April 13, 1888.] 



SCIENCE 



175 



law. The almost universal acceptation of that law is sufficient to 

 stamp this as a paradox, provided it be true. Mr. Henry George 

 was, I believe, the first writer who had the courage to formulate it 

 and attempt its substantiation. In this, I must admit, he has been 

 successful. After reading his argument, one is inclined to wonder 

 how any other view could ever have been taken. Society is really 

 a great co-operative institution, and as such it has succeeded in econo- 

 mizing the forces of production. All who understand what the 

 value of co-operation consists in, know that the more general it is, 

 the more effective. Society, though a very imperfect form of co- 

 operation, is a very general one, and it results, defective as it is, in 

 a greater production /t";' capita than could be secured by individu- 

 als each working for himself ; that is to say, the larger the popula- 

 tion of any given community, the greater the amount of subsistence 

 that each can and does produce. 



There are two curious facts that result from this, both of which 

 are decidedly paradoxical in their character. One is, that this is 

 the very truth which has been so exultantly brought out by the 

 chief defenders of Malthusianism when they showed that the con- 

 dition of the disaffected classes is improving. It is improving, and 

 has been improving, with a few interruptions, ever since the begin- 

 ning of the industrial epoch ; but this improvement has been the 

 result of social co-operation, division of labor, employment of ma- 

 chinery and all the other agencies that result from social integration 

 and the increase and massing of population. The more dense the 

 population, the greater the friction of mind upon mind, the more 

 rapid the development of intelligence, the quicker the action of the 

 inventive faculty, and the more exact, methodical, and economical 

 the outlay of energy in the production of wealth. Everybody is 

 familiar with this law in the obvious contrast between intelligence 

 and thrift of city and country population. As Mr. George has well 

 said, the world has never yet reached a point at which the popula- 

 tion was too dense to create wealth, not merely in proportion to the 

 subsistence required, but in excess of it. Thus far all experiments 

 which history affords have proved the law above formulated in dia- 

 metrical antithesis to the so-called 'law of Malthus,' and shown 

 that production increases with population in some ratio greater than 

 unity. The second curious result of this truth so successfully es- 

 tablished by Mr. George, is that it serves as a flat contradiction of the 

 fundamental theorem of his book ; viz., that poverty increases with 

 wealth. It would, of course, be easy to find isolated cases, perhaps 

 important departments of industry, in which the haphazard develop- 

 ment of modern wealth-producing agencies has worked severe tem- 

 porary hardship ; but that they tend, using the old phrase, " to 

 make the rich richer, and the poor poorer," in any permanent or 

 systematic way, may be regarded as apodictically disproved. Com- 

 ing next more nearly within the field of political economy as that 

 science is usually defined, let us note a paradox which may be re- 

 garded as a corollary of the one last considered. It may be 

 stated in this form : capital is more effective titan labor in tlie pro- 

 duction of wealtli. 



In the view of the popular belief that labor creates all wealth, 

 this, if true, must certainly rank as a paradox. To understand its 

 truth we must consider what constitutes capital. To do this we 

 must loose entirely from all the current definitions which may, 

 however, also be true, and look at it from one special point of view. 

 It is a common thing to hear it said that in the modern indus- 

 trial world it is not human power that produces most of the wealth, 

 but natural forces. This is true, and is one way of looking at it. 

 It is equally common to hear it said that it is not muscle, but brain, 

 that accomplishes the principal results. This is also true, and an- 

 other way of looking at it. Brain, i.e., intelligence, organizes and 

 directs natural forces, and the latter do the work. Still a third point 

 of view is expressed when it is said that it is machinery which does 

 it. Machinery is the material embodiment of intelligent direction 

 of natural forces. But very few, I imagine, have taken the fourth 

 step in this train of reasoning, and attributed the result to capital. 

 Yet this view is perfectly legitimate, and a necessary sequence of 

 logic. The term ' machinery ' is too narrow. Much of the force will 

 not admit of being referred to it. The expression ' natural forces ' 

 is often not strictly applicable. Animals often supply the motive 

 power. ' Intelligence ' is too vague a term to reduce to economic 

 language. But ' capital ' includes every possible agency, and it is 



really to this that all production beyond what could have resulted 

 from naked human muscle is due. This, I need not tell this society, 

 is the greatest bulk of all that makes up civilization. We thus 

 come back to the paradox with which we started out, of the artifi- 

 cial over the natural. 



We will next consider the proposition that K/£Z^^.y 3r«^ra:7£/«/>-w« 

 products, not from capital. 



The old economists all maintain that there was a particular part 

 of capital, called the 'wages fund,' from which all wages were paid, 

 and without which, or beyond which, no wages could, under any 

 circumstances, be paid. Mr. Henry George has shown that there 

 is nothing of the kind ; and so clear is his demonstration upon this 

 point, that Professor Clark, in his admirable little work on the phi- 

 losophy of wealth, pronounces his reasoning as clear as anything in 

 mathematics. Capital, as we have seen, consists in the machinery, 

 tools, appliances, and other labor-saving agencies, employed to in- 

 crease production. Money, except when used for these purposes, is 

 not capital. The idea that the manufacturer lays aside a certain 

 sum of money to pay for his labor, which he keeps distinct from 

 his profits, as a wages fund, is sufficiently absurd to need no disproof. 

 What he really does is to count the sum needed to pay his laborers 

 out of his profits as current earnings devoted to production, and it 

 is out of production that this sum must come from week to week or 

 from day to day. For myself, however, I can see no distinction 

 between this and the money devoted to the purchase of tools or 

 machinery. It is capital in the true sense of the term as wealth 

 applied to production. 



We are now prepared to consider what I regard as the most im- 

 portant, as it is the least unequivocal, of all economic paradoxes. 

 It may be expressed in the following form : profits rise ivit/i wages, 

 or in the stronger form ; increase of wages results in increased 

 profits. 



Surely this proposition would stagger an old-time political-econo- 

 mist ; and very few employers, with all their mercantile sagacity 

 reputed to be so unerring, could be brought to accept it. In fact, 

 not only is the exact opposite theory the only one taught .in the 

 books, but the business of the whole world has always been con- 

 ducted upon it, and to the normal mind the statement that profits 

 will diminish as wages increase seems to be self-evident. How, 

 then, can the opposite be maintained .'' We owe to Mr. George Gun- 

 ton, the author of a recent work entitled ' Wealth and Progress,' 

 the full elaboration of this new theorem ; and any believer in the 

 old one who will carefully read this book, provided he be really 

 seeking the truth, can scarcely fail to admit that there are two sides 

 to the question. For myself, I can scarcely resist the acceptance 

 of the new doctrine, though, of course, with certain qualifications 

 and reservations. It is something like the argument for non-resist- 

 ance. Any one who understands it must admit its truth ; and yet 

 for those who believe it, so long as their number is small, to under- 

 take to apply it, would be ruinous to themselves, and would seem 

 to disprove the doctrine itself. 



Mr. Gunton's method of exposition is something like the follow- 

 ing ; political economy, as expounded in all the books, teaches that 

 industrial society is divided into two great classes, — producers and 

 consumers. In this classification the wage-receivers are uniformly 

 classed as producers. The consumers are a class who go into the 

 market, and purchase the products wrought by the wage-receivers. 

 They are vaguely conceived, illy defined, never distinctly located, 

 and, except that they actually buy the goods and consume them, 

 they are a sort of economic myth. But Mr. Gunton asks, " Who 

 are these consumers? Where are they.' What are they.?" A 

 consumer is a human being. He is part of the population. Some- 

 where in the population he is to be found. In fact, the consumers 

 are the whole population. The wage-receivers must therefore also 

 be consumers ; and when we take the census of population, we find 

 that they, with their families, constitute the greatest majority. 

 Therefore, in all calculations based upon the nature of the market, 

 not only must they not be ignored, but they must be regarded as 

 the prime factor. But it may be said that they consume much less 

 than the other classes of people. Their humble rank and simple 

 wants make them scanty consumers, and therefore it is necessary 

 to bid for the wealthy classes, and neglect the laboring-classes. 

 No one will claim that they consume iL%vcmA\ per capita zs'Ch^ 



