Note 166-7 — Chapter III

Watts, Statist. Journal, 1861, 500, asserts altogether too generally that an "increase of profit increases the future wages-fund, and consequently the demand for laborers;" and that therefore every new machine useful in manufactures must also be of use to the laboring class. The employer engaged in any enterprise who has grown richer, can pay more wages, but whether he will do it depends on other causes, and even his ability to do it, in the long run, on his customers. When John Stuart Mill, Principles, I, ch. 5, 9, says that only the capital which comes into the hands of labor before the completion of their work contributes to their support, it is as if he were to explain the phenomena of prices by demand and supply, and nothing else, denying the influence of the cost of production, of value in use, and of the deeper determining causes upon them. (Supra, § 107, note 1.) Compare Roesler, Z. Kritik der Lehre vom Arbeitslohn, 1861, 104 ff. In England, the superstition which to a great extent attached to the idea "wages-fund," was first questioned by F. Longe, Refutation of the Wages-Fund Theory of modern Political Economy, 1866. See also Thornton, On Labour, II, ch. 1. Even John Stuart Mill dropped his earlier erroneous views on this subject. (Fortnightly Review, May and June, 1869.) Not, however, without exaggeration, as is proved by his well-known saying, that laborers needed capital but no capitalists. Still, even here, he tenaciously holds that a rise in wages which increases the price of some classes of commodities, must decrease the aggregate demand for commodities. But better paid workmen may now increase their demand for commodities to the same extent that the purchasers of labor who do not gain as much as before, or the consumers of the goods whose price has been enhanced diminish theirs. (Brentano, in Hildebrand's Jahrbb., 1871, 374.) Only, this increase need not affect the very commodities influenced by the decrease.