Wlffffffff BIRD FACTOR OF PRODUCTION A.J.OGIL 1 LIBRARY OF THE UNIVERSITY OF CALIFORNIA. Class THE THIRD FACTOR OF PRODUCTION Bn& tber BY A. J. OGILVY WITH AN INTRODUCTORY NOTE BY ALFRED RUSSEL WALLACE, D.C.L. (Oxon), F.R.S. LONDON SWAN SONNENSCHEIN & CO., LTD. PATERNOSTER SQUARE, E.G. 1898 fCmtb Jfatoaliedkm Office: 47 VICTORIA STREET, WESTMINSTER, S.W. bject ; To restore the Land to the People, and the People to the Land. President. ALFRED EUSSEL WALLACE, D.C.L. (Oxon), F.E.S., etc. Vice-Presidents. Eev. STOPFORD BROOKE, M.A. ; W. P. BYLES : Eev. J. CLIFFORD, D.D. ; E. D. GIRDLESTONE, B.A. ; MICHAEL FLURSCHEIM; Sir EGBERT HEAD, Bart. ; T. LOUGH, M.P. ; J. W. LOGAN, M.P. ; DADABHAI NAOROJI; A. J. OGILVY, J.P. ; D'ARCY W. EEEVE ; T. P. EITZEMA, J.P. ; CHARLES E. SHAW, M.P. ; A. C. SWINTON ; Miss HELEN TAYLOR ; Eev. W. TUCKWELL ; W. VOLCKMAN J T. F. WALKER ; CHAS. WlCKSTEED. Treasurer. ALEXANDER W. PAYNE, F.C.A., F.S.S., 70 Finsbury Pavement, E.C, Hon. Secretary HERBERT G. MOBERLY. Secretary JOSEPH HYDER. Assistant Secretary HENRY E. ALDRIDGE. Editor of Land and Labour GEORGE CROSOER. LECTURES. The Secretary will be glad to hear from Political Associa- tions and Land Eeformers generally, with a view to holding meetings, supplying lecturers, or attending debates. MEMBERSHIP. Payment of an Annual Subscription of or exceeding One Shilling confers Membership. A Subscription of 2s. 6d. or more entitles the giver to a regular monthly copy O/LAND AND LABOUR. Sub- scribers of Five Guineas or more become Life Members. Those who desire a just solution of the Land Problem are earnestly invited to become Members. Cheques to be crossed " The London and County Bank, a/c Land Nationalisation Society." 102208 ERRATA Page 7, line 14, for B and C read B or C ,, 19, ,, 19, for accept, the taxed read accept the tax, ,, 23, 27, for id eality read ideally ,, 30, ,, 1, omit but ,, 34, ,, 28, for payments read payment ,, 38, ,, 32, omit because, and the ,, 39, ,, 12, for Saharasread Sahara ,, 41, ,, 1 1, for inertia read in ertise ,, 53, ,, 26, for enjoyments read enjoyment ,. 63, ,, 24, for earnings read produce (twice) ,, 71, ,, 1, for comparatively read comparative 92, ,, 29,/or|micM-Sth ,, 96, 20, for landlord's read landlords' 32, for l-10th, only read 1-lOth only, ,, 119, 23, for scythe read scythe (1888). ,, 145, ,, 2, for damages read damage ,, 163, 26, for are read is ,, ,, ,, 27, for taught read sought ,, 174, after title read (Labour being the Creator of Capital and able to Create it in any Quantity that may be required) ,, 206, line 26, for beleagured read beleaguered ,, 227, ,, 6, for firm read firmly ,, 254, ,, 7, for Flurscheim read Fliirscheim INTRODUCTORY NOTE, BY ALFRED R. WALLACE, President of the Land Nationalisation Society. THE author of this volume is a gentleman who has been long settled in Tasmania, and is a considerable landowner there ; and the present work is founded upon personal observation in the Australian Colonies and also in England. It says much for his freedom from prejudice and independence of thought, that under these conditions he has arrived at conclusions which are practically identical with those of English land nationalises as to the evil results of private property in land. The lesson afforded by Tasmania is indeed very striking. It is by nature one of the most favoured countries in the world. It possesses a delightful climate, free from the extreme heats and long droughts of Australia ; its soil is varied and fertile, its forests are magnificent, its streams numerous and overflow- ing; all the products of the temperate zone nourish there, while for fruit production it is unsurpassed ; it has excellent main roads constructed by convicts long ago, with railroads and navigable rivers. Here would seem to be all the conditions requisite for the support of a large agricultural population in comfort and prosperity ; in place of which we find a large pro- portion of the land still uncultivated, and instead of general happiness and well-being, universal complaining, as with us, of trade depressed, capital unemployed, farming unprofitable, and all kinds of labourers out of work. In that portion of the volume dealing with land nationalisa- tion, the author shows us clearly the cause of this state of things. viii Introduction. and what is still more important, he explodes one of the commonest fallacies of our opponents that large farms lead to better cultivation and higher production than small farms or peasant-holdings. This part of his work is especially valuable, because he shows, as the results of observation and owing to the inevitable working of the law of self-interest, that the large owner or large tenant will often cultivate his land badly, or even leave much of it uncultivated, because he obtains the largest net returns by doing so. The peasant farmer, on the other hand, working a small area by the help of his own family, finds his profit in high culture and the maximum of production from the land. By the former system one man gets a large profit but small proportionate produce by employ- ing say ten men on a large area of land j by the latter system twice that number of men work for themselves on the same area, produce double the amount of crops and stock, and live, all of them, in independence, and in that healthy enjoyment of life which a man obtains when he works freely upon the soil and knows that the whole produce of his labour is his own. Other chapters deal with various problems of political economy, and especially of the currency; and although here the author cannot claim to speak with such practical experience as he possesses in regard to the land, yet he has claims on our attention as an original thinker and an acute reasoner, and as possessing the rare quality of expressing his views on some of the most intricate of these questions so clearly and forcibly as to render them intelligible to any careful reader. I have therefore much pleasure in introducing these instruc- tive and suggestive essays to the general public. CONTENTS PAGE. Introductory, by Alfred R. Wallace, - vii THE THIRD FACTOR OF PRODUCTION Wealth Labour Interest, ,- 1 The Law of Indifference, - - 14 The Distinction in the Mind of the Capitalist, - 17 Transferability of Taxes on Capital, - 19 Medium of Exchange, - 23 The " Tyranny " of Capital, - 24 Capital as Originating Enterprise, - 29 Summary, 53 A COLONIST'S PLEA FOR LAND NATIONALISATION The Unearned Increment : its Nature, - 55 The Unearned Increment : its Magnitude, - 65 The Real Sufferer, 75 Proletarianism v. Slavery, 83 Land Monopoly not only Absorbs the Fruit of Industry but also Breaks its Progress, 91 Review of the Situation, 100 Principles and Proposals, - 106 Conclusion, - - - 112 THE CAUSE OF A CRISIS Money, - - 124 Tribute v. Earnings, - - 128 Tribute can only be paid by Work, - . - - 130 All Tribute arises from Private Ownership of Land, - 153 vi Contents. PAGE. THE MALTHUSIAN DOCTRINE, - 157 Diminishing Return v. Diminishing Area, - 162 The Law of Diminishing Return, - 164 Resort to Inferior Lands, - 167 Supposed Examples of the Malthusian Doctrine Examined, - 170 LABOUR v. CAPITAL, - 174 SAVING AND SPENDING Part I. Is Capital the Result of Abstinence ? - 198 Part II. Saving of Real Wealth (i.e. Goods), - 211 Consumption, - 216 Over-Consumption, - - 220 Saving of Labour, - 222 Saving Money, - 225 Interest, - 242 THE APPRECIATION OF GOLD, - - 255 THE THIRD FACTOR OF PRODUCTION. WEALTH. By wealth is understood all those material utilities which Labour has produced or collected, and which minister to man's maintenance or enjoyment. Economists (having the processes of exchange in view) have restricted the term to goods having an exchange value. But this arbitrary restriction injuriously limits the field of inquiry shutting us off from many aspects of the subject which it is desirable for us to examine, and often leading us absolutely astray. The house, clothes, tools, live stock, and other ac- cumulations of Kobinson Crusoe constituted his wealth in the sense in which everyone in daily life understands the word ; none the less that there being no one with whom he could ex- change they had no exchange value. Similarly the macadam- ised highways, the bridges, docks, and public buildings of the State are as much a part of the wealth of the country, that is, have the same origin and fulfil the same purpose, as the rail- ways, factories, and mansions in private hands ; none the less that they have no exchange value, seeing that the State has no idea of disposing of them, and could hardly find a purchaser for some of them if it had. What the world wants to know is the laws that govern the A 2 The Third Factor of Production. production and distribution of utilities', of the things that minister to our comfort and enjoyment, no matter whether they have an exchange value or not. Where they have (as they generally have), a special field of inquiry (the field of exchange) is opened up ; but the whole inquiry ought not to be limited to one particular part. However, the point will not much concern us, so we need not dwell upon it. All wealth, whether we take it in its ordinary and broad sense or in its technical and restricted sense, is produced by human effort (usually called Labour) acting on the raw materials and forces of the earth, briefly expressed by the term Land, because they are all parts or properties or adjuncts of the land ; the minerals that lie under the surface, the waters that flow over it, the fertility, accessibility, aspect, rainfall of any given piece of land being the elements or attributes that give that land its utility, just as the intelligence, knowledge, strength, activity of a labourer are the properties that alone make his labour worth having. Indeed, if you take away the attributes of anything from the thing itself, there is hardly anything left, for we know nothing of anything but by its attributes. Moreover, land itself, or the crust of the earth, is the most important, from the productive point of view, of all the gifts of nature, and the term Land conveniently covers them all ; and every spontaneous product of the earth before labour has touched it, the trees of the forest, the fish of the sea, every- thing, in short, which is the pure and unassisted product of nature is included in the same term. 1 do not invent this comprehensive term. I take it from the Economists as I find it; but if anyone objects to it, he can substitute the term nature. LABOUR. By labour is understood human effort of every kind, mental or bodily, applied to useful purpose ; to work, as distinguished from play; that is, to the production of some utility or to the acquisition (not indulgence) of some erjoyment. The Third Factor of Production. 3 The industry, skill, knowledge, judgment of the labourer, being reckoned as properties of his labour, are included in the term labourer, just as the fertility and so on of the land are included in the term land. Land and labour thus broadly understood as nature and man's action upon it are the matter and force of industry, the two prime factors of production. INSTRUMENTS. But man with his naked fingers could hardly satisfy a single want, certainly make no progress, no matter how favourable his surroundings. The savage could kill no game without a weapon of some kind which we may call his tool of trade ; could not till the ground without a hoe, could not construct a dwelling without a stone axe or instrument of some sort ; and with every step forward in improvement of his condition and development of his nature the number and com- plexity of his tools and appliances and the necessity for them will increase. The first act of labour then in every case will be to procure a tool. So indispensable to progress and even to existence are tools that they have been fairly called the third factor of production ; though they are so only in a derivative sense, being themselves the product of labour acting on the materials and forces of the earth that is, upon land. The term Tools, however, is hardly comprehensive enough for our purpose, custom having restricted it to the simpler sort of appliances. We want a term that shall cover all appliances ; that shall express the most complicated machine as well as the simplest tool, and that shall include those raw materials, them- selves the product of labour, that labour works on as well as the tool it works with; that shall include the cloth for the coat as well as the needle, the plank as well as the hammer and nails ; for these raw products of our industry, which we work up, are as much the instruments of production as the tools we work them up with ; one is as necessary as the other, 4 The Third Factor of Production. and each is useful only as a means of producing something else. The term Instruments, then, is comprehensive enough to cover both, familiar enough to be in no danger of being misunderstood, and has not been appropriated for any technical purpose, so we shall adopt that term. Instruments, then, represent the third factor of production. All the accumulated products which constitute wealth may be classified under two heads : products which minister directly to maintenance or enjoyment, as a loaf, a coat, a necklace, requiring no further labour to fit them for such use, and which, therefore, we shall call final products ; and pro- ducts whose function is not to minister directly to mainten- ance or enjoyment, but only as a tool with which, a material out of which, or a vehicle by means of which, we can procure the things that do, and which, therefore, we call instruments ; as a spade, a roll of cloth, a cart. No doubt there are many articles which we might feel doubtful whether to classify as instruments or final products, and others again which may be changed at will from one category to the other, as when a carriage horse, bred and kept solely for enjoyments and there- fore figuring as a final product, is set to draw a plough and so becomes an instrument. But these niceties do not affect the argument. What we want is not to make a classified catalogue of goods, but to clear our ideas ; and all we are now concerned with is this, that all wealth consists of two classes of goods only goods which represent the crown of labour and are fitted directly for enjoyments, which, therefore, we call final products, and goods whose use is only to produce other goods, and which, therefore we call instruments. Any given article comes at any given moment under one or other of these two heads, no matter whether we feel sure under which head to place it, or whether we may find reason to change it from one category to the other. The productive power of a community depends (ceteris The Third Factor of Production. 5 paribus) on the number and efficiency of the articles which it can use as instruments for the work it wants to do. So far, I think, there is nothing new, nothing on which economists are not already pretty well agreed ; and when they expressed this third factor of production by the term Capital, there can be little doubt that by capital they originally meant instruments, and nothing else. And the word Capital would have done as well as any other for the purpose but for the fact the fatal fact that the usage of the world had already appropriated it to mean something that at first sight seems much the same thing, but which, as we shall see, is radically different, and in some aspects even absolutely opposed to it. Ask a business man what he understands by Capital, and he will reply by an illustration ; he will say that 1,000 is Capital. He does not care what the 1,000 consists of. It may con- sist of coin, or of bank-notes, or of a mere entry to credit at a bank, or of goods, or mining scrip, or shares in a company, or debts due by solvent people, or of title deeds authorising him to exact rent from land, or Government debentures entitling him to draw on the general revenue. Whatever it is, so long as it can command 1,000 in cash, or goods, or services, it is to him 1,000, and 1,000 is Capital. He knows, in short, exactly what he means by it, and he means money. Not money in the narrow and technical sense of coin of the realm, but money poiver, that general command of the market or purchasing power, of which coin is merely the outward and visible symbol and token of exchange. To be recognised as a man of money, and to exercise money- power, a man need not have a sovereign, or a bale of goods in his possession. In the vast majority of cases his money con- sists in a mere claim ; a claim on a bank, on a mine, on an estate, on the general revenue, on a private debtor. Indeed, when we look closely into it, it is always a claim. 6 The Third Factor of Production. Even when it consists of actual coin, that coin is only a metal ticket representing so much purchasing power free of further labour ; just as a bank-note is a paper one, indicating that its possessor has rendered some service, real or imaginary, entitling him to draw to that amount on the general stock. Money, in short, in its broad, every-day commercial sense, represents (no matter what form it may assume) the power to secure services to a given extent, without rendering any service in return, by simply transferring the token (coin or note) when it is a token, or exhibiting the authority (title deed or deben- ture) when it is an authority. Whosoever prospers in business does not convert his gains into coin to be hoarded, or into goods to be stored up, but into claims to be registered. A is owed something by B, C, and D. B pays him in currency (coin or notes), and A, by transferring these tokens, can get goods from anybody. C pays him by a cheque, which merely means that C had a previous claim on a bank, and now transfers that claim to A. D does not pay him at all, but gives an acknowledgment of indebtedness, and A keeps his claim hanging over him. The claim in any given case may be morally good or bad. It may represent real services actually rendered, or it may re- present impudent blackmail, or corrupt grant on the public treasury ; but good or bad, so long as the law recognises it as a claim, the public recognises it as money ; that is, as money- power, as that which constitutes the possessor a monied man. But claims are not the third factor of production. They might all be obliterated by legal fiat ; and though great injustice might be done, and the whole industrial system put out of joint for the moment, the working, productive power of the Community would not be impaired a whit. The efforts that D makes, the land he works on, the materials he works up, the tools he works with, are none of them The Third Factor of Production. 7 more effective because A has a claim on the result. However justifiable it may be, however desirable in the public interest that it should be recognised, the claim, as a claim, adds nothing to the sum of enjoyment or production. Whence we perceive that the greater part of what is called " Accumulated Capital " represents no accumulation at all ; or (to put it differently) represents not accumulated goods but accumulated debts. For a claim and a debt are the same thing viewed from opposite sides. A having by service rendered, or in some way or other become entitled to demand cash or goods from B, waives pay- ment for the time being, and allows B (or someone else, C, to whom the debt is transferred) to consume the goods instead of receiving and consuming them himself ; B and C having to provide such goods hereafter out of the future produce of his labour. You may say that this amounts practically to an accumula- tion, because B, being relieved of payment of the goods, will employ them productively and produce them. But that is not certain. What is certain is that the goods are not really accumulated, but consumed just as much as if payment had been made, only they are consumed by B instead of by A, and what remains is a claim. When to this accumulation of liabilities (figuring as " savings of capital ") is added interest, we shall see that so far from assisting industry, it weighs upon it. Indeed it may happen, and very often does happen, that this waiving of present pay- ment injures the debtor in the end much more than it relieves him in the present. The debt, light at first, accumulates till the weight becomes crushing ; when one of two things happens : either the debtor is ruined by payment, or he goes bankrupt, and the whole "accumulation" disappears. However I am not arguing that credit is a bad thing, but only illustrating my point that a great part of the so-called 8 The Third Factor of Production. accumulations of Capital are wholly imaginary ; that is, that they are not accumulations of goods but of debts. So far as to the business man's idea of Capital : he knows exactly what he means by it, and he means Money. But if you ask the Economist what he means by it, you get no such prompt and definite reply. You find, on the contrary, that no two economists mean the same thing; and further (if you look closely), you will find that no single economist ever keeps strictly to his own definition. You will find, too, that these differences are not merely as to the best way of expressing the thing, but as to the very nature of the thing itself. Mill calls it The fund for carry- ing on present production ; Bonamy Price Wealth employed to produce wealth ; Senior Whatever gives a profit ; Perry says It is either a commodity or a claim, but not personal powers ; George calls it Wealth in course of exchange ; Giffen includes all accumulations under it, making no distinction between capital and other forms of wealth ; Huxley includes under it the muscular force of the labourer, the food he eats, the grass of the field, anything and everything, in short, by aid of which man lives and works. I was once at a dinner of the Political Economy Club in London, whereat was distributed a printed list of subjects for discussion, amongst which was, "What is Capital?" Imagine a meeting of leading Mathematicians meeting to discuss " What is a right line ? " I suppose that if non-mathematicians heard of such a debate, they would conclude that if mathematicians were not yet agreed as to what a right line was, mathematics could hardly be worth studying. For a clear idea of a right line is not more necessary to mathematics than is to political economy a clear idea of capital, or, at any rate, of that third factor of production which economists profess to express by the term capital. The Third Factor of Production. 9 There seems no doubt that the economists meant at start- ing to signify by capital Instruments; the tools, appliances, and materials with which man supplemented his naked fingers in the act of production, and without which his naked fingers would have helped him but little. They meant instruments as instruments, and not money ; that is, if they included money it was only in a secondary sense, as that with which one could procure instruments. While the man of business, on the contrary, understands by it money as money and not instruments ; that is, if he includes instruments it is only in a secondary sense, as that which one can sell for money, or by aid of which one can make money; money being that with which one can purchase the labour of others, or procure goods already in existence; while instruments are that by aid of which labour (one's own or another's) is made more efficient, and fresh goods are brought into existence. The two ideas are not only different but directly opposed to each other, and are perpetually in conflict a conflict which could have but one result. For as the clear and definite idea (that of the man of business) overpowers the obscure and variable (that of the contending economists) ; as the sense of the many in the market and the street overpowers the sense of the few in the closet, so in public life ; in the press, on the platform, the leaders of the public, addressing the public on public affairs, use the word (capital) in the sense in which the public understands the word, and the public understands it as money. Moreover, the economist is himself a man of the world and a citizen before he is an economist, and as such uses the word, must use it continually in the common sense, till the distinction between the two becomes lost, or is remembered only to be forgotten the next minute; until again half conscious of his floundering, he tries to express himself so as to cover both meanings, to reconcile the irreconcilable. What confusion io The Third Factor of Production. and error have arisen from this we shall see as we proceed. The whole difficulty has arisen from undertaking to say that A shall mean B ; that a word which universal custom has decreed shall mean money as money and not instruments, shall mean instruments as instruments and not money. When Mill described the third factor of production as wealth devoted to productive purposes, he came very near the correct definition. Very near, but he just missed it and passed by. For, starting from the assumption that wealth is that only which has exchange value, and placing the distinction between capital and not capital in the mind of the capitalist and not in the nature of the article, and saying that anything which can be exchanged for other things is capable of contributing to production in the same degree as those other things, he clearly lost sight for the moment of the difference, the enormous difference, between production and profit-making; between absolute gain and relative gain ; between the effect on the sum total of goods and enjoyments and the effect on the capi- talist's pocket. He uses the word capital, as the business man avowedly does, to represent simply that with which a man pro- poses to enrich himself, not that by which wealth in the mass is to be increased. Profit is no test of productiveness. It constantly happens that profit is made without adding anything to the sum total of goods and enjoyments ; often by actually diminishing it. There are rings and monopolies of all kinds that make their profit by restricting output and so forcing up price. There are makers of gold trowels for laying foundation stones and other useless articles representing high value, and undertakers who use up useful timber and metal in funereal frippery to be straightway buried under ground, and countless others of the same type who make their profit by sheer waste of good materials. A hundred-guinea ball dress that will be used per- haps twice, and then discarded, represents rather a waste of a The TJdrd Factor of Production. 1 1 hundred guineas than a production of it. On the other hand, there are businesses that bring no profit to the promoters, but yet are highly productive, though, unfortunately, the promoters do not often continue them long. The gentleman farmer, for example, who loses two or three hundred a year by what is called fancy-farming, is often putting his land to more produc- tive use, adding more to the stock of goods and enjoyments than the shrewd tenant farmer alongside who is turning a good penny. He builds more substantial and commodious out-houses, he grows heavier crops, he raises better stock, and he does all this often at no greater real cost that is, with no greater ex- penditure of labour and consumption of raw material than the thrifty farmer, but only at greater apparent cost or relative that is, with larger disbursement from his own pocket. But this disbursement represents neither waste of labour nor destruction of material. He pays higher wages to his men, he gives higher prices when he buys, does not drive such hard bargains when he sells, and hands to his overseer as salary that profit which the thrifty tenant keeps as his own overseer. All which means not that there has been no gain from his enter- prise, but only that he has allowed his labourers, his customers, and his overseer to divide it among them instead of keeping it for himself. No doubt profit is a most influential factor in de- termining the course of industry, for capitalists generally will not long continue any course that brings no profit ; but for all that, profit is a most delusive test of productiveness. Here is an example in which the influence of profit has diverted and continues to divert one of the most important industries from more to less productive lines. A farmer employs habitually 10 men at 16s. a week to grow corn, spending thus (in round numbers) .400 a year, as wages, on which outlay he makes a profit of (say) 10 per cent. = 40. For simplicity's sake we leave out of account his other expenses, on which also we may assume him to make 12 The Third Factor of Production. !0 per cent. The farmer gets back every year the whole of this 400, besides pocketing his .40. It is clear, then, that the labour of these men must produce from that land every year 440 of wealth, fresh wealth, in the shape of corn ; 400 of which goes to them and 40 to their employer. If now the farmer sees his way by laying down his land in grass to get 50 only from it total in the shape of meat, employing his time in looking after his cattle instead of after his men, he will be the gainer by 10 a year. His interest then will be to clear all the labourers (with their families) off the land and lay it down to grass, the land henceforth producing only 50 worth of meat instead of 440 worth of corn. His interest, in short, will be to depopulate the area in his possession, and reduce the productiveness of the land to about one-ninth of what it was. This is the kind of thing that is now actually going on over the most fertile parts of Great Britain, and that has been carried in Ireland to such a pitch as to reduce the population from eight millions to less than five. INTEREST. What is interest? Interest, it will be said, is payment for the use of capital. But is all the payment that is made for use of capital, interest? Suppose I have a carriage, 1 and that a borrower hires it for a month and I charge for the use, is the whole of that charge interest ? 1. The use to which the borrower will put it will take something out of it. Even if there is no outward appearance of wear and tear when it is returned, still it is certain there must have been wear and tear. The cart is a month nearer to its latter end. I charge something on this account ; but it is not interest. I profit nothing by it. It is compensation for deterioration. 2. The borrower may never return my cart at all ; he may sell it and bolt, or ruin it and go bankrupt. I charge some- 1 Adapted from M. Fllirscheim. The Third Factor of Production. 1 3 thing for this also ; but it is again not interest but insurance against risk. 3. I may have built that cart, not to use nor to sell, but to let out for hire ; and if I charge no more than will, after a series of hirings, recoup me for my labour in collecting the timber and iron and working them up into a cart, the charge I make is again not interest but reward of my labour ; i.e., wages. 4. I may have been on the point of using that cart myself when the borrower applied for it, and it will put me to incon- venience or loss to part with it just then. But if he makes it worth my while I may forego my expected profit or enjoyment. I charge then for that ; but that again is not interest, but only compensation for a sacrifice. Interest is something over and above compensation. I am none the better off for the lending ; I am only squared. 5. But if my cart is standing idle and likely to remain idle for a month, so that it will not hurt me to lend it, provided I am compensated for deterioration and insured against risk, and yet I do charge, over and above this, for the mere per- mission to use it, because I know that he is in want of a cart, and will pay rather than not have it ; that is interest. This constant attempt of lenders to take advantage of the necessi- ties of borrowers causes interest and its fluctuations. If the number of idle carts increase, the number of borrowers and their eagerness to borrow remaining the same, it will be easier for them to get a cart somewhere, and they will therefore be able to get one on easier terms : the rate of interest will fall. Conversely, if the number of borrowers or their eagerness to borrow increase, either because the greater urgency of their work compels them to borrow, or because the increasing profit of carting tempts them to borrow, then the number of idle carts remaining the same, the lenders can exact more ; the rate of interest will rise. Interest then 14 The Third Factor of Production. arises from the necessities of borrowers, and the tendency of the lender to take advantage of their necessities. The tendency may be quite right and proper ; I am not going into the ethics of the question ; but whether right or wrong, interest arises thus and in no other way. If employment were so abundant, and labour so well paid that no one was under any necessity to borrow, interest would disappear. Every one being able to command not only the necessaries of life but its comforts by his own labour, would obtain them in that way rather than pay interest for using them before he had earned them, with the certainty of having to return them unimpaired when he had earned them ; or if some were so improvident they would be so few, as compared with the amount of capital lying idle, that they would get the use of it for next to nothing. But what do we mean by this capital on which interest is paid ? Do we mean instruments or money ? The famous law of indifference will show us. THE LAW OF INDIFFERENCE. This law is universally accepted, I believe, by economists. According to this law, as stated by Walker " In regard to two portions of capital as yet uninvested, there is no reason why one should bear a higher rate of interest than the other " ; and accordingly they both bear the same rate. Nothing can be clearer than that the Economist is here adopting the very meaning he repudiates ; that by " Capital " he means, as the man in the street means, money and not instruments ; and money not as coin but as money-power as the bank balance or other registered claim that commands the coin or goods The Third Factor of Production. 1 5 already in existence and produced by other people, not the productive tool that helps to bring fresh coin or goods into existence. And his " Capitalist " is the mere " Fat Man " of the Socialist, who, producing nothing, supplying nothing, can live without work on the rent, interest, or dividends produced by other people. If capital means money, or if my capital happens to consist of money, then the law of indifference applies absolutely. But if my capital consists of the actual instruments of production (as most economists now and then say that it does) the law of indifference does not apply to it at all. For I must get my profit or interest out of these instruments in one or other of two ways ; either by using them myself, or by lending or selling them to people who do want to use them. If I propose to use them myself, it is obviously not a matter of indifference but of the greatest consequence what these instru- ments consist of, and how they are to be used. " Of two por- tions as yet uninvested " (unused), one may bring in a much greater return than the other. It makes all the difference to one situated as I am, on a farm, in a factory, or on board ship, whether my instruments consist of ploughs, spinning machines, or ropes and sails ; whether they are clumsy and antiquated, or up-to-date in all improvements ; whether they are in good order or bad ; whether I and my men know how to use them properly or not. The returns I shall get from this " capital " will depend entirely on the desirability of the work I undertake, on the suitability of the instruments for that work, and on my judgment in using them. It will be uncertain and variable in the highest degree. The law of indifference has no applica- tion. If on the other hand I want to make my profit, not by using these instruments myself, but by selling them or hiring them out, then, indeed, it will make no difference to me whether they are of great or of little utility, or of no utility at all ; whether they consist of cutlery, which is of great utility ; of toothpicks, which are of little utility ; or of Hindoo idols, 1 6 The Third Factor of Production. which are of no utility ; so long as people want to buy or hire them. But whether people will want to buy or hire them will depend on the work they want to do, and on whether my in- struments are suitable for that work; or whether they are good or bad of their kind ; or whether they are plentiful or scarce ; in short, on a multitude of conditions which will vary so much that some of my instruments will bring me in a high return, some only a little, and some nothing at all. All de- pends on the demand for the particular instruments I happen to possess ; and the reason why this demand is of such import- ance to me is that the greater demand the more money they will fetch. Till I have converted my " Capital " from instru- ments into money, the Law of Indifference does not apply. The instruments as instruments will bring me no definite and foreseeable return for my outlay. It is uncertain what I can get for them on sale, and still more uncertain what I could get for them on hire ; most uncertain of all what I could get by use. But directly I have converted them into money, the law of indifference applies to my money in full force. For money (general purchasing power) is the same obviously all round. The purchasing power of my pound (whether embodied in a sovereign or simply recognised as a claim at the bank) is exactly the same as that of everybody else's pound. For the use of that, then, I can get exactly what everybody else can get ; the current rate of interest, according to the law of indifference. But directly I re-convert my pound into actual instruments, the law of indifference fails again, and I must take my chance of my return. The law of indifference, in short, applies solely to money ; meaning by that word, remember, always money in the ordinary business sense of coin, paper, balance to credit, any- thing which represents a negotiable claim or general power of commanding goods and services ; money power, in short. You may say that what I really want at bottom is goods, and The Third Factor of Production. 17 not money. But that is not what I want. That is what I may want hereafter, but what I want now is money. No one wants to realise all his gains immediately in goods. He does not want to lumber up his premises with a mass of articles that he will not want for months, perhaps for years ; and of which many are inherently perishable, all liable to accidental destruction, and some at least, which, when the time comes, would be found to be not what he wanted, and would have to be got rid of. No ! What he wants is something that will represent a de- ferred claim of a general nature upon the world's stock of goods, and that something, no matter what exact shape it may assume, is money. But money, whether we consider it as coin, as paper, as bank credit, or as the deferred claim which coin, paper, or credit re- presents, is not the Third Factor of Production. Coin, paper, credit, and claim might all disappear, yet the facilities for production remain unimpaired. Whence again we see that the economists, misled by the adoption of a word to mean one thing, while universal custom had already appropriated it to mean something else, have got confused between the two meanings, and after declaring that capital meant instruments, and not money, have come without knowing it to mean money, and not instruments. THE DISTINCTION IN THE MIND OF THE CAPITALIST. As to the distinction being in the mind of the Capitalist, this is true only in a certain sense, and to a very limited extent. A man, for instance, may use his chaise cart for useful work B 1 8 The Third Factor of Production. in conveying food to market, in which case it figures as an instrument ; or he may use it for mere enjoyment in driving about, in which case it figures as a final product. But the number of articles that can be applied indifferently as instru- ments or final products is not very great. In the great mass of goods their use is determined by their nature and structure, and not by the mind of their possessor ; or, if you prefer it, the mind of their possessor is determined by their nature and structure. A wheelbarrow, for instance, is of no use except as an instru- ment of work to transport materials ; while a sofa can only be used for enjoyment to recline upon. Therefore, in any esti- mate of the facilities for productive work of a community, the wheelbarrow will figure as an available instrument, aud the sofa will not count at all ; while in an estimate of their facili- ties for direct enjoyment, the sofa will figure, and the wheel- barrow will not count at all. The man who holds the sofas may be an upholsterer, and hold them only for uale, never reclining upon them ; but whether for sale or use, they are fit for reclining on only, whether they are being actually reclined upon or not. It is argued that' a sofa for sale is not a final product. Production is not complete till the finished article is in the hands of the consumer, and not a single act of preparation or transport remains to do. The point seems hardly worth discussing, because, as I have said, the main thing is to realise that every article is either an instrument or a final product. It does not greatly matter in which division you place some given doubtful article. But in case anyone should think it of importance, I would remark that the objection is theoretically right, practically wrong ; because, in the useful application of theoretical principles, a sufficient approximation is often better than rigid exactitude. For example, everyone will recognise a loaf of bread and a pat The Third Factor of Production. 19 of butter when placed on the consumer's table as final pro- ducts, notwithstanding he knows that neither of them will be eaten till a further effort has been expended on them ; that is, that the loaf will be first cut into slices, and the butter spread upon it. In the same way a sofa once delivered in the locality where it is wanted, even though not sold, is for all practical purposes a final product, in that henceforth it is fitted for enjoyment only, and cannot be applied to any productive use. TRANSFERABILITY OF TAXES ON CAPITAL. It is said that taxes on capital are transferable. Taxes on land are not. Taxes on capital are said to be transferable because capital is portable. If a tax is levied on capital, the capitalist at once passes it on to the borrower in increased interest, saying, I want the current rate of interest, and if I can't get it here, I will take my capital elsewhere where it is not taxed. This is what they call " driving capital out of the country." If the borrower refuses to accept, the taxed capital begins to flow out of the country till it becomes so appreciably scarce that interest rises, and the borrower has to pay the tax. But this idea of the portability of capital evidently rests on the assumption that capital signifies money. If a man's capital is invested in the shape of a deposit at the bank, or a mortgage on land, in a mere claim, in short, representing money power, he can withdraw it at a word, and transfer it by bill of exchange to the utmost parts of the earth for the mere cost of a stamp. If it consists of a bag of sovereigns, he can withdraw it nearly as easily. 20 The Third Factor of Production, But if capital means instruments, it can be rarely withdrawn in this easy and airy way. It depends on what sort of instru- ments I have when the tax is levied. If my capital, estimated at say 5,000, consists of a ship, I can, of course, weigh anchor and evade the tax. But if it con- sists of a warehouse, I cannot weigh anchor with that. Neither can I evade the tax by selling my warehouse, turning it into gold, and departing with that ; for the warehouse not being portable the tax sticks to it, and the buyer, knowing this, will give me just so much the less for it. So even if I realise and depart, I shall not have evaded the tax. Indeed, when we come to consider it, capital, except when already converted into money, is portable only to a very limited extent. A large part of the capital represented by instruments of production consists of fixtures, and cannot be moved at all. Another part consists of articles so fragile, perishable, or bulky, that they cannot be moved except at great cost and risk ; and another part consists of articles which, though much wanted where they are, would be little wanted elsewhere, either because they would be of no use there, or because they are so abundant there, or so easily procurable that they would not be worth moving, even at small cost. A part, again, consists of live stock ; and to remove large flocks of sheep from the interior to the coast, and from the coast across seas, would be so ruinous that their owners would pay almost any tax, or even abandon their flocks rather than attempt their removal. The doctrine, then, of the transferability of taxes on capital is accepted by the man of business only, because he means by capital, money money as money, not instruments as instru- ments and the economist teaches it because he really means the same thing, though he is not conscious of it. Well, but it will again be said : " When all is said and done, money at bottom means instruments." The Third Factor of Production. 2 1 No. It is quite a different thing, though like other different things, the two often get mixed together, or convertible one into another, to outward appearance, at least. Money will buy instruments, and instruments will fetch money, but the two things are in their nature essentially different. Money is that by means of which I can obtain goods already existing in other people's possession. Instruments are that by means of which I can increase the sum total of goods. The money power of a rich man does not indicate any aid, actual or potential, to industry. His money merely indicates a claim on, or command over, the goods or services of other people ; a claim sometimes just and reasonable, sometimes indefensible and outrageous, but within the sanction of the law. The wealth (or money power) of some Irish landlords, for in- stance (I select them because, in their case, it is most clearly seen), consists solely in a claim on the yearly produce of their tenants ; a claim founded on no shadow of service rendered to them, or to be rendered, on no work done for them, on no instruments supplied to them, on no money lent to them ; a claim based solely on their ownership of the land, by which they are enabled to say, " Rent or Eviction,' 5 equivalent to " Stand and deliver : your money or your life." And yet this claim, the claim itself, mind, as distinguished from any par- ticular pigs or potatoes which may have been exacted as rent, is a negotiable article, and therefore in the commercial world represents capital. Such a "capital," however, is obviously no part of the Third Factor of Production. So far from assist- ing industry, it despoils and paralyses it. On the other hand, instruments, as instruments, do represent this third factor, and do so equally, whether they have a money value or not. The pointed stick with which the bushman digs up wild roots, which, if broken, he can replace in a minute, and which 22 The Third Factor of Production. has no exchange value, even among his own tribe, is a most potent third factor in his industrial life. He could not get on without it. It is to him what the spade is to the Irish cotter, what the theodolite is to the surveyor, what the ship is to the mariner. Whether the instruments with which we do our work be rudely simple or ingeniously complicated, whether they cost much labour to produce or can be picked up anywhere, whether they have an exchange value or not matters nothing. Their worth and efficiency as a third factor of production depends en- tirely on their nature and use ; and no intellectual thimble-rig of exchange can alter the fact. " Nothing/' says the economist, " can be considered as capital, which, being eliminated, leaves the sum total of capital unimpaired. For example, a cheque is not capital ; a sovereign is." The proposition is undisputed ; but, as to the example, I beg to differ. A cheque represents capital exactly as a sovereign does, equally so whether we consider capital as money or as instruments. A. as money. A cheque for 1, so long as the signature is good, will command 20 shillings' worth of goods as readily as will a sovereign. B. as instruments. The cheque fulfils precisely the same function that the sovereign does, viz., as a token repre- senting a deferred claim, or power to draw upon the general stock of goods. Sovereign and cheque alike are useless in themselves ; alike are useful only to exchange away for real utilities, and alike command the same quantity of those utilities. If the cheque were as costly to produce as the sovereign, everyone would re- cognise it to be capital, exactly as is the sovereign. The only difference between the two (so far as we are concerned at present) is that the one can be replaced at a cost so trifling as The Third PactoY of Production. 2$ to be counted nil, while the other will cost its own nominal value to reproduce. But this facility of production in the cheque does not detract from its efficiency as an instrument ; on the contrary, it enhances it. Spades and steam engines would be much more efficient aids to production, that is, would contribute a much greater net increase to production if they could be produced as easily as cheques. For the gain to in- dustry due to any given instrument may be measured by the gross increase due to its use, less the cost of producing it. Say it would take 100 men 12 months to excavate a given length of canal with picks and shovels, which they have already got, while they could do it in 9 months with a steam excavator, but it would take them (or 100 other men) a month to make the excavator. Then the gain due to the excavator would be 3 months less 1 month = 2 months ; while, if the excavator could be produced as easily as a cheque, the gain would be the whole 3 months without any deduction. The smaller the cost then of producing any instrument, the greater the gain due to its use. MEDIUM OF EXCHANGE. Money in its concrete form of coin, cheques, notes, is said to be the medium of exchange. It is rather a contrivance for de- ferring the completion of exchange. If I exchange 100 worth of grain for 100 worth of cloth, the money is not wanted. The two commodities change hands, and there is an end of the matter. The money only comes in ideality, as a measure of value. But if I want to throw my grain into the general stock, thus getting rid of the trouble and risk of keeping it, and do not want cloth or anything else in 24 The Third Factor of Production. particular just then, but do want some token to hold good my claim for a deferred exchange of 100 value of goods of some sort, then I take money coins or a cheque, I don't care which. The matter stands thus : A community that uses coins for exchange instead of resort- ing to tedious barter, and still more, a community that uses cheques instead of coins, effects a great saving of labour, just as a savage, who uses a pointed stick for digging up roots in- stead of grubbing them up with his finger nails, effects a great saving of labour. Cheque and stick alike are thus most efficient instruments of production represent most effectively that third factor by which labour achieves its results, and do so none the less but much the more in that if either of them be destroyed, it can be reproduced without difficulty and without cost. THE " TYRANNY " OF CAPITAL. Capital has been described as that by which I can command the services of others. How far is this correct 1 If capital means money, then it gives its owner power over goods, but not over men. If it means instruments, then it gives its owner power over nature, but not over men. CAPITAL AS MONEY. If I have 100, that 100 will com- mand 100 worth of goods if their owner chooses to sell them ; but it cannot compel him to sell them. If he chooses to sell them, then, indeed, my money commands his goods, but so also do his goods command my money. It is an exchange on equal terms. Neither party has any command over the other. So also with services as with goods. The Third Factor of Production. 25 CAPITAL AS INSTRUMENTS. Let A with a team of horses and full supply of instruments settle alongside B, who has only a spade ; each having as much land as he can cultivate. Then A's superior appliances will give him a greater command over nature (enabling him to get a greater return from the soil to the same labour), but it gives him no power over B. Say that A can put in 1 00 acres with one ploughing, getting 20 bushels to the acre = 2,000 bushels, while B can only put in 5 acres with one digging, getting 40 bushels to the acre = 200 bushels. This will be all the better for A, but none the worse for B. B gets no less from his 5 acres, because A gets more from his 100. If B could do fairly well on his 5 acres before A came to settle beside him, he can do even better now, for when two men settle beside each other (especially when they have different appliances), exchange of services results to their mutual benefit. A with his team can cart for B when he is not using his team himself; and B with his spade can open out A's drains, or set his garden in order, when he is not digging for himself. Exchanges of this kind are so advantageous that they soon become habitual, so that each comes to rely on the other for certain services, and a mutual dependence ensues ; but it is a purely voluntary, not a compulsory, dependence on both sides. We are supposing that both grow grain. But the quantity of grain required is limited, and its price is fixed by supply and demand. Say, then, that A's superior appliances enable him to grow all the grain that is wanted, and to undersell B, so that B is driven out of the market. Out of that market, yes the grain market j but out of that only. The very fact that A takes to supplying the whole grain market precludes him from occupying the other markets, the whole range of which remain open to B to produce what he fancies and is best fitted for. Besides, market or no market, B has his family to feed, and it will always pay him to grow food enough for that, no matter how cheap food may be, rather than stand idle, earning 26 The Third Factor of Production. nothing to buy food with. But having land he can always find something to produce that somebody else wants. Even if there be no actual land-produce that seems to him worth pro- ducing for sale, there are always goods to make that somebody will be glad to buy, or services to render that somebody will be glad to hire. His home and his food supply being secure, he is independent. For even under the extreme and absurd supposition that he can find nothing to produce or to do that anybody else wants, he can always employ himself : he can always find something useful to do on his own account to multiply his comforts, or add to his enjoyment in some way, so long as he has access to land. But if he has not access to land if A claims all the land, and will not allow him to occupy then is his freedom gone indeed ; he is at A's mercy. He must get work from A (or from somebody) on any terms, or die. Without the first factor (land) the second factor (his labour) is paralysed, and the third factor (his spade) is useless. If a labourer is out of employment and destitute, anyone who offers him the opportunity to work can, in return, exact the whole produce of his labour beyond bare subsistence. Suppose this person to be one with appliances of industry at his command, say raw cotton and spinning machinery ; such a one would be called a capitalist. It does not matter whether there be only one destitute, or whether there be thousands, the result is the same. If there be more than one, the capitalist can avoid the appearance of oppressive extortion, and salve his conscience by going through the farce of offering the employment to competition, saying lie will be content to accept what is finally offered. The destitute will, of course, run each other down to this one chance of life, till wages come down to bare subsistence, and the capitalist can then declare that it was the labourer himself who offered to work on these terms, and not he who compelled him. This is The Third Factor of Production. 2J the famous " freedom of contract" that we tiear so much about. But he can get the labourer on these terms just as easily if there be only one labourer, for the man is helpless, and must take what he can get. The land being closed to him, he has no alternative but hired employment on any terms. Practically, in Great Britain wages generally are not forced down to quite this minimum, because trade unions, customs, public opinion, and other influences come into play. But we may dismiss these complications. Given one man, destitute and landless, with no trade union to back him up, no custom or public opinion to befriend him, and the capitalist can get him on any terms he likes to name. It is not, however, the capitalist's possession of the instru- ments of production that gives him this power (not even if we include food among them) ; for the man who offers this oppor- tunity to work may possess neither appliances nor food. He may own only a certain portion of the earth's surface. He may say to the labourer, " This moor or this river is mine, and I will give you leave to snare rabbits or catch fish, but only on condition that you give me two fish or two rabbits for every one you catch for yourself." Or he may say : " This garden plot or this quarry is mine, and I will give you leave to grow cabbages or hew stone, but only on condition that you give me so many cabbages or so much hewn stone." Or he may say, " I have got a contract to convey goods from a place where they are worth 20s. to a place where they are worth 30s., and you may carry them for me, but only on condition that of the 10s. increased value which your labour has created you are to receive half only, and I am to keep the other half as my profit for allowing or employing you to work." It is clear that the labourer would not consent to such terms, would not sacrifice his independence and exhaust himself at work in which he felt no interest, by which he could only just 28 The Third Factor of Production. live, and at which he could have no hope of bettering his condition, if the soil were open to him to cultivate, the quarries to hew stone, the moors to hunt, or the rivers to fish, or, in short, if the countless natural facilities for employment which the land offers were not closed to him, by which, even in the rare case where he could win nothing more than bare subsistence (a case that does not really happen even amongst the lowest savages in the worst surroundings), he would at any rate be a free man, feel an interest in his work, and cherish, at least, the hope of ultimately bettering his condition. It is not, then, the possession of the instruments of produc- tion that gives the one man power over the other, but the denial of that natural alternative to hired employment that the land offers. What the labourer wants, what he must have, is the opportunity to work, which at present he must pay for with his heart's blood, so to speak. Whether he pays for it [for this mere opportunity] in the shape of rent to a landlord, or by producing goods under the direction of an employer, on the condition that these goods are to belong, not to him who produces them, but to the employer, matters nothing. The thing that concerns us here is that it is not the possession of appliances by an employer, but the denial of access to land by a landlord that throws the labourer at the feet of capital ; that capital which, no matter what precise form it may assume, or what the economist may declare, is what the world at large understands to mean money, and what the economist himself constantly means without knowing it. The Third Factor of Production. 29 CAPITAL AS ORIGINATING ENTERPRISE. Yet there is a mysterious something which appears to be wanted, under present conditions, before any great work can be undertaken; which mysterious something goes by the name of Capital, and turns out to be money. Take our vast mineral fields in Tasmania. The only two factors required to develop these resources are labour and the instruments of production. To say that food also is wanted is only to say that while one body of men are working at the mines, another body of men must be producing food for them, so that it comes to labour and instruments after all. Count- ing food too, however, as one of the factors wanted, and wanted at once, all are present already ; and if they were not, " Capital " itself could do nothing. Yet somehow the active and passive factors the labour and the requirements of labour do not come together, and the work hangs fire till a big capitalist appears upon the scene, when the enterprise starts at once. How is this 1 What has the capitalist supplied ? The labourers he employs were all present already and willing to work : the food with which he is to feed them existed already in abundance, in granaries, in storehouses, in grocers' shops ; besides what was coming in daily in the shape of sheep being fattened into mutton, vegetables being grown and gathered, butter being churned, eggs being laid, and so on. The tools again with which he is to equip them were, many of them, already in the labourers' hands, while vast reserves were in the shops and warehouses awaiting sale, in back-yards lying unused, and more were being constantly turned out from the factory or imported in the ordinary course of business. Every material factor for the work was either already in existence in the country and available for use, or was procurable when 30 The Third Factor of Production. wanted, as the work went on; but the capitalist supplied none of these things, but only drew upon the supplies in other people's hands. What then did he supply ? To answer this, we must go back a step and recapitulate. What, once more, is capital? Not that vague, indefinite capital which the economist evolves, as the German philo- sopher evolved the camel, .out of his " moral consciousness," and which some economists define one way, some another, and no two alike ; but that capital which everybody talks about in daily life, which is applied for in prospectuses, which floats enterprise, which the needy borrow, and which brings interest. It is money. Ask any man in business whether he would rather have capital or money, and he will laugh at your question. He will reply, " They are the same thing." Moreover, whether he lends or borrows he will not care in what shape it comes, gold or notes, mortgages, debentures, railway shares, mining scrip, so long as it is immediately con- vertible to the one use for which he wants it purchasing power; the command of the goods and services of other people. Purchasing power that is its distinguishing property ; but what is the thing itself, essentially ? The way to find out is not to sit down and theorise about it, but to go to the capitalist and look into his pocket, so to speak. You will find that as to actual goods he often has little more than the clothes on his back and in his wardrobe, and a little loose cash in his purse. As likely as not, he rents his house, he hires his conveyance, he buys his provisions and luxuries from day to day, or from week to week. But behind all this, he has claims claims on the daily earnings of other people. Sometimes these claims are legitimate and just, representing past service rendered; sometimes they are extortionate and preposterous, but be they one or the other, they are mere claims now ; airy, unsubstantial claims, adding The Third Factor of Production. 31 not a fraction to the sum total of enjoyment or production, but whose grasp is far-reaching and whose power tremendous, and by virtue of which he can live without labour on the labour of other people. Not only are they mere claims in themselves, but they are in great part claims resting upon claims; the shadow of a shade ; the effect of a cause long since passed away, and that often had no more substantial basis than the existing claim. The bank on which our capitalist draws interest from deposit generally never saw the colour of his money. What he deposited was cheques, bills, title-deeds transfers of the claims of other people. The fortune he inherits is generally of a similar nature. Has he a lien on a factory, a railway, a mine, or a commercial firm ? All this means that other people produce goods, convey passengers, extract minerals, buy and sell ; the hands that labour, the brains that devise, the eyes that superintend are not his, but he claims a share of the profit. " Well," it may be said, "it comes after all to this, that he, the capitalist, is the real practical owner of the funds in the bank where he has shares, of the farm on which he has a mortgage, of the business on which he has a lien, and the banker, the farmer, the business man are really if not technically his agents, using his instruments for his profit." You may say this, of course, if you like, but I submit that it is straining words out of their ordinary meaning, and getting an incorrect view of the substantial facts. For the capital that he originally advanced, if it consisted of goods, has long ago been consumed and used up ; if it consisted of money, has long ago disappeared and been lost in the general circulation, and all that remains to him is a claim on the earnings of the people to whom he made the advance. The produce out of which his interest is to come, out of which the advance is to be ultimately 32 The Third Factor of Production. repaid, is a new creation, the fruits of the borrower's, or some other person's labour. Even if the claim always represented a real contribution in the past, it does not follow (as is too hastily assumed) that this contribution survives perennially, in any shape, to swell the sum total of accumulations. Much has been consumed in self- indulgence; much has been wasted through carelessness and bad management ; much, invested judiciously and tended carefully, has come to naught through unforeseen accident by the " fortune of war" : but the claim lives on. No doubt there are failures in business continually occurring, culminating in bankruptcy by which claims are being wiped out, but the claimants, as claimants, lose less than the strug- gling workers who are wound up. While the workers lose everything, the claimants generally save a good deal from the wreck, for in the winding up the claims come first. I do not complain that it is so. Let just debts be paid by all means. I am only pointing out how largely so-called accumulations resolve themselves into claims, and how these claims multiply and persist figuring as increase of capital which is supposed to support and carry on industry, while, in fact, it only drains it. Much, however, an enormous part, of these claims never originated in any real contribution at all ; never represented materials supplied, work done, or service rendered of any kind, but arose simply out of demands made by some privileged person for mere permission granted to a worker to work some- where, to a traveller to pass somewhere, to an individual to be somewhere; and these preposterous claims have by transfer, by amalgamation, by lapse of time become so inextricably interwoven with claims based on real service rendered, that there is no disentangling them in the mass of floating so-called capital Here, for instance, is a capitalist, the recognised possessor The Third Factor of Production. 33 of .10,000. Who, in most cases, knows, or who in the busi- ness would care to know, how this 10,000 grew up 1 ? How much of it came by inheritance from a dim past of lands, or goods, or claims, or privileges, having a money value; how much from interest, how much from rent (both representing mere claims on other people's labour), and how much from work actually done by the possessor 1 All that the world knows is that he has 10,000, and the whole commercial world unanimously recognises this 10,000 as capital, no matter what shape it assumes. The economist says, they are all wrong ; that mere claims are not capital. He might as well tell the nautical world that a three-masted square-rigged vessel is not a ship. For capital is a commercial term just as a ship is a nautical term, and the meaning of words is determined not by the fiat of closet philo- sophers or by their derivation, but by custom, the custom of the people who habitually use them ; and the philosopher him- self, so great is the power of custom, must and does use them in the customary sense despite all his protests to the contrary. It is the plague of Political Economy that almost every fresh writer begins by taking some accepted term and declaring that it does not mean what everybody else understands it to mean, but something else that he thinks it ought to mean, and so starts a fresh vocabulary till they are all at cross-purposes, and no students know certainly what any term means. Who can wonder that the ordinary clear-headed man of business does not trouble himself much about Political Economy, or care what it teaches ? Labour is the active factor that produces all wealth. No doubt the forces of nature take a very active part, in one sense, in production, but they do not of themselves produce wealth. The rain might fall and the sun shine, but unless labour pre- pared the soil and sowed the seed there would be no crop. Even if the crops grew spontaneously, unless labour gathered 34 Th* Third Factor of Production. the harvest and prepared the grain there would be no food. It is man's labour alone that turns these natural forces to man's use, and so produces wealth. See what a multitude and variety of efforts go to the pro- duction 'of a loaf of bread. Some men are felling timber, some extracting iron, some working these up into tools ; some using these tools to cultivate, to harvest, to grind, to bake ; and an innumerable host, as great as all these put together, are simply shifting materials to and fro ; from the forest and the mine to the factory, from the factory to the farm, to the mill, to the bakery, to the consumer ; and behind these more still, making roads, building ships, keeping accounts, disseminating informa- tion, preserving order. At every step there is an increment added, a profit made, and on every profit descends the dead hand and claims a por- tion ; the hand of somebody whose ancestors acquired the title to the land, or who lent money, or left the money to lend, or who acquired some right of taking something, which has be- come a " vested right " ; and so the claims roll up and roll on and overspread the land, till the labourer, whose toil produces everything, receives so little that, besides having to buy some- body's permission to work on any particular spot, he must borrow, and in so doing, create fresh claims against himself. Rent and interest differ in many important respects, but they are alike in these two : that they represent no work done by the claimant, but only permission accorded to somebody to use something; and that they can be handed down from generation to generation, while payments for active service rendered, once made is done with, and cannot be claimed again. (The original capital lent may have represented actual work done by its possessor, but the interest demanded for its use does not.) Rent and interest both grow continually, but in different ways ; one by intension, the other by extension. All the land The Third Factor of Production. 35 is owned and all bears rent, therefore the quantity of land bearing rent cannot increase, but the rate of rent rises ever. Interest grows in the opposite way. The rate of interest does not rise, but rather falls, but the amount of (reputed) capital to which interest attaches increases continually; so that the sum total of rent and the sum total of interest grow together, and together they weigh upon industry like a night- mare. Now we can see why capital seems necessary to start enter- prise. It is not capital itself, but capital's consent that is required. Capital not the indefinable abstraction on which economists alone agree, and agree only to differ but the capital of real life the capital that everybody recognises and understands and wants, and that bears interest ; the capital by aid of which one man controls enterprise, and for want of which another fails ; the capital at whose call labourers assemble, and the instruments of production are brought forth ; this capital consists of claims only, and therefore it supplies nothing, it only takes ; but it is ever ready, on sufficient inducements and for its own profit, to apply what it takes to new and specula- tive enterprise. If this capital were to disappear, claims cease, and the workers reap the full fruits of their work, they would them- selves start all the enterprises that were wanted without difficulty and without delay. We have now gone pretty fully into the essential difference between instruments and money. We have seen what con- fusion and error have resulted from the adoption by economists of the term capital to express the Third Factor of Production, and we have found that this third factor consists of Instru- ments; an instrument signifying anything, the product of labour, which does not directly afford enjoyment, but only helps us to procure the things that do ; something which is 36 The Third Factor of Production. useful not in itself but only in assisting us in producing, trans- porting, or improving the things that are enjoyable in them- selves. We are now in a position to affirm certain clear, broad prin- ciples concerning this Third Factor. 1. Nothing can be included under this head : nothing can be regarded as an instrument, as that which facilitates pro- duction, unless it is of such use directly and in itself, and not vicariously, by exchange. This sounds rank heresy, as Mill and all the economists plainly declare the contrary. Still it has only to be put plainly, I think, to be seen at once to be true. In a tribe of savages who live by the chase, their weapons (which we shall represent by a spear) constitute their third factor of production ; and their capacity for maintaining them- selves and for accumulating those comforts which the hides, bones, sinews, and so on of their game supply, will depend (ceteris paribus) on the number and excellence of their spears up to the point at which there are as many spears as are wanted. While their capacity for direct enjoyment will depend (c. p.) on the number and excellence of their articles of comfort and enjoyment (which we shall represent by a shell- necklace). No multiplication of shell-necklaces will add an iota to the tribe's capacity for production ; not even though division of labour and exchange go on, so that a necklace will exchange for a spear. True, that by such exchange the man who had an indus- trially useless necklace has now got an industrially useful spear and so can go out hunting ; but the man who had an industrially useful spear has now got only an industrially useless necklace : and though the man who bought the neck- lace may have had two spears, so that he still has one (which is all that he wants), after parting with the other, so that there are now spears enough to go all round, still this suffi- The Third Factor of Production. 37 ciency for all is due not to the one man for having made a necklace, but to the other man for having made two spears. Exchange or no exchange, the productive power of the tribe, their capacity to kill the game that supplies their food, their clothing, and their other requirements, depends entirely on their weapons, not at all on their ornaments. Exchange does not alter the nature of the thing exchanged, and a spear remains an instrument (something of use only to procure something else), and a necklace remains a final product (some- thing of use only for enjoyment), no matter who possesses it. But the economist, misled by that fatal word capital, counts as this capital (which he declares to be the third factor of production), the necklace equally with the spear, because the one exchanges for the other. He counts (rising to higher levels) all the silk dresses and velvet hangings, the jewellery and pictures of a wealthy community, as this third factor under the name of capital, not because some of these goods are in an unfinished state, and therefore still in the stage of instruments, but because finished or unfinished, they can be exchanged for money, and with money you can command all things. But final products, such as these, no matter how great their money value, no matter whether held for personal use or for sale, no matter how useful the goods they may exchange for, no more assist the productive power of the community that possesses them than did the shell-necklaces of the savage tribe help them to kill game. 2. PRODUCTION NOT LIMITED BY INSTRUMENTS. We are told constantly that production is limited by capital ; that labour is unemployed, natural resources remain undeveloped, progress ceases, in this or that region for want of capital. That population is limited by food is obvious enough. Man cannot exist without food, procured or procurable, from day to day. But that single requisite being assured, there is nothing 38 The Third Factor of Production. in the nature of things to prevent him from doing useful work. If he has not a tool of some sort, his first step will be to pro- cure one, and he can always procure it. If he cannot find useful work, it is always because somebody forbids him, and not because there is none that he can do. The savage rises at daybreak, and breakfastless goes forth to seek his breakfast. His first step is to procure a tool, a club to kill some animal, or a pointed stick to dig up roots. The meat or the roots being provided, he is free to apply his labour to the satisfaction of his other wants. The London casual worker also rises breakfastless, and goes forth to seek his breakfast. He has not to kill game or dig up roots, not only because there are no wild beasts or roots within reach, but also because there are meats and vegetables already procured all around him, but owned by other people, to whom he must render some service before he can get his share. Nor has he to find or fashion a tool for himself, because the appliances of industry also exist in profusion all around him, and his employer, if he can find one, will supply him with tools. He has to earn his breakfast instead of capturing it, and if he cannot do so it is not because the needful instruments are non-existent or out of reach, or all in use, but because the existing conditions of society are such that, while the rich have a superabundance of good things, the poor may neither partake of this superabundance, nor yet produc.e an abundance for them- selves, without their permission, a permission often very hard to obtain. In other words, because the rich have command not only over the products of labour, but over the natural oppor- tunities of labour, and have closed them against the poor. Food, fuel, bricks, hewn stone, and metals of all kinds are wanted in all directions, and people in all directions are willing to pay for them ; but because the labourer may not till the the soil, snare the rabbit, catch the fish, dig the clay, hew the The Third factor of Production. 39 stone, or open out the minerals, because the fertile lands, the moors, the rivers, the clay beds, the quarries, the mines, are all owned by one person or another who bars access to them. The hindrance to productive work is artificial and arbitrary always, not natural and just, Useful, productive work can always go on if only the people are allowed to do it. If there are no tools, their first act will be to procure them, and that in itself is useful work, and work that can always be done. Some particular work may be stopped temporarily by want of the necessary instruments, but work as work useful, pro- ductive labour never. Progress may be checked by a barren soil like the Saharas, by an inhospitable climate like Labrador, by insecurity of life and property as in Armenia, by a crushing despotism as in some Eastern Spates ; but from want of the means to work, and in- ability to procure them, never. There is not a corner of the inhabited world where the people hav3 not already in their hands the tools required to do the work they are accustomed to ; much less is there any corner where they could not get more and better instruments if they wanted to, not perhaps to do the work in the best conceivable way, but to do it so well as to be well worth doing. The advantage of superior appliances is real the necessity for them is imaginary. The Pyramids of Egypt still rank among the mightiest works of man, but the tools they were built with were of the simplest. The handspike and the skid were all the builders wanted. The handspike and the skid ! Instruments that any savage could pick up ready-made, so to speak, in the woods. 1 It is said that the way the Pyramids were built was as follows : The first layer of stones was handspiked into place 1 1 am speaking of the actual building of the Pyramids, not of the quarrying and transport of the stone; though the instruments required for these were almost as simple. 4$ The Tliird Factor of Production. and that course finished. The first stone for the next course was then handspiked up alongside. Then a number of men \vith handspikes raised one side of the stone and placed a chock under ; another gang of men then raised the other side andchocked that ; repetitions of the process raised the stone to a level with the top of the first layer, then two skids were laid across and the stone handspiked over into position. Repetitions of these processes completed layer after layer till the pyramid was finished. Whether the Pyramids were really built in tlis simple manner is of no consequence. The statement is only given as an illustration. The Pyramids could have been built in this way, and that is enough for us. So long as there is labour (people willing to work), work can go on. If, indeed, there is no food for them, the people will die, and work will cease ; not for the want of the instruments, but for want of the people. If there is food, but not enough for all, some will die, but work will go on as usual among those who don't die while the others are dying. Not only can a community always find useful, productive work to do of some sort, but I think we may say they always can and do find the instruments for doing the work that most wants doing. A tribe of Red Indians could not tunnel through the Rocky Mountains, but then they would not want to. There would be abundance of work much more suited to their require- ments that they could do quite easily. What they w r ant is food, shelter, clothing, arms, ornaments, and they are never hindered from getting these by want of in- struments for getting them. If they cannot get food enough to eat, it is because the buffalo have left the country, or the crops have failed, or the men are weakened by disease, and had not foresight or industry enough to provide beforehand a stock supply against accidents. They want a certain quantity of a I UNIVERSITY 1 The Third Factor of^ Productions 41 certain kind of goods for immediate and immediately prospect- tive use, and when they think they have got about enough of these, they trouble themselves no further. If you gave them ploughs and scarifiers and steam-engines for nothing they would not use them. Most of the wants of civilised man are artificial and acquired. The savage never dreams of wanting such things till he sees them ; often does not want them when he sees them, and those that he wants he does not want with sufficient intensity to take the trouble to acquire them. Simplicity of wants, vis inertia and insecurity of life and property, not lack of instruments, account for the non-progress of stationary races. Want of capital in any sense of the word is never the cause. A people may abandon a great work half finished, as the French abandoned the Panama Canal ; but again it was not that the instruments were wanting, but that the people no longer cared to apply them to that purpose ; the cost of the work having proved to be greater, or the profit promising to be less, than was anticipated. The instruments are there still, rotting away. So long as there are human beings, there will be wants un- satisfied that are worth satisfying ; that is, there will be work to do worth doing. Grant them access to natural facilities and the work will go on ; the instruments will, so to speak, find themselves. The supply of instruments available for production is not a fixed, much less an ascertainable quantity, but is indefinite and enormously elastic. According to the Wage Fund theory, wages are drawn from capital, and that being so, the rate of wages is determined by the amount of capital offering for employment of labour as com- pared with the number of labourers seeking employment. This was long accepted by economists ns not only being true but 42 The Third Factor of Production. self-evident. It is now, however, abandoned, I believe, by most economists. It rested, like so many other fallacies, on the un- conscious identification of capital with money. The only point in it with which we need concern ourselves here is the assump- tion contained in it that the quantity of the third factor of production available for the employment of labour and carrying on of work is at any given moment a determinate quantity ; whereas it is highly indeterminate and enormously elastic. There are always a vast quantity of instruments of produc- tion not in actual use, nor devoted by anticipation to any particular use, but available at any moment if wanted A. Complete, but unsold, in the hands of salesmen awaiting sale. B. Sold and supposed to be in use, but often not really in use all their time, or for half their time. There are always spades, ploughs, axes, engines, working horses, instruments of every conceivable use, unused at the moment because their habitual users are doing other work with other tools. The same tools that are now in nominal use by a hundred men could often be used to keep some hundreds of men going by a mere re-arrangement of labour and apportionment of tools. There is also a vast quantity of goods in process of construc- tion which could be hastened to completion, altered and adapted to other uses than those originally intended, and turned into instruments instead of luxuries, or if designed for instruments already, into instruments of a different kind more urgently wanted. There are articles innumerable, again, complete, disposed of, and put to use as final products, for mere enjoyment, which could be turned to use as instruments of work ; dwelling-rooms that could be used as stores, carriage horses that could be put into carts, food products that could be converted into starch, glue, and so on. Further, there are people who are doing no The Third Factor of Production. 43 work, people who are doing work useful in a way, but not pro- ductive, and people who are producing superfluities, who could on emergency be set to work to increase, almost at a moment's notice, the supply of instruments. Want of instruments, indeed, never retarded progress, never checked industry for a day, though want of instruments of a particular kind may have temporarily changed the course of industry. There are always instruments and to spare for more work than is being carried on, and there is always the power of multiplying them to any extent that may be required. Much of the success that is attributed to capital (either as money or as instruments) is really due to organisation, and much of the failure that is attributed to want of capital is due really to privileged obstruction. Here, for instance, is a 1,000 acre swamp with a rich, alluvial bottom. Around it live 100 small settlers, splitters, quarry- men, shepherds men recognised as of " no capital," and living by their own labour entirely, owning amongst them merely the simple tools required for their work, a few ploughs, and teams of bullocks, a dray or two, picks and spades, mattocks. It would be a grand thing to drain this swamp, but far be- yond the means (it is supposed) of these poor men. Such an undertaking would require a big capitalist. But it wants no big capitalist. It wants nothing more than is already possessed or readily procurable as required by these poor men. Land, labour, and instruments are all that is re- quired, and they are all there. The men have only to com- bine, to come to an understanding, as to how the work shall be apportioned, and the profit shared, and the work can begin to-morrow. Some can begin taking the levels and laying out the work, some opening out with the plough, some shovelling. As for food, they have to procure that anyhow ; a certain amount is already on hand, and for the rest they can apportion 44 The Third Factor of Production. their time or their numbers (as in practice they have always had to do), and some can be growing food while the rest do other work. There is no necessity for forming themselves into a Socialistic federation, or sacrificing one jot of their individualism ; all that is wanted is an understanding by which the work shall be apportioned, and the reward be in shares proportionate to the work done, or supplies provided by each, on ordinary joint stock principles, and may consist in a given area of the drained land for occupation, or a percentage on the proceeds of sale or lease. No one need take a larger share than he likes. Some may give only one month's work in the year, some six months, and there is no hurry. Suppose the work will take five years to complete, this does not imply that they must wait five years for a return. The return will begin in a few months. For once the main drain is opened out, the general water-level will subside, and so much land be rendered available at once. Meanwhile, they can push on with the work when circumstances allow, or leave it for a while, when harvest or other calls keep them away. If there are any particular tools wanted which they have not got, or unforeseen difficulties arise, such as an outcrop of rock, they can get all they want from outsiders ; for the work being once fairly commenced, advances will freely be offered payable by shares in the proceeds. It may be objected that such an enterprise is not a fair sample. It is too simple an affair altogether. It is only a matter of digging out some earth and letting some water off. Well, the same thing may be said of the Suez Canal, which was only a matter of digging out some earth and letting some water in. Countless examples could be given of enterprises equally vast and equally simple which are supposed to be impracticable for want of capital, but which require nothing but organisation The Third Factor of Production. 45 and freedom from outside interference, to be begun at once with instruments already at hand, or readily procurable as required. Why, then, do not these men begin to drain that swamp at once 1 For the old, old reason. The landlord bars the way. Somebody owns that swamp, or has a " vested right " in it, or in some of its surroundings, and either wants cash down (and a lot of it) before he will permit a stroke of work to be done, or else will grant permission only on the condition that, after a certain interval, he may appropriate the whole concern. And so it is all the world over. Privilege of some sort bars the way and demands backsheesh, before labour can exert itself. FOOD. and now we come to the crux of the whole question is Food a third factor of production ? Is it an instru- ment or a final product ? It is urged that when we say labour is limited by capital, we mean by capital, not tools and raw materials, but food, the food required to keep the labourer going. Nearly all economists seem to agree that the food of the labourer is an instrument for carrying on the general work of production, and represents part, and the chief part, of the cost of the work ; not merely relative cost (cost to the employer) but absolute cost (cost to the community). Let us make sure that we are not disputing about mere words. What is really meant by the statement that labour is limited by food, and that food is the instrument and cost of labour (all three statements being bound up together) ? That population is limited by the food supply (procured or 46 The Third Factor of Production. procurable from day to day) is obvious enough. Man cannot exist without food. But what is stated and what is apparently meant is much more than this. For observe that it is the labourer's food only which is repre- sented as the instrument and the cost of the work. The food of the landlord, who simply permits the use of the land, and lives on the rent, is not so reckoned ; nor is the food of the capitalist, who simply permits the use of the instruments of production, and lives upon the interest. The reason given for the distinction being that the food consumed as rent and interest is not consumed in doing the work, but represents a surplus derived from the work, while the food consumed as wages is consumed in the doing of the work, and has vanished before the completion of the work ; whence it is assumed as a self-evident truth that it is a deduction to be made from the product, or set against it. It is thus cost, not to the employer only, but to the community. I venture to dispute the whole theory. I shall try to make clear 1. That food is not an instrument, but a final product. It is what people work /or, not what they work with. 2. It represents (and all wages with it) not the cost, but the profit of the work, the labourers' share of the product, just as rent and interest represent the landlords' and capitalists' share, and these two are never represented as cost of work. Indeed, economists themselves describe the produce of labour as being divided between the landlord, the capitalist, and the labourer (the labourer characteristically being placed last). It is true that wages are often paid for labour which is abso- lutely, and in its nature, unproductive, but so also are rent and interest charged for land improvements and appliances, which are put to absolutely unproductive use. It is true, also, that even in productive occupations the work often fails of its ex- The Third Factor of Production. 47 pected result, yet none the less the wages have been paid ; but so also none the less will the rent and interest have to be paid. But I am only stating my case now ; I shall prove it presently. 3. Labour is not limited by food, but given land and people willing to work, work can go on till labourers fail or laud gives out ; neither of which catastrophes are at all likely to happen. The whole misconception has arisen from looking only through the employers' spectacles ; from the custom of regard- ing our industrial system as a vast machine, of which the capitalist is of necessity the engineer, by whose will, and under whose guidance, the machine moves ; while the labourer is merely an instrument in his hands, like the horse and the steam-engine ; an instrument requiring to be supplied with bread, as the horse is supplied with oats, and the engine with fuel, not for the purpose of satisfying its wants, but of produc- ing that profit to the capitalist, without the prospect of which he will employ neither horse, nor engine, nor man. Capitalists' profit is thus made the keystone of the universe, so to speak. The work of the world is carried on, not to satisfy the necessi- ties of the workers (that is only an incidental result), not to contribute to their freedom and happiness (that is quite un- necessary), but only to enable an investor to make so much per cent. We have taken the artificial and local state of affairs for the essential and universal, and have landed ourselves in a conclu- sion which is as immoral as it is absurd. To unravel the tangle we must reduce the matter to its simplest elements. We must go back to industry in its beginnings, and trace it out from thence. Three men breakfast together. Then A digs, B plays cards, C goes to sleep. The breakfast is no more the instrument or the cost of A's digging than of B's playing cards, or C's going 48 The Third Factor of Production. to sleep. There is no cost in any of the proceedings, and the only instruments required are for A a spade, for B a pack of cards, for C nothing. It is quite immaterial whether A, B, and C are independent parties, or whether C is a capitalist and employs A to dig and B to gamble for him while he sleeps. The relations of the parties to each other would be different, the essential facts would remain unaltered. Again, suppose two men, of whom A has two days' food supply, B has none. Then A can do one or other of four things : He can consume the whole supply in two days, doing nothing, and leaving B idle and hungry. Then the whole supply will have been consumed, and no work done. Or he may give half to B on condition of B's doing a day's work for him, he con- suming the other half and doing nothing. Then the supply will have been consumed, and one day's work done. Or he may share the supply and both work. Then the supply will have gone, and two days' work be dona Lastly, he may con- sume the supply himself in two days, working all the time, but leaving B idle and hungry. Then, as in the case before, the supply will have gone, and two days' work be done. But there will be this difference, that in the last case there has been a man idle for two days, and so two days' work will be lost to the community. It is in this only, in the loss of work, that loss comes in anywhere. For, in any case, the two days' food will have been consumed, and consumed equally whether work was done or not. Xo less is consumed if no work is done, no more is consumed if two days' work are done. The food, therefore, is no part of the cost of the work. Employment of labour, by capital and advance of food, pre- supposes the existence of the food. What the community wants, then, is not that this food shall be " saved," but put to its proper use of feeding somebody ; only that those who con- The Third Factor of Production. 49 sume it shall produce something or do some useful work while they are consuming it, and that they shall do so as soon as possible. The food is produced only to be consumed, aud will disap- pear equally whether it is consumed to-day or to-morrow, whether it is consumed by A or by B, or be left to rot. So far from its being a loss to the community, it is an actual gain that it has been consumed by a labourer doing useful work, rather than by a capitalist doing nothing, or consumed in one day by two men working productively, rather than in two days by one man, for in the former case there will be just double the useful work done by the end of the day. The game which the savage kills, and the roots he digs up are, obviously, the reward and not the instrument or the cost of his labour. So with the city labourer : the breakfast which he earns is also the reward and not the cost or the instrument of his getting it, none the less that it is already produced by other people, for he has to work in order to get it. Nor would it aftect the argument if he got the food first on condition of doing the work afterwards. Wages are the reward of labour, whether paid in advance, or deferred till completion of the work. Our savage, having secured his breakfast, can work or not, as he pleases. If he does not, he is likely to have no dinner but in no case is his breakfast an instrument for getting his dinner. It is true that if he has not had a breakfast (or some previous meal), he may not have strength to seek his dinner. It is therefore in so far a condition precedent to his getting his dinner, just as his having ha< a father and mother was a con- dition precedent to his getting (or wanting) a breakfast. It is a link in the chain of causation that has brought about his present condition of existence and vigour. But his breakfast will no more be an instrument for getting his dinner, than were his parents an instrument for getting his breakfast. D SO The Third Factor of Production, But suppose that in seeking his breakfast he kills a deer that will last him for three days. Then the whole three days' supply is the reward of his morning's labour, and for three days he can be idle if he likes ; but as it will involve no more consumption to work than to be idle, all that he produces by his labour, if he chooses to work, will be the reward of that labour without any deduction. And work to a certain extent he must. For the deer he killed is not, properly speaking, a final product. He cannot, like a boa constrictor, swallow the carcase as it lies. It is only a mass of raw material for further labour ; an instrument by which (or out of which) he can ob- tain flesh for food, a skin for clothing, and bones and sinews for arrow-tips and bow-strings. The garment (if he makes it) will be the reward entirely of his labour, just as the meat was, and as the arrow-tips will be. And if instead of making them him- self he gets another savage to make them for him on condition of sharing in the deer meat, then the meat which that savage receives will be the reward of his labour ; no matter whether he receives it in advance, or has to wait till the work is finished. Here we have our whole industrial system in a nut-shell. The capitalist, it is said, maintains the labourer by advanc- ing him food (the capitalist and the employer being assumed to be the same person). 1. The capitalist makes no advance to the labourer of any sort. What advance there is is from the labourer to the capitalist, for work precedes payment. There is an exchange of services : work for wages ; and the labourer supplies the work before the employer supplies the wages : the work and wages being supposed equal in value. But they are not equal ! The work done is worth more than the wages paid, otherwise there would be no profit for the capitalist, without which pro- fit he will not employ. The Third Factor of Production. 5 1 It is objected that the inequality is. on the whole, the other way ; for though the work may be worth more hereafter, it is worth less now, being generally incomplete and often inconvert- ible. It may consist of a tree felled or a strip of land ploughed, which the capitalist can neither use for his own en- joyment nor dispose of at a profit. Still he is so much the richer. So much of a desired work has been done, and so much the less remains to do. Say that -^ of the desired work is done, then the capitalist is as much advantaged as a traveller who has completed -^ of his journey ; as a mortgagee who has paid off ^ of his liabilities ; he is 10 per cent, better off. However, let the services exchanged be assumed to be equal. The point that concerns us is : first, that what advance there is is from the labourer to the capitalist, not from the capitalist to the labourer, as work usually precedes payment ; and secondly, that the work done by the labourer represents (in productive employments) as real an addition to the existing sum of wealth as did the production of the food which he consumes. A tree felled, but unsaleable, represents as distinct an addition to the stock of wealth as do the boards sawn out of it, which are readily saleable. The saleability has nothing to do with the matter. Both are incomplete products. Both are necessary preliminaries to (say) the building of a house, and society is the richer by so much useful work done. 2. What the capitalist supplies is not food but money. He has not, except in rare cases, the food to supply. The man who really supplies the food is another labourer, another man who lives by work, a baker or butcher ; and the capitalist is merely a go-between, and by no means a necessary one. If ho were to disappear to-morrow, the other two men would come together and exchange together. Labour would feed labour. The baker, having lost his capitalist customer, would still have 52 The Third Factor of Production. his bread to sell, and would want a thousand things, which only labour could supply, consequently he would apply to the labourer ; while the labourer would be only too glad to do what he could in exchange for the bread. No doubt if the capitalist were to disappear suddenly, the whole industrial structure would be violently dislocated, and much suffering would ensue before the two survivors came together satis- factorily. But this suffering would be due not to the absence of a capitalist go-between, but to the sudden dislocation of existing arrangements, no matter how caused. Sooner or later the two men would come together satisfactorily. 3. The food supply of the community (not merely of the labourer, but of us all) is not, except to a comparatively small extent, drawn from a pre-existing pile as seems always to be assumed. It is the result mainly of a continuous process of production. While A is working for B, C is producing the food that is to feed him. Admitting that a large part of the food supply consists of grain which was grown last harvest, a still larger part is being produced from day to day. The meat is being fattened off and killed, the cow is being milked, the butter is being churned, the eggs are being laid, the vegetables are being grown and gathered, from day to day. Moreover, the sugar and tea and foreign produce of all sorts, though they were grown and worked up some time ago, are being imported from day to day, and their importation is as much a part of the process of food supply, that is, of the feeding of the people, as was their growth and manufacture. Moreover, even as to the wheat, people do not eat wheat but bread, and bread is being baked from day to day. The harvesting of the grain was only a stage of the pro- cess, like the ploughing and sowing, like the grinding and baking, like the countless acts of cultivation and preparation, transport and exchange required before the baked loaf could be placed in the hands of the person who is to eat it. The Third Factor of Production. 53 The feeding of the people is a continuous, never-ceasing process. To say that our present existence (not the labourer's only, but all society's) is due to the results of past as well as present labour, is a very different thing from saying that the labourer is fed by the capitalist. Labour is fed by labour; by that continuous process of present labour, which, if intermitted, would render all the results of past labour useless, and bring the whole community face to face with immediate starvation. SUMMARY. 1. The Third Factor of Production consists solely of the in- struments of production (tools and raw materials), them- selves the product of labour, and does not include food. 2. To constitute an instrument, and be effective as a factor of production, the article in question must be productively effective, directly and in itself and not vicariously, by exchange. 3. The productive power of a community depends, ceteris paribus, on the number and efficiency of those instruments that it possesses. 4. The greater part of the so-called " accumulations of capital ' are not factors of production at all ; consisting, in part, of mere claims on the industry of others no matter how originating and in part of final products, which, however useful for enjoyments, are of no use for further production. 5. Labour is not limited by instruments, but only assisted by them ; land and labour being all that are necessary to enable work to continue, 54 The Third Factor of Production. 6. The supply of instruments is not a definite quantity, but indefinite and enormously elastic. 7. The efficiency of instruments depends on their nature and construction, and not on the mind of the possessor. 8. The only possible way of " saving," so as to facilitate or economise labour, is by increasing the number and improv- ing the quality of useful products. 9. Instruments give their possessor power over Nature, but not over other men. The so-called " tyranny of capital " being due solely to land monopoly. 10. The law of indifference does not apply to the third factor of production (instruments), but only to money. A COLONIST'S PLEA FOR LAND NATIONALISATION. THE UNEARNED INCREMENT : ITS NATURE. LET us begin by taking the increment in its simplest and clearest form. Suppose I buy Government land at 1 per acre, and quietly holding on while roads are being pushed forward, settlement extending, and land values rising, refuse offer after offer till the price reaches .2, when I sell out. Of these <2, one I have acquired by direct purchase ; 1 worth of money for 1 worth of land ; but the other I have done nothing to acquire. It is not interest on the purchase-money, for interest is pay- ment for the use of capital, and comes out of the use. Who would expect interest on money tied up in an old rag ? There has been no use here. It is not compensation for risk, for the land could not disappear or deteriorate, and was sure to be wanted. It may be quite right, for all that, that I should have it. That is not the point at present. The point at present is simply to explain the term, and to show not only what it directly means, but what it indirectly implies, for it implies a great deal much more than most people have any idea of. I have neither done anything to create this increase of value, nor rendered any service in return for it. If a sovereign were suddenly to drop into my pocket from the sky, it would not be more completely unearned. 55 56 A Colonist's Plea for Land Nationalisation. But it has not only been unearned. If that were all, it would be no great matter. If, like the sovereign, it had dropped from the sky, then, though I might be undeservedly the richer, nobody else would be the poorer. My gain would be a clear addition to the sum total of human wealth, out of which others besides myself would, in one way or another, derive benefit ; and, whether or no, whatever benefits one without injuring another is fair subject for congratulation. But it has not only been unearned ; it has been drawn from the earnings of others. My gain is others' loss. If I sell goods or perform work for another, then no matter how high I may charge for the goods or the work, I am rendering goods for goods, service for service, earnings for earnings. What I offer is my labour, or the fruits of it, and as the public are free to get the same goods or services else- where if my terms don't suit, or to go without them, the fact of their accepting my terms shows that the thing I offer is, under the circumstances, worth the money. But in the case of this unearned increment on land, there is no pretence of any exchange. I offer for it neither labour nor the produce of labour. All I do is to place my hand on a cer- tain portion of the earth's surface and say, " No one shall use this without paying me for the mere permission to use it." I am rendering no more service in return for this extra pound, either to the purchaser or to society, than if I had acquired exclusive title to the air, and charged people for permission to breathe. And if, instead of selling my land for an additional pound, I let it at a proportionately additional rent, the principle would be the same. The increase of value in my land has arisen from the execu- tion of public works and increase of population, causing an in- creased demand for the land ; in other words, it has arisen from the national progress ; and I, so far from aiding in this progress, have actually hindered it, by keeping my property A Colonist's Plea for Land Nationalisation. 57 locked up, and so forcing on intending producers to inferior or less accessible lands ; and by holding so much land back have helped to make land so much scarcer, and, therefore, so much dearer, and so have helped to increase the tribute which in- dustry has to pay to monopoly for the mere privilege of exert- ing itself. I have employed my land not as an instrument of production, but as a means of extortion. I have bought it, not to use, but to prevent other people from using it without my purchased leave ; not to earn anything by it, but to obtain the power of demanding the earnings of others. Suppose certain parties, knowing that a road would shortly be made into a particular region, bought from Government the privilege of placing bars across the road (when made) and for- bidding anybody to pass until he had paid toll ; toll, not (as under the old State tolls) to pay for the maintenance of the road, but toll for the mere permission to pass along the road. Everyone would recognise that this toll was pure blackmail and not earnings, and the obstructors mere parasites licensed to prey upon the public. But where is the difference between blocking the road and blocking the land that the road leads to 1 Where is the difference between levying blackmail on the transport of goods, and levying it on their production ? But it will be said, " It was with real earnings that I bought the right to demand this payment." True. But the point is that whether I bought it or stole it. the thing I have bought or stolen is the privilege of levying blackmail upon industry ; of demanding something and giving nothing in return ; of laying my hand on the earth's surface and saying to all and sundry, " Give me of the produce of your labour or be off with you ; so much a year if I choose to let it ; so much in a lump sum if I prefer to sell it." Whichever of the two forms the demand assumes, it is called by political economists "rent," and by that name I shall henceforth call 58 A Colonist's Plea for Land Nationalisation. it, because that is the accepted name, and because there is no other compact and handy term by which to express it ; but it is not to be confounded with rent in the legal and commercial sense, which includes interest on the cost of improvements. The rent I shall mean is economic rent only ; the price charged for the mere use of the laud as such, either without any improvements or apart from them : I shall mean " ground rent " in short. The economist tells us that all rent is differential only. Owing to the competition amongst landlords for tenants, there can be no such thing as a monopoly or forced rents. All the facts are dead against this theory. I give three typical examples : (a) In West Ireland, where landlords own large areas apiece, all equally good, or rather equally bad, but only a small part of each occupied (not appreciably better than the rest), the rents are higher in proportion to productiveness of the land than in England where the land is put to comparatively full use. But is there any competition amongst the Irish landlords, each with his vast unoccupied area, for the over-rented tenants of his neighbour \ On the contrary there is a practical informal Trades Union amongst them to keep up rents. So far from offering easier terms to tempt other tenants on to their own unoccupied lands, which are bringing them in nothing, they do not even abate one farthing of their own extortionate rents, except from occasional generosity or the obvious impossibility of the tenant paying the higher rate. (b) The English landlord, as a rule, will not let a small plot of land to the labourer, except for two, three, four, or five times as much as the capitalist farmer is paying for land of the same quality. Even then he refuses to grant the same limited security of tenure that he grants to the farmer, but reserves the right to eject the labourer at short notice (generally a month), and confiscate his growing crops and improvement. A Colonist's Plea for Land Nationalisation. 59 And this, notwithstanding that the labourer offers better security for the rent than does the farmer ; for the labourer wants the land for no other purpose but to improve it to dig, manure, and cultivate it as a garden ; to build a house and outbuildings upon it. While the capitalist farmer makes no improvements, but expects the landlord to make them for him. (c) There are in and around every growing city lots with- held from the builders (checking the natural desired expansion of the city) because the price asked from the builder is pro- hibitive the owner knowing that if he cannot get his price this year, he will next, or the year after before long, at any- rate, for the city must expand ; and meanwhile the land eats nothing, costs him nothing (though at the same time it generally produces little or nothing). But, it is urged, the necessities of owners must often force them to let their land go at a reduced rate. Even this apparent small mitigation does not help the public. For if A is obliged to sell, B of the same kidney is always ready to buy and to keep up the speculative, extortionate demand. So I could go on multiplying examples and, consequently, proofs that the alleged competition of landlords for tenants prevents monopolistic rent is a transparent delusion. The evils of monopoly are not dependent on a given com- modity being owned by one person, or a few only. So long as the demanders are more numerous than the suppliers, especially when the article is a necessary of life, and cannot be multi- plied in response to demand, like clothes or houses, the game is in the hands of suppliers, and they can ask what they please within wide limits. Land is the first necessary of life, being the source from which all necessaries proceed ; and people, therefore, must have access to it at any price which may be demanded, so long as it is one that they can possibly pay. 60 A Colonist's Plea for Land Nationalisation. It does not avail to say that A, B, or C, this individual or that, need not take land ; that HE can do something else. SOMEBODY must take it, or production cease, and the landlord knows this. There is no land so bad but the occupier can be made to pay a very appreciable, not merely nominal, rent for it if he is practically obliged to take it, as he often is. There is land in Donegal so bad that all recognise that the tenant could not possibly live by it (under existing conditions) even if he had no rent to pay. Yet that land fetches rent; because the peasant being a terrestrial, and not an serial or marine animal, must have some land to reside on ; and he has to go to Scot- land in the harvest time to earn a few pounds to make up his deficient subsistence and earn his rent. However bad the occupancy may be, and incapable of yield- ing full subsistence, it will not take all the occupier's time to till it. There will be days and weeks when there is no work for him to do upon it in wet weather between seedtime and harvest, and again between harvest and seedtime, not to mention hours in the evening; and this TIME the landlord can exact as rent to dig for him or wait upon him, or (as in the case given) to go elsewhere and earn money for him. Rent then consists of two distinct elements monopoly rent or the rent which can be demanded for any land however bad ; and differential rent, which represents the differing productive- ness or desirability of different pieces of land. Thus if the monopoly rent of 5-bushel land, which just keeps the occupier alive, be 10s., land which yields 10 bushels will pay 10s. plus the value of the five extra bushels, and so on. Differential rent rests upon inherent, natural differences, not upon arbitrary enactments or personal privileges, and it will always correspond to those differences. But monopoly rent is an artificial product a tribute-levying power arising from un- just laws and privileges that can be abolished. A Colonist's Plea for Land Nationalisation. 61 The fact that it was with real earnings that I bought the land for which I charge rent does not make rent earnings. I may invest earnings in buying a share in a pirate vessel (as a great writer puts it), but the proceeds of piracy are not therefore earnings. It is the nature of the business whereby I make money, and not the manner in which I got into it, that makes the difference between earnings and appropriation. Earnings mean taking payment for goods or service rendered ; appropriation means taking something and giving nothing in return ; no matter whether the taking be legal or illegal, or how I acquired the privilege of taking. Anyone can recognise that it is one thing to charge for the fish I caught in the sea, and quite another thing to charge for permission to fish in the sea ; one thing to charge for produce I have raised from the land, and quite another thing to charge for permission to raise produce from land. " Still I have the right to make this charge." I am not disputing that. If Government, with the full consent of the governed, issued licenses authorising to rob on the highway, the robbers, I suppose, would be justified in acting on their privilege ; but their gains, all the same, would be appropriation and not earn- ings, no matter how high they paid for their license or how honestly they came by the money to pay for it. And if the public, disgusted with the system, demanded its immediate abolition, the robbers would have a claim to compensation ; but their compensation would have to be assessed, not by the amount of plunder they had expected to make, but by the fee they had paid for their license and the actual loss to which, in one way or another, they had been put by the sudden abolition of a privilege they had honestly paid for. But it will be said, " Rent is the result of a free contract." Is it ? The Italian peasant who agrees to pay to the brigand 62 A Colonist's Plea for Land Nationalisation. on the mountain so much a year in consideration of not being robbed makes a contract, but is it a free contract 1 If he refuses to pay it, the brigand will take his earnings ; if the applicant for land refuses to pay rent, the landlord will refuse to let him make any earnings. Where is the great difference between the two cases ? There is a contract in each case, and the one is about as free as the other. In neither case is anything given in return for the payment received, except permission to work unmolested in a par- ticular place. " But," it will be said, " in practice the rent of an estate represents real earnings in the shape of improvements made, as well as mere permission to use the laud, and how can you separate the two values ? " Not only is it quite possible to separate them, but the thing is often done. In London, for instance, the ground rent and the rent for the house often belong to quite different persons. In Ulster, again, the retiring tenant receives the value of his improvements, while the landlord keeps the value of the land. And in America, I am told, the land and the improvements are assessed separately and taxed separately. But all this has really nothing to do with the subject in hand. My concern at present is simply to explain the nature of the unearned increment. Whether the value of land and the value of the improvements can be separated or not, they are quite distinct elements, just as in a glass of grog, the brandy is brandy and the water water, each with its own distinctive properties and effects, not- withstanding their indistinguishable commixture ; and he, therefore, who lets land levies blackmail upon industry by charging for something which represents no service at all, none the less that at the same time he charges for something else that does represent service. No doubt there are many other things besides land in which A Colonist's Plea for Land Nationalisation. 63 a monopoly of the article will enable the possessor to levy something resembling blackmail ; but there are points of dif- ference that distinguish them all from the pure and simple appropriation of land monopoly. The first is that none of them excludes other people from making a living or from making earnings to any extent by other means than the article monopolised. If by a day's labour or by pure accident I find a diamond, I may ask a price entirely disproportionate to the value of my labour ; but then the public need not buy my diamond unless they like. My finding a diamond does not prevent other people from looking for diamonds with as much chance of find- ing them as I had, and if they don't think they are likely to find any by looking for them they can go without, and be none the worse. But every piece of land appropriated shuts out so many other people from that land, and as all the land (practically speaking) is appropriated, or in one way or another out of reach of the masses, they are at the mercy of the landholders, and have no choice but either to rent it from them as tenants, or work for them as labourers on the hardest terms to which com- petition can drive them ; which means that the landowner has the power of appropriating the greater part of their earnings in return for the mere permission to them to earn anything. Or suppose that, instead of finding a diamond, I buy tin, and that next week the price goes up to double here there is an additional distinction between my gains and the land specu- lator's ; for not only are the public under no compulsion to buy tin (while they are to rent land), and not only does tin repre- sent the results of labour, and so represent earnings (which land does not), but the magnitude of my gain in most cases re- presents compensation for great risk. The earnings of farmers and of miners may average the 64 A Colonist's Plea for Land Nationalisation. same, but the farmers' average is made up of pretty equal profits all round, while the miners' average is made up of a few big prizes and many blanks. And what applies to the miner applies also to the speculator in mining products. His occasional large profits represent compensation for great risks, and is thus as much of the nature of insurance as of profit. No one would think of either mining or speculating in mining products unless the many blanks were compensated by occasional large prizes. They are the necessary inducements to engage in those callings, and therefore fair earnings when they come. Land, however, is not a speculation in this sense (though even if it were, its profits would still be appropriation and not earnings for reasons already given) ; it is a sure invest- ment in the sense that it is subject to no extraordinary risks : to no more risks, that is, than such as are inseparable from all human enterprise, even the safest. The value of land, as of everything else, will oscillate within certain limits, and even in some exceptional cases, as in the sudden diversion of traffic, fall for an indefinitely prolonged period ; but these occasional or exceptional perturbations are but as the advance and recession of the waves in a flowing tide. The tide still comes in. In every country which has any enterprise and progress, land values must rise. The movement may be fast or slow, continuous or interrupted, but it is up not down. There is not a single factor in a nation's progress that does not add to the value of land. Every road improved and rail- way laid down ; every machine invented and process perfected ; every opening of new markets ; every improvement in fiscal policy, in order and good Government, in the knowledge and skill, in the morals, manners, and even numbers of the people ; every conceivable element, in short, that adds to the produc- tiveness of industry adds to the value of land, and increases the A Colonist's Plea for Land Nationalisation. 65 tribute which monopoly can wring from industry, which the man, who merely owns the land, can exact from him who uses it for the mere permission to use it. This is why the gradual rise of land value or rent (ground rent only, remember), is called the unearned increment. So far for its nature. Our next consideration will be its magnitude. THE UNEARNED INCREMENT: ITS MAGNITUDE. Under the system prevailing all over the civilised world, every country is cut up into square pieces and appropriated by a (comparatively) few owners. What these owners do with the land is a matter the State concerns itself very little about. Whether they occupy and use it themselves, or let it to a tenant and live in idleness on the fruits of his labour ; whether they cultivate it like a garden, making it yield abundant wealth and maintain hundreds of families, or leave it in a state of nature to carry sheep, exclud- ing the whole rising tide of population from the opportunity of developing its boundless resources because the sheep pay them rather better; whether they open out the mineral treasures hidden in its depths, or lock them up by demanding such ex- orbitant royalties that enterprise either will not attempt the work, or attempts and fails ; whether they construct factories and build cities upon it, or turn out the whole population and burn down their dwellings (as in the Scottish Highlands), be- cause a foreign millionaire offers them a higher price for the privilege of turning it into a wilderness to shoot deer in than the children of the soil can give for the mere privilege of earn- ing a living; all these things the State regards as matters of E 66 A Colonist's Plea for Land Nationalisation. quite secondary consideration with which it is not called upon to interpose, because that would be interfering with the " sacred rights " of property. The one thing it does concern itself energetically about is to establish these " sacred rights " as fast as possible and in all directions, and ensure that every acre shall have its black- mailer privileged to exclude everybody else from the land he has acquired possession of, and to forbid access to all industry, except on payment of the heaviest toll which the keenest competition can compel. The whole country (that is, the whole country worth occupy- ing at any given moment) being thus apportioned amongst these privileged few, they are masters of the situation. The first thing a man requires is room to stand in ; and there is no unappropriated room available for the purpose. If he stands on private land he is liable to an action for trespass. If he goes out into the street, the policeman may order him to move on. When night comes on, matters are worse. If he sleeps on somebody's premises, he can be apprehended for being on the premises for an unlawful purpose. If he sleeps in the bush, he may be locked up as a vagrant without any visible means of support. The State insists that he shall pay blackmail to somebody ; not payment for service of any sort rendered, but payment for the mere permission to be somewhere. Land is the basis of all industry. All industry consists either 1. In extracting the raw materials of wealth from the land ; or 2. In working up, shifting about, or distributing these materials, or in aiding, in one way or another, some of these processes. We shall call the one class primary, and the other secondary industries. Farming and mining are the chief examples of the primaries. A Colonist's Plea for Land Nationalisation. 67 As to the secondaries, they are legion ; and not only are all the materials these last have to operate upon drawn from the land, but so are the tools they work with, as well as the food the workmen consume. It is clear that the extent of the secondary industries will be strictly limited by the primaries ; that is, there can be no more persons engaged in working up, shifting about, and dis- tributing materials than there are materials (extracted from the land) for them to work up, shift about, and distribute and not only is the extent of the secondaries determined by the extent of the primaries, but so also are the profits in the secondaries determined by the profits in the primaries. Materials must be extracted (or produced) from the land before they can be put to any further use, and men will not leave this necessary preliminary work to take to the secondary work unless they can make as much by the new industry as they could by the old ; and they cannot hope to make more, because, if they did, the openings in the secondary industries being strictly limited, competitors would at once flock in and bring their profits down. If profits in the primary industries are high that is, if the land yields abundantly, and no one steps in to appropriate the fruits profits in the secondaries will be high, too, for other- wise people would leave the secondaries and betake themselves to the land. If, on the other hand, profits in the primaries are low that is, if either nature is niggardly, or someone (the landlord, for instance) appropriates the fruits profits in the secondaries will be low, too ; for otherwise people would leave the land and crowd into the secondaries till they brought profits down. Now, if all the land is held by a comparatively few people (as is the case), then, since the land is the basis of all industry, there will be keen competition for it a competition becoming keener year by year, as the competitors multiply, and wealth 68 A Colonists Plea for Land Nationalisation. increases, the result of which competition will be that the man of average means and capacity will have to give the very highest price for the land that he will consent to give, rather than go without it, and this highest price will be determined, not by the amount that it takes out of his pocket, but by the amount it leaves behind. Here, for instance, are three farms of differing fertility, esti- mated to yield to the customary system of farming 200, .300, and 400 net profit respectively. Then, if the first of these fetches, after a pretty close competition, 100 a year, this shows that no bidder will give more than will leave him 100 to himself, but that the competition of the others will not allow him to retain more ; in other words, that 100 is the lowest he will consent to keep, and the highest he will be allowed to keep, so that 100 a year is the average profit of farming amongst farmers of that class and means. But since he cannot hope to keep more than 100, it does not matter to him what the surplus may be which he is compelled to give up to his landlord ; consequently the other two farms will fetch respectively 200 and 300. Of course, it is the rate of profit, and not the actual profit of which we are speaking. The 100 is only quoted as an example. Amongst one class of farmers the reserve will be higher, among another lower, according to their means, and the magnitude of their operations. This is the theory, and it corresponds exactly with the facts ; for whether a farmer settles here or there, near a market or far off, whether he pays 100 a year for an indifferent farm, 150 for a better, or 200 for a better still, he finds that except by some lucky accident his profits as a farmer remain much the same ; which shows that his rent is determined, not by what he has to pay away, but by what he is determined to keep ; and this amount, this rate of profit will, for reasons already given, determine the rate of profit, in all the secondary in- A Colonists Plea far Land Nationalisation. 69 dustries, though they have no visible connection with the land at all. To put it compactly, the profits of industry all around are determined by the rent of land. That rate of profit which the worker on the land can save from his landlord will be all that the worker at any industry can hope to get, and it will represent that minimum margin to which he will consent to be beaten down rather than go without the land. What is the minimum margin 1 The applicant for the land has a certain amount of capital (otherwise he could not be an applicant), and for this he knows he could get interest, and he also has the capacity to work. Consequently, the least he will determine to keep will be what he could earn as a labourer, plus the interest he could get on his capital. Actually (except in the case of the poorest com- petitors for the smallest and worse farms) it will be something rather more than this, for his capital, such as it is, gives him a certain advantage in the position. He and his competitors being none of them in danger of immediate want, and there- fore not pressed by necessity, will have a tendency to hold back in the bidding when it begins to run high, and to cling to something more than the closeness of the competition might seem to demand ; and the larger his capital the greater will be his advantage, not only because of his greater power and stronger inclination to hold out for better terms, but also because the men of sufficient means to require a large farit^ such as he wants, are fewer in number, and the competition in every way less keen and forced. Hence the smallest and worst farms are always the highest rented, which is only another way of saying that the profits on them are smallest. Still, be the farms large or small, competition will always force rents up, and therefore profits down to the smallest re- turn the average applicant of his class will consent to accept rather than go without the land, 70 A Colonists Plea for Land Nationalisation. Land, as we have said, is the basis of all industry,, and agriculture is the fundamental industry. Everyone recognises this ; and in view of the hard struggle and hand-to-mouth existence of the farmer, all sorts of projects are proposed to ameliorate his lot. One party advocates protection, another the lightening and equalising of taxation, another cheapness of labour by assisted immigration (making the labourer the scapegoat), another pins its faith on railways, and so on. Of these proposals some are good, some bad; but their effects, whichever way they tend, will not, except for the moment, affect the farmers' profit one way or the other. Let us suppose protection to be the true policy, and raising the price of some particular article by a duty, say meat, see what the result would be. The rise of price in meat will produce two opposite effects. It will immediately injure one class of farmers and benefit another. Those who by reason of distance from market, un- suitability of their land for grazing, or its still greater suit- ability for something else, do not fatten stock, notwithstanding the rise in price (and these will be a very large number), will suffer a distinct appreciable loss in increased household ex- penses and increased cost of feeding their men, without any advantage to set off; while those on the other hand, with land specially adapted for grazing, who already made a profit by it, will make a larger profit still ; and those on land passably suited for it, who formerly made their profit by something else, may, perhaps, change their system, and make their profit by grazing instead of by those other things. But the point is, that after the first start neither those who gain nor those who lose will be any the better or the worse off for their gain or loss, because at the first renewal of their lease they will transfer the gain or loss to their landlords. For so long as all the land of the country is in the hands of A Colonists Plea for Land Nationalisation. 7 i a comparatively few, so that there are more farmers wanting farms than there are farms for them to have, so long will com- petition force land values up to their maximum, and rent will mean to the farmer the utmost that he can see his way to giving for the land rather than go without it and let another take his place. But for the very reason that competition is thus already at its full stretch, it cannot be stretched any farther, and those farmers whose narrow margin of profit is trenched on by their increased expenses consequent on the rise in meat will insist on having that margin restored, and they will be able to carry their point ; for they were already giving fall value for their farms, and their farms (since they produce no more and yet cost more to work) are now worth less, less not only to the present occupants, but to anyone else who might want to take their place ; therefore, the landlords cannot play off one against another, and so must accept reduction. Conversely, where profits on land already profitable for grazing have been increased by the duty, those lands will have become just so much more valuable, and will fetch so much more rent. So, if you make a railway to every farmer's door, you would simply make the land more valuable. Compare those districts that have railways with those that have none. In the former you will see a greater population ; probably more cultivation, certainly higher rents, but no higher farm profits ; for where the carcase is, there will the eagles be gathered together ; where returns are high, thither will competitors flock. There may be no actual bidding against each other among the ap- plicants, but this is only because the landlord will kindly take that trouble off their hands. He will put up the rent as high as he thinks he can too high at first, perhaps if so, his vacant farm will soon cause him to correct his error; but whatever the process, the result will be the same. 72 A Colonist's Plea for Land Nationalisation. So, if by assisted immigration, you reduce the cost of labour by half, or if by mechanical inventions you enable the farmer to do with half the number of men (which would come to much the same thing to him), you would be simply reducing the cost of working the land, and so increasing the return to be got out of the land, and so increasing the value of land, and so raising rents. One after another labour-saving appliances have been in- troduced within the last 20 years ; double-furrow ploughs, reapers and binders, horse rakes, steam threshers, without improving the condition of the farmer in the least. Never have there been so many aids and appliances to industry as there are now, and never has the struggle of the farmer been more severe. So if you lightened taxation, or even abolished it altogether, it would make no difference to the farmer, beyond the moment. At present some leases stipulate that the land- lord shall pay all rates ; others that the tenant shall pay them ; others again that each shall pay half, but it is all a mere adjustment of rent. The more taxes the less rent, and vice versa. If the farmer pays more rent it is because he has to pay less taxes, and whether this is owing to the landlord paying them, or to there being none to pay, makes not the least difference to the farmer. So if nature herself instead of the mere instruments of pro- duction were improved ; if the soil were suddenly doubled in fertility ; if the sun could be got to shine and the rain to fall exactly when and where it was wanted ; if all weeds and plagues were abolished, it would come to the same thing, and for the same reasons. The Press is continually preaching that the fault of things all lies with the farmer. He should be more industrious or more provident, he should know something about chemistry, A Colonists Plea for Land Nationalisation. 73 he should buy the best appliances, and use the most advanced methods. It is very good advice in its way, perhaps, but it does not touch the question in the least. If you passed every farmer through a technical college, if by a network of meteorological stations and commercial agencies you supplied him every day with a forecast of the weather, and the state of the markets, if you supplied him gratis with all the best machinery, if you trained him in habits of industry and economy, foresight and skill, till you made him as much superior to what he now is as a steam thresher is superior to a flail, you would enormously increase his efficiency no doubt, but you would not add one farthing to his profits. The whole benefit would go as before to the landlord, and for the same reasons. You would not have eased the pressure of competition, but only have put it into the power of every competitor to offer more. Still as before, rent would mean the utmost the farmer could be forced to bid for the land rather than go without it. Granting that there are many things that swallow up much of the surplus that would otherwise come to the farmer; heavy taxes, injudicious laws, bad roads, scarce labour; all these matter nothing (as a great writer says) so long as behind them stands something which swallows all that is left. So long as that something stands waiting with open mouth, abolishing any of these only leaves so much more for it to swallow. Some people shrink from these conclusions saying, " It is a hard doctrine " (as if truths could be dodged by shrinking from them). Others say that the remedy is the fixing of a fair rent. But what is meant by a fair rent 1 If Brown objects to his present rent of 100, saying it is too high, and should be reduced to ,80, and yet Jones is standing by prepared to give 100, why should the rent be reduced? 74 A Colonist's Plea for Land Nationalisation. Why should Jones be forbidden to have what he is ready to give 100 for, in order that Brown should have it for 80 ? It is fair neither to Jones nor to the landlord, whatever it may be to Brown. What would Brown think if Jones objected to pay the 5s. for his wheat that he had agreed to pay, saying it ought to be reduced to 4s., when Smith is standing by ready to give 5s. ? In the open market a " fair price " has no meaning. Hudibras' saying still holds good that " The value of a thing is just as much as it will bring." There is a remedy for this evil, and a very simple one, but it is not the fixing of a fair rent. " But," it will be said, " all farmers are not tenants. Many own the land they occupy." True ; but all that this proves is, not that the preceding remarks are incorrect, but that there is a certain class to whom they do not apply. For the present we will let the exception go for what it is worth. What I shall undertake to show by and by is that it is worth nothing. But we shall have to present one or two other considerations at some length before we are prepared to deal fully with this. For the present we will let it stand over, only remarking that in farming tenants are the rule, occupying owners the exception, and that the exceptions grow steadily fewer year by year. Not only in Tasmania, but in all the other colonies, in the United States, and wherever, in short, land is recognised as absolute private property, the divorce between occupation and ownership is proceeding apace, and the very institution which was designed to secure to the producer the full fruits of his labour is becoming the means by which he is compelled to surrender them to another. A Colonists Plea for Land Nationalisation. 75 THE REAL SUFFERER. As the landlord by virtue of his monopoly of the land holds the applicant for it at his mercy, so the applicant once in possession holds the labourer at his mercy. The competition was first for possession of the land, it is now for employment on the land. The competition is in the one case open and direct, in the other disguised and indirect. Labourers do not usually underbid each other for employ- ment as tenants overbid each other for possession, but it comes to much the same thing as if they did. The more numerous the labourers in proportion to the work to be done, the lower the wages, and vice versd. If the landlords were to divide their land into as many pieces of equal value as there were applicants for it, and were to offer these pieces separately, there would be no competition to run rents up, and the landlord would have to take what he could get for it a merely nominal rent. To make money by his monopoly he must keep up its character as a monopoly ; that is, he must offer his land in a single block, so to speak, and so compel competition. And just as the landlord forces rents up by offering his whole land for one tenant's occupation, and so setting all to compete for the privilege of being that one, so the occupier in his turn forces wages down by employing as few labourers as he can, and so setting all to compete for the privilege of being among those few. The secret of his power over the labourer is the same as that of his landlord over him. It is not in his capital as is generally supposed, but in his getting possession of more land than he can use by his own personal labour, and preventing other people from using it by their personal labour, except for his profit. 76 A Colonist's Plea for Land Nationalisation. The landlord makes the occupier give him his money ; the occupier makes the labourer give him his work. In so far as the occupier can keep his wage expenditure below the general level by doing the same work with fewer men, or paying them less wages, he can retain the saving to himself ; but in so far as he only succeeds in keeping down the general cost of labour, he is only keeping down the recognised cost of working the land, and so increasing the value of land, and so raising rent ; and the result of his efforts (as a rule) is only to keep down the general level, for all are playing the same game, and any saving effected by one is soon copied by all, and absorbed in a general reduced cost of production, increasing the value of land and raising rent. The productiveness of any industry that is, the amount it adds to the general wealth, or to the material comforts and enjoyments of the people is measured by the difference in value between the thing produced, and the materials used up in producing it. Thus, if a carpenter in a day makes a door worth Capital Future generations will wonder how we, with all our scientific attainments and diffused education and political rights, could have tolerated, much more believed in, a system which allowed and encouraged the rich to buy land AS AN INVESTMENT that is, not to use, but with the sole and avowed purpose of pre- venting anyone else from using it, except on payment of the highest rent that could be got out of him ; that is, for the utmost he could be got to give rather than go without the land and HAVE NO means of living, and that it was further per- fectly allowable for the purchaser to hold back as much of this land as he chose, for as long as he chose, either to force up its price or for mere purpose of sport or any idle whim ; that he might forbid the soil to be cultivated, the minerals to be worked, the city to expand, though land values were rising all around through the artificial scarcity of land so produced, and thousands were without work, tens of thousands without homes, and hundreds of thousands forcing down each other's wages, or cutting down each other's trade profits, in their desperate com- petition for employment or custom. Make property in the PRODUCTS of Labour as secure as you can, but abolish, gradually if you like, but resolutely, all ownership in the opportunities of Labour in that which is the ultimate source of all industry, the land. Secure the user of the land in his possession, in his improvements, in the fruit of his Labour, but abolish the right of the irresponsible despot to say to one man, you may be homeless, but you shall not build here ; to another, you may be foodless, but you shall grow no food here ; to a third, you may be without employment, but you shall do no work here, simply because I am the lord of the earth of this part of it, at any rate and I choose to forbid you. The man who owns the opportunities of Labour owns its fruits, and practically owns the men who must live by produc- ing them. He, indeed, may be over head and ears in debt to Labour v. Capital* 193 other people, and so be none the better off, but that does not free the labourer. If slavery may be defined as the power of one class to hold another in subjection, and appropriate the fruits of its Labour, then slavery is as rampant now over the whole civilised world as it was in the days when men and women could be bought and sold like cattle. It may be changed in form, it may be mitigated in degree, but it is the same in kind. There is, as before, one above who does nothing but lives on the Labour of those below, only he is no longer called a slave-owner, but a Landlord or Capitalist. Under him are others who, for better pay than the lowest workers, direct the work and extort the wealth which the big man above receives, only they are no longer called slave-drivers, but Capitalist tenants, superin- tendents, or middlemen of one kind or another. Below are the working millions, who toil for bare subsistence, and many of whom can hardly get that, though they it is who do all the hard work, and produce all the wealth. The new form of slavery is better than the old in some respects, worse in others. Better in that the labourer can no longer be bought and sold like a beast, kicked and flogged, nor have his family taken from him ; but worse in that the patri- archial tie that formed the one redeeming feature of the old system is gone, and there remains but a cold-blooded com- mercial transaction, with the mockery of a free contract. The law, or custom, and public opinion, required the old slave-owner at least, in recent times to see that his slaves had enough food and shelter and clothing, and was expected to keep them in sickness and old age ; but the modern Landlord, or Capitalist, has no responsibility of this kind, and may send his men adrift directly they cease to be of use to him, not exactly (nowadays) to die, but to be maintained grudgingly and igno- miniously at the expense of the people. We may put it that the old slavery was individualistic, the N 194 Labour v. Capital. new collective ; that is, that under the old system each slave had a recognised master whom he was bound to serve, and who in turn was bound to maintain him, so that between the two there was a mutual responsibility ; while under the new system the worker is an ownerless slave, who is bound to find a master for himself. The Capitalist class collectively thus owns the working class collectively without any individual responsibility for any one of them. And all this is solely because Labour is denied access to natural opportunities to that source of all industry, the land. The worker may not make himself a home in the neighbourhood of his work, though land fit for sites and practically unused abounds j he may not grow his own food, may not find employ- ment in producing and working up, singly or in co-operation, the grain and the roots, the milk and the meat, the flax and the wool, the timber and the bark, the lime and the stone, the gold and the tin, the coal and the iron, the raw materials in all their countless shapes, all of which come from the land, and all of which together go to form the countless utilities and com- forts, for the want of which they suffer poverty, but are thrown upon an " overstocked labour market " to scramble for a master, only too glad if they can get one on any terms ; and so wages are determined, not as they ought to be by the moral law, not as they would be by the natural law (by the amount the labourer could get for himself by direct access to natural opportunities), but by that cut-throat competition for employment which tends to reduce wages to bare subsistence, and is fast driving the working classes into Socialism and open revolt. We constantly see the three prime requisites of production left idle ; men unemployed, tools unused, land either not put to use at all, or put to far less efficient use than is required of it. But we never see raw products lying idle. We never see cotton or wool, wheat sheaves or sugar cane, bricks or boards, bar iron or sheet copper, silver or tin, kicking about neglected. Labour v. Capital. 195 There is always a scramble for the privilege of working these up. But why should there be a scramble ? Why should there not be enough of these raw products to keep all hands con- stantly going working them up into the countless utilities that are so badly wanted t \ It is not that the land will not produce them, and to any extent that may be required. It is that there is a privileged obstructionist somewhere at the back who prohibits their production, either by a blank refusal, or by asking such excessive tribute as to be tantamount to a refusal. Strikes are obstructive and wasteful ; they entail suffering and engender hate ; still, they are better than war, and even war, cruel and destructive as it is, is sometimes necessary. Disorder is sometimes the only way to settled order, war the only way to lasting peace ; and what is wanted just now is not Peace but Justice. Till Justice is obtained it is not desirable to have Peace. Whenever there is a great wrong there should be agitation against that wrong, resistance in whatever form may be necessary. I grant freely that the wrong is done unwittingly ; that the people who do it have no idea that it is wrong, and even that many of them deplore the evils they see around them, and are earnestly seeking a remedy, quite unconscious that they them- selves are the sole cause. But that is almost always the case with a great wrong. The despot, under whose tyranny the people groan, is fully persuaded that he is the instrument chosen by Providence to rule, that he knows better than his people what is good for them, and that it is the first principle of law and order that his will be enforced at all costs. The religious persecutor also fully believes that a right faith is necessary to salvation, that his faith is the right faith, and that it is therefore absolutely necessary to suppress heresy at all costs. The Southern Americans, again, were as honest and kind and well-meaning a people as any, and even noted for 1 96 Labour v. Capital. their chivalry; but nothing would convince them that there was anything wrong in slavery. Not only the actual owners of slaves, but the whole of the superior, the slave-owning race, defended slavery as instituted by Providence, as necessary to civilisation, and as being the very best thing on the whole for the slaves themselves. You will never get the holders of any improper powers or privileges to recognise any harm in their having these powers or privileges, but only in the gross abuse of them, and very often not then. At any impeachment of Capitalism, the Capitalist class not only the rich man himself, but all his brothers and cousins and clients and dependents, even if they are not rich remark contemptuously, " Capital ! Capital is food and tools," and the speaker turns away fully convinced that that settles the matter to any fair-minded man, and that every labour-leader and agitator is a rogue and his followers fools ; and yet if he would but consider the matter for one moment he would see that Capital does not in anyone's mind, not even in his own, mean food and tools, but only the command by one person of the food and tools produced and used by other people, and of the goods they produce with them. So with Landlordism, which is merely the pedestal on which Capitalism stands, and which, if knocked away, would bring down Capitalism with a crash. You will never get the Landowning class neither the Landlord himself, nor his brothers, nor his cousins, nor his menservants and maidservants, or the people who are honoured by his notice, or who profit by his custom ; above all, the Capitalist tenants, who live by hiring his improper powers to see any harm in private ownership of land that is, in one class claiming all nature as their private property, to grant or withhold access to her at their sovereign will, and charge other people for the mere permission to live by their own labour. Labour v. Capital. 197 This is the wrong you have to abolish. Whatever method of doing so you may choose (and there are several to choose from), the process will take time, and meanwhile the Capitalist profits by the wrong as much as the actual Landowner, and should bear his share of the cost of emancipation. It is not fair to throw the whole cost, as the Single Taxers propose, on the unfortunate who happens, by pure accident, officially to represent the wrong at the moment by owning a bit of land for which he has probably paid full value. The man who sold land yesterday is deeper implicated, and has profited more than the man to whom he sold, for land always sells at prospective value ; and the Capitalist, whether he ever owned land or not, benefits by the enormous power which Land Monopoly has given to mere " Money." Therefore it seems to me a progressive tax on all unearned incomes should accompany a land-tax, at any rate until the Land Monopolist's power of obstruction has been so crippled, and withheld resources so far forced into use that incomes have ceased to represent tribute to any great extent, and are coming to represent earnings of work. SAVING AND SPENDING. PART I. IS CAPITAL THE RESULT OF ABSTINENCE? THE proposition that Capital is the result of abstinence is generally considered by economists so self-evident as to require no proof. They therefore simply state it, give an illustration or two of what they mean, and pass on. I venture to submit that this proposition has been taken for granted far too easily that Capital has not originated solely or chiefly through abstinence, and, in fact, that abstinence has had very little to do with the matter. Let us make sure, first, that we understand the real meaning of the proposition, and are not disputing about mere words. 1. As to the term ft Capital." There have been many definitions of it given by economists, and no two are agreed as to the proper definition, while the man of business understands by it something quite different from any of them, viz., money, or the command of it. But we need not concern ourselves about these differences, for they will not affect the issue I propose to raise. A factory with its looms and engines is wealth devoted to production, and is therefore capital in the technical sense, if anything is ; while a private mansion, with its picture 198 Saving and Spending. 199 galleries and costly furniture, is wealth devoted to enjoyment, and therefore technically not capital. But the proposition before us, if it is true of the one, is equally true of the other. If self-denying abstinence was required to produce or to maintain the factory, it must have been equally jiecessary to produce or to maintain the mansion. The proposition applies to all accumulated forms of wealth alike, or it applies to none. What it really amounts to, then, and what was really intended, is that accumulations are the result of abstinence; and I shall therefore henceforth so express it, dropping* the word " capital " altogether as expressing a needless limitation, and sure to give rise to irrelevant discussions as to its nature. 2. As to " Abstinence." Difficulties have been suggested to me as to the meaning of the term " Abstinence " ; but these difficulties are not raised until it is found that if the term is used in any ordinarily accepted sense, the proposition in question falls to the ground, and therefore the term has to be used in some mystical or figurative or technical sense, as to the exact nature of which no one seems to feel very certain. But the proposition that Capital (or, as I now put it, Accumulation) is the result of Abstinence is put forward by the economists as a self-evident truth needing no demonstra- tion, which implies that its terms are to be understood in the ordinary sense ; for how can a proposition be self- evident if its terms are mystical or technical, and the mystical or technical meaning is not set forth ? The term may of course be made to mean anything. A man who does anything may be said to abstain from not doing it, but this is to expand away its meaning altogether, for a word that means everything means nothing. The word, I take it, is here meant in its ordinary every-day sense as implying prudence and self-denial. Indeed, the words "prudential" and "self-denying" are often expressly introduced, and 2OO Saving and Spending. capital is said to be " the reward of self-denial," which, as I have shown, if it is true of accumulations devoted to production, is equally true of accumulations devoted to enjoyment. What we are to understand, then, by the proposition before us is that any given product of the past continues to exist in the present, because some one self-denyingly abstained from con- suming it (from actually using up and destroying it), or else self-denyingly refrained from consuming something else which icas necessary to produce this. I do not, of course, say that accumulations are never due to self-denying abstinence of this sort, but my contention is that such cases are few and insignificant in comparison with the mass; and that, speaking broadly, accumulations are due, not to abstinence, but to a variety of causes, the three chief of which are 1. To extra exertion : that is, a man, having satisfied his immediate wants, proceeds to produce something else which he does not want now, but expects to want hereafter. 2. To the natural durability of most of the articles we produce, in consequence of which they are produced faster than they are worn out, and so accumulate. 2. To the exercise of ingenuity and advance of know- ledge, whereby with the same labour that we formerly produced a mere sufficiency, we can now produce a surplus. There are other causes, no doubt, but these will suffice for our purpose. We shall begin our illustrations with the stock example usually given by economists, that of a tribe that lives by fishing. The idea of the economist is that the Indian, having caught his supply of fish, self-denyingly abstains from con- suming as much as he would like in order to put some by, and so accumulation originates. Saving and Spending. 201 My idea is that no self-denying abstinence comes in any- where. The Indian when he goes out fishing catches one or another of three given quantities of fish. Either he catches less than he can comfortably consume, or exactly as much as he can comfortably consume, or more than he can comfortably consume. If less, he can hardly save even if he wants to; he must eat all he has caught and still go hungry. If more, there is no self-denial in putting by the surplus. If he catches exactly as much as he can consume, then indeed he might save by putting himself on short commons; but he certainly won't, because it is not in his nature to do so, and because it is not necessary, as he can make his savings on his surplus days. The Ked Indian, when he has killed his game, eats as much as he can, then, if there is any left over, he saves it, but not otherwise. His supplies of food are laid up at great harvests of special exertion, at the buffalo hunt or the spawning season of the salmon, on which occasions he does not practise any ab- stinence, but quite the contrary, but undergoes unusual and prolonged exertion. There is one occasion on which the savage may be expected to use prudential abstinence, and that is in presence of some great impending crisis. In Kamstchatka and other sub-polar regions the ground in winter is covered many feet deep with snow, the wild animals have either migrated or are hibernat- ing, and there are no wild fruits to be got. In such case the tribe would perish but for a previously-accumulated store of provisions ; so, as a matter of simple self-preservation, they must save. But in such case they save only enough just to tide over the crisis, and barely enough for that. By the time summer comes round again the whole tribe is generally in a state of semi-starvation. So serious a matter did the Russian Government find this that it compelled every house- hold to contribute a supply of smoked fish during the season, 2O2 Saving and Spending. to be stored away as a public provision, and doled out in time of scarcity under stringent regulations. But abstinence of this sort barely to tide over a crisis could not account for the origin of accumulations. It was essentially a temporary expedi- ent, and barely effective even for its temporary purpose. It is doubtful, however, whether, even in presence of a periodically recurring crisis like this, the savage ever really practises any self-denying abstinence in the season of plenty, not only because abstinence is hateful to him, but because there is really no necessity for it, as he is certain, if not to-day, then to-morrow or the next day, to catch more fish than he wants, in which case he can eat his fill as usual, and yet save. But, again, the saving does not consist in abstinence, but in exertion ; that is, in industriously preserving and putting away what he does not want at present, instead of idly leaving it to rot. He does not eat his surplus straight off, because he does not want to because he cannot. There is nothing to exchange it away for, and therefore nothing to do with it but put it by. Abstinence does not come in anywhere in any shape. Next day he has his day's food ready secured, so need not go fishing again unless he likes ; but the question with him is not whether he shall eat or go hungry, consume or abstain, but whether he shall work or be idle. He decides to work, and makes, say a net, which, once made, lasts a long time ; and so, by the intelligent use of his spare time, he gradually accumulates a variety of goods nets and lines, spears and axes, pots and baskets, clothing and orna- ments generally intended to satisfy some immediate want, or fulfil some immediate purpose, but any way, all of a more or less durable nature, outlasting their first use, often outlasting many successive uses, and so accumulating faster than they are worn out. But to commence an accumulation in this way it is not Saving and Spending. 203 necessary even that he should on any one day catch more fish than he wants : it is sufficient if he catches what he does want quickly, and so have all the rest of the day not to speak of his idle evenings round the fire wherein by simple diligence, without any abstinence, he can accumulate possessions to an indefinite extent. If we take the case, not of an Indian who lives by fishing, but of an African who lives by cultivation, the needlessness, so to speak, of abstinence conies out still more clearly. For, while the Indian's supply depends mainly on what he catches from day to day, the African's depends upon a series of opera- tions conducted at a particular season. His supplies consist of his crop, and his crop all comes in together in a lump. Those, then, will have abundance, and will be able, without practising any abstinence, to live comfortably on that abund- ance who have put in a sufficiency of ground, and those will be badly off, and have to go on short commons, who have put in an insufficiency. Abstinence will count for very little either way. Those who have put in enough crop will be able to live luxuriously, and even wastefully to some extent, and yet have plenty over, while those who have not put in enough will run short, and will hardly be able to put by for the future, even though they stint themselves exceedingly. It is all a matter of doing enough work at the right time. But since his food consists of his crop, there will be two long periods, between seed-time and harvest, and between harvest and preparation time, in which the African will have plenty of spare time on his hands wherein to produce all kinds of manu- factured articles, nearly the whole of which will be of a more or less durable character, and which there is no temptation to consume except by ordinary wear, and which, therefore, will accumulate. So far, following the example of the economists, we have 204 Saving and Spending. confined our illustrations to savage life because the working of natural processes can be best seen when reduced to their simplest elements, and because it is amongst savages that the foundations of accumulation must have been laid, for without some accumulations they could not have emerged from the savage state. If we turn to the other end of the social scale to the millionaire capitalist it is clear that no self-denying absti- nence is required on his part to permit a gradually-accumu- lating mass to grow up from his yearly income, and, as a matter of fact, he very rarely does practise any such abstinence ; and though it is true that abstinence consists not only in putting one's self on short commons in the matter of food, but in denying one's self any enjoyment of consumption, no matter what, still the ways in which a rich man, growing richer, can find any gratification in really consuming goods are very limited. He may, indeed, spend his ivhole income very easily, and find gratification in so doing ; but spending money is one thing, consuming goods in the sense of using up and destroying them is another. Most of the spending is mere transfer of possession or change of form. If a man loses his money in gambling, the money merely changes hands. If he spends it in pictures, furniture, and so on, he is merely changing his wealth from one shape into another. The quantity of goods that the most reckless spendthrift really consumes in the destructive sense is very small. But it will be said that the poorer classes in any highly- organised community such as ours must practise actual absti- nence, or, at any moment, through sickness, accident, loss of employment, or of vital power, they will assuredly find them- selves in dire straits. No doubt ; but this abstinence enjoined on the labourer is not designed to add to the existing mass of accumulations, but only to ensure his having something to Saving and Spending. 205 consume when he is not in a position to earn anything ; and he is not much given to abstaining for either reason. Human nature is so constituted that, as a general rule, men will not deliberately make short commons shorter still in order to provide against a remote and problematical contingency ; for life is uncertain, and the contingency therefore will always be problematical. Those (and they are many) who hold that the only, or at any rate the chief, hope of bettering the labourer's condition is by encouraging him to restrict his already scanty indulgences in order to provide against sickness or old age, apparently fail to realise that this is not bettering his condition at all, but only changing the period of his deprivation, spreading it over his youth when his powers of enjoyment are keenest, instead of postponing it to a later period which he may never live to see. What the labourer wants, and what the Philanthropist and the Reformer want for him, is not a greater pinch in the present as insurance against a worse pinch still in a doubtful future, but the improvement of his condition now ; the power not to save more, but to consume more. Consumption is the crown of production. What else do people produce goods for but to consume them 1 The proper aim of human labour is not the piling up of an imposing mass of accumulations, but the satisfaction of human wants, and the labourer's wants must be much better satisfied than they are at present before he is likely to do much in the way of piling up. I may sum up my position so far in these words : Given industry and intelligence, under just laws, wealth must accumu- late, no matter how reckless and improvident a people may be. (Of course, if they are not reckless and improvident, it may accumulate faster ; but that is understood.) Suppose such a race, intelligent and industrious, living 206 Saving and Spending. under ordinarily favourable conditions, but so reckless as to have absolutely no care forthe morrow, each (being industrious) earning as much as he can, but (being improvident) earning it only to spend it as fast as he gets it every one living up to his income from day to day ; then wealth would accumulate rapidly. For, as I have said, spending money is one thing, consuming goods (in the sense of using them up) is another. The vast majority of goods produced, even of those required for immediate use, consists of articles which, being more or less durable, are produced faster than they are worn out, and so accumulate; and transferring goods from one person to another, or converting them from one shape to another, is not destroying them is not "consuming capital." But, it may be said, so improvident a people as this, although they might undesignedly accumulate vast possessions, would always be in imminent danger of starvation. A bad harvest, or any one of a thousand likely accidents, might cut off their daily food supply, and, as no one had laid by for the morrow, they must all die. Even if this were true, it would be quite beside the question ; for the question is whether accumulations, such as they are, are due to self-denying abstinence, not whether these accumu- lations are always of the kind most necessary ; and a man in- disputably rich, and with all his riches around him, may die, and often has died, of starvation, as in a beleagured city or shipwreck. But it is not true that such a people would be in any more danger of starvation than we are. For the division of labour is one necessary consequence of energy and intelligence ; and with such a people, as with us, the production of food would fall into the hands of one class, the storing it to another, the distributing it to a third, and so on, each making its living by so doing ; and each, therefore, in pursuit of its regular business would produce as much food as possible, store it as carefully, Saving and Spending. 207 and distribute it as opportunely, merely as a matter of busi- ness, that is, merely to earn from day to day as much as it could in order to spend it from day to day. The acquiring impulse, as distinguished from the saving impulse, would always ensure the existence of an excess supply available whenever wanted; and even if, by some accident, this supply appeared likely to fall short of its required amount, or to be in danger of destruction, the desire of immediate gain, apart from any prudential considerations, would set an in- creased number of people to work at once to produce more food before the crisis came. As knowledge increases, as laws become more just, as the distribution of wealth becomes more equitable, and income comes to represent work, accumulations will become so abun- dant, and the morrow's return to labour so certain, that abstinence will become less and less incumbent on anyone, and labour will come to be looked on in its proper light as a means of satisfying human wants, not for the piling up of needless wealth, often in the hands of persons who, doing nothing to earn it, have yet so much that they do not know how to spend it. But as to the general proposition I go further still, and while admitting that here and there abstinence of the self- denying sort has added to accumulations, yet, taking it on the Afhole and in the manner in which it is habitually practised, I submit that abstinence, so far from adding to accumulations, actually restricts them, because it checks production. Suppose a number of people suddenly determine to save to the extent of a quarter of their income ; aud let bread, boots, and tobacco (representing food, clothing, and enjoyments) be the articles they have been habitually consuming, and in which they now propose to save. If they continue their customary purchases, putting by a quarter of them in a strong room for future use, the result will be that the bread will certainly spoil, 208 Saving and Spending. the boots and the tobacco deteriorate, and so many useful articles not only lie uselessly idle, but actually go to waste. But we need not dwell upon this, because we all know that the saving will not be effected in this way. The abstainers will not hoard up their purchases, but discontinue them. No goods will be accumulated at all. What the abstainers will save is money. If they saved it in the shape of coin, hoarding it, there would again be no accumu- lation. The money would be lying uselessly idle instead of circulating usefully, and that is all. A little wear and tear would be saved, no doubt, but that is hardly worth mention- ing. The money was coined for the sole purpose of being cir- culated, and the withdrawal of so much of it from circulation would disturb prices, cause a tightness in the money market, and derange trade generally. Society would be none the better for its withdrawal, but the worse. But we need not dwell on this supposition either, for we know that the saving will not be effected by hoarding coin any more than by hoarding goods. It will be effected by contracting expenditure, by waiving receipt of so much income or wages due, or accepting it from one person only to transfer it to another, and keeping the claim suspended to come down by and by on somebody. So that, so far as the abstainers themselves are concerned, they will have added nothing to the stock of accumulations, but only a lien on the accumulations of other people. What, now, will be the effect on other people ? Those who have been supplying the abstainers with bread, boots, and tobacco will suddenly find a quarter of their goods left on their hands. There will be stagnation in those trades, with all its inconvenience and distress. After a while, finding their customers are resolved to buy only the reduced quantity, the sellers will have to clear out their goods at whatever price they can get, even at a loss, and will have to reduce their production for the future in view of the diminished demand, thereby Saving and Spending. 209 throwing so many people out of employment, who, under the existing conditions of society, will either crowd into other employment, bringing down wages, or will have to be main- tained by charity. Thus there will be a dead loss all round. The abstainers will have lost their accustomed comforts, the producers their market, and the labourers their employment. There will next year be no more old accumulations standing over, while there will be fewer new accumulations brought into existence. Saving, then, which consists not in preserving goods but in ceasing to buy them, is illusory. For goods are made only to be consumed, and if A ceases to consume them, B will cease to produce them, unless C takes them instead ; that is, unless one man's increased consumption counterbalances and so cancel's another's abstinence. To realise the futility of "saving" in this way as a means of adding to accumulations, we have only to suppose the case of everybody determining to save, ceasing to spend, and allowing his income to accumulate as a deferred claim. Then everybody will have a claim over some- body else ; the claims will cancel each other, and the supposed accumulations vanish. What, then, is the moral of our discourse ? Are we to take no thought for the morrow ? make no provision for the future 3 Certainly we ought ; and the ways of doing so are chiefly three 1, By avoiding waste. This is saving in the strictest sense, and in its most legitimate form, but it is quite a different thing from the self-denying abstinence of the economist. The thrifty housewife who saves all the bones for the soup, who never strikes three or four matches when one will do, who cutr> out her material so as to make it go as far as possible, either adds to accumulations or saves labour, one or the other, and yet foregoes none of her enjoyments, but rather increases them. o 2io Saving and Spending. 2. By spending our money or our labour in producing things which will last, rather than things which are quickly consumed in the use ; but even this may easily be overdone. However, it represents judicious expenditure and not saving at all (in the strict sense), so it is rather outside the limits of our subject. 3. By doing to a limited extent what I may have appeared to denounce that is, by " saving money." Remember that the question now is how we are to provide for the morrow, not how we are to add to accumulations. The two things are quite different. The tendency of " saving " is always to check production, and (under existing conditions) to throw labourers out of employment, but if kept within due limits, though it adds nothing to accumulations, but rather diminishes them, it does good by equalising fortune and averting disaster. Its effect is like that of insurance of property. There is more loss by fire and shipwreck since in- surance was introduced than there was before. Not only because there are always scoundrels who will burn their houses or wreck their vessels feloniously for the sake of the insurance, but still more because people do not make nearly the same efforts to save burning houses and sinking ships. When a man's all was in his house or his ship, he worked as for dear life to save it, and his neighbours in sympathy and as a point of honour did their best to help him, even at the risk of their lives. They are not nearly so strenuous now. Formerly, when there was a fire, everyone rushed to put it out. Now, they ask first whether it is insured, and, if it is, half of them go quietly back to their business, and the others, though they may work well, give up much sooner, and in no case make the same desperate efforts unless they are firemen, perhaps, with whom it is a point of honour. For all that, insurance is an excellent thing. An arrange- ment by which utter ruin to individuals is averted by dis- Saving and Spending. 211 tributing the loss amongst people who are prepared as a matter of business to accept it, is well worth some cost ; and the benefit of " saving " is of much the same nature. It represents no increase of accumulations, but the contrary, but it averts suffering. Saving, when judiciously effected and kept within modest limits, represents a lien founded on previous self- restraint by the sick and the old and the unfortunate on the healthy, the young, and the successful. It is a good thing, but the relief secured comes out of current production, and represents no increase of wealth. PART II. NOW LET US GO INTO THE WHOLE QUESTION OF SAVING V. SPENDING. SAVING OF REAL WEALTH (i.e., GOODS). Saving of goods in the sense of avoidance of waste is always practicable and always good. But saving them in the sense that we are here concerned with, in the sense of abstaining from present use in order to put them by, and so form accumulations for future use, is only possible within pretty narrow limits, and only desirable within still narrower. Many important articles spoil in a few days, others in a few weeks ; some take longer; but almost all begin to deteriorate from the moment they are put by, require more or less costly receptacles and precautions, and frequent inspection and over- haul. Rust and moth corrupt where spontaneous decay holds aloof. This dries up, that moulders with damp. Insects, thieves, fire, always threaten, and often have their way in 212 Saving and Spending. spite of all precaution. The unused machinery rusts, the stored-up provision rots, the uninhabited house goes to ruin, the closed road becomes impassable. Meanwhile, everything put by remains uselessly idle, while it might be doing good service. And in point of fact, goods, broadly speaking, never are "put by" in the literal, prudential, self-denying manner imagined by the economists as the foundation of accumula- tions. We are told that the labourer is fed, work is provided with tools, enterprise with appliances from a store which has been created by the wise far-seeing capitalist, virtuously and self- denyingly putting things by when he might have consumed them in enjoyment ; so that but for his self-denial in providing such a store the poor would starve, progress become impos- sible, and industry be thrown back to the rude processes of the savage. It is all a delusion. There is no such store of pro- visions and requisites self-denyingly put by. Perishable goods cannot be put by to accumulate ; durable goods persist and accumulate, without any putting by, through their own inherent durability. Everything is produced for use, sold for use, put to use, as fast as use can be found for it. No one ever produces any- thing unless he intends either to use it (begin using it), or to sell it as soon as possible. Whoever wants to put by for the future, puts by not goods, but " money " ; that is, he lives within his income and lets the balance accumulate as an unpaid or transferred debt due to him. Take the prime necessary food, which is one of the chief things the capitalist is supposed to provide out of his mysterious store, after having self-denyingly put it by from last harvest. The great bulk of this food is produced from day to day, and none of it has been self-denyingly put by. Look round your breakfast table. Were those eggs laid last harvest ? Was that milk drawn from the cow last harvest ? that butter churned Saving and Spending. 213 last harvest \ the sheep that yielded those chops fattened and killed last harvest? that dish of fresh vegetables grown last harvest 1 True, the wheat that produced the flour that pro- duced that one article, the loaf that was baked this morning, was grown last harvest ; and the land that produced the wheat was ploughed before that, and the iron and timber to make the plough was got still earlier. But all this means not that the capitalist prudentially saved the wheat any more than he prudentially saved the land, and the plough that came before it, or the flour and the dough, and the loaf that came after it; but simply that the whole process of production is continuous ; that the present is the product of the past ; that every article in existence is the out- come of an interminable series of acts reaching into the far past, wherein it is not necessary to introduce at any point a self-denying " putter by." Still if you must pick out one particular link in the long chain more than another, let us take the wheat. How could the capitalist, or all the capitalists put together, consume all last year's wheat if they had wanted to 1 ? Even a capitalist can eat only a certain quantity of bread. No part of last year's harvest was self-denyingly and prudentially put by by anybody. The farmer grew it for sale and sold it directly he got his price. The miller bought it and sold it to the baker as fast as the baker would take it, and the baker bought only so much as he wanted at a time and sold the bread over the counter as fast as he could find customers. Everyone concerned in the business produced or bought the thing at one stage or another for profit (except what he wanted for personal use), and passed it on as fast as he could, making as quick and as big a profit as he could. So with the groceries ; they were produced for profit, pre- pared for profit, exported by one country and imported by another for profit, and disposed of as fast as possible. If any 214 Saving and Spending. one of the parties withheld for a time, it was only to run up or keep up the price. Self-denying abstinence never showed its nose once. I quite admit that it is necessary to make present supply last till next supply comes in; but, first, this is a mere temporary expedient covering a brief period, and so cannot originate ac- cumulations ; and second, the proper way to ensure this is not to produce an insufficient supply and then put everyone on short commons, or trust to a wise capitalist, but to produce enough to keep all hands well provided till next supply comes in, with a bit of a surplus over in case of accidents. And this, in fact, is what always is done. There is always (in any decently civilised and progressive country) enough for all, of necessaries and tools at any rate. If the poor are starving, or labourer cannot find work, it is never because the food to eat or the tools to work with are non-existent, but always because the capitalist will not employ him to produce for hire, and the landlord will not allow him access to natural opportunities to produce for himself; but the food to eat and the tools to work with are all around, and that in such abundance that both the food grower and the tool maker are hard pushed to dispose of their goods, and complain of "over-production." The defect is in the apportionment not in the supply, and in that privileged obstruction which restricts the supply, which yet, notwithstanding the restriction, is sufficient, and more than sufficient for all moderate wants, if only it were equitably ap- portioned; so that no self-denying capitalist is wanted to ensure this sufficiency. Leaving food now, consider what do our other accumulations consist of? Houses, furniture, clothing, books, carriages. Who ever dreams of self-denyingly putting these by] The man who collects a private library, though he puts his books in a secure place, does not put them by self-denyingly out of use, but self-hid ulgently for use for the constant use of refer- Saving and Spending. 215 ence, or it may be, making a display. As for " putting by " a house, the idea is absurd. A house really "put by" (un- tenanted) goes to ruin in no time. The man who invests his earnings in building a house does no doubt thus make pro- vision for the future, and in that figurative sense " puts by." But the point is that from first to last the putting by is a mere figure of speech ; nothing is really put by out of use. The money he is said to have saved has been spent (on the build- ing) and not saved ; the bricks and timber have been used up, not put by ; and for the house, when finished, a tenant is found as soon as possible. What survives as accumulation comes of production not of saving ; from the spending of money and the using up of materials. So with all the rest. Goods, I admit, are often really put by, but not from self- denying abstinence ; only when they are no longer wanted in the present, but likely to be wanted by and by. When I have pruned my trees I put by my pruning knife, but only because I have no further use for it in the present, because I am not fool enough to throw it away, and because to sell it now and buy another next year would cost me more in the end. Not only would it be unprofitable and almost impracticable in many cases to put by goods to form accumulations, but it would often be actually wrong. To put by food when thousands are ill-fed would be a crime. To put by tools when willing men were idle and work undone that wanted doing (as there always is) would be folly. Mill has shown that the mass of our accumulations is a thing of yesterday, so to speak ; that those a trifle older would have disappeared before now but for constant repair and re- production ; our existing wealth is a perpetual creation and re-creation ; that if work ceased for the briefest period nearly all our accumulations would disappear ; and we may add that what there is of longest standing was never " put by " from the very first, but was produced for immediate use, put to 216 Saving and Spending. immediate use, and persists solely by its inherent durability, aided by constant supervision and repair. CONSUMPTION. In ordinary language the word consumption implies destruc- tion, and a consumer is one who (productively or unproduc- tively) makes away with uses up the article of consumption. But in its later sense, both economic and commercial, the consumer has come to mean merely the ultimate purchaser, THE PUTTER TO USE, no matter whether the putting to use uses up the thing or not. Sometimes it does, sometimes it does not. It does so with food, immediately and designedly; it does so with clothing, gradually and undesignedly. It does not at all with some things, as pictures, whose only use is to be looked at ; while in other cases the use, or the vigilance and care demanded by the use, actually prolongs the thing's existence, as with a house, which is never worn out by being inhabited, but only by natural decay, which the dweller averts, or at any rate postpones, by his attention and repairs. But food-eater, clothes-wearer, picture-collector, and house- dweller are each spoken of equally as the " consumer," though only the first two use up and the last two actually preserve. But as always happens when an old word comes to be used in a new sense, the old meaning clings to it and will not be altogether got rid of ; so consumption, though it still professes to mean only putting to use, is always associated in the mind with using up with destruction ; and not only with destruc- tion, but with destruction that would not otherwise have occurred. It is looked upon as a loss to be set against production ; as a thing to be averted or delayed by saving, Saving and Spending. 217 though most things would perish quickly of themselves if we did not use them, so that the consumer only causes them to disappear usefully instead of uselessly. The consumption of an article (in whichever sense the word be used) is simply the crowning of the work, the fulfilment of the sole purpose for which the thing was produced, and, failing "which, the labour of producing it in the past was labour lost, and the business of producing it in the future will cease. Still, people persist in looking askance at. consumption, and regard as a simple truism the proposition that "the greater the consumption, the less the goods." Bui it is not true at all. The very converse is the truth. Consumption calls forth what it consumes. The greater the consumption, the greater the demand, the more active the production, THE MORE THE GOODS, The consumption of an individual article no more diminishes the sum of wealth (generally speaking) than the death of the individual plant diminishes the sum of vegetation. A new seed is always striking where an old plant died, and vegetation on the whole is the more luxuriant from the enrichment of the soil by previous deaths. Take champagne. If the existing stock is not drunk it will spoil, and so disappear as certainly as if it were drunk, and all the past labour of producing it will have been thrown away. Till it has gone off, or is in evident process of going off, no more will be produced, and a number of workers will be thrown out of employment. If it is drunk, then, though there may be less for the moment, there will be mure next year, and the quicker it is drunk (the less the abstinence) the greater will be the production to meet the more rapid consumption and demand. But not only will the demand for champagne call forth more champagne, it will also call forth wealth of a more generally useful and abiding character. For to produce more champagne there will be required more spades and hoes, carts and buckets 21 8 Saving and Spending. barrels and bottles, appliances of one kind and another, which will outlast the year's output of champagne, and be available for innumerable uses. In short, champagne (which we take here as a type of all luxuries) affords gratification to the con- sumer, an incentive to industry, a livelihood to the producer, and indirectly promotes the multiplication of utilities available for other use. No doubt, of course, the money might be spent better than in champagne; that is, in producing something that would afford a higher, more enduring, more diffused gratification. But the point is that the money is better spent than not spent, even though it be spent in champagne ; that the spending, by stimulating production, indirectly increases wealth, while the not spending, by checking production, diminishes wealth. It is said that no loss of employment need result from the cessation of demand for champagne, because the men might just as well be employed in producing something else instead. True ; they might, but they will not. When one industry is pushed out by another, as when a fashion changes, or a new and improved article supersedes an old one, then there is only a change, not a loss, of employment. But when a demand ceases of itself, or the supply is checked, the lost employment is hard to recover. If not, how comes it that there is always an army of unemployed, and only occasionally employed always an " overstocked labour market," varying in degree, but never absent. When the farmer adopts a labour-saving contrivance, he rarely keeps on the old number of men to do increased work, but does the accustomed work with fewer men, dis- charging the balance, and when he puts his arable land down to grass, the displaced labourers, finding no occupation in the country, drift to the already overcrowded towns, where, though there are already more men seeking work than there is work offering, still, the chance of getting it is more of a lottery, and Saving and Spending. 219 the new-comers hope to be among the lucky ones who get it, while in the country the substitution of pasture for cultivation has effectually closed all openings. It is not, as is so often and so absurdly stated, the superior attractions of town life that tempt the bulk of the penniless out of work into the towns, for such superior attractions as there are are available only for people with money, and the misery of a slum in the city is worse than the misery of a hovel in the country ; it is simply the cessation of demand for his labour in the country that drives him into the town. In the great cotton famine, during the American civil war, the stranded factory hands did not, during that whole disas- trous period, find other employment, but starved in silence. The rich, who, having the money, could easily have found them other employment in a thousand ways, in producing luxuries, making improvements, or what not, did not do so. They did not happen to fancy any of these thousand things, and actually preferred to give help (when they gave it at all) by alms rather than by wages, a mode injurious to both parties ; the giver receiving nothing in return for his gift, and the receiver being demoralised and degraded by being com- pelled to accept charity when he wanted honest, useful work. The sad fact is, that under existing conditions all natural opportunities being monopolised, the poor are absolutely dependent for their living on the expenditure of the rich. For the necessaries and small comforts which are all that the poor can buy would only keep a portion of them employed in pro- duction. If these and the necessaries of the rich were all that were called for, the demand for labour would be so reduced that wages would fall to starvation point, and the army of the unemployed be swelled to fabulous proportions. What keeps employment at all going and wages up even to their poor present rate is the expenditure of the rich on luxuries, a terrible and unnatural condition of affairs which cannot go on for ever; 22O Saving and Spending. the industrious depending on the idle, production upon waste, and the comfort of one class on the extravagance of another ! For example, a rich man, having provided himself with all that he particularly cares to have, has 100 over. Say that he proposes to spend this in giving a ball. Then so many horticulturists, dressmakers, decorators at once find employ- ment, and with the money they so earn employ others to supply their wants, and these earning so much the more em- ploy others, and so a whole field of productive useful industry is indirectly stimulated into being. The ball-expenditure does not produce the food, clothes, etc., the workers want ; that was present already, otherwise the workers could not get it, even with the ball- wages, for these things cannot be produced at a minute's notice. But the money spent was like a key that opens many successive doors of the storehouse, doing nothing to fill them, but giving access to their contents. None of this beneficial round of production is possible so long as the rich man holds back his 100, that is, abstains from demanding the things that the ,100 will buy. He may spend it himself or lend it to someone else to spend, but spent it must be by somebody, and not saved, if industry is to go on. Let him spend it wisely if it may be, or foolishly if it must be, but spend it somehow, by himself or another. OVER-CONSUMPTION. Over-consumption is theoretically conceivable, practically impossible. That a nation should bring itself to bankruptcy by spending money faster than it made it is nothing wonder, ful or even uncommon ; but that it should bring itself to want by literally consuming using up goods faster than it Saving and Spending. 221 can produce them would be very wonderful indeed. Take the more or less durable goods first. Imagine a nation, industrious, intelligent, with all the knowledge and appliances of civilisa- tion, wearing out its clothes, crockery, books, utensils, faster than it could make them ; its houses, ships, carriages, faster than it could build them ; its roads, railways, clocks, faster than it could construct them. And as to more perishable goods, take food, which no doubt is what people are thinking of when they talk of over-consumption. So long as in a country like, say, Great Britain, with not half its arable land actually in cultivation, with not half that half cultivated with half the efficiency it might be ; with vegetables, meat, milk, eggs, and other food stuffs coming in continuously ; with manu- factures (available for exchange for foreign food) always going on ; with inventions and discoveries constantly increasing the productiveness of labour, with every facility to emigrate, and the field for emigration practically boundless, and the first sign of approaching deficiency calling forth immediately fresh effort and directing that effort into the required channel, the idea of the nation coming to want from over-consumption is ridiculous. Destitution among many there may be, but it will not be from scarcity of food, only from want of money to buy the food that abounds all round. A nation may indeed run short of food from there being not land enough to grow it, or from a foreign blockade cutting off imports it had relied on : but that is not from over-consumption. Such cause might bring want, no matter how careful the people might be to under-consume. To sum up so far, saving of goods, in the sense of accumu- lating them by putting them by, is impracticable with perish- able goods, ridiculous with goods that are wanted for use, and is hardly ever practised. So far as supplies are made to last by withholding, it is only done for a merely temporary purpose (to last till next supply comes in) and so adds nothing to per- manent accumulations, and they are thus held back (so far as 222 Saving 1 and Spending. they are held back) by the holder raising his price as supply becomes scarce, not from self-denying abstinence, but, quite the contrary, from the desire to make money, and to make it as quickly as possible. The delusion that goods, i.e., actual utilities, are accumulated by saving, arises mainly from a false analogy drawn from money. It is seen that those who save money get rich. It is concluded that if all saved money all would get rich. It is seen that 100 put by in a bank will increase by accumulation of interest, can be drawn out as sovereigns, and will command at once 100 worth of goods. So it seems that if all money were put by in banks it would accumulate by in- terest, could be drawn out as sovereigns, and command that proportionate quantity of goods ; and that society is as much the richer by the money that economisers have saved and not spent as it would be by all the provisions that were put by and not eaten. A conclusion that will not bear examination for a moment. SAVING OF LABOUR. There is a true and a false saving of labour. The true is where we so judiciously direct our efforts as to produce a greater result with the same efforts or the same result with less effort, as when we divide and combine the efforts of many to a common end, or when we use a lever instead of our bare hands. But a great part of what is spoken of as saving of labour is mere saving of wages to one person (the employer) and loss of it to another(the labourer), and waste of labour. For example, three men are employed eight hours a day ; but the employer, taking advantage of hard times and scarcity of employment, dis- Saving and Spending. 223 charges one man and makes the remaining two work 12 hours. He calls this a saving of labour; so unfortunately do most people. But it is a waste of labour, a waste of 16 hours instead of a gain of eight ; a waste first of the four extra hours each of the two men in excessive, all-absorbing, and needless toil (needless because there is an idle man standing by), which hours should in the interests of the two men and of society be devoted to domestic joys, wholesome recreation, possible self- improvement, and citizens' duty; and it is a worse than waste of the eight hours of the discharged man, who is now eating his head off in discontented and demoralising idleness. While an idle man and an unused machine both "rust" and de- teriorate, the idle man becomes destitute, demoralised, dis- contented, and dangerous, which the machine does not. As for the money wages, the gain to the employer is set off by the loss to the discharged man. As for the work, there are 24 hours of it done in either case, but the 12 hours each of the two men is less effective than the eight hours each of the three men ; not only because the last four hours of the two are performed by tired men, but also because when a man is habitually overworked, his labour becomes lesa effective throughout. As for society, it has now two overworked drudges and one idle man in place of three men in full vigour of work. Even if the 12 hours' work are not physically exhausting they would still be objectionable, because they leave the man no leisure; and leisure some leisure is necessary for happiness, for self-improvement, and for citizen's duty. The case of machinery is much the same. When labour- saving inventions are used to enable the existing number of workers to produce a better result, or the same result with less toil, there is saving of labour. But when they are used (as they too often are) to throw a third man out of work, and do only the old work with two men, then, though there may in 224 Saving and Spending. this case be no increase of toil for the two kept on, there remains a waste of labour of the one discharged. Of course, if inventions open up some fresh employment for the discharged man, he is not thrown out of work. But this, though it happens often, does not happen always. For the tendency of such inventions (to enable the employer to do with fewer men) continues even in the new industries opened up ; so that no matter how many new industries are thus opened up, there remains always so great a number of unemployed men as to cause serious difficulty to the politician, as well as destitution for the unemployed. Moreover, it is worth notice that the unemployed are most numerous in the countries where there are most labour-saving inventions. A great writer (Mill, I think) has declared that all the inventions of this inventive age have not lessened the toil of the workers by a single hour; and he might have added that though they may often have made the toil less physically exhausting, they have quite as often made it more monotonous, depressing, and mentally exhausting. Economists assert that inventions open out more employ- ment than they close, and give examples. But the examples are all taken from the favourable side, not from the unfavour- able. If the assertion were true, it would follow that wherever inventions were most abundant, the unemployed would be fewest. But the facts are all the other way. It is just in those countries where invention is most rapid and most highly developed or widely adopted, as in Great Britain, the United States, and Australia, that the number of the unemployed and only partially employed is greatest, and the difficulty of dealing with them most serious; and this notwithstanding that, in the two latter at any rate, the undeveloped resources of nature, inviting employment, are most abundant and con- spicuous ; while in backward countries, though the labourer is badly enough off in all conscience sometimes from ignorance, Saving and Spending. 22$ sometimes from unfavourable surroundings, sometimes from grinding taxation, sometimes from insecurity of life and property he almost invariably finds work. You will see cripples in plenty begging for alms, but no strong men begging for employment. Though inventions undoubtedly do open out numberless fresh openings, yet the same tendency that drove the men out of the old employment follows them into the new ; the same tendency to supply a machine or a process by which the employer can make one man do the work of two, and use it not to lighten the toil or increase the product of the two, but to dispense with the odd one. SAVING MONEY. But to return to saving of wealth ; this (real or apparent) saving is not effected in goods, but in money ; the saver does not accumulate goods, but only abstains from buying them. Money may be saved in two ways : absolutely, as by hoard- ing it ; relatively, as by investing it, that is, transferring it to someone else to spend, at interest and on security. Hoarding obviously makes the community no richer, but only puts it to inconvenience, locking up that which is wanted for circulation, and disturbing prices ; but as the practice is quite out of date, we need not concern ourselves about it. Money saving is effected mainly by investing it on mortgage, State bonds, shares, etc., and it should be, but apparently is not, equally obvious that society is no more enriched by this than by hoarding. When A lends money to B to spend, instead of spending it himself, two things are to be noted : 1st, that the money is not saved at all, but spent equally in either p 226 Saving and Spending. case ; 2nd, that being spent it remains unspent, and available for further spending. So obvious is this that most people will declare at once that no one questions it; but almost everyone does question it, unconsciously, or at any rate absolutely fails to realise it. For almost everyone thinks and speaks of the Savings Bank deposits, the Insurance effected, the State bonds taken up, and bottled-up claims of all sorts as constituting or indicating so much accumulated wealth, so much multiplication of actual utilities, and points with pride to them as the great reserve force of the nation, and the source from which labour is main- tained and industry carried on. Yet all these savings are imaginary. They are mere accumulations of debt, of claims for money advanced for one purpose or another by A to B, which has been spent as certainly by B as it would have been by A, and remains exactly the same in sum whether spent by A or by B, or however often it is spent, or whether not spent at all. The Savings theory is akin to the old mercantile theory which the present generation flatters itself it has outgrown. Our forefathers knew as well as we do that money is merely the token of exchange ; that a purse of money no more im- plies the existence of the goods it represents than the figures s. D. represent the existence of the money they represent ; that a man on an ocean rock would starve though he sat upon a chest of gold, and that one who had abundance of goods could live sumptuously though he had not a shilling in his pocket. For all that the association in their minds of money with purchasing power, with command of goods, was so strong that they passed law after law to entice money into the country and prevent it going out, so as to cause an accumula- tion of money, irrespective of goods, under an undefined im- pression that they were, must be, thereby enriching the country. And we, rejecting this delusion in one form, cling to Saving and Spending. 227 it in another, knowing quite well that money is not goods, and yet thinking and speaking and acting as if the more bottled- up claims there are in the country the richer it must be, the more utilities it must possess; and exalting the practice of bottling up these claims under the name of investments as a national virtue and the source of its greatness. So firm fixed is this delusion and so disastrous its results that I must be pardoned for going thoroughly into the whole question and attempting to demonstrate what should need no demonstration, viz., that a country is none the richer for its money savings (except, of course, when they represent interest bearing claims against other countries), but, on the contrary, is greatly the poorer, inasmuch as they represent a burden upon industry and a check upon production, instead of, as supposed, a fund for its support and furtherance. If A build a house for himself at a cost of 1,000, he spends his money. If he lend it to B to build a house he is said to save it. If he put it into the Savings Bank and the Savings Bank lend it to B, it is the same thing done in a roundabout way ; but in the latter case a saving appears in a ledger and the country is supposed to be so much the richer, as if so much had been saved from destruction and added to the general stock. Yet the sole real result is that the number of houses has been increased by one, in the one case, as in the other } the same materials have been used up in building it, and a certain sum is no longer in the hands of either A or B, but in those of the builder, and is as available for further spending as if neither A nor B had ever spent it. It is true that A would make as real a provision for the future by building himself a house as by lending the money to B, receiving yearly enjoyment instead of yearly interest ; and a house is sometimes called an investment, though generally only when it is built for sale or lease, not for personal use for making money, not for enjoyment. But whether or no, 228 Saving and Spending. the point is that the house is the result of production, not of saving, and that the money has been spent as truly when spent on the house as if it had been spent on cigars more usefully perhaps, but still spent; the spender receiving in return, in the one case a house, in the other the cigars. In both cases the money would have gone to maintain workers (builders or tobacco-growers), and in both it is available to spend over again. It can be spent only once at a time, but any number of times in succession. Nor does the building of the house represent saving in the past any more than in the present. It is not built from a store of bricks and timber " self-denyingly put by " by a far- seeing capitalist ; the bricks and timber have either been pro- duced to order expressly for the house, or if already existing were at any rate produced for immediate sale and sold at the first opportunity. There is no necessary connection between spending money and consuming goods. We can spend money in a thousand ways without consuming goods ; usefully, as in wise charity, in education, in recreating and informing travel ; or uselessly, as in gambling, in indiscriminate alms, in getting our fortune told; and conversely, we can consume goods in a thousand ways without spending money ; usefully, as in eating food of our own growing, wearing clothes of our own making, burning fuel of our own collecting ; or uselessly, as by ignorance, care- lessness, or malice. AVhen we spend money we receive goods ; the two things simply change hands; the using up of the goods may be hastened by the purchase, or retarded, or remain unaffected; but so in each case might it have been if the original possessor had retained them for himself instead of selling them. But in all cases goods are produced for use, and the putting them to use puts the crown to the work Saving and Spending. 229 whether it uses up the goods or not. As often as not it delays their inevitable destruction in the course of nature. A picture is, like other things, produced for use, but its use is only to be looked at, which cannot wear it out, and the purchaser almost invariably buys it to preserve it carefully. Yet we call him (for convenience sake) the consumer. But consumption, whether as using up or mere putting to use, creates demand, calls for the very goods that it consumes, and in so doing calls forth more than it consumes. But though spending money has no necessary and little actual connection with consumption in the sense of using up, it has everything to do with it in the sense of putting to use ; seeing that (with trifling exceptions) goods nowadays are pro- duced for sale, not for personal use of the producer, each producing one article or class of articles for sale not for personal use of the producer, and that generally in such quantity that he cannot use them himself in default of selling them. The farmer cannot eat all the grain he grows, the clothier cannot wear all the clothes he makes. And seeing that money is for the most part concentrated in the hands of the rich, the great mass of workers have to look to the rich to buy ; have to depend on the expenditure of the rich for their existence. For example, a clothier, after selling as much as his fellow-workers and the poor generally want (or rather are able to buy) has 100 worth still left on hand; for this he looks to the rich to buy. But the rich man says, "I don't want your goods; nor do I want anything else in particular. I want to save my money, not to spend it. Therefore, I will neither buy your goods nor employ you to produce other goods, but T will tell you what I will do. I will lend you 100 on security of your stock." Does that help the clothier? Yes, for the moment. It postpones his difficulties, but increases them. For it does not make his goods any more saleable, nor lessen the cost of their production. The clothier 230 Saving and Spending. finding the market permanently contracted by the rich man's steady refusal to buy either clothes or anything else, would prefer to produce less, but he is obliged to produce more in the desperate hope of selling it somehow, for he has now not only his ordinary expenses to meet, but a debt of 100 in addition, with interest on the top of it. So his output is kept up, but remains unsaleable at paying price. And people cry " over- production ! " when really it is underconsumption that is the matter. There are never more goods produced than are wanted never so many as are wanted. There are always thousands suffering for want of the very goods that are " a drug in the market," and there are hardly any (except the very rich) who would not like to have more than they have, and these too (the very rich), only that they like the pleasure of saving and so getting richer more than the pleasure of possessing those other things. So long as a human want remains unsatisfied, over-production is impossible, incon- ceivable. Over-production of some particular article there may be, though even that can hardly ever happen, seeing that there is hardly an imaginable article that someone, that many people, could not find a use for and be glad to have. But over-production of goods generally, that is absurd. A people cannot be the poorer the more goods they produce. All that the rich man, as such, can do is to spend his money; usefully if it may be, uselessly if it must be, only spend it. Do some good with it by all means, but better gamble it away (from the economic point of view) than keep it in your pocket. The winner will almost certainly buy something with it, and in doing so benefit himself and the seller, help to work off existing supplies and call forth more. Better buy sham jewellery than nothing ; it is generally pretty and pleases somebody, and the making of it affords a livelihood to many. Better even pay men to dig holes and fill them up again than leave them stand- ing idle at the street corner j it is good for them if not for you; Saving and Spending. 231 good for them to do a foolish thing for a foolish fellow and earn honest pay for honest, if useless, work, than starve, beg, or steal. Their labour is no more lost in the one case than in the other, and they are found in food and the money put into circulation. A very little money will maintain a great deal of enterprise and call forth a great deal of wealth if only it is KEPT GOING. The rich man's spending, though it contributes nothing to the stream of industry, is the turning of the tap that sets it flowing, and without which it would not flow ; not from any inherent deficiency in the stream, but because the rich man has got the tap in his possession, and can turn the stream on or off as he likes. What keeps the stream going at all is that, whether he spends or lends, the money nowadays is not hoarded but spent, by him or by another, so that nothing is put by, nothing is accumulated except (when he lends) the debts of the borrower. This spending by proxy, this so-called saving, which saves nothing, while it is better than real saving (than absolute non- expenditure by anyone), yet lays a heavy burden on industry, which grows heavier with every additional pound "saved," till it becomes a formidable drag on the wheels of progress, weigh- ing down the debtor, crippling his means, and checking pro- duction. It does this in three distinct ways : 1. When a man has " saved " up to a certain point, he (or his son) generally retires from work to live in idleness on his savings, thereby diminishing the number of workers just when the burden of interest which the workers have to find has grown heavier. 2. Whether he invests his savings in land (charging rent), or leaves them a purely money investment (charging interest), in either case he levies a pure tribute on the worker, contributing thenceforth nothing to the work, but retaining a yearly claim on the product for his rent or interest, and yet standing to 232 Saving and Spending. receive his whole original purchase money or loan back by and by. The more these money savings (converted into claims) accumulate, the heavier grows the tribute that industry has to provide; rent rising as population presses on the land, and interest extending its area as interest-bearing investments multiply till the burden becomes too great to bear, and con- tinual complete break-downs of individual workers occur, with occasional widespread incomplete break-downs affecting the whole community, when we have what is called a financial crisis. 3. The tribute expected on these investments not only cripples and often breaks down existing enterprise, but it permanently prevents many enterprises from coming into exist- ence at all. An industry that will merely maintain one man, affording no surplus for rent or interest, is still a productive industry ; it at least maintains that one man ; and if it does that it will do more, for there can be no man, self-maintained, who will not be of use in some way or another to the community, even though no landlord or money-lender get anything out of him. But so long as this tribute system continues, no such industry will be allowed to arise. The landlord, who owns all the natural opportunities, will not allow him access to them unless he pays rent ; and the money-lender or investor, who commands (though he does not provide) all the artificial appliances, will not allow him to use them unless he can get interest from or profit out of him. So the man is thrown out a pauper, to be maintained at other people's cost or starve. The only relief, under existing circumstances, from this scarcity of employment, glut of goods, stagnation of business, and check to production, is for the rich man to spend his money instead of saving it. If the savers who retire to " live on their savings," as the phrase goes, did really live on their savings, there would be no great harm done. Unfortunately they do not. The live on the interest of their savings only, on a tribute exacted from the Saving and Spending. 233 workers, which leaves their savings intact. It is as if a weight of SOOlbs., carried by ten men, were increased to 5501bs., and one bearer stepped out, leaving the increased weight to be carried by the diminished number. We may admit that a slight tax of this or any other sort levied on the worker may sometimes act as a stimulus and in- crease his output, as in the case of the farmer who never made the farm pay so long as he owned the land (taking things " too easy "), but made a decent living out of it when he was sold up and had to work the farm as a tenant. But no such increase of effort by one man will compensate for another man's leaving the ranks to live in idleness as a landlord (or a money-lender) ; and the extra levy on the worker must be kept within very moderate limits or it will depress instead of stimulating him, breaking his hope and spirit, crippling his means, and causing constant interruptions to industry by the selling up of debtors who break down, throwing their employes out of work, and causing heavy loss to outsiders by the collateral debts they leave unpaid and the interruption of business relations. But the mere accumulation of debt, as debt (putting interest aside), is an evil in itself, and the whole process of money saving consists in the multiplication of debts. It is a mistaken kindness to let your debtor get deeply into arrears ; " short reckonings make long friends." A small loan is often a great help, and no one would wish to see it prohibited. But a debt which might pretty easily be met by a slight effort or pinch under pressure this year becomes more difficult next year if the debt has grown, and in no great time becomes hopeless of payment; It is not only that the debtor becomes more accustomed to being in debt, and more heedless of its increase, but the artificial supply of money encourages him to acquire more expensive habits or to engage in enterprises beyond his means, so that when payment is at last demanded he is 234 Saving and Spending. entangled in his engagements and unable to extricate himself. No doubt enterprises are sometimes started with borrowed money and brought to a successful issue ; but for one that so succeeds there are many that fail. In proof of this is the fact that once a farming landowner has mortgaged his farm he rarely pays the mortgage off by ordinary course of business. He may do so by a legacy, by a fortunate speculation, or a good deal, by a stroke of luck of some kind ; but by ordinary steady industry, not once in fifty times. For myself I have never known a single instance, though no doubt there are some. And the evil of this is not confined to the disheartened debtor ; the whole community is injured. For a mortgaged farm is a paralysed farm. A man rarely mortgages his farm till he is already in difficulties, and the yearly interest, with the sword of foreclosure ever hanging over his head, cripples his means in the present and in time disheartens him. He loses his interest in the land, which he feels is no longer really his own nor can be handed down to his son. He ceases to improve it; he fails to get the full produce out of it ; so the field of employment for labour is contracted and the output of wealth diminishes. Granting all that can be said of the usefulness of credit when kept within due limits, it yet remains the golden rule, observed by nearly all the most successful men, to keep out of debt. But if every- body kept out of debt, how could the savers invest their savings? Some methods might remain available, but the openings would be wonderfully reduced and the rate of interest fall rapidly. Note further that the interest on which the saver lives is never, as represented, the reward of virtuous self-denial. The savings themselves may be, but not the interest on them. If I self-denyingly put by one loaf out of two to-day, the reward of my self-denial is that I have a loaf to the good to-morrow. Saving and Spending. 235 There my reward begins and ends. But if I find to-morrow that I do not particularly want that extra loaf, and lend it to a starving man for a week on condition of his giving me a slice of bread every day in the week, and a whole loaf back at the end of the week; that is not the reward of self-denial, but a pure advantage taken of my neighbour's wants. But even as to the savings themselves, consider the nature of their mass, and how they have arisen, and see how much self-denial there is about it. The poor, those for whom provision is most wanted, rarely save ; partly because their poverty forbids ; because they really cannot spare from the present enough to make any provision ivorth saving (that is, enough for a real sufficiency). They may by great pinch put by a few shillings, or pounds ; but what would that be as a provision for old age 1 It would be all gone in a few weeks, and they would be destitute again. The game is not worth the candle. Better, the poor man thinks, to make sure of a little comfort and enjoyment while you can get it, and take your chance for the future ; who knows whether you will live to see it ! Moreover, he is beginning to think (and I agree with him) that those who in their youth and health bear all the toil and produce all the wealth of the country have done their duty to the country, and have a fair claim upon it when they break down and can do no more. Let us ask a little of this famous self-denial from the rich, whose riches they have produced, and a little less from the actual producers, whose whole life is one long exercise of self-denial, voluntary or involuntary. The labourer is a human being with as much natural (that is, equitable) right as "his betters" of access to natural opportunities as distinguished from artificial ones to the earth, which is Nature's gift as distinguished from the instruments which are man's product, and has more right to put the soil to use than the landlord has to order him off. He would only too 236 Saving and Spending. gladly maintain himself, and in maintaining enrich himself, if he were allowed ; but that, in the eyes of " his betters/' is not in accordance with the fitness of things. The labourer is too often spoken of, even by the highest authorities, as if he were a mere instrument of production in the hand of an employer, like the horse : to make use of as long as he is in good working condition, and to be turned adrift when he breaks down, either to starve or to be maintained miserably and grudgingly as a pauper, with a curse for not having saved enough out of his "oats" when he was young to keep him when he was old. Still the labourer is not treated exactly like the horse, I admit. There is this difference between them, that the human animal is expected to maintain himself in sickness, in old age, and when out of work, and to rear his progeny at his own expense which the horse is not. Indeed, I remember the late respected Professor Huxley (I think it was), in an article on " Capital," asking reproachfully why a man should expect to find employment or maintenance when he was " not wanted." Not wanted by whom 1 He is wanted by his wife, by his children, by his parents, by his friends, by a number of people who would gladly exchange services with him if they were allowed. But all these little wants didn't matter to the Professor. If the man was not wanted by a landlord or a money-lender or an investor, that was enough to damn him. Some irreverent people have lately been turning the question the other way, and asking why the landlord, or the money-lender, or the investor should exist when they are not wanted. Two things seem clear, that the labourer as a labourer is always wanted by somebody, even when he is " a drug " in the capitalist's labour market that is, there is always work wanting to be done j and that if there were no labourers there would be no labour, and if no labour no life, but that the land would remain though there were no landlord ; the instruments Saving and Spending. 237 of production and the power of multiplying them though there were no "capitalist" to command them; and that the railways could be run and the mines worked, paying their own expenses, though there were no investors to buy up the shares. The great bulk of existing savings has been accumulated by the already rich ; and the richer the man, and the less con- sequently in need of saving, the more, generally, he saves. It is the few millionaires (not the many poor) who roll up the great mass. But when a man has all his accustomed wants fully supplied, and there is nothing else he particularly fancies, where is the self-denial in putting by the surplus ? He saves it because he derives more pleasure from the saving than the spending ; and this leads us to the consideration why people save. It is said that people save not for the sake of the money, but for the goods which it will buy. This is true up to a certain point. Up to a certain point people save to make reasonable provision against the future; to secure a sufficiency of necessaries, comforts, and leisure when they are old, ill, or unable to earn; this "reasonable provision" varying with the style of life to which the saver has been accustomed ; the labourer's representing a snug cottage, a sufficiency of plain food and coarse clothing, with a trifle over for beer, baccy, and enjoyments ; that of a member of the "upper ten" representing good cookery, servants to wait, many little luxuries and refinements, and the ability to " keep up his posi- tion." Between these two lie all degrees of " reasonable provision." But it almost always happens that he who has acquired the habit of saving continues to save long after his "reasonable provision" has been secured, and without the least intention of spending, now or hereafter, what he has saved. The interest he can get on his savings counts for a good deal, of course, but he often saves much of that too. Putting aside as exceptional the mere blind instinct of 238 Saving and Spending. accumulation common with man to many of the lower animals, and which, once thoroughly aroused, occasionally becomes an overmastering passion, producing the miser who hoards secretly and gloats over his hoard ; putting aside, too, the sporting motive, whereby the huntsman hunts for the sake of the run, not of the fox, and the chess-player for the sake of the game, not for any stakes; yet the one is disappointed if the fox escapes, and the other if he loses the game ; so the confirmed money-maker makes for the pleasure of making more than for the possession of the thing, and sometimes spends freely as fast as he makes. But making money is one thing, saving it is another, and our concern is with saving. The great impelling motive that makes the saver go on saving long after reasonable provision has been secured, and without the least intention of ever spending what he saves, is the deep satisfaction of feeling that he could get goods in abundance if he chose, and the power and influence which the known possession of money confers; that the shop looks to him for custom, labour for employment, charity for subscrip- tion, enterprise for support ; that men hang upon his actions and touch their hats and try to conciliate him ; that the pro. gress of a cause, the establishment of an industry, even (when his savings mount up high) the war power of a nation, or the propagation of a religion depend on his will, and that of his fellow " big capitalists " ; that his power is greater than that of a king in some respects, if less in others. In a word, it is a form of ambition, which has been called a " noble rage " ; though whether it be noble or not depends on whether it stands by itself or has another and a higher motive behind it ; or whether the desire of power is for the mere pleasure of feeling it and exercising it, or to do good with it. Too often the desire is for the mere power itself, in which case it is no better than a blind instinct cultivated into a passion. Also, on how the power has been acquired, and in the case supposed it Saving and Spending. 239 has been acquired not by creating or accumulating utilities by which all may benefit, but by piling up against his fellows a mass of indebtedness which the world at large, the man of business, he himself, and even the people who suffer by it, unfortunately, conceive to be, or to indicate, accumulations of real wealth enriching the community. But, say some, by saving money is really meant diverting capital from unproductive to productive use. Is that so 1 The word capital has different meanings to different people. To the man of business it means money always ; or if goods, too, then only in so far as they can be turned into money or made money out of (whether usefully or uselessly matters not), while the economist declares that it means the actual requisites of production, food, tools, raw materials, not the mere token of exchange. Let us try the proposition in both senses. 1. As money. Say that I had proposed to spend 10 on a holiday trip, but change my mind and determine to invest it instead, and to lend it to a small shopkeeper on security of his stock. Here there is a clear case of the alleged diversion of money from unproductive to productive use. Note here in passing that people are apt to speak of unproductive v. pro- ductive work as equivalent to useless v. useful work, which is quite a different thing. Both productive and unproductive work may be either useful or useless. Making drawers for a sideboard to be used in a dining-room, and making frippery for a coffin to be buried underground are both productive ; both exhibit fresh goods as a result, but the one is useful, the other useless. So a surgeon and a sandwich man are both unpro- ductive in the current sense, that is, they add nothing to the sum of tangible wealth ; but the occupation of the one is useful and elevating, that of the other useless and degrading. What we are here concerned with is productive v. unproduc- 240 Saving and Spending. live work as bearing on accumulations. In the case of holiday v. loan, I personally part with my money in either case, receiving in return, in the one, case a holiday, in the other a lien on the shopkeeper's goods. As to which of the two will be the better for me will depend on the state of my health, the amount of my bank balance, and the nature of my work. But this has no bearing on the present question, which is whether my investing my money in an assumed unproductive loan, in- stead of spending it on an assumed productive holiday, has in any way preserved wealth from destruction, and so increased the sum total, or conferred benefit in any way on society. In both cases my money merely changes hands, going here to carry on a shop and maintain the seller who supplies cus- tomers, there to carry on a railway, and maintain the lodging- house keeper who supplies boarders. In both cases it helps a worker to live by his work. But as to the enterprise, it is certain that the railway is useful, and that my fare helps to keep it going ; but the usefulness of the shop depends on whether there are more shops than are wanted, as there generally are, or just enough. If more than are wanted, then I do no good by helping to keep a superfluous one going; if just enough shops, then there will be just enough business to keep them going whether I take my holiday or not, and the money I spend on my ticket goes into circulation, and eventually comes round to the shops. But there remains this marked difference of result between the two applications of my money ; that in spending it on a railway ticket I put it into circulation, and help to keep useful work going, without adding anything to the mass of indebtedness or exacting tribute of anybody ; while in lending it, though I may possibly have tided a useful man over a crisis, and set him on his legs, I may also, just as likely, have simply postponed his failure for the moment. But what is certain is that I have added one more item to the existing mass of indebtedness and ever-accumulating interest. True, Saving and Spending. 241 the debtor may fail or may repay the debt, in either case removing the item ; still my loan has added it for so long i.e., till one or other of these results occur. But what is quite certain is that I have added one straw more to the camel's back. Now, take capital as signifying the actual requisites of pro- duction tools, raw material, food : 1. Tools (in their widest sense as including machinery and appliances of all kinds). There are few tools that are suited for more than one particular use, and which can therefore be diverted from one kind of use to another, and the more uses a tool is meant for, the less use it is generally for any one of them. A saw, for instance, can be used only to saw, a spade to dig with ; both are adapted for productive use only, and can- not be applied to mere unproductive enjoyments, even if desired. A billiard cue, again, is fit only to play with, and a banjo to play on, and they can therefore only be used unproductively, for mere enjoyment. You can, indeed, use them to make money with, but making money is not producing goods. It is the nature of a tool that mainly determines whether it shall be put to unproductive or productive use ; the will of the pos- sessor has not much to do with it. Raw Materials. But though a cue can only be used for play and a spade for work, still I can make this piece of wood either into a cue or a spade handle at my will. To that extent I oan "divert capital "from unproductive to productive use, or vice versd, though my range of choice is narrow, being still restricted by the nature of my material. A boat, again, can be used for an unproductive pleasure excursion or for productive fishing, though still only for carrying somebody on the water. But, broadly speaking, goods in an unfinished state only can be diverted from one kind of use to another, and that within nar- row limits ; finished goods rarely can. Q 242 Saving and Spending. Food. Food is of no use except to eat. Whether the eater does useful work in return for it is a question of what he does with his time, not with the food ; that can only be eaten. INTEREST. But supposing money savings were as meritorious in the saver, and as beneficial to society as they are represented to be, the question remains why, as a matter of pure ethics, the saver should get interest for them. The borrower obtains the use of something which he has not, but urgently needs, and that is worth paying for. True, but the lender has something which he does not want taken care of till he does want it, and that also is worth paying for. It is an exchange of services, and one cancels the other. If there is among my possessions something that I have at present no use for, I can do either of two things : I can exchange it for some- thing that I do want, or I can put it by for future use. Say that, my harvest being gathered, I have no further use for my reaper till next harvest, then I can either exchange it for ploughs and harrows, which I do want, or I can lock it up. But if I lock it up I shall have to go to the expense of building a shed for it ; natural decay will be at work at it for ten months, and there is the chapter of accidents (thieves, fire, breakage), to reckon with. If, now, my neighbour, who, living at a higher elevation, has a later harvest, offers to use my reaper, giving security that he will return it (or another) next year AS GOOD AS WHEN HE GOT IT, he saves me the expense of building a shed, cheats natural decay, and insures me against accident. Is not that as sub- stantial a service to me as the use of it is to him ? Then, why Saving and Spending. 243 should either party pay the other ] True, the one service may be greater than the other, but who can tell which ? Sometimes it is one, sometimes the other, according to circumstances. But in practical life it is always the borrower who pays the lender. Why 1 Simply because the lender is in the stronger position, and can take advantage of the other's weakness. If I had 100 loaves of bread, which I could not eat before they grew dry and mouldy, but seeing men starving around me, lent these loaves to them at 100 per cent, interest, or any other rate I chose to demand (as I could), the verdict of the commercial world would be " business " : the law of supply and demand producing its natural consequences scarcity running up price ; but the verdict of equity would, I think, be " extortion " : the law of greed taking advantage of the necessities of others. A friend objects that this is usury, not interest ; the differ- ence being that usury is an unfair advantage taken by a monopolist of the victim of monopoly, while interest represents a voluntary contract between two free agents on equal terms, when monopoly is abolished. But since the economist in his study and the man in the street are for once agreed in their meaning, both referring under the term interest to a charge made for the use of capital put by from savings, therefore there is here (as before said) a simple exchange of services, caretaking for use, so that if monopoly were really abolished and both parties were free agents bargaining on equal terms, the one service would pay for the other, and no charge would be made on one side or allowed on the other. In other words., wherever there is interest there is usury in the sense of my friend's definition. Take a somewhat analogous case. Cost of production, measured in labour, determines theoretically, and in the main truly, the exchange value of commodities ; it determines how much cloth will exchange for how much wheat, 244 Saving and Spending. and how much gold will be required to express the price. But cost of production determines this only by influencing demand and supply, which is the vital factor. If there happens to be more cloth and less wheat than are asked for, the exchange value (and the price which expresses it) of the cloth will fall below, and that of the wheat rise above, the cost of production, for the moment, so that less cloth and more wheat will be produced till the balance is restored. The temporary scarcity of the wheat confers a temporary monopoly on the holders, and enables them to make a monopoly charge. Now money, under existing circumstances, is always a monopoly in this sense : that is, there are always more people wanting to get money than offering to supply it ; therefore, it has always a monopoly value, and the holder can make a special charge for its use, which charge is interest. But, it is again objected, interest is necessary in order to ensure a full supply of the instruments of production. Is that so ? " If the instrument-maker can expect a price that will only cover his wages of labour, and nothing for interest, he will make so many instruments only as he expects to sell for ready cash ; and the many workers who cannot buy, but would gladly borrow, will be left without tools." There will be no difficulty of the sort. There are three distinct ways at least in which the moneyless workers will be able to get the use of all the instruments they want : (1) The far greater number of the workers are now, and as the organisation of industry improves will increasingly become, subordinates in large undertakings under state, co-operative, or individual direction ; no longer underpaid or overworked subordinates, but still subordinates, receiving orders, but re- ceiving also the full productive value of their labour ; and the directing agency which employs them will supply them with all Saving and Spending. 245 the tools and appliances they require. For the much fewer, but still numerous, workers who wish to work on their own account, but have not ready cash to buy, there will remain the choice between purchase by instalments and hire. (2) Purchase by instalments. The instrument-makers (a sufficient number of them, at any rate) will always be willing to make for sale on deferred purchase by instalments so long as the sum of the ex- pected instalments will cover the full value of their labour of making plus something extra to compensate them for the inconvenience of having to wait for full payment. But this compensation for inconvenience has nothing to do with that charge for the use of saving, which is called interest ; for in this latter there is no inconvenience to compensate. The saver does not want prompt repayment of his savings ; he wants the payment to be deferred ; he wants his savings kept for him. The inconvenience in his case would be if the borrower did repay him before the appointed time, and so com- pelled him to seek a fresh investment. (3) Hire. The man again who cannot buy can hire, and hire is also essentially different from interest, and always so recognised ; for which reason the two things are called by different names. Hire is price paid for the use of the instrument itself, continues only so long as the instrument lasts, and diminishes in amount as the instrument wears out and depreciates ; while interest is for money value, whether of some particular instrument or not, and is immortal, suffering no diminution as the instrument de- preciates, and continuing after the instrument has disappeared. The maker, say, of a cab will be quite content to make a cab for hire, not for sale, so long as he expects (as before said) to realise by the sum of expected hiring the full value of his labour in making it (including, of course, the labour of provid- ing the materials for it as represented by their price) plus compensation for the inconvenience of deferred payment. So that we need have no fear of a deficient supply of instruments. 246 Saving and Spending. On the contrary, the supply will be greatly increased when that overthrow of artificial and privileged monopoly and forcing into use of withheld natural opportunities, which has caused tribute to disappear, has broadened out the whole field of in- dustry and fired the workers with fresh hope and energy. Assuming, then, that interest has no inherent justification (so to speak), is it morally wrong for the money-lender (the man who wants his savings kept) to demand interest ? His money has, by no act of his, acquired a market value, a tribute-commanding power, over and above its direct purchas- ing power, and so long as existing conditions continue, that power will cling to it, and if he waives it someone else will get it who has no more right to it than he has. If he refuse to accept interest on his loan, the borrower will be so much the better off, will have that much special advantage over other tradesmen who have to pay interest, and over other workers who cannot get money, but he will pay no higher wages to his employes, no higher price for his goods. Labour as labour will be none the better off; only that borrower as a borrower, whether he be a worker or an idler, a wise user or a reckless waster, will get the benefit of his freedom from interest all the same, but nobody will share it. The money-lender's con- scientious disclaimer will have done nothing to force withheld opportunities into use, to widen the field of employment, to raise wages or earnings, or to break the power of the landlord or capitalist ; that is, so long as only one or a few money- lenders act in this way. But if all tribute were abolished, especially if abolished in the only way in which it really can be abolished, that is, by abolishing landlordism, forcing all natural opportunities into use, and superseding taxation by State rent (the conversion being effected with fair consideration for all claims), then, indeed, parasites and obstructionists having disappeared, what formerly went in tribute will now be added Saving and Spending. to earnings, and the worker will get the full fruits of his work. One curious result of the disappearance of tribute which we may expect to see will be a great development of art. For? suppose I have 1,000 saved which I want kept, but for which I can expect no interest, I may indeed lend it gratis, on good security, and be glad to have it taken care of, but I can do better than that. I can buy some practically indestructible article, such as a diamond necklace for my wife, a noble statue for my hall, or a picture by some eminent artist. I shall thus get a return for my investment not half-yearly, but every time I look at it ; the pleasure it will afford me will be of a higher kind than that of mere money-making, and can be shared by all my friends without diminishing my own share, and when I want to realise my savings I have only to sell the article. No doubt the value of my investment may fluctuate, but so do all investments; only this class less than others. The article again may be destroyed or stolen, but, per contra, a borrower may go bankrupt or his securities fail ; the risk is no greater in one case than in the other, and the money I spend on my purchase goes into circulation and helps to maintain enterprise as truly as if I had invested it on loan, yet without imposing a burden of tribute on anyone ; and I help to develop artistic taste in myself, in the worker who produces such articles, and in the public. If I have no artistic taste I can buy something, also practically indestructible, that will afford a return in enjoyment in some way ; say, a substantial and commodious stone house. One way or another, I can always get a return in enjoyment of some sort out of my savings with- out sacrificing them even if I get no interest. A stranger landing on this planet would suppose that if the rich ceased to demand luxuries the poor would simply produce goods direct for themselves. But they are debarred from this 24& Saving and Spending. by the rich owning the land, the source of all industry, and commanding all the requisites of production, so that monopoly forbids them to produce what .their poverty forbids them to buy. Moreover, when interest has to be found for a money-lender or profit for an investor, as well as rent for a landlord, no enterprise can be attempted, however desirable it may be in regard to the satisfaction of human wants, unless it will pro- vide two at least of these forms of tribute, if not all three. So that production is checked further still. In short, the money savings that are so flourished before us as accumulations of real wealth assisting enterprise are a mere incubus weighing it down ; for the more rent and interest and monopoly profit (tribute on investment) there is to be found (and necessarily by the workers), the harder it is for the workers to carry on ; for the tradesman to keep his business going ; for the farmer to make both ends meet and put his land to full use ; for the labourer to find employment ; and the more frequently is trade interrupted by failure and insolvencies that spread ruin all around. The way to keep business going at full swing, to stimulate production to the uttermost, to multi- ply products faster than they can be used up, and so promote accumulation of utilities, is to spend money, not to save it ; to keep it circulating without running up a mass of debt against the workers. For consumption calls forth what it consumes ; so that though there is less for the moment there is more presently. The passing off of existing supplies is the signal for fresh supplies to come forth. Consumption creates demand, and demand is the voice of the consumer calling for more, a call to which production instantly replies. Whenever there is a financial crisis, trade depression, checked production, goods unsaleable, labour unemployed and eating its head off in enforced idleness, it is always because some people, somewhere, have stopped spending money; and the Saving and Spending. 249 cause of the stoppage (the immediate cause) is that the mass of indebtedness, miscalled savings, has overpassed the power of payment, and the overburdened workers have broken down under it. It is strange to note the action of our colonial Governments in the great financial trouble that befell us four years ago, and which hardly shows a sign of passing away yet. This depres- sion, of which the breaking of a bank was the first signal (though not the cause, for that lay deeper), shows itself in " scarcity of money." Unexpected liabilities have fallen upon many, and involve others behind them ; and so it goes round. Debtors cannot pay their debts, so creditors' incomes are reduced ; goods do not sell, and have to be sacrificed ; farmers are crippled for want of means ; mines closed for want of funds ; sawmills shut up for want of custom ; labourers cannot find work ; business languishes ; production is checked. Yet all the essentials of production are unimpaired. The soil, the minerals, and the timber, the factories, and the fruit trees, are with us still ; the workers are as willing, the food and the tools are as abundant, but something seems to have gone wrong with the machinery, the motion of the wheels is checked. Now when the coach is stuck, we do not take out some of the horses and clap on the drag ; we hitch on all the horses we can get and redouble our efforts. But this is exactly what our Government does not do. I am not blaming it. It is the Parliament behind the Government, and the electors behind the Parliament, that are accountable. Still, what the Govern- ment does is to take out the horses and clap on the drag, as their means of getting the State coach out of the mud. In other words, it stops all public works, discharges all the men, and " retrenches " every official whom it can possibly do with- 250 Saving and Spending. out; and all these willing workers are cast adrift just at the exact moment when even outsiders cannot find employment. The work that all these men were doing might not have been was not absolutely necessary. Most of the work of the world is not ; but it was useful work, well worth doing. The railways they were laying, the waterworks they were construct- ing, the roads they were mending, the plans they were drawing, the accounts they were keeping, the various services they were rendering, were all good and helpful. Now, the men who were doing all these useful things are eating their heads off in idleness, straining the diminished resources of the charitable, losing their skill and getting out of hand in every way, and suffering in their self-respect by receipt of alms, by supercilious treatment, by the consciousness of increasing disreputableness of appearance. The moral loss is the worst of all. It has been said (and I can easily believe it) that once a man has been out of work for a twelvemonth, losing steady and acquiring vagrant habits, accepting charity and rebuff, he is rarely any good afterwards. Surely when a country is suffering poverty and business stagnates, the way out of it is to produce more wealth, all the wealth we can ; to stimulate every industry, call forth every resource. Yet we are doing the reverse. The wonder is that a country that behaves thus ever gets out of its difficulties at all! "But," pleads the Government, "we cannot help ourselves; we have no money." Well, where is the money? It has not melted ; it has not flown to other countries, for these other countries are in the same plight as we are (such crises when they come are pretty universal). Where, then, is the money ? It has accumulated in the hands of the savers, whose saving, by rolling up a mass of debt and imposing a crushing tribute, has caused the whole trouble ; and still they will not spend, but save all the more. Saving and Spending. 251 Tap this reservoir. Tax these unearued incomes, and with the proceeds set the machinery going. Why is it not done ? Ah ! that is for the people to answer. It forms no part of our present subject, but raises a different question altogether. The professed practical man here remarks to me dryly that he has noticed that those who save do well, while the others don't; and that what is good for each must be good for all. True ; but there is here a little uncertainty about the " each." Say there is a panic about a bank. Some then rush off and draw out their balance forthwith and secure themselves. This is good for each of those who do it, but is it good for all ? Would it be good for all to do it or, rather, try to do it ? It would simply produce the very calamity that was dreaded ; it would break the bank. All cannot do it ; and those who do ruin those who don't. The case of saving is sufficiently parallel. All cannot save, in the sense in which we are con- sidering the practice, and in which the practice is carried out, for it consists in lending instead of spending what is saved. But if all lend where are the borrowers ? It is only possible for some to lend on condition that others borrow instead of lending. If rich A will not buy poor B's goods, what is B to do ? His goods being unsaleable and his funds run out, both his capacity and his will to produce more will be impaired, and industry will be checked. He cannot produce more without the means, and why should he produce more when he cannot sell even what he has 1 Still, he must do something, so he borrows. This starts him afresh, but the assistance is like a glass of brandy to an exhausted man ; it is a mere stimulant, enabling him to make a spurt for the moment, but leaving him the more exhausted afterwards. The borrower's market is not widened, his expenses are not lessened, but he has now got a debt added to 252 Saving and Spending. his other liabilities, and interest on the top of it. No wonder we have periodical crises, widespread failures, wholesale wipings out of impossible debts. Why are these things so ? Why is it that the poor who perform all the toil that produces all the wealth are dependent on the rich, who for the most part do not toil or produce 1 ? That the willing worker may not build his own home, make or procure his own clothes, satisfy his numerous wants directly or by exchange with his fellow- workers though the resources of nature, whence all these things are derivable, lie unused all round ; the soil untilled, the sites unbuilt on, the minerals un- extracted, the opportunities unused? Why are the primary products, those that the earth directly yields, the raw materials of which all the forms of wealth consist, so scarce the grain and the roots, the flax and the wool, the coal and the iron, the brick and the lime so that there is a, so to speak, life and death struggle for the privilege of working them up into finished products, mainly for the enrichment of the already rich, the workers receiving little more than their "oats" like the horse 1 Why should there be any scarcity of these raw materials, any scarcity of employment in working them up, any scarcity of the finished products, or any difficulty to any willing worker in securing them ? The opportunities are there, all around unused ; Nature is prolific beyond conception, and becoming more so every year as our knowledge of her secrets widens and our appliances multiply. Why should not the earth- tiller and the house-builder, the baker and the tailor, and the producer of every kind, supply each the other's wants by mutual and free exchange 1 Because "property has been made to consist not in the products of labour only as it should, but in the opportunities of labour also which it should not ; because the land, with all its constituent elements and properties, spontaneous products, advantages and opportunities, as Nature, unassisted by art, Saving and Spending. 253 supplies them, has been made an article of commerce to be cut up into square pieces and sold to the highest bidder, and there- fore bought up by the rich in any quantity, and unconditionally ; and the rich buy it up as an investment, that is, not to use, but to prevent anyone else from using except for the highest tribute that can be got out of him for the mere permission to use it, so that the monopolist may live in idleness on the worker's toil ; because, in short, the land is bought for obstruc- tion, and obstruction used for extortion (though these, of course, are not the terms applied to the transaction). Till this great fundamental wrong is remedied ; till it is re- cognised that exclusive occupation of any portion of the earth's surface of the face of nature of the common inheritance of all is granted to secure to the occupier the fruits of his own labour only, not the fruits of other people, and that, only so far as is necessary, on such conditions only as public policy may require, and in such limited area as shall prevent it be- coming a monopoly, to the disinheritance of others these evils will continue. Palliatives may be devised here and there, slight improvement in the condition of the poor may be effected, but the main evils will remain substantially as they are. So long as this system continues, natural action will produce, so to speak, unnatural results; the poor toiler's hardest efforts will not enrich him, while the rich will grow continually richer by mere investment ; the poor economiser's most pinching self-denial will not secure him a comfortable provision in the future, while the rich man's profuse ex- travagance will leave his future still safe ; labour-saving con- trivances, while opening out many fresh fields, will yet carry into every fresh field the power and the tendency of the employer to make a machine do two men's work and cast the odd man adrift, and so help to reduce wages instead of diminishing toil (for, as a great writer has said, all the in- ventions of the age have riot succeeded in lessening the hours 254 Saving and Spending. of toil by a single hour) ; warlike expenditure will not hurt the poor, only diverting to cannon and gunpowder what would otherwise be spent on luxuries in which the poor had no share, and converting into comparatively well-paid and well-fed soldiers men who would otherwise become paupers and black- legs ; in short, helping to keep wages up. Everything (as Mr. Flurscheim has well observed) is turned topsy-turvy under the existing system, that becoming evil which is naturally good, and that good which is naturally evil. So long as labour is forbidden access to natural opportunities barred by monopolists, the labourer will be at the mercy of the landlord and the capitalist ; wages will be determined by cut- throat competition for employment in an overcrowded labour market, instead of by the return obtainable from these natural opportunities. So long as the rich man can with his money buy land which will bring him rent, so long will he insist on interest for loan equal to the rent he could get for the land he might buy. But when once this our own mother earth is re- cognised as the heritage of the race, not as a monopoly of the landlords, when all natural resources are forced into use and no monopolist may withhold or extort ; when work is offering for all and the fruits of work are secured to the worker, then it will not matter whether the rich man spends or saves the money. He will get no tribute on his savings, for interest will disappear with private rent. He will give no added employ- ment by his expenditure, for everyone will find work to do who wants it, and will produce something for himself or for his neighbours if the rich man does not want anything. In short, this treatise will cease to have any practical application. May that good time come quickly. THE "APPRECIATION OF GOLD." No I. It seems to be admitted on all sides that the pound sterling has about twice the purchasing power that it had a generation ago. This fall of prices has been called the appreciation of gold, not the depreciation of goods, because it is supposed to be caused by a growing scarcity of the coin material, gold. I take the liberty to question that, and to offer a different ex- planation. The scarcity-of-gold explanation has been jumped at partly because it seemed at first glance to many to be the only and obvious solution, and partly because the fall of prices followed soon after the adoption of the gold standard by other countries as well as Great Britain. This, however, is a mere coincidence. What I shall try to show is that it is money as money, not gold as gold that has " appreciated," and that it was inevitable, no matter whether the coin material were gold, silver, or cowries, and whether we had monometallism or bimetallism. The accepted theory is that prices are determined by the amount of coin in circulation ; that is, that if there were only half the number of sovereigns in circulation, the amount of business done remaining the same, or if the amount of business were doubled the number of sovereigns remaining the same, the sovereign would appreciate; each sovereign would have to do double duty, and cover twice as much goods, i.e., prices would fall one-half. Conversely if the sovereigns were doubled or the business halved. Well, if the sovereigns have fallen short of requirements, that would explain it. But they 2 55 256 The "Appreciation of Gold" have not. Gold has not, in the period in question, become scarcer, but much more plentiful, relatively to requirements as well as actually. 1. As to Annual Output. There have in this period been wider and richer gold discoveries than at any former period, Pizzarro's, perhaps, excepted ; first in California, later in the Eastern Australian colonies, later still in South Africa and West Australia. At the same time scientific discoveries and mechanical inventions have increased the facilities for working these increasingly abundant deposits. There is now more gold found, and more easily got than at any previous known period. 2. Past Accumulations. Gold, being at once highly valued and practically indestructible, has in the course of centuries accumulated in private hands for ornamental and other purposes in enormous quantities. The wear and tear for these purposes is so slight that we may almost say we have the whole accumulation of past ages to draw upon if at any time the supply of coin should run short. 3. Hoarding of gold, which in former days was the chief way of accumulating savings, has practically ceased in all civilised and progressive countries, and all these hoards are now added to the available supply. 4. The need for coin does not increase proportionately with increasing business. On the contrary, the more commerce is extended the better it is organised, and the more securely credit is established the less coin is required. The great mass of business is ever-increasingly transacted by cheques, notes, bills of exchange, balancing of contra accounts, and so on, very little coin passing at all, except for petty transactions and odd surpluses. Moreover, the more rapid the circulation the less the coin required proportionately to the business done, the same money, whether in coin or paper, effecting a vast number of successive transactions in the course of the year. Such being the case, it does not seem possible for the The "Appreciation of Gold? 257 sovereign to have appreciated through growing scarcity even for the briefest space, much less for a permanence. It seems as absurd to imagine that sovereigns could become inconveniently scarce so long as the gold of which sovereigns are made existed in abundance, uncoined, in the shape of bullion, plate, ornaments, and so on, as to imagine there could arise an inconvenient scarcity of chairs to sit on so long as the timber of which chairs are made existed in abundance in the shape of logs, sawn timber, superfluous tables, and cupboards, and so on. Given the material, the slightest temporary scarcity of any particular form of it will at once cause enough of the super- fluous material to be made into the required form, and restore the deficiency. If coin did begin to fall short of demand, it is the banks that would feel it first ; the public could not so long as it could call on a bank to cash its paper ; and the bank, finding a scarcity of this coin (a real scarcity of the coin, re- member, not a mere entanglement of its business aflairs), would either have its bullion at once turned into coin, or if it had no bullion would offer a slight temporary premium for gold, just enough to divert a little more than usual of the ever-incoming supply from the goldsmith to themselves, and so make up the deficiency before the public found out that it existed. Nor could the sovereign depreciate from over-abundance (except in the same momentary, scarce perceptible manner), because while the use for gold as gold is practically unlimited in extent and variety, coin is restricted to a single use that of exchange, and for this a certain quantity only is required, an excess being as inconvenient as a deficiency, and the overplus is rejected. No one (except a bank for limited necessary reverses) wants, or will keep, more than a very few sovereigns. If he has XI 00 coming to him, he would much rather not have it in sovereigns, but paid into his credit at a bank (generally done by a mere written order.) If the sovereigns are forced upon him, he promptly gets rid of them by depositing them in 25 8 The "Appreciation of Gold." a bank, and the bank as promptly passes them out to its customers, if they will take them. But they, for the same reasons, will not take more than a few each, so that if there are more than these customers will take, the bank finds itself saddled with a supply of useless gold to be got rid of somehow as may seem best. It is so much safer and simpler to keep your money in the shape of a credit entry at a bauk than in that of a pile of sovereigns in a strong box, and so much easier to write a cheque when you want to make payment than to go to the strong box, that every one adopts the former course. It is only when a man is doubtful whether the cheque offered him will command sovereigns if required, that he refuses the cheque and insists on the sovereigns, and it is only when he is doubtiful whether his bank has got sovereigns enough that he hastens to draw out his balance. Directly he is satisfied that the cheque is " good " and the bank " safe," he prefers the cheque to the coin, and leaves his balance intact. In short, you may almost say that no one ever wants sovereigns except when he cannot get them. Hence it is no more possible to force more sovereigns into circulation than business requires than to pour more water into a bucket that is already full. Where people persist in coining more sovereigns than are wanted, as at the Sydney and Melbourne mints, the number of sovereigns in circulation does not increase; there are no more sovereigns circulating, in proportion to business done, in Melbourne or Sydney than elsewhere; the overplus "runs over" and disappears somehow. The supply of coin then accommodates itself to requirements, and any rise or fall of prices cannot therefore be due to scarcity or excess of coin, but to some other cause. When we hear of quantities of gold lying idle in the banks, this does not imply that so much " capital " cannot find in- vestment ; it merely means The "Appreciation of Gold." 259 That there is a financial crisis and stagnation of trade, less business being done, and therefore less coin wanted to do it, so that the overplus accumulates in the banks as before stated ; and the banks cannot get rid of it, not because substantial borrowers cannot be found, but because they do not choose to take out their loans in that inconvenient shape. If the bank did lend a borrower 1,000 sovereigns, he would simply and immediately re-deposit them in the bank, and draw on his account, and there is nothing for the bank to do in such case but melt it down, or wait till reviving business requires more coin. The 1,000 sovereigns, then, are not " idle capital, seeking investment." The sum as a sum has just been lent, and the bank cannot go on lending it over and over again, even though no one will take it out in sovereigns, so that the sovereigns remain on its hands. The sovs. as sovs. are idle, but the capital as capital is fully invested. The supply of coin then accommodates itself to requirements, instead of exceeding or falling short of them, and so deranging prices. Any rise or fall of prices, then, cannot be due to scarcity or excess of coin, but to some other cause. No. II. Prices might fall through discoveries, inventions, and im- provements, cheapening production ; and, no doubt, many articles have become cheaper from this cause ; but it cannot account for that general fall of prices which producers all round complain of. For such improvements act most irregu- larly, making vast strides along particular lines, and no per- ceptible advance on others, and the cheapening so produced does not lessen profits or wages. The general all-round and (to the producer) impoverishing fall of prices which we are here dealing with must be due to some wider, more universal 260 The "Appreciation of Gold'' cause. Let it be understood, too, that the general fall referred to does not mean that everything is now cheaper than it was absolutely, for some goods certain furs, for example having become more difficult to procure, have actually risen in price. But the general movement affects even these, for though dearer than they were (owing to their growing scarcity), they are not yet so dear as they would have been but for this general fall. No one pursuit, open to all, can ever continue more pro- fitable than another, much less more profitable than all others. Directly it was found to be so, increased com- petition in that line would soon restore the level. The rise of price in some few articles then merely means their increased cost of production ; and the general fall of prices means that all things are now cheaper in comparison with their cost of pro- duction ; in other words, that the work of production is worse paid in money, that is, nominally. I hope to show that it, and all other useful work, is worse paid in money's worth that is, in reality. No. III. The last, and I believe the true, explanation of the fall of prices is what is called over-production, but is really under- consumption, due to the contraction of "effective demand," which again is caused by the present unequal and apparently inequitable apportionment of the annual product (or rather of its value), not of past accumulations, which would not so much matter ; those who work hardest, longest, and at the most disagreeable or dangerous work being generally worst paid, and those who do little, often nothing, to further work, having the largest claim on the proceeds. In Tasmania, for instance, in the income tax estimates the farmer's earnings are estimated at half the rent ; the man who does nothing to pro- duce the rent receiving twice as much as the man who does. The "Appreciation of Gold." 261 Hence the many poor cannot buy all they want, and the few rich are increasingly disinclined to buy all they could. Dis- coveries and inventions have so increased the productiveness of labour that the supply of this " effective demand," limited as it is by poverty at one end, and "saving" at the other, is effected without employing all the workers, whence ensues in- tense competition amongst the workers for employment, bring- ing down the price of work and of the products of work. I use the term " work " rather than the more usual one of " labour," because custom has restricted the term " labour " to the lower, more mechanical, and worst paid form of work, and the reduction of earnings I am referring to applies to all work, whether of the head or hand, whether superior or inferior, whether by employer or employed, whether in trade or the professions. But if this be so, why has it not happened before 1 Well, I give several reasons, closely connected, yet distinct. (a.) Natural resources are now more completely monopolised than they ever were before. The homeless cannot erect a shanty on the most uninviting vacant spot, the labourer cannot put a spade to grow a few vegetables in the most neglected corner, the prospector cannot search for minerals in the wildest mountain range, the villager may not turn his cow on the poorest pasture, the passenger may not take a short cut, the tourist may not quit the high road to admire the scenery, with- out running up against a landlord who warns him off; old pathways are shut up, the commons have to a great extent been enclosed bit by bit, the very fish in the rivers, the seaweed washed up by the waves, the limpets growing between high and low watermark, are all claimed and barred. In America, though there remain thousands of square miles unused, there is hardly an acre worth having still open to selection. Every- where the land speculator gets ahead of the landuser, and snaps up the land. One-third of American farmers no longer 262 The "Appreciation of Gold'' own the land they use, but are crushed by rent ; another third are mortgaged up to their full value, and are crushed by in- terest, and the remaining third are fast following the other two. In Australia, as elsewhere, the landowner as distinguished from the landuser, commands the situation more aud more. Land wanted for cultivation is kept under sheep on unimproved bush pasture, though farm rents are forced up by the artificial scarcity of farms, so produced till the farmer can barely make both ends meet ; and some colonies, with vast areas of good land untouched (but not unmonopolised), and with willing men un- employed, do not raise their own food supply. Tasmania, for instance, imports wheat and oats, butter, bacon, and other pro- ducts, which she could supply for her own use and for export, abundantly. Mineral lands, again, though reserved from actual sale, are let to dummy companies of mere speculators, who simply sit on them, and keep other people off. And so on with all our natural resources. One after another they are mono- polised and in great part kept from use ; sometimes from any use, as with the dummy company and the land speculator, but more often merely from the use for which they are most wanted, which is enough to force up the price of all land wanted for such use, and check progress in tfcat particular line. (6.) All the sentiment connected formerly with land owner- ship and occupation is fast disappearing. The nobleman who clings to his estate because his family has owned it, and the yeoman because his fathers have lived on it for generations, and who take a pride in it, and recognise a duty attached to it, are types unknown in America and the colonies, and fast dying out in England. Everywhere (in Anglo-Saxon commun- ities at any rate) land is coming more and more to be regarded as a mere investment for capital ; something to be acquired, not to use, but to prevent other people from using, except for the highest rent that can be squeezed out of them ; something The "Appreciation of Gold? 26$ to be bought up at advance price by the rich, who can afford to put up with a small return for a few years, in view of a big profit later as the land value increases, while the real landuser, having to live by his work, requires immediate return for his money (when he has any money), and has, therefore, no chance in the bidding ; finally, something which the owner may legiti- mately put to whatever use, non-use, or misuse, brings him in most money, no matter how much other people may be incon- venienced, natural opportunities held back, and national pro- gress checked. (c.) Again, the capitalist, in the sense of the moneyed man (the sense universally accepted in the business world), has now more complete command of the whole field of enterprise. Everything is being done on a larger and ever larger scale. The handicraftsman disappears before the factory, the small farms are consolidated into large ones, the universal provider swallows up the shops, the big steamer supersedes the small sailing vessels, the syndicate buys up the surrounding mines, the trust gets control of the whole salt, oil, or fish trade. Everywhere capital, in the sense of money, has full possession, and the man who would start from small beginnings, and work his way up independently, finds no place to make his small beginning.. There are no independent openings left anywhere ; or, at any rate, they are fast disappearing. Every worker must find an employer, and the employer resolves himself into a money man. The architect and engineer who design, the expert who understands, the organiser who arranges, the over- seer who directs, as well as the underlings who obey, are all hired servants, or contractors, or professionals, who receive " current rates " (rates continually cut down by their competi- tion for employment) for their services, but who have no claim on the product. That goes to the man who has merely " put his money " into it, and without doing a hand's turn to the work expects all the annual profit and his whole capital back 264 The "Appreciation of Gold" at the end. One result of the increasing magnitude of enter- prise is the rise of the shareholder. Everything is being done by companies, the owners of the enterprise being a number of people, great and small, who have simply bought up the shares, and not only do none of the actual work, but have practically no more to do with the management than they have with the Solar System. The real worker of every sort is a mere seeker for employment, a competitor for employment, a bringer-down of wages, salaries, fees earnings of work ; while the mere money-owner can grow richer and richer without work, by mere investment and reinvestment. No. IV. There is an old saying that " who buys, sells " ; that is, that no one can get goods or services without rendering goods or services in return. It is quite false, as everyone knows. All ground rent (amounting to millions per annum) consists in the right to demand goods and services from the landuser for mere permission to use the land, no goods or services being given in return. All fortunes realised by past sales of land consist of money received for mere transfer from an outgoing to an in- coming landlord of this right to levy toll upon industry. These fortunes are not converted into coin (so no more coin is re- quired), but are registered as general purchasing power, ex- pressed as State debentures, mortgages, company shares ; that is, as a claim for " money lent " (really mere transfers of registered claims), authorising the owner to demand goods and services from the State revenue, the land produce, or the business profit, to the whole capital value at a future date. The interest on these fortunes represents a further separate annual claim for goods and services up to the date named, when the whole capital value is to be returned undiminished. All these claims and all these incomes represent no goods or The " Appreciation of Gold" 26$ services rendered, either in the present or in the past, by the holders and recipients, or by their predecessors. From first to last they are all pure Tribute that is, a toll levied on industryi as distinguished from Earnings, or the reward of work. All these landlords, fortune-possessors, and interest-receivers, so far as they represent or originate in rent, are pure parasites licensed to live without work, on the earnings of those who do work to receive without giving to " buy " without " selling," and every " fall of prices " means a fall of earnings, and a rise of tribute ; it means that so much less money will command so much more goods and services ; so much more work must be done to pay off so much debt, or realise so much income ; so much more of the annual output is diverted from the worker to the non-worker from " Labour " to " Capital " from the man who gives work or goods for money to the man who gives money for work or goods. It is these all-devouring claims on the worker that, together with the contraction of effective de- mand, produces that depreciation of earnings that exhibits it- self as lowered prices. The nature of the currency has nothing to do with the matter. It is true that all these claims are payable in gold if demanded, and that if they were so demanded there is not gold enough in the whole world (ready produced) to meet them. Still since, as I have shown, they are not so demanded, the impossibility of meeting them if they were is of no consequence. Perhaps this state of things is all right. Perhaps the money was all honestly earned. Perhaps its tremendous, all-commanding power over land and labour, food and tools, over all the opportunities, requisites, and products of work is a necessary inevitable consequence of its nature. I am not here concerned with that question ; I am only con- cerned with the facts. My subject is the fall of prices, and my business simply to account for it. This ever-intensifying monopoly of all opportunity for the worker even to maintain, let alone enrich, himself by inde- 266 The " Appreciation of Gold* pendent direct access to nature drives the worker ever more and more into absolute dependence on the expenditure of the rich in either hiring him to work, or buying the goods which represent his work. If the rich will not spend, then workers cannot find employment, nor goods sell ; and just in so far as the rich " save money," just in so far does employment become scarce, and earnings fall, and just in so far does the market for goods become contracted, and prices fall. In short, the fall of prices is merely one way of expressing the fall of earnings. The moneyed man, or capitalist, as he is called, does not as such supply anything. He does not supply the soil we culti- vate, the sites we build on, the minerals we extract, the natural resources of any kind that we put to use. He only buys them up and charges for the use of them. He does not supply the labour that turns these natural resources to use ; he only hires it (or worse still, leaves it unhired). He does not supply the food the workers eat, the tools they use, the appliances of any kind that enterprise requires. He only buys these up \ or, worse still, leaves them unbought as " overproduced " goods ; goods, that is, produced in excess, not of human wants, but of " effective demand " ; and as he commands all the requisites of production, he commands as a necessary consequence the products. In short, he supplies nothing, but commands every- thing. But, it is said, people do not nowadays hoard their savings, but invest them ; that is, lend them out at interest for other people to spend, so that the money gets spent all the same. True, it is spent, but not in the way wanted ; not in relieving the congestion, but in maintaining it not in buying the ** over-produced " final products, but in advances to the producer to enable him to keep up the " over-production." For example Capitalist A, with 100 to spare, refuses to buy worker B's 100 worth of unsold goods, and also to buy any- thing else that B might supply instead, because he wants to The "Appreciation of Gold!' 26; save his money, not to spend it ; but he offers to lend B 100 on security of his plant, to enable him to carry on. How does this mend matters ? It does not help B to sell his surplus goods ; it does not reduce the cost of producing them ; it opens out no new prospect ; it only enables B to struggle on a little longer, but under an increased burden of debt. True, the money is spent all the same, and by the same person B, whether he obtains it from A by sale of finished goods or by loan, but the results in the two cases are wide as the poles apart. What was wanting was not the power to produce (that existed al- ready, in excess, as you may say), but the motive, that is, the prospect of selling what was produced, i.e., an effective demand. A's refusal to buy abolishes that effective demand, and his loan does not restore it. The inability of the poor to buy, and the disinclination of the rich to spend, both alike restrict the field of employment, check production, and lower earnings and prices. The inability of the poor to buy, which means the low rate of their earnings (caused by land monopoly and money-saving, limiting the demand for work) deprives the workers not only of direct enjoyments, but also of a vast market for their labour and its products. If, say, half the money that now goes in tribute to the non-workers went in wages to the workers, their mutual demand for each other's goods and services would find work for all, abolishing the army of the unemployed and only partially employed (whose cut-throat competition for employ- ment is the chief proximate cause of low wages), and effectually prevent all possibility of " over-production." The goods which are now a " drug in the market " would go off rapidly, and producers start fresh supplies, to be followed by further supplies as these were in turn consumed. Industry would resolve it- self all round into a continuous interchange of useful services, and the markets would be far steadier than they are at present, inasmuch as- there would no longer be the same pressing 268 The "Appreciation of Gold" temptation to over-produce in any particular department, aud inasmuch as the wants of the poorer classes are less liable to sudden changes of fashion or caprice, and can be pretty accurately calculated in advance. No. V. The disinclination of the rich to spend is equally disastrous. Reasonable insurance by money-saving against accident and old age is always good, because, though the "savings" are purely imaginary (since nothing is really "put by" except a claim on somebody else), still it gives security to each in- dividual who saves and averts privation. But every pound " saved " beyond such reasonable insurance simply narrows the area of " effective demand " and checks production. If I refuse to buy my neighbour's goods, not because they are of no use to me, but simply because I want to " save money," then there is nothing really saved in the present, while there will be less produced in the future; consequently a net loss to society. There will be nothing saved in the present, because goods are produced to be consumed, and if not consumed will spoil, so they will be lost equally, whether I (or somebody) do or do not consume them; and surely it is better that they should be usefully or agreeably consumed than that they should spoil And there will be less produced in the future, because goods are produced for sale prior to consumption, and if I (or some- body) will not buy them, there is no object in producing them. Even if somebody else buys what I do not, the loss from my saving is not avoided. For evidently in that case there were two people who could buy, he and I ; but only one of us did buy, therefore the loss to " effective demand " remains. " But if low prices are a loss to the producer, they must in the same degree be a gain to the consumer; and as the producer is himself a consumer, must he not gain in The " Appreciation of Gold:' 269 the one capacity exactly what he loses in the other?" Certainly not. Every producer consumes some things, but not all things ; often (unfortunately) very few things. On every- thing that he produces, but does not consume, he suffers the whole loss of a fall of prices. Take the lowest order of producers, the "labouring man." The list of articles which he consumes is of the very shortest. Speaking roughly, 99 out of 100 of the articles that fill the price-lists are things that he never dreams of buying, and every fall of price in any one of these (which is not caused by improvements cheapening pro- duction) represents a loss to him as a producer for which he receives no compensation as a consumer. Take now some article which he does consume say boots and suppose boots to fall Is. a pair. Then he loses Is. on every pair he makes, and gains Is. on every pair he buys. But as he makes probably 100 pairs for one pair that he buys, he will lose 100s. for every one that he gains. Of course the figures are only given for illustration, and do not pretend to be exact. My point is the fact of his loss, not its precise magnitude. If there were no mass of ever- accumulating money claims, enabling the owners to receive without giving, to buy without selling and every purchase resolved itself into an exchange of service, then it would matter little whether prices were high or low, for everyone would gain in one way what he lost in the other. It is the quantity of these accumulated claims that represents the loss to producers through low prices. Every fall of price (not caused by lessened cost of production, measured in labour not wages) benefits the buyer at the expense of the seller the money-owner at the expense of the producer the capitalist at the expense of the worker. Neither the increased consumption of the working masses, nor the increased expenditure of the money-owners would lessen the sum of wealth, but, on the contrary, greatly increase it ; 270 The "Appreciation of Gold'' for both would resolve themselves into a productive exchange of services, beneficial all around. The increased consumption of the working masses would create a vast home market, stimulating production in all directions, giving work to all the unemployed, abolishing all chance of " over-production," raising prices and earnings; and the expenditure of the rich would merely mean their exchange of useless " money ; ' (useless so long as unspent) for useful goods or services increasing the sum of wealth or of enjoyment. Bear ever in mind this golden maxim, that money spent re- mains unspent. Labour may be wasted, goods may be destroyed, but money only changes hands, and is available for spending and re-spending in the new hands, and in any successive number of hands. 100 would suffice to transact all the business of a pretty large and busy community if only it were kept going ; 100 spent 10 times successively by different people in a day would represent 10 pretty large transactions, and would be equivalent to 1,000 spent once in a day, to 7,000 spent once in a week, and to 365,000 spent once in a year, and not even 100 sovereigns, or near it, would be wanted, for the far greater part would be affected by paper exchange and balancing of contra accounts. Increased power of con- sumption by the masses would benefit all the workers, employers as well as employed, the professional as well as the trading class. The farmer would no longer be in despair what to pro- duce or how to find sale for it, the merchant or shopkeeper to get his goods off, the manufacturer to dispose of his wares. The doctors would find paying patients, the briefless barristers other occupations, the artist, architect, engineer, abundant call for their services. And as for the farmer, rising wages would mean falling rents, so that matter would square itself. The farm that fetches 100 a year when wages are 10s. a week will certainly not fetch that when wages are 20s. The landlord can only get what tenant competition compels. Rent is a The "Appreciation of Gold? 271 surplus (of a sort), and the heavier the working expenses the less the surplus available for the landlord. If gold were "over-produced" as goods are, gold would too in its turn depreciate : less goods would exchange for more gold. The price of gold would not fall, but prices of goods would rise. The price of gold cannot vary, because its price is its exchange value as against itself, which must be always the same. An ounce of gold is worth (in round numbers) 4, not by force of any law or custom, but from the simple fact that an ounce of gold will coin into four sovereigns, and four sovereigns melt down into one ounce of gold ; because, in short, they are the same thing in different shapes, convertible back- wards and forwards at will from one shape to another. There- fore gold will always be worth 4 an ounce, whether it be plentiful or scarce. But the purchasing power of 4 its exchange value as against goods may vary to any extent, and will depend on the comparative over or under production of the two things. The exchange value of the two things (money v. goods) being what it is, if at any time the supply of clothes, tools, houses, books, exceeds the demand at the price going, the supply of gold remaining the same, then prices of these goods will fall, the goods will depreciate, the money appreciate. This is what has happened. My point is, that though the low prices complained of are due to the fact that goods are " over-produced," while gold is not, still this comparative under production of gold is not the cause of that trade depression and poverty of work remuneration, which is the real trouble. Trade depression and poverty of work remuneration would not be alleviated by an over-production of gold, as well as of goods. Prices would, indeed, in that case return to their old level; but this would merely mean that every transaction would be reckoned in higher figures. The difficulty of effecting 272 The " Appreciation of Gold? any transactions at all would remain as before, so long as that " effective demand," which alone calls forth production, fails as it does now, to represent the voice of human wants calling for their satisfaction, and is a mere artificially contracted " market," limited at one end by the inability of the poor to buy all the goods they want, and at the other by the disinclination of the rich to spend all the money they have. So-called "over-production," with its consequent low prices and diminished earnings, will continue so long as natural resources are made mere articles of commerce, to be bought up and monopolised by the rich, and used to extort tribute from the workers ; and so long as the creditor can refuse to accept payment in goods or services, which are all that the worker can really pay in, and insist on money, which the worker cannot get, for the very reason that the creditor's refusal to buy his goods or services has destroyed their money value. I put forward these views with great diffidence, thinking merely that I have a sufficiently good case to "bring into C0urt " THE END. Printed by Cowan &> Co., Limited, Perth. THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO SO CENTS ON THE FOURTH DAY AND TO $1.OO ON THE SEVENTH DAY OVERDUE. nn Utb A -' i99* **in c? 4Jun'52Bf . 4 LD 21-100m-7,'39(402s) ,