Knowledge is power

CHAPTER XXIII.

Accumulation—Productive and unproductive consumption—Use of capital—Credit—Security of property—Production applied to the satisfaction of common wants—Increase of comforts—Relations of capitalist and labourer.

Dr. William Bulleyn, who lived three centuries ago, first gave currency to the saying, that great riches were "like muckhills, a burthen to the land, and offensive to the inhabitants thereof, till their heaps are cast abroad, to the profit of many." The worthy physician belonged to an age when the class called misers extensively prevailed; and when those who lent out money upon interest were denominated usurers. They were generally objects of public obloquy, and their function was not understood. There are plenty of men still amongst us who, in Dr. Bulleyn's view of the matter, are impersonations of the muck that is not spread. The muck-spreaders, according to the old notion, were those whose consumption was always endeavouring to outstrip the production that was going forward around them. The latter is by far the larger class at the present day; the former, the more powerful.

Let us endeavour, somewhat more with reference to practical results than we have already attempted, to look at some of the general principles existing in modern society which determine the existence, and regulate the employment, of capital.

Whatever is saved and accumulated is a saving and accumulation of commodities which have been produced. The value of the accumulation is most conveniently expressed by an equivalent in money; but only a very small part of the accumulation is actually money. A few millions of bullion are sufficient to carry on the transactions of this country. Its accumulations, or capital, which have been considered to amount to twenty-two hundred million pounds sterling, could not be purchased by several times the amount of all the bullion that exists in the world. A great part of what is saved, therefore, is an accumulation of products suitable for consumption. The moment that they are applied to the encouragement of production, they begin to be consumed. They encourage production only as far as they enable the producers to consume while they are in the act of producing. Accumulation, therefore, is no hindrance to consumption. It encourages consumption as much as expenditure of revenue unaccompanied by accumulation. It enables the things consumed to be replaced, instead of being utterly destroyed.

Whatever is consumed by those who are carrying forward the business of production has been called productive consumption. Whatever, on the other hand, is consumed by those who are not engaged in re-producing, has been called unproductive consumption. The difference may be thus illustrated:—A shoemaker, we will say, rents a shop, works up leather and other materials, uses various tools, burns out candles, and is himself fed and clothed while in the act of producing a pair of shoes. This is productive consumption;—for the pair of shoes represents the value of the materials employed in them, the commodities consumed by the shoemaker during their production, and the wear and tear of the tools applied in making them. If the shoes represent a higher value than what has been consumed, in consequence of the productiveness of the labour of the shoemaker, the difference is net produce, which may be saved, and, with other savings, become capital. But further:—The shoemaker, we will suppose, accumulates profits sufficient to enable him to live without making shoes, or applying himself to any other branch of industry. He now uses no materials, he employs no tools, but he consumes for the support and enjoyment of existence, without adding anything to the gross produce of society; this is called unproductive consumption.

The differences, however, between productive and unproductive consumption admit of considerable qualification. We have already described the course of a spendthrift, and of a man of fortune who lives virtuously and economically.[33] Whatever may be the scientific definition, no one can say that these, even viewed from the industrial point, can be classed together as unproductive consumers. Productive consumption, according to the strict definition of the earlier economists, is consumption directly applied to the creation of some material product. But a new element was introduced into the question by Mr. Mill's definition—that labour and expenditure are also productive, "which, without having for their direct object the creation of any useful natural product, or bodily or mental faculty or quality, yet lead indirectly to promote one or other of those ends." On the other hand, unproductive consumption consists of labour and expenditure exerted or incurred "uselessly, or in pure waste, and yielding neither direct enjoyment nor permanent sources of enjoyment."

It has been suggested by Dr. Cooper, an American professor, that the parable of "the ten talents," in St. Matthew's Gospel, points to the employment of capital for future production. "For the kingdom of heaven is as a man travelling into a far country, who called his own servants, and delivered unto them his goods. And unto one he gave five talents, to another two, and to another one; to every man according to his several ability; and straightway took his journey. Then he that had received the five talents went and traded with the same, and made them other five talents. And likewise he that had received two, he also gained other two. But he that had received one, went and digged in the earth, and hid his lord's money." The last was the "wicked and slothful," because unprofitable, servant. His was the sin of omission. He ought to have put out the money to "the exchangers," even if he had been afraid to trade with it.

Adam Smith has laid it down as an axiom that the proprietor who encroaches upon his capital by extravagance and waste, is a positive destroyer of the funds destined for the employment of productive labour. No doubt this is, in many respects, true. He, also, has buried his "one talent." But the common opinion of what are called "the money-making classes" of our time goes somewhat further than this. It is said that, amongst "the middle class" of this country, "the life of a man who leaves no property or family provision, of his own acquiring, at his death, is felt to have been a failure."[34] There are many modes in which the life of an industrious, provident, and able man may have been far other than "a failure," even in a commercial point of view, when he leaves his family with no greater money inheritance than that with which he began the world himself. He may have preserved his family, during the years in which he has lived amongst them, in the highest point of efficiency for future production. He may have consumed to the full extent of his income, producing, but accumulating no money capital for reproductive consumption; and, indirectly, but not less certainly, he may have accumulated whilst he has consumed, so as to enable others to consume profitably. If he have had sons, whom he has trained to manhood, bestowing upon them a liberal education; bringing them up, by honest example, in all trustworthiness; and causing them to be diligently instructed in some calling which requires skill and experience—he is an accumulator. If he have had daughters, whom he has brought up in habits of order and frugality—apt for all domestic employments—instructed themselves, and capable of carrying forward the duties of instruction—he has reared those who in the honourable capacity of wife, mother, and mistress of a family, influence the industrial powers of the more direct labourers in no small degree; and, being the great promoters of all social dignity and happiness, create a noble and virtuous nation. By the capital thus spent in enabling his children to be valuable members of society, he has accumulated a fund out of his consumption which may be productive at a future day. He has postponed his money contribution to the general stock; but he has not withheld it altogether. He has not been "the wicked and slothful servant." On the other hand, many a man, whose life, according to the mere capitalist doctrine, has not been "a failure," and who has taught his family to attach only a money-value to every object of creation, bequeaths to the world successors whose rapacity, ignorance, unskilfulness, and improvidence, will be so many charges upon the capital of the nation. The "muckhill" will by them be "cast abroad," but it will be devoted to the mere pursuit of sensual indulgence, losing half its fertilizing power, and too often burning up the soil that its judicious application would stimulate. He that has been weak enough, according to this "middle-class" doctrine, not to believe that the whole business of man is to make "a muckhill," may have spent existence in labours, public or private, for the benefit of his fellow creatures; but his life is "a failure!" The greater part of the clergy, of the bar, of the medical profession, of the men of science and literature, of the defenders of their country, of the resident gentry, of the aristocracy, devote their minds to high duties, and some to heroic exertions, without being inordinately anxious to guard themselves against such "a failure." It would perhaps be well if some of those who believe that all virtue is to be resolved into pounds sterling, were to consider that society demands from "the money-making classes" a more than ordinary contribution—not to indiscriminate benevolence, but to those public instruments of production—educational institutions—improved sanitary arrangements—which are best calculated to diminish the interval between the very rich and the very poor.

Whatever tends to enlighten the great body of the people facilitates individual accumulation. A large portion of the productions of industry, especially amongst the humbler classes of the community, is wasted, in addition to that portion which is enjoyed. Every consumption that is saved by habits of order, by knowing the best way of setting about a thing, by economy in the use of materials, is so much saved of the national capital; and what is saved remains to give new encouragement to the labour of the producer, and to bestow an increase of comforts upon the consumer. Again, the more that professional skill of every sort is based upon real knowledge, the more productive will be the industry of every class of labourers. Above all, sound morals, and pure and simple tastes, are the best preservatives from wasteful expenditure, both in the rich, and in the poor; and he that limits his individual gratification to objects worthy of a rational being, has the best chance of acquiring a sufficiency for his wants, and of laying by something to provide a fund for that productive consumption by which the wants of others are supplied.

With these general remarks upon accumulation and consumption, let us proceed to consider some points connected with the application of capital.

The use of capital consists in its advance. It goes before all operations of labour and trade. It is the power that sets labour and trade in motion; just as the power of wind, or water, or steam, gives movement to wheels and pistons.

Let us briefly see how capital operates upon the three great branches of human industry, namely, upon agriculture, manufactures, and commerce.

A farmer having acquired capital, either by the former savings of himself or his fathers, or by borrowing from the savings of others, takes a certain number of acres of land. He changes his capital of money into other things which are equally capital;—into horses, and cows, and sheep, and agricultural instruments, and seed. He makes an advance in the hope of producing a profit. He therefore sets his horses to work;—he gets milk from his cows;—he shears his sheep;—he fattens his oxen;—and he put his tools into the hands of labourers, to prepare the ground for the reception of his seed. He is paying money away on every side, which he would not do if he did not expect a return, with a profit. By all these operations—by the work of his horses and his labourers—by the increase in number, and the increase in value of his flocks and herds,—and by the harvest after the seed-time,—new produce is created which produces a return of capital, and ought to produce a profit if that capital is properly expended. The hope of profit sets the capital to work, and the capital sets the labour to work. If there were no capital there would be no labour. Capital gives the labourer the power, which he has not in himself, of working for a profit.

A capitalist desires to set up a cotton manufactory. He erects buildings, he purchases machines, he buys cotton-wool, he engages workmen. The annual value of the buildings and of the machines,—that is the interest upon their cost, added to their loss by wear and tear—the price of the raw material, and the wages of the workmen, are all calculated to be paid out of the price at which the cotton thread will be sold. To engage in such large undertakings, in which the returns are slow, there must be great accumulation of capital. To engage in such large undertakings, in which the risk is considerable, there must be abundant enterprise. Without extensive accumulations of capital, which produce enterprise, they could not be engaged in at all.

Capital employed in commerce circulates through the world in a thousand forms; but it all comes back in produce to the country that sends it out. Nations that have no accumulated stock, that is no capital, have no commerce; and where there is no commerce there are no ships and no sailors; and there are no comforts besides those which spring up at the feet of the more fortunate individuals of such nations.

In all these operations of capital upon the enterprises of agriculture, manufactures, and commerce, another power, which is the result of accumulation, is more or less, in most cases, called into action. That power is Credit.

Credit, upon a large scale, arose from the difficulty of transmitting coined money from place to place, and particularly from one country to another; and hence the invention of bills of exchange. A bill of exchange is an order by one person on another, to pay to a specified person, or his order, a sum of money specified, at a certain time and a certain place. It is evident that the bill of exchange travels as much more conveniently than a bag of money, as the bag of money travels more conveniently than the goods which it represents. For instance a box of hardware from Birmingham might be exchanged for a case of wine from Bordeaux, by a direct barter between the tradesman at Birmingham and the tradesman at Bordeaux; but this sort of operation must be a very limited one. Through the agency of merchants, the hardware finds it way to Bordeaux, and the wine to Birmingham, without any direct exchange between either place, or without either having more of the commodity wanted than is required by the market,—that is, the supply proportioned to the demand of each town. Through the division of labour, the merchant who exports the hardware to Bordeaux, and the merchant who imports the wine from Bordeaux, are different people; and there are other people engaged in carrying on other transactions at and with Bordeaux, with whom these merchants come in contact. When, therefore, the merchant at Bordeaux has to pay for the hardware in England, he obtains a bill of exchange from some other merchant who has to receive money from England, for the wine which he has sent there. And thus not only is there no direct barter between the grower of the wine and the manufacturer of the hardware, but the wine and the hardware are each paid for without any direct remittance of coined money from France to England, but by a transfer of the debt due from one person to another in each country. By this transfer, the transaction between the buyer and the seller is at once brought to maturity; and by this operation the buyer and seller are each benefited, because the exchange which each desires is rendered incomparably more easy, because more speedy and complete. The same principle applies to transactions between commercial men in the same country. The order for payment, which stands in the place of coined money in one case, is called a Foreign bill of exchange; in the other an Inland bill of exchange.

The operation of credit in a country whose industry is in an advanced state of activity, is extended over all its commercial transactions, by the necessity of obtaining circulating capital for the carrying forward the production of any commodity, from its first to its last stages. A manufacturer has a large sum expended in workshops, warehouses, machinery, tools. This is called his plant, or fixed capital. He has capital invested also in the raw material which he intends to convert into some article of utility. He works up his raw material; he makes advances for the labour required in working it up. The article is at length ready for the market. The wholesale dealer, who purchases of the manufacturer, sells to a retailer, who is in the habit of buying upon credit, long or short, because the article remains a certain time in his hands before it reaches the consumer, who ultimately pays for it. From the time when a fleece of wool is taken from the sheep's back in Australia, till it is purchased in the shape of a coat in London, there are extensive outlays in every department, which could not be carried on steadily unless there were facilities of credit from one person concerned in the production to another person concerned in the production,—the whole credit being grounded upon the belief that the debt contracted in so many stages will be repaid by the sale of the cloth to the consumer. The larger operations of this credit are represented by bills of exchange, or engagements to pay at a given date; and these bills being converted into cash by a banker, furnish a constant supply of consumable commodities to all parties concerned in advancing the production, till the produce arrives in the hands of the consumer. To judge of the extent to which credit is carried in this country, it is only necessary to mention, that five millions sterling are daily paid in bills and cheques by the London bankers alone; that the Bank of England alone, in 1853, discounted bills to the amount of twenty-five millions sterling; and that the note circulation of the United Kingdom is about forty millions. Credit, undoubtedly, if conducted upon fair principles, represents some capital actually in existence, and therefore does not really add to the accumulation or capital of the producers. But it enables men in trade at once to have stock and circulating capital—to use even their houses and shops and manufactories and implements; and to give, at the same time, a security to others upon that fixed capital. This process is, as it were, as if they coined that fixed capital. The credit, which is rendered as secure as possible in all its stages by the accumulating securities of the drawer, acceptor, and endorsers of a bill of exchange, brings capital into activity,—it carries it directly to those channels in which it may be profitably employed,—it conducts it to those channels by a systematic mode of payment for its use, which we call interest, or discount;—and it therefore carries forward accumulation to its highest point of productiveness.

If the reader will turn to the passage in our third chapter, where Tanner describes the refusal of the traders to give him credit, he will see how capital, advanced upon credit, sets industry in motion. The Indians had accumulated no store of skins to exchange for the trader's store of guns, ammunition, traps, and blankets. The trader, although he possessed the articles which the Indians wanted, refused to advance them upon the usual credit; and they were consequently as useless to the Indians as if they had remained in a warehouse at Liverpool or Glasgow. When the credit was taken away from the Indians, they could no longer be exchangers. Their own necessities for clothing were too urgent to enable them to turn their attention from that supply to accumulate capital for exchange, after the winter had passed away. They hunted only for themselves. The trader went without his skins, and the Indians without their blankets. Doubtless, the keenness of commercial activity soon saw that this state of things was injurious even to the more powerful party, for the accustomed credit was presently restored to the Indians. It was the only means by which that balance of power could be quickly restored which would enable the parties again to become exchangers. Every exchange presupposes a certain equality in the exchangers; and credit, therefore, from the capitalist to the non-capitalist, must, in many cases, be the first step towards any transaction of mutual profit. If the Indians had adopted the resolution of Tanner, to do without the blankets for the winter, and had substituted the more imperfect clothing of skins,—and if the traders had persevered in their system of refusing credit, that is, of advancing capital,—the exchange of furs must have been suspended, until, by incessant industry, and repeated self-denial, the Indians had become capitalists themselves. They probably, after a long series of laborious accumulations, might have done without the credit—that is, have not consumed the goods which they received before they were in a condition to give their own goods as equivalents; and then, as it usually happens in the exchanges of civilized society, they would have ensured a higher reward for their labour. The credit rendered the labour of the Indians loss severe, inasmuch as it allowed them to work with the aid of the accumulations of others, instead of with their own accumulations. But it doubtless gave the traders advantage, and justly so, in the terms of the exchange. If the Indians had brought their furs to the mart where the dealers had brought their blankets, there would have been exchange of capital for capital. As the Indians had not accumulated any furs, and were only hoping to accumulate, there was, on the part of the white traders, an advance of a present good for a remote equivalent. The traders had doubtless suffered by the casualties which prevented the Indians completing their engagements. They made a sudden, and therefore an unjust, change in their system. The forbearance of the Indians shows their respect for the rights of property, and their consequent appreciation of their own interests. They might, possessing the physical superiority, have seized the blankets and ammunition of the traders. If so, their exchanges would have been at an end; the capital would have gone to stimulate other industry; the Indians would have ripped up the goose with the golden eggs.

It is easy to see that the employment of capital, through the agency of credit, in all the minute channels of advanced commerce, must wholly depend upon the faith which one man has in the stability and the honesty of another; and also upon the certainty of the protection of the laws which establish security of property, to enforce the fulfilment of the contract.

It is necessary to establish this point of the security of property, as one of the rights, and we may add as the greatest right, of industry;—and therefore, at the risk of being thought tedious, we may call attention to the general state of the argument in reply to some who hold that the rights of property, and the rights of labour, are antagonistic.

The value of an article produced is the labour required for its production.

Capital, the accumulation of past labour, represents the entire amount of that labour which is not consumed;—it is the old labour stored up for exchange with new labour.

Those who attach an exclusive value to new labour as distinguished from old labour—or labour as distinguished from capital—say that the new production shall be stimulated by the old production, without allowing the old production to be exchanged against the new;—that is, that the old production shall be an instrument for the reward of new labour, but not a profitable one to its possessor.

The doctrine therefore amounts to this; that labour shall be exchanged with labour, but not with the produce of labour,—or that there shall be no exchange whatever;—for if the present labourers are to have the sole benefit of the capital, the principle of exchange, in which both exchangers benefit, is destroyed. There must be an end of all exchanges when the things to be exchanged are not equally desired by both parties. If the capitalist is to lend or give the capital to the labourer without a profit, or without a perfect freedom which would entitle him to withhold it if no profit could be obtained, the balance is destroyed between capital and labour. Accumulation is then at an end; because the security of the thing accumulated to the accumulator is at an end. The security is at an end, because if the new labour is to have the advantage of the old labour without compensation or exchange, the new labour must take the old labour by force or fraud; for the new cannot proceed without the old;—labour cannot stir without capital. Accumulation, therefore, being at an end, labour for an object beyond the wants of an hour is at an end. Society resolves itself into its first elements.

Strabo, the ancient geographer, has described a tribe amongst whom the title of the priest to the priesthood was acquired by having murdered his predecessor; and consequently the business of the priest in possession was not to discharge the duties of the priesthood, but to watch sword in hand, to defend himself against the new claimant to the office. If the principle were to be recognized, that the accumulation of former labour belongs to the present labourers; and that the best title to the accumulation is to have added nothing towards it, but only to be willing to add,—the title of the labourers in possession would require to be maintained by a constant encounter with new claimants; as the priest of Strabo, who had dispossessed the previous priest, had to dread a similar expulsion from his office, by a new violence.

The course of national misery resulting from national disorders always begins with financial embarrassment; by the destruction of capital, or its withdrawal from all useful works. Capital was circulated only because it could be circulated with security. If the present capitalists were driven away, as some reasoners would imply might easily be done, and the labourers were left to work the tools and steam-engines—to labour in the manufactories, and to inhabit the houses of the present capitalists,—production could not go on an hour, unless the appropriation of the plunder were secured to the individual plunderers.

In speaking of credit, then, we naturally turn to the only foundation upon which credit rests—the security of property. Commercial men, who know how easily credit is destroyed by individual guilt or imprudence, also know how easily it is interrupted, generally by a combination of circumstances over which an individual, apart from a nation, has no control. The instant that any circumstances take place which weaken the general confidence in the security of property, credit is withdrawn. The plant remains—the tools and warehouses stand—the shops are open; but production languishes, labour is suspended. The stocks of consumable commodities for the maintenance of labour may still in part exist, but they do not reach the labourer through the usual channels. Then men say, and say truly, confidence is shaken; the usual relations of society are disturbed. Capital fences itself round with prudence—hesitates to go on accumulating—refuses to put its existence in peril—withdraws in great part from production—

"Spreads its light wings, and in a moment flies."

Within these six years we have had before our eyes a fearful example of the universal evil created by the sudden loss of confidence in the security of property; The revolution of 1848, which overthrew the government of Louis Philippe, was associated with a general belief that the whole fabric of society was about to be shaken in the overthrow of capital. The capital was instantly withdrawn from circulation; there was no exchange; there was no labour. The more immediate sufferers were the workmen themselves; and the mode in which the ruling power relieved them by giving forced employment was wholly unavailing, except as a temporary expedient. After several dreadful months of tumult and bloodshed, a little confidence was restored by the pressure of an armed force; and when at length a government was established that rested upon security of property, it was hailed as the greatest of all blessings, although accompanied with some evils to which Englishmen, especially, cannot shut their eyes. When capital and labour could once more work in a safe union, France quickly developed those great natural resources with which she is blessed; and the ingenuity of her people was again called into activity, to carry forward and perfect those resources by higher and higher exertions of science and skill.

When the great body of the people of a country are so generally educated as to know that it is the interest of the humblest and the poorest that property shall be secure, there will be little occasion for fencing round property with guards, against the secret violence of the midnight robber, or the open daring of the noonday mob. "It is an enlightened moral public sentiment that must spread its wings over our dwellings, and plant a watchman at our doors."[35] A very little insecurity destroys the working of capital. The cloth trade of Verviers, a town in France, was utterly ruined, because the morals of the people in the town were so bad, and the police so ineffectual, that the thefts in the various stages of the manufacture amounted to eight per cent. upon the whole quantity produced. The trade of the place, therefore, was destroyed; and the capital went to encourage labour in places where the rights of property were better respected.

But, generally speaking, the security of property is not so much weakened by plunder, as by those incessant contentions which harass the march of capital and labour; and keep up an irritation between the classes of the capitalists and the labourers, who ought to be united in the most intimate compact for a common good. These irritations most frequently exhibit themselves in the shape of combinations for the advance of wages. We have no hesitation in declaring our opinion that it is the positive duty of the working-man to obtain as high wages as he can extract out of the joint products of capital and labour; and that he has an equal right to unite with other workmen in making as good a bargain as he can, consistently with the rights of others, for his contribution of industry to the business of production. But it is also necessary for us to declare our conviction that, in too many cases, the working men attempt an object which no single exertion, and no union however formidable or complete, can ever accomplish. They attempt to force wages beyond the point at which they could be maintained, with reference to the demand for the article produced;—and if they succeed they extinguish the demand, and therefore extinguish the power of working at any wages. They drive the demand, and therefore the supply, into new channels;—and they thrust out capital from amongst them, to work in other places where it can work with freedom and security. Above all, such combinations, and the resistance which they call up, have a tendency to loosen the bonds of mutual regard which ought to subsist between capitalists and labourers. Their real interests are one and the same.

All men are united in one bond of interests, and rights, and duties; and although each of us have particular interests, the parts which we play in society are so frequently changing, that under one aspect we have each an interest contrary to that which we have under another aspect. It is in this way that we find ourselves suddenly bound closely with those against whom we thought ourselves opposed a moment before; and thus no class can ever be said to be inimical to another class. In the midst, too, of all these instantaneous conflicts and unions, we are all interchangeably related in the double interest of capitalists and consumers,—that is, we have each and all an interest that property shall be respected, and that production shall be carried forward to its utmost point of perfection, so as to make its products accessible to all. The power of production, in its greatest developments of industry, is really addressed to the satisfaction of the commonest wants. If production, as in despotic countries, were principally labouring that some men might wear cloth of gold whilst others went naked, then we should say that production was exclusively for the rich oppressor. But, thank God, the man who exclusively wears "purple and fine linen every day" has ceased to exist. The looms do not work for him alone, but for the great mass of the people. It is to the staple articles of consumption that the capitals of manufactures and commerce address their employment. Their employment depends upon the ability of the great body of the people to purchase what they produce. The courtiers of the fifteenth century in France carried boxes of sugar-plums in their pockets, which they offered to each other as a constant compliment; the courtiers of the next age carried gingerbread in the same way; and lastly, the luxury of snuff drove out the sugar-plums and the gingerbread. But the consumption of tobacco would never have furnished employment to thousands, and a large revenue to the state, if the use of snuff had rested with the courtiers. The producers, consequently, having found the largest, and therefore the most wealthy class of consumers amongst the working men, care little whether the Peer wears a silk or a velvet coat, so that the Peasant has a clean shirt. When capital and labour work with freedom and security, the wants of all are supplied, because there is cheap production. It is a bad state of society where

"One flaunts in rags, one flutters in brocade."

Those who like the brocade may still wear it in a state of things where the rights of industry are understood; but the rags, taking the average condition of the members of society, are banished to the lands from which capital is driven,—while those who labour with skill, and therefore with capital, have decent clothes, comfortable dwellings, wholesome food, abundant fuel, medical aid in sickness, the comfort and amusement of books in health. These goods, we have no hesitation in saying, all depend upon the security of property; and he that would destroy that security by force or fraud is the real destroyer of the comforts of those humbler classes whose rights he pretends to advocate.

The principles which we maintain, that the interests of all men, and of the poorer classes especially, are necessarily advanced in a constantly increasing measure by the increase of capital and skill, have been put so strikingly by a philosophical writer, that we cannot forbear quoting so valuable an authority in support and illustration of our opinions:—

"The advantage conferred by the augmentation of our physical resources, through the medium of increased knowledge and improved art, have this peculiar and remarkable property,—that they are in their nature diffusive, and cannot be enjoyed in any exclusive manner by a few. An eastern despot may extort the riches and monopolize the art of his subjects for his own personal use; he may spread around him an unnatural splendour and luxury, and stand in strange and preposterous contrast with the general penury and discomfort of his people; he may glitter in jewels of gold and raiment of needle-work; but the wonders of well-contrived and executed manufacture which we use daily, and the comforts which have been invented, tried, and improved upon by thousands, in every form of domestic convenience, and for every ordinary purpose of life, can never be enjoyed by him. To produce a state of things in which the physical advantages of civilized life can exist in a high degree, the stimulus of increasing comforts and constantly elevated desires must have been felt by millions; since it is not in the power of a few individuals to create that wide demand for useful and ingenious applications, which alone can lead to great and rapid improvements, unless backed by that arising from the speedy diffusion of the same advantages among the mass of mankind."[36]

In looking back upon all the various circumstances which we have exhibited as necessary for carrying industry to the greatest point of productiveness, we think that we must have established satisfactorily that the two great elements which concur in rendering labour in the highest degree beneficial, are, 1st, the accumulated results of past labour, and 2nd, the contrivances by which manual labour is assisted,—those contrivances being derived from the accumulations of knowledge. Capital and skill, therefore, are essential to the productive power of labour. The different degrees in which each possesses capital and skill make the difference between an English manufacturer and a North American savage; and the less striking gradations in the productive power of the English manufacturer of the present time, and the English manufacturer of five hundred years ago, may be all resolved into the fact that the one has at his command a very large amount of capital and skill, and that the other could only command a very small amount of the same great elements of production.

We think, also, that we have shown that the accumulation of former labour in the shape of tangible wealth, and the accumulation of former labour in the shape of the no less real wealth of knowledge, are processes which go on together, each supporting, directing, and regulating the other. Knowledge is the offspring of some leisure resulting from a more easy supply of the physical wants; and that leisure cannot exist unless capital exists; which allows some men to live upon former accumulations. Capital, therefore, may be said to be the parent of skill, as capital and skill united are the encouragers and directors of profitable labour.

We have shown that the only foundation of accumulation is security of property—we have shown, too, that labour is the most sacred of properties. It results, therefore, that in any state of society in which the laws did not equally protect the capitalist and the labourer as free exchangers, each having the most absolute command over his property, compatible with a due regard to the rights of the other,—in such a state, where there was no real freedom and no real security, there would be very imperfect production; and production being imperfect, all men, the capitalists and the labourers, would be equally destitute, weak, ignorant, and miserable.

It is under these several conditions, all working together with united force, that the entire labour of this country, and indeed of all other countries advanced in civilization, must now be directed. The enormous increase of productiveness which we have exhibited, in so many operations of industry, is chiefly the result of production carried on upon a large scale, and working with every possible application of science. It is in this sense that Knowledge is Power; and skilled labour is a part of that power.

CHAPTER XXIV.

Natural law of wages—State-laws regulating wages—Enactments regulating consumption—The labour-fund and the want-fund—Ratio of capital to population—State of industry at the end of the seventeenth century—Rise of manufactures—Wages and prices—Turning over capital.

During the next two centuries, the condition of the people had been materially improved. Capital had increased, and so had population. But capital had increased faster than population, and hence the improvement. The class of free labourers had for the most part succeeded to the old class of villeins. Labourers for hire, without understanding the great principles which govern the rate of wages, any more than did their masters, would practically seek to measure their earnings according to those principles. The lawgivers determined the contrary.[37] The Statute of Labourers, 23rd Edward III., says:—"Because a great part of the people, and especially of workmen and servants, late died of the pestilence, many, seeing the necessity of masters and great scarcity of servants, will not serve unless they receive excessive wages." They were therefore to be compelled to serve, and they were to serve at the same wages which they had received three years before. The ratio of population, in consequence of the pestilence, had fallen considerably below the ratio of accumulated capital seeking to employ labour. Under the natural laws of demand and supply, the scarcity of labourers and the excess of capital would have raised the wages of labour. These laws were not to operate. Forty years after this enactment of Edward III., comes the statute of Richard II., which says that "Servants and labourers will not, nor by a long season would, serve and labour without outrageous and excessive hire, and much more than hath been given to such servants and labourers in any time past, so that for scarcity of the said servants and labourers the husbands and land-tenants may not pay their rents, nor scarcely live upon their lands." Here was a distinct conflict between the capitalists seeking profits and the labourers seeking wages. The law-makers resolved that the hires of the servants and labourers should be "put in certainty;" and they fixed the rate of wages throughout the land. They settled the contest in favour of profits, arbitrarily. To avoid this interference with the due payments of their labour in proportion to the ratio of capital and labour, the husbandmen might have fled to the towns, and some did so. But they were met there by the enactment that the artificers should be subject to the same controlling power, and that the boy who had laboured at the plough and cart till he was twelve years old should continue so to labour for the rest of his life. This state of things was truly slavery without the name. Some such marvellous folly and injustice went on for several centuries. But, regulating wages, the laws also undertook to regulate the cost of food and of clothing—their quality, and their consumption—how much people should eat, and what coats they should wear. These absurdities also went on for centuries—of course under a perpetual system of open violation or secret evasion. The people, we may safely conclude, never fully believed what their rulers told them of their prodigious kindness in managing private affairs so much better than individuals could themselves. Mr. Sergeant Thorpe, judge of assize for the northern circuit, in a charge to the grand jury in 1648, tells them to be vigilant against servants taking higher wages than those allowed by the justices,—to enforce the laws against everybody who bought every thing for the sustenance of man, with intent to make a profit by it—against every tradesman who did not produce his wares in conformity with the statutes;—wonderful laws, which would not permit the tanner to sell a piece of leather that had not been kept twelve months in the tan-pit, and which forbade the cloth-maker to use lime in whitening linen cloth. "And thus you see," says solemn Mr. Sergeant Thorpe, "how the wisdom of the common laws of this nation, and of the parliaments, from time to time, hath provided for the security and ease of the people; and hath furnished us with a salve for every sore; and gives us rules and instructions how to govern ourselves, that we may be helpful and useful to one another."[38] Instead of providing the salve, it probably would have been better not to have made the sore.

But, after all, it is scarcely candid to laugh at the wisdom of "the good old times" in regulating trades, when in our own day, we have had excise laws which interfered in the most absurd way with production, and some of which still interfere. Nor can we look with perfect complacency at the manifest impolicy and injustice of fixing the rate of wages, when, within the last quarter of a century, we have had justices at work all over the country to keep down the wages of labour, by paying labourers not in proportion to their earnings, but according to their necessities; and raising up a fund for the encouragement of idleness and improvidence, by a diversion of the real funds for the maintenance of labour. The Poor Laws, as they were administered in the beginning and middle of the last half century, did this evil, and a great deal more; and persons of influence, with the most benevolent intentions, could see no difference between the parish allowance to able-bodied labourers, and the wages which they could have really commanded for their labour if this opposing fund had not been called into action. In those times, and even after a strenuous effort had been made to bring about an improvement, educated gentlemen used to say—"something must be done to give the labourers employment upon fair wages;" and they were accustomed to believe that "some plan should be devised whereby work should be at hand."[39] These gentlemen, and many others, did not understand that there is a natural fund for the maintenance of labour which is to produce such beneficial results; that this fund cannot be increased but by the addition of the results of more profitable labour; that whatever is paid out of the fund for the support of unprofitable labour has a direct tendency to lower the rate at which the profitable labour is paid,—to prevent the payment of "fair wages;" and that there is a "plan" which requires no devising, because our necessities are constantly calling it into operation,—the natural law of exchange, which makes "work at hand" wherever there is capital to pay for it. Such reasoners also held that the labourers were not to seek for the fund "about the country on an uncertainty;" but that the work for the labourers "should be at hand"—"it should be certain." This clearly was not the ordinary labour-fund. That is neither always at hand, nor is it always certain. It shifts its place according to its necessity for use; it is uncertain in its distribution in proportion to the demand upon it. The fund which was to work this good was clearly not the labour-fund—it was the want-fund; and the mistake that these gentlemen and many others fell into was that the want-fund had qualities of far greater powers of usefulness than the labour-fund; that the parish purse was the purse of Fortunatus, always full; that the parish labour field was like the tent of the Indian queen in the Arabian tale—you could carry it in the palm of your hand, and yet it would give shelter to an army of thousands. All these fallacies are now, happily, as much exploded as the laws for the regulation of wages and the price of commodities. The real labour-fund—the accumulation of a portion of the results of past labour—is the only fund which can find profitable work and pay fair wages.

It is extremely difficult to ascertain the ratio of Capital to Population at any particular period; yet some approximations may be made, which, in a degree, may indicate the activity or the inertness of the labour-fund, in regard to the condition of the labourer.

At the end of the seventeenth century, about half the land of England and Wales was, according to the best authorities, held to be under cultivation, either as arable or pasture. As the whole area of England and Wales is about thirty-seven millions of acres, this would show a cultivation of eighteen million five hundred thousand acres. The entire quantity of wheat, rye, barley, oats, pease, beans, and vetches, grown upon these eighteen million and a half acres, was estimated at less than ten millions of quarters, wheat being little more than a sixth of the whole produce. The quantity of stock annually fattened for food was even more inconsiderable. We may safely assume that in a century and a half the amount of agricultural produce in England has increased five-fold. Two-thirds of the whole area of England and Wales are now under cultivation; for in the census returns of 1851 we have twenty-five million acres of farm holdings, occupied by two hundred and twenty-five thousand farmers. In the calculations of Gregory King, in 1688, the number of farmers was given at a hundred and fifty thousand; but the number of lesser freeholders, who were doubtless cultivators, was also a hundred and twenty thousand. The produce of the land has increased at a greater rate than the increase of population. According to the commonly received estimates, the population of England and Wales was about five millions and a half, perhaps six millions, at the end of the seventeenth century; it is now eighteen millions. The inhabited houses, according to the hearth-books of 1690,[40] were one million three hundred and twenty thousand. In 1851 they were three million two hundred and seventy-eight thousand. The hearth-books of 1685 show that, of the houses of the kingdom, five hundred and fifty-four thousand had only one chimney—they were mere hovels.

Gregory King has given 'A Scheme of the Income and Expense of the several Families in England, calculated for the year 1688.' He considers that, in the aggregate, there were five hundred thousand families who were accumulators—that is to say, whose annual expense was less than their income. He values this accumulation at three millions. The number of persons comprised in the accumulating families was two million six hundred and seventy-five thousand. Of this number only one-fifth belonged to the trading classes—merchants, shopkeepers and tradesmen, artisans and handicrafts. The remainder were the landholders, farmers, lawyers, clergy, holders of office, and persons in liberal arts and sciences. But there was a large non-accumulating class, consisting of two million eight hundred and twenty-five thousand, whom he puts down as "decreasing the wealth of the kingdom,"—that is to say, that their annual expense exceeded their income; and this excess he computes at six hundred and twenty-two thousand pounds, which reduces the annual national accumulation to two million four hundred thousand pounds. The positive plunderers of the national capital were thirty thousand vagrants, such as gipsies, thieves, and beggars. We were in a happier condition than Scotland at the same period; where, according to Fletcher of Saltoun, there were two hundred thousand "people begging from door to door," out of a population of one million, for whose suppression he saw no remedy but slavery. We were more favoured, too, than France; where, as Vauban records, in 1698, more than a tenth part of the population of sixteen millions were beggars, in the extremity of hunger and nakedness.[41] But we may be sure that in England the two million eight hundred and twenty-five thousand "labouring people, out-servants, cottagers, and paupers," who are put down by Gregory King as non-accumulators, were working upon very insufficient means, and that they were constantly pressing upon the fund for the maintenance of profitable labour. It is a curious fact that he classes "cottagers and paupers" together; but we can account for it when we consider how much of the land of the country was uninclosed, and how many persons derived a scanty subsistence from the commons, upon which they were "squatters," living in mean huts with "one chimney."

The small number of "artisans and handicrafts," comprising only sixty thousand families, is of itself a sufficient indication that our manufactures, properly so called, were of very trifling amount. In various parts of this volume we have incidentally mentioned how slowly the great industries of this country grew into importance. At the period of which we are now speaking, nearly every article of clothing was, in many districts, of domestic production, and was essentially connected with the tillage of the land. The flax and the wool were spun at home; the stockings were knit; the shoes were often untanned hide nailed upon heavy clogs. Furniture there was little beyond the rough bench and the straw bed. The fuel came from the woods and hedges. About forty thousand of the cottages mentioned in the hearth-books had some land belonging to them; and, to prevent the growth of a "squatter" population, it was the business of the Grand Jury to present, as a nuisance, all newly-erected cottages that had not four acres of land attached to them. There was a contest perpetually going on between the more favoured portion who had regular means of subsistence, and the unhappy many who were pressing upon those means, in all the various forms of pauperism. One of the means of keeping down this class was to prevent them having dwellings.

Towards the end of the seventeenth century, then, we see that there was some accumulation of capital, however small. There was then a vague feeling amongst the accumulators that something might be saved by setting the unemployed and the starving to other work than was provided for them in the fields. Population was pressing hard upon Capital. It pressed, chiefly, in the shape of increasing demands upon the poor-rate. The remedy universally proposed was "to set the poor to work." The notion was extremely crude as to the mode in which this was to be effected; but there was a sort of universal agreement expressed by sober economists as well as visionary projectors, that the more general introduction of manufactures would remedy the evil. Of course, the first thing to be done was to prohibit foreign manufactures by enormous duties; and then we were to go to work vigorously at home, knowing very little of the arts in which foreigners were greatly our superiors. But we were to go to work, not in the ordinary way of profitable industry, by the capitalist working for profit employing the labourer for wages, but by withholding from the poor the greater part of the want-fund, and converting it into a labour-fund, by setting up manufactures under the management of the poor-law administrators. Here, in these "workhouses" was the linen trade to be cultivated. Mr. Firmin set up a workhouse in Aldersgate Street, of the results of which, after four years, he thus speaks:—"This, I am sure, is the worst that can be said of it, that it hath not been yet brought to bear its own charges." Sir Matthew Hale was for setting up a public manufactory of coarse cloth, of which the charges for materials and labour in producing thirty-two yards would be 11l. 15s. He calculated that the cloth, if sold, would only yield 12l. The excellent Judge does not make any calculation of the cost of implements, or rent, or superintendence. He desires to employ fifty-six poor people, who are paid by the parish 400l. per annum, and by this cloth manufacture he will give them the 400l. for their work, and save the parish their cost. One thing is forgotten. The pauper labour yielding no profit, and consequently preventing any accumulation, the labourers must be kept down to the minimum of subsistence, which appears to be about seven pounds per annum for each labourer. The earnings of the artisan and handicraft are estimated by Gregory King at thirty-eight pounds per annum. These were the wages of skilled labourers. The pauper labourers were unskilled. If these schemes had not broken down by their own weight, and workhouse manufactories had gone on producing a competition of unskilled labourers with skilled, the rate of wages would have been more and more deteriorated, and the amount of poor seeking workhouse employment as a last resource more and more increased. Experience has very satisfactorily demonstrated that these schemes for employing the poor ought to be strictly limited to the production of articles of necessity for their own consumption. Even the production of such articles is scarcely remunerating,—that is, the produce scarcely returns the cost of materials and superintendence. Even the boasted Free and Pauper Colonies of Holland have turned out to be commercial failures. They are not self-sustaining. The want of skill in the colonists, and their disinclination to labour, having no immediate individual benefit from their labours, have combined to produce the result that one good day-labourer is worth five colonists working in common. There are also tenants of small colonial farms, at a low rent, and having many advantages. They are not so prosperous as the little farmers out of the colony, who pay a higher rent, and have no incidental benefits. The solution of the question is thus given:—"The certainty that the society will maintain them, whether they save or not, has an unfavourable influence on their habits."[42]

The increase of population was very small during the first fifty years of the eighteenth century. It absolutely declined at one period. The two million four hundred thousand pounds that were calculated by Gregory King as annual savings, were probably more and more trenched upon by pauperism and war, by "malice domestic, foreign levy," under a disputed succession. The upper classes were licentious and extravagant; the labourers in towns were drunkards to an excess that now seems hardly credible. Hogarth's 'Gin Lane' was scarcely an exaggeration of the destitution and misery that attended this national vice. About the middle of the century, or soon after, sprang up many of the great mechanical improvements which made us a manufacturing people; and which, in half a century, added a third to the population. In spite of the most expensive war in which England had ever been engaged, the accumulated capital, chiefly in consequence of these discoveries and improvements, had increased as fast as the population in the second fifty years of the eighteenth century. In the present century the population has doubled in fifty years; and the accumulated capital has more than doubled. Population has been recently increasing at the rate of one and a half per cent.; capital has been increasing at the rate of two and a half per cent.[43] It is this accumulation which has been steadily raising the rate of wages in many employments of industry; whilst the chemical and mechanical arts, the abundant means of rapid transit, the abolition or reduction of duties upon great articles of consumption, and the freedom of commercial intercourse, have given all the receivers of wages a greatly increased command of articles of necessity, and even of what used to be thought luxuries.

There is nothing more difficult in economical inquiries than the attempt to ascertain what was the actual rate of wages at any given period. The fluctuations in the value of money enter into this question, more or less, at every period of our history. We find the nominal rate of wages constantly increasing, from one generation to another, but we cannot at all be certain that the real rate is increasing. That nominal rate always requires to be compared with the prices of the necessaries of life. What pertains to wages pertains to all fixed money-payments. A Fellow of a college applied to Bishop Fleetwood to know if he could conscientiously hold his fellowship, when the statutes of the college, made in the time of Henry VI., say that no one shall so hold who has an estate of 5l. a year. The Fellow had an estate of much larger nominal amount. The Bishop made a very valuable collection of the prices of commodities, and he thus answers the conscientious inquirer:—

"If for 20 years together (from 1440 to 1460) the common price of wheat were 6s. 8d. the quarter; and if from 1686 to 1706 the common price of wheat were 40s. the quarter; 'tis plain that 5l. in H. VI. time would have purchased 15 quarters of wheat; for which you must have paid, for these last 20 years, 30 pound. So that 30 pound now, would be no more than equivalent to 5 pound in the reign of H. VI. Thus if oats, from 1440 to 1460, were generally at 2s. the quarter, and from 1686 to 1706 were at 12s. the quarter, 'tis manifest that 12s. now would be no more than equivalent to 2s. then, which is but a sixth part of it. Thus, if beans were then 5s. and now 30s. the quarter, the same proportion would be found betwixt 5l. and 30l. But you must not expect that everything will answer thus exactly. Ale, for instance, was, during the time of your founder, at three-halfpence the gallon; but it has been, ever since you were born, at 8d. at the least: which is but five times more, and a little over. So that 5l. heretofore (betwixt 1440 and 1460) would purchase no more ale than somewhat above 25l. would now. Again, good cloth, such as was to serve the best doctor in your University for his gown, was (between 1440 and 1460) at 3s. 7d. the yard; at which rate, 5l. would have purchased 29 yards, or thereabouts. Now you may purchase that quantity of fine cloth at somewhat less, I think, than 25l. So that 25l. now would be an equivalent to your 5l. then, 250 years since, if you pay about 18s. the yard for your cloth. I think I have good reason to believe that beef, mutton, bacon, and other common provisions of life, were six times as cheap in H. VI. reign as they have been for these last 20 years. And therefore I can see no cause why 28 or 30l. per ann. should now be accounted a greater estate than 5l. was heretofore betwixt 1440 and 1460."[44]

But we are not to infer from these considerations that the wages of labour ought to fluctuate with the prices of commodities, or that practically they do so fluctuate. If this were the principle of wages, every improvement which lowers the price of commodities would lower the rewards of labour. Almost every article of necessity is cheaper now than it was ten years ago, taking the average of years; and the larger amount of this cheapness has been produced by improvements in manufactures, by facilities of communication, and by the removal of taxation. At the same time, taking the average of years and of employments, wages have risen. There must be some general cause in operation to produce this result.