Principles Of Political Economy, by John Stuart Mill

That's French for "the ancient system," as in the ancient system of feudal privileges and the exercise of autocratic power over the peasants. The ancien regime never goes away, like vampires and dinosaur bones they are always hidden in the earth, exercising a mysterious influence. It is not paranoia to believe that the elites scheme against the common man. Inform yourself about their schemes here.

Re: Principles Of Political Economy, by John Stuart Mill

Postby admin » Tue May 19, 2020 10:25 am

Chapter VI. Of Causes Affecting The Efficiency Of Production.

§ 1. General Causes of Superior Productiveness.

The most evident cause of superior productiveness is what are called natural advantages. These are various. Fertility of soil is one of the principal. The influence of climate [is another advantage, and] consists in lessening the physical requirements of the producers.

In spinning very fine cotton thread, England's natural climate gives in some parts of the country such advantages in proper moisture and electric conditions that the operation can be carried on out-of-doors; while in the United States it is generally necessary to create an artificial atmosphere. In ordinary spinning in our country more is accomplished when the wind is in one quarter than in another. The dry northwest wind in New England reduces the amount of product, while the dry northeast wind in England has a similar effect, and it is said has practically driven the cotton-spinners from Manchester to Oldham, where the climate is more equably moist. The full reasons for these facts are not yet ascertained.

Experts in the woolen industry, also, explain that the quality and fiber of wool depend upon the soil and climate where the sheep are pastured. When Ohio sheep are transferred to Texas, in a few years their wool loses the distinctive quality it formerly possessed, and takes on a new character belonging to the breeds of Texas. The wool produced by one set of climatic conditions is quite different from that of another set, and is used by the manufacturers for different purposes.

In hot regions, mankind can exist in comfort with less perfect housing, less clothing; fuel, that absolute necessary of life in cold climates, they can almost dispense with, except for industrial uses. They also require less aliment. Among natural advantages, besides soil and climate, must be [pg 100]mentioned abundance of mineral productions, in convenient situations, and capable of being worked with moderate labor. Such are the coal-fields of Great Britain, which do so much to compensate its inhabitants for the disadvantages of climate; and the scarcely inferior resource possessed by this country and the United States, in a copious supply of an easily reduced iron-ore, at no great depth below the earth's surface, and in close proximity to coal-deposits available for working it. But perhaps a greater advantage than all these is a maritime situation, especially when accompanied with good natural harbors; and, next to it, great navigable rivers. These advantages consist indeed wholly in saving of cost of carriage. But few, who have not considered the subject, have any adequate notion how great an extent of economical advantage this comprises.

As the second of the [general] causes of superior productiveness, we may rank the greater energy of labor. By this is not to be understood occasional, but regular and habitual energy. The third element which determines the productiveness of the labor of a community is the skill and knowledge therein existing, whether it be the skill and knowledge of the laborers themselves or of those who direct their labor. That the productiveness of the labor of a people is limited by their knowledge of the arts of life is self-evident, and that any progress in those arts, any improved application of the objects or powers of nature to industrial uses, enables the same quantity and intensity of labor to raise a greater produce. One principal department of these improvements consists in the invention and use of tools and machinery.114

The deficiency of practical good sense, which renders the majority of the laboring-class such bad calculators—which makes, for instance, their domestic economy so improvident, lax, and irregular—must disqualify them for any but a low grade of intelligent labor, and render their industry far less productive than with equal energy it otherwise might be. [pg 101]The moral qualities of the laborers are fully as important to the efficiency and worth of their labor as the intellectual. Independently of the effects of intemperance upon their bodily and mental faculties, and of flighty, unsteady habits upon the energy and continuity of their work (points so easily understood as not to require being insisted upon), it is well worthy of meditation how much of the aggregate effect of their labor depends on their trustworthiness.

Among the secondary causes which determine the productiveness of productive agents, the most important is Security. By security I mean the completeness of the protection which society affords to its members.

§ 2. Combination and Division of Labor Increase Productiveness.

In the enumeration of the circumstances which promote the productiveness of labor, we have left one untouched, which is co-operation, or the combined action of numbers. Of this great aid to production, a single department, known by the name of Division of Labor, has engaged a large share of the attention of political economists; most deservedly, indeed, but to the exclusion of other cases and exemplifications of the same comprehensive law. In the lifting of heavy weights, for example, in the felling of trees, in the sawing of timber, in the gathering of much hay or corn during a short period of fine weather, in draining a large extent of land during the short season when such a work may be properly conducted, in the pulling of ropes on board ship, in the rowing of large boats, in some mining operations, in the erection of a scaffolding for building, and in the breaking of stones for the repair of a road, so that the whole of the road shall always be kept in good order: in all these simple operations, and thousands more, it is absolutely necessary that many persons should work together, at the same time, in the same place, and in the same way. [But] in the present state of society, the breeding and feeding of sheep is the occupation of one set of people; dressing the wool to prepare it for the spinner is that of another; spinning it into thread, of a third; weaving the thread into broadcloth, of a fourth; dyeing the cloth, of a fifth; making it into a coat, of a sixth; without [pg 102]counting the multitude of carriers, merchants, factors, and retailers put in requisition at the successive stages of this progress.

Without some separation of employments, very few things would be produced at all. Suppose a set of persons, or a number of families, all employed precisely in the same manner; each family settled on a piece of its own land, on which it grows by its labor the food required for its own sustenance, and, as there are no persons to buy any surplus produce where all are producers, each family has to produce within itself whatever other articles it consumes. In such circumstances, if the soil was tolerably fertile, and population did not tread too closely on the heels of subsistence, there would be, no doubt, some kind of domestic manufactures; clothing for the family might, perhaps, be spun and woven within it, by the labor, probably, of the women (a first step in the separation of employments); and a dwelling of some sort would be erected and kept in repair by their united labor. But beyond simple food (precarious, too, from the variations of the seasons), coarse clothing, and very imperfect lodging, it would be scarcely possible that the family should produce anything more.

Suppose that a company of artificers, provided with tools, and with food sufficient to maintain them for a year, arrive in the country and establish themselves in the midst of the population. These new settlers occupy themselves in producing articles of use or ornament adapted to the taste of a simple people; and before their food is exhausted they have produced these in considerable quantity, and are ready to exchange them for more food. The economical position of the landed population is now most materially altered. They have an opportunity given them of acquiring comforts and luxuries. Things which, while they depended solely upon their own labor, they never could have obtained, because they could not have produced, are now accessible to them if they can succeed in producing an additional quantity of food and necessaries. They are thus incited to increase the productiveness [pg 103]of their industry. The new settlers constitute what is called a market for surplus agricultural produce; and their arrival has enriched the settlement, not only by the manufactured articles which they produce, but by the food which would not have been produced unless they had been there to consume it.

There is no inconsistency between this doctrine and the proposition we before maintained,115 that a market for commodities does not constitute employment for labor. The labor of the agriculturists was already provided with employment; they are not indebted to the demand of the new-comers for being able to maintain themselves. What that demand does for them is to call their labor into increased vigor and efficiency; to stimulate them, by new motives, to new exertions.

From these considerations it appears that a country will seldom have a productive agriculture unless it has a large town population, or, the only available substitute, a large export trade in agricultural produce to supply a population elsewhere. I use the phrase “town population” for shortness, to imply a population non-agricultural.

It is found that the productive power of labor is increased by carrying the separation further and further; by breaking down more and more every process of industry into parts, so that each laborer shall confine himself to an ever smaller number of simple operations. And thus, in time, arise those remarkable cases of what is called the division of labor, with which all readers on subjects of this nature are familiar. Adam Smith's illustration from pin-making, though so well known, is so much to the point that I will venture once more to transcribe it: “The business of making a pin is divided into about eighteen distinct operations. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business; [pg 104]to whiten the pins is another; it is even a trade by itself to put them into the paper.... I have seen a small manufactory where ten men only were employed, and where some of them, consequently, performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upward of four thousand pins of a middling size. Those ten persons, therefore, could make among them upward of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day.”

§ 3. Advantages of Division of Labor.

The causes of the increased efficiency given to labor by the division of employments are some of them too familiar to require specification; but it is worth while to attempt a complete enumeration of them. By Adam Smith they are reduced to three: “First, the increase of dexterity in every particular workman; secondly, the saving of the time which is commonly lost in passing from one species of work to another; and, lastly, the invention of a great number of machines which facilitate and abridge labor, and enable one man to do the work of many.”

(1.) Of these, the increase of dexterity of the individual workman is the most obvious and universal. It does not follow that because a thing has been done oftener it will be done better. That depends on the intelligence of the workman, and on the degree in which his mind works along with his hands. But it will be done more easily. This is as true of mental operations as of bodily. Even a child, after much practice, sums up a column of figures with a rapidity which resembles intuition. The act of speaking any language, of [pg 105]reading fluently, of playing music at sight, are cases as remarkable as they are familiar. Among bodily acts, dancing, gymnastic exercises, ease and brilliancy of execution on a musical instrument, are examples of the rapidity and facility acquired by repetition. In simpler manual operations the effect is, of course, still sooner produced.

(2.) The second advantage enumerated by Adam Smith as arising from the division of labor is one on which I can not help thinking that more stress is laid by him and others than it deserves. To do full justice to his opinion, I will quote his own exposition of it: “It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools. A country weaver, who cultivates a small farm, must lose a good deal of time in passing from his loom to the field, and from the field to his loom. When the two trades can be carried on in the same workhouse, the loss of time is no doubt much less. It is even in this case, however, very considerable. A man commonly saunters a little in turning his hand from one sort of employment to another.” I am very far from implying that these considerations are of no weight; but I think there are counter-considerations which are overlooked. If one kind of muscular or mental labor is different from another, for that very reason it is to some extent a rest from that other; and if the greatest vigor is not at once obtained in the second occupation, neither could the first have been indefinitely prolonged without some relaxation of energy. It is a matter of common experience that a change of occupation will often afford relief where complete repose would otherwise be necessary, and that a person can work many more hours without fatigue at a succession of occupations, than if confined during the whole time to one.116 Different occupations employ different muscles, or different energies of the mind, some of which rest and are refreshed while [pg 106]others work. Bodily labor itself rests from mental, and conversely. The variety itself has an invigorating effect on what, for want of a more philosophical appellation, we must term the animal spirits—so important to the efficiency of all work not mechanical, and not unimportant even to that.

(3.) The third advantage attributed by Adam Smith to the division of labor is, to a certain extent, real. Inventions tending to save labor in a particular operation are more likely to occur to any one in proportion as his thoughts are intensely directed to that occupation, and continually employed upon it.

This also can not be wholly true. “The founder of the cotton manufacture was a barber. The inventor of the power-loom was a clergyman. A farmer devised the application of the screw-propeller. A fancy-goods shopkeeper is one of the most enterprising experimentalists in agriculture. The most remarkable architectural design of our day has been furnished by a gardener. The first person who supplied London with water was a goldsmith. The first extensive maker of English roads was a blind man, bred to no trade. The father of English inland navigation was a duke, and his engineer was a millwright. The first great builder of iron bridges was a stone-mason, and the greatest railway engineer commenced his life as a colliery engineer.”117

(4.) The greatest advantage (next to the dexterity of the workmen) derived from the minute division of labor which takes place in modern manufacturing industry, is one not mentioned by Adam Smith, but to which attention has been drawn by Mr. Babbage: the more economical distribution of labor by classing the work-people according to their capacity. Different parts of the same series of operations require unequal degrees of skill and bodily strength; and those who have skill enough for the most difficult, or strength enough for the hardest parts of the labor, are made much more useful by being employed solely in them; the operations which everybody is capable of being left to those who are fit for no others.

The division of labor, as all writers on the subject have remarked, is limited by the extent of the market. If, by the separation of pin-making into ten distinct employments, forty-eight thousand pins can be made in a day, this separation will only be advisable if the number of accessible consumers is such as to require, every day, something like forty-eight thousand pins. If there is only a demand for twenty-four thousand, the division of labor can only be advantageously carried to the extent which will every day produce that smaller number. The increase of the general riches of the world, when accompanied with freedom of commercial intercourse, improvements in navigation, and inland communication by roads, canals, or railways, tends to give increased productiveness to the labor of every nation in particular, by enabling each locality to supply with its special products so much larger a market that a great extension of the division of labor in their production is an ordinary consequence. The division of labor is also limited, in many cases, by the nature of the employment. Agriculture, for example, is not susceptible of so great a division of occupations as many branches of manufactures, because its different operations can not possibly be simultaneous.

(5.) “In the examples given above the advantage obtained was derived from the mere fact of the separation of employments, altogether independently of the mode in which the separated employments were distributed among the persons carrying them on, as well as of the places in which they were conducted. But a further gain arises when the employments are of a kind which, in order to their effective performance, call for special capacities in the workman, or special natural resources in the scene of operation. There would be a manifest waste of special power in compelling to a mere mechanical or routine pursuit a man who is fitted to excel in a professional career; and similarly, if a branch of industry were established on some site which offered greater facilities to an industry of another sort, a waste, analogous in character, would be incurred. In a word, while a great number of the occupations in which men engage are such as, with proper preparation for them, might equally well be carried on by any of those engaged in them, or in any of the localities in which they are respectively established, there are others which demand for [pg 108]their effective performance special personal qualifications and special local conditions; and the general effectiveness of productive industry will, other things being equal, be proportioned to the completeness with which the adaptation is accomplished between occupation on the one hand and individuals and localities on the other.”118

§ 4. Production on a Large and Production on a Small Scale.

Whenever it is essential to the greatest efficiency of labor that many laborers should combine, the scale of the enterprise must be such as to bring many laborers together, and the capital must be large enough to maintain them. Still more needful is this when the nature of the employment allows, and the extent of the possible market encourages, a considerable division of labor. The larger the enterprise the further the division of labor may be carried. This is one of the principal causes of large manufactories. Every increase of business would enable the whole to be carried on with a proportionally smaller amount of labor.

As a general rule, the expenses of a business do not increase by any means proportionally to the quantity of business. Let us take as an example a set of operations which we are accustomed to see carried on by one great establishment, that of the Post-Office. Suppose that the business, let us say only of the letter-post, instead of being centralized in a single concern, were divided among five or six competing companies. Each of these would be obliged to maintain almost as large an establishment as is now sufficient for the whole. Since each must arrange for receiving and delivering letters in all parts of the town, each must send letter-carriers into every street, and almost every alley, and this, too, as many times in the day as is now done by the Post-Office, if the service is to be as well performed. Each must have an office for receiving letters in every neighborhood, with all subsidiary arrangements for collecting the letters from the different offices and redistributing them. To this must be added the much greater number of superior officers [pg 109]who would be required to check and control the subordinates, implying not only a greater cost in salaries for such responsible officers, but the necessity, perhaps, of being satisfied in many instances with an inferior standard of qualification, and so failing in the object.

Whether or not the advantages obtained by operating on a large scale preponderate in any particular case over the more watchful attention and greater regard to minor gains and losses usually found in small establishments, can be ascertained, in a state of free competition, by an unfailing test. Wherever there are large and small establishments in the same business, that one of the two which in existing circumstances carries on the production at greatest advantage will be able to undersell the other. The power of permanently underselling can only, generally speaking, be derived from increased effectiveness of labor; and this, when obtained by a more extended division of employment, or by a classification tending to a better economy of skill, always implies a greater produce from the same labor, and not merely the same produce from less labor; it increases not the surplus only, but the gross produce of industry. If an increased quantity of the particular article is not required, and part of the laborers in consequence lose their employment, the capital which maintained and employed them is also set at liberty, and the general produce of the country is increased by some other application of their labor.

A considerable part of the saving of labor effected by substituting the large system of production for the small, is the saving in the labor of the capitalists themselves. If a hundred producers with small capitals carry on separately the same business, the superintendence of each concern will probably require the whole attention of the person conducting it, sufficiently, at least, to hinder his time or thoughts from being disposable for anything else; while a single manufacturer possessing a capital equal to the sum of theirs, with ten or a dozen clerks, could conduct the whole of their amount of business, and have leisure, too, for other occupations.

Production on a large scale is greatly promoted by the practice of forming a large capital by the combination of many small contributions; or, in other words, by the formation of stock companies. The advantages of the principle are important, [since] (1) many undertakings require an amount of capital beyond the means of the richest individual or private partnership. [Of course] the Government can alone be looked to for any of those works for which a great combination of means is requisite, because it can obtain those means by compulsory taxation, and is already accustomed to the conduct of large operations. For reasons, however, which are tolerably well known, government agency for the conduct of industrial operations is generally one of the least eligible of resources when any other is available. Of [the advantages referred to above] one of the most important is (2) that which relates to the intellectual and active qualifications of the directing head. The stimulus of individual interest is some security for exertion, but exertion is of little avail if the intelligence exerted is of an inferior order, which it must necessarily be in the majority of concerns carried on by the persons chiefly interested in them. Where the concern is large, and can afford a remuneration sufficient to attract a class of candidates superior to the common average, it is possible to select for the general management, and for all the skilled employments of a subordinate kind, persons of a degree of acquirement and cultivated intelligence which more than compensates for their inferior interest in the result. It must be further remarked that it is not a necessary consequence of joint-stock management that the persons employed, whether in superior or in subordinate offices, should be paid wholly by fixed salaries. In the case of the managers of joint-stock companies, and of the superintending and controlling officers in many private establishments, it is a common enough practice to connect their pecuniary interest with the interest of their employers, by giving them part of their remuneration in the form of a percentage on the profits.

The possibility of substituting the large system of production for the small depends, of course, in the first place, on the extent of the market. The large system can only be advantageous when a large amount of business is to be done: it implies, therefore, either a populous and flourishing community, or a great opening for exportation.

In the countries in which there are the largest markets, the widest diffusion of commercial confidence and enterprise, the greatest annual increase of capital, and the greatest number of large capitals owned by individuals, there is a tendency to substitute more and more, in one branch of industry after another, large establishments for small ones. These are almost always able to undersell the smaller tradesmen, partly, it is understood, by means of division of labor, and the economy occasioned by limiting the employment of skilled agency to cases where skill is required; and partly, no doubt, by the saving of labor arising from the great scale of the transactions; as it costs no more time, and not much more exertion of mind, to make a large purchase, for example, than a small one, and very much less than to make a number of small ones. With a view merely to production, and to the greatest efficiency of labor, this change is wholly beneficial.

A single large company very often, instead of being a monopoly, is generally better than two large companies; for there is little likelihood of competition and lower prices when the competitors are so few as to be able to agree not to compete. As Mr. Mill says in regard to parallel railroads: “No one can desire to see the enormous waste of capital and land (not to speak of increased nuisance) involved in the construction of a second railway to connect the same places already united by an existing one; while the two would not do the work better than it could be done by one, and after a short time would probably be amalgamated.” The actual tendency of charges to diminish on the railways, before the matter of parallel railways was suggested is clearly seen by reference to Chart V (p. 137).
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Re: Principles Of Political Economy, by John Stuart Mill

Postby admin » Tue May 19, 2020 10:28 am

Chapter VII. Of The Law Of The Increase Of Labor.

§ 1. The Law of the Increase of Production Depends on those of Three Elements—Labor. Capital, and Land.

Production is not a fixed but an increasing thing. When not kept back by bad institutions, or a low state of the arts of life, the produce of industry has usually tended to increase; stimulated not only by the desire of the producers to augment their means of consumption, but by the increasing number of the consumers.

We have seen that the essential requisites of production are three—labor, capital, and natural agents; the term capital including all external and physical requisites which are products of labor, the term natural agents all those which are not. The increase of production, therefore, depends on the properties of these elements. It is a result of the increase either of the elements themselves, or of their productiveness. We proceed to consider the three elements successively, with reference to this effect; or, in other words, the law of the increase of production, viewed in respect of its dependence, first on Labor, secondly on Capital, and lastly on Land.

§ 2. The Law of Population.

The increase of labor is the increase of mankind; of population. The power of multiplication inherent in all organic life may be regarded as infinite. There are many species of vegetables of which a single plant will produce in one year the germs of a thousand; if only two come to maturity, in fourteen years the two will have multiplied to sixteen thousand and more. It is but a moderate case of fecundity in animals to be capable of quadrupling their numbers in a single year; if they only do as much in half a century, [pg 113]ten thousand will have swelled within two centuries to upward to two millions and a half. The capacity of increase is necessarily in a geometrical progression: the numerical ratio alone is different.

To this property of organized beings, the human species forms no exception. Its power of increase is indefinite, and the actual multiplication would be extraordinarily rapid, if the power were exercised to the utmost. It never is exercised to the utmost, and yet, in the most favorable circumstances known to exist, which are those of a fertile region colonized from an industrious and civilized community, population has continued, for several generations, independently of fresh immigration, to double itself in not much more than twenty years.

Years. / Population. / Food.

25 / 11 mills / x
25 / 22 mills / 2x
25 / 44 mills / 3x
25 / 88 mills / 4x
25 / 176 mills / 5x

By this table it will be seen that if population can double itself in twenty-five years, and if food can only be increased by as much as x (the subsistence of eleven millions) by additional application of another equal quantity of labor on the same land in each period, then at the end of one hundred years there would be the disproportion of one hundred and seventy-six millions of people, with subsistence for only fifty-five millions. Of course, this is prevented either by checking population to the amount of the subsistence; by sending off the surplus population; or by bringing in food from new lands.

In the United States to 1860 population has doubled itself about every twenty years, while in France there is practically no increase of population. It is stated that the white population of the United States between 1790 and 1840 increased 400.4 per cent, deducting immigration. The extraordinary advance of population with us, where subsistence is easily attainable, is to be seen in the chart on the next page (No. III), which shows the striking rapidity of increase in the United States when compared with the older countries of Europe. The steady demand for land can be seen by the gradual westward movement of the center of population, as seen in chart No. IV (p. 116), and by the rapid settlement of the distant parts of our country, as shown by the two charts (frontispieces), which represent to the eye by heavier colors the areas of the more densely settled districts in 1830 and in 1880.

Illustration. Chart III: Population of European Countries, XIXth Century.

§ 3. By what Checks the Increase of Population is Practically Limited.

The obstacle to a just understanding of the subject arises from too confused a notion of the causes which, at most times and places, keep the actual increase of mankind so far behind the capacity.

The conduct of human creatures is more or less influenced by foresight of consequences, and by some impulses superior to mere animal instincts; and they do not, therefore, propagate like swine, but are capable, though in very unequal degrees, of being withheld by prudence, or by the social affections, from giving existence to beings born only to misery and premature death.

Malthus found an explanation of the anomaly that in the Swiss villages, with the longest average duration of life, there were the fewest births, by noting that no one married until a cow-herd's cottage became vacant, and precisely because the tenants lived so long were the new-comers long kept out of a place.

In proportion as mankind rise above the condition of the beast, population is restrained by the fear of want, rather than by want itself. Even where there is no question of starvation, many are similarly acted upon by the apprehension of losing what have come to be regarded as the decencies of their situation in life. Among the middle classes, in many individual instances, there is an additional restraint exercised from the desire of doing more than maintaining their circumstances—of improving them; but such a desire is rarely found, or rarely has that effect, in the laboring-classes. If they can bring up a family as they were themselves brought up, even the prudent among them are usually satisfied. Too often they do not think even of that, but rely on fortune, or on the resources to be found in legal or voluntary charity.

Illustration. Chart IV: Westward Movement of Center of Population.

This, in effect, is the well-known Malthusian doctrine. The thorough reader will also consult the original “Essay” of Malthus. Mr. Bowen119 and other writers oppose it, saying it has [pg 116]“no relation to the times in which we live, or to any which are near at hand.” He thinks the productive power of the whole world prevents the necessity of considering the pressure of population upon subsistence as an actuality now or in the future. This, however, does not deny the existence of Malthus's principles, but opposes them only on the methods of their action. Mr. Rickards120 holds that man's food—as, e.g., wheat—has the power to increase geometrically faster than man; but he omits to consider that for the growth of this food land is demanded; that land is not capable of such geometrical increase; and that without it the food can not be grown. Of course, any extension of the land area, as happened when England abolished the corn laws and drew her food from our prairies, removes the previous pressure of population on subsistence. No believer in the Malthusian doctrine is so absurd as to hold that the growth of population actually exceeds subsistence, but that there is a “constant tendency in all animated life to increase beyond the nourishment prepared for it,” no one can possibly doubt. This is not inconsistent with the fact that subsistence has at any time increased faster than population. It is as if a block of wood on the floor were acted on by two opposing forces, one tending to move it forward, one backward: if it moves backward, that does not prove the absence of any force working to move it forward, but only that the other force is the stronger of the two, [pg 117]and that the final motion is the resultant of the two forces. It is only near-sighted generalization to say that since the block moves forward, there is therefore no opposing force to its advance.121 Mr. Doubleday maintains that, as people become better fed, they become unprolific. Mr. Mill's answer, referring to the large families of the English peerage, is unfortunate.122 In Sweden the increase of the peasantry is six times that of the middle classes, and fourteen times that of the nobility. The diminishing fertility of New England families gives a truer explanation, when it is seen that with the progress in material wealth later marriages are the rule. When New-Englanders emigrate to the Western States, where labor is in demand and where it is less burdensome to have large families, there is no question as to their fertility.123

(1.) In a very backward state of society, like that of Europe in the middle ages, and many parts of Asia at present, population is kept down by actual starvation. The starvation does not take place in ordinary years, but in seasons of scarcity, which in those states of society are much more frequent and more extreme than Europe is now accustomed to. (2.) In a more improved state, few, even among the poorest of the people, are limited to actual necessaries, and to a bare sufficiency of those: and the increase is kept within bounds, not by excess of deaths, but by limitation of births.124 The limitation is brought about in various ways. In some countries, it is the result of prudent or conscientious self-restraint. There is a condition to which the laboring-people are habituated; they perceive that, by having too numerous families, they must sink below that condition, or fail to transmit it to their children; and this they do not choose to submit to.

There are other cases in which the prudence and forethought, which perhaps might not be exercised by the people [pg 118]themselves, are exercised by the state for their benefit; marriage not being permitted until the contracting parties can show that they have the prospect of a comfortable support. There are places, again, in which the restraining cause seems to be not so much individual prudence, as some general and perhaps even accidental habit of the country. In the rural districts of England, during the last century, the growth of population was very effectually repressed by the difficulty of obtaining a cottage to live in. It was the custom for unmarried laborers to lodge and board with their employers; it was the custom for married laborers to have a cottage: and the rule of the English poor-laws, by which a parish was charged with the support of its unemployed poor, rendered land-owners averse to promote marriage. About the end of the century, the great demand for men in war and manufactures made it be thought a patriotic thing to encourage population: and about the same time the growing inclination of farmers to live like rich people, favored as it was by a long period of high prices, made them desirous of keeping inferiors at a greater distance, and, pecuniary motives arising from abuses of the poor-laws being superadded, they gradually drove their laborers into cottages, which the landowners now no longer refused permission to build.

It is but rarely that improvements in the condition of the laboring-classes do anything more than give a temporary margin, speedily filled up by an increase of their numbers. Unless, either by their general improvement in intellectual and moral culture, or at least by raising their habitual standard of comfortable living, they can be taught to make a better use of favorable circumstances, nothing permanent can be done for them; the most promising schemes end only in having a more numerous but not a happier people. There is no doubt that [the standard] is gradually, though slowly, rising in the more advanced countries of Western Europe.125 [pg 119]Subsistence and employment in England have never increased more rapidly than in the last forty years, but every census since 1821 showed a smaller proportional increase of population than that of the period preceding; and the produce of French agriculture and industry is increasing in a progressive ratio, while the population exhibits, in every quinquennial census, a smaller proportion of births to the population.

This brings forward the near connection between land-tenures and population. France is pre-eminently a country of small holdings, and it is undoubtedly true that the system has checked the thoughtless increase of numbers. On his few hectares, the French peasant sees in the size of his farm and the amount of its produce the limit of subsistence for himself and his family; as in no other way does he see beforehand the results of any lack of food from his lack of prudence.126 From 1790 to 1815 the average yearly increase of population was 120,000; from 1815 to 1846, the golden age of French agriculture, 200,000; from 1846 to 1856, when agriculture was not prosperous, 60,000; from 1856 to 1880 the increase has been not more than 36,000 yearly. In France the question shapes itself to the peasant proprietor, How many can be subsisted by the amount of produce, not on an unlimited area of land in other parts of the world, but on this particular property of a small size? While in England there are ten births to six deaths, in France there are about ten births to every nine deaths.127 In no country has the doctrine of Malthus been more attacked than in France, and yet in no other country has there been a more marked obedience to its principles in actual practice. Since the French are practically not at all an emigrating people, population has strictly adapted itself to subsistence. For the relative increase of population in France and the United States, see also the movement of lines indicating the increase of population in chart No. III (p. 114).
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Re: Principles Of Political Economy, by John Stuart Mill

Postby admin » Tue May 19, 2020 10:31 am

Chapter VIII. Of The Law Of The Increase Of Capital.

§ 1. Means for Saving in the Surplus above Necessaries.

The requisites of production being labor, capital, and land, it has been seen from the preceding chapter that the impediments to the increase of production do not arise from the first of these elements. But production has other requisites, and, of these, the one which we shall next consider is Capital. There can not be more people in any country, or in the world, than can be supported from the produce of past labor until that of present labor comes in [although it is not to be supposed that capital consists wholly of food]. We have next, therefore, to inquire into the conditions of the increase of capital: the causes by which the rapidity of its increase is determined, and the necessary limitations of that increase.

Since all capital is the product of saving, that is, of abstinence from present consumption for the sake of a future good, the increase of capital must depend upon two things—the amount of the fund from which saving can be made, and the strength of the dispositions which prompt to it.

(1.) The fund from which saving can be made is the surplus of the produce of labor, after supplying the necessaries of life to all concerned in the production (including those employed in replacing the materials, and keeping the fixed capital in repair). More than this surplus can not be saved under any circumstances. As much as this, though it never is saved, always might be. This surplus is the fund from which the enjoyments, as distinguished from the necessaries of the producers, are provided; it is the fund from which all are subsisted who are not themselves engaged in production, and from which all additions are made to capital. The capital of the employer forms the revenue of the laborers, and, if this exceeds the necessaries of life, it gives them a surplus which they may either expend in enjoyments or save.

It is evident that the whole unproductive consumption of the laborer can be saved. When it is considered how enormous a sum is spent by the working-classes in drink alone (and also in the great reserves of the Trades-Unions collected for purposes of strikes), it is indisputable that the laborers have the margin from which savings can be made, and by which they themselves may become capitalists. The great accumulations in the savings-banks by small depositors in the United States also show somewhat how much is actually saved. In 1882-1883 there were 2,876,438 persons who had deposited in the savings-banks of the United States $1,024,856,787, with an average to each depositor of $356.29. The unproductive consumption, however, of all classes—not merely that of the working-men—is the possible fund which may be saved. That being the amount which can be saved, how much will be saved depends on the strength of the desire to save.

The greater the produce of labor after supporting the laborers, the more there is which can be saved. The same thing also partly contributes to determine how much will be saved. A part of the motive to saving consists in the prospect of deriving an income from savings; in the fact that capital, employed in production, is capable of not only reproducing itself but yielding an increase. The greater the profit that can be made from capital, the stronger is the motive to its accumulation.

§ 2. Motive for Saving in the Surplus above Necessaries.

But the disposition to save does not wholly depend on the external inducement to it; on the amount of profit to be made from savings. With the same pecuniary inducement, the inclination is very different, in different persons, and in different communities.

(2.) All accumulation involves the sacrifice of a present, for the sake of a future good.

This is the fundamental motive underlying the effective desire of accumulation, and is far more important than any other. It is, in short, the test of civilization. In order to induce the laboring-classes to improve their condition and save capital, it is absolutely necessary to excite in them (by education or religion) a belief in a future gain greater than the present sacrifice. It is, to be sure, the whole problem of creating character, and belongs to sociology and ethics rather than to political economy.

In weighing the future against the present, the uncertainty of all things future is a leading element; and that uncertainty is of very different degrees. “All circumstances,” therefore, “increasing the probability of the provision we make for futurity being enjoyed by ourselves or others, tend” justly and reasonably “to give strength to the effective desire of accumulation. Thus a healthy climate or occupation, by increasing the probability of life, has a tendency to add to this desire. When engaged in safe occupations and living in healthy countries, men are much more apt to be frugal, than in unhealthy or hazardous occupations and in climates pernicious to human life. Sailors and soldiers are prodigals. In the West Indies, New Orleans, the East Indies, the expenditure of the inhabitants is profuse. The same people, coming to reside in the healthy parts of Europe, and not getting into the vortex of extravagant fashion, live economically. War and pestilence have always waste and luxury among the other evils that follow in their train. For similar reasons, whatever gives security to the affairs of the community is favorable to the strength of this principle. In this respect the general prevalence of law and [pg 123]order and the prospect of the continuance of peace and tranquillity have considerable influence.”128

It is asserted that the prevalence of homicide in certain parts of the United States has had a vital influence in retarding the material growth of those sections. The Southern States have received but a very small fraction (from ten to thirteen per cent) of foreign immigration. “A country where law and order prevail to perfection may find its material prosperity checked by a deadly and fatal climate; or, on the other hand, a people may destroy all the advantages accruing from matchless natural resources and climate by persistent disregard of life and property. A rather startling confirmation of this economic truth is afforded by the fact that homicide has been as destructive of life in the South as yellow fever. Although there have been forty thousand deaths from yellow fever since the war, the deaths from homicide, for the same period, have been even greater.”129 The influence of the old slave régime, and its still existing influences, in checking foreign immigration into the South can be seen by the colored chart, No. VIII, showing the relative density of foreign-born inhabitants in the several parts of the United States. The deeper color shows the greater foreign-born population.

The more perfect the security, the greater will be the effective strength of the desire of accumulation. Where property is less safe, or the vicissitudes ruinous to fortunes are more frequent and severe, fewer persons will save at all, and, of those who do, many will require the inducement of a higher rate of profit on capital to make them prefer a doubtful future to the temptation of present enjoyment.

In the circumstances, for example, of a hunting tribe, “man may be said to be necessarily improvident, and regardless of futurity, because, in this state, the future presents nothing which can be with certainty either foreseen or governed.... Besides a want of the motives exciting to provide for the needs of futurity through means of the abilities of the present, there is a want of the habits of perception [pg 124]and action, leading to a constant connection in the mind of those distant points, and of the series of events serving to unite them. Even, therefore, if motives be awakened capable of producing the exertion necessary to effect this connection, there remains the task of training the mind to think and act so as to establish it.”

§ 3. Examples of Deficiency in the Strength of this Desire.

For instance: “Upon the banks of the St. Lawrence there are several little Indian villages. The cleared land is rarely, I may almost say never, cultivated, nor are any inroads made in the forest for such a purpose. The soil is, nevertheless, fertile, and, were it not, manure lies in heaps by their houses. Were every family to inclose half an acre of ground, till it, and plant it in potatoes and maize, it would yield a sufficiency to support them one half the year. They suffer, too, every now and then, extreme want, insomuch that, joined to occasional intemperance, it is rapidly reducing their numbers. This, to us, so strange apathy proceeds not, in any great degree, from repugnance to labor; on the contrary, they apply very diligently to it when its reward is immediate. It is evidently not the necessary labor that is the obstacle to more extended culture, but the distant return from that labor. I am assured, indeed, that among some of the more remote tribes, the labor thus expended much exceeds that given by the whites. On the Indian, succeeding years are too distant to make sufficient impression; though, to obtain what labor may bring about in the course of a few months, he toils even more assiduously than the white man.”

This view of things is confirmed by the experience of the Jesuits, in their interesting efforts to civilize the Indians of Paraguay. The real difficulty was the improvidence of the people; their inability to think for the future; and the necessity accordingly of the most unremitting and minute superintendence on the part of their instructors. “Thus at first, if these gave up to them the care of the oxen with which they plowed, their indolent thoughtlessness would probably leave them at evening still yoked to the implement. Worse than this, instances occurred where they cut them up [pg 125]for supper, thinking, when reprehended, that they sufficiently excused themselves by saying they were hungry.”

As an example intermediate, in the strength of the effective desire of accumulation, between the state of things thus depicted and that of modern Europe, the case of the Chinese deserves attention. “Durability is one of the chief qualities, marking a high degree of the effective desire of accumulation. The testimony of travelers ascribes to the instruments formed by the Chinese a very inferior durability to similar instruments constructed by Europeans. The houses, we are told, unless of the higher ranks, are in general of unburnt bricks, of clay, or of hurdles plastered with earth; the roofs, of reeds fastened to laths. A greater degree of strength in the effective desire of accumulation would cause them to be constructed of materials requiring a greater present expenditure, but being far more durable. From the same cause, much land, that in other countries would be cultivated, lies waste. All travelers take notice of large tracts of lands, chiefly swamps, which continue in a state of nature. To bring a swamp into tillage is generally a process to complete which requires several years. It must be previously drained, the surface long exposed to the sun, and many operations performed, before it can be made capable of bearing a crop. Though yielding, probably, a very considerable return for the labor bestowed on it, that return is not made until a long time has elapsed. The cultivation of such land implies a greater strength of the effective desire of accumulation than exists in the empire. The amount of self-denial would seem to be small. It is their great deficiency in forethought and frugality in this respect which is the cause of the scarcities and famines that frequently occur.”

That it is defect of providence, not defect of industry, that limits production among the Chinese, is still more obvious than in the case of the semi-agriculturized Indians. “Where the returns are quick, where the instruments formed require but little time to bring the events for which they were formed to an issue,” it is well known that “the great [pg 126]progress which has been made in the knowledge of the arts suited to the nature of the country and the wants of its inhabitants” makes industry energetic and effective. “What marks the readiness with which labor is forced to form the most difficult materials into instruments, where these instruments soon bring to an issue the events for which they are formed, is the frequent occurrence, on many of their lakes and rivers, of structures resembling the floating gardens of the Peruvians, rafts covered with vegetable soil and cultivated. Labor in this way draws from the materials on which it acts very speedy returns. Nothing can exceed the luxuriance of vegetation when the quickening powers of a genial sun are ministered to by a rich soil and abundant moisture. It is otherwise, as we have seen, in cases where the return, though copious, is distant. European travelers are surprised at meeting these little floating farms by the side of swamps which only require draining to render them tillable.”

When a country has carried production as far as in the existing state of knowledge it can be carried with an amount of return corresponding to the average strength of the effective desire of accumulation in that country, it has reached what is called the stationary state; the state in which no further addition will be made to capital, unless there takes place either some improvement in the arts of production, or an increase in the strength of the desire to accumulate. In the stationary state, though capital does not on the whole increase, some persons grow richer and others poorer. Those whose degree of providence is below the usual standard become impoverished, their capital perishes, and makes room for the savings of those whose effective desire of accumulation exceeds the average. These become the natural purchasers of the lands, manufactories, and other instruments of production owned by their less provident countrymen.

In China, if that country has really attained, as it is supposed to have done, the stationary state, accumulation has stopped when the returns to capital are still as high as is indicated by a rate of interest legally twelve per cent, and practically [pg 127]varying (it is said) between eighteen and thirty-six. It is to be presumed, therefore, that no greater amount of capital than the country already possesses can find employment at this high rate of profit, and that any lower rate does not hold out to a Chinese sufficient temptation to induce him to abstain from present enjoyment. What a contrast with Holland, where, during the most flourishing period of its history, the government was able habitually to borrow at two per cent, and private individuals, on good security, at three!

§ 4. Examples of Excess of this Desire.

In [the United States and] the more prosperous countries of Europe, there are to be found abundance of prodigals: still, in a very numerous portion of the community, the professional, manufacturing, and trading classes, being those who, generally speaking, unite more of the means with more of the motives for saving than any other class, the spirit of accumulation is so strong that the signs of rapidly increasing wealth meet every eye: and the great amount of capital seeking investment excites astonishment, whenever peculiar circumstances turning much of it into some one channel, such as railway construction or foreign speculative adventure, bring the largeness of the total amount into evidence.

There are many circumstances which, in England, give a peculiar force to the accumulating propensity. The long exemption of the country from the ravages of war and the far earlier period than elsewhere at which property was secure from military violence or arbitrary spoliation have produced a long-standing and hereditary confidence in the safety of funds when trusted out of the owner's hands, which in most other countries is of much more recent origin, and less firmly established.

The growth of deposit-banking in Great Britain, therefore, advances with enormous strides, while in Continental countries it makes very little headway. The disturbed condition of the country in France, owing to wars, leads the thrifty to hoard instead of depositing their savings. But in the United States the same growth is seen as among the English. The net deposits of the national banks of the United States in 1871 were $636,000,000, but in 1883 they had increased more than 83 [pg 128]per cent to $1,168,000,000. Deposit accounts are the rule even with small tradesmen; and the savings-banks of Massachusetts alone show deposits in 1882-1883 of $241,311,362, and those of New York of $412,147,213. The United States also escapes from the heavy taxation which in Europe is imposed to maintain an extravagant army and navy chest. The effect of institutions, moreover, in stimulating the growth of material prosperity is far more true of the United States than of England, for the barriers raised against the movement from lower to higher social classes in the latter country are non-existent here, and consequently there is more stimulus toward acquiring the means of bettering a man's social condition.

The geographical causes which have made industry rather than war the natural source of power and importance to Great Britain [and the United States] have turned an unusual proportion of the most enterprising and energetic characters into the direction of manufactures and commerce; into supplying their wants and gratifying their ambition by producing and saving, rather than by appropriating what has been produced and saved. Much also depended on the better political institutions of this country, which, by the scope they have allowed to individual freedom of action, have encouraged personal activity and self-reliance, while, by the liberty they confer of association and combination, they facilitate industrial enterprise on a large scale. The same institutions, in another of their aspects, give a most direct and potent stimulus to the desire of acquiring wealth. The earlier decline of feudalism [in England] having removed or much weakened invidious distinctions between the originally trading classes and those who had been accustomed to despise them, and a polity having grown up which made wealth the real source of political influence, its acquisition was invested with a factitious value independent of its intrinsic utility. And, inasmuch as to be rich without industry has always hitherto constituted a step in the social scale above those who are rich by means of industry, it becomes the object of ambition to save not merely as much as will afford a large income while in business, but enough to retire from business and live in affluence on realized gains.

In [the United States,] England, and Holland, then, for a long time past, and now in most other countries in Europe, the second requisite of increased production, increase of capital, shows no tendency to become deficient. So far as that element is concerned, production is susceptible of an increase without any assignable bounds. The limitation to production, not consisting in any necessary limit to the increase of the other two elements, labor and capital, must turn upon the properties of the only element which is inherently, and in itself, limited in quantity. It must depend on the properties of land.
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Re: Principles Of Political Economy, by John Stuart Mill

Postby admin » Tue May 19, 2020 10:41 am

Chapter IX. Of The Law Of The Increase Of Production From Land.

§ 1. The Law of Production from the Soil, a Law of Diminishing Return in Proportion to the Increased Application of Labor and Capital.

Land differs from the other elements of production, labor, and capital, in not being susceptible of indefinite increase. Its extent is limited, and the extent of the more productive kinds of it more limited still. It is also evident that the quantity of produce capable of being raised on any given piece of land is not indefinite. This limited quantity of land and limited productiveness of it are the real limits to the increase of production.

The limitation to production from the properties of the soil is not like the obstacle opposed by a wall, which stands immovable in one particular spot, and offers no hindrance to motion short of stopping it entirely. We may rather compare it to a highly elastic and extensible band, which is hardly ever so violently stretched that it could not possibly be stretched any more, yet the pressure of which is felt long before the final limit is reached, and felt more severely the nearer that limit is approached.

After a certain, and not very advanced, stage in the progress of agriculture—as soon, in fact, as mankind have applied themselves to cultivation with any energy, and have brought to it any tolerable tools—from that time it is the law of production from the land, that in any given state of agricultural skill and knowledge, by increasing the labor, the produce is not increased in an equal degree; doubling the labor does not double the produce; or, to express the same thing in other words, every increase of produce is obtained [pg 131]by a more than proportional increase in the application of labor to the land. This general law of agricultural industry is the most important proposition in political economy. Were the law different, nearly all the phenomena of the production and distribution of wealth would be other than they are.

It is not generally considered that in the United States, where in many sparsely settled parts of the country new land is constantly being brought into cultivation, an additional population under existing conditions of agricultural skill can be maintained with constantly increasing returns up to a certain point before the law of diminishing returns begins to operate. Where more laborers are necessary, and more capital wanted, to co-operate in a new country before all the land can give its maximum product, in such a stage of cultivation it can not be said that the law of diminishing returns has yet practically set in.

When, for the purpose of raising an increase of produce, recourse is had to inferior land, it is evident that, so far, the produce does not increase in the same proportion with the labor. The very meaning of inferior land is land which with equal labor returns a smaller amount of produce. Land may be inferior either in fertility or in situation. The one requires a greater proportional amount of labor for growing the produce, the other for carrying it to market. If the land A yields a thousand quarters of wheat to a given outlay in wages, manure, etc., and, in order to raise another thousand, recourse must be had to the land B, which is either less fertile or more distant from the market, the two thousand quarters will cost more than twice as much labor as the original thousand, and the produce of agriculture will be increased in a less ratio than the labor employed in procuring it.

Instead of cultivating the land B, it would be possible, by higher cultivation, to make the land A produce more. It might be plowed or harrowed twice instead of once, or three times instead of twice; it might be dug instead of being plowed; after plowing, it might be gone over with a hoe instead of a harrow, and the soil more completely pulverized; it might be oftener or more thoroughly weeded; [pg 132]the implements used might be of higher finish, or more elaborate construction; a greater quantity or more expensive kinds of manure might be applied, or, when applied, they might be more carefully mixed and incorporated with the soil.

The example of market-gardens in the vicinity of great cities and towns shows how the intensive culture permits an increase of labor and capital with larger returns. These lands, by their situation, are superior lands for this particular purpose, although they might be inferior lands as regards absolute productiveness when compared with the rich wheat-lands of Dakota. New England and New Jersey farms, generally speaking, no longer attempt the culture of grains, but (when driven out of that culture by the great railway lines which have opened up the West) they have arranged themselves in a scale of adaptability for stock, grass, fruit, dairy, or vegetable farming; and have thereby given greater profits to their owners than the same land did under the old régime. Even on lands where any grain can still be grown, corn, buckwheat, barley, oats, and rye, cover the cultivated areas instead of wheat.

Inferior lands, or lands at a greater distance from the market, of course yield an inferior return, and an increasing demand can not be supplied from them unless at an augmentation of cost, and therefore of price. If the additional demand could continue to be supplied from the superior lands, by applying additional labor and capital, at no greater proportional cost than that at which they yield the quantity first demanded of them, the owners or farmers of those lands could undersell all others, and engross the whole market. Lands of a lower degree of fertility or in a more remote situation might indeed be cultivated by their proprietors, for the sake of subsistence or independence; but it never could be the interest of any one to farm them for profit. That a profit can be made from them, sufficient to attract capital to such an investment, is a proof that cultivation on the more eligible lands has reached a point beyond which any greater application of labor and capital would yield, at the best, no greater return than can be obtained at the same expense from less fertile or less favorably situated lands.

“It is long,” says a late traveler in the United States,130 “before an English eye becomes reconciled to the lightness of the crops and the careless farming (as we should call it) which is apparent. One forgets that, where land is so plentiful and labor so dear as it is here, a totally different principle must be pursued from that which prevails in populous countries, and that the consequence will of course be a want of tidiness, as it were, and finish, about everything which requires labor.” Of the two causes mentioned, the plentifulness of land seems to me the true explanation, rather than the dearness of labor; for, however dear labor may be, when food is wanted, labor will always be applied to producing it in preference to anything else. But this labor is more effective for its end by being applied to fresh soil than if it were employed in bringing the soil already occupied into higher cultivation.

The Western movement of what might be called the “wheat-center” is quite perceptible. Until recently Minnesota has been a great wheat-producing State, and vast tracts of land were there planted with that grain when the soil was first broken. The profits on the first few crops have been enormous, but it is now said to be more desirable for wheat-growers to move onward to newer lands, and to sell the land to cultivators of a different class (of fruit and varied products), who produce for a denser population. So that (in 1884) Dakota, instead of Minnesota, has become the district of the greatest wheat production.131

Only when no soils remain to be broken up, but such as either from distance or inferior quality require a considerable rise of price to render their cultivation profitable, can it become advantageous to apply the high farming of Europe to any American lands; except, perhaps, in the immediate vicinity of towns, where saving in cost of carriage may compensate for great inferiority in the return from the soil itself.

The principle which has now been stated must be received, no doubt, with certain explanations and limitations. Even after the land is so highly cultivated that the mere application of additional labor, or of an additional amount of ordinary dressing, would yield no return proportioned to the expense, it may still happen that the application of a much greater additional labor and capital to improving the soil itself, by draining or permanent manures, would be as liberally remunerated by the produce as any portion of the labor and capital already employed. It would sometimes be much more amply remunerated. This could not be, if capital always sought and found the most advantageous employment.

§ 2. Antagonist Principle to the Law of Diminishing Return; the Progress of Improvements in Production.

That the produce of land increases, cæteris paribus, in a diminishing ratio to the increase in the labor employed, is, as we have said (allowing for occasional and temporary exceptions), the universal law of agricultural industry. This principle, however, has been denied. So much so, indeed, that (it is affirmed) the worst land now in cultivation produces as much food per acre, and even as much to a given amount of labor, as our ancestors contrived to extract from the richest soils in England.

The law of diminishing returns is the physical fact upon which the economic doctrine of rent is based, and requires careful attention. Carey asserts, instead, that there is a law of increasing productiveness, since, as men grow in numbers and intelligence, there arises an ability to get more from the soil.132 Some objectors even deny that different grades of land are cultivated, and that there is no need of taking inferior soils into cultivation. If this were true, why would not one half an acre of land be as good as a whole State? Johnston133 says: “In a country and among poor settlers ... poor land is a relative term. Land is called poor which is not suitable to a poor man, which on mere clearing and burning will not yield good first crops. Thus that which is poor land for a poor man may prove rich land to a rich man.”134 Moreover, as is constantly the case in our country, it often happens that a railway may bring new lands into competition with old lands in a given [pg 135]market; of which the most conspicuous example is the competition of Western grain-fields with the Eastern farms. In these older districts, before the competition came, there was a given series of grades in the cultivated land; after the railway was built there was a disarrangement of the old series, some going out of cultivation, some remaining, and some of the new lands entering the list. The result is a new series of grades better suited to satisfy the wants of men.

This, however, does not prove that the law of which we have been speaking does not exist, but only that there is some antagonizing principle at work, capable for a time of making head against the law. Such an agency there is, in habitual antagonism to the law of diminishing return from land; and to the consideration of this we shall now proceed. It is no other than the progress of civilization. The most obvious [part of it] is the progress of agricultural knowledge, skill, and invention. Improved processes of agriculture are of two kinds: (1) some enable the land to yield a greater absolute produce, without an equivalent increase of labor; (2) others have not the power of increasing the produce, but have that of diminishing the labor and expense by which it is obtained. (1.) Among the first are to be reckoned the disuse of fallows, by means of the rotation of crops; and the introduction of new articles of cultivation capable of entering advantageously into the rotation. The change made in agriculture toward the close of the last century, by the introduction of turnip-husbandry, is spoken of as amounting to a revolution. Next in order comes the introduction of new articles of food, containing a greater amount of sustenance, like the potato, or more productive species or varieties of the same plant, such as the Swedish turnip. In the same class of improvements must be placed a better knowledge of the properties of manures, and of the most effectual modes of applying them; the introduction of new and more powerful fertilizing agents, such as guano, and the conversion to the same purpose of substances previously wasted; inventions like subsoil-plowing or tile-draining, by which the produce of some kinds of lands is so greatly multiplied; improvements in the breed or feeding of [pg 136]laboring cattle; augmented stock, of the animals which consume and convert into human food what would otherwise be wasted; and the like. (2.) The other sort of improvements, those which diminish labor, but without increasing the capacity of the land to produce, are such as the improved construction of tools; the introduction of new instruments which spare manual labor, as the winnowing and thrashing machines. These improvements do not add to the productiveness of the land, but they are equally calculated with the former to counteract the tendency in the cost of production of agricultural produce, to rise with the progress of population and demand.

§ 3. —In Railways.

Analogous in effect to this second class of agricultural improvements are improved means of communication. Good roads are equivalent to good tools. It is of no consequence whether the economy of labor takes place in extracting the produce from the soil, or in conveying it to the place where it is to be consumed.

The functions performed by railways in the system of production is highly important. They are among the most influential causes affecting the cost of producing commodities, particularly those which satisfy the primary wants of man, of which food is the chief. The amount of tonnage carried is enormous; and the cost of this service to the producers and consumers of the United States is a question of very great magnitude. The serious reduction in the cost of transportation on the railways will be a surprise to all who have not followed the matter very closely; the more so, that it has been brought about by natural causes, and independent of legislation. Corn, meat, and dairy products form, it is said, at least 50 per cent, and coal and timber about 30 per cent, of the tonnage moved on all the railways of the United States. If a lowered cost of transportation has come about, it has then cost less to move the main articles of immediate necessity. Had the charge in 1880 remained as high even as it was from 1866 to 1869, the number of tons carried in 1880 would have cost the United States from $500,000,000 to $800,000,000 more than the charge actually made, owing to the reductions by the railways. It seems, however, that this process of reduction culminated about 1879. In order to show the facts of this process, note the changes in the following chart, No. V. The railways of the State of New York are taken, but the same is also true of those of Ohio:

Chart V.

Cost of 20 Barrels of Flour, 10 Beef, 10 Pork, 100 Bushels Wheat, 100 Corn, 100 Oats, 100 Pounds Butter, 100 Lard, and 100 Fleece Wool, in New York City, at the Average of each Year, Compiled by Months, in Gold; Compared Graphically with the Decrease in the Charge per Ton per Mile, on all the Railroads of the State of New York, during the Same Period.

Year. / Price in gold of staple farm products. (Dollars) / Charge for carrying one ton one mile. (Cents) / Decrease in the railroad expenses per ton. (Cents) / Decrease in the profits of the railroads for carrying one ton. (Cents)

1870 / 776.02 / 1.7016 / 1.1471 / .5545
1871 / 735.33 / 1.7005 / 1.1450 / .5555
1872 / 675.92 / 1.6645 / 1.1490 / .5155
1873 / 662.50 / 1.6000 / 1.0864 / .5136
1874 / 748.54 / 1.4480 / .9730 / .4750
1875 / 696.40 / 1.3039 / .9587 / .3452
1876 / 651.74 / 1.1604 / .8561 / .3043
1877 / 751.95 / 1.0590 / .7740 / .2850
1878 / 569.81 / .9994 / .6900 / .3094
1879 / 568.34 / .8082 / .5847 / .2295
1880 / 631.32 / .9220 / .6030 / .3190
1881 / 703.10 / .8390 / .5880 / .2510
1882 / 776.12 / .8170 / .6010 / .2160
1883 / 662.11 / .8990 / .6490 / .2500

In 1855 the charge per ton per mile was 3.27 cents, as compared with 0.89 in 1883.

Tons moved 1 m. in 1883 by railroads of N.Y. / 9,286,216,628
At rate of 1855, would cost / $303,659,283
Actual cost in 1883 / 83,464,919
Saving to the State / $220,194,364

The explanation of this reduced cost is given by Mr. Edward Atkinson135 as (1) the competition of water-ways, (2) the competition of one railway with another, and (3) the competition of other countries, which forces our railways to try to lay our staple products down in foreign markets at a price which will warrant continued shipment. Besides these reasons, much ought also (4) to be assigned to the progress of inventions and the reduced cost of steel and all appliances necessary to the railways.

The large importance of the railways shows itself in an influence on general business prosperity, and as a place for large investments of a rapidly growing capital. The building of railways, however, has been going on, at some times with greater speed than at others. Instead of 33,908 miles of railways at the close of our war, we have now (1884) over 120,000 miles. How the additional mileage has been built year by year, with two distinct eras of increased building—one from 1869 to 1873, and another from 1879 to 1884—may be seen by the shorter lines of the subjoined chart, No. VI.

That speculation has been excited at different times by the opening up of our Western country, there can be no doubt. And if a comparison be made with Chart No. XVII (Book IV, Chap. III), which gives the total grain-crops of the United States, it will be seen that since 1879, although our population has increased from 12-½ per cent to 14 per cent, our grain-crops only 5 per cent, yet our railway mileage has increased 40 per cent.

The extent to which the United States has carried railway-building, as compared with European countries, although we have a very much greater area, is distinctly shown by Chart No. VII. This application of one form of improvement to oppose the law of diminishing returns in the United States has produced extraordinary results, especially when we consider that we are probably not yet using all our best lands, or, in other words, that we have not yet felt the law of diminishing returns in some large districts.

Chart VI.

Miles of Railroad in Operation on the 1st January in each Year, and the Miles added in the Year Ensuing.

Year. / Miles of Railroad. / Miles added.

1865 / 33,908 / 1,177
1866 / 35,085 / 1,716
1867 / 36,801 / 2,449
1868 / 39,250 / 2,979
1869 / 42,229 / 4,615
1870 / 46,844 / 6,070
1871 / 52,914 / 7,379
1872 / 60,293 / 5,878
1873 / 66,171 / 4,107
1874 / 70,278 / 2,105
1875 / 72,383 / 1,713
1876 / 74,096 / 2,712
1877 / 76,808 / 2,281
1878 / 79,089 / 2,687
1879 / 81,776 / 4,721
1880 / 86,497 / 7,048
1881 / 93,545 / 9,789
1882 / 103,334 / 11,591
1883 / 114,925 / 6,618

Railways and canals are virtually a diminution of the cost of production of all things sent to market by them; and literally so of all those the appliances and aids for producing which they serve to transmit. By their means land can be [pg 140]cultivated, which would not otherwise have remunerated the cultivators without a rise of price. Improvements in navigation have, with respect to food or materials brought from beyond sea, a corresponding effect.

§ 4. —In Manufactures.

From similar considerations, it appears that many purely mechanical improvements, which have, apparently, at least, no peculiar connection with agriculture, nevertheless enable a given amount of food to be obtained with a smaller expenditure of labor. A great improvement in the process of smelting iron would tend to cheapen agricultural implements, diminish the cost of railroads, of wagons and carts, ships, and perhaps buildings, and many other things to which iron is not at present applied, because it is too costly; and would thence diminish the cost of production of food. The same effect would follow from an improvement in those processes of what may be termed manufacture, to which the material of food is subjected after it is separated from the ground. The first application of wind or water power to grind corn tended to cheapen bread as much as a very important discovery in agriculture would have done; and any great improvement in the construction of corn-mills would have, in proportion, a similar influence.

Those manufacturing improvements which can not be made instrumental to facilitate, in any of its stages, the actual production of food, and therefore do not help to counteract or retard the diminution of the proportional return to labor from the soil, have, however, another effect, which is practically equivalent. What they do not prevent, they yet, in some degree, compensate for.136

Chart VII.

Ratio of Miles of Railroad to the Areas of States and Countries—United States and Europe. The relative proportion is 1 Mile Railroad to 4 Square Miles of Area.

No. / Name. / Rank in Size. / Relative.

1 / Massachusetts / 67 / 98
2 / Belgium / 62 / 96
3 / England and Wales / 29 / 88
4 / New Jersey / 62 / 81
5 / Connecticut / 68 / 80
6 / Rhode Island / 71 / 65
7 / Ohio / 44 / 60
8 / Illinois / 32 / 59
9 / Pennsylvania / 40 / 55
10 / Delaware / 69/ 53
11 / Indiana / 50 / 52
12 / New Hampshire / 65 / 45
13 / Switzerland / 59 / 44
14 / New York / 39 / 41
15 / Iowa / 33 / 39
16 / German Empire / 4 / 38
17 / Scotland / 52 / 37
18 / Maryland / 63 / 36
19 / Vermont / 64 / 35
20 / Ireland / 51 / 29
21 / Michigan / 31 / 28
22 / France / 5 / 27
23 /Denmark / 60 / 26
24 / Netherlands / 57 / 25
25 / Missouri / 26 / 24
26 / Wisconsin / 34 / 23
27 / Austrian Empire / 3 / 21
28 / Virginia / 45 / 19
29 / Italy / 13 / 18
30 / Georgia / 30 / 17
31 / Kansas / 22 / 16
32 / Kentucky / 46 / 15
33 / South Carolina / 49 / 14
34 / Tennessee / 42 / 14
35 / Minnesota / 21 / 13
36 / Alabama / 36 / 13
37 / West Virginia / 55 / 12
38 / Roumania / 41 / 12
39 / North Carolina / 37 / 12
40 / Maine / 48 / 12
41 / Nebraska / 23 / 10
42 / Mississippi / 38 / 9
43 / Spain / 6 / 9
44 / Portugal / 47 / 9
45 / Sweden / 7 / 9
46 / Arkansas / 35 / 8
47 / Louisiana / 43 / 8
48 / Colorado / 16 / 8
49 / California / 8 / 7
50 / Turkey / 27 / 7
51 / Texas / 2 / 7
52 / Utah / 20 / 6
53 / Florida / 28 / 6
54 / Dakota / 7 / 6
55 / Russia in Europe / 1 / 5
56 / Nevada / 15 / 5
57 / Norway / 11 / 5
58 /Oregon / 18 / 4
59 / Bulgaria / 54 / 4
60 / New Mexico / 12 / 3
61 / Wyoming / 17 / 2
62 / Indian Territory / 25 / 2
63 / Washington / 24 / 1
64 / Arizona / 14 / 1
65 / Idaho / 19 / 1
66 / Greece / 58 / 0
67 / Montana / 10 / 0
68 / Bosnia and Herzegovina / 53 / 0
69 / Servia / 56 / 0
70 / Eastern Roumelia / 61 / 0
71 / Montenegro / 70 / 0
72 / Andorra / 72 / 0

(The United States have substantially one mile of railway to each 540 inhabitants. Europe has one mile to each 3,000 inhabitants, if Russia be included; about one mile to each 2,540, exclusive of Russia.)

The materials of manufactures being all drawn from the land, and many of them from agriculture, which supplies in particular the entire material of clothing, the general law of production from the land, the law of diminishing return, must in the last resort be applicable to manufacturing as well as to agricultural history. As population increases, and [pg 142]the power of the land to yield increased produce is strained harder and harder, any additional supply of material, as well as of food, must be obtained by a more than proportionally increasing expenditure of labor. But the cost of the material forming generally a very small portion of the entire cost of the manufacture, the agricultural labor concerned in the production of manufactured goods is but a small fraction of the whole labor worked up in the commodity.

Mr. Babbage137 gives an interesting illustration of this principle. Bar-iron of the value of £1 became worth, when manufactured into—

Slit-iron, for nails / 1.10
Natural steel / 1.42
Horseshoes / 2.55
Gun-barrels, ordinary / 9.10
Wood-saws / 14.28
Scissors, best /446.94
Penknife-blades / 657.14
Sword-handles, polished steel / 972.82

It can not, however, be said of such manufactures as coarse cotton cloth, wherein the increased cost of raw cotton causes an immediate effect upon the price of the cloth, that the cost of the materials forms but a small portion of the cost of the manufacture.138

All the labor [not engaged in preparing materials] tends constantly and strongly toward diminution, as the amount of production increases. Manufactures are vastly more susceptible than agriculture of mechanical improvements and contrivances for saving labor. In manufactures, accordingly, the causes tending to increase the productiveness of industry preponderate greatly over the one cause which tends to diminish it; and the increase of production, called forth by the progress of society, takes place, not at an increasing, but at a continually diminishing proportional cost. This fact has manifested itself in the progressive fall of the prices and values of almost every kind of manufactured goods during two centuries past; a fall accelerated by the mechanical inventions of the last seventy or eighty years, and susceptible [pg 143]of being prolonged and extended beyond any limit which it would be safe to specify. The benefit might even extend to the poorest class. The increased cheapness of clothing and lodging might make up to them for the augmented cost of their food.

There is, thus, no possible improvement in the arts of production which does not in one or another mode exercise an antagonistic influence to the law of diminishing return to agricultural labor. Nor is it only industrial improvements which have this effect. Improvements in government, and almost every kind of moral and social advancement, operate in the same manner. We may say the same of improvements in education. The intelligence of the workman is a most important element in the productiveness of labor. The carefulness, economy, and general trustworthiness of laborers are as important as their intelligence. Friendly relations and a community of interest and feeling between laborers and employers are eminently so. In the rich and idle classes, increased mental energy, more solid instruction, and stronger feelings of conscience, public spirit, or philanthropy, would qualify them to originate and promote the most valuable improvements, both in the economical resources of their country and in its institutions and customs.

§ 5. Law Holds True of Mining.

We must observe that what we have said of agriculture is true, with little variation, of the other occupations which it represents; of all the arts which extract materials from the globe. Mining industry, for example, usually yields an increase of produce at a more than proportional increase of expense.

It does worse, for even its customary annual produce requires to be extracted by a greater and greater expenditure of labor and capital. As a mine does not reproduce the coal or ore taken from it, not only are all mines at last exhausted, but even when they as yet show no signs of exhaustion they must be worked at a continually increasing cost; shafts must be sunk deeper, galleries driven farther, greater power applied to keep them clear of water; the produce must be [pg 144]lifted from a greater depth, or conveyed a greater distance. The law of diminishing return applies therefore to mining in a still more unqualified sense than to agriculture; but the antagonizing agency, that of improvements in production, also applies in a still greater degree. Mining operations are more susceptible of mechanical improvements than agricultural: the first great application of the steam-engine was to mining; and there are unlimited possibilities of improvement in the chemical processes by which the metals are extracted. There is another contingency, of no unfrequent occurrence, which avails to counterbalance the progress of all existing mines toward exhaustion: this is, the discovery of new ones, equal or superior in richness.

Professor Jevons has applied this economic law to the industrial situation of England.139 While explaining that the supply of cheap coal is the basis of English manufacturing prosperity, yet he insists that, if the demand for coal is constantly increasing, the point must inevitably be reached in the future when the increased supply can be obtained only at a higher cost. When coal costs England as much as it does any other nation, then her exclusive industrial advantage will cease to exist. In the United States the outlying iron deposits of Lake Superior, Lake Champlain, and Pennsylvania, so geologists tell us, will find competition arising from the new grades of greater productiveness in the richer deposits of States like Alabama. In that case we shall be going from poorer to better grades of iron-mines, but after the change is made a series of different grades of productiveness will be established as before.

To resume: all natural agents which are limited in quantity are not only limited in their ultimate productive power, but, long before that power is stretched to the utmost, they yield to any additional demands on progressively harder terms. This law may, however, be suspended, or temporarily controlled, by whatever adds to the general power of mankind over nature, and especially by any extension of their knowledge, and their consequent command, of the properties and powers of natural agents.
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Re: Principles Of Political Economy, by John Stuart Mill

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Chapter X. Consequences Of The Foregoing Laws.

§ 1. Remedies for Weakness of the Principle of Accumulation.

From the preceding exposition it appears that the limit to the increase of production is twofold: from deficiency of capital, or of land. Production comes to a pause, either because the effective desire of accumulation is not sufficient to give rise to any further increase of capital, or because, however disposed the possessors of surplus income may be to save a portion of it, the limited land at the disposal of the community does not permit additional capital to be employed with such a return as would be an equivalent to them for their abstinence.

In countries where the principle of accumulation is as weak as it is in the various nations of Asia, the desideratum economically considered is an increase of industry, and of the effective desire of accumulation. The means are, first, a better government: more complete security of property; moderate taxes, and freedom from arbitrary exaction under the name of taxes; a more permanent and more advantageous tenure of land, securing to the cultivator as far as possible the undivided benefits of the industry, skill, and economy he may exert. Secondly, improvement of the public intelligence. Thirdly, the introduction of foreign arts, which raise the returns derivable from additional capital to a rate corresponding to the low strength of the desire of accumulation.

An excellent example of what might be done by this process is to be seen under our very eyes in the present development of Mexico, to which American capital and enterprise have been [pg 146]so prominently drawn of late. All these proposed remedies, if put into use in Mexico, would undoubtedly result in a striking increase of wealth.

§ 2. Even where the Desire to Accumulate is Strong, Population must be Kept within the Limits of Population from Land.

But there are other countries, and England [and the United States are] at the head of them, in which neither the spirit of industry nor the effective desire of accumulation need any encouragement. In these countries there would never be any deficiency of capital, if its increase were never checked or brought to a stand by too great a diminution of its returns. It is the tendency of the returns to a progressive diminution which causes the increase of production to be often attended with a deterioration in the condition of the producers; and this tendency, which would in time put an end to increase of production altogether, is a result of the necessary and inherent conditions of production from the land.

This, of course, is based on the supposition that no new lands, such as those of the United States, can be opened for cultivation. If there is no prohibition to the importation of cheaper food, new and richer land in any part of the world, within reach of the given country, is an influence which works against the tendency. Yet the tendency, or economic law, is there all the same, forever working.

In all countries which have passed beyond a very early stage in the progress of agriculture, every increase in the demand for food, occasioned by increased population, will always, unless there is a simultaneous improvement in production, diminish the share which on a fair division would fall to each individual. An increased production, in default of unoccupied tracts of fertile land, or of fresh improvements tending to cheapen commodities, can never be obtained but by increasing the labor in more than the same proportion. The population must either work harder or eat less, or obtain their usual food by sacrificing a part of their other customary comforts. Whenever this necessity is postponed, it is because the improvements which facilitate production continue progressive; because the contrivances of mankind for making their labor more effective keep up an [pg 147]equal struggle with Nature, and extort fresh resources from her reluctant powers as fast as human necessities occupy and engross the old.

From this results the important corollary, that the necessity of restraining population is not, as many persons believe, peculiar to a condition of great inequality of property. A greater number of people can not, in any given state of civilization, be collectively so well provided for as a smaller. The niggardliness of nature,140 not the injustice of society, is the cause of the penalty attached to over-population. An unjust distribution of wealth does not even aggravate the evil, but, at most, causes it to be somewhat earlier felt. It is in vain to say that all mouths which the increase of mankind calls into existence bring with them hands. The new mouths require as much food as the old ones, and the hands do not produce as much.

After a degree of density has been attained, sufficient to allow the principal benefits of combination of labor, all further increase tends in itself to mischief, so far as regards the average condition of the people; but the progress of improvement has a counteracting operation, and allows of increased numbers without any deterioration, and even consistently with a higher average of comfort. Improvement must here be understood in a wide sense, including not only new industrial inventions, or an extended use of those already known, but improvements in institutions, education, opinions, and human affairs generally, provided they tend, as almost all improvements do, to give new motives or new facilities to production.

The increase in the population of the United States has been enormous, as already seen, but the increase of production has been still greater, owing to the fertility of our land, to improvements in the arts, and to our great genius for invention, as may be seen by the following table (amounts in the second [pg 148]column are given in millions).141 The steady increase of the valuation of our wealth goes on faster than the increase of population, so that it manifests itself in a larger average wealth to each inhabitant.

Decades. / Valuation. / Per cent of increase. / Population. / Per cent of increase. / Per capital valuation.

1800 / $1,742 / .. / 5,308,483 / .. / $328
1810 / 2,382 / 37 / 7,239,881 / 36 / 329
1820 / 3,734 / 57 / 9,633,882 / 33 / 386
1830 / 4,328 / 16 / 12,866,020 / 34 / 336
1840 / 6,124 / 41 / 17,069,453 / 33 / 359
1850 / 8,800 / 44 / 23,191,876 / 36 / 379
1860 / 16,160 / 84 / 31,443,321 / 35 / 514
1870 / 30,068 / 86 / 38,558,371 / 23 / 780
1880 / 40,000 / 33 / 50,155,783 / 30 / 798

If the productive powers of the country increase as rapidly as advancing numbers call for an augmentation of produce, it is not necessary to obtain that augmentation by the cultivation of soils more sterile than the worst already under culture, or by applying additional labor to the old soils at a diminished advantage; or at all events this loss of power is compensated by the increased efficiency with which, in the progress of improvement, labor is employed in manufactures. In one way or the other, the increased population is provided for, and all are as well off as before. But if the growth of human power over nature is suspended or slackened, and population does not slacken its increase; if, with only the existing command over natural agencies, those agencies are called upon for an increased produce; this greater produce will not be afforded to the increased population, without either demanding on the average a greater effort from each, or on the average reducing each to a smaller ration out of the aggregate produce.

Ever since the great mechanical inventions of Watt, Arkwright, and their contemporaries, the return to labor has probably increased as fast as the population; and would [pg 149]even have outstripped it, if that very augmentation of return had not called forth an additional portion of the inherent power of multiplication in the human species. During the twenty or thirty years last elapsed, so rapid has been the extension of improved processes of agriculture [in England], that even the land yields a greater produce in proportion to the labor employed; the average price of corn had become decidedly lower, even before the repeal of the corn laws had so materially lightened, for the time being, the pressure of population upon production. But though improvement may during a certain space of time keep up with, or even surpass, the actual increase of population, it assuredly never comes up to the rate of increase of which population is capable: and nothing could have prevented a general deterioration in the condition of the human race, were it not that population has in fact been restrained. Had it been restrained still more, and the same improvements taken place, there would have been a larger dividend than there now is, for the nation or the species at large. The new ground wrung from nature by the improvements would not have been all tied up in the support of mere numbers. Though the gross produce would not have been so great, there would have been a greater produce per head of the population.

§ 3. Necessity of Restraining Population not superseded by Free Trade in Food.

When the growth of numbers outstrips the progress of improvement, and a country is driven to obtain the means of subsistence on terms more and more unfavorable, by the inability of its land to meet additional demands except on more onerous conditions, there are two expedients, by which it may hope to mitigate that disagreeable necessity, even though no change should take place in the habits of the people with respect to their rate of increase. One of these expedients is the importation of food from abroad. The other is emigration.

The admission of cheaper food from a foreign country is equivalent to an agricultural invention by which food could be raised at a similarly diminished cost at home. It equally increases the productive power of labor. The return was [pg 150]before, so much food for so much labor employed in the growth of food: the return is now, a greater quantity of food for the same labor employed in producing cottons or hardware, or some other commodity to be given in exchange for food. The one improvement, like the other, throws back the decline of the productive power of labor by a certain distance: but in the one case, as in the other, it immediately resumes its course; the tide which has receded, instantly begins to readvance. It might seem, indeed, that, when a country draws its supply of food from so wide a surface as the whole habitable globe, so little impression can be produced on that great expanse by any increase of mouths in one small corner of it that the inhabitants of the country may double and treble their numbers without feeling the effect in any increased tension of the springs of production, or any enhancement of the price of food throughout the world. But in this calculation several things are overlooked.

In the first place, the foreign regions from which corn can be imported do not comprise the whole globe, but those parts of it almost alone which are in the immediate neighborhood of coasts or navigable rivers; and of such there is not, in the productive regions of the earth, so great a multitude as to suffice during an indefinite time for a rapidly growing demand, without an increasing strain on the productive powers of the soil.

In the next place, even if the supply were drawn from the whole instead of a small part of the surface of the exporting countries, the quantity of food would still be limited, which could be obtained from them without an increase of the proportional cost. The countries which export food may be divided into two classes: those in which the effective desire of accumulation is strong, and those in which it is weak. In Australia and the United States of America, the effective desire of accumulation is strong; capital increases fast, and the production of food might be very rapidly extended. But in such countries population [pg 151]also increases with extraordinary rapidity. Their agriculture has to provide for their own expanding numbers, as well as for those of the importing countries. They must, therefore, from the nature of the case, be rapidly driven, if not to less fertile, at least what is equivalent, to remoter and less accessible lands, and to modes of cultivation like those of old countries, less productive in proportion to the labor and expense.

The extraordinary resources of the United States are scarcely understood even by Americans. Chart No. XVIII (see Book IV, Chap. III) may give some idea of the agricultural possibilities of our land. It will be seen from this that the quantity of fertile land in but one of our States—Texas—is greater than that of Austria-Hungary.

But the countries which have at the same time cheap food and great industrial prosperity are few, being only those in which the arts of civilized life have been transferred full-grown to a rich and uncultivated soil. Among old countries, those which are able to export food, are able only because their industry is in a very backward state, because capital, and hence population, have never increased sufficiently to make food rise to a higher price. Such countries are Russia, Poland, and Hungary.

The law, therefore, of diminishing return to industry, whenever population makes a more rapid progress than improvement, is not solely applicable to countries which are fed from their own soil, but in substance applies quite as much to those which are willing to draw their food from any accessible quarter that can afford it cheapest.

§ 4. —Nor by Emigration.

Besides the importation of corn, there is another resource which can be invoked by a nation whose increasing numbers press hard, not against their capital, but against the productive capacity of their land: I mean Emigration, especially in the form of Colonization. Of this remedy the efficacy as far as it goes is real, since it consists in seeking elsewhere those unoccupied tracts of fertile land which, if they existed at home, would enable the demand of an increasing [pg 152]population to be met without any falling off in the productiveness of labor. Accordingly, when the region to be colonized is near at hand, and the habits and tastes of the people sufficiently migratory, this remedy is completely effectual. The migration from the older parts of the American Confederation to the new Territories, which is to all intents and purposes colonization, is what enables population to go on unchecked throughout the Union without having yet diminished the return to industry, or increased the difficulty of earning a subsistence.

How strictly true this is may be seen by examining the map given in the last census returns,142 showing the residence of the natives of the State of New York. The greater or less frequency of natives of New York, residing in other States, is shown by different degrees of shading on the map. A large district westward as far as the Mississippi shows a density of natives of New York of from two to six to a square mile, and a lesser density from Minnesota to Indian Territory, on the other side of the Mississippi. The same is shown of other older States. The explanation of the movement can not be anything else than the same as that for the larger movement from Europe to America.

There is no probability that even under the most enlightened arrangements (in older countries) a permanent stream of emigration could be kept up, sufficient to take off, as in America, all that portion of the annual increase (when proceeding at its greatest rapidity) which, being in excess of the progress made during the same short period in the arts of life, tends to render living more difficult for every averagely situated individual in the community. And, unless this can be done, emigration can not, even in an economical point of view, dispense with the necessity of checks to population.

The influence of immigration to the United States from European countries, in lessening the tension in the relation between food and numbers, is one of the most marked events in this century. The United States has received about one fourth of its total population in 1880 from abroad since the foundation of the republic, as will be seen by this table:

Total Immigration Into The United States.

Periods. / Numbers.

From 1789-1820 / 250,000143
1820-1830 / 151,824
1831-1840 / 599,125
1841-1850 / 1,713,251
1851-1860 / 2,598,214
1861-1870 / 2,491,451
1871-1880 / 2,812,191
1881-1883 / 2,061,745
Total / 12,677,801

Of this number, 5,333,991 came from the British Isles, of which 3,367,624 were Irish.

There came 3,860,624 Germans, 593,021 Scandinavians, and 334,064 French. (See United States “Statistical Abstract,” 1878, 1880, 1883.)

The causes operating on this movement of men—a movement unequaled in history—are undoubtedly economic. Like the migration of the early Teutonic races from the Baltic to Southern Europe, it is due to the pressure of numbers on subsistence.

A still more interesting study is that of the causes which attempt to explain the direction of this stream after it has reached our shores. It is a definite fact that the old slave States have hitherto received practically none of this vast foreign immigration.144 The actual distribution of the foreign born in the United States is to be seen in a most interesting way by aid of the colored map, Chart No. VIII, giving the different densities of foreign-born population in different parts of the Union. It seems almost certain that the general belief hitherto in the insecurity of life and property in the old slave States has worked against the material prosperity of that section.

The different ages of the native- and foreign-born inhabitants of the United States may be seen from the accompanying diagrams145 comparing the aggregate population of the United States with the foreign-born. This may profitably be compared with a similar diagram relating to the Chinese in the United States (Book II, Chap. III, § 3).

Aggregate: 1870. The figures give the number of thousands of each sex.

Decade of Life. / Males. / Females.

1 / 136 / 132
2 / 115 / 114
3 /87 / 90
4 / 62 / 63
5 / 47 / 44
6 / 31 / 27
7 / 17 / 15
8 / 7 / 7
9 / 2 / 2

Foreign: 1870.

Decade of Life. / Males. / Females.

1 / 24 / 23
2 / 48 / 49
3 /128 / 114
4 / 134 / 113
5 / 107 / 84
6 / 60 / 44
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Re: Principles Of Political Economy, by John Stuart Mill

Postby admin » Tue May 19, 2020 10:48 am

Book II. Distribution.

Chapter I. Of Property.

§ 1. Individual Property and its opponents.

The laws and conditions of the Production of Wealth partake of the character of physical truths. There is nothing optional or arbitrary in them. It is not so with the Distribution of Wealth. That is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like. They can place them at the disposal of whomsoever they please, and on whatever terms. The Distribution of Wealth depends on the laws and customs of society. The rules by which it is determined are what the opinions and feelings of the ruling portion of the community make them, and are very different in different ages and countries; and might be still more different, if mankind so chose. We have here to consider, not the causes, but the consequences, of the rules according to which wealth may be distributed. Those, at least, are as little arbitrary, and have as much the character of physical laws, as the laws of production.

We proceed, then, to the consideration of the different modes of distributing the produce of land and labor, which have been adopted in practice, or may be conceived in theory. Among these, our attention is first claimed by that primary and fundamental institution, on which, unless in some exceptional and very limited cases, the economical arrangements of society have always rested, though in its secondary features it has varied, and is liable to vary. I mean, of course, the institution of individual property.

Private property, as an institution, did not owe its origin to any of those considerations of utility which plead for the maintenance of it when established. Enough is known of rude ages, both from history and from analogous states of society in our own time, to show that tribunals (which always precede laws) were originally established, not to determine rights, but to repress violence and terminate quarrels. With this object chiefly in view, they naturally enough gave legal effect to first occupancy, by treating as the aggressor the person who first commenced violence, by turning, or attempting to turn, another out of possession.

In considering the institution of property as a question in social philosophy, we must leave out of consideration its actual origin in any of the existing nations of Europe. We may suppose a community unhampered by any previous possession; a body of colonists, occupying for the first time an uninhabited country. (1.) If private property were adopted, we must presume that it would be accompanied by none of the initial inequalities and injustice which obstruct the beneficial operation of the principle in old society. Every full-grown man or woman, we must suppose, would be secured in the unfettered use and disposal of his or her bodily and mental faculties; and the instruments of production, the land and tools, would be divided fairly among them, so that all might start, in respect to outward appliances, on equal terms. It is possible also to conceive that, in this original apportionment, compensation might be made for the injuries of nature, and the balance redressed by assigning to the less robust members of the community advantages in the distribution, sufficient to put them on a par with the rest. But the division, once made, would not again be interfered with; individuals would be left to their own exertions and to the ordinary chances for making an advantageous use of what was assigned to them. (2.) If individual property, on the contrary, were excluded, the plan which must be adopted would be to hold the land and all instruments of production as the joint property of the community, and to carry on the operations of industry on the common account. The direction of the labor of the community would devolve upon a magistrate or magistrates, whom we may suppose elected by the suffrages of the community, and whom we must assume to be voluntarily obeyed by them. The division of the produce would in like manner be a public act. The principle might either be that of complete equality, or of apportionment to the necessities or deserts of individuals, in whatever manner might be conformable to the ideas of justice or policy prevailing in the community.

The assailants of the principle of individual property may be divided into two classes: (1) those whose scheme implies absolute equality in the distribution of the physical means of life and enjoyment, and (2) those who admit inequality, but grounded on some principle, or supposed principle, of justice or general expediency, and not, like so many of the existing social inequalities, dependent on accident alone. The characteristic name for this [first] economical system is Communism, a word of Continental origin, only of late introduced into this country. The word Socialism, which originated among the English Communists, and was assumed by them as a name to designate their own doctrine, is now, on the Continent, employed in a larger sense; not necessarily implying Communism, or the entire abolition of private property, but applied to any system which requires that the land and the instruments of production should be the property, not of individuals, but of communities, or associations, or of the government.

It should be said, moreover, that Socialism is to-day used in the distinct sense of a system which abolishes private property, and places the control of the capital, labor, and combined industries of the country in the hands of the state. The essence of modern socialism is the appeal to state-help and the weakening of individual self-help. Collectivism is also a term now used by German and French writers to describe an organization of the industries of a country under a collective instead of an individual management. Collectivism is but the French expression for the system of state socialism.

§ 2. The case for Communism against private property presented.

The objection ordinarily made to a system of community of property and equal distribution of the produce, that each person would be incessantly occupied in evading his fair share of the work, points, undoubtedly, to a real difficulty. But those who urge this objection forget to how great an extent the same difficulty exists under the system on which nine tenths of the business of society is now conducted. And though the “master's eye,” when the master is vigilant and intelligent, is of proverbial value, it must be remembered that, in a Socialist farm or manufactory, each laborer would be under the eye, not of one master, but of the whole community. If Communistic labor might be less vigorous than that of a peasant proprietor, or a workman laboring on his own account, it would probably be more energetic than that of a laborer for hire, who has no personal interest in the matter at all.

Another of the objections to Communism is that if every member of the community were assured of subsistence for himself and any number of children, on the sole condition of willingness to work, prudential restraint on the multiplication of mankind would be at an end, and population would start forward at a rate which would reduce the community through successive stages of increasing discomfort to actual starvation. But Communism is precisely the state of things in which opinion might be expected to declare itself with greatest intensity against this kind of selfish intemperance. An augmentation of numbers which diminished the comfort or increased the toil of the mass would then cause (which now it does not) immediate and unmistakable inconvenience to every individual in the association; inconvenience which could not then be imputed to the avarice of employers, or the unjust privileges of the rich.

A more real difficulty is that of fairly apportioning the labor of the community among its members. There are many kinds of work, and by what standard are they to be measured one against another? Who is to judge how much cotton-spinning, or distributing goods from the stores, or brick-laying, or chimney-sweeping, is equivalent to so much plowing? Besides, even in the same kind of work, nominal equality of labor would be so great a real inequality that the feeling of justice would revolt against its being enforced. All persons are not equally fit for all labor; and the same quantity of labor is an unequal burden on the weak and the strong, the hardy and the delicate, the quick and the slow, the dull and the intelligent.146

If, therefore, the choice were to be made between Communism with all its chances and the present state of society with all its sufferings and injustices, all the difficulties, great or small, of Communism, would be but as dust in the balance. But, to make the comparison applicable, we must compare Communism at its best with the régime of individual property, not as it is, but as it might be made. The laws of property have never yet conformed to the principles on which the justification of private property rests. They have made property of things which never ought to be property, and absolute property where only a qualified property ought to exist. Private property, in every defense made of it, is supposed to mean the guarantee to individuals of the fruits of their own labor and abstinence. The guarantee to them of the fruits of the labor and abstinence of others, transmitted to them without any merit or exertion of their own, is not of the essence of the institution, but a mere incidental consequence, which, when it reaches a certain height, does not promote, but conflicts with the ends which render private property legitimate. To judge of the final destination of the institution of property, we must suppose everything rectified which causes the institution to work in a manner opposed to that equitable principle, of proportion between remuneration and exertion, on which, in every vindication of it that will bear the light, it is assumed to be grounded. We must also suppose two conditions realized, without which neither Communism nor any other laws or institutions could make the condition of the mass of mankind other than degraded and miserable. One of these conditions is, universal education; the other, a due limitation of the numbers of the community. With these, there could be no poverty, even under the present social institutions: and, these being supposed, the question of socialism is not, as generally stated by Socialists, a question of flying to the sole refuge against the evils which now bear down humanity, but a mere question of comparative advantages, which futurity must determine. We are too ignorant either of what individual agency in its best form, or socialism in its best form, can accomplish, to be qualified to decide which of the two will be the ultimate form of human society.

If a conjecture may be hazarded, the decision will probably depend mainly on one consideration, viz., which of the two systems is consistent with the greatest amount of human liberty and spontaneity.

Definition of spontaneity: 1: the quality or state of being spontaneous; 2: voluntary or undetermined action or movement
Synonyms: abandon, abandonment, ease, lightheartedness, naturalness, spontaneousness, unconstraint, uninhibitedness, unrestraint
Antonyms: constraint, restraint

It is yet to be ascertained whether the communistic scheme would be consistent with that multiform development of human nature, those manifold unlikenesses, that diversity of tastes and talents, and variety of intellectual points of view, which not only form a great part of the interest of human life, but, by bringing intellects into stimulating collision and by presenting to each innumerable notions that he would not have conceived of himself, are the mainspring of mental and moral progression.

§ 3. The Socialists who appeal to state-help.

For general purposes, a clearer understanding of the various schemes may be gained by observing that (1) one class of socialists intend to include the state itself within their plan, and (2) another class aim to form separate communities inside the state, and under its protection.

Of this first system there are no present examples; but the object of most of the socialistic organizations in the United States and Europe is to strive for the assumption by the state of the production and distribution of wealth.147 At present the most active Socialists are to be found in Germany. The origin of this influence, however, is to be traced to France.148 Louis Blanc,149 in his “Organisation du Travail,” considers property the great scourge of society. The Government, he asserts, should regulate production; raise money to be appropriated without interest for creating state workshops, in which the workmen should elect their own overseers, and all receive the same wages; and the sums needed should be raised from the abolition of collateral inheritance. The important practical part of his scheme was that the great state workshops, aided by the Government, would make private competition in those industries impossible, and thus bring about the change from the private to the socialistic system.

The founder of modern German socialism was Karl Marx,150 and almost the only Socialist who pretended to economic knowledge. He aimed his attack on the present social system against the question of value, by asserting that the amount of labor necessary for the production of an article is the sole measure of its exchange value. It follows from this that the right of property in the article vests wholly in the laborer, while the capitalist, if he claims a share of the product, is nothing less than a robber. No just system, he avers, can properly exist so long as the rate of wages is fixed by free contract between the employer and laborer; therefore the only remedy is the nationalization of all the elements of production, land, tools, materials, and all existing appliances, which involves, of course, the destruction of the institution of private property. An obvious weakness in this scheme is the provision that the Government should determine what goods are to be produced, and that every one is bound to perform that work which is assigned by the state. In this there is no choice of work, and the tyranny of one master would be supplanted by the tyranny of a greater multiplex master in the officers of Government. Moreover, it can not be admitted that exchange value is determined by the quantity of labor alone. Every one knows that the result of ten days' labor of a skilled watch-maker does not exchange for the result of ten days' labor of an unskilled hodman. Of two men making shoes, one may produce a good the other a poor article, although both may work the same length of time; so that their exchange value ought not to be determined by the mere quantity of labor expended. Above all, Marx would extend the equality of wages for the same time to the manager and superintendent also. In other words, he proposes to take away all the incentives to the acquirement or exercise of superior and signal ability in every work of life, the result of which would inevitably lead to a deadening extension of mediocrity.

This system gained an undue attention because it was made the instrument of a socialist propaganda under the leadership of Ferdinand Lassalle.151 This active leader, in 1863, founded the German “Workingmen's Union,” a year earlier than the “International152 Association.” In 1869 Liebknecht and his friends established the “Social Democratic Workingmen's Party,” which after some difficulties absorbed the followers of Lassalle in a congress at Gotha in 1875, and form the present Socialist party in Germany. Their programme,153 as announced at Gotha, is as follows:

I. Labor is the source of all riches and of all culture. As general profitable labor can only be done by the human society, the whole product of labor belongs to society—i.e., to all its members—who have the same duties and the same right to work, each according to his reasonable wants.

In the present society the means of work are the monopoly of the class of capitalists. The class of workingmen thus become dependent on them, and consequently are given over to all degrees of misery and servitude.

In order to emancipate labor it is requisite that the means of work be transformed into the common property of society, that all production be regulated by associations, and that the entire product of labor be turned over to society and justly distributed for the benefit of all.

None but the working-class itself can emancipate labor, as in relation to it all other classes are only a reactionary mass.

II. Led by these principles, the German Social Workingmen's party, by all legal means, strives for a free state and society, the breaking down of the iron laws of wages by abolishing the system of hired workingmen, by abolishing exploitation in every shape, and doing away with all social and political inequality.

The German Social Workingmen's party, although first working within its national confines, is fully conscious of the international character of the general workingmen's movement, and is resolved to fulfill all duties which it imposes on each workingman in order to realize the fraternity of all men.

The German Social Workingmen's party, for the purpose of preparing the way, and for the solution of the social problem, demands the creation of social productive associations, to be supported by the state government, and under the control of the working-people. The productive associations are to be founded in such numbers that the social organization of the whole production can be effected by them.

The German Social Workingmen's party requires as the basis of state government:

1. Universal, equal, direct, and secret suffrage, which, beginning with the twentieth year, obliges all citizens to vote in all State, county, and town elections. Election-day must be a Sunday or a holiday.

2. Direct legislation by the people; decision as to war and peace by the people.

3. General capability of bearing arms; popular defense in place of standing armies.

4. Abolition of all exceptional laws, especially those relating to the press, public meetings, and associations—in short, of all laws which hinder the free expression of ideas and thought.

5. Gratuitous administration of justice by the people.

6. General and equal, popular and gratuitous education by the Government in all classes and institutes of learning; general duty to attend school; religion to be declared a private affair.

The German Social Workingmen's party insists on realizing in the present state of society:

1. The largest possible extension of political rights and freedom in conformity to the above six demands.

2. A single progressive income-tax for State, counties, and towns, instead of those which are imposed at present, and in place of indirect taxes, which unequally burden the people.

3. Unlimited right of combination.

4. A normal working-day corresponding with the wants of society; prohibition of Sunday labor.

5. Prohibition of children's work and of women's work, so far as it injures their health and morality.

6. Protective laws for the life and health of workingmen; sanitary control of their dwellings; superintendence of mines, factories, industry, and home work by officers chosen by the workingmen; an effectual law guaranteeing the responsibility of employers.

7. Regulation of prison-work.

8. Unrestricted self-government of all banks established for the mutual assistance of workingmen.

The above scheme also represents very well the character of the Socialist agitators in the United States, who are themselves chiefly foreigners, and have foreign conceptions of socialism. On this form of socialism it is interesting to have Mr. Mill's later opinions154 in his own words.

“Among those who call themselves Socialists, two kinds of persons may be distinguished. There are, in the first place, (1) those whose plans for a new order of society, in which private property and individual competition are to be superseded and other motives to action substituted, are on the scale of a village community or township, and would be applied to an entire country by the multiplication of such self-acting units; of this character are the systems of Owen, of Fourier, and the more thoughtful and philosophic Socialists generally. The other class (2) who are more a product of the Continent than of Great Britain, and may be called the revolutionary Socialists, propose to themselves a much bolder stroke. Their scheme is the management of the whole productive resources of the country by one central authority, the general Government. And with this view some of them avow as their purpose that the working-classes, or somebody in their behalf, should take possession of all the property of the country, and administer it for the general benefit. The aim of that is to substitute the new rule for the old at a single stroke, and to exchange the amount of good realized under the present system, and its large possibilities of improvement, for a plunge without any preparation into the most extreme form of the problem of carrying on the whole round of the operations of social life without the motive power which has always hitherto worked the social machinery. It must be acknowledged that those who would play this game on the strength of their own private opinion, unconfirmed as yet by any experimental verification, must have a serene confidence in their own wisdom on the one hand, and a recklessness of people's sufferings on the other, which Robespierre and St. Just, hitherto the typical instances of those united attributes, scarcely came up to.”

§ 4. Of various minor schemes, Communistic and Socialistic.

[Of the schemes to be tried within a state], the two elaborate forms of non-communistic Socialism known as Saint-Simonism and Fourierism are totally free from the objections usually urged against Communism. The Saint-Simonian155 scheme does not contemplate an equal, but an unequal division of the produce; it does not propose that all should be occupied alike, but differently, according to their vocation or capacity; the function of each being assigned, like grades in a regiment, by the choice of the directing authority, and the remuneration being by salary, proportioned to the importance, in the eyes of that authority, of the function itself, and the merits of the person who fulfills it. But to suppose that one or a few human beings, howsoever selected, could, by whatever machinery of subordinate agency, be qualified to adapt each person's work to his capacity, and proportion each person's remuneration to his merits, is a supposition almost too chimerical to be reasoned against.156

The most skillfully combined, and with the greatest foresight of objections, of all the forms of Socialism is that commonly known as Fourierism.157 This system does not contemplate the abolition of private property, nor even of inheritance: on the contrary, it avowedly takes into consideration, as an element in the distribution of the produce, capital as well as labor. It proposes that the operations of industry should be carried on by associations of about two thousand members, combining their labor on a district of about a square league in extent, under the guidance of chiefs selected by themselves (the “phalanstery”). In the distribution a certain minimum is first assigned for the subsistence of every member of the community, whether capable or not of labor. The remainder of the produce is shared in certain proportions, to be determined beforehand, among the three elements, Labor, Capital, and Talent. The capital of the community may be owned in unequal shares by different members, who would in that case receive, as in any other joint-stock company, proportional dividends. The claim of each person on the share of the produce apportioned to talent is estimated by the grade or rank which the individual occupies in the several groups of laborers to which he or she belongs, these grades being in all cases conferred by the choice of his or her companions. The remuneration, when received, would not of necessity be expended or enjoyed in common; there would be separate ménages for all who preferred them, and no other community of living is contemplated than that all the members of the association should reside in the same pile of buildings; for saving of labor and expense, not only in building, but in every branch of domestic economy; and in order that, the whole buying and selling operations of the community being performed by a single agent, the enormous portion of the produce of industry now carried off by the profits of mere distributors might be reduced to the smallest amount possible.

Fourierism was tried in West Virginia by American disciples, and it was advocated by Horace Greeley. A modified form appeared in the famous community at Brook Farm (near Dedham, Massachusetts), which drew there George Ripley, Margaret Fuller, and even George William Curtis and Nathaniel Hawthorne.

There have been many smaller communities established in the United States, but it can not be said that they have been successful from the point of view either of numbers or material prosperity. The followers of Rapp, or the Harmonists, in Pennsylvania and Indiana; the Owenites,158 in Indiana; the community of Zoar, in Ohio; the Inspirationists, in New York [pg 168]and Iowa; the Perfectionists, at Oneida and Wallingford—are all evidently suffering from the difficulties due to the absence of family life, from the increasing spirit of personal independence which carries away the younger members of the organizations,159 and the want of that executive ability which distinguishes the successful manager in private enterprises.

§ 5. The Socialist objections to the present order of Society examined.

“The attacks160 on the present social order are vigorous and earnest, but open to the charge of exaggeration.

“In the first place, it is unhappily true that the wages of ordinary labor, in all the countries of Europe, are wretchedly insufficient to supply the physical and moral necessities of the population in any tolerable measure. But when it is further alleged that even this insufficient remuneration has a tendency to diminish; that there is, in the words of M. Louis Blanc, une baisse continue des salaires; the assertion is in opposition to all accurate information, and to many notorious facts. It has yet to be proved that there is any country in the civilized world where the ordinary wages of labor, estimated either in money or in articles of consumption, are declining; while in many they are, on the whole, on the increase; and an increase which is becoming, not slower, but more rapid. There are, occasionally, branches of industry which are being gradually superseded by something else, and in those, until production accommodates itself to demand, wages are depressed.

“M. Louis Blanc appears to have fallen into the same error which was at first committed by Malthus and his followers, that of supposing because population has a greater power of [pg 169]increase than subsistence, its pressure upon subsistence must be always growing more severe. It is a great point gained for truth when it comes to be seen that the tendency to over-population is a fact which Communism, as well as the existing order of society, would have to deal with. However this may be, experience shows that in the existing state of society the pressure of population on subsistence, which is the principal cause of low wages, though a great, is not an increasing evil; on the contrary, the progress of all that is called civilization has a tendency to diminish it, partly by the more rapid increase of the means of employing and maintaining labor, partly by the increased facilities opened to labor for transporting itself to new countries and unoccupied fields of employment, and partly by a general improvement in the intelligence and prudence of the population. It is, of course, open to discussion what form of society has the greatest power of dealing successfully with the pressure of population on subsistence, and on this question there is much to be said for Socialism; but it has no just claim to be considered as the sole means of preventing the general and growing degradation of the mass of mankind through the peculiar tendency of poverty to produce over-population.

“Next, it must be observed that Socialists generally, and even the most enlightened of them, have a very imperfect and one-sided notion of the operation of competition. They see half its effects, and overlook the other half. They forget that competition is a cause of high prices and values as well as of low; that the buyers of labor and of commodities compete with one another as well as the sellers; and that, if it is competition which keeps the prices of labor and commodities as low as they are, it is competition which keeps them from falling still lower. To meet this consideration, Socialists are reduced to affirm that, when the richest competitor has got rid of all his rivals, he commands the market and can demand any price he pleases. But in the ordinary branches of industry no one rich competitor has it in his power to drive [pg 170]out all the smaller ones. Some businesses show a tendency to pass out of the hands of small producers or dealers into a smaller number of larger ones; but the cases in which this happens are those in which the possession of a larger capital permits the adoption of more powerful machinery, more efficient by more expensive processes, or a better organized and more economical mode of carrying on business, and this enables the large dealer legitimately and permanently to supply the commodity cheaper than can be done on the small scale; to the great advantage of the consumers, and therefore of the laboring-classes, and diminishing, pro tanto, that waste of the resources of the community so much complained of by Socialists, the unnecessary multiplication of mere distributors, and of the various other classes whom Fourier calls the parasites of industry.

“Another point on which there is much misapprehension on the part of Socialists, as well as of trades-unionists and other partisans of labor against capital, relates to the proportion in which the produce of the country is really shared and the amount of what is actually diverted from those who produce it, to enrich other persons. When, for instance, a capitalist invests £20,000 in his business, and draws from it an income of (suppose) £2,000 a year, the common impression is as if he were the beneficial owner both of the £20,000 and of the £2,000, while the laborers own nothing but their wages. The truth, however, is that he only obtains the £2,000 on condition of applying no part of the £20,000 to his own use. He has the legal control over it, and might squander it if he chose, but if he did he would not have the £2,000 a year also. For all personal purposes they have the capital and he has but the profits, which it only yields to him on condition that the capital itself is employed in satisfying not his own wants, but those of laborers. Even of his own share a small part only belongs to him as the owner of capital. The portion of the produce which falls to capital merely as capital is measured by the interest of money, since that is all that the owner of capital obtains [pg 171]when he contributes to production nothing except the capital itself.

“The result of our review of the various difficulties of Socialism has led us to the conclusion that the various schemes for managing the productive resources of the country by public instead of private agency have a case for a trial, and some of them may eventually establish their claims to preference over the existing order of things, but that they are at present workable only by the élite of mankind, and have yet to prove their power of training mankind at large to the state of improvement which they presuppose.”

§ 6. Property in land different from property in Movables.

It is next to be considered what is included in the idea of private property and by what considerations the application of the principle should be bounded.

The institution of property, when limited to its essential elements, consists in the recognition, in each person, of a right to the exclusive disposal of what he or she have produced by their own exertions, or received either by gift or by fair agreement, without force or fraud, from those who produced it. The foundation of the whole is, the right of producers to what they themselves have produced. Nothing is implied in property but the right of each to his (or her) own faculties, to what he can produce by them, and to whatever he can get for them in a fair market: together with his right to give this to any other person if he chooses, and the right of that other to receive and enjoy it.

It follows, therefore, that although the right of bequest, or gift after death, forms part of the idea of private property, the right of inheritance, as distinguished from bequest, does not. That the property of persons who have made no disposition of it during their lifetime should pass first to their children, and, failing them, to the nearest relations, may be a proper arrangement or not, but is no consequence of the principle of private property. I see no reason why collateral inheritance should exist at all. Mr. Bentham long ago proposed, and other high authorities have agreed in the opinion, that, if there are no heirs either in the descending or in the [pg 172]ascending line, the property, in case of intestacy, should escheat to the state. The parent owes to society to endeavor to make the child a good and valuable member of it, and owes to the children to provide, so far as depends on him, such education, and such appliances and means, as will enable them to start with a fair chance of achieving by their own exertions a successful life. To this every child has a claim; and I can not admit that as a child he has a claim to more.

The essential principle of property being to assure to all persons what they have produced by their labor and accumulated by their abstinence, this principle can not apply to what is not the produce of labor, the raw material of the earth. If the land derived its productive power wholly from nature, and not at all from industry, or if there were any means of discriminating what is derived from each source, it not only would not be necessary, but it would be the height of injustice, to let the gift of nature be engrossed by individuals. [But] the use of the land in agriculture must indeed, for the time being, be of necessity exclusive; the same person who has plowed and sown must be permitted to reap.

But though land is not the produce of industry, most of its valuable qualities are so. Labor is not only requisite for using, but almost equally so for fashioning, the instrument. Considerable labor is often required at the commencement, to clear the land for cultivation. In many cases, even when cleared, its productiveness is wholly the effect of labor and art. One of the barrenest soils in the world, composed of the material of the Goodwin Sands, the Pays de Waes in Flanders, has been so fertilized by industry as to have become one of the most productive in Europe. Cultivation also requires buildings and fences, which are wholly the produce of labor. The fruits of this industry can not be reaped in a short period. The labor and outlay are immediate, the benefit is spread over many years, perhaps over all future time. A holder will not incur this labor and outlay when strangers and not himself will be benefited by it. If he [pg 173]undertakes such improvements, he must have a sufficient period before him in which to profit by them; and he is in no way so sure of having always a sufficient period as when his tenure is perpetual.

These are the reasons which form the justification, in an economical point of view, of property in land. It is seen that they are only valid in so far as the proprietor of land is its improver. Whenever, in any country, the proprietor, generally speaking, ceases to be the improver, political economy has nothing to say in defense of landed property, as there established.

When the “sacredness of property” is talked of, it should always be remembered that any such sacredness does not belong in the same degree to landed property. No man made the land. It is the original inheritance of the whole species. Its appropriation is wholly a question of general expediency. When private property in land is not expedient, it is unjust. The reverse is the case with property in movables, and in all things the product of labor: over these, the owner's power both of use and of exclusion should be absolute, except where positive evil to others would result from it; but, in the case of land, no exclusive right should be permitted in any individual which can not be shown to be productive of positive good. To be allowed any exclusive right at all, over a portion of the common inheritance, while there are others who have no portion, is already a privilege. No quantity of movable goods which a person can acquire by his labor prevents others from acquiring the like by the same means; but, from the very nature of the case, whoever owns land keeps others out of the enjoyment of it. When land is not intended to be cultivated, no good reason can in general be given for its being private property at all. Even in the case of cultivated land, a man whom, though only one among millions, the law permits to hold thousands of acres as his single share, is not entitled to think that all this is given to him to use and abuse, and deal with as if it concerned nobody but himself. [pg 174]The rents or profits which he can obtain from it are at his sole disposal; but with regard to the land, in everything which he does with it, and in everything which he abstains from doing, he is morally bound, and should, whenever the case admits, be legally compelled to make his interest and pleasure consistent with the public good.
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Re: Principles Of Political Economy, by John Stuart Mill

Postby admin » Fri Aug 21, 2020 1:39 am

Chapter II. Of Wages.

§ 1. Of Competition and Custom.

Political economists generally, and English political economists above others, have been accustomed to lay almost exclusive stress upon the first of [two] agencies [competition and custom]; to exaggerate the effect of competition, and to take into little account the other and conflicting principle. They are apt to express themselves as if they thought that competition actually does, in all cases, whatever it can be shown to be the tendency of competition to do. This is partly intelligible, if we consider that only through the principle of competition has political economy any pretension to the character of a science. So far as rents, profits, wages, prices, are determined by competition, laws may be assigned for them. Assume competition to be their exclusive regulator, and principles of broad generality and scientific precision may be laid down, according to which they will be regulated. The political economist justly deems this his proper business: and, as an abstract or hypothetical science, political economy can not be required to do, and indeed can not do, anything more. But it would be a great misconception of the actual course of human affairs to suppose that competition exercises in fact this unlimited sway. I am not speaking of monopolies, either natural or artificial, or of any interferences of authority with the liberty of production or exchange. Such disturbing causes have always been allowed for by political economists. I speak of cases in which there is nothing to restrain competition; no hindrance [pg 176]to it either in the nature of the case or in artificial obstacles; yet in which the result is not determined by competition, but by custom or usage; competition either not taking place at all, or producing its effect in quite a different manner from that which is ordinarily assumed to be natural to it.

As stated by Mr. Cairnes,161 political economy is a science just as is any recognized physical science—astronomy, chemistry, physiology. The economic “facts we find existing are the results of causes, between which and them the connection is constant and invariable. It is, then, the constant relations exhibited in economic phenomena that we have in view when we speak of the laws of the phenomena of wealth; and in the exposition of these laws consists the science of political economy.” It is to be remembered that economic laws are tendencies, not actual descriptions of any given conditions in this or that place.

Competition, in fact, has only become in any considerable degree the governing principle of contracts, at a comparatively modern period. The further we look back into history, the more we see all transactions and engagements under the influence of fixed customs. The relations, more especially between the land-owner and the cultivator, and the payments made by the latter to the former, are, in all states of society but the most modern, determined by the usage of the country. The custom of the country is the universal rule; nobody thinks of raising or lowering rents, or of letting land, on other than the customary conditions. Competition, as a regulator of rent, has no existence.

Prices, whenever there was no monopoly, came earlier under the influence of competition, and are much more universally subject to it, than rents. The wholesale trade, in the great articles of commerce, is really under the dominion of competition. But retail price, the price paid by the actual consumer, seems to feel very slowly and imperfectly the effect of competition; and, when competition does exist, [pg 177]it often, instead of lowering prices, merely divides the gains of the high price among a greater number of dealers. The influence of competition is making itself felt more and more through the principal branches of retail trade in the large towns.

All professional remuneration is regulated by custom. The fees of physicians, surgeons, and barristers, the charges of attorneys, are nearly invariable. Not certainly for want of abundant competition in those professions, but because the competition operates by diminishing each competitor's chance of fees, not by lowering the fees themselves.

These observations must be received as a general correction to be applied whenever relevant, whether expressly mentioned or not, to the conclusions contained in the subsequent portions of this treatise. Our reasonings must, in general, proceed as if the known and natural effects of competition were actually produced by it, in all cases in which it is not restrained by some positive obstacle. Where competition, though free to exist, does not exist, or where it exists, but has its natural consequences overruled by any other agency, the conclusions will fail more or less of being applicable. To escape error, we ought, in applying the conclusions of political economy to the actual affairs of life, to consider not only what will happen supposing the maximum of competition, but how far the result will be affected if competition falls short of the maximum.

§ 2. The Wages-fund, and the Objections to it Considered.

Under the head of Wages are to be considered, first, the causes which determine or influence the wages of labor generally, and secondly, the differences that exist between the wages of different employments. It is convenient to keep these two classes of considerations separate; and in discussing the law of wages, to proceed in the first instance as if there were no other kind of labor than common unskilled labor, of the average degree of hardness and disagreeableness.

Competition, however, must be regarded, in the present state of society, as the principal regulator of wages, and custom [pg 178]or individual character only as a modifying circumstance, and that in a comparatively slight degree.

Wages, then, depend mainly upon the demand and supply of labor; or, as it is often expressed, on the proportion between population and capital. By population is here meant the number only of the laboring-class, or rather of those who work for hire; and by capital, only circulating capital, and not even the whole of that, but the part which is expended in the direct purchase of labor. To this, however, must be added all funds which, without forming a part of capital, are paid in exchange for labor, such as the wages of soldiers, domestic servants, and all other unproductive laborers. There is unfortunately no mode of expressing, by one familiar term, the aggregate of what may be called the wages-fund of a country: and, as the wages of productive labor form nearly the whole of that fund, it is usual to overlook the smaller and less important part, and to say that wages depend on population and capital. It will be convenient to employ this expression, remembering, however, to consider it as elliptical, and not as a literal statement of the entire truth.

With these limitations of the terms, wages not only depend upon the relative amount of capital and population, but can not, under the rule of competition, be affected by anything else. Wages (meaning, of course, the general rate) can not rise, but by an increase of the aggregate funds employed in hiring laborers, or a diminution in the number of the competitors for hire; nor fall, except either by a diminution of the funds devoted to paying labor, or by an increase in the number of laborers to be paid.

Illustration: Pie chart of Fixed Capital, Raw Materials, and Wages Fund.

This is the simple statement of the well-known Wages-Fund Theory, which has given rise to no little animated discussion. Few economists now assent to this doctrine when stated as above, and without changes. The first attack on this explanation of the rate of wages came from what is now a very scarce pamphlet, written by F. D. Longe, entitled “A Refutation of the Wage-Fund Theory of Modern Political Economy” (1866). Because laborers do not really compete with each other, he [pg 179]regarded the idea of average wages as absurd as the idea of an average price of ships and cloth; he declared that there was no predetermined wages-fund necessarily expended on labor; and that “demand for commodities” determined the amount of wealth devoted to paying wages (p. 46). While the so-called wages-fund limits the total amount which the laborers can receive, the employer would try to get his workmen at as much less than that amount as possible, so that the aggregate fund would have no bearing on the actual amount paid in wages. The quantity of work to be done, he asserts, determines the quantity of labor to be employed. About the same time (but unknown to Mr. Longe), W. T. Thornton was studying the same subject, and attracted considerable attention by his publication, “On Labor” (1868), which in Book II, Chap. I, contained an extended argument to show that demand and supply (i.e., the proportion between wages-fund and laborers) did not regulate wages, and denied the existence of a predetermined wages-fund fixed in amount. His attack, however, assumes a very different conception of an economic law from that which we think right to insist upon. The character of mankind being what it is, it will be for their interest to invest so much and no more in labor, and we must believe that in this sense there is a predetermination of wealth to be paid in wages. In order to make good investments, a certain amount must, if capitalists follow their best interests, go to the payment of labor.162 Mr. Thornton's argument attracted the more attention because Mr. Mill163 admitted that Mr. Thornton had induced him to abandon his Wages-Fund Theory. The subject was, however, taken up, re-examined by Mr. Cairnes,164 and stated in a truer form. (1.) The total wealth of a country (circle A in the diagram) is the outside limit of its capital. How much capital will be saved out of this depends upon the effective desire of accumulation in the community (as set forth in Book I, Chap. VIII). The size of circle B within circle A, therefore, depends on the character of the people. The wages-fund, then, depends ultimately on the extent of A, and proximately on the extent of B. It can never [pg 180]be larger than B. So far, at least, its amount is “predetermined” in the economic sense by general laws regarding the accumulation of capital and the expectation of profit. Circle B contracts and expands under influences which have nothing to do with the immediate bargains between capitalists and laborers. (2.) Another influence now comes in to affect the amount of capital actually paid as wages, one also governed by general causes outside the reach of laborer or capitalist, that is, the state of the arts of production. In production, the particular conditions of each industry will determine how much capital is to be set apart for raw material, how much for machinery, buildings, and all forms of fixed capital, and how many laborers will be assigned to a given machine for a given amount of material. With some kinds of hand-made goods the largest share of capital goes to wages, a less amount for materials, and a very small proportion for machinery and tools. In many branches of agriculture and small farming this holds true. The converse, however, is true in many manufactures, where machinery is largely used. No two industries will maintain the same proportion between the three elements. The nature of the industry, therefore, will determine whether a greater or a less share of capital will be spent in wages. It is needless to say that this condition of things is not one to be changed at the demand of either of the two parties to production, Labor and Capital; it responds only to the advance of mechanical science or general intelligence. It is impossible, then, to escape the conclusion that general causes restrict the amount which will, under any normal investment, go to the payment of wages. Only within the limits set by these forces can any further expansion or contraction take place. (3.) Within these limits, of course, minor changes may take place, so that the fund can not be said to be “fixed” or “absolutely predetermined”; but these changes must take place within such narrow limits that they do not much affect the practical side of the question. How these changes act, may be seen in a part of the following illustration of the above principles:

Suppose a cotton-mill established in one of the valleys of Vermont, for the management of which the owner has $140,000 of capital. Of this, $100,000 is given for buildings, machinery, and plant. If he turns over his remaining capital ($40,000) each month, we will suppose that $28,000 spent in raw materials will keep five hundred men occupied at a monthly expenditure of $12,000. The present state of cotton-manufacture itself settles the relation between a given quantity of raw cotton and a certain amount of machinery. A fixed amount of cotton, no more, no less, can be spun by each spindle and woven by each loom; and the nature of the process determines [pg 181]the number of laborers to each machine. This proportion is something which an owner must obey, if he expects to compete with other manufacturers: the relationship is fixed for, not by, him. Now, each of the five hundred laborers being supposed to receive on an average $1.00 a day, imagine an influx of a body of French Canadians who offer to work, on an average, for eighty cents a day.165 The five hundred men will now receive but $9,600 monthly instead of $12,000, as before, as a wages-fund; the monthly payment for wages now is nearly seven per cent, while formerly it was nearly nine per cent of the total capital invested ($140,000). Thus it will be seen that the wages-fund can change with a change in the supply of labor: but the point to be noticed is that it is a change in the subdivision, $12,000, of the total $140,000. That is, this alteration can take place only within the limits set by the nature of the industry. Now, if this $2,400 (i.e., $12,000 less $9,600) saved out of the wages-fund were to be reinvested, it must necessarily be divided between raw materials, fixed capital, and wages in the existing relations, that is, only seven per cent of the new $2,400 would be added to the wages-fund. It is worth while calling attention to this, if for no other reason than to show that in this way a change can be readily made in the wages-fund by natural movements; and that no one can be so absurd as to say that it is absolutely fixed in amount. But it certainly is “predetermined” in the economic sense, in that any reinvestments, as well as former funds, must necessarily be distributed according to the above general principles, independent of the “higgling” in the labor market. The following is Mr. Cairnes's statement of the amount and “predetermination” of the wages-fund:

“I believe that, in the existing state of the national wealth, the character of Englishmen being what it is, a certain prospect of profit will ‘determine’ a certain proportion of this wealth to productive investment; that the amount thus ‘determined’ will increase as the field for investment is extended, and that it will not increase beyond what this field can find employment for at that rate of profit which satisfies English commercial expectation. Further, I believe that, investment thus taking place, the form which it shall assume will be ‘determined’ by the nature of the national industries—‘determined,’ not under acts of Parliament, or in virtue of any physical law, but through the influence of the investor's interests; while this, the form of the investment, will again ‘determine’ the proportion of the whole capital which shall be paid as [pg 182]wages to laborers.”166 In this excellent and masterly conception, the doctrine of a wages-fund is not open to the objections usually urged against it. Indeed, with the exception of Professor Fawcett, scarcely any economist believes in an absolutely fixed wages-fund. In this sense, then, and in view of the above explanation, it will be understood what is meant by saying that wages depend upon the proportion of the wages-fund to the number of the wage-receivers.167

In applying these principles to the question of strikes, it is evident enough that if they result in an actual expansion of the whole circle B, by forcing saving from unproductive expenditure, a real addition, of some extent, may be made to the wages-fund; but only by increasing the total capital. If, however, they attempt to increase one of the elements of capital, the wages-fund, without also adding to the other elements, fixed capital and materials, in the proportion fixed by the nature of the industry, they will destroy all possibility of continuing that production in the normal way, and the capitalist must withdraw from the enterprise.

Francis A. Walker168 has also offered a solution of this problem in his “Wages Question” (1876), in which he holds that “wages are, in a philosophical view of the subject, paid out of the product of present industry, and hence that production furnishes the true measure of wages” (p. 128). “It is the prospect of a profit in production which determines the employer to hire laborers; it is the anticipated value of the product which determines how much he can pay him” (p. 144). No doubt wages can be (and often are) paid out of the current product; but what amount? What is the principle of distribution? Wherever the incoming product is a moral certainty (and, unless this is true, in no case could wages be paid out of the future product), saving is as effective upon it as upon the actual accumulations of the past; and the amount of the coming product which will be saved and used as capital is determined by the same principles which govern the saving of past products. An increase of circle A by a larger production makes possible an increase of circle B, but whether it will be enlarged [pg 183]or not depends on the principle of accumulation. The larger the total production of wealth, the greater the possible wages, all must admit; but it does not seem clear that General Walker has given us a solution of the real question at issue. The larger the house you build, the larger the rooms may be; but it does not follow that the rooms will be necessarily large—as any inmate of a summer hotel will testify.

§ 3. Examination of some popular Opinions respecting Wages.

There are, however, some facts in apparent contradiction to this [the Wages-Fund] doctrine, which it is incumbent on us to consider and explain.

1. For instance, it is a common saying that wages are high when trade is good. The demand for labor in any particular employment is more pressing, and higher wages are paid, when there is a brisk demand for the commodity produced; and the contrary when there is what is called a stagnation: then work-people are dismissed, and those who are retained must submit to a reduction of wages; though in these cases there is neither more nor less capital than before. This is true; and is one of those complications in the concrete phenomena which obscure and disguise the operation of general causes; but it is not really inconsistent with the principles laid down. Capital which the owner does not employ in purchasing labor, but keeps idle in his hands, is the same thing to the laborers, for the time being, as if it did not exist. All capital is, from the variations of trade, occasionally in this state. A manufacturer, finding a slack demand for his commodity, forbears to employ laborers in increasing a stock which he finds it difficult to dispose of; or if he goes on until all his capital is locked up in unsold goods, then at least he must of necessity pause until he can get paid for some of them. But no one expects either of these states to be permanent; if he did, he would at the first opportunity remove his capital to some other occupation, in which it would still continue to employ labor. The capital remains unemployed for a time, during which the labor market is overstocked, and wages fall. Afterward the demand revives, and perhaps becomes unusually brisk, enabling the manufacturer to sell his commodity [pg 184]even faster than he can produce it; his whole capital is then brought into complete efficiency, and, if he is able, he borrows capital in addition, which would otherwise have gone into some other employment. These, however, are but temporary fluctuations: the capital now lying idle will next year be in active employment, that which is this year unable to keep up with the demand will in its turn be locked up in crowded warehouses; and wages in these several departments will ebb and flow accordingly: but nothing can permanently alter general wages, except an increase or a diminution of capital itself (always meaning by the term, the funds of all sorts, destined for the payment of labor) compared with the quantity of labor offering itself to be hired.

2. Again, it is another common notion that high prices make high wages; because the producers and dealers, being better off, can afford to pay more to their laborers. I have already said that a brisk demand, which causes temporary high prices, causes also temporary high wages. But high prices, in themselves, can only raise wages if the dealers, receiving more, are induced to save more, and make an addition to their capital, or at least to their purchases of labor. Wages will probably be temporarily higher in the employment in which prices have risen, and somewhat lower in other employments: in which case, while the first half of the phenomenon excites notice, the other is generally overlooked, or, if observed, is not ascribed to the cause which really produced it. Nor will the partial rise of wages last long: for, though the dealers in that one employment gain more, it does not follow that there is room to employ a greater amount of savings in their own business: their increasing capital will probably flow over into other employments, and there counterbalance the diminution previously made in the demand for labor by the diminished savings of other classes.

A clear distinction must be made between real wages and money wages; the former is of importance to the laborer as being his real receipts. The quantity of commodities satisfying [pg 185]his desires which the laborer receives for his exertion constitutes his real wages. The mere amount of money he receives for his exertions, irrespective of what the money will exchange for, forms his money wages. Since the functions of money have not yet been explained, it is difficult to discuss the relation between prices and money wages here. But, as the total value of the products in a certain industry is the sum out of which both money wages and profits are paid, this total will rise or fall (efficiency of labor remaining the same) with the price of the particular article. If the price rises, profits will be greater than elsewhere, and more capital will be invested in that one business; that is, the capital will be a demand for more labor, and, until equalization is accomplished in all trades between wages and profits, money wages will be higher in some trades than in others.169

When reference is had to the connection between real wages and prices, the question is a different one. General high prices would not change general real wages. But if high prices cause higher money wages in particular branches of trade, then, because the movement is not general, there will accrue, to those receiving more money, the means to buy more of real wages. And, as in practice, changes in prices which arise from an increased demand are partial, and not general, it often happens that high prices produce high real wages (not general high wages) in some, not in all employments. (For a further study of this relation between prices and wages the reader is advised to recall this discussion in connection with that in a later part of the volume, Book III, Chaps. XX and XXI.)

3. Another opinion often maintained is, that wages (meaning of course money wages) vary with the price of food; rising when it rises, and falling when it falls. This opinion is, I conceive, only partially true; and, in so far as true, in no way affects the dependence of wages on the proportion between capital and labor: since the price of food, when it affects wages at all, affects them through that law. Dear or cheap food caused by variety of seasons does not affect wages (unless they are artificially adjusted to it by law or charity): or rather, it has some tendency to affect them in the contrary way to that supposed; since in times of scarcity people generally compete more violently for employment, and lower the labor market against themselves. But dearness [pg 186]or cheapness of food, when of a permanent character, and capable of being calculated on beforehand, may affect wages. (1.) In the first place, if the laborers have, as is often the case, no more than enough to keep them in working condition and enable them barely to support the ordinary number of children, it follows that, if food grows permanently dearer without a rise of wages, a greater number of the children will prematurely die; and thus wages will ultimately be higher, but only because the number of people will be smaller, than if food had remained cheap. (2.) But, secondly, even though wages were high enough to admit of food's becoming more costly without depriving the laborers and their families of necessaries; though they could bear, physically speaking, to be worse off, perhaps they would not consent to be so. They might have habits of comfort which were to them as necessaries, and sooner than forego which, they would put an additional restraint on their power of multiplication; so that wages would rise, not by increase of deaths but by diminution of births. In these cases, then, wages do adapt themselves to the price of food, though after an interval of almost a generation.170 If wages were previously so high that they could bear reduction, to which the obstacle was a high standard of comfort habitual among the laborers, a rise of the price of food, or any other disadvantageous change in their circumstances, may operate in two ways: (a) it may correct itself by a rise of wages, brought about through a gradual effect on the prudential check to population; or (b) it may permanently lower the standard of living of the class, in case their previous habits in respect of population prove stronger than their previous habits in respect of comfort. In that case the injury done to them will be permanent, and their deteriorated condition will become a new minimum, tending to perpetuate [pg 187]itself as the more ample minimum did before. It is to be feared that, of the two modes in which the cause may operate, the last (b) is the most frequent, or at all events sufficiently so to render all propositions, ascribing a self-repairing quality to the calamities which befall the laboring-classes, practically of no validity.

The converse case occurs when, by improvements in agriculture, the repeal of corn laws, or other such causes, the necessaries of the laborers are cheapened, and they are enabled with the same [money] wages to command greater comforts than before. Wages will not fall immediately: it is even possible that they may rise; but they will fall at last, so as to leave the laborers no better off than before, unless during this interval of prosperity the standard of comfort regarded as indispensable by the class is permanently raised. Unfortunately this salutary effect is by no means to be counted upon: it is a much more difficult thing to raise, than to lower, the scale of living which the laborers will consider as more indispensable than marrying and having a family. According to all experience, a great increase invariably takes place in the number of marriages in seasons of cheap food and full employment.

This is to be seen by some brief statistics of marriages in Vermont and Massachusetts.

Year. / Vermont / Massachusetts

1860 / 2,179 / 12,404
1861 / 2,188 / 10,972
1862 / 1,962 / 11,014
1863 / 2,007 / 10,873
1864 / 1,804 / 12,513
1865 / 2,569 / 13,052
1866 / 3,001 / 14,428
1867 / 2,857 / 14,451

In Vermont, while the average number of marriages was reached in 1860 and 1861, it fell off on the breaking out of the war; rose in 1863, under the fair progress of the Northern arms; again fell off in 1864, during the period of discouragement; and since 1865 has kept a steadily higher average. In manufacturing Massachusetts the number fell earlier than in agricultural Vermont, at the beginning of the difficulties.

1856, July to Jan. / 6,418
1857, Jan. to July / 5,803
1857, July to Jan. / 5,936
1858, Jan. to July / 4,917
1858, July to Jan. / 5,610

The effects of the financial panic of 1857, in Massachusetts, [pg 188]show a similar movement in the number of marriages. The crisis came in October, 1857. In the three months following that date there were 400 less marriages.

To produce permanent advantage, the temporary cause operating upon them must be sufficient to make a great change in their condition—a change such as will be felt for many years, notwithstanding any stimulus which it may give during one generation to the increase of people. When, indeed, the improvement is of this signal character, and a generation grows up which has always been used to an improved scale of comfort, the habits of this new generation in respect to population become formed upon a higher minimum, and the improvement in their condition becomes permanent.

§ 4. Certain rare Circumstances excepted, High Wages imply Restraints on Population.

Wages depend, then, on the proportion between the number of the laboring population and the capital or other funds devoted to the purchase of labor; we will say, for shortness, the capital. If wages are higher at one time or place than at another, if the subsistence and comfort of the class of hired laborers are more ample, it is for no other reason than because capital bears a greater proportion to population. It is not the absolute amount of accumulation or of production that is of importance to the laboring-class; it is not the amount even of the funds destined for distribution among the laborers; it is the proportion between those funds and the numbers among whom they are shared. The condition of the class can be bettered in no other way than by altering that proportion to their advantage: and every scheme for their benefit which does not proceed on this as its foundation is, for all permanent purposes, a delusion.

In countries like North America and the Australian colonies, where the knowledge and arts of civilized life and a high effective desire of accumulation coexist with a boundless extent of unoccupied land, the growth of capital easily keeps pace with the utmost possible increase of population, and is chiefly retarded by the impracticability of obtaining laborers enough. All, therefore, who can possibly be born can find employment without overstocking the market: every [pg 189]laboring family enjoys in abundance the necessaries, many of the comforts, and some of the luxuries of life; and, unless in case of individual misconduct, or actual inability to work, poverty does not, and dependence need not, exist. [In England] so gigantic has been the progress of the cotton manufacture since the inventions of Watt and Arkwright, that the capital engaged in it has probably quadrupled in the time which population requires for doubling. While, therefore, it has attracted from other employments nearly all the hands which geographical circumstances and the habits or inclinations of the people rendered available; and while the demand it created for infant labor has enlisted the immediate pecuniary interest of the operatives in favor of promoting, instead of restraining, the increase of population; nevertheless wages in the great seats of the manufacture are still so high that the collective earnings of a family amount, on an average of years, to a very satisfactory sum; and there is as yet no sign of decrease, while the effect has also been felt in raising the general standard of agricultural wages in the counties adjoining.

But those circumstances of a country, or of an occupation, in which population can with impunity increase at its utmost rate, are rare and transitory. Very few are the countries presenting the needful union of conditions. Either the industrial arts are backward and stationary, and capital therefore increases slowly, or, the effective desire of accumulation being low, the increase soon reaches its limit; or, even though both these elements are at their highest known degree, the increase of capital is checked, because there is not fresh land to be resorted to of as good quality as that already occupied. Though capital should for a time double itself simultaneously with population, if all this capital and population are to find employment on the same land, they can not, without an unexampled succession of agricultural inventions, continue doubling the produce; therefore, if wages do not fall, profits must; and, when profits fall, increase of capital is slackened.

Except, therefore, in the very peculiar cases which I have [pg 190]just noticed, of which the only one of any practical importance is that of a new colony, or a country in circumstances equivalent to it, it is impossible that population should increase at its utmost rate without lowering wages. In no old country does population increase at anything like its utmost rate; in most, at a very moderate rate: in some countries, not at all. These facts are only to be accounted for in two ways. Either the whole number of births which nature admits of, and which happen in some circumstances, do not take place; or, if they do, a large proportion of those who are born, die. The retardation of increase results either from mortality or prudence; from Mr. Malthus's positive, or from his preventive check: and one or the other of these must and does exist, and very powerfully too, in all old societies. Wherever population is not kept down by the prudence either of individuals or of the state, it is kept down by starvation or disease.

§ 5. Due Restriction of Population the only Safeguard of a Laboring-Class.

Where a laboring-class who have no property but their daily wages, and no hope of acquiring it, refrain from over-rapid multiplication, the cause, I believe, has always hitherto been, either actual legal restraint, or a custom of some sort which, without intention on their part, insensibly molds their conduct, or affords immediate inducements not to marry. It is not generally known in how many countries of Europe direct legal obstacles are opposed to improvident marriages.

Where there is no general law restrictive of marriage, there are often customs equivalent to it. When the guilds or trade corporations of the middle ages were in vigor, their by-laws or regulations were conceived with a very vigilant eye to the advantage which the trade derived from limiting competition; and they made it very effectually the interest of artisans not to marry until after passing through the two stages of apprentice and journeyman, and attaining the rank of master.

Unhappily, sentimentality rather than common sense usually presides over the discussions of these subjects. Discussions [pg 191]on the condition of the laborers, lamentations over its wretchedness, denunciations of all who are supposed to be indifferent to it, projects of one kind or another for improving it, were in no country and in no time of the world so rife as in the present generation; but there is a tacit agreement to ignore totally the law of wages, or to dismiss it in a parenthesis, with such terms as “hard-hearted Malthusianism”; as if it were not a thousand times more hard-hearted to tell human beings that they may, than that they may not, call into existence swarms of creatures who are sure to be miserable, and most likely to be depraved!

I ask, then, is it true or not, that if their numbers were fewer they would obtain higher wages? This is the question, and no other: and it is idle to divert attention from it, by attacking any incidental position of Malthus or some other writer, and pretending that to refute that is to disprove the principle of population. Some, for instance, have achieved an easy victory over a passing remark of Mr. Malthus, hazarded chiefly by way of illustration, that the increase of food may perhaps be assumed to take place in an arithmetical ratio, while population increases in a geometrical: when every candid reader knows that Mr. Malthus laid no stress on this unlucky attempt to give numerical precision to things which do not admit of it, and every person capable of reasoning must see that it is wholly superfluous to his argument. Others have attached immense importance to a correction which more recent political economists have made in the mere language of the earlier followers of Mr. Malthus. Several writers had said that it is the tendency of population to increase faster than the means of subsistence. The assertion was true in the sense in which they meant it, namely, that population would in most circumstances increase faster than the means of subsistence, if it were not checked either by mortality or by prudence. But inasmuch as these checks act with unequal force at different times and places, it was possible to interpret the language of these writers as if they had meant that population is usually [pg 192]gaining ground upon subsistence, and the poverty of the people becoming greater. Under this interpretation of their meaning, it was urged that the reverse is the truth: that as civilization advances, the prudential check tends to become stronger, and population to slacken its rate of increase, relatively to subsistence; and that it is an error to maintain that population, in any improving community, tends to increase faster than, or even so fast as, subsistence.171 The word tendency172 is here used in a totally different sense from that of the writers who affirmed the proposition; but waiving the verbal question, is it not allowed, on both sides, that in old countries population presses too closely upon the means of subsistence?
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Re: Principles Of Political Economy, by John Stuart Mill

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Chapter III. Of Remedies For Low Wages.

§ 1. A Legal or Customary Minimum of Wages, with a Guarantee of Employment.

The simplest expedient which can be imagined for keeping the wages of labor up to the desirable point would be to fix them by law; and this is virtually the object aimed at in a variety of plans which have at different times been, or still are, current, for remodeling the relation between laborers and employers. No one, probably, ever suggested that wages should be absolutely fixed, since the interests of all concerned often require that they should be variable; but some have proposed to fix a minimum of wages, leaving the variations above that point to be adjusted by competition. Another plan, which has found many advocates among the leaders of the operatives, is that councils should be formed, which in England have been called local boards of trade, in France “conseils de prud'hommes,” and other names; consisting of delegates from the work-people and from the employers, who, meeting in conference, should agree upon a rate of wages, and promulgate it from authority, to be binding generally on employers and workmen; the ground of decision being, not the state of the labor market, but natural equity; to provide that the workmen shall have reasonable wages, and the capitalist reasonable profits.

The one expedient most suggested by politicians and labor-reformers in the United States is an eight-hour law, mandatory upon all employers. It is to be remembered, however, that in very many industries piece-work exists, and if a diminution of hours is enforced, that will mean a serious reduction in the amount of wages which can be possibly earned in a day. [pg 194]Even if all industries were alike in the matter of arranging their work, this plan means higher wages for the same work, or the same wages for less work, and so an increased cost of labor. This would, then, take its effect on profits at once; and the effects would be probably seen in a withdrawal of capital from many industries, where, as now, the profits are very low. It must be recalled, however, that in the United States there has been, under the influence of natural causes, unaided by legislation, a very marked reduction in the hours of labor, accompanied by an increase of wages. For example, in 1840, Rhode Island operatives in the carding-room of the cotton-mills worked fourteen hours a day for $3.28 a week, while in 1884 they work eleven hours and receive $5.40 a week. This result is most probably due to the gain arising from the invention of labor-saving machinery.

Others again (but these are rather philanthropists interesting themselves for the laboring-classes, than the laboring people themselves) are shy of admitting the interference of authority in contracts for labor: they fear that if law intervened, it would intervene rashly and ignorantly; they are convinced that two parties, with opposite interests, attempting to adjust those interests by negotiation through their representatives on principles of equity, when no rule could be laid down to determine what was equitable, would merely exasperate their differences instead of healing them; but what it is useless to attempt by the legal sanction, these persons desire to compass by the moral. Every employer, they think, ought to give sufficient wages; and if he does it not willingly, should be compelled to it by general opinion; the test of sufficient wages being their own feelings, or what they suppose to be those of the public. This is, I think, a fair representation of a considerable body of existing opinion on the subject.

I desire to confine my remarks to the principle involved in all these suggestions, without taking into account practical difficulties, serious as these must at once be seen to be. I shall suppose that by one or other of these contrivances wages could be kept above the point to which they would be brought by competition. This is as much as to say, above the highest rate which can be afforded by the existing capital [pg 195]consistently with employing all the laborers. For it is a mistake to suppose that competition merely keeps down wages. It is equally the means by which they are kept up. When there are any laborers unemployed, these, unless maintained by charity, become competitors for hire, and wages fall; but when all who were out of work have found employment, wages will not, under the freest system of competition, fall lower. There are strange notions afloat concerning the nature of competition. Some people seem to imagine that its effect is something indefinite; that the competition of sellers may lower prices, and the competition of laborers may lower wages, down to zero, or some unassignable minimum. Nothing can be more unfounded. Goods can only be lowered in price by competition to the point which calls forth buyers sufficient to take them off; and wages can only be lowered by competition until room is made to admit all the laborers to a share in the distribution of the wages-fund. If they fell below this point, a portion of capital would remain unemployed for want of laborers; a counter-competition would commence on the side of capitalists, and wages would rise.

The assumption in the last chapter in regard to competition and custom should be kept in mind in all this reasoning. As a matter of fact, there is not that mobility of labor which insures so free an operation of competition that equality of payment always exists. In reality there is no competition at all between the lower grades of laborers and the higher classes of skilled labor. Of course, the tendency is as explained by Mr. Mill, and as time goes on there is a distinctly greater mobility of labor visible. Vast numbers pass from Scandinavia and other countries of Europe to the United States, or from England to Australia, urged by the desire to go from a community of low to one of higher wages.

Since, therefore, the rate of wages which results from competition distributes the whole wages-fund among the whole laboring population, if law or opinion succeeds in fixing wages above this rate, some laborers are kept out of employment; and as it is not the intention of the philanthropists that these should starve, they must be provided for [pg 196]by a forced increase of the wages-fund—by a compulsory saving. It is nothing to fix a minimum of wages unless there be a provision that work, or wages at least, be found for all who apply for it. This, accordingly, is always part of the scheme, and is consistent with the ideas of more people than would approve of either a legal or a moral minimum of wages. Popular sentiment looks upon it as the duty of the rich, or of the state, to find employment for all the poor. If the moral influence of opinion does not induce the rich to spare from their consumption enough to set all the poor at work at “reasonable wages,” it is supposed to be incumbent on the state to lay on taxes for the purpose, either by local rates or votes of public money. The proportion between labor and the wages-fund would thus be modified to the advantage of the laborers, not by restriction of population, but by an increase of capital.

§ 2. —Would Require as a Condition Legal Measures for Repression of Population.

If this claim on society could be limited to the existing generation; if nothing more were necessary than a compulsory accumulation, sufficient to provide permanent employment at ample wages for the existing numbers of the people; such a proposition would have no more strenuous supporter than myself. Society mainly consists of those who live by bodily labor; and if society, that is, if the laborers, lend their physical force to protect individuals in the enjoyment of superfluities, they are entitled to do so, and have always done so, with the reservation of a power to tax those superfluities for purposes of public utility; among which purposes the subsistence of the people is the foremost. Since no one is responsible for having been born, no pecuniary sacrifice is too great to be made by those who have more than enough, for the purpose of securing enough to all persons already in existence.

But it is another thing altogether when those who have produced and accumulated are called upon to abstain from consuming until they have given food and clothing, not only to all who now exist, but to all whom these or their descendants may think fit to call into existence. Such an obligation [pg 197]acknowledged and acted upon, would suspend all checks, both positive and preventive; there would be nothing to hinder population from starting forward at its rapidest rate; and as the natural increase of capital would, at the best, not be more rapid than before, taxation, to make up the growing deficiency, must advance with the same gigantic strides. But let them work ever so efficiently, the increasing population could not, as we have so often shown, increase the produce proportionally; the surplus, after all were fed, would bear a less and less proportion to the whole produce and to the population: and the increase of people going on in a constant ratio, while the increase of produce went on in a diminishing ratio, the surplus would in time be wholly absorbed; taxation for the support of the poor would engross the whole income of the country; the payers and the receivers would be melted down into one mass.

It would be possible for the state to guarantee employment at ample wages to all who are born. But if it does this, it is bound in self-protection, and for the sake of every purpose for which government exists, to provide that no person shall be born without its consent. To give profusely to the people, whether under the name of charity or of employment, without placing them under such influences that prudential motives shall act powerfully upon them, is to lavish the means of benefiting mankind without attaining the object. But remove the regulation of their wages from their own control; guarantee to them a certain payment, either by law or by the feeding of the community; and no amount of comfort that you can give them will make either them or their descendants look to their own self-restraint as the proper means for preserving them in that state.

The famous poor-laws of Elizabeth, enacted in 1601, were at first intended to relieve the destitute poor, sick, aged, and impotent, but in their administration a share was given to all who begged it. Employers, of course, found it cheaper to hire labor partly paid for by the parish, and the independent farm-laborer who would not go on the parish found his own wages lowered by this kind of competition. This continued a crying [pg 198]evil until it reached the proportions described by May: “As the cost of pauperism, thus encouraged, was increasing, the poorer rate-payers were themselves reduced to poverty. The soil was ill-cultivated by pauper labor, and its rental consumed by parish rates. In a period of fifty years, the poor-rates were quadrupled, and had reached, in 1833, the enormous amount of £8,600,000. In many parishes they were approaching the annual value of the land itself.”173 The old poor-laws were repealed, and there went into effect in 1834 the workhouse system, which, while not denying subsistence to all those born, required that the giving of aid should be made as disagreeable as possible, in order to stimulate among the poor a feeling of repugnance to all aid from the community. This is also the general idea of poor-relief in the United States.

The cultivation of the principle of self-help in each laborer is certainly the right object at which to aim. In the United States voluntary charitable organizations have associated together, in some cities, in order to scrutinize all cases of poverty through a number of visitors in each district, who advise and counsel the unfortunate, but never give money. This system has been very successful, and, by basing its operations on the principle of self-help, has given the best proof of its right to an increasing influence.

§ 3. Allowances in Aid of Wages and the Standard of Living.

Next to the attempts to regulate wages, and provide artificially that all who are willing to work shall receive an adequate price for their labor, we have to consider another class of popular remedies, which do not profess to interfere with freedom of contract; which leave wages to be fixed by the competition of the market, but, when they are considered insufficient, endeavor by some subsidiary resource to make up to the laborers for the insufficiency. Of this nature was the allowance system. The principle of this scheme being avowedly that of adapting the means of every family to its necessities, it was a natural consequence that more should be given to the married than to the single, and to those who had large families than to those who had not: in fact, an allowance was usually granted for every child. It is obvious that this is merely another mode of fixing a minimum of wages.

There is a rate of wages, either the lowest on which the [pg 199]people can, or the lowest on which they will consent, to live. We will suppose this to be seven shillings a week. Shocked at the wretchedness of this pittance, the parish authorities humanely make it up to ten. But the laborers are accustomed to seven, and though they would gladly have more, will live on that (as the fact proves) rather than restrain the instinct of multiplication. Their habits will not be altered for the better by giving them parish pay. Receiving three shillings from the parish, they will be as well off as before, though they should increase sufficiently to bring down wages to four shillings. They will accordingly people down to that point; or, perhaps, without waiting for an increase of numbers, there are unemployed laborers enough in the workhouse to produce the effect at once. It is well known that the allowance system did practically operate in the mode described, and that under its influence wages sank to a lower rate than had been known in England before.

The operation of a low standard upon the wages of those in the community who have a higher one, has been seen in the United States to a certain extent by the landing on our shores of Chinese laborers, who maintain a decidedly lower standard of living than either their American or Irish competitors. If they come in such numbers as to retain their lower standard by forming a group by themselves, and are thereby not assimilated into the body of laborers who have a higher standard of comfort, they can, to the extent of their ability to do work, drive other laborers out of employment. This, moreover, is exactly what was done by the Irish, who drove Americans out of the mills of New England, and who are now being driven out, probably, by the French Canadians, with a standard lower than the Irish. The Chinese come here now without their families, as may be seen by the accompanying diagram, in which the shaded side represents the males on the left, and the unshaded the females on the right, of the perpendicular line.

Decade. / Males. / Females.

1 / 6 / 4
2 / 106 / 12
3 / 351 / 37
4 / 283 / 15
5 / 139 / 3
6 / 32 / 1
7 / 10 / 0
8 / 1 / 0
9 / 0 / 0

The horizontal lines show the ages, the largest number being about thirty years of age. It will be noted how many come in the prime of life, and how few children and females there are.

It need hardly be said that the economic side of a question is here discussed, which requires for its solution many ethical and political considerations besides.

§ 4. Grounds for Expecting Improvement in Public Opinion on the Subject of Population.

By what means, then, is poverty to be contended against? How is the evil of low wages to be remedied? If the expedients usually recommended for the purpose are not adapted to it, can no others be thought of? Is the problem incapable of solution? Can political economy do nothing, but only object to everything, and demonstrate that nothing can be done? Those who think it hopeless that the laboring-classes should be induced to practice a sufficient degree of prudence in regard to the increase of their families, because they have hitherto stopped short of that point, show an inability to estimate the ordinary principles of human action. Nothing more would probably be necessary to secure that result, than an opinion generally diffused that it was desirable.

But let us try to imagine what would happen if the idea became general among the laboring-class that the competition of too great numbers was the principal cause of their poverty. We are often told that the most thorough perception of the dependence of wages on population will not influence the conduct of a laboring-man, because it is not the children he himself can have that will produce any effect in generally depressing the labor market. True, and it is also true that one soldier's running away will not lose the battle; accordingly, it is not that consideration which keeps each soldier in his rank: it is the disgrace which naturally and inevitably attends on conduct by any one individual which, if pursued by a majority, everybody can see would be fatal. Men are seldom found to brave the general opinion of their class, unless supported either by some principle higher than regard for opinion, or by some strong body of opinion elsewhere.

If the opinion were once generally established among the [pg 201]laboring-class that their welfare required a due regulation of the numbers of families, the respectable and well-conducted of the body would conform to the prescription, and only those would exempt themselves from it who were in the habit of making light of social obligations generally; and there would be then an evident justification for converting the moral obligation against bringing children into the world, who are a burden to the community, into a legal one; just as in many other cases of the progress of opinion, the law ends by enforcing against recalcitrant minorities obligations which, to be useful, must be general, and which, from a sense of their utility, a large majority have voluntarily consented to take upon themselves.

The dependence of wages on the number of the competitors for employment is so far from hard of comprehension, or unintelligible to the laboring-classes, that by great bodies of them it is already recognized and habitually acted on. It is familiar to all trades-unions: every successful combination to keep up wages owes its success to contrivances for restricting the number of competitors; all skilled trades are anxious to keep down their own numbers, and many impose, or endeavor to impose, as a condition upon employers, that they shall not take more than a prescribed number of apprentices. There is, of course, a great difference between limiting their numbers by excluding other people, and doing the same thing by a restraint imposed on themselves; but the one as much as the other shows a clear perception of the relation between their numbers and their remuneration. The principle is understood in its application to any one employment, but not to the general mass of employment. For this there are several reasons: first, the operation of causes is more easily and distinctly seen in the more circumscribed field; secondly, skilled artisans are a more intelligent class than ordinary manual laborers; and the habit of concert, and of passing in review their general condition as a trade, keeps up a better understanding of their collective interests; thirdly and lastly, they are the most [pg 202]provident, because they are the best off, and have the most to preserve.

§ 5. Twofold means of Elevating the Habits of the Laboring-People; by Education, and by Foreign and Home Colonization.

For the purpose, therefore, of altering the habits of the laboring people, there is need of a twofold action, directed simultaneously upon their intelligence and their poverty. An effective national education of the children of the laboring-class is the first thing needful; and, coincidently with this, a system of measures which shall (as the Revolution did in France) extinguish extreme poverty for one whole generation. Without entering into disputable points, it may be asserted without scruple that the aim of all intellectual training for the mass of the people should be to cultivate common sense; to qualify them for forming a sound practical judgment of the circumstances by which they are surrounded. [But] education is not compatible with extreme poverty. It is impossible effectually to teach an indigent population. Toward effecting this object there are two resources available, without wrong to any one, without any of the liabilities of mischief attendant on voluntary or legal charity, and not only without weakening, but on the contrary strengthening, every incentive to industry, and every motive to forethought.

The first is a great national measure of colonization. I mean, a grant of public money, sufficient to remove at once, and establish in the colonies, a considerable fraction of the youthful agricultural population. It has been shown by others that colonization on an adequate scale might be so conducted as to cost the country nothing, or nothing that would not be certainly repaid; and that the funds required, even by way of advance, would not be drawn from the capital employed in maintaining labor, but from that surplus which can not find employment at such profit as constitutes an adequate remuneration for the abstinence of the possessor, and which is therefore sent abroad for investment, or wasted at home in reckless speculations.

The second resource would be to devote all common land, hereafter brought into cultivation, to raising a class of [pg 203]small proprietors. What I would propose is, that common land should be divided into sections of five acres or thereabout, to be conferred in absolute property on individuals of the laboring-class who would reclaim and bring them into cultivation by their own labor.

This suggestion works to the same purpose as the proposal that our Government should retain its public lands and aid in the formation of a great number of small farmers, rather than, by huge grants, to foster large holdings in the Western States and Territories.174

The preference should be given to such laborers, and there are many of them, as had saved enough to maintain them until their first crop was got in, or whose character was such as to induce some responsible person to advance to them the requisite amount on their personal security. The tools, the manure, and in some cases the subsistence also, might be supplied by the parish, or by the state; interest for the advance, at the rate yielded by the public funds, being laid on as a perpetual quitrent, with power to the peasant to redeem it at any time for a moderate number of years' purchase. These little landed estates might, if it were thought necessary, be indivisible by law; though, if the plan worked in the manner designed, I should not apprehend any objectionable degree of subdivision. In case of intestacy, and in default of amicable arrangement among the heirs, they might be bought by government at their value, and re-granted to some other laborer who could give security for the price. The desire to possess one of these small properties would probably become, as on the Continent, an inducement to prudence and economy pervading the whole laboring population; and that great desideratum among a people of hired laborers would be provided, an intermediate class between them and their employers; affording them the double advantage of an object for their hopes, and, as there would be good reason to anticipate, an example for their imitation.

It would, however, be of little avail that either or both of these measures of relief should be adopted, unless on such a scale as would enable the whole body of hired laborers remaining on the soil to obtain not merely employment, but a large addition to the present wages—such an addition as would enable them to live and bring up their children in a degree of comfort and independence to which they have hitherto been strangers.
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Re: Principles Of Political Economy, by John Stuart Mill

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Chapter IV. Of The Differences Of Wages In Different Employments.

§ 1. Differences of Wages Arising from Different Degrees of Attractiveness in Different Employments.

In treating of wages, we have hitherto confined ourselves to the causes which operate on them generally, and en masse; the laws which govern the remuneration of ordinary or average labor, without reference to the existence of different kinds of work which are habitually paid at different rates, depending in some degree on different laws. We will now take into consideration these differences, and examine in what manner they affect or are affected by the conclusions already established.

The differences, says [Adam Smith], arise partly “from certain circumstances in the employments themselves, which either really, or at least in the imaginations of men, make up for a small pecuniary gain in some, and counterbalance a great one in others.” These circumstances he considers to be: “First, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them.”

(1.) “The wages of labor vary with the ease or hardship, the cleanliness or dirtiness, the honorableness or dishonorableness of the employment. A journeyman blacksmith, though an artificer, seldom earns so much in twelve hours as a collier, who is only a laborer, does in eight. His work [pg 206]is not quite so dirty, is less dangerous, and is carried on in daylight and above ground. Honor makes a great part of the reward of all honorable professions. In point of pecuniary gain, all things considered,” their recompense is, in his opinion, below the average. “Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of the public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.”

(2.) “Employment is much more constant,” continues Adam Smith, “in some trades than in others. In the greater part of manufactures, a journeyman may be pretty sure of employment almost every day in the year that he is able to work. A mason or brick-layer, on the contrary, can work neither in hard frost nor in foul weather, and his employment at all other times depends upon the occasional calls of his customers. He is liable, in consequence, to be frequently without any. What he earns, therefore, while he is employed, must not only maintain him while he is idle, but make him some compensation for those anxious and desponding moments which the thought of so precarious a situation must sometimes occasion.”

“When (1) the inconstancy of the employment is combined with (2) the hardship, disagreeableness, and dirtiness of the work, it sometimes raises the wages of the most common labor above those of the most skillful artificers. A collier working by the piece is supposed, at Newcastle, to earn commonly about double, and in many parts of Scotland about three times, the wages of common labor. His high wages arise altogether from the hardship, disagreeableness, and dirtiness of his work. His employment may, upon most occasions, be as constant as he pleases. The coal-heavers in London exercise a trade which in hardship, dirtiness, and disagreeableness almost equals that of colliers; and from the unavoidable irregularity in the arrivals of coal-ships, the [pg 207]employment of the greater part of them is necessarily very inconstant. If colliers, therefore, commonly earn double and triple the wages of common labor, it ought not to seem unreasonable that coal-heavers should sometimes earn four or five times those wages. In the inquiry made into their condition a few years ago, it was found that, at the rate at which they were then paid, they could earn about four times the wages of common labor in London.”

These inequalities of remuneration, which are supposed to compensate for the disagreeable circumstances of particular employments, would, under certain conditions, be natural consequences of perfectly free competition: and as between employments of about the same grade, and filled by nearly the same description of people, they are, no doubt, for the most part, realized in practice.

But it is altogether a false view of the state of facts to present this as the relation which generally exists between agreeable and disagreeable employments. The really exhausting and the really repulsive labors, instead of being better paid than others, are almost invariably paid the worst of all, because performed by those who have no choice. If the laborers in the aggregate, instead of exceeding, fell short of the amount of employment, work which was generally disliked would not be undertaken, except for more than ordinary wages. But when the supply of labor so far exceeds the demand that to find employment at all is an uncertainty, and to be offered it on any terms a favor, the case is totally the reverse. Partly from this cause, and partly from the natural and artificial monopolies, which will be spoken of presently, the inequalities of wages are generally in an opposite direction to the equitable principle of compensation, erroneously represented by Adam Smith as the general law of the remuneration of labor.

(3.) One of the points best illustrated by Adam Smith is the influence exercised on the remuneration of an employment by the uncertainty of success in it. If the chances are great of total failure, the reward in case of success must be [pg 208]sufficient to make up, in the general estimation, for those adverse chances. Put your son apprentice to a shoemaker, there is little doubt of his learning to make a pair of shoes; but send him to study the law, it is at least twenty to one if ever he makes such proficiency as will enable him to live by the business. In a perfectly fair lottery, those who draw the prizes ought to gain all that is lost by those who draw the blanks. In a profession where twenty fail for one that succeeds, that one ought to gain all that should have been gained by the unsuccessful twenty. How extravagant soever the fees of counselors-at-law may sometimes appear, their real retribution is never equal to this.

§ 2. Differences arising from Natural Monopolies.

The preceding are cases in which inequality of remuneration is necessary to produce equality of attractiveness, and are examples of the equalizing effect of free competition. The following are cases of real inequality, and arise from a different principle.

(4.) “The wages of labor vary according to the small or great trust which must be reposed in the workmen. The wages of goldsmiths and jewelers are everywhere superior to those of many other workmen, not only of equal but of much superior ingenuity, on account of the precious materials with which they are intrusted.” The superiority of reward is not here the consequence of competition, but of its absence: not a compensation for disadvantages inherent in the employment, but an extra advantage; a kind of monopoly price, the effect not of a legal, but of what has been termed a natural monopoly. If all laborers were trustworthy, it would not be necessary to give extra pay to working goldsmiths on account of the trust. The degree of integrity required being supposed to be uncommon, those who can make it appear that they possess it are able to take advantage of the peculiarity, and obtain higher pay in proportion to its rarity.

This same explanation of a natural monopoly applies exactly to the causes which give able executive managers, who watch over productive operations, the usually high rewards for [pg 209]labor under the name of “wages of superintendence.” If successful managers of cotton or woolen mills were as plentiful, in proportion to the demand for them, as ordinary artisans, in proportion to the demand for them, then the former would get no higher rewards than the latter. Able executive and business managers secure high wages solely on the ground—as explained above—of monopoly; that is, because their numbers, owing to natural causes, are few relatively to the demand for them in every industry in the land.

(5.) Some employments require a much longer time to learn, and a much more expensive course of instruction, than others; and to this extent there is, as explained by Adam Smith, an inherent reason for their being more highly remunerated. Wages, consequently, must yield, over and above the ordinary amount, an annuity sufficient to repay these sums, with the common rate of profit, within the number of years [the laborer] can expect to live and be in working condition.

But, independently of these or any other artificial monopolies, there is a natural monopoly in favor of skilled laborers against the unskilled, which makes the difference of reward exceed, sometimes in a manifold proportion, what is sufficient merely to equalize their advantages. But the fact that a course of instruction is required, of even a low degree of costliness, or that the laborer must be maintained for a considerable time from other sources, suffices everywhere to exclude the great body of the laboring people from the possibility of any such competition. Until lately, all employments which required even the humble education of reading and writing could be recruited only from a select class, the majority having had no opportunity of acquiring those attainments.

Here is found the germ of the idea, which has been elaborately worked out by Mr. Cairnes175 in his theory of non-competing groups of laborers: “What we find, in effect, is not a whole population competing indiscriminately for all occupations, but a series of industrial layers superposed on one another, within each of which the various candidates for employment [pg 210]possess a real and effective power of selection, while those occupying the several strata are, for all purposes of effective competition, practically isolated from each other.” (Mr. Mill certainly understood this fully, and stated it clearly again in Book III, Chap. II, § 2.)

The changes, however, now so rapidly taking place in usages and ideas, are undermining all these distinctions; the habits or disabilities which chained people to their hereditary condition are fast wearing away, and every class is exposed to increased and increasing competition from at least the class immediately below it. The general relaxation of conventional barriers, and the increased facilities of education which already are, and will be in a much greater degree, brought within the reach of all, tend to produce, among many excellent effects, one which is the reverse: they tend to bring down the wages of skilled labor.

§ 3. Effect on Wages of the Competition of Persons having other Means of Support.

A modifying circumstance still remains to be noticed, which interferes to some extent with the operation of the principles thus far brought to view. While it is true, as a general rule, that the earnings of skilled labor, and especially of any labor which requires school education, are at a monopoly rate, from the impossibility, to the mass of the people, of obtaining that education, it is also true that the policy of nations, or the bounty of individuals, formerly did much to counteract the effect of this limitation of competition, by offering eleemosynary instruction to a much larger class of persons than could have obtained the same advantages by paying their price.

[Adam Smith has pointed out that] “whenever the law has attempted to regulate the wages of workmen, it has always been rather to lower them than to raise them. But the law has upon many occasions attempted to raise the wages of curates, and, for the dignity of the Church, to oblige the rectors of parishes to give them more than the wretched maintenance which they themselves might be willing to accept of. And in both cases the law seems to have been equally ineffectual, and has never been either able to raise [pg 211]the wages of curates or to sink those of laborers to the degree that was intended, because it has never been able to hinder either the one from being willing to accept of less than the legal allowance, on account of the indigence of their situation and the multitude of their competitors, or the other from receiving more, on account of the contrary competition of those who expected to derive either profit or pleasure from employing them.”

Although the highest pecuniary prizes of successful authorship are incomparably greater than at any former period, yet on any rational calculation of the chances, in the existing competition, scarcely any writer can hope to gain a living by books, and to do so by magazines and reviews becomes daily more difficult. It is only the more troublesome and disagreeable kinds of literary labor, and those which confer no personal celebrity, such as most of those connected with newspapers, or with the smaller periodicals, on which an educated person can now rely for subsistence. Of these, the remuneration is, on the whole, decidedly high; because, though exposed to the competition of what used to be called “poor scholars” (persons who have received a learned education from some public or private charity), they are exempt from that of amateurs, those who have other means of support being seldom candidates for such employments.

When an occupation is carried on chiefly by persons who derive the main portion of their subsistence from other sources, its remuneration may be lower almost to any extent than the wages of equally severe labor in other employments. The principal example of the kind is domestic manufactures. When spinning and knitting were carried on in every cottage, by families deriving their principal support from agriculture, the price at which their produce was sold (which constituted the remuneration of their labor) was often so low that there would have been required great perfection of machinery to undersell it. The amount of the remuneration in such a case depends chiefly upon whether the quantity of the commodity produced by this description of labor [pg 212]suffices to supply the whole of the demand. If it does not, and there is consequently a necessity for some laborers who devote themselves entirely to the employment, the price of the article must be sufficient to pay those laborers at the ordinary rate, and to reward, therefore, very handsomely the domestic producers. But if the demand is so limited that the domestic manufacture can do more than satisfy it, the price is naturally kept down to the lowest rate at which peasant families think it worth while to continue the production. Thus far, as to the remuneration of the subsidiary employment; but the effect to the laborers of having this additional resource is almost certain to be (unless peculiar counteracting causes intervene) a proportional diminution of the wages of their main occupation.

For the same reason it is found that, cæteris paribus, those trades are generally the worst paid in which the wife and children of the artisan aid in the work. The income which the habits of the class demand, and down to which they are almost sure to multiply, is made up in those trades by the earnings of the whole family, while in others the same income must be obtained by the labor of the man alone. It is even probable that their collective earnings will amount to a smaller sum than those of the man alone in other trades, because the prudential restraint on marriage is unusually weak when the only consequence immediately felt is an improvement of circumstances, the joint earnings of the two going further in their domestic economy after marriage than before.

This statement seems to be borne out by the statistics of wages176 both in England and the United States. In our cotton-mills, where women do certain kinds of work equally well with men, the wages of the men are lower than in outside employments into which women can not enter.

Blacksmiths, per week: $16.74
Family of four: Drawers-in, cotton-mill—man, per week: $5.50
Family of four: Drawers-in, cotton-mill—woman, per week: $5.50
Family of four: Tenders, two boys: $4.50
Total: $15.50

In this case the family of four all together receive only about the same as the wages of the single blacksmith alone.

§ 4. Wages of Women, why Lower than those of Men.

Where men and women work at the same employment, if it be one for which they are equally fitted in point of physical power, they are not always unequally paid. Women in factories sometimes earn as much as men; and so they do in hand-loom weaving, which, being paid by the piece, brings their efficiency to a sure test. When the efficiency is equal, but the pay unequal, the only explanation that can be given is custom. But the principal question relates to the peculiar employments of women. The remuneration of these is always, I believe, greatly below that of employments of equal skill and equal disagreeableness carried on by men. In some of these cases the explanation is evidently that already given: as in the case of domestic servants, whose wages, speaking generally, are not determined by competition, but are greatly in excess of the market value of the labor, and in this excess, as in almost all things which are regulated by custom, the male sex obtains by far the largest share. In the occupations in which employers take full advantage of competition, the low wages of women, as compared with the ordinary earnings of men, are a proof that the employments are overstocked: that although so much smaller a number of women than of men support themselves by wages, the occupations which law and usage make accessible to them are comparatively so few that the field of their employment is still more overcrowded.

Yet within the employments open to women, such as millinery and dress-making, certain women are able to charge excessively high prices for work, because, having obtained a reputation for especial skill and taste, they can exact in the high prices of their articles what is really their high wages. Within these employments women are unable to earn a living not so much by the lack of work, as by not bringing to their occupation that amount of skill and those business qualities (owing, of course, to their being brought up unaccustomed to business methods) which are requisite for the success of any one, either man or woman.

It must be observed that, as matters now stand, a sufficient degree of overcrowding may depress the wages of women to a much lower minimum than those of men. The wages, at least of single women, must be equal to their support, but need not be more than equal to it; the minimum, in their case, is the pittance absolutely requisite for the sustenance of one human being. Now the lowest point to which the most superabundant competition can permanently depress the wages of a man is always somewhat more than this. Where the wife of a laboring-man does not by general custom contribute to his earnings, the man's wages must be at least sufficient to support himself, a wife, and a number of children adequate to keep up the population, since, if it were less, the population would not be kept up.

§ 5. Differences of Wages Arising from Laws, Combinations, or Customs.

Thus far we have, throughout this discussion, proceeded on the supposition that competition is free, so far as regards human interference; being limited only by natural causes, or by the unintended effect of general social circumstances. But law or custom may interfere to limit competition. If apprentice laws, or the regulations of corporate bodies, make the access to a particular employment slow, costly, or difficult, the wages of that employment may be kept much above their natural proportion to the wages of common labor. In some trades, however, and to some extent, the combinations of workmen produce a similar effect. Those combinations always fail to uphold wages at an artificial rate unless they also limit the number of competitors. Putting aside the atrocities sometimes committed by workmen in the way of personal outrage or intimidation, which can not be too rigidly repressed, if the present state of the general habits of the people were to remain forever unimproved, these partial combinations, in so far as they do succeed in keeping up the wages of any trade by limiting its numbers, might be looked upon as simply intrenching round a particular spot against the inroads of over-population, and making the wages of the class depend upon their own rate of [pg 215]increase, instead of depending on that of a more reckless and improvident class than themselves.

To conclude this subject, I must repeat an observation already made, that there are kinds of labor of which the wages are fixed by custom, and not by competition. Such are the fees or charges of professional persons—of physicians, surgeons, barristers, and even attorneys.
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Re: Principles Of Political Economy, by John Stuart Mill

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Chapter V. Of Profits.

§ 1. Profits include Interest and Risk; but, correctly speaking, do not include Wages of Superintendence.

Having treated of the laborer's share of the produce, we next proceed to the share of the capitalist; the profits of capital or stock; the gains of the person who advances the expenses of production—who, from funds in his possession, pays the wages of the laborers, or supports them during the work; who supplies the requisite buildings, materials, and tools or machinery; and to whom, by the usual terms of the contract, the produce belongs, to be disposed of at his pleasure. After indemnifying him for his outlay, there commonly remains a surplus, which is his profit; the net income from his capital [and skill]; the amount which he can afford to expend in necessaries or pleasures, or from which by further saving he can add to his wealth.

As the wages of the laborer are the remuneration of labor, so [a part of] the profits of the capitalist are properly, according to Mr. Senior's well-chosen expression, the remuneration of abstinence. They are what he gains by forbearing to consume his capital for his own uses, and allowing it to be consumed by productive laborers for their uses. For this forbearance he requires a recompense.

Of the gains, however, which the possession of a capital enables a person to make, (1) a part only is properly an equivalent for the use of the capital itself; namely, as much as a solvent person would be willing to pay for the loan of it. This, which as everybody knows is called interest, is all that a person is enabled to get by merely abstaining from the [pg 217]immediate consumption of his capital, and allowing it to be used for productive purposes by others. The remuneration which is obtained in any country for mere abstinence is measured by the current rate of interest on the best security; such security as precludes any appreciable chance of losing the principal. What a person expects to gain, who superintends the employment of his own capital, is always more, and generally much more, than this. The rate of profit greatly exceeds the rate of interest. (2.) The surplus is partly compensation for risk. By lending his capital on unexceptionable security he runs little or no risk. But if he embarks in business on his own account, he always exposes his capital to some, and in many cases to very great, danger of partial or total loss. For this danger he must be compensated, otherwise he will not incur it. (3.) He must likewise be remunerated for the devotion of his time and labor. The control of the operations of industry usually belongs to the person who supplies the whole or the greatest part of the funds by which they are carried on, and who, according to the ordinary arrangement, is either alone interested, or is the person most interested (at least directly), in the result. To exercise this control with efficiency, if the concern is large and complicated, requires great assiduity, and often no ordinary skill. This assiduity and skill must be remunerated.

The gross profits from capital, the gains returned to those who supply the funds for production, must suffice for these three purposes; and the three parts into which profit may be considered as resolving itself may be described respectively as interest, insurance, and wages of superintendence.

Inasmuch as risk is the cause affecting the rate of interest, it would be much simpler to consider the whole reward for abstinence as interest, the rate of which is affected by the risk; and to carefully exclude from the profits of capital the payment for “assiduity and skill,” which is distinctly wages of labor. The “wages of superintendence,” as every one on a moment's reflection must admit, have no necessary connection whatever with the possession of capital. The thing with which the laborer is occupied does not give the reason for associating his [pg 218]wages with the name of that thing; because a highly-qualified manager supervises the operations of capital, it does not follow that he has capital, or should be regarded as being paid for the possession of capital. The man who shovels ashes is not paid wages of ashes, any more than a man who superintends other people's capital is paid the reward of capital. The payment for services, in the one case as in the other, depends upon the skill of the manager, just as it does with an ordinary mechanic, rising or falling with his fitness for the peculiar work. Skill as a manager is the cause; the amount of the remuneration is the consequence. If so, then the wages of superintendence have no logical connection, in the economic sense, with capital as the thing which determines the amount of its reward, any more than it affects the wages of any and all labor. The payment for the use of capital, simply as capital, may be seen by the amount which a widow who is not engaged in active business receives from her property invested as trust funds. Moreover, it is less and less true that the manager of the operations of industry is necessarily the capitalist. To see this, mark the executive managers (called “treasurers” by custom) of cotton and woolen mills, who receive a remuneration entirely distinct from any capital they may have invested in the shares of the corporation; and the officials of the great mutual insurance companies, who receive the wages of managers, but for managing the capital of others. A large—by far the largest—part of what is usually called profit, therefore, should be treated as wages, and the forces which govern its amount are the same as those affecting the amounts of all other kinds of wages, such as are discussed in the preceding chapter. The acknowledgment of this distinction is of extreme importance, and affects, in a profound way, the whole question of distribution. To include “wages of superintendence” in profits of capital is to unnecessarily complicate one of the most serious economic questions—namely, the relations of capital and labor.

§ 2. The Minimum of Profits; what produces Variations in the Amount of Profits.

The lowest rate of profit that can permanently exist is that which is barely adequate, at the given place and time, to afford an equivalent for the abstinence, risk, and exertion implied in the employment of capital. From the gross profit has first to be deducted as much as will form a fund sufficient on the average to cover all losses incident to the employment. Next, it must afford such an equivalent to the owner of the capital for forbearing to consume it as is then and there a sufficient motive to him to persist in his abstinence. How much will be required to form this equivalent depends [pg 219]on the comparative value placed, in the given society, upon the present and the future (in the words formerly used): on the strength of the effective desire of accumulation. Further, after covering all losses, and remunerating the owner for forbearing to consume, there must be something left to recompense the labor and skill of the person who devotes his time to the business.

Such, then, is the minimum of profits: but that minimum is exceedingly variable, and at some times and places extremely low, on account of the great variableness of two out of its three elements. That the rate of necessary remuneration for abstinence, or in other words the effective desire of accumulation, differs widely in different states of society and civilization, has been seen in a former chapter. There is a still wider difference in the element which consists in compensation for risk.

The remuneration of capital in different employments, much more than the remuneration of labor, varies according to the circumstances which render one employment more attractive or more repulsive than another. The profits, for example, of retail trade, in proportion to the capital employed, exceed those of wholesale dealers or manufacturers, for this reason among others, that there is less consideration attached to the employment. The greatest, however, of these differences, is that caused by difference of risk. The profits of a gunpowder-manufacturer must be considerably greater than the average, to make up for the peculiar risks to which he and his property are constantly exposed. When, however, as in the case of marine adventure, the peculiar risks are capable of being, and commonly are, commuted for a fixed payment, the premium of insurance takes its regular place among the charges of production, and the compensation which the owner of the ship or cargo receives for that payment does not appear in the estimate of his profits, but is included in the replacement of his capital.

The minimum of profits can not properly include wages of superintendence, nor is it so included, practically, in Mr. Mill's [pg 220]discussions on the minimum of profits in a later part of this volume. The operation of the various elements in changing the amount of profits might be expressed as follows: As between different countries and communities, who have a different effective desire of accumulation, profits may vary with the element of interest and risk; within the same district, where interest is generally the same on the same security, profits may vary with the risk attached to different industries; and, within the same occupations, interest and risk being given, the wages of superintendence may make a greater variation than either of the other two causes—since a skillful manager may make a large return, a poor one none at all. Or between two employments, interest and risk remaining the same, wages of superintendence sometimes produce a wide difference.

The portion, too, of the gross profit, which forms the remuneration for the labor and skill of the dealer or producer, is very different in different employments. This is the explanation always given of the extraordinary rate of apothecaries' profit. There are cases, again, in which a considerable amount of labor and skill is required to conduct a business necessarily of limited extent. In such cases a higher than common rate of profit is necessary to yield only the common rate of remuneration.

All the natural monopolies (meaning thereby those which are created by circumstances, and not by law) which produce or aggravate the disparities in the remuneration of different kinds of labor, operate similarly between different employments of capital.

In this passage Mr. Mill points out distinctly that the movement up and down in the wages of a manager are governed by the same laws as those which regulate differences in the different rewards of labor, but yet he connects it improperly with capital. It will be seen that Mr. Mill uses the term “gross profit” on the next page in order to avoid the difficulty, which rises unconsciously in his mind, of the anomalous presence of the wages of the manager in the question of profit.

§ 3. General Tendency of Profits to an Equality.

After due allowance is made for these various causes of inequality, namely, difference in the risk or agreeableness of different employments, and natural or artificial monopolies [which give greater or less wages of superintendence], [pg 221]the rate of profit on capital in all employments tends to an equality. That portion of profit which is properly interest, and which forms the real remuneration for abstinence, is strictly the same at the same time and place, whatever be the employment. The rate of interest, on equally good security, does not vary according to the destination of the principal, though it does vary from time to time very much, according to the circumstances of the market.

It is far otherwise with gross profit, which, though (as will presently be seen) it does not vary much from employment to employment, varies very greatly from individual to individual, and can scarcely be in any two cases the same. It depends on the knowledge, talents, economy, and energy of the capitalist himself, or of the agents whom he employs; on the accidents of personal connection; and even on chance. Hardly any two dealers in the same trade, even if their commodities are equally good and equally cheap, carry on their business at the same expense, or turn over their capital in the same time. That equal capitals give equal profits, as a general maxim of trade, would be as false as that equal age or size gives equal bodily strength, or that equal reading or experience gives equal knowledge. The effect depends as much upon twenty other things as upon the single cause specified. On an average (whatever may be the occasional fluctuations) the various employments of capital are on such a footing as to hold out, not equal profits, but equal expectations of profit, to persons of average abilities and advantages. By equal, I mean after making compensation for any inferiority in the agreeableness or safety of an employment. If the case were not so; if there were, evidently, and to common experience, more favorable chances of pecuniary success in one business than in others, more persons would engage their capital in the business. If, on the contrary, a business is not considered thriving; if the chances of profit in it are thought to be inferior to those in other employments; capital gradually leaves it, or at least new capital is not attracted to it; and by this change in the distribution of [pg 222]capital between the less profitable and the more profitable employments, a sort of balance is restored.

Illustration: Parallel vertical lines AB and GD, with horizontal lines EG and FC joining them.

This may be easily shown by a diagram in which the capital in one employment is represented by A B, and which exceeds C D, that in another employment, by the amount of A F. It is not necessary that the whole of the excess, A F should be transferred to C D to make the two capitals equal, but only A E, which, added to C D, brings C D to an equality with E B.

This equalizing process, commonly described as the transfer of capital from one employment to another, is not necessarily the onerous, slow, and almost impracticable operation which it is very often represented to be. In the first place, it does not always imply the actual removal of capital already embarked in an employment. In a rapidly progressive state of capital, the adjustment often takes place by means of the new accumulations of each year, which direct themselves in preference toward the more thriving trades. Even when a real transfer of capital is necessary, it is by no means implied that any of those who are engaged in the unprofitable employment relinquish business and break up their establishments. The numerous and multifarious channels of credit through which, in commercial nations, unemployed capital diffuses itself over the field of employment, flowing over in greater abundance to the lower levels, are the means by which the equalization is accomplished. The process consists in a limitation by one class of dealers or producers and an extension by the other of that portion of their business which is carried on with borrowed capital.

“Political economists say that capital sets toward the most profitable trades, and that it rapidly leaves the less profitable and non-paying trades. But in ordinary countries this is a slow process, and some persons, who want to have ocular demonstrations of abstract truths, have been inclined to doubt it because they could not see it. The process would be visible enough if you could only see the books of the bill-brokers and the bankers. If the iron-trade ceases to be as profitable as [pg 223]usual, less iron is sold; the fewer the sales the fewer the bills; and in consequence the number of iron bills [at the banks] is diminished. On the other hand, if, in consequence of a bad harvest, the corn trade becomes on a sudden profitable, immediately ‘corn bills’ are created in large numbers, and, if good, are discounted [at the banks]. Thus capital runs as surely and instantly where it is most wanted, and where there is most to be made of it, as water runs to find its level.”177

In the case of an altogether declining trade, in which it is necessary that the production should be, not occasionally varied, but greatly and permanently diminished, or perhaps stopped altogether, the process of extricating the capital is, no doubt, tardy and difficult, and almost always attended with considerable loss; much of the capital fixed in machinery, buildings, permanent works, etc., being either not applicable to any other purpose, or only applicable after expensive alterations; and time being seldom given for effecting the change in the mode in which it would be effected with least loss, namely, by not replacing the fixed capital as it wears out. There is besides, in totally changing the destination of a capital, so great a sacrifice of established connection, and of acquired skill and experience, that people are always very slow in resolving upon it, and hardly ever do so until long after a change of fortune has become hopeless.

In general, then, although profits are very different to different individuals, and to the same individual in different years, there can not be much diversity at the same time and place in the average profits of different employments (other than the standing differences necessary to compensate for difference of attractiveness), except for short periods, or when some great permanent revulsion has overtaken a particular trade. It is true that, to persons with the same amount of original means, there is more chance of making a large fortune in some employments than in others. But it would be found that in those same employments bankruptcies also are more frequent, and that the chance of greater success is balanced by a greater probability of complete failure.

§ 4. The Cause of the Existence of any Profit; the Advances of Capitalists consist of Wages of Labor.

The preceding remarks have, I hope, sufficiently elucidated what is meant by the common phrase, “the ordinary rate of profit,” and the sense in which, and the limitations under which, this ordinary rate has a real existence. It now remains to consider what causes determine its amount.

The cause of profit is, that labor produces more than is required for its support; the reason why capital yields a profit is, because food, clothing, materials, and tools last longer than the time which is required to produce them; so that if a capitalist supplies a party of laborers with these things, on condition of receiving all they produce, they will, in addition to reproducing their own necessaries and instruments, have a portion of their time remaining, to work for the capitalist. We thus see that profit arises, not from the incident of exchange, but from the productive power of labor; and the general profit of the country is always what the productive power of labor makes it, whether any exchange takes place or not. I proceed, in expansion of the considerations thus briefly indicated, to exhibit more minutely the mode in which the rate of profit is determined.

I assume, throughout, the state of things which, where the laborers and capitalists are separate classes, prevails, with few exceptions, universally; namely, that the capitalist advances the whole expenses, including the entire remuneration of the laborer. That he should do so is not a matter of inherent necessity; the laborer might wait until the production is complete for all that part of his wages which exceeds mere necessaries, and even for the whole, if he has funds in hand sufficient for his temporary support. But in the latter case the laborer is to that extent really a capitalist, investing capital in the concern, by supplying a portion of the funds necessary for carrying it on; and even in the former case he may be looked upon in the same light, since, contributing his labor at less than the market price, he may be regarded as lending the difference to his employer, and receiving it back with interest (on whatever principle computed) from the proceeds of the enterprise.

The capitalist, then, may be assumed to make all the advances and receive all the produce. His profit consists of the excess of the produce above the advances; his rate of profit is the ratio which that excess bears to the amount advanced.

For example, if A advances 8,000 bushels of corn to laborers in return for 10,000 yards of cloth (and if one bushel of corn sells for the same sum as one yard of cloth), his profit consists of 2,000 yards of cloth. The ratio of the excess, 2,000, to 8,000, the outlay, or 25 per cent, is the rate of profit. It is not the ratio of 2,000 to 10,000.

But what do the advances consist of? It is, for the present, necessary to suppose that the capitalist does not pay any rent; has not to purchase the use of any appropriated natural agent. The nature of rent, however, we have not yet taken into consideration; and it will hereafter appear that no practical error, on the question we are now examining, is produced by disregarding it.

If, then, leaving rent out of the question, we inquire in what it is that the advances of the capitalist, for purposes of production, consist, we shall find that they consist of wages of labor.

A large portion of the expenditure of every capitalist consists in the direct payment of wages. What does not consist of this is composed of materials and implements, including buildings. But materials and implements are produced by labor; and as our supposed capitalist is not meant to represent a single employment, but to be a type of the productive industry of the whole country, we may suppose that he makes his own tools and raises his own materials. He does this by means of previous advances, which, again, consist wholly of wages. If we suppose him to buy the materials and tools instead of producing them, the case is not altered: he then repays to a previous producer the wages which that previous producer has paid. It is true he repays it to him with a profit; and, if he had produced the things himself, he himself must have had that profit on this part of his outlay [pg 226]as well as on every other part. The fact, however, remains, that in the whole process of production, beginning with the materials and tools and ending with the finished product, all the advances have consisted of nothing but wages, except that certain of the capitalists concerned have, for the sake of general convenience, had their share of profit paid to them before the operation was completed.

This idea may be more clear, perhaps, if we imagine a large corporation, not only making woolen cloth, but owning sheep-ranches, where the raw materials are produced; the shops where all machinery is made; and who even produce on their own property all the food, clothing, shelter, and consumption of the laborers employed by them. A line of division may be passed through the returns in all these branches of the industry, separating what is wages from what is profit. Then it can be easily imagined that all the returns on one side, representing profits, go to capitalists, no matter whether they are thousands in number, or only one capitalist typifying the rest, or a single corporation acting for many small capitalists.

§ 5. The Rate of Profit depends on the Cost of Labor.

It thus appears that the two elements on which, and which alone, the gains of the capitalists depend, are, first, the magnitude of the produce, in other words, the productive power of labor; and secondly, the proportion of that produce obtained by the laborers themselves; the ratio which the remuneration of the laborers bears to the amount they produce.

We thus arrive at the conclusion of Ricardo and others, that the rate of profits depends upon wages; rising as wages fall, and falling as wages rise. In adopting, however, this doctrine, I must insist upon making a most necessary alteration in its wording. Instead of saying that profits depend on wages, let us say (what Ricardo really meant) that they depend on the cost of labor.

This is an entirely different question from that concerning the rate of wages before discussed (Book II, Chap. II). That had to do with the amount of the capital which each laborer, on an average, received as real wages, and this average rate was affected by the number of competitors for labor, as compared with the existing capital, taking into account the nature of the industries in a country. An increase of population, bringing more laborers to compete for employment, will lower [pg 227]the average amount of real wages received by each one; and a decrease of population will bring about the reverse. The rate of wages, however, now that we are considering the matter from the point of view of the capitalist, is but one of the things to be considered affecting cost of labor. The former question was one as to the distribution of capital; the latter is one as to the amount by which the total production is greater than the total capital advanced. Since all capital consists of advances to labor, the present inquiry is one in regard to the quantity of advances compared with the quantity returned; that is, the relation of the total capital to the total production arising from the use of that capital. In the diagram before used (p. 179) the question is not how the contents of circle B are to be distributed, but the relative size of circle B to circle A. In order to produce circle A, it is necessary to advance what is represented by circle B.

Wages and the cost of labor; what labor brings in to the laborer and what it costs to the capitalist are ideas quite distinct, and which it is of the utmost importance to keep so. For this purpose it is essential not to designate them, as is almost always done, by the same name. Wages, in public discussions, both oral and printed, being looked upon from the same point of view of the payers, much oftener than from that of the receivers, nothing is more common than to say that wages are high or low, meaning only that the cost of labor [to the capitalist] is high or low. The reverse of this would be oftener the truth: the cost of labor is frequently at its highest where wages are lowest. This may arise from two causes. (1.) In the first place, the labor, though cheap, may be inefficient.

The facts presented by Mr. Brassey178 very fully illustrate this principle. Although French workmen in their ship-yards receive less wages for the same kind of work than the English workmen in English yards, yet it costs less per ton to build ships in England than in France. The same correspondence between high wages and efficient work was found to be true of railway construction in different parts of the world. With different character, varying amounts of industrial energy, varying intelligence, and endurance, different people do not have the same efficiency of labor. It is ascertained that inefficiency is, as a rule, accompanied by low wages. Even though wages paid for ordinary labor in constructing railways were in India [pg 228]only from nine to twelve cents a day, and in England from seventy-five to eighty-seven cents a day, yet it cost as much to build a mile of railway in India as in England. The English laborer gave a full equivalent for his higher wages. Moreover, while an English weaver tends from two to three times as many looms as his Russian competitor, the workman in the United States, it is said, will tend even more than the Englishman. In American sailing-vessels, also, a less number of sailors, relatively to the tonnage, is required than in English sailing-ships. Mr. Brassey, besides, came to the conclusion that the working power, or efficiency, of ordinary English laborers was to the French as five to three.

(2.) The other cause which renders wages and the cost of labor no real criteria of one another is the varying costliness of the articles which the laborer consumes. If these are cheap, wages, in the sense which is of importance to the laborer, may be high, and yet the cost of labor may be low; if dear, the laborer may be wretchedly off, though his labor may cost much to the capitalist. This last is the condition of a country over-peopled in relation to its land; in which, food being dear, the poorness of the laborer's real reward does not prevent labor from costing much to the purchaser, and low wages and low profits coexist. The opposite case is exemplified in the United States of America. The laborer there enjoys a greater abundance of comforts than in any other country of the world, except some of the newest colonies; but owing to the cheap price at which these comforts can be obtained (combined with the great efficiency of the labor), the cost of labor to the capitalist is considerably lower than in Europe. It must be so, since the rate of profit is higher; as indicated by the rate of interest, which is six per cent at New York when it is three or three and a quarter per cent in London.

The cost of labor, then, is, in the language of mathematics, a function of three variables: (1) the efficiency of labor; (2) the wages of labor (meaning thereby the real reward [or real wages] of the laborer); and (3) the greater or less cost179 [pg 229]at which the articles composing that real reward can be produced or purchased. It is plain that the cost of labor to the capitalist must be influenced by each of these three circumstances, and by no others. These, therefore, are also the circumstances which determine the rate of profit; and it can not be in any way affected except through one or other of them.

The efficiency of labor, in this connection, is highly important in its practical aspects, and as affecting the labor question, because as a function of cost of labor, that is, as an element affecting the quantity of things advanced to the laborers in comparison with the quantity of things returned to the employer, it includes the whole influence of machinery, labor-saving devices, and the results of invention. The quantity of produce depends, for a given advance, on the kind of machinery, the speed with which it is run, and on the general state of the arts and industrial inventions. The extent to which the productive capacity of a single laborer has been increased in the United States has been almost incredible. Instead of weaving cloth by hand, as was done a hundred years ago, “one operative in Lowell, working one year, can produce the cotton fabric needed for the year's supply of 1,500 to 1,800 Chinese.” Moreover, there is no question as to the fact that no nation in the world compares with ours in the power to invent, construct, and manage the most ingenious and complicated machinery. The inventive faculty belongs to every class in our country; and, in studying cost of labor, it must be well borne in mind that the efficiency of American labor, particularly as combined with mechanical appliances, is one of the great causes of our enormous production. The result of this, for instance, has been that, without lowering profits, although the price of cloth has been greatly reduced, employers have been able to raise the wages of operatives, and shorten their hours of labor, because machinery has so vastly increased the production for a given outlay. As one of a few facts showing this tendency in the last fifty years, note the following table, taken from the books of the Namquit cotton-mill in Bristol, Rhode Island:

Kind Of Labor. / 1841. / 1884.
Card-room help, per week / $3.28 / $5.40
Card-strippers, per week / 4.98 / 6.00
Weavers, per week / 4.75 / 6.00
Carding-room overseer, per week / 7.00 / 13.50

The hours per week have decreased in the same time from 84 to 66, while the product of the mill in pounds has increased 25 per cent. It may be unnecessary, perhaps, to say that these figures represent the current wages in [pg 230]other mills at the same periods; and that these facts can be sustained by the records of other mills.

In its economic effect we must also consider, under efficiency, the whole question of natural advantages of soil, climate, and natural resources. Laborers of the same skill, paid the same real wages, of the same cost, will produce a vastly greater amount of wheat in Dakota than in Vermont or England. This is the chief reason why profits are so high in the United States. In many industries we have very marked natural advantages, which permits a high reward to labor, and yet yields a high profit to the capitalist. This applies not merely to agriculture, but to all the extractive industries, such as the production of petroleum, wood, copper, etc.

In short, the whole matter of ease and difficulty of production, of high or low cost of production, taking it in the sense of great or little sacrifice (compare carefully Book III, Chap. II, § 4), comes in under the element of efficiency, in cost of labor. The reader can not be too strongly urged to connect different parts of the economic system together. And the questions of Cost of Labor and Cost of Production are of paramount importance to a proper understanding of political economy.

If labor generally became more efficient, without being more highly rewarded; if, without its becoming less efficient, its remuneration fell, no increase taking place in the cost of the articles composing that remuneration; or if those articles became less costly, without the laborers obtaining more of them; in any one of these three cases, profits would rise. If, on the contrary, labor became less efficient (as it might do from diminished bodily vigor in the people, destruction of fixed capital, or deteriorated education); or if the laborer obtained a higher remuneration, without any increased cheapness in the things composing it; or if, without his obtaining more, that which he did obtain became more costly; profits, in all these cases, would suffer a diminution. And there is no other combination of circumstances in which the general rate of profit of a country, in all employments indifferently, can either fall or rise.

The connection of profit with the three constituents of cost of labor may probably be better seen by aid of the following illustration; it being premised that as yet money is not used, [pg 231]and that the laborers are paid in the articles which their money wages would have bought had money been used. For simplicity we will suppose that all articles of the laborer's consumption are represented by corn. Imagine a large woolen-mill employing 500 men, and paying them in corn; and suppose that one yard of woolen cloth exchanges for one bushel of corn in the open market. In the beginning, with a given condition of efficiency, suppose that each man produces on an average 1,200 yards of cloth, for which he is paid 1,000 bushels of corn:

500 men, each producing 1,200 yards, give a total product of 600,000 yards.
500 men, each paid 1,000 bushels, cause an outlay of 500,000 yards.
Profit: 100,000 yards.

(1.) Now suppose a change increasing the efficiency of labor to such an extent that each laborer produces 1,300 instead of 1,200 yards, then the account will stand, if the other elements remain unchanged:

500 men, each producing 1,300 yards, give a total product of 650,000 yards.
500 men, each paid 1,000 bushels, cause an outlay of 500,000 yards.
Profit: 150,000 yards.

(2.) If efficiency and the cost of producing food remain the same as at first, suppose a change to occur which raises the quantity of corn each laborer receives from 1,000 to 1,100, or, as it is called, increases his real wages—then the account will be:

500 men, each producing 1,200 yards, give a total product of 600,000 yards.
500 men, each paid 1,100 bushels, cause an outlay of 550,000 yards.
Profit: 50,000 yards.

(3.) If efficiency and real wages remain the same, suppose such an increase in the cost to the employers of obtaining corn that they are obliged to give one and one tenth yard of their goods for one bushel of corn (1,000 bushels of corn costing them 1,100 yards of cloth), then the statement will read:

500 men, each producing 1,200 yards, give a total product of 600,000 yards.
500 men, each paid 1,000 bushels, cause an outlay of 550,000 yards.
Profit: 50,000 yards.
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