Progress and Poverty by Henry George (most important books of all time txt) 📕

seed, and a jackknife thrown upon the ground would take root and in due time bear a crop of assorted cutlery. Imagine certain capitalists transported, with their capital in appropriate forms, to such a place. Manifestly, they would get, as the return for their capital, the whole amount of wealth it produced only so long as none of its produce was demanded as rent. When rent arose, it would come out of the produce of capital, and as it increased, the return to the owners of capital must necessarily diminish. If we imagine the place where capital possessed this power of producing wealth without the aid of labor to be of limited extent, say an island, we shall see that as soon as capital had increased to the limit of the island to support it, the return to capital must fall to a trifle above its minimum of mere replacement, and the land owners would receive nearly the whole produce as rent, for the only alternative capitalists would have would be to throw their capital into the sea. Or, if we imagine such an island to be in communication with the rest of the world, the return to capital would settle at the rate of return in other places. Interest there would be neither higher nor lower than anywhere else. Rent would obtain the whole of the superior advantage, and the land of such an island would have a great value.

To sum up, the law of interest is this:

The relation between wages and interest is determined by the average power of increase which attaches to capital from its use in reproductive modes. As rent arises, interest will fall as wages fall, or will be determined by the margin of cultivation.

I have endeavored at this length to trace out and illustrate the law of interest more in deference to the existing terminology and modes of thought than from the real necessities of our inquiry, were it unembarrassed by befogging discussions. In truth, the primary division of wealth in distribution is dual, not tripartite. Capital is but a form of labor, and its distinction from labor is in reality but a subdivision, just as the division of labor into skilled and unskilled would be. In our examination we have reached the same point as would have been attained had we simply treated capital as a form of labor, and sought the law which divides the produce between rent and wages; that is to say, between the possessors of the two factors, natural substances and powers, and human exertion⁠—which two factors by their union produce all wealth.

VI Wages and the Law of Wages

We have by inference already obtained the law of wages. But to verify the deduction and to strip the subject of all ambiguities, let us seek the law from an independent starting point.

There is, of course, no such thing as a common rate of wages, in the sense that there is at any given time and place a common rate of interest. Wages, which include all returns received from labor, not only vary with the differing powers of individuals, but, as the organization of society becomes elaborate, vary largely as between occupations. Nevertheless, there is a certain general relation between all wages, so that we express a clear and well-understood idea when we say that wages are higher or lower in one time or place than in another. In their degrees, wages rise and fall in obedience to a common law. What is this law?

The fundamental principle of human action⁠—the law that is to political economy what the law of gravitation is to physics⁠—is that men seek to gratify their desires with the least exertion. Evidently, this principle must bring to an equality, through the competition it induces, the reward gained by equal exertions under similar circumstances. When men work for themselves, this equalization will be largely affected by the equation of prices; and between those who work for themselves and those who work for others, the same tendency to equalization will operate. Now, under this principle, what, in conditions of freedom, will be the terms at which one man can hire others to work for him? Evidently, they will be fixed by what the men could make if laboring for themselves. The principle which will prevent him from having to give anything above this, except what is necessary to induce the change, will also prevent them from taking less. Did they demand more, the competition of others would prevent them from getting employment. Did he offer less, none would accept the terms, as they could obtain greater results by working for themselves. Thus, although the employer wishes to pay as little as possible, and the employee to receive as much as possible, wages will be fixed by the value or produce of such labor to the laborers themselves. If wages are temporarily carried either above or below this line, a tendency to carry them back at once arises.

But the result, or the earnings of labor, as is readily seen in those primary and fundamental occupations in which labor first engages, and which, even in the most highly developed condition of society, still form the base of production, does not depend merely upon the intensity or quality of the labor itself. Wealth is the product of two factors, land and labor, and what a given amount of labor will yield will vary with the powers of the natural opportunities to which it is applied. This being the case, the principle that men seek to gratify their desires with the least exertion will fix wages at the produce of such labor at the point of highest natural productiveness open to it. Now, by virtue of the same principle, the highest point of natural productiveness open to labor under existing conditions will be the lowest point at which production continues, for men, impelled by a supreme law of the human mind to seek the satisfaction of their desires