To give all labor its proportion of total food the limit of food money is divided and only half the cash is allowed to the labor producing all the living, and the price rises to two times cost thereby setting aside half the money and half the living for labor that must find other work.

When a land owner employs labor to produce food he must pay that labor a wage equal to its standard of living and therefore the fertile land must produce a surplus above the living of its labor. The land owner having the surplus living as profit will employ surplus labor as his personal servant or to build upon and otherwise improve his land.

It is self evident that any product of secondary labor, whose living comes from primary labor working the fertile land, must cost the land owner two units of living, one unit of living for the primary worker, and one unit from surplus paid as wages to the secondary worker, hence all capital has at its foundation the same sea level price of two times cost, measured by cost of living.

This double cost, of two units for capital, provides money for two classes of labor to buy back the buildings sent to market from money the buildings sell for, when they sell for two times cost, the same as two times cost of goods supplies the money for two classes of labor to buy back all the goods sent to market.