Book 3 — CHAPTER VI.

CONCLUDING REMARKS ON THE THREE BRANCHES OF INCOME.

SECTION CXCVII.

INFLUENCE OF THE BRANCHES OF INCOME ON THE PRICE OF COMMODITIES.

We have seen, § 106, that the cost of production of a commodity, considered from the point of view of individual economy, may be reduced to the payment for the use of the requisite productive forces rented or loaned to the producer. Hence every great variation in the relation of the three branches of income to one another must produce a corresponding variation in the price of commodities.[197-1] When, for instance, the rate of wages increases because they absorb a larger part of the national income, those commodities in the production of which human labor, directly employed, is the chief factor, must become dearer as compared with others. Whether this difference shall be felt principally by the products of nature or of capital (compare § 46 seq.), depends on the causes which brought about the enhancement of the rate of wages. Thus, a large decrease of population, or emigration on a large scale, will usually lower rent as well as the rate of interest;[197-2] an extraordinary improvement made in the art of agriculture, only the former; and an extraordinary increase of capital, only the latter. The usual course of things, namely that the growth of population necessitates a heavier draft on the resources of the soil, and thus causes rents to go up, and makes labor dear, must have the effect of raising the price of the products of labor and of natural forces, as compared with the products of capital; and all the more as it causes the rate of interest to suffer a positive decline. The products of mechanical labor become relatively cheaper; and cheaper in proportion as the producing machinery is more durable; therefore in proportion as, in the price of the services it renders, mere interest preponderates over compensation for its wear and tear.[197-3]

Let us, for a moment, leave ground-rent out of the question entirely, and suppose a nation's economy whose production is conducted by eleven undertakers employed on different commodities. Let us suppose that undertaker No. 1 uses machinery exclusively and employs only as many workmen as are strictly necessary to look after it, that undertaker No. 2 has a somewhat larger number of workmen and a somewhat smaller amount of fixed capital, etc.; and that this increase in the number of workmen and decrease in the amount of fixed capital continues until we reach undertaker No. 11, who employs all his capital in the payment of wages. If now, the rate of wages were to rise, and the interest on capital to fall in the same proportion, the commodities produced by undertaker No. 11 would rise most in price, and those of No. 1 decline most. In the case of undertaker No. 6, the opposing influences would probably balance each other, and if the producers of money belonged to this sixth class, it would be very easy to get a view of the whole change in the circumstances of production, in the money-price of the different commodities.[197-4]

SECTION CXCVIII.

REMEDY IN CASE ONE FACTOR OF PRODUCTION HAS BECOME DEARER.

When one of the three branches of income has grown as compared with the others; in other words, when the factor of production which it represents has become relatively dearer, it is to the interest of the undertaker and of the public, that it should be replaced where possible by another and cheaper productive force. (§ 47.) On this depends the advantageousness of intensive agriculture (high farming) in every higher stage of civilization. There land is dear and labor cheap. Hence, efforts are made to get along with the least amount of land-surface, and this minimum of land is made more productive by a number of expedients in cultivation, by manuring it, by seed-corn, etc., of course also by the employment of journeymen laborers, oxen, etc. And since the price of land is intimately connected with the price of most raw material, remains are here saved as much as possible, often with a great deal of trouble.[198-1] In a lower stage of civilization, such savings would be considered extravagance. As land is here cheap, and capital dear, it is necessary to carry on the cultivation of land extensively; that is, save in capital and labor, and allow the factor nature to perform the most possible. The clearing up of untilled land, or the draining of swampy land etc., would be frequently injurious here; for it would require the use of a very large amount of capital to obtain land of comparatively little value.

In large cities, it is customary to build houses high in proportion to the dearness of the land.[198-2] Thus, in England, where the rate of interest is low and wages high, labor is readily supplanted by capital. In countries like the East Indies or China, the reverse is the case. I need only call attention to the palanquins used in Asia instead of carriages; to the men who in South America carried ore down eighteen hundred steps to the smelting furnaces,[198-3] and, on the other hand, to the "elevators," so much in favor in England, which are used in factories to carry people from one story to another inside to save them the trouble of going up stairs.[198-4]

SECTION CXCIX.

INFLUENCE OF FOREIGN TRADE.

Foreign trade, that great means of coöperation of labor among different nations, affords such a remedy in a very special manner. It very frequently happens that the undertakers of one country, when a certain factor of production seems too dear at home, borrow it elsewhere. Thus, for instance, a country with a high rate of wages draws on another for labor, and one with a high rate of interest on another for capital.[199-1] We elsewhere consider such a course of things from the standpoint of the supplying country, which in this way is healed of a heavy plethora of some single factor of production which disturbs the harmony of the whole. (§§ 187, 259, ff.). But, at the same time, the supplied country, considered from a purely economic point of view, reaps decided advantages therefrom. If, for instance, a Swiss confectioner returns from Saint Petersburgh to his home, after having made a fortune in an honest way, no one can say that Russia has grown poorer by the amount of that fortune. This man made his own capital; if he were to remain in Russia, its national economy would be richer than before his immigration thither. Now, it is, at least, no poorer, and has in the meantime had the advantage of the more skilled labor of the foreigner.[199-2] And, so, when a capitalist living in Germany purchases Hungarian land, the national income of Hungary is diminished by the amount of the annual rent which now goes to Germany; but it receives an equal amount in the interest on capital, provided the purchase was an honorable one and the capital given in exchange for the land honestly invested.[199-3] If Hungary, in general, had a superabundance of land but a lack of capital, the economic advantage is undoubted.[199-4]

These economic rules, indeed, are applicable only to the extent that higher and national considerations do not in the interest of all, create exceptions to them. "Is not the life more than meat, and the body than raiment?" No rational people will allow certain services to be performed for them preponderantly by foreigners, even when they can be performed cheaper by the latter—the services of religion, of the army, of the state, etc. The same is true of landownership; and all the truer in proportion as political and legal rights of presentation and other forms of patronage are attached to it. Lastly, hypothecation-debts which go beyond certain limits, may entail the same consequences as the complete alienation of the land;[199-5] and Raynal may have been, under certain circumstances, right when he said, that to admit foreigners to subscribe to the national debt was equivalent to ceding a province to them.[199-6] It is obvious that a great power may do much in this relation that would be a risk to a small state.[199-7] [199-8]

SECTION CC.

INFLUENCE OF THE BRANCHES OF INCOME ON THE PRICE OF COMMODITIES.

In relation to foreign trade, in the narrowest sense of the term, fears were formerly very frequently expressed and are sometimes even now, which in the last analysis are based on the assumption that one country might be underbid by another in all branches of commodities.[200-1] This is evidently absurd. Whoever wants to pay for foreign commodities can do it only in goods of his own. When he pays for them with money, the money is either the immediate product of his own husbandry (mining countries!), or the mediate product obtained by the previous surrender of products of his own. To receive from foreign countries all the objects which one has need of, would be to receive them as a gift.

It is just as absurd to fear that the three branches of income in the same country's economy should be all relatively high at the same time, and competition with foreign countries be thus made more difficult. Rent and interest especially in this respect have to demean themselves in ways diametrically opposed to each other.[200-2] When trade is entirely free, every nation will engage at last in those branches of production which require chiefly the productive forces which are cheapest in that country; that is which the relatively low level of the corresponding branch of income recommends to individual economy and enterprise. The merely absolute and personal height of the three branches of income has, as we have said, no direct influence on the price of commodities. In this respect, all these may be higher in one country than in another. Thus, for instance, English landowners, capitalists and workmen may be all at the same time in a better economic condition respectively than Polish landowners, capitalists and workmen, when the national income of England stands to its area and population in general, in a much more favorable ratio than the Polish.[200-3]

SECTION CCI.

HARMONY OF THE THREE BRANCHES OF INCOME.—INDIVIDUAL DIFFERENCE IN THEM.

As national-economical civilization advances, the personal difference of the three branches of income is wont to become more and more sharply defined.[201-1] The struggle between landowners, farmers and workmen, which Ricardo necessarily assumed, did not exist at all in the middle ages; since landowners and farmers were then usually one and the same person, and since workmen, either as slaves or peasants, were protected against competition properly so called. And so in the industry of that time, based on the trades or on domestic industry.[201-2] [201-3]

When, later, the division of labor increases, all the differences of men's aptitudes are turned to more advantage, and are more fully developed. In the same proportion that a working class is developed, the members of which are nothing but workmen, and can scarcely hope to possess capital or land,[201-4] there grows up, side by side with it, a class of mere capitalists, who come to obtain an ever-increasing importance.

Considered from a purely economic point of view, this transition has its great advantages. How much must the existence of a special class of capitalists facilitate the concentration of capital and the consequent promotion of production, as well as its (capital's) price-leveling influx and outflow! Even "idle" capitalists have this of good, that, without them, no competent man, destitute of means could engage in any independent enterprise. When, indeed, the gulf between these two classes passes certain bounds, it may, politically and socially, become a great evil. (§ 63.)[201-5]

SECTION CCII.

HARMONY OF THE THREE BRANCHES OF INCOME.—NECESSITY OF THE FEELING OF A COMMON INTEREST.

Every class corresponding to a branch of the national income must live with the consciousness that its interests coincide with the economic interests of the whole nation. Whenever the entire national income increases, each branch of it may increase without any injury to the others, and, as a rule, does really increase.[202-1] But it is possible that the land owning class may be specially dependent on the prosperity of the whole people. How easy it is for workmen to emigrate; and how much easier yet for capital! England, to-day, can scarcely carry on a great war, in which it would not, at least at the beginning, have to fight English capital.[202-2] Where the treasure is, the heart is also! The land alone is immovable. It alone cannot be withdrawn from the pressure of taxation or from the distress of war. It alone cannot flee into foreign parts.[202-3] [202-4] At the same time, it cannot be denied that the possibility of being able to carry one's fortune out of a country in one's pocketbook and to be able to procure there with one's money the same conveniences, customs, etc., to which one was accustomed at home, is, under certain circumstances, an important element of political and religious freedom. Moreover, the bright side and the dark of every class of owners, especially the dread of all unnecessary and also of all necessary change, must be common to rent and interest. Hence, where there is a marked and well-defined separation of the branches of income, it will be always considered a difficult but unavoidable problem, how to enable mere labor to take an active part in the affairs of the state.[202-5]

In times when calm prevails (not, however, in transition-crises such as are referred to in § 24), there is a public opinion concerning merit and reward, we might say a public conscience, by which a definite relation of the three branches of income to one another is declared equitable. Every "fair-minded man" feels satisfied when this relation is realized, and this feeling of satisfaction is one of the principal conditions precedent to the prosperity of production; inasmuch as upon it depends the participation (Theilnahme) of all owners of funds and forces. Every deviation from this relation or proportion is, of course, a misfortune,[202-6] but never so great as when it takes place at the expense of the wages of labor. It should never be forgotten that rent is an appropriation of the gifts of nature, and that interest is a further fruit obtained by frugality from older labor already remunerated. Besides, the rate of wages when high, generally adds to the efficiency of labor, which cannot be claimed for interest or rent.[202-7] The best means to preserve the harmony of the three branches of income is, however, universal activity. "Rich or poor, strong or weak, the idler is a knave." (J. J. Rousseau.)