title: Progress and poverty; an inquiry into the cause of industrial depressions and of increase of want with increase of wealth; the remedy,
text: Wvn<- LIBRARY OF CONGRESS 0001747=5^,5^ %i> o. • • s vf>V ° ,0 * * '^^ (V « a '^ > V %^c^- •^^0^ » lO^ »L!nL% > '^ -' ^ 0^ **vi% <> ,♦" . *^ ^^ ^yi^.* .<&' "»^ -J j^-^- ^"■^*^ ". ^'^-n^. •■ 4 O «^ * o » o ' ^^ ^\' '^0' 'oK '^0' ,•0 "^^ A PEOGRESS AND POVERTY BOOKS BY HENRY GEORGE The Science of Political Economy, l vol., 8vo, cloth, gilt top, $2.50. Progress and Poverty. 12mo, cloth, $1.00 ; paper, 25 cents. A Perplexed Philosopher. 13iiio, cloth, $1.00 ; paper, 25 cents. Social Problems. 12mo, cloth, $1.00; imper, 25 cents. Protection or Free Trade ? 12mo, cloth, $1.00 ; paper, 25 cents. Property in Land, The Condition of Labor, and The Land Question, bound together in one volume. ISir^o, cloth, $1.00 ; paper, 25 cents. DOUBLEDAY & McCLURE CO. PUBLISHERS, 141-155 EAST 25TH ST., NEW YORK PROGRESS AND POYERTY AN INQUIRY INTO THE CAUSE OF INDUSTRIAL DEPRESSIONS AND OF INCREASE OF WANT WITH INCREASE OF WEALTH THE REMEDY BY HENRY GEORGE Author of " Protection or Free Trade? " " Social Problems, " " A Perplexed Philosopher," ''Tlie Condition of Labor, " "The Laud Question," "'Pi-operty in Land," etc. NEIV EDITION NEW YORK DOUBLEDAY & McCLURE CO. 1899 w 'A (^''M\ Entered according to act of Congress in the year 1879 By Henry George In the office of the Librarian of Congress. o^-3m MANHATTAN PRESS 474 W. BROADWAY NEV^ YORK TO THOSE WHO, SEEING THE VICE AND mSERY THAT SPRING FROM THE UNEQUAL DISTRIBUTION OP WEALTH AND PRIVILEGE, FEEL THE POSSIBILITY OF A HIGHER SOCIAL STATE AND WOULD STRIVE FOR ITS ATTAINMENT San Pbancisco, March, 1879. if There must be refuge ! Men Perished in winter winds till one smote fire From flint stones coldly hiding what they held, The red spark treasured from the kindling sun j They gorged on flesh like wolves, till one sowed corn, Which grew a weed, yet makes the life of man ; They mowed and bahbled till some tongue struck speech, And patient fingers framed the lettered sound. What good gift have my brothers, but it came From search and strife and loving sacrifice? Edwin Arnold. Never yet Share of Truth was vainly set In the world's wide fallow ; After hands shall sow the seed, After hands, from hill and mead, Eeap the harvests yellow. Whittier. PREFACE TO FOURTH EDITION. The views herein set forth were in the main briefly stated in a pamphlet entitled ** Our Land and Land Policy," published in San Francisco in 1871. I then intended, as soon as I could, to present them more fully, but the opportunity did not for a long time occur. In the meanwhile I became even more firmly convinced of their truth, and saw more completely and clearly their relations; and I also saw how many false ideas and erroneous habits of thought stood in the way of their recognition, and how necessary it was to go over the whole ground. This I have here tried to do, as thoroughly as space would permit. It has been necessary for me to clear away before I could build up, and to write at once for those who have made no previous study of such subjects, and for those who are familiar with economic reason- ings; and, so great is the scope of the argument that it has been impossible to treat with the fullness they deserve many of the ques- tions raised. What I have most endeavored to do is to establish general principles, trusting to my readers to carry further their applications where this is needed. In certain respects this book will be best appreciated by those who have some knowledge of economic literature; but no previous read- ing is necessary to the understanding of the argument or the passing of judgment upon its conclusions. The facts upon which I have relied are not facts which can be verified only by a search through libraries. They are facts of common observation and common knowledge, which every reader can verify for himself, just as he can decide whether the reasoning from them is or is not valid. Beginning with a brief statement of facts which suggest this in- quiry, I proceed to examine the explanation currently given in the name of political economy of the reason why, in spite of the increase of productive power, wages tend to the minimum of a bare living. This examination shows that the current doctrine of wages is founded upon a misconception; that, in truth, wages are produced by the labor for which they are paid, and should, other things being equal, increase with the number of laborers. Here the inquiry meets a viii PREFACE. doctrine which is the foundation and center of most important economic theories, and which has powerfully influenced thought in all directions— the Malthusian doctrine, that population tends to increase faster than subsistence. Examination, however, shows that this doctrine has no real support either in fact or in analogy, and that when brought to a decisive test it is utterly disproved. Thus far the results of the inquiry, though extremely important, are mainly negative. They show that current theories do not satis- factorily explain the connection of poverty with material progress, but throw no light upon the problem itself, beyond showing that its solution must be sought in the laws which govern the distribution of wealth. It therefore becomes necessary to carry the inquiry into this field. A preliminary review shows that the three laws of dis- tribution must necessarily correlate with each other, which as laid down by the current political economy they fail to do, and an ex- amination of the terminology in use reveals the confusion of thought by which this discrepancy has been slurred over. Proceeding then to work out the laws of distribution, I first take up the law of rent. This, it is readily seen, is correctly apprehended by the current political economy. But it is also seen that the full scope of this law has not been appreciated, and that it involves as corollaries the laws of wages and interest — the cause which determines what part of the produce shall go to the land owner necessarily determining what part shall be left for labor and capital. Without resting here, I pro- ceed to an independent deduction of the laws of interest and wages. I have stopped to determine the real cause and justification of in- terest, and to point out a source of much misconception — ^the con- founding of what are really the profits of monopoly with the legiti- mate earnings of capital. Then returning to the main inquiry, investigation shows that interest must rise and fall with wages, and depends ultimately upon the same thing as rent — the margin of cultivation or point in production where rent begins. A similar but independent investigation of the law of wages yields similar har- monious results. Thus the three laws of distribution are brought into mutual support and harmony, and the fact that with material progress rent everywhere advances is seen to explain the fact that wages and interest do not advance. What causes this advance of rent is the next question that arises, and it necessitates an examination of the effect of material progress upon the distribution of wealth. Separating the factors of material progress into increase of population and improvements in the arts, it is first seen that increase in population tends constantly, not merely PREFACE. IX by reducing the margin of cultivation, but by localizing the econ- omies and powers which come with increased population, to increase the proportion of the aggregate produce which is taken in rent, and to reduce that which goes as wages and interest. Then eliminating increase of population, it is seen that improvement in the methods and powers of production tends in the same direction, and, land being held as private property, would produce in a stationary population all the effects attributed by the Malthusian doctrine to pressure of population. And then a consideration of the effects of the continuous increase in land values which thus spring from material progress reveals in the speculative advance inevitably begotten when land is private property a derivative but most powerful cause of the increase of rent and the crowding down of wages. Deduction shows that this cause must necessarily produce periodical industrial depressions, and induction proves the conclusion; while from the analysis which has thus been made it is seen that the necessary result of material progress, land being private property, is, no matter what the in- crease in population, to force laborers to wages which give but a bare living. This identification of the cause that associates poverty with prog- ress points to the remedy, but it is to so radical a remedy that I have next deemed it necessary to inquire whether there is any other remedy. Beginning the investigation again from another starting point, I have passed in examination the measures and tendencies currently advocated or trusted in for the improvement of the condi- tion of the laboring masses. The result of this investigation is to prove the preceding one, as it shows that nothing short of making land common property can permanently relieve poverty and check the tendency of wages to the starvation point. The question of justice now naturally arises, and the inquiry passes into the field of ethics. An investigation of the nature and basis of property shows that there is a fundamental and irreconcil- able difference between property in things which are the product of labor and property in land; that the one has a natural basis and sanction while the other has none, and that the recognition of ex- clusive property in land is necessarily a denial of the right of prop- erty in the products of labor. Further investigation shows that private property in land always has, and always must, as develop- ment proceeds, lead to the enslavement of the laboring class; that land owners can make no just claim to compensation if society choose to resume its right; that so far from private property in land being in accordance with the natural perceptions of men, the very reverse X PREFACE. is true, and that in the United States we. are already beginning to feel the effects of having admitted this erroneous and destructive principle. The inquiry then passes to the field of practical statesmanship. It is seen that private property in land, instead of being necessary to its improvement and use, stands in the way of improvement and use, and entails an enormous waste of productive forces; that the recog- nition of the common right to land involves no shock or dispossession, but is to be reached by the simple and easy method of abolishing all taxation save that upon land values. And this an inquiry into the principles of taxation shows to be, in all respects, the best subject of taxation. A consideration of the effects of the change proposed then shows that it would enormously increase production; would secure justice in distribution; would benefit all classes; and would make possible an advance to a higher and nobler civilization. The inquiry now rises to a wider field, and recommences from another starting point. For not only do the hopes which have been raised come into collision with the widespread idea that social prog- ress is possible only by slow race improvement, but the conclusions we have arrived at assert certain laws which, if they are really nat- ural laws, must be manifest in universal history. As a final test, it therefore becomes necessary to work out the law of human progress, for certain great facts which force themselves on our attention, as soon as we begin to consider this subject, seem utterly inconsistent with what is now the current theory. This inquiry shows that dif- ferences in civilization are not due to differences in individuals, but rather to differences in social organization ; that progress, always kindled by association, always passes into retrogression as inequality is developed; and that even now, in modern civilization, the causes which have destroyed all previous civilizations are beginning to manifest themselves, and that mere political democracy is running its course toward anarchy and despotism. But it also identifies the law of social life with the great moral law of justice, and, proving previous conclusions, shows how retrogression may be prevented and a grander advance begun. This ends the inquiry. The final chapter will explain itself. The great importance of this inquiry will be obvious. If it has been carefully and logically pursued, its conclusions completely change the character of political economy, give it the coherence and certitude of a true science, and bring it into full sympathy with the aspirations of the masses of men, from which it has long been es- PREFACE. Xi tranged. What I have done in this book, if I have correctly solved the great problem I have sought to investigate, is, to unite the truth perceived by the school of Smith and Ricardo to the truth perceived by the schools of Proudhon and Lasalle; to show that laissez faire (in its full true meaning) opens the way to a realization of the noble dreams of socialism; to identify social law with moral law, and to disprove ideas which in the minds of many cloud grand and elevat- ing perceptions. This work was wiitten betw^een August, 1877, and March, 1879, and the plates finished by September of that year. Since that time new illustrations have been given of the correctness of the views herein advanced, and the march of events — and especially that great movement which has begun in Great Britain in the Irish land agita- tion — shows still more clearly the pressing nature of the problem I have endeavored to solve. But there has been nothing in the criticisms they have received to induce the change or modification of these views — in fact, I have yet to see an objection not answered in advance in the book itself. And except that some verbal errors have been corrected and a preface added, this edition is the same as previous ones. Henry George. New York, November, 1880. CONTENTS. Introductory. PAQE The Problem 3 Book I.— Wages and Capital, Chapter I. —The current doctrine of wages— its insufficiency 17 n.— The meaning of the terms 30 III.— Wages not drawn from capital, but produced by the labor 49 rV.— The maintenance of laborers not drawn from capital 70 v.— The real functions of capital 79 Book II.— Population and Subsistence. Chapter I.— The Malthusian theory, its genesis and support 91 n.— Inferences fromfacts 103 III.— Inferences from analogy 129 rV.— Disproof of the Malthusian theory 140 Book III.— The Laws op Distribution. Chapter I.— The inquiry narrowed to the laws of distribution— necessary relation of these laws 153 n.— Rent and the law of rent 165 in. — Interest and the cause of interest 173 IV.— Of spurious capital and of profits often mistaken for interest. . 189 v.— The law of interest 195 VI.— Wages and the law of wages 204 Vn.— Correlation and co-ordination of these laws 217 VIII.— The statics of the problem thus explained 219 Book IV.— Effect of Material Progress upon the Distribution op Wealth. Chapter I.— The dynamics of the problem yet to seek 225 n.— Effect of increase of population upon the distribution of wealth 228 in.— Effect of improvements in the arts upon the distribution of wealth 242 rV.— Effect of the expectation raised by material progress 253 Book V. — The Problem Solved. Chapter I. — The primary cause of recurring paroxysms of industrial depression 261 II. — The persistence of poverty amid advancing wealth. . . . : 280 Xiv CONTENTS. Book VI.— The Remedy. Chapter I.— Insuflaciency of remedies currently advocated 297 II.— The true remedy 326 Book VII.— Justice of the Remedy. Chapter I.— In justice of private property in land 381 n.— Enslavement of laborers the ultimate result of private property in land 345 m.— Claim of land owners to compensation, . , 356 rv,— Property in land historically considered 366 v.— Property in land in the United States 383 Book VIQ.— Application of the Remedy. Chapter I.— Private property in land inconsistent with the best use of land. 395 II.— How equal rights to the land may be asserted and secured 401 in.— The proposition tried by the canons of taxation 406 IV.— Indorsements and objections 420 Book IX.— Effects of the Remedy. Chapter I.— Of the effect upon the production of wealth 431 n.— Of the effect upon distribution and thence upon production. ... 438 m.— Of the effect upon individuals and classes 445 rv.— Of the changes that would be wrought in social organization and social life 452 Book X.— The Law of Human Progress. Chapter I.— The current theory of human progress— its insuflBciency 473 n.— Differences in civilization— to what due 487 in.— The law of human progress 503 IV.— How modern civilization may dechne 524 v.— The central truth 541 Conclusion. The problem of individual life 553 INTRODUCTORY. THE PKOBLBM. Ye build! ye build! but ye enter not in, Like the tribes whom the desert devoured in their sin; From the land of promise ye fade and die, Ere its verdure gleams forth on your wearied eye. — Mrs. Sigourney. INTRODUCTORY. THE PROBLEM. The present century has been marked by a prodigious increase in wealth-producing power. The utilization of steam and electricity, the introduction of improved proc- esses and labor-saving machinery, the greater subdivision and grander scale of production, the wonderful facilita- tion of exchanges, have multiplied enormously the effect- iveness of labor. At the beginning of this marvelous era it was natural to expect, and it was expected, that labor-saving inven- tions would lighten the 'toil and improve the condition of the laborer; that the enormous increase in the power of producing wealth would make real poverty a thing of the past. Could a man of the last century — a Franklin or a Priestley — have seen, in a vision of the future, the steamship taking the place of the sailing vessel, the rail- road train of the wagon, the reaping machine of the scythe, the threshing machine of the flail; could he have heard the throb of the engines that in obedience to human will, and for the satisfaction of human desire, exert a power greater than that of all the men and all the beasts of burden of the earth combined; could he have seen the forest tree transformed into finished lumber — into doors, sashes, blinds, boxes or barrels, with hardly the touch of a human hand; the great work- shops where boots and shoes are turned out by the case with less labor than the old-fashioned cobbler could have 4 Iiq^TRODUCTORY. put on a sole; the factories where, under the eye of a girl, cotton becomes cloth faster than hundreds of stal- wart weavers could have turned it out with their hand- looms; could he have seen steam hammers shaping mam- moth shafts and mighty anchors, and delicate machinery making tiny watches; the diamond drill cutting through the heart of the rocks, and coal oil sparing the whale; could he have realized the enormous saving of labor resulting from improved facilities of exchange and com- munication — sheep killed in Australia eaten fresh in England, and the order given by the London banker in the afternoon executed in San Francisco in the morning of the same day; could he have conceived of the hundred thousand improvements which these only suggest, what would he have inferred as to the social condition of man- kind? It would not have seemed like an inference; further than the vision went it would have seemed as though he saw; and his heart would have leaped and his nerves would have thrilled, as one who from a height beholds just ahead of the thirst-stricken caravan the living gleam of rustling woods and the glint of laughing waters. Plainly, in the sight of the imagination, he would have beheld these new forces elevating society from its very foundations, lifting the very poorest above the possibility of want, exempting the very lowest from anxiety for the material needs of life; he would have seen these slaves of the lamp of knowledge taking on themselves the tradi- tional curse, these muscles of iron and sinews of steel making the poorest laborer's life a holiday, in which every high quality and noble impulse could have scope to grow. And out of these bounteous material conditions he would have seen arising, as necessary sequences, moral conditions realizing the golden age of which mankind have always dreamed. Youth no longer stunted and THE PROBLEM. 5 starved; age no longer harried by avarice; the child at play with the tiger; the man with the muck-rake drink- ing in the glory of the stars: Foul things fled, fierce things tame; discord turned to harmony I For how could there be greed where all had enough? How could the vice, the crime, the ignorance, the brutality, that spring from poverty and the fear of poverty, exist where pov- erty had vanished? Who should crouch where all were freemen; who oppress where all were peers? More or le^s vague or clear, these have been the hopes, these the dreams born of the improvements which give this wonderful century its preeminence. They have sunk so deeply int-o the popular mind as radically to change the currents of thought, to recast creeds and displace the most fundamental conceptions. The haunting visions of higher possibilities have not merely gathered splendor and vividness, but their direction has changed — instead of seeing behind the faint tinges of an expiring sunset, all the glory of the daybreak has decked the skies before. It is true that disappointment has followed disappoint- ment, and that discovery upon discovery, and invention after invention, have neither lessened the toil of those who most need respite, nor brought plenty to the poor. But there have been so many things to which it seemed this failure could be laid, that up to our time the new faith has hardly weakened. We have better appreciated the difficulties to be overcome; but not the less trusted that the tendency of the times was to overcome them. Now, however, we are coming into collision with facts which there can be no mistaking. From all parts of the civilized world come complaints of industrial depression; of labor condemned to involuntary idleness; of capital massed and wasting; of pecuniary distress among busi- ness men; of want and suffering and anxiety among the working classes. All the dull, deadening pain, all the keen, maddening anguish, that to great masses of men 6 INTKODUCTORY. are involved in the words "hard times," afflict the world to-day. This state of things, common to communities differing so widely in situation, in political institutions, in fiscal and financial systems, in density of population and in social organization, can hardly be accounted for by local causes. There is distress where large standing armies are maintained, but there is also distress where the standing armies are nominal; there is distress where protective tariffs stupidly and wastefully hamper trade, but there is also distress where trade is nearly free; there is distress where autocratic government yet prevails, but there is also distress where political power is wholly in the hands of the people; in countries where paper is money, and in countries where gold and silver are the only currency. Evidently, beneath all such things as these, we must infer a common cause. That there is a common cause, and that it is either what we call material progress or something closely con- nected with material progress, becomes more than an inference when it is noted that the phenomena we class together and speak of as industrial depression are but intensifications of phenomena which always accompany material progress, and which show themselves more clearly and strongly as material progress goes on. Where the conditions to which material progress everywhere tends are most fully realized — that is to say, where popu- lation is densest, wealth greatest, and the machinery of production and exchange most highly developed — we find the deepest poverty, the sharpest struggle for existence, and the most of enforced idleness. It is to the newer countries — that is, to the countries where material progress is yet in its earlier stages — that laborers emigrate in search of higher wages, and capital flows in search of higher interest. It is in the older countries— that is to say, the countries where material progress has reached later stages— that widespread desti- THE PROBLEM. 7 tution is found in the midst of the greatest abundance. Go into one of the new communities where Anglo-Saxon vigor is just beginning the race of progress; where the machinery of production and exchange is yet rude and inefficient; where the increment of wealth is not yet great enough to enable any class to live in ease and luxury; where the best house is but a cabin of logs or a cloth and paper shanty, and the richest man is forced to daily work — and though you will find an absence of wealth and all its concomitants, you will find no beggars. There is no luxury, but there is no destitution. No one makes an easy living, nor a very good living; but every one can make a living, and no one able and willing to work is oppressed by the fear of want. But just as such a community realizes the conditions which all civilized communities are striving for, and ad- vances in the scale of material progress — just as closer settlement and a more intimate connection with the rest of the world, and greater utilization of labor-saving ma- chinery, make possible greater economies in production and exchange, and wealth in consequence increases, not merely in the aggregate, but in proportion to population — so does poverty take a darker aspect. Some get an infinitely better and easier living, but others find it hard to get a living at all. The "tramp" comes with the loco- motive, and almshouses and prisons are as surely the marks of "material progress" as are costly dwellings, rich warehouses, and magnificent churches. Upon streets lighted with gas and patrolled by uniformed policemen, beggars wait for the passer-by, and in the shadow of college, and library, and museum, are gather- ing the more hideous Huns and fiercer Vandals of whom Macaulay prophesied. This fact — the great fact that poverty and all its con- comitants show themselves in communities just as they develop into the conditions toward which material prog- 8 INTRODUCTORY. ress tends— proves that the social difficulties existing wherever a certain stage of progress has been reached, do not arise from local circumstances, but are, in some way or another, engendered by progress itself. And, unpleasant as it may be to admit it, it is at last becoming evident that the enormous increase in produc- tive power which has marked the present century and is still going on with accelerating ratio, has no tendency to extirpate poverty or to lighten the burdens of those compelled to toil. It simply widens the gulf between Dives and Lazarus, and makes the struggle for existence more intense. The march of invention has clothed mankind with powers of which a century ago the boldest imagination could not have dreamed. But in factories where labor-saving machinery has reached its most won- derful development, little children are at work; wherever the new forces are anything like fully utilized, large classes are maintained by charity or live on the verge of recourse to it; amid the greatest accumulations of wealth, men die of starvation, and puny infants suckle dry breasts; while everywhere the greed of gain, the worship of wealth, shows the force of the fear of want. The promised land flies before us like the mirage. The fruits of the tree of knowledge turn as we grasp them to apples of Sodom that crumble at the touch. It is true that wealth has been greatly increased, and that the average of comfort, leisure, and refinement has been raised; but these gains are not general. In them the lowest class do not share.* I do not mean that the * It is true that the poorest may now in certain ways enjoy what the richest a century ago could not have commanded, but this does not show improvement of condition so long as the ability to obtain the necessaries of life is not increased. The beggar in a great city may enjoy many things from which the backwoods farmer is de- barred, but that does not prove the condition of the city beggar better than that of the independent farmer. I THE PKOBLEM. 9 condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improve- ment which can be credited to increased productive power. I mean that the tendency of what we call material prog- ress is in nowise to improve the condition of the lowest class in the essentials of healthy, happy human life. Nay, more, that it is still further to depress the condition of the lowest class. The new forces, elevating in their nature though they be, do not act upon the social fabric from underneath, as was for a long time hoped and be- lieved, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through soci- ety. Those who are above the point of separation are elevated, but those who are below are crushed down. This depressing effect is not generally realized, for it is not apparent where there has long existed a class just able to live. Where the lowest class barely lives, as has been the case for a long time in many parts of Europe, it is impossible for it to get any lower, for the next low- est step is out of existence, and no tendency to further depression can readily show itself. But in the progress of new settlements to the conditions of older communi- ties it may clearly be seen that material progress does not merely fail to relieve poverty — it actually produces it. In the United States it is clear that squalor and misery, and the vices and crimes that spring from them, every- where increase as the village grows to the city, and the march of development brings the advantages of the im- proved methods of production and exchange. It is in the older and richer sections of the Union that pauperism and distress among the working classes are becoming most painfully apparent. If there is less deep poverty in San Francisco than in New York, is it not because San Francisco is yet behind New York in all that both cities are striving for? "When San Francisco reaches the point 10 INTRODUCTORY. where New York now is, who can doubt that there will also be ragged and barefooted children on her streets? This association of poverty with progress is the great enigma of our times. It is the central fact from which spring industrial, social, and political difficulties that perplex the world, and with which statesmanship and philanthropy and education grapple in vain. Erom it come the clouds that overhang the future of the most progressive and self-reliant nations. It is the riddle which the Sphinx of Fate puts to our civilization, and which not to answer is to be destroyed. So long as all the increased wealth which modern progress brings goes but to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent. The reaction must come. The tower leans from its foundations, and every new story but hastens the final catastrophe. To educate men who must be condemned to poverty, is but to make them restive; to base on a state of most glaring social in- equality political institutions under which men are theoretically equal, is to stand a pyramid on its apex. All-important as this question is, pressing itself from every quarter painfully upon attention, it has not yet re- ceived a solution which accounts for all the facts and points to any clear and simple remedy. This is shown by the widely varying attempts to account for the pre- vailing depression. They exhibit not merely a diver- gence between vulgar notions and scientific theories, but also show that the concurrence which should exist be- tween those who avow the same general theories breaks up upon practical questions into an anarchy of opinion. Upon high economic authority we have been told that the prevailing depression is due to over-consumption; upon equally high authority, that it is due to over-pro- duction; while the wastes of war, the extension of rail- THE PROBLEM. 11 roads, the attempts of workmen to keep up wages, the demonetization of silver, the issues of paper money, the increase of labor-saving machinery, the opening of shorter avenues to trade, etc., are separately pointed out as the cause, by writers of reputation. And while professors thus disagree, the ideas that there is a necessary conflict between capital and labor, that machinery is an evil, that competition must be re- strained and interest abolished, that wealth may be created by the issue of money, that it is the duty of gov- ernment to furnish capital or to furnish Avork, are rapidly making way among the great body of the people, who keenly feel a hurt and are sharply conscious of a wrong. Such ideas, which bring great masses of men, the repositories of ultimate political power, under the leadership of charlatans and demagogues, are fraught with danger; but they cannot be successfully combated until political economy shall give some answer to the great question which shall be consistent with all her teachings, and which shall commend itself to the per- ceptions of the great masses of men. It must be within the province of political economy to give such an answer. For political economy is not a set of dogmas. It is the explanation of a certain set of facts. It is the science which, in the sequence of certain phenomena, seeks to trace mutual relations and to iden- tify cause and effect, just as the physical sciences seek to do in other sets of phenomena. It lays its foundations upon firm ground. The premises from which it makes its deductions are truths which have the highest sanc- tion; axioms which we all recognize; upon which we safely base the reasoning and actions of every-day life, and which may be reduced to the metaphysical expres- sion of the physical law that motion seeks the line of least resistance — viz., that men seek to gratify their de- sires with the least exertion. Proceeding from a basis 12 INTRODUCTORY. thus assured, its processes, which consist simply in identification and separation, have the same certainty. In this sense it is as exact a science as geometry, which, from similar truths relative to space, obtains its conclu- sions by similar means, and its conclusions when valid should be as self-apparent. And although in the domain of political economy we cannot test our theories by arti- ficially produced combinations or conditions, as may be done in some of the other sciences, yet we can apply tests no less conclusive, by comparing societies in which different conditions exist, or by, in imagination, separat- ing, combining, adding or eliminating forces or factors of known direction. I propose in the following pages to attempt to solve by the methods of political economy the great problem I have outlined. I propose to seek the law which associ- ates poverty with progress, and increases want with advancing wealth; and I believe that in the explanation of this paradox we shall find the explanation of those recurring seasons of industrial and commercial paralysis which, viewed independently of their relations to more general phenomena, seem so inexplicable. Properly commenced and carefully pursued, such an investigation must yield a conclusion that will stand every test, and as truth, will correlate with all other truth. Por in the sequence of phenomena there is no accident. Every effect has a cause, and every fact implies a preceding fact. That political economy, as at present taught, does not explain the persistence of poverty amid advancing wealth in a manner which accords with the deep-seated percep- tions of men; that the unquestionable truths which it j does teach are unrelated and disjointed; that it has failed to make the progress in popular thought that truth, even when unpleasant, must make; that, on the con- trary, after a century of cultivation, during which it has THE PROBLEM. 13 engrossed the attention of some of the most subtle and powerful intellects, it should be spurned by the statsman, scouted by the masses, and relegated in the opinion of many educated and thinking men to the rank of a pseudo-science in which nothing is fixed or can be fixed must, it seems to me, be due not to any inability of the science when properly pursued, but to some false step in its premises, or overlooked factor in its estimates. And as such mistakes are generally concealed by the re- spect paid to authority, I propose in this inquiry to take nothing for granted, but to bring even accepted theories to the test of first principles, and should they not stand the test, freshly to interrogate facts in the endeavor to discover their law. I propose to beg no question, to shrink from no con- clusion, but to follow truth wherever it may lead. Upon us is the responsibility of seeking the law, for in the very heart of our civilization to-day women faint and little children moan. But what that law may prove to be is not our affair. If the conclusions that we reach run counter to our prejudices, let us not flinch; if they chal- lenge institutions that have long been deemed wise and natural, let us not turn back. BOOK I. WAGES AND CAPITAL. CHAPTER I. — THE CURRENT DOCTRINE — ITS INSUF- FICIENCY. CHAPTER II. — THE MEANING OP THE TERMS. CHAPTER III. — AVAGES NOT DRAWN FROM CAPITAL, BUT PRODUCED BY THE LABOR. CHAPTER IV. — THE MAINTENANCE OF LABORERS NOT DRAWN FROM CAPITAL. CHAPTER V. — THE REAL FUNCTIONS OF CAPITAL. He that is to follow philosophy must he a freeman in mind, — Ptx)lemy. CHAPTER I. THE CURREi^'T DOCTRIN^E OF WAGES — ITS INSUFFICIENCY. Reducing to its most compact form the problem we have set out to investigate, let us examine, step by step, the explanation which political economy, as now accepted by the best authority, gives of it. The cause which produces poverty in the midst of ad- vancing wealth is evidently the cause which exhibits it- self in the tendency, everywhere recognized, of wages to a minimum. Let us, therefore, put our inquiry into this compact form: Why, in spite of increase in productive power, do ivages tend to a miiiitrnmi ivliich tvill give but a dare living f The answer of the current political economy is, that wages are fixed by the ratio between the number of laborers and the amount of capital devoted to the em- ployment of labor, and constantly tend to the lowest amount on which laborers will consent to live and repro- duce, because the increase in the number of laborers tends naturally to follow and overtake any increase in capital. The increase of the divisor being thus held in check only by the possibilities of the quotient, the divi- dend may be increased to infinity without greater result. In current thought this doctrine holds all but undis- puted sway. It bears the indorsement of the very high- est names among the cultivators of political economy, and though there have been attacks upon it, they are 18 WAGES AISTD CAPITAL. Book I. generally more formal than real.* It is assumed by Buckle as the basis of his generalizations of universal history. It is taught in all, or nearly all, the great Eng- lish and American universities, and is laid down in text- books which aim at leading the masses to reason correctly upon practical affairs, while it seems to harmonize with the new philosophy, which, having in a few years all but conquered the scientific world, is now rapidly permeating the general mind. Thus entrenched in the upper regions of thought, it is in cruder form even more firmly rooted in what may be styled the lower. What gives to the fallacies of protec- tion such a tenacious hold, in spite of their evident in- consistencies and absurdities, is the idea that the sum to be distributed in wages is in each community a fixed one, which the competition of ^"foreign labor" must still further subdivide. The same idea underlies most of the theories which aim at the abolition of interest and the restriction of competition, as the means whereby the share of the laborer in the general wealth can be in- creased; and it crops out in every direction among those who are not thoughtful enough to have any theories, as may be seen in the columns of newspapers and the debates of legislative bodies. * This seems to me true of Mr. Thornton's objections, for while he denies the existence of a predetermined wage fund, consisting of a portion of capital set apart for the purchase of labor, he yet holds (which is the essential thing) that wages are drawn from capital, and that increase or decrease of capital is increase or decrease of the fund available for the payment of wages. The most vital attack upon the wage fund doctrine of which I know is that of Professor Francis A. Walker (The Wages Question: Kew York, 1876), yet he admits that wages are in large part advanced from capital — which, so far as it goes, is all that the stanchest supporter of the wage fund theory could claim — while he fully accepts the Malthusian theory. Thus his practical conclusions in nowise differ from those reached by expounders of the current theory. Chap. I. THE CURREKT DOCTRIl^E. 19 And yet, widely accepted and deeply rooted as it is, it seems to me that this theory does not tally with obvious facts. For, if wages depend upon the ratio between the amount of labor seeking employment and the amount of capital devoted to its employment, the relative scarcity or abundance of one factor must mean the relative abundance or scarcity of the other. Thus, capital must be relatively abundant where wages are high, and rela- tively scarce where wages are low. Now, as the capital used in paying wages must largely consist of the capital constantly seeking investment, the current rate of inter- est must be the measure of its relative abundance or scar- city. So, if it be true that wages depend upon the ratio between the amount of labor seeking employment and the capital devoted to its employment, then high wages, the mark of the relative scarcity of labor, must be ac- companied by low interest, the mark of the relative abundance of capital, and reversely, low wages must be accompanied by high interest. This is not the fact, but the contrary. Eliminating from interest the element of insurance, and regarding only interest proper, or the return for the use of capital, is it not a general truth that interest is high where and when wages are high, and low where and when wages are low? Both wages and interest have been higher in the United States than in England, in the Pacific than in the Atlantic States. Is it not a notorious fact that where labor flows for higher wages, cajjital also flows for higher interest? Is it not true that wherever there has been a general rise or fall in wages there has been at the same time a similar rise or fall in interest? In California, for instance, when wages were higher than anywhere else in the world, so also was interest higher. Wages and inter- est have in California gone down together. When com- mon wages were $5 a day, the ordinary bank rate of in- terest was twenty-four per cent, per annum. Now that 20 WAGES AND CAPITAL. Book I. common wages are 12 or 12.50 a day, the ordinary bank rate is from ten to twelve per cent. 