UCSB LfBRARY
THE DISTRIBUTION
OF THE PRODUCE
BY
JAMES C. SMITH
POSTMASTER OF BAHAMAS,
FEI.I.OW OF THE ROYAL COLONIAL INSTITUTE
" Finally, I must repeat my conviction, that the industrial system, which
divides society absolutely into two portions, the payers of wages and the
receivers of them, the first counted by thousands and the last by millions,
is neither fit for nor capable of indefinite duration : and.the possibility of
changing this system for one of combination without dependence, and
unity of interest instead of organized hostility, depends altogether upon
the future developments of the partnership principle." J. S. MILL.
LONDON
KEGAN PAUL, TRENCH, TRUBNER CO., LTD.
PATERNOSTER HOUSE, CHARING CROSS ROAD
1892
THE DISTRIBUTION OF THE PRODUCE.
APART from the want of a technical " language adapted
for the investigation of truth," there is not a more
fruitful source of perplexity or confusion in investigations
of economic phenomena than the disagreement which
exists among economists as to the number of fundamental
groups among whom, in modern society, under existing
industrial conditions, wealth or produce is divided.
Let us attempt to tabulate, in their mutual relations
to each, the several basic departments and functions into
which modern society resolves itself :
Society .
State
( Polity
.Poll
(A.)
r Judicature
< Executive
(. Legislature
("Banker or Money-Lord
I Capitalist < Merchant or Transporter
(. Real Estate Merchant or Land-Lord
Employer or Entrepreneur
Labourer < Foreman
or < Journeyman
Employe ( Apprentice
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The Distribution of the Produce.
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icians, Students of these professi
^ Banking and Insurance Compani
^ Commercial Companies
( Real Estate Merchants
( Ocean -Transport Companies
Inland- Water Transport Compar
'_ Land Transport Companies
f C Of Floating Structures
Builders < Of Rolling Structures
( Of Stationary Structur
Machine and Implement Makers
C Of Food Stuffs
Manufacturers < Of Clothing Stui
I (Of Other Stuffs
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rintendence performed by respons
pulation performed by automatic
rintendence performed by respons
pulation performed by automatic
iesthood in some form or other." Augusi
litical Science Quarterly for March, 1887
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6 The Distribution of the Produce.
The professional classes together constitute a group
fundamentally distinct from the rest of society, whose
portion of the produce taxation, understanding the
term to include the cost of maintaining the Polity, the
Church, and the School, is determined in advance by
convention, partly of the community through their
representatives in national or municipal parliaments,
and partly of the members of each particular profession.
Regarding bankers and landlords as typical capitalists,
vve find that almost the whole of their capital is, for
value in exchange, being continually surrendered by
them for use to entrepreneurs.
Bankers and landlords are respectively the lenders of
circulating and fixed capital.
The group of working-men by whom this capital is
borrowed and operated are entrepreneurs the working-
men who employ both the capital and labour of every
industrial community, who organize and adventure upon
all industrial enterprises, who are the controllers of the
entire plant, and the custodians of the entire produce.
The capitalist is the lender of capital, the entrepreneur
is the borrower of capital.
The rent* and interest received by capitalists con-
* The term Rent is used by the present writer in its generally
received and popular meaning, and refers to fixed capital
exclusively.
1. The rent of a house includes (a) interest on its capitalized
value, (b] allowance for its average wear and tear, and (c) insurance
of the house against loss by fire.
2. The rent of land includes () interest on its capitalized value,
(b) allowance for its average wear and tear, but it does not include
insurance, because land cannot be destroyed by fire like a house.
An esoteric meaning, however, has been affixed to the term Rent
The Distribution of the Produce. 7
stitute their portion of the produce of human industry,
the rate of such interest and rent being determined
in advance by competition. The entrepreneur who
operates a factory or mill, who supplies the raw materials
wrought up therein, and who employs the labour, is
usually spoken of as the capitalist, and indeed he is
by many distinguished economists, totally different from its
generally received and popular meaning, which has been the
cause of a considerable degree of confusion. This esoteric mean-
ing of rent is The excess of the yield of the superior lands over and
above the yield of lands at the margin of cultivation. The excess
of the produce over and above its cost of production. But this
excess of yield is both popularly and scientifically known as
PROFIT when immediately derived from sources other than land.
Whenever used by the present writer the term Rent will mean
(1) interest on the capitalized value of the thing rented, and
(2) allowance for wear and tear of the thing rented, except in cases
where the item wear and tear is specified separately. The term
Profit will always mean the excess of the yield of produce, over
and above the yield at the producing-point or margin of production,
without reference to the particular source from which such excess
may be immediately derived.
Profit and Interest have been used by several distinguished
economists as interchangeable terms, but they are essentially
different.
When A borrows ^1000 from B, undertaking to pay interest for
the use of the capital at the rate of 3! per centum per annum, and
invests it in an industrial enterprise, he does so because he believes
that the yield or produce of the enterprise during its continuance
will be sufficient to replace periodically the full amount of capital
originally invested, plus 3$ per centum per annum interest to be
paid to the lender B, plus an indefinite sum representing the
profit of the enterprise to be retained by the borrower A, with
which sum A will, from time to time, pay off the loan of ^1000,
and ultimately become the exclusive and absolute owner of the
industrial enterprise, free from the lien of B.
The rate of interest also has been regarded as being identical
with the rate of profit, but these also are essentially different.
The rate of interest in England for many years past may be
estimated at 3^ per centum per annum, and yet for the Bank of
England " The total dividends for the year ending 5th October,
1880, were at the rate of ^9 los. per cent. The price of Bank
Stock, 25th November, 1880, was .276." "The total dividends
8 The Distribution of the Produce.
invariably the representative of the interests of capital,
although all or almost all of the capital invested in the
enterprise may have been borrowed by him : and in
cases where all of the capital invested is the property of
the entrepreneur, he regularly charges interest and rent
against the business, as value in exchange for the use
of the circulating and fixed capital invested by him in
the enterprise, just as if the capital had been borrowed
from someone else. This interest and rent due to him
as capitalist are regularly drawn by him out of the
for the year ending 5th October, 1883, were at the rate of 10 5^.
per cent. The price of Bank Stock, 3Oth October, 1883, was
.297." " The total dividends for the year ending 5th October,
1887. were at the rate of 9 15.$-. per cent. The price of Bank
Stock, 26th October, 1887, was ^304."
In 1880 the rate of Dividend was 9^ per centum per annum.
Interest ^
^
In 1883 the rate of Dividend was io per centum per annum.
" Interest 3i
Profit 6%
In 1887 the rate of Dividend was 9! per centum per annum.
Interest 3^
Profit 6i
It is evident, therefore, that the rate of interest is in no way identical
with the rate of profit.
Profit only is the true Dividend. This fact is conspicuously
manifested in all cases where the capital invested in an industrial
enterprise is borrowed and, as a consequence, the interest thereon
is paid to the lender, and does not constitute any part of the sum
to be divided as the profit of the enterprise ; if this allowance is
made it maybe affirmed that the rate of dividend is identical with
the rate of profit, that dividend and profit are interchangeable
terms.
The Distribution of the Produce. 9
business, in the same manner that wages due to labourers
are regularly drawn by them out of the business. Fur-
thermore, the entrepreneur in every single instance
receives, draws out of the business, as wages of
superintendence, a sum sufficient to maintain himself
and the average family according to the standard of
living to which they may be accustomed.
These receipts by the entrepreneur of interest, rent,
and wages of superintendence, or of wages of superin-
tendence only, are separate and distinct from, and form
no part of any profit which the business may finally
yield to which the entrepreneur would have the exclusive
claim.
The capitalist, whether banker or landlord, is not, as
such, the appropriator of profits ; he is the appropriator
of profits only to the extent and in the degree in which
he is an entrepreneur.
This is manifest if we examine the case of an interest-
bearing bank-deposit (the depositor not being an owner
of any of the bank stock), where the capital of the bank
is invested above the producing-point. In such a case
the depositor receives interest upon his deposit at a
fixed rate per centum per annum.
The rate of interest is usually determined at or prior
to the time of making the deposit, and the payment of
the interest is made with the same fixedness of its
amount, and with the same periodic regularity, as the
payment of the wages of the officials and other employes
of the bank.
Like the payment of wages, the payment of interest
io The Distribution of the Produce.
to the depositor is not contingent upon the declaration
of dividends, nor upon the rate of such dividends, and,
like the officials and other employes of the bank, such
depositor does not participate in the dividends which
may be, from time to time, declared such dividends
being participated in by and distributed among those,
and only those, who are the owners of bank stock.
The element profit may be involved in the interest
paid to the depositor, just as the element profit may be
involved in the wages paid to the bank officials and
other employes ; however, the element of profit which
may be so involved forms, and can form, no part of the
profit of the bank ; but forms, and can only form, part
of the profits of the depositor or of the officials and
other employes respectively.
The depositor is also an entrepreneur to the full
extent of the investment and employment of his capital
at interest in the bank ; and the officials and other
employes are also entrepreneurs to the full extent of
the employment and investment of their labour for
wages by the bank ; but, whatever there may be of
profit involved in any interest paid to a depositor, or
in any wages paid to officials and other employes by
the bank, such profit forms, and can form, no part of
the profits of the bank. Indeed, the interest paid to
depositors, and the wages paid to officials and other
employes, are equally items of expense to the bank ;
are not, and cannot be, elements of profit, but on the
contrary, their tendency is ever to become, to the bank,
elements of loss. The depositor, as such, is the
The Distribution of the Produce. n
capitalist, the owner of bank stock is the entrepre-
neur.
The entrepreneur, and not the capitalist, is the
appropriator of profits. The difference between the
capitalist and the entrepreneur is the difference between
an individual who has a deposit at interest in the bank
and an individual who is the owner of bank stock.
The portion of produce due to labourers is received
by them in the form of wages, both of superintendence
and of manipulation, the rate of which is determined in
advance by competition.
The element profit, that is, the excess of produce
over and above its cost of production, the excess of
price over and above cost, is that portion of the produce
which is the peculiar, the special share of the entre-
preneur, the rate of which is determined in arrear by
variations, either in the circumstances of production or
in the circumstances of distribution or exchange.
According to this view industrial society is divided
into four fundamental groups :
(i.) Professionals receiving their portion of the
produce of industry in the form of taxation, the rate
being determined in advance by convention.
(2.) Capitalists receiving their portion of the produce
of industry either in the form of interest or of rent, the
rate being determined in advance by competition.
(3.) Labourers receiving their portion of the produce
of industry in the form of wages, either of superinten-
dence or of manipulation, the rate being determined in
advance by competition.
12 77^' Distribution of the Produce.
(4.) Entrepreneurs receiving wages of superinten-
dence, and receiving also their peculiar, their special
portion of the produce of industry in the form of profit,
the rate being determined in arrear by the circumstances
of production, and of distribution or exchange.
It will be noticed that entrepreneurs, in addition to
the regular receipt of wages of superintendence as value
in exchange for their services, in directing and con-
trolling the operations of industrial enterprises, are also
legally entitled to appropriate for their own use and
benefit the whole of the profit of industry, that is, the
surplus produce, or the legal titles to property for
which such surplus produce may have been exchanged,
which may at any time be remaining in their control
and custody after the items wages, taxation, insurance,
freight, interest, and rent have been paid.
Before attempting to examine any of the reasons
usually advanced to justify the exclusive appropriation
of profits by entrepreneurs, let us point out, from the
following illustration, one of its consequences. (See the
Illustration on next page.)
In the illustration the industrial conditions are
favourable : the capital invested has been fully employed
in the payment of necessary business expenses, wages
(hire of labour and purchase of material), taxation,
insurance, freight, interest and rent, all of which are
different forms of income or expenditure (income to
him who receives, expenditure to him who pays), the
different names indicating, in a general way, the different
industrial functions of the recipients, and the sum of all
The Distribution of the Produce. 13
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The Distribution of the Produce.
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The Distribution of the Produce. 15
these payments to working-men are again expended
by them in the purchase of articles produced by their
joint industry ; so that consumption is at the highest
rate possible under existing industrial conditions;
nevertheless, the effective demand for commodities neces-
sarily falls short of the actual supply of commodities by the
exact amount of the profit of the entrepreneur, therefore,
under the wage competitive system, wherever there is
profit, there is also an over-supply or glut of commodities.
Assuming that the whole of the capital of an industrial
society is fully employed above the producing-point or
margin of production, the whole of the produce of such
society is the property of, and remains in the custody
of and under the control of, the different entrepreneurs ;
and such produce is mutually offered for sale and
purchased by each and all of them, each exchanging
what he has for what he wants, so that as between
different entrepreneurs, as exchangers, there may not
be any over-production, the exchanges, for proximate
consumption, taking place with precision and balancing
each other.
But there is also another set of exchanges, namely,
the exchanges between entrepreneurs as exchangers, and
all working-men as consumers, for ultimate consumption.
In an industrial soci^y%founded upon the separation
of employments, the division of industrial functions, in
which exchange is the method of distribution of products,
both for proximate and for ultimate consumption, the
measure of the expenditure of all entrepreneurs, as
employers, in the payment of all the various forms of
1 6 The Distribution of the Produce.
income or expenditure wages, taxation, insurance,
freight, interest, rent, is the measure of the effective
demand for commodities by all working-men for ultimate
consumption. But the sum of all this expenditure
the cost of production is not equal to the sum of the
whole of the produce, if there is a profit, that is, if there
is surplus produce over and above all expenditure, over
and above cost of production ; consequently, whenever
and wherever there is profit or surplus produce, there is
also over-supply or glut, and the measure of the profit,
the measure of the surplus produce, is also, under the
wage competitive system, the measure of the over-
supply or glut of commodities.
In society (i) commodities exchange for commodities
between different entrepreneurs as exchangers, as
between such exchangers an over-supply or glut of
commodities is an impossibility ; (2) commodities, other
than money, exchange for money between different
entrepreneurs, as exchangers, as between such exchangers
an over-supply or glut of commodities, other than money,
is equivalent to an under-supply or scarcity of money,
which manifests itself by a fall of general prices and
speculative incomes, that is, incomes expressed in terms
of money, and which is indicative of the appreciation
of the value of money, and the consequent depreciation
of the value of all commodities other than money in
comparison with money ; and (3) commodities exchange
for commodities between entrepreneurs, as exchangers,
on the one side, and all working-men, as consumers,
for ultimate consumption, on the other side, and as
The Distribution of the Produce. 1 7
between such exchangers and consumers, under the
wage-competitive system, the measure of the profit or
surplus produce, as such, accruing to entrepreneurs,
is also the measure of the over-supply or glut of
commodities.
All entrepreneurs understand this, and in periods of
" depression," of " shrinkage of value," use all available
means to reduce the normal volume of the aggregate out-
put of commodities, so as to work off "stock in hand."
This reduction of the normal volume of the work of
the productive industries tends to make the " depression "
more acute by reducing expenditure (income of employes),
and with it, as a consequence, the effective demand for
commodities ; but it tends also to shorten the period
of " depression."
Perceiving the consequences of the existence of this
surplus produce or profit, entrepreneurs continually
desire the opening up of new markets wherein to dispose
of such surplus produce or profit. Those who prefer
to receive from the foreign countries to which the
surplus produce may be exported, payments for the
same in money are to a certain extent right ; because
if there did not exist within the exporting country in
the hands of working-men, other than the entrepreneurs
as exchangers (exporters), prior to the exportation,
wealth sufficient and available to constitute an effective
demand for such surplus produce or profit, there can be
nothing in the mere exportation of such surplus produce
or profit to create within the exporting country wealth
sufficient and available to constitute an effective demand
B
1 8 The Distribution of the Produce.
for produce imported into the country in exchange for
the surplus produce or profit previously exported ; there
would still be wealth in the hands of the entrepreneurs
as exchangers (importers), for which there would not,
and could not, be an effective demand among working-
men as consumers for ultimate consumption.
The periodic accumulations of such surplus wealth or
profit in the hands of entrepreneurs, is, in the opinion
of this writer, the efficient cause of the periodic mani-
festation of the economic phenomenon known as a
commercial crisis, whenever such commercial crisis is
not the consequence of scarcity or dearth* : and during
the continuance of every such crisis and with the ever-
increasing productiveness of human industry commercial
crises occur with ever-increasing frequency every
branch of industry becomes more or less disorganized,
and the various classes of working-men find themselves,
more and more frequently, sharply divided into two
great groups, the employed and the unemployed.
Over-paid = Inflation or Waste.
/Employed ... . Fully-paid = Equilibrium.
k Unemployed
Under-paid
-.
I Destitute ...J
( Under-paid ... "j
Working-men C
C Partly-cared-for ^ = Depression or Want.
II.
" The requisites of production are two : labour and
appropriate natural objects." Work is impossible without
the simultaneous presence of (i) materials or instruments
* See Table on opposite page.
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2O The Distribution of the Produce.
upon which or with which human activity may be
systematically employed or expended ; and (2) human
beings to employ or expend systematically their activity
upon or with the materials or instruments.
The materials or instruments, whether embodied in
outward objects or human beings, are capital ; and the
human activity, whether " muscular or nervous," is labour.
Capital + Labour = Work.
Capital is the accumulated stock of wealth destined
to be used in facilitating the production of wealth ; it
is wealth existing and immediately available for human
use ; it is wealth produced and accumulated by past
industry.
Capital is the inheritance of the present from the past.
Even where man appropriates the spontaneous pro-
ducts of nature, these must first exist before they can
be appropriated. In the chronological order of the
manifestation of life on this planet, man is the last to
appear, and before he appears, the food and shelter
necessary to sustain and perpetuate human life must
exist in sufficient quantities.
This is the eternal physical basis of life, and " all moral
and intellectual life bottoms in the physical." In the
natural order capital is prior to labour.
Capital is industrial solidarity.
Labour is human activity destined to be systematically
employed in facilitating the production of wealth ; it is
human activity the results of which will be for the use
of future industry. Labour is the contribution of the
present to the. future. Labour is industrial continuity.
The Distribution of the Produce. 21
If " solidarity ... is, and must be more and more
subordinated to . . . continuity," then, in the social order,
labour is prior to capital. That this is the social order
is manifest, for although capital must necessarily exist
prior to its being appropriated and utilized by man, yet,
until man puts forth that activity which we call labour,
and the capital is appropriated and utilized, for all social
purposes it is as though it did not exist, and unless such
human activity is perpetually put forth the continuity
of the human race cannot be secured. " In the sweat
of thy face shalt thou eat bread, till thou return unto
the ground."
Within industrial society, as it at present exists, the
two grand divisions of working-men distinguished as
capitalists or labourers, accordingly as they are primarily
employed in administering the capital which is the
inheritance of the present, or in executing the labour
which is the contribution of the present are brought
together, for purposes of industrial co-operation, through
the agency of entrepreneurs, who secure for themselves
the direction and control of both the capital and labour
of society, and the custody of the entire produce oi
industry, by undertaking in advance to pay (i) fixed
sums to capitalists, as value in exchange for the use oi
their capital, and (2) fixed sums to labourers as value
in exchange for the services of their labour.
The fixed sums paid for the services of labour include
a sum wages of superintendence which entrepreneurs
pay to themselves as value in exchange for their services
of direction, control and general management, and with
22 The Distribution of the Produce.
which they provide for the natural and social needs of
themselves and families. But entrepreneurs receive also,
in addition to their wages of superintendence, the whole
of any surplus produce remaining over after all fixed
and necessary charges have been fully paid.
In every industrial enterprise there is necessarily
employed both fixed and circulating capital, which must
yield both rent and interest ; and both superintendent
and manipulative labour, which must also yield both
wages of superintendence and wages of manipulation,
and the item wages, include the cost of all materials
used in production ; there is also more or less of
transport service, which introduces the element freight ;
the incomes received and expended by all working-men
include the sums which they contribute towards the
support of the government of society, and this introduces
the element taxation ; and lastly, the capital invested
must be insured against accidents, and this introduces
the element insurance.
If the produce of any industrial enterprise is sufficient
to replace periodically the full amount of the capital
invested and expended in the payment of these necessary
charges its continuity is secured.
(1) ^/ the producing-point or margin of production :
Produce = Rent + Interest + Wages + Freight + Taxa-
tion + Insurance.
Produce = Expenditure ; or Price == Cost.
(2) Above fat producing-point or margin of produc-
tion : Produce Rent + Interest + Wages + Freight
+ Taxation + Insurance = Profit.
The Distribution of the Produce. 23
Produce Expenditure = Profit ; or Price Cost =
Profit.
(3) Below the producing-point or margin of pro-
duction: Rent 4- Interest + Wages + Freight -t- Taxa-
tion + Insurance Produce = Loss.
Expenditure Produce = Loss ; or Cost Price =
Loss.
Investments below the producing-point can only be
regarded as temporary investments ; they represent errors
in the forecasts of investors, and if enterprises in which
capital may be so invested are persisted in, their
economical conditions continuing below the producing-
point, they must necessarily put a period to their own
existence by the gradual extinguishment of capital
invested in them. But investments at and above the
producing-point may both be regarded as permanent
investments.
Investments at the producing-point, although yielding
no profit, are sustaining no loss, and may therefore
continue on for ever under the same economical con-
ditions. Every investment above the producing-point
yields, over and above all the elements which produce
must necessarily replace periodically, in order to secure
the continuity of any industrial enterprise, a surplus
which we call profit. This element, profit, does not enter
into cost of production. Profit is the real net produce
of every industrial society, and it is the fund from which
all additions to capital are made.
The statement that profit does not enter into the
cost of production, must, however, be qualified. If
24 The Distribution of the Produce.
the industrial organization of society is considered
objectively, it is manifest that the surplus produce, the
excess of the yield of commodities over and above the
produce or commodities necessarily expended during
the period of production, does not and cannot enter
into cost of production. But in a society founded upon
the separation of employments, the division of industrial
functions, the industrial organization of society must
also be considered subjectively ; and when so considered
it is equally manifest that profit does enter into cost of
production in the degree in which it enters into the
price of the produce of any particular industry, which
produce constitutes the raw materials or instruments of
another industrial enterprise. But the profit of any par-
ticular industrial enterprise does not and cannot enter into
the cost of production of the produce of that enterprise.
Considered objectively, profit does not enter into cost
of production ; but considered subjectively, profit enters
into cost of production in the degree in which it enters
into the price of commodities used as raw materials or
instruments of production.
The elements which produce must necessarily replace
periodically in order to secure the continuity of any
industrial enterprise, are the elements which permanently
enter into the cost of production of commodities, and
these are rent, interest, wages, freight, taxation, and
insurance.
It must also be pointed out that these different forms
of expenditure do not necessarily enter into cost of
production at the same time, nor in any constant ratio.
The Distribution of the Produce. 25
If machinery fixed capital supersedes man, or if it is
introduced at an earlier stage of the process of production,
the element rent will be increased, and the element wages
will be decreased ; if improved processes of production
are used, and the circulating capital invested is released,
is " realized," with greater rapidity, the element interest
will be decreased ; if there is a cheaper or more efficient
performance of transport service, the element freight
will be decreased ; if there is greater efficiency of labour,
the standard of living of the labourers remaining
unchanged, or if the efficiency of labour remaining
unchanged the standard of living of the labourers falls,
the element wages will be decreased ; if taxes* are
* If a tax on " raw material " enters into the cost of production
of manufactured articles, if a tax on imported wheat enters into the
cost of production of bread, it follows as a consequence that a tax
on land, the rawest of all raw materials, enters into the cost of
production of everything produced on or out of it ab initio. A
land tax, a tax on a piece of the earth's surface, as distinguished
from a tax on the annual income obtained by the proprietor from
the land, is, in the opinion of the present writer, one of the most
objectionable forms of taxation. Every reason urged against the
imposition of taxes on the " raw materials " used in the constructive
industries applies with increased pertinency when urged against a
tax imposed upon the " raw materials " of the extractive industries.
By imposing a tax upon the commodity land, it is thereby placed
in the category of luxuries.
To tax any commodity is to place that commodity in the category
of luxuries to the full extent of the tax.
Wherever and as long as there is a land tax, there and so long
will the ownership of land be necessarily the exclusive luxury of
the rich, the poor can never own a form of property for which,
neither they, nor their children, nor their children's children can
ever hope to complete the payment of the purchase money.
If land were absolutely free from taxation, the-men and women
who actually superintend and manipulate the operations of the
extractive industries would, if land could be sold and bought as
inexpensively as other commodities, in a few generations, be the
proprietors of the greater portion of it.
26 The Distribution of the Produce.
reduced or if they are removed from the materials
instruments or processes of production, or from the
earlier stages of production, the element taxation will
be decreased ; and if there are fewer accidents to men,
materials or instruments, during the various stages of
production, the element insurance will be decreased.
The opposite consequences will follow the opposite
antecedents, and in the degree in which the antecedents
vary will the consequences vary.
The measure of the distance from the apex of the
industrial pyramid the finished product, the incomes
of working-men at which any particular element enters
into the process of the production of any commodity, is
the measure of the degree in which that element enters
into the cost of production of that commodity.
The existence of profit not being necessary to secure
the continuity of any industrial enterprise, entrepreneurs
may reasonably be regarded as being fully compensated
for their services of direction, control, and general
management by the wages of superintendence which they
regularly receive as value in exchange for such services.
There is no essential difference, but only a difference
of degree, between the entrepreneur and any other
highly-skilled working-man, and like every other highly-
skilled working-man, he receives a correspondingly high
rate of wages ; and if the entrepreneur is also the
owner, in whole or in part, of the fixed or circulating
capital invested, he is also, to the full extent of his
ownership, the recipient of either rent or interest, or
both rent and interest.
The Distribution of the Prodiice. 27
To reward every man according to his work is the
eternal principle regulating the distribution of the
produce of human industry, and whatever claims the
entrepreneur may have upon the final product, whether
as capitalist in the form of rent or interest, or as labourer
in the form of wages of superintendence, are or may be
fully satisfied in cases where the enterprise does not
yield any profit. The following special reasons are
usually advanced to justify the claim of the entrepreneur
to be rightfully, as he is legally, the sole, the exclusive,
appropriator of profits.
We are told that
(1) Profit is the reward of the abstinence of the
entrepreneur.
(2) Profit is indemnification for risk of loss assumed
by the entrepreneur.
(3) Profit is the reward of the special ability of the
entrepreneur.
Whatever else the entrepreneur may be he is un-
questionably a working-man, consequently he does not
abstain from work ; he is the responsible organizer,
director and general manager of industrial operations,
for which services he receives an income wages of
superintendence sufficient to satisfy the needs of his
organic, functional, and artistic consumption, and so
enable him to perform regularly and efficiently the
work inherent in his particular industrial function. He
does not and cannot abstain from consumption, because
as a working-man, a producer-automaton, he is " con-
stantly wearing out" and "his energy running down."
28 The Distribution of the Produce.
And this waste which his functions animal, industrial,
and emotional " involve must be repaired by obtaining
from the environment supplies of new matter and
energy. From the destructive forces of the environ-
ment he must similarly be protected ; and so on." All
of these organic, functional, and emotional needs are
provided for in his wages of superintendence.
There is neither abstinence from work nor abstinence
from consumption ; and consumption must be equal to
organic, functional, and artistic needs, otherwise work
cannot be regularly and efficiently performed. To
consume more than sufficient to satisfy his needs is
waste of matter or material ; to consume less than
sufficient to satisfy his needs is waste of the working-
man, the -producer-automaton. Both excessive and
insufficient consumption are injurious to working-men,
they impair their industrial capacity and reduce them
to the condition of irregular, inefficient, and unreliable
working-men, and lower their value as industrial
functionaries. Possession is the sufficient reward of
abstinence.
Whatever we abstain from consuming to-day we
retain to be consumed to-morrow, or next week or
next year, or it may remain to be consumed by our
posterity in the next generation, and so on ad in-
finitum.
To abstain from consumption in the present is to
retain for consumption in the future : there is only a
deferment of consumption, there is no real abstinence
from consumption; there is no place found for abstinence,
The Distribution of the Produce. 29
and in any case, no claim for remuneration can be
founded thereon.
If the incomes of any particular class of working-men
are exposed to any special form of accidents, such
working-men have unquestionably a claim that some
special allowance be made to them as indemnification
for any losses which may, from time to time, be occa-
sioned by such accidents ; and the item insurance, which
enters into the price of all perishable commodities, and
the rate of which varies directly with business risks,
is the special allowance claimed and received by
entrepreneurs as indemnification for business losses,
whether they be physical losses, occasioned by unfavour-
able circumstances of production, by fire or tempest, by
flood or drought, by plague or pestilence, or by war, in
which cases commodities are actually lost or destroyed ;
or whether they be speculative losses, occasioned by
unfavourable circumstances of exchange, by bad debts,
by declining prices, or by the appreciation of money, in
which cases commodities are neither lost nor destroyed,
but in which titles to property are simply transferred
from one group of working-men to another group of
working-men, the measure of the loss of one group
being also the measure of the profit of another group.
There is in society direct insurance against physical
losses, and there is also indirect insurance against
speculative losses. Those of us who pay for what we
consume, pay not only for what is actually consumed
by ourselves, but also for what has been actually lost
by others ; and further, those of us who pay for what
30 The Distribution of tke Produce.
we consume, pay not only for what is actually consumed
by ourselves, but also for what has been actually con-
sumed by those who do not pay for what they consume.
But even in cases where the item insurance is not
sufficient to cover actual business losses, whether physical
or speculative, it is not entrepreneurs, but capitalists,
who really sustain the losses. This is manifest whenever
the magnitude of the business losses of an entrepreneur
forces him into the Bankruptcy Court, where the claims
of creditors capitalists are reduced pro rata in pro-
portion to the magnitude of the business losses of the
entrepreneur. Business losses are, as a rule, anticipated,
and the average measure of such losses determines the
rate of insurance, which item enters into the price of
all perishable commodities : the losses of individual
entrepreneurs are borne conjointly by the whole society
of consumers. There is social participation in individual
losses. Insurance is participation in losses.
Industrial progress is so largely indebted to the
particular kind of ability which distinguishes the en-
trepreneur his " practical, pushing, organizing energy
co-existing .... with scientific knowledge" that
society is and ever will be ready and willing to pay for
that ability the full measure of its value.
But the productive ability of the entrepreneur, how-
ever practical, pushing and scientific it may be, depends
for its successful application upon the active, intelligent
co-operation of many other kinds of working-men of
various degrees of ability. To produce a house the
classes of working-men from hod-carrier to master-builder
The Distribution of the Produce. 31
co-operate ; to produce a crop of wheat the classes of
working-men from the common farm-labourer to the
scientific farmer co-operate ; to produce the tones of
the organ bellows-blower and organist co-operate. But
it is claimed " that average labour has increased in
productiveness only because it has been trained and
manipulated by productive ability, or in other words by
men of exceptional gifts."
" That values depend on the amount of productive
energy embodied in them ; and that energy consists of
two parts, average labour and ability/' *
But is not average labour the mean between the
ordinary gift of the bellows-blower and the extraordinary
gift of the organist ? And is there not one law of
remuneration to each according to his work appli-
cable to every kind of human effort ? If we can
determine in advance the value of the work of the
bellows-blower, may we not also be able to determine
in advance the value of the work of the organist, or of
any other working-man ?
What is value ?
" Value .... is no intrinsic quality of a thing, it is
an intrinsic accident or relation .... the very same
substance may rise and fall in value at the same time.
If in exchange for a given weight of gold, I can get
more silver but less copper than I used to do, the value
of gold has risen with respect to silver, but fallen with
respect to copper. It is evident that an intrinsic property
* W. H. MALLOCK, in the Fortnightly Review for December,
1887.
32 The Distribution of the Produce.
of a thing cannot both increase and decrease at the
same time, therefore value must be a mere relation or
accident of a thing as regards other things and persons
needing them." *
But Ralph Waldo Emerson has somewhere said, " In
nature there are no false valuations. A pound of water
in the ocean tempest has no more gravity than in a
midsummer pond ; " and the present writer will add,
neither has it any more gravity in 1889 A.D. than it
had in 1889 B.C.
Although accepting the facts stated by the learned
professor, yet the conclusion that value is an "accident"
cannot be accepted ; we must still affirm with
Emerson, that " in nature there are no false valuations."
Let us suppose that three chronometers A, B, and
C are adjusted and placed in suitable positions in the
Royal Observatory at Greenwich, or in the Republican
Observatory at Washington, and kept regularly going
for a period of three calendar months, and at the
expiration of that period, it is found that the chrono-
meter B has lost 10" in time as compared with the
chronometer A, but that it has gained 10" in time as
compared with the chronometer C. Under these cir-
cumstances and concurrently the chronometer B will
have both gained and lost in time. Would we, reasoning
from these facts, come to the conclusion that time is an
" accident" ? Certainly not : the question, What is the
correct time ? would be referred to astronomers or other
* Professor W. S. JEVONS, " Money and the Mechanism of
Exchange," Chap. ii.
The Distribution of the Produce. 33
experts for determination, who would be required to
make the necessary observations of the physical
phenomena by means of which we are enabled to
determine from day to day the correct time, and also the
measure of the variations of any or of all chronometers.
We appeal from the artificial standard measures which
may get out of order, or which may be tampered with,
to the natural standard measures, which do not get out
of order, and which cannot be tampered with. " Labour
.... is the real measure of the value of all other
commodities." * But what is the measure of the value
of labour itself? Nature, mindful of all things, has not
left us unprovided for even in this particular, but has
furnished us with two unimpeachable standards Space
and Time. By means of Space we measure the quantities
or dimensions of all things ; and by means of Time we
measure the duration of all events or services. Space
is the common standard measure of the quantities or
dimensions of all things ; and Time is the common
standard measure of the duration of all events or services ;
and in cases where the problem to be solved requires
the determination of both the quantities or dimensions
of things and the duration of events or services, we may
use both Space and Time as the common double standard
measure. Now, as a matter of fact, we do use both
Space and Time as the common standard measures for
determining the value of almost all things, services or
employments. We buy and sell land at so much per
acre, timber at so much for foot, iron at so much/^ ton,
* ADAM SMITH " Wealth of Nations," Book I., Chap. XL
C
34 The Distribution of the Produce.
wheat at so much per quarter, cloth at so much per yard,
&c., &c. We hire or lease real estate and other forms
of fixed capital at so much per day, per week, per month,
or per year ; we employ or hire circulating capital at so
much per centum per annum ; and we employ or hire
labour, at so much per hour, per day,per^veek,per month,
or per year. The quantities or dimensions of these things,
and the duration of these services or employments are
all expressed in terms of Space and Time ; and in terms
of one or other or both of these standards must the
value of the commodities be expressed which may be
given or received in exchange for any or for all of the
things, services, or employments specified above.
Value is the cost of production of commodities measured
in Space and in Time.
(i) The cost of production of land, and (2) the cost
of production of the acquired and useful abilities of
man between these two extremes lie all other commo-
dities. What is production ? What is it to produce
economically considered ? To produce means to make
immediately available for human use. Whoever brings
a piece of land into a state fit for cultivation whenever
required, that is, whoever clears a piece of land or in
any other way makes it immediately available for
human use, for all practical purposes, economically
considered, produces that piece of land. Whoever
develops the latent abilities of a human being into a
state fit to perform efficiently, whenever required, some
useful work, that is, whoever by education, in schools
or in workshops, makes the latent abilities of a human
The Distribution of the Produce. 35
being immediately available for human use, for all
practical purposes, economically considered, produces
those abilities. Production is the making of commo-
dities immediately available for human use. The cost
of making any commodity immediately available for
human use is its cost of production.
If the outlay or expenditure necessary for bringing a
piece of land into a state fit for cultivation whenever
required is represented by
5000 Ibs. Bread, at ~$d. per Ib 62 10 o
5000 Ibs. Meat, at 6d. per Ib 125 o o
1000 yards Cloth, at is. per yard 50 o o
5000 days Labour, at los. per day ... 2500 o o
Total ^2737 10 o
we have an aggregate outlay or expenditure of
2737 IQS. of wealth (estimated in terms of money)
as the cost of production of that piece of land.
If the outlay or expenditure necessary for developing
the latent abilities of a human being into a state fit to
perform efficiently some useful work whenever required
is represented by
10,000 Ibs. Bread, at ~$d. per Ib 12 5 o o
10,000 Ibs. Meat, at 6d. per Ib. ... ... 250 o o
2000 yards Cloth, at is. per yard 100 o o
10,000 days Labour, at los. per day ... 5000 o o
Total ^5475 o
we have an aggregate outlay or expenditure of ^"5475
of wealth (estimated in terms of money) as the cost of
production of those abilities.
Apart from and in addition to the money valuation,
C 2
36 The Distribution of the Produce.
the cost of production of the land and of the abilities is
represented (i) by quantities or dimensions of things
Space ; and (2) by duration of services Time ; and it
is manifest that whichever valuation we use the cost of
production of the abilities is twice as much as the cost
of production of the land.
The advantage of the money valuation being the
combination and expression of both quantities or
dimensions of things, and of duration of services in
terms of a single substance ; but at any given place
and time, the money valuation of any commodity is
equitable or inequitable, accordingly as it represents or
misrepresents the actual quantities or dimensions of
things and the duration of services necessarily expended
in the production of that commodity : we have, however,
apart from and in addition to money, a double standard
of value.
The value of all commodities is extrinsic when ex-
pressed in terms of each other, but the value of all
commodities is intrinsic when expressed in terms of the
double standard measure Space and Time ; and any
money system is equitable or inequitable in the degree
in which, under it, all commodities distributed in space
are or are not exchanged, or all claims distributed in
time are or are not cancelled in the ratio of their
intrinsic value.
Why is A, the organist, who works 8 hours per diem,
paid at the rate of 40^. per diem, while B, the bellows-
blower, who also works 8 hours per diem, is paid at the
rate of only 5^. per diem ? To learn the trade of a
The Distribution of the Produce. 37
bellows-blower requires the outlay or expenditure of
less things and of less time of both teacher and learner
than is necessary to enable anyone to learn the trade of
an organist. This necessary outlay or expenditure
which must be made before the abilities of any human
being can be immediately available for human use,
determines their value, and consequently, the rate of
their remuneration. The income of every working-man
must be sufficient to provide for
while
Maintenance according to
standard of living whUe Unemployed .
Rent of, and 7 /- -^ i ^ j AU-V,.-
Insurance of j Ca P ltal fixed m Ablllties '
The standard of living being given the in come will
vary as the abilities employed represent a greater or
less amount of fixed capital in use, and which must,
according to its amount, yield the average amount of
rent, and which must also, according to its amount and
its liability to waste, be covered by insurance so as to
ensure its continuity.
The rate of incomes vary not because one working-
man labours more than another working-man, nor
because, on an average, he consumes or can consume
more than another working-man, each considered as a
human animal, but because the abilities of one working-
man represent a greater or less amount of capital. The
incomes of working-men are partly wages for personal
service, partly rent of fixed capital, and partly insurance
of fixed capital, and the variations of incomes represent,
not variations of personal service, but variations of that
38 The Distribution of the Produce.
previous outlay or expenditure which is the cost of
production of the various grades of ability of different
working-men.*
Considered simply as animals the necessary con-
sumption of one human being may on an average
correspond with the necessary consumption of every
other human being (see Extract from Army Regula-
tions, opposite) ; but considered industrially and
emotionally the consumption of a working man corre-
sponds with and is limited by his industrial function
and his artistic requirements. A skilled mechanic in
any craft requires a greater number of, or more expensive
* Incomes received by certain classes in Society represent
the incomes not only of themselves and the absolutely necessary
average family, but also the incomes of their establishment
or domestic employe's. An individual, with the absolutely
necessary average family, who receives a nominal income of
,10,000 sterling per annum, does not consume the whole of
such an income themselves. Nominally the income may be con-
sumed by himself and family, but as a matter of fact they consume
but a fraction of the sum a fraction strictly and absolutely limited
(1) by the number of human beings composing the family, and by
their limited capacity for consumption considered as animals ;
(2) by the industrial functions performed by the several individuals
composing the family; and (3) by the emotional requirements of
the several individuals composing the family the residue or
remainder constitutes the incomes of the establishment or domestic
employe's, which is paid to them with the same regularity as the
income of ,10,000 per annum is received.
If the individual has no family, has no establishment or domestic
employe's, if he is the most miserly individual imaginable, and
deposits at interest in a bank .9900 per annum out of his income
of .10,000 per annum, still he is only the nominal receiver of the
income, others must of necessity have the use and benefit of his
deposits, or he-could not receive any interest thereon.
From this conclusion there is no escape, whatever the nominal
income of an individual may be, his actual consumption is strictly
and absolutely limited (i) by his animal capacity; (2) by his
industrial function ; (3) by his emotional requirements.
The Distribution of the Produce. 39
EXTRACT FROM
ARMY REGULATIONS, VOL. I., PART III., 1884.
Section I, Paragraph 3.
Persons entitled to Draw
Rations.
Number
of
Rations.
Scale of Rations.
Each Staff, Departmental, or
Regimental Officer
Each effective male civilian ser-
vant employed by an Officer
as a groom not exceeding the
number specified in para-
graph 18
Each Warrant Officer, Non-
Commissioned Officer, and
man, borne on the Effective
Strength of the Army
One
One
') One
i Ib. Bread.
i Ib. Fresh Meat
or
J-lb. Preserved Meat
"And . . . they received every man a penny:' ST. MATTHEW
xx. 9.
4O The Distribution of the Produce.
tools than a common labourer in the same craft, and
the measure of their culture, respectively, is also the
measure of their artistic requirements. The incomes
of working-men are partly for animal or organic con-
sumption,. partly for industrial or functional consumption,
and partly for emotional or artistic consumption.
Consumption is limited by the ensemble of needs
animal, industrial, and emotional, and expenditure is
limited by nutrition.
The reason why the organist is paid at a higher rate
per diem than the bellows-blower is not because he
labours more, but because his abilities cost more ; and,
consequently, the reason why the bellows-blower is paid
at a lower rate per diem than the organist is not because
he labours less, but because his abilities cost less.
The variations of the rate of income do not represent
variations of labour, but variations of capital. If the
value of all commodities is determined by their cost of
production, then the value of the work performed by
the entrepreneur and the rate of remuneration to which
he is entitled must be determined, not by the surplus
produce, the profit of any particular industrial enter-
prise, but by the requirements of his organic, industrial,
and artistic consumption requirements necessary to
secure the efficient performance of the work inherent in
the function not only during a single lifetime, but also
to secure the continuity of the function : and this rate
of remuneration is, or should be determined for the
entrepreneur whenever the rate of his wages of superin-
tendence is fixed.
The Distribution of the Produce. 4 1
The extraordinary ability of the entrepreneur is paid
for at an extraordinary rate of wages, and the ordinary
ability of the common labourer is paid for at an ordinary
rate of wages : all grades of working-men need and do
actually receive on an average, incomes according to
their respective, organic, functional, and artistic require-
ments, whether the particular industrial enterprises to
which they may be attached yields a profit or sustains
a loss, and moreover incomes are drawn at stated
periods by all grades of working-men part passu, with
the progress of the work from its initiation to its com-
pletion, whereas profit cannot be determined, and
consequently cannot be drawn until the work in hand
has been completed.
The rate of income for entrepreneur and common
labour alike is determined in advance, the rate of profit
can only be determined in arrear. Income is for con-
sumption, profit is the surplus produce remaining after
consumption has been satisfied.
Income is indispensable ; profit is dispensable. The
entrepreneur receives his extraordinary but indispensable
income, his wages of superintendence, as value in
exchange for his extraordinary and indispensable ser-
vices in accordance with the same economic law which
apportions to the common labourer his ordinary and
indispensable income, his wages of manipulation, as
value in exchange for his ordinary but also indispensable
services ; each is entitled to and on an average receives
or should receive an income sufficient to satisfy all
necessary, organic, functional, and artistic requirements
42 The Distribution of the Prodiice.
this is the law throughout the whole hierarchy* of
industrial functions. But if after all of such require-
ments have been satisfied there remains surplus produce,
the outcome of the co-operation of the entrepreneur
and his employes, it is, under such circumstances, only
a just and reasonable demand that such surplus produce,
such profit, should be legally recognized as the joint-
property of all the co-operators, and that it should be
distributed among them unto each according to his
work. " The profit of the earth is for all."
III.
All investments above the producing point or margin
of production yield an excess, a surplus, an increase of
produce over and above all the wealth expended in and
during all the processes of production, over and above
the cost of production of such produce ; yield an excess,
a surplus, an increase in the price of the produce, when
sold over and above the cost of such produce.
This excess, surplus, or increase of produce over and
* Considered in the abstract there is a consensus of industrial
functions in that all industrial functions are mutually inter-
dependent ; and also that each industrial function is exclusive and
supreme within its particular sphere. But considered in the
concrete there is a hierarchy of industrial functions in that some
industrial functions are governing while other industrial functions
are governed ; and also that each industrial function is governed
by and included within every other industrial function according
to the degree of the complexity of the function, the less complex
functions being governed by and included within the more complex
functions : the ultimate governing function being all inclusive and
supreme.
The Distribution of the Produce. 43
above cost of production ; this excess, surplus, or increase
of price over and above cost, is profit.
All investments do not as a rule, yield a profit even
in an industrial society in which there is progress,* and
no investment yields a profit in an industrial society
which has attained unto the stationary state, that is, in
which all investments are at the producing point or
margin of production.
Everywhere and always profit is the result of the
co-operation of working men. If there was no co-
operation, that is, if there was no conjoint action of
working men either in the same employments, in the
performance of the same industrial processes ; or in
different employments, in the performance of different
* There is industrial Progress when the increase of wealth,
occasioned by industrial improvements or inventions, more than
neutralizes the pressure of population upon the means of subsistence
occasioned by the increase of population, or by the increased
consuming power of the population ; or when, in the absence of
any increase of wealth, there is such a decrease of population as to.
make the pressure of population upon the means of subsistence
less severe.
The department of industry is Stationary when the increase of
wealth occasioned by industrial employments, improvements, or
inventions, exactly neutralizes the pressure of population upon the
means of subsistence occasioned by the increase of population, or
by the increased consuming power of the population ; or when
there is neither increase nor decrease of wealth, nor increase
nor decrease of population, nor of the consuming power of the
population.
There is industrial Regress when the pressure of population
upon the means of subsistence occasioned by the increase of
population or by the increased consuming power of the population,
more than neutralizes the increase of wealth occasioned by
industrial improvements or inventions ; or when, in the absence of
any increase of population or of any increased consuming power of
the population, there is such a decrease of wealth as to make the
pressure of population upon the means of subsistence more severe.
44 The Distribution of the Produce.
industrial processes ; if there was neither separation of
employments, nor division of industrial functions ; if
there was only individual working-men, each working,
severally and separately, only to supply directly all of
their own individual wants, with no combination of
activity, with no exchange of wealth, there would be no
excess, no surplus, no increase of produce, over and
above cost of production, if indeed there happened to
be even sufficient produce to secure each individual
against want ; in any case the standard of living of all
working-men would necessarily be very low, would
scarcely ever rise above the physical point or margin of
existence ; and if every individual working man supplied
directly only all of his own wants, there would not be
any exchange of wealth, and consequently there would
be no excess, no surplus, no increase of price, over and
above cost.
Profit is the excess, the surplus, the increase result-
ing from the co-operation of working men from the
separation of employments, the division of industrial
functions, the exchange of products. The particular
excess, surplus, or increase resulting from the operations
of any industrial function is the particular profit of that
industrial function ; and the general excess, surplus, or
increase resulting from the operations of all industrial
functions is the general profit of the whole body of
industry.
It must, however, be pointed out that in a certain
sense only the extractive industries yield an actual
excess, surplus, or increase of produce over and above
The Distribution of the Produce. 45
the cost of production ; and even within this section of
industry there is an important difference between the
productiveness of agriculture and pisciculture and the
productiveness of mining and quarrying between the
produce which lies upon the surface of the earth, the
land and the water, and the produce which is found
existing in the interior of the earth in mines and
in quarries.
The supply and the sources of the supply of animal
and vegetable produce useful to man, may now be re-
garded as being practically inexhaustible. We know how
to secure the continuity of almost all forms of animal and
vegetable life useful to man ; we know how to utilize
as manures materials which would otherwise be wasted }
so as to maintain the land continuously in the condition
of average fertility, and even to increase its fertility ; we
know how to regulate fisheries and the waters which the
fishes inhabit or frequent for breeding purposes, so as to
keep up and even to increase " the harvest of the sea."
But the supply and the sources of the supply of
mineral produce useful to man are, for all practical
purposes, being gradually exhausted. The greater
durability of mineral wealth, as compared with animal
or vegetable wealth, is an off-set against the compara-
tively excessive limitation of its supply and of our
inability to utilize materials which would otherwise be
wasted so as to maintain continuously the productive-
ness of mines and quarries.
For all practical purposes, an actual increase in the
present output of the agricultural and piscicultural
46 The Distribution of the Produce.
industries does not necessarily decrease the supply or
the sources of the supply of any future output of these
industries. But for all practical purposes not only
does an actual increase, but also the average annual
output of all mines and quarries necessarily decrease
the supply, or the sources of the supply of every future
output of the mining and quarrying industries.
With the average annual output of mines and
quarries, and also with any increase therein, there is
an actual increase in the quantity of mineral wealth
immediately available for human use ; but such increase
in the quantity thus made immediately available is
obtained by continuously impairing the productiveness
of the sources of all future supplies, so that the quantity
of the average output of mines and quarries has a
tendency to decrease, and must one day reach a condi-
tion when the aggregate annual output will be, at first,
barely sufficient, and afterwards insufficient to make
good the aggregate annual consumption, wear and tear,
and waste of the whole mass of mineral wealth required
for use. The influence of deficiency of supply of
mineral wealth, of the continuous impairment of the
sources of the supply of mineral wealth, may be felt at
different places, at different times, in different degrees,
from different causes, and in connection with different
forms of mineral wealth, according to the particular
average production of the several mines and quarries,
as compared with the particular average consumption
and waste of the several kinds of mineral wealth, at
any particular place and time. Deficiency in the supply
Distribution of the Produce. 47
of an article like coal, which is used so very extensively,
is much more likely to result from an actual increase,
in its consumption and waste, rather than from any
decrease in its average annual production at the mines.
But deficiency in the supply of gold has been caused
by an actual decrease in its average annual production
at the mines, rather than from any increase in its con-
sumption, wear and tear, and waste in use.
The extractive industries within the sub-sections of
agriculture and pisciculture, while being limited in their
possible produce by nature, by the limited supply of
land and water, by the limited capacity of both land
and water, to sustain animal and vegetable life, by the
limited productiveness of the animal and vegetable life
inhabiting the land and the water, nevertheless give
out, or have the capacity of giving out, matter or
material increased in quality by adaptation, and also
increased in quantity by fecundity.
The output of the constructive industries is co-exten-
sive with and strictly limited by the supply of raw
materials which constitute the output, the produce of
the extractive industries ; which supply of raw materials
is the measure of the possible output of the constructive
industries. Within the constructive industries there is
the conversion of raw materals into manufactured
articles, and the measure of the raw materials, minus
the waste incident to the conversion, is the measure of
the manufactured articles. The constructive industries
give out again matter or material increased in quality
by adaptation, but decreased in quantity by waste.
48 The Distribution of the Produce.
Profit resulting from the co-operation of working-men
exists only in society, that is, under conditions where
and when two or more human beings are acting con-
jointly for common objects. If income (for organic and
functional consumption) is the bounty of Nature, then
profit is the bounty of Society.
Fundamentally, the measure of the excess, the surplus,
the increase of the output or produce of an industrial
society of, say 1000 men, working during a specified
period of time and co-operating ; over and above the
output or produce of the same 1000 men working
during the same period of time, but acting severally
and separately, is the measure of the profit resulting
from the co-operation.
The existence of profit, however, has been the suffi-
cient means of gradually raising the standard of living
of all classes of working-men, thereby also raising the
producing point ; so that, for all practical purposes, the
standard of living at the industrial point or margin of
industry of the several classes or sub-classes of working-
men being given, or the producing point being given,
the measure of the excess, surplus, or increase of the
actual produce over and above the actual cost of pro-
duction, over and above the sum of all the various
forms of income, expended by all of the working-men
for organic and functional consumption ; the measure
of the excess surplus, or increase of actual price over
and above actual cost, is the measure of the profit
resulting from the co-operation.
The proof that profit results from the co-operation of
The Distribution of the Produce. 49
working-men is contained in Dr. Adam Smith's illus-
tration from pin-making, in M. Say's illustration from
the manufacture of playing cards, in Mr. Babbage's
" Economy of Machinery and Manufactures," in Mr.
Atkinson's "Mechanism and Metaphysics of Exchange,"
and in all that has been written to demonstrate the
superior economy of production on a large scale as
compared with production on a small scale; of the
factory system as compared with the system of home
industries which it has superseded ; of grand culture as
compared with petite culture, all of which writings or
the economic truths illustrated and made manifest
thereby are familiar to all students of economic science.
Those nations are richest in which the co-operation
of working-men is most extensively and efficiently
applied, and those nations are poorest in which such
co-operation is least extensively and efficiently applied.
In tabulating or classifying the different nations
distributed in space and in time, which together form
the Social Kingdom of Man, we rightly rank those
nations lowest in the social scale in which co-operation
is least extensively and efficiently applied, and those
nations highest in which co-operation is most exten-
sively and efficiently applied. The measure of the
extent and the efficiency of the co-operation which
prevails severally among the nations determines the
relative positions of the different nations in the social
scale. Every advance in civilization is the consequence
of a corresponding advance in co-operation. The
history of discoveries and inventions is the history of
D
50 The Distribution of the Produce.
civilization, it is also the history of the co-operation of
working-men, of the expansion of industry, of the
increase of the wealth of society.
Profit, resulting from co-operation^ is the joint property
of all the co-operators. Profit is dividend, that is, wealth
to be divided among all the co-operators, " unto each
according to his work."
IV.
Every manner of work requires for its performance
the simultaneous presence of (i) matter or material
available for use, (2) human intelligence or skill being
or about to be exercised in connection therewith, and
(3) human activity being or about to be expended
thereon for the purpose of placing the matter or
material, in connection with which the human intelli-
gence or skill is being or is about to be exercised, and
upon which the human activity is being or is about to
be expended, in the midst of the particular conditions
where the forces inherent in nature may act upon it so
as to produce the particular kind of wealth required.
If from lack of human intelligence or skill, or from
lack of human activity, the matter or material is not
placed in the midst of such suitable conditions, the
operation will not be productive of wealth, but of waste
or destruction ; the matter or material will be more
or less spoiled for the purpose of producing the par-
ticular kind of wealth required, and result in a mani-
festation, not of economy, but of extravagance.
The Distribution of the Proditce, 5 1
There is
The work of Industry and Production, \
the end of which is Wealth ...... (.Virtue
There is
The work of Idleness and Destruction, C
the end of which is Illth
Idleness is activity which tendeth to destruction. Those
who draw incomes from occupations the outcome, the
result of which is Illth, in anyof its modes of manifesta-
tion, verily receive the wages of unrighteousness.
Matter or material is economically productive, that
is, productive of the greatest amount of wealth, with
the least amount of work, in the degree in which human
intelligence or skill directs the activity which attempts
to place it in the midst of the particular condition where
the forces inherent in nature may act upon it in the
particular manner which experience has taught us to
regard as the most suitable for the production of the
particular kind of wealth required.
Matter or material divorced from human intelligence
or skill as the directorate of the operations in connection
therewith is not economically productive, but is extra-
vagantly productive, that is, productive of somewhat
with an excessive amount of work. Before a human
being can be regarded as a working-man it is necessary
that some wealth be expended upon him, that he
undergo some previous training, so as to develop or
create within him the particular kind of intelligence
and skill required to perform the operations of the
D 2
52 The Distribution of the Produce.
trade to which he intends to devote his time and what-
ever talent he may possess. The result of such expen-
diture of wealth, of such previous training, is the intelli-
gence or skill fixed in the individual who may have
undergone such training and for and on account of
whom such wealth may have been expended. This
intelligence or skill is a form of fixed capital, and the
character of the working-man, the degree of his relia-
bility, the measure of his integrity, enhances or lowers
the value of such intelligence or skill.
A member of any of the professional classes, who,
like most of the members of the extractive and con-
structive classes, works for a fixed salary, practically
regards the cost of his education as so much fixed
capital, and demands and obtains in exchange for his
services a salary large enough to enable him (i) to
maintain himself and to maintain and educate his
family up to the requirements of his and their habitual
standard of living, and (2) to save out of his earnings,
during the working years of his life, a sum sufficient for
the maintenance of himself and those legally and
necessarily dependent upon him during those years of
his life when he is no longer able to work.
It must also be remembered that as an item in the
cost of maintenance of a member of any of the profes-
sional classes there is usually included a charge for
Life Insurance, for a substantial sum to be paid to his
family at his death, so that all the capital fixed in the
individual is not lost to his family even at his death.
A has saved 1000, which he expends in the purchase
The Distribution of the Produce. 53
of materials and in the payment of wages to working-men
employed by him to produce the article wheat. A's
;iooo while so employed would be universally regarded
as capital, the wheat produced as wealth, and if the
wheat so produced should be used to facilitate the
production of wealth, it also, in its turn, would be
regarded as capital. B has saved 1000, which he
expends in maintaining and educating his son, who is
learning some branch of skilled labour. The product
of this expenditure is fixed in his son, the trained
working-man ; it is the intelligence or skill which he
could not acquire except by the expenditure of wealth
for his maintenance and education, and by devoting
his time to study and practice. Should not B's "1000,
while so employed, be regarded as capital ? Should
not the intelligence or skill fixed in the working-man
be regarded as wealth ? Should not this intelligence or
skill, whenever employed in facilitating the production
of wealth, be also regarded as capital ?
If the intelligence or skill of the working-man is
wealth, and if all wealth employed in facilitating the
production of wealth is capital, then it must be admitted
that the intelligence or skill of employes forms a part
of the fixed capital of every industrial enterprise, and
we arrive at the conclusion that, nolens volens, every
industrial enterprise, in which there is the co-operation
of working-men, is a joint-stock enterprise in which an
indispensably necessary part of the capital is the
property of the employes, and who are therefore
entitled to participate equally with the employer in
54 The Distribution of the Produce.
the profit of their joint industry to the full extent of
the value of the capital represented by their intelligence
or skill, and to the full amount of the work performed.
But work is not possible with capital alone ; matter
or material conjoined with human intelligence or skill
necessarily needs human activity, that is, needs labour
as one of the co-operating elements in order that any
manner of work may be performed. Capital apart from
labour is unproductive ; and in like manner labour
apart from capital is unproductive. Production results
from the co-operation of these equally necessary
elements.
The industrial army is composed wholly of working-
men, as the military army is composed wholly of
soldiers. There are necessarily in each of these armies
diverse functions, and as a consequence diverse func-
tionaries. The desiderata in each of these armies are
(1) that the functionary be equal to the function, and
(2) that the income of the functionary be equal to the
work inherent in the function. But how are we to
determine the value of the capital represented by the
intelligence or skill of employes ? How are we to
determine the exact amount of work performed by
them so as to make an equitable distribution of profit
(i) between employes representing the interests of
capital, and employes representing the interests of
labour ; and (2) between the different classes of work-
ing-men, having regard (a) to the diversity of functions,
and (b) to the different degrees of efficiency in different
working-men ?
The Distribution of the Produce. 55
The aggregate amount of wages income earned by
an employe within a given time is the measure of the
value (i) of the capital represented by his intelligence
and skill and (2) of the amount of work performed by
him in executing his task, just as the aggregate amount
of interest income received by a banker within a
given time is the measure of the value (i) of the capital
represented by his investments and (2) of the amount
of work performed by him in administering his invest-
ments ; or just as the aggregate amount of rent
income received by a landlord within a given time is
the measure of the value (i) of the capital represented
by his real estate and (2) of the amount of work per-
formed by him in administering his real estate ; and it
is submitted that the aggregate amount of wages earned
by an employe within a given time is an equitable
standard for determining the portion of the . profit,
realized by an industrial enterprise to which he may
be attached due to and receivable by him as a co-
operator in ths enterprise.
How the portion of profit due to working-men is to
be divided among them severally, having due regard to
the diversity of industrial functions, and to the different
degrees of efficiency of different working-men, is exhi-
bited in the statement illustrating the distribution of por-
tion of profit due to labour-wage-co-operative system ;
and the balancesheet-wage co-operative system, exhibits
the division of the aggregate amount of profit realized
by an industrial enterprise into two equal parts
between the employer as the representative of the
56 The Distribution of the Produce.
element of capital, and the employes as the representa-
tives of the element labour.
Symbols
A = Total amount of Profit or Dividend.
B = Total amount of Wages of Working-men.
C = Total amount of Wages of Individual Working-man.
D = Portion of Profit or Dividend due to the Individual
Working-man.
Formula
or
If we compare the balance-sheet, wage co-operative
system, with the balance-sheet, wage competitive
system, it is manifest that, in society, under the wage
co-operative system, the measure of the profit accruing
to the representatives of the element capital is also the
measure of the profit accruing to the representatives of
the element labour, and consequently the portion of the
profit accruing to employes would constitute the effec-
tive demand for the portion of the profit accruing to
employers or entrepreneurs, and would most effectually
prevent the periodic recurrence of commercial crises
resulting from over-production : only under the wage
io-operative system is that " glut " of commodities
which is one of the causes of " shrinkage of value " and
" trade depression " really and truly impossible.
The wage co-operative system by dividing the total
amount of profit realized by an industrial enterprise
into two equal parts, between the representatives of the
The Distribution of the Produce.
57
DISTRIBUTION OF PORTION OF PROFIT DUE LABOUR WAGE CO-OPERATIVE SYSTEM
Portion of Profit due Labour = 168 2s. gd. ,. n f _ - . ,, _ , .. -,,
_ f ... 2^ = 2s. 6d. = Rate of Profit in the Pound of Wages.
Total amount of Wages = .1345 25. od.
Comparative Statement.
Gross Incomes,
Wage Competitive
System.
-^oooooooooo
^NNNNCslOOOOOOOOO
O vo
00 00
00
Wage Competitive System.
tWages of Superintendence ^5 o
VC^ 1
S?|
S^VO VOVOVOVO ON ON ON O> VO
Gross Incomes,
Wage Co-operative
System.
^0000000000 N N N N
O\ ON
O O
10 ro
ON t^
*
VO
t-i
00
VO
Gross Incomes,
Wage Co-operative
System.
-500000OOOOO N N vN N **
S?t^i^t^t^t^o o o o t^
ON ON
^- N
>o ro
ON t^.
*
VO
OO
VO
Wage Co-operative System.
* Wages of Superintendence ,500 o oJ
Portion of Profit due Labour of Superintendence... 62 10 0(^562 10 o
Portion of Profit due Entrepreneur (Capital) ... 168 2 9 -
o
Si
t--'
^
Portion of Profit
due to the
Individual at the
Rate of zs . (>ei. in
the Pound of
Wages.
"::::::::::
ON O
N O
O vo
ON
N
OO
VO
^^.^t^^t ON
B
1
i
-j
i
<
^30000000000
^NNNNNOOOOOOOOO
o o
N
m O
*
OO 10
o
N
^v2.SvSv2S?SS?^o
uisip jad
F|7
^ '?, ^
f,H
rt *<!) r/5 C
S g w
"o g- j,
|n
~c
3
"o
h
UlMccAcI(4<Hto-<o*5
^ ^ Tt" ^ ^-vO vO "O ^ O
S.EQ jo jaquin^j
mmmmnntftmnm
CO CO CO CO ro m ro ro ro ro
JSS3
Iu W j) d
to Ml)
The Distribution of the Produce.
BALANCE-SHEET-WAGE
INVESTMENT ABOVE THE
Ledger Accounts.
Trial Balance.
Inventory.
Business Statement.
Dr.
Cr.
Losses.
Profits.
Stock (Capital Invested)
Cash
s- d.
6000 o o
1000
845 2
500 o o
1254 18 o
100
40 o o
40 o o
120
100 o o
*. d.
4000 o o
3000 o o
3000 o o
*. d.
950 o o
386 5 6
s. d.
50 o o
845 2
500 o o
1251 iS o
IOO O O
40 o o
40 o" o
I2O O O
100
1 68 2 9
168 2 9
s. d.
3386 5 6
Machinery, &c
Wages of Manipulation
Wages of Superintendence
Materials
Taxes...
Freight
Interest
Rent
Manufactured Articles (Produce)
;lO,OOO O O
10,000 o o
Portion of Profit due Entrepreneur (Capital)
Portion of Profit due Employe's (Labour) ...
3386 5 6
3386 5 6
Present Worth of Investment'
Portion of Profit due Employe 1 '
Allowance for Wear and Tear of Machinery &c. (Rent).
?E!!l-*- Total amount of Wages x Wage
The Distribution of the Produce. 59
:O-OPERATIVE SYSTEM.
'RODUCING POINT.
Stock.
(Investment of Entre-
preneur).
Labour.
(Investment of Employes)
Cash.
Financial Statement.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Resources.
Liabilities.
s. d.
s. d.
4000 o o
*. d.
s. d.
s. d.
*. rf.
s. d.
* A
-
3000 o o
950 o o
386 5 6
168 2 9
168 2 9
4168 2 9
i<58 2 9
-
168 2 9
2 S 3 i 17 3
2831 I? 3
4168 2 9
;j4l63 2 9
4168 2 9
r) Paid in Cash
168 2 9
168 2 9
Balance of Cash in hand
3000 o o
3000 o o
4168 2 9
4168 2 9
Individual = Portion of Profit due Individual.
60 The Distribution of the Produce.
element capital, and labour, affirms and maintains the
co-equality of capital and labour ; and by adopting the
total amount of wages earned, within a given time, by each
individual working-man, as the standard for determining
the portion of profit due to each working-man affirms
and maintains the hierarchy of industrial functions.
It recognizes differences in the skill and efficiency of
working-men, and provides that the more skilful and
efficient shall participate more largely in profits, thus
offering a greater incentive to industrial skill and
efficiency than can be claimed for the wage competitive
system even by its most ardent admirers.
By distributing a portion of profits among employes
according to the total earnings of each, within a given
time, there is furnished a most powerful inducement to
continuous work, thereby reducing to a minimum the
chances of irregularity of work, which, under the wage
competitive system, is often a very serious difficulty
wherever and whenever wages are high and the supply
of labour not more than sufficient to meet the demand,
which is an almost invariable antecedent and con-
comitant of high wages.
The wage co-operative system reconciles the sub-
jective interests of employers and employes with the
objective interests of society by making the profits of
all dependent upon the greatest amount of economy
practised by all in the use of time, means, and materials
in production. Such a system cannot fail to have a
fair share of beneficial influence upon the characters
of all working-men, alike upon employers and upon
The Distribution of the Produce. 6 1
employes ; and remembering that " the welfare of
society and the justice of its arrangements are at
bottom dependent upon the character of its members,"
the wage co-operative system, offering as it does a prac-
ticable scheme for reconciling the now hostile interests
of employers and employes, is entitled to some con-
sideration.
It cannot be expected, and it is not claimed, that the
adoption of the wage co-operative system, or any other
system of distribution of profits, will in itself effect those
beneficial changes in the character of all classes of
workipg-men which would bring into existence a feel-
ing of greater confidence between employers and
employes, and to that extent make their conjoint action
more harmonious and effective ; but, remembering that
character is the result of germinal polarity as modified
by pre-natal and post-natal, physical, intellectual, and
moral environment, that is to say, the incarnation of
ethics, takes place according to the law of heredity, the
bush which burneth with fire but is not consumed, as
modified by the power of association, it is submitted
that such changes may be accelerated by the establish-
ment of economical and industrial conditions which
would operate as incentives and stimuli, developing in
all working-men the particular characteristics it is con-
sidered desirable to possess.
What is claimed for the wage co-operative system is
simply that it will establish economical and industrial
conditions which operate as more powerful stimuli
and incentives, developing trustworthiness, intelligence,
62 The Distribution of tJie Produce.
efficiency, steadiness, and economy in all working-men
in a far higher degree than is practically possible under
the wage competitive system ; and that it reduces to a
minimum the chances of disputes between employers
and employes about the rate of wages, reconciling the
interests of capital and labour without confounding the
one with the other by recognizing each as permanent,
necessary, and equal elements in production.
The establishment of the wage co-operative system
would bring about a reconciliation of the interests of
employers and employes such as cannot exist between
these two classes of working-men under the wage
competitive system, but which should be the normal
condition of the interests of all of the industrial classes ;
it would largely increase the productiveness of industry
and secure a more equitable distribution of wealth than
now obtains, without in any way operating so as to
decrease the individual responsibility of any working-
man for anything he may do or neglect to do, permit-
ting no one but himself to gain or lose by his individual
action or inaction, so far as the limitation of the effects
of individual action or inaction is possible in society.
"In the gingliam mill, a broken thread or a sJired
spoils tJie web through a piece of a hundred yards, and is
traced back to the girl who wove it, and lessens her wages.
The stockholder on being shown this, rubs his hands
with delight." *
If we can determine the measure of the loss which
results from negligence or inefficiency, can we not also
* R. W. EMERSON.
The Distribution of the Produce. 63
determine the measure of the profit which results from
attentiveness and skilfulness ? And if we decrease the
amount of the income of the working-man because of
negligence and inefficiency, and to the full amount of
the loss resulting therefrom, should we not also increase
the amount of the income of the working-man because
of attentiveness and skilfulness, and also to the full
amount of the profit resulting therefrom ?
V.
Like every other human contrivance there are diffi-
culties connected with the practical application of the
wage co-operative system, some perhaps of which this
writer is at present unconscious, but there are several
difficulties which immediately present themselves, the
scope and magnitude of which should, as far as prac-
ticable, be distinctly understood and definitely deter-
mined.
(i) If employe's are to participate in profits should
they also participate in losses ? Should employes
participate in business losses ? Yes. But how, and to
what extent ? It must be constantly borne in mind
that under the wage co-operative system every
employe would expect to receive, at the expiration of
each year or at the time dividends are usually declared,
a portion of the profits of the particular business to
which he may be attached, which would represent and
be his share of the net profit of the industry of the
country ; and if the particular business or enterprise to
64 The Distribution of the Produce.
which any particular employe may be attached should
not be successful in its operations, during the imme-
diately preceding year or other dividend period, the
employe would sustain, equally with the employer, a
loss of anticipated profits but for which he would not
have attached himself to that particular business or
enterprise ; his time and talent would be expended
without yielding to him anything more than would be
needed for his organic and functional consumption
during the period of his employment ; the fixed capital
represented by his skill or intelligence would be
expended without receiving anything more than would
be necessary to make good the actual wear and tear of
work during the period of employment. Beyond this
loss of anticipated profit the employe should not be
called upon to participate ; he could not justly be
required to participate in the losses of a business, the
administration, direction, and control of which would
be vested exclusively in the hands of the employer.
The employe", like the employer, would suffer the loss
of anticipated profits, the capital of each would suffer
deterioration ; respectively their losses would be mea-
sured by the extent of their anticipated profits, and the
deterioration of their capital would be in proportion to
their possessions.
(2) Should an employe, justly and consistently with
his position as a joint-capitalist, be discharged, for
cause, from the particular business or enterprise to
which he may be attached ? Yes. The employe would
have a claim upon the profits of the business resulting
The Distribution of the Produce. 65
in part from his industry, he would have the right to
dispose of his own capital, that is, his skill or intelli-
gence, as might best suit his own interests; but he
would have no right whatever to dispose of the capital
of his employer except in the manner such employer
might direct. The claim is that employes should par-
ticipate in the profits of industry, not in the capital of
their employers ; and until such profits are actually
realized and declared, the entire plant and the entire
produce must, as under the wage competitive system,
remain in the custody of and under the discretion and
control of the employer or of his duly accredited agents.
Employes could not justly claim to remain in the service
of any employer except with the full consent of such
employer freely given, any more than employers could
justly claim to retain the service of any employe except
with the full consent of such employe also freely given.
(3) If an employe is discharged from or leaves the
work upon which he may be engaged before its com-
pletion, should he be entitled to receive, to participate
in, any profit which might be realized upon the com-
pletion of the work ? The successful execution of all
industrial enterprises necessarily depends, in an essential
and fundamental degree, upon the regular supply of
working-men of the required efficiency, and of many
varieties ; if this supply fails or falls below the require-
ments of the work in progress in consequence of
employes leaving before the completion of the work,
the result would probably, be a very serious loss to the
employer or entrepreneur, a loss which might mean
66 The Distribution of the Produce.
ruin, and for no fault whatever of the employer or
entrepreneur. In such a case it would appear that the
employer or entrepreneur had all to lose but not all to
gain. It must however be borne in mind that the
employe, in leaving his employer and thereby causing
his enterprise to result in loss, would also lose the
portion of the profit of the enterprise which would have
fallen due to him, if the enterprise of his employer had
resulted in profit ; and it will not be possible for such
employe to realize, in any other enterprise to which he
might subsequently attach himself, any profit for the
work previously performed by him. The total amount
of wages earned, during a given time, being the standard
regulating the distribution of profits, an employe could
not, in any other enterprise to which he might subse-
quently attach himself, include the wages previously
earned by him in the enterprise which he had aban-
doned.
On the other hand, an employe might be discharged
from an enterprise at a time when it would be very
difficult, perhaps impossible, to obtain regular employ-
ment on as advantageous terms as might have been
practicable at the time he attached himself to the
enterprise from which he might be discharged. In
such a case it would appear that the employe would
suffer, not only loss of anticipated profits, but also loss
of employment and the income obtained therefrom, in
consequence of the act of his employer, without such
employer sustaining any loss whatever (it is reasonably
presumed that employes would not be discharged unless
The Distribution of the Prodiice. 67
they could be immediately replaced if required). To
remedy this difficulty an agreement should be entered
into between employers and employes, at the time of
employment, fixing the minimum period of continuous
work during which an employe must be attached to a
particular enterprise to entitle him to participate in any
profit which such enterprise might yield.
The performance of continuous work during and
beyond such minimum period to entitle employes to
participate in profits accordingly, whether their employ-
ment be terminated by their own act or by the act of
their employer. But in the event of their employment
terminating before the expiration of such minimum
period of continuous work, employes should forfeit their
claim to participate in any profits which the enterprise
might yield, only if such employment should be ter-
minated by their own act ; if however such employment
should be terminated by the act of their employer, then,
and in every such instance, their claim to participate in
any profit which the enterprise might yield, according
to work actually performed, in connection with the
enterprise, to remain in full force and virtue, and to be
collectable by the employes which may be discharged
at the termination of the dividend period of such indus-
trial enterprise immediately succeeding such discharge.
The portion of profits due to the element labour to be
declared and distributed among the employes, attached
to every industrial enterprise, at the expiration of the
dividend period of each particular enterprise or business.
(4) How far can the wage co-operative system be
E 2
68 The Distribution of the Produce.
practically applied to the work of the world under
existing industrial and social conditions ?
The application of the wage co-operative system
appears to be limited by, and co-extensive with, the
application of the principle of the simple combination
or co-operation of labour to gainful occupations, but
these include such a very large proportion of the
industry of every country, that if the system should be
adopted by employers and applied to all such occupa-
tions in any country, the average earnings of the
employes working under this system would determine
the average earnings of the whole body of employes
thoughout that country.
The wage co-operative system does not appear to be
directly applicable to the occupations of government
and domestic employes. Such occupations are not
gainful, consequently there would never be any profits
to be distributed. But even with reference to these
employes the system is indirectly applicable. It must
be borne in mind that, under the wage co-operative
system, the average rate of profit in the pound of wages
received at the end of a year or dividend period by
employes attached to gainful occupations would be as
easily and as accurately ascertained or determined as
we now ascertain or determine the average rate of
discount charged by bankers during any year or other
period. The system could be applied to government
and domestic employes by engaging them at the current
market rate of wages with an agreement that, at the
end of the year or some other specified period, they
The Distribution of the Produce. 69
would receive, in addition to wages earned and received
by them, a sum equal to what such wages would have
yielded as profit if it had been earned in any gainful
occupation, such sum to be determined by the average
rate of profit in the pound of wages realized by
employes in gainful occupations during the year or
other specified period. With these limitations there is
nothing in the nature of things to prevent the wage
co-operative system from being adapted and applied to
the work of the world to-day ; all that is really necessary
is the agreement freely entered into between employers
and employes.
(5) If labour, as an element facilitating the production
of wealth, is the equal of capital, why does it not secure
for itself, even under the wage competitive system, an
equal proportion of the profits of industry ? Under the
wage competitive system, working-men are divided into
two great classes, employers controlling the element
capital, and employes controlling the element labour
whose subjective interests are apparently hostile. The
great objection to this system is that it really makes
their immediate subjective interests mutually antago-
nistic, other things remaining the same, the rate of
wages rising as the rate of profit falls, and the rate of
wages falling as the rate of profit rises.
From the fundamental separation of working-men
into these two great classes, there results the condition
that, whilst employes have almost complete possession
and control of one of the requisites of production
human activity employers have complete possession
70 The Distribution of the Produce.
and control of the entire stock of the produce of
previous work (except that portion which is fixed or
hoarded by employes), which is not only one of the
requisites of production, but which is also the entire
stock of the necessaries and comforts of human life. In
a conflict between employers and employes the latter
are, and always will be, placed at a disadvantage, because
employers can live on their capital during the suspen-
sion of industrial occupations occasioned by a strike or
lock-out, whereas employes have nothing beyond their
scanty savings to depend on, and these savings have
never yet enabled them to conduct to a successful issue
any strike they have ever entered on, where and when
employers were determined not to yield.
As soon as the savings of employes become exhausted
they must of necessity either (i) accept whatever terms
may be offered to them by employers, (2) go on the
poor rates or subsist somehow or other on charity, or
(3) die of starvation.
It is admitted that to those who are prepared to
apply practically and without limitation the principle
that it is natural and right to " seek to satisfy their
desires with the least possible exertion," there need be
no immediate necessity for employes to accept either of
the three specified alternatives, even after all their
savings become exhausted ; it might be easier for
employes to take possession of the property of em-
ployers, and subsist thereon until the entire stock of
wealth immediately available for human use became
exhausted, and all classes of society be reduced to a
The Distribution of the Produce. 7 i
common condition of destitution. Such a contingency,
however, carries us outside of the sphere of political
economy into the department of applied social science
presided over by the police authorities. Employers,
having legally earned what they possess, cannot be
disturbed in their possessions by anyone without
violating the law, which is the most potent defence and
shield of both employers and employes against all forms
of mutual aggression. Respect for the law, and the
respectability of the law, this is what has been gained
during the long, long struggle, so that to-day the
humblest employe cannot with impunity be defrauded
of what is legally his : the law protects both employers
and employes in their mutual possessions, all of which
are equally sacred in the eyes of the law.
The law exists for several purposes, and among these
are the protecting and defending the persons and
property of all classes of society from all forms of
internal and external aggression. The progress of
civilization has been and is toward the establishment
of such balanced inter-social conditions among the
various classes and sub-classes of society, so that
neither a single group, nor a combination of groups,
may become powerful enough to constitute a menace
to the persons or property of any or all of the remain-
ing groups. It is, however, impossible to estimate
accurately, and exceedingly difficult to check effectively,
the enormous power necessarily wielded by that class
of an industrial society having legal possession and
complete control of the entire stock of wealth imme-
72 The Distribution of the Produce.
diately available for human use, the entire available
capital of society, living under a government in which
the civil power is supreme, in which the law is fearlessly
administered, and order resolutely maintained.
To-day, with the internationalization of industry,
commerce and banking, as a consequence of the
apparent stability and permanence of the reign of law
in society, and with all the facilities of inter-communi-
cation afforded by steam and telegraphy, different
political boundaries, languages, races, climates, religions,
have ceased to exist for capital all of these still exist
for labour which moves from place to place with the
rapidity of steam and telegraphy, availing itself con-
stantly of the most advantageous markets, flowing
almost spontaneously to those countries where the
highest price can be obtained for its use. These means,
ever in the service of employers, who control the capital
of the country, increase immeasurably their power over
the persons and property of employes, that is, over the
rest of society. This power wielded by employes and
concentrated in the hands of the bankers, is simply
overwhelming it is a power which threatens with
thraldom the governments of the nations of the earth.
If " life is a search after power," then here indeed is real
power. But all classes of society do not participate in
this " sovereignty of power." However, this vast indus-
trial organization, and the power which directs and
controls it, are not bad, but good ; they represent, if not
the best, at any rate a good " mode of doing each thing,"
and the best mode is certainly somewhere indicated.
The Distribution of the Produce. 73
How then shall all classes of society participate in
this " sovereignty of power " as embodied in capital ?
By participating in the profits of industry, the source
from which it flows, and from which all additions to
this power are drawn.
" The opinion of the million was the terror of the
world, and it was attempted to dissipate it by amusing
nations, or to pile it over with strata of society a layer
of soldiers ; over that a layer of lords ; and a king on
the top ; with clamps and hoops of castles, garrisons,
and police. But, sometimes, the religious principle
would get in, and burst the hoops and rive every
mountain laid on top of it. The Fultons and Watts
of politics, believing in unity, saw that it was a power,
and, by satisfying it (as Justice satisfies everybody)
through a different disposition of society, grouping on
a level instead of piling it into a mountain, they have
contrived to make of this terror the most harmless and
energetic form of a state."*
The power of political despotism has been completely
checked, not by altering the actual political organiza-
tion of society, but by extending the political franchise
to and thereby diffusing political power throughout the
entire mass of citizens ; by allowing all classes of
citizens to participate equally in political power at its
source. We have established co-operation between the
rulers and the ruled.
Authority and liberty are reconcilable in duty as
defined by that law which is the fulfilment of the
* R. W. EMERSON.
74 The Distribution of the Produce.
ethical code, and which is also the affirmation of the
sovereignty of ethics.
The power of industrial despotism will be completely
checked, not by altering the actual industrial organiza-
tion of society, but by diffusing industrial power
throughout the entire mass of working-men ; by allow-
ing all classes of working-men to participate equally,
each according to his work, in the profits of industry,
in the source of industrial power. It is only thus that
we shall be able to establish co-operation between
employers and employes, thereby converting the power
of capital into one of the means by which humanity
shall climb to the highest possible platform of physical,
intellectual, and ethical culture. " This is the right
compound interest ; this is capital doubled, quadrupled,
centupled ; man raised to his highest power."
The power exercisable by employers as a class over
employes as a class, in the event of a struggle, is founded
upon the twofold advantage possessed by employers, as
the custodians and controllers of the capital of a country,
and which is a consequence in part of the fundamental
division of industrial society into two great classes ; and
in part of the internationalization of industry, commerce,
and banking, which characterizes the Western civiliza-
tion of the modern era :
(1) The greater mobility of capital as compared with
labour.
(2) The greater means of self -subsistence possessed by
employers as a class as compared with employes as a
class.
The Distribution of the Produce. 75
The basis of the relations existing at any time
between employers and employes should be ethical. In
any appeal to either intellectual or physical force
employers as a class have been and are more than a
match for employes as a class. Justice the rendering
to every man that which is his due is the one common
stronghold of both employers and employes, and it
should be the watchword of all working-men.
Everywhere employers and employes are being more
completely organized, yet their mutual relations are
daily becoming more and more strained ; students oi
the industrial phenomena of society are being " appalled
by the indications of the contest t which seems to be
approaching in every civilized State."
This armed truce must soon terminate, both employers
and employes must soon grow disgusted with a con-
tinuous struggle, as among beasts of prey, over the
question of how much they shall eat, drink, and wear
during the threescore years and ten which is the
outside measure of man's life on this planet ; and the
movement towards a system of co-operation, under
which both employers and employes participate in the
profits of their joint industry, is to-day so pronounced,
so irresistible, that there is now no choice but to accept
some form of the co-operative industrial system.
Co-operation has ceased to be a theory only ; it is a
fact which cannot be ignored, which must be recognized
by economists, and its claims to modify the existing
laws of distribution must be heard and determined by
reference to its advantages in facilitating and increasing
76 The Distribution of the Produce.
the productiveness of industry, and in reconciling
differences between employers and employes. The
co-operation and not the competition of working-men
must soon be recognized as the regulating principle in
the industrial organization of society.
The principle of competition, however, can never be
entirely eliminated from society while the spirit of
emulation and rivalry inheres in human beings, and, in
the opinion of the present writer, it is not desirable that
it should be entirely eliminated.
The competition between different establishments in
all branches of industry, manifested at industrial exhi-
bitions, national and international, having for its single
object the attainment of the maximum degree of adminis-
tration and execution in every department of industry,
is helpful and not harmful in its influence on spciety ;
but the competition between employers and employes,
having for its double object the obtainment from the
point of view of the employer of the maximum of
work in exchange for the minimum of pay ; and from
the point of view of the employ^ the obtainment of
the maximum of pay in exchange for the minimum of
work ; is to-day an element of danger to society,
threatening it with dissolution from the widespread
internal dissensions engendered thereby.
These conflicting interests must be reconciled, society
must evolve, must make manifest, an organization in
which it will be both possible and practicable for every
social functionary to enjoy those alternate periods of
The Distribution of the Produce. 77
harmonious activity and rest, which constitute fulness
of life and completeness of repose.
This is the abiding faith and hope of humanity,
which can never die until faith and hope are absorbed
in realization.
It is hereinbefore attempted to show (i) that
employes should participate in profits equally with
employers, as a matter of justice, not as a matter of
benevolence ; (2) that such equal participation in profits
by employers and employe's is mutually beneficial and
practically possible ; and (3) that the distribution among
employes of the portion of profits due to them, " to
each according to his capacity, to each capacity accord-
ing to its results/' is also practically possible under the
wage co-operative system, which establishes united and
harmonious, instead of divided and discordant relations
between employers and employes.
JAS. C. SMITH.
GEORGE STREET,
NASSAU, N.P.
UCSB LIBRARY
A 000607213 6