Natural economic law

Preface

About thirty years ago I accidentally stumbled upon one of the most important truths in the world of science; the key to natural law in the social and economic world; the key to natural laws that control the growth of civilization. To unlock the door of science with the key was a work of research into millions of facts, — a work almost without end.

Systems of finance and political economy have been built around a false premise, and no matter how logically a writer may have reasoned he could not arrive at a right conclusion from his false starting point, no progress was made in unraveling industrial problems, or in abolishing a slavery of labor since the time of Aristotle.

The thinking world has been chasing solutions of labor and capital, money and wealth, for centuries, only to see one nation after another rise to wealth and power, to fall in ruin and barbarism.

Taking a wrong starting point we travel ever so far and in any direction, but never at any right conclusion; such has been the case with our social and industrial problems.

The wrong starting point is found in saying labor is the Cause of the Value of goods and of Property, and the market price is made by adding 3

4 PKEFACE

up various costs of labor from producer to consumer. The self-evident fact is in plain sight, namely, instead of labor being the cause of value, labor cannot be employed in any line of production unless value will attach to the product in the market, unless more value will so attach than was spent as cost for labor. Value is the Cause of Labor. The occupation of labor is a result of market values. The common mistake is found in treating labor as a cause of value, treating value as an effect of labor in spite of milHons of self-evident facts to the contrary.

Some years ago the Austrian School of Political Economy discovered the prevailing theory of value was wrong, and asked the question — "if labor is the cause of value what then is the cause of the value of labor! Will you chase value around a circle like a cat chasing its tail?'' The Austrian School produced a new theory of value seeking to find a cause of value outside of labor in what they called — marginal utility, but with no more success in solving problems than the theories they attacked, because value is itself a final cause.

Labor works because value will attach to a product from some outside source, and it is not permitted to work unless more value will attach to a product in the market than the cost of such labor. The self-evident, true premise is just the reverse of the accepted theory. Value is the

PREFACE 5

primary economic cause, while labor is but one of its principal effects. Value has no cause the human mind may conceive; it is one of the great inscrutable creative powers of the Almighty under the control of natural law, like heat, light, electricity, and life itself; we cannot discover its cause.

Value is the cause of labor in all its many occupations. It has created the intelligent laborer from the savage, and it has developed civilization as a living organism under a superhuman plan of which man has ever been unconscious. Value directs the way labor must go, the way capital and wealth must develop, its laws come to us in the circulation of money.

It may not be clear to the mind just how a natural law may compel labor to work at tasks it does not like, to work out a plan for the general good when it seeks only to gratify its selfish desires. But when we recognize the circulation of money as being value in action, under the control of natural law, it is not difficult to see that without money labor will starve in a civilized community, that the control over money by natural law directs labor in the way it must go.

The capitalist and employer has no such power over labor as he is given credit for having; he has no mine, or cave, or mint from which to draw unlimited supplies of money to pay impossible wages, which are limited and controlled by natu-

6 PREFACE

ral law. The employer must sell something that labor sends to market to get money to pay labor and sell it to the mass of consumers who are mainly the mass of laborers. What an employer will have labor produce is not decided by his own will and caprice; he has no control oVer the market price at which a product may sell, except to a very limited degree. What labor may produce in great quantity and variety is decided by the world's markets, and by the circulation of money among consumers in each country. Prices in the world's markets being under control of natural law, it follows that prices in lesser markets are under similar control, but with more room for variation.

Vast systems of natural law establish a general sea-level of prices and general rates of wages according to a standard of living which is the basis of every civilization. Such laws cover a world of facts, and are like laws of gravity that establish the weights of all things on the surface of the earth, and hold the sun and planets to their courses.

The reader is not directly interested in the great general scheme of progress for the human race during centuries of the past, and for centuries of the future, but he is deeply concerned with the laws that fix the terms of his daily life, laws which distribute money upon which his daily life depends.

PREFACE 7

The individual finds his family life tied up to some general plan for the good of mankind, he is forced to suffer wars, panics, hard times, disease, poverty, vice, crime and insanity because human law fails to harmonize with the natural order, and he wants to know how the nation to which he belongs, may conform its own system of law to the world system of civilization.

Because physical science has been quite successful in discovering and applying natural law, there seems the best of reasons to expect that science will discover and apply natural economic law, but to this day, all such efforts have resulted in total failure, and no discovery of a single law for natural order in the social world has been established.

After natural economic law has been discovered, the failure, on the part of physical science, becomes clear for the simple reason that economic laws relate to living things, to growth and movement of a social organism, while physical laws deal with the activity of non-living matter and forces.

In the physical world, for example, a natural law fixing the weight of one cubic foot of any substance will give each minute particle of it the same proportion of weight, but such is not the case with living things; there is no such fixed relations between life and the substance with which life works.

5 PREFACE

In the social world prices are like weights and are under the control of a natural law like gravitation; yet the price of any class of goods may change in either direction, and must be permitted to change in either direction, and must meet demands for changes in the living organism. There is, for example, a natural law governing the length of human life, which probably controls the birth rate. By this law we calculate life insurance with great exactness and know almost to a day when the last member of a class of one hundred thousand insured will die, but we are helpless to say when any one of that group may die.

General economic laws govern great masses of facts, which divide into classes under other laws, prices for each class of goods and different lines of goods and wages for different classes of labor seem outside the law, but are on the whole under its control.

New York City, March, 1920.

CHAPTER 1 A World Disease

Two very common sayings are used to excuse our faults, ''What we don't know can't hurt us'' and "We cannot lose what we never had," but in the most important affairs of life what hurts most is what we don't know, and we lose most by not getting what we never had. It becomes extremely difficult for a new science to tell the people what they don't know, and explain to them how they may get what they never had in the history of the world.

When the Czar's Government in Russia was destroyed, together with its police system, courts and laws, its oppression and tyranny, the people were seeking — they knew not what — trying to recover what they never were permitted to have from the good things in life.

The world was surprised at the quick revolution in Russia overturning the autocracy of the Czar with so little loss of life, surprised at the failure of the ruling class, with an army in the field, to defend its power and privileges.

The world rejoiced along with the wild rejoicing of the Russian people, at the prospect of creating 11 a new and beautiful world where misery had been the lot of tens of millions for centuries, to see liberty and plenty for its people, with the opportunity to plan each life along lines of justice and happiness.

In a short time the whole scene changed in Russia, and the world outside of Russia, stood aghast at unforeseen results, for something more than the old regime of the Czar had fallen; the structure of civilization was torn apart, the savage was no longer under the control of law and order.

It is doubtful if any student of politics could have predicted the quick change of events in Russia after the first revolution, the civil war that followed from counter-revolutions seeking to put fatal theories in practice.

What is the protective influence surrounding civilization that prevents looting of wealth, murder and wholesale crime?

What gave way in Russia to unloose the Barbarian brute in a vast population, to permit thousands to die from murder and starvation, and as many more from disease that otherwise would not have appeared?

The Government of Lenine was not without a great ideal which it hoped to realize, although it must swim in blood of the common people to reach an end for Government. The ideal was to abolish private property, to make one common plan for the government of the whole world.

which has been the religious ideal from the beginning of an organized church and system of religion.

The ideal of Lenineism was to secure the rule of the moneyless man, although it would put an ignorant brute in power and give reign to all the thieving and murderous instincts of the dormant savage. What had fallen out in Russia was the long age institution of private property, upon which the circulation of money and the progress of mankind is based by natural law.

It was not the rise of Lenine and Trotzky to power that destroyed private property in Russia, it was the abuse of private property under the Czar's Government, the failure of private property to carry forward its beneficent functions for the welfare of the masses; it was a concentration of wealth to a small class of absurdly rich property owners.

A few in Russia realized it was not the mere rule of an aristocracy that was destroyed, but no one realized that a world's civilization was in danger of the torch, that private property, with its roots buried deep in the past, was to be torn out of the living body of the social organism.

A few fanatics in Russia, as in other countries, preached a religion for the worker, promising wealth with ease and luxury, by taking wealth from the rich, and they found the ground prepared for a new religious crusade and for a new form of government, with an army ready for the men who had courage to seize the power.

A civil war against private property fills the world of property-owners, outside of Russia, with a fearful distrust in their own working classes, a fear that a similar crusade of religious fanatics cannot be kept from spreading over all other governments, and the greater the wealth, the greater the danger.

Fanaticism in Russia is not led, as many suppose, by ignorant and brutal men; on the contrary it called out leaders who had devoted their lives to a study of economic theory; men who were university graduates and library rats; men without business experience who spent years in the study of false and fatal theories of human affairs.

There were many in Russia who owned small tracts of land, and other property, and the fanatics who sought to abolish capitalism, feared the small owners would rush to combine with those of great wealth, and would restore the capitalistic system. On this account there was a wide persecution and execution of all unbelievers against the new religion, who owned property, or who did not work with hands and muscle for daily wages. Murder by wholesale and famine which starved hundreds of thousands came to Russia as it has in other religious wars.

The civilized world, outside of Russia, trembles in fear, not so much about what is taking place in that distracted land, because its misery should make all other people recoil from a like experiment, but in fear that other attempts at abolishing profits or experiments in Government ownership will have identical results.

It is the chain of events in Russia all have reason to fear; the chain that once starting cannot be stayed until bloody revolution and its evil consequences have run their course of murder and pillage, when unbelievers in a new religion have been silenced or destroyed.

Can this tidal wave, now pulsing among the laboring classes in all countries be held back in time? Can reforms that will satisfy the demands for the future, and satisfy the natural order, be instituted in time? or will the wealthy classes seek to hold the old order of unjust distribution until civilization is buried in one common grave of anarchy?

The question in the mind of every student of today is, why the first revolutionary government of Kerensky, having the approval of a vast majority of Russian people, could not maintain its power, with a great army in its control? Why it was overturned by a mere handful of fanatics led by a few sailors and soldiers?

When a people hold a common belief concerning any fundamental institution, and by that belief demand the institution shall be abolished, as was the case with the wealthy class in Russia, when property as the source of power has lost its usefulness in the body poHtic, vast changes may come from forces that seem of no importance at the time.

A people come to believe a false theory about property on account of the contrast between the idle luxury of the rich and the hard lot of the toiling millions, on account of the failure of wealth to relieve the distress of common people, and they seek to destroy wealth which seems to be the cause of poverty among laborers.

No one who has made a study of Socialism and its theory of capitalism, will deny that the present government of Lenine is putting such theories to a logical conclusion, and to a practical application in the affairs of government. In seeking to abolish capitalism the theory makes no distinction between the small owner and the millionaire; property as an institution is attacked, and if the small owner stands in the way he must be exterminated.

Lenine and Trotzky have many faithful defenders in other countries, who recognize that owners will fight to retain their property. The small owner will fight harder than the few rich, and therefore they excuse the rivers of blood that flow in Russia and the famine that kills more than the war. It is the small owner who is the bulwark of private property; it is the failure to add to the number of small owners, when wealth concentrates, that brings the misery and discontent which ends in revolution. If private property is to be abolished on account of some fatal theory, then the small owner must be exterminated. Such is the logic of the theory of Socialism.

What foundation belief combines millions into societies of socialists, anarchists and syndicalists over the world against the owners of private property, and against capital in private hands? The belief that men become rich by robbing the poor, by enslaving the vast body of workers, by denying them a living wage, forcing them to die before their time from over-work and underfeeding.

Fanatics say the rich cannot be restrained by law because wealth is all powerful; it controls the state and it makes the law, hence the only salvation for labor is to abolish, not only the rich but all private owners of wealth and capital.

According to theory when the cause of poverty has been abolished a Paradise for labor must automatically follow, and the defenders of Lenine over the world, seeing the completeness of his work of murder, and his control over property, decide that a Paradise has been secured in spite of truth and fact to the contrary.

No one will deny that somehow the concentration of wealth to the hands of a small class has been responsible for the downfall of civilization in the past. The same evil is now threatening all the world, and a just distribution of wealth to millions of small owners, is the true remedy.

Admitting the concentration of wealth to a millionaire class is an evil that will destroy civilization; it does not follow that we cannot secure a natural and just distribution, and must make fatal experiments in government ownership.

That the millionaire class must be abolished may be admitted; in fact, must be admitted if our civilization is to be saved, but ruthless changes of wealth can do no good and must work harm; we can only cure a long standing disease as fast as the patient may return to normal health.

A rise of the savage to civil life came from the institution of private property, and from the fact that some land was more fertile than other land, which would give an easy living to its owner, but this difference in fertility is wholly ignored by socialist theories, although all progress and all life, human, animal, and vegetable depends upon it.

When it was discovered that a simple cultivation of the soil would greatly increase supplies and give more than the cultivator could himself consume, property took its root in the land; the land-owner became the lord of the earth, and slaves, captured in war, was the first labor to be forced to work the land for a master and employer.

No matter how much capital and machinery a people may use, its use will depend upon the fact that only a small part of total labor need to work upon the fertile land and supply all the people with a living, that half the total labor may be employed at other work.

The problem of the world has always been to j&nd work for the labor set free from providing its own living. When it was clear that fertile land under cultivation would give the owner a living without work, and would allow a surplus living with which to employ other labor, it followed that only fertile land would be used, and a margin of fertility was established which became the foundation of civilization.

Lands must produce more than the living of the labor that improves and cultivates them, and poorer lands will not be cultivated; hence the labor, cut off from the land, must either work for the owner of fertile land, work poor land, or migrate.

The land-lord controlled, not only the labor on his own land but also the labor that must live upon the surplus, and thus slavery was introduced by forcing savages to become laborers and provide an easy living for the property owner.

Private property has its birth in slavery, war and murder, and is based upon the fertility of soil, but natural social law was not then in power, and mankind was subject to the law of brute creation where the strong will take the life and living from the weak.

It was a long time in the history of the world before any advance was made above land-owning laws and governments ; the church and state were all based upon the power given by land owning; the chiefs of state and church were rich landlords, while all the labor was slave, usually a conquered people, and even merchants and educated classes were long held as slaves.

The owner of the land could not consume all the surplus living by his own demands, could not use it all by employing surplus labor to improve his land. Trade was developed to supply the rich land-owning class with a higher standard of living, and thereby trade became a basis for the advance for civilization by making a better standard of living, the hope of enslaved laborer.

The first natural law to assert its power is found in the cost of surplus labor to the landowner, which cost creates a sea level price for a living, a cost level for all prices, both for goods and capital.

When the landlord employed labor to build, or otherwise improve his land, the product of this surplus labor had a cost of two units of living; it cost the living of the labor working the fertile land and a living for the other labor cut off from the soil ; this fact made a price for goods and capital consists of two units of living, or two units of money cost, when money is limited to buying a living.

The landlord had an enormous surplus he wished to exchange it for goods from other lands; and a cost of two units of living for other goods forced him to sell his surplus at a low price and from this market price profits were created. The low cost of surplus living from fertile lands measured by two times cost in other goods made trade and commerce profitable and introduced money which could then pay for itself out of the gains or difference in costs from a variety of products.

When money was introduced the power of the landlord over labor was divided with merchants, with money-lenders and with other employers because the natural law forced a price for surplus labor equal to two units of living. When the landlord could not himself employ surplus labor he had to pay the gain to other employers by the sale of his surplus at a price which gave two units of living and gave to other employers the same profit from labor the landlord himself received when improving his own land.

In whatever form changes of government appeared in the past, from war or religion, land-owning was at the foundation, seeking to change the ownership of property from one class in power to the class-seeking power. The modern labor movement is the same force at work, seeking control over property for the power it confers, uniting millions by the hope that they at last will obtain the property and the power wealth confers on its owner.

There is a natural law working at the foundation of every war and revolution, a law seeking to change the ownership of wealth, seeking to lift the mass of the people to a higher standard by forcing ownership to include more classes of people and to widen distribution until millions of families shall enjoy the blessings of wealth.

Nature makes it plain to a stupid man that he can live with the least labor where the land is fertile and where the climate is favorable. Civilization concentrates population on belts of the most fertile lands in the most favorable climates, where the least work will provide the most abundant living.

When money was introduced so that a people must buy its living with money, the natural law limited the quantity of money that buys a living, and forced money to divide labor into great classes one of which provided the total living, setting free one class with its living supplied from using the most fertile land.

Two units of living had to be provided, one for the worker on the land, and a surplus for the worker cut off from the land, and thereby was created a sea-level standard price for all goods at two units of living, permitting one unit of living to measure what we call profit, and be equal to half the cost of living for the whole people.

Here is where confusion in theory originates on account of the single labor cost of goods and the double cost of the same goods when two units of living must be supplied.

If only the labor directly paid for producing goods is considered, it leaves other labor without hope of getting a living. Lawyers, government, servants, doctors, writers, printers, actors, artists, and the like would not be able to live unless the retail price of goods carried the money to buy a living for the workers who do not produce what they consume.

When labor working in factories, on railways, street cars and the like claims all the money in wages which the public may pay for goods or service; such claim becomes impossible because the wages of other labor must be included in the market price, and must be separated from the cost by taking off what we call profit, which is but a measure of wages for other labor.

When the socialist theory asserts that profits may be included in the wages of the worker, and when it seeks to have organized labor lift its wages to include profits, it puts other labor out of work, and puts the money out of circulation that would pay other labor.

The false wage theory of Lenine in Russia is the main cause of his failure to start industry. His radical attempts to pay the factory worker the whole selling price of the factory product and destroy profits of capital, succeeds only in destroying the wages of other labor along with idle factories and ruined industry.

The railway, factory, and farm improvements of a country consume vast quantities of past labor that has been crystallized into what we call capital, but capital demands present labor, not only to operate it, but to keep it in repair, to rebuild and improve it, and to create new forms of capital.

How is the city consumer who depends upon capital construction and capital operation, to buy his living with money unless the selling price of goods will hold the money in the city which its population must use to buy its living.

The selling price of any labor product must be high enough above its own cost to include at least one other cost of living for the labor that has its living supplied. Buying from the market what labor sends to market demands that enough money must be provided to buy two equal shares. The money price in the market must carry the money with which all people buy goods; each class of goods must carry enough money to market them and carry the wages of other labor not paid for producing goods:

If it is true that each class of goods must carry a price that will distribute money to buyers, where does capital come in? What part of the purchase money that buys a living does capital supply? If goods distribute all the money to buy goods why need capital employ labor? This is the socialist position, and for that reason they expect to abolish the capitalist.

Capital does not now and never did employ the labor that sends goods to market. Labor employs labor by dividing into two great classes, one class producing all the living and the other class engaging at other work with money circulating to pay the wages for both classes independent of capital.

Capital brings past labor into cooperation with living labor which provides the living, and raw material for new construction. The value of past labor is most important in the progress of the world. If we advance above the savage, if we may have any leisure for higher things than a mere hand to mouth living, we must depend upon capital and upon the crystallized labor it brings into use.

In the United States in the year 1919 there was at least two hundred and fifty billion dollars worth of past labor called capital cooperating with present labor. There is a daily force of two hundred and fifty billion dollars worth of past labor assisting one hundred million cost of present labor each day; such is the power and importance of capital.

But the SociaHst asks, — ''Shall the owner of capital enjoy the advantage of all this power without paying the past labor that produced capital?" The owner must pay labor according to natural law, but it cannot pay present labor; it can only pay through the distribution of wealth.

Capital has little power over present labor, and that little consists in getting a living from present labor without working, by taking a part of the surplus living from fertile soil.

Capital must pay labor, but must pay just as any buyer in the market pays for any labor product, — by buying it at its market price. In selling capital at a profit the natural law expects the demand for labor to become so great that wages will rise to a point where a surplus in wages will permit laborers to become the chief buyers of capital as they are the chief buyers of goods.