Another large portion of capital, however, consists in instruments of production, of a more or less permanent character; which produce their effect not by being parted with, but by being kept; and the efficacy of which is not exhausted by a single use. To this class belong buildings, machinery, and all or most things known by the name of implements or tools. The durability of some of these is considerable, and their function as productive instruments is prolonged through many repetitions of the productive operation. In this class must likewise be included capital sunk (as the expression is) in permanent improvements of land. So also the capital expended once for all, in the commencement of an undertaking, to prepare the way for subsequent operations: the expense of opening a mine, for example; of cutting canals, of making roads or docks. Other examples might be added, but these are sufficient. Capital which exists in any of these durable shapes, and the return to which is spread over a period of corresponding duration, is called Fixed Capital.

Of fixed capital, some kinds require to be occasionally or periodically renewed. Such are all implements and buildings: they require, at intervals, partial renewal by means of repairs, and are at last entirely worn out. In other cases the capital does not, unless as a consequence of some unusual accident, require entire renewal. A dock or a canal, once made, does not require, like a machine, to be made again, unless purposely destroyed. The most permanent of all kinds of fixed capital is that employed in giving increased productiveness to a natural agent, such as land.

To return to the theoretical distinction between fixed and circulating capital. Since all wealth which is destined to be employed for reproduction comes within the designation of capital, there are parts of capital which do not agree with the definition of either species of it; for instance, the stock of finished goods which a manufacturer or dealer at any time possesses unsold in his warehouses. But this, though capital as to its destination, is not yet capital in actual exercise; it is not engaged in production, but has first to be sold or exchanged, that is, converted into an equivalent value of some other commodities, and therefore is not yet either fixed or circulating capital, but will become either one or the other, or be eventually divided between them.



2. Increase of Fixed Capital, when, at the Expense of Circulating, might be Detrimental to the Laborers.

There is a great difference between the effects of circulating and those of fixed capital, on the amount of the gross produce of the country. Circulating capital being destroyed as such, the result of a single use must be a reproduction equal to the whole amount of the circulating capital used, and a profit besides. This, however, is by no means necessary in the case of fixed capital. Since machinery, for example, is not wholly consumed by one use, it is not necessary that it should be wholly replaced from the product of that use. The machine answers the purpose of its owner if it brings in, during each interval of time, enough to cover the expense of repairs, and the deterioration in value which the machine has sustained during the same time, with a surplus sufficient to yield the ordinary profit on the entire value of the machine.

From this it follows that all increase of fixed capital, when taking place at the expense of circulating, must be, at least temporarily, prejudicial to the interests of the laborers. This is true, not of machinery alone, but of all improvements by which capital is sunk; that is, rendered permanently incapable of being applied to the maintenance and remuneration of labor.

It is highly probable that in the twenty-five years preceding the panic of 1873, owing to the progress of invention, those industries in the United States employing much machinery were unduly stimulated in comparison with other industries, and that the readjustment was a slow and painful process. After the collapse vast numbers left the manufacturing to enter the extractive industries.

The argument relied on by most of those who contend that machinery can never be injurious to the laboring-class is, that by cheapening production it creates such an increased demand for the commodity as enables, ere long, a greater number of persons than ever to find employment in producing it. The argument does not seem to me to have the weight commonly ascribed to it. The fact, though too broadly stated, is, no doubt, often true. The copyists who were thrown out of employment by the invention of printing were doubtless soon outnumbered by the compositors and pressmen who took their place; and the number of laboring persons now employed in the cotton manufacture is many times greater than were so occupied previously to the inventions of Hargreaves and Arkwright, which shows that, besides the enormous fixed capital now embarked in the manufacture, it also employs a far larger circulating capital than at any former time. But if this capital was drawn from other employments, if the funds which took the place of the capital sunk in costly machinery were supplied not by any additional saving consequent on the improvements, but by drafts on the general capital of the community, what better are the laboring-classes for the mere transfer?

There is a machine used for sizing the cotton yarn to prepare it for weaving, by which it is dried over a steam cylinder, the wages for attendance on which were only two dollars per day, as compared with an expenditure for labor of fourteen dollars per day to accomplish the same ends before the machine was invented.

All attempts to make out that the laboring-classes as a collective body can not suffer temporarily by the introduction of machinery, or by the sinking of capital in permanent improvements, are, I conceive, necessarily fallacious.(111) That they would suffer in the particular department of industry to which the change applies is generally admitted, and obvious to common sense; but it is often said that, though employment is withdrawn from labor in one department, an exactly equivalent employment is opened for it in others, because what the consumers save in the increased cheapness of one particular article enables them to augment their consumption of others, thereby increasing the demand for other kinds of labor. This is plausible, but, as was shown in the last chapter, involves a fallacy; demand for commodities being a totally different thing from demand for labor. It is true, the consumers have now additional means of buying other things; but this will not create the other things, unless there is capital to produce them, and the improvement has not set at liberty any capital, even if it has not absorbed some from other employments.

If the improvement has lowered the cost of production, it has often required less capital (as well as less labor) to produce the same quantity of goods; or, what is the same thing, an increased product with the same capital.



3. —This seldom, if ever, occurs.

Nevertheless, I do not believe that, as things are actually transacted, improvements in production are often, if ever, injurious, even temporarily, to the laboring-classes in the aggregate. They would be so if they took place suddenly to a great amount, because much of the capital sunk must necessarily in that case be provided from funds already employed as circulating capital. But improvements are always introduced very gradually, and are seldom or never made by withdrawing circulating capital from actual production, but are made by the employment of the annual increase. I doubt if there would be found a single example of a great increase of fixed capital, at a time and place where circulating capital was not rapidly increasing likewise.

In the United States, while the cost per yard of the manufactured goods has decreased, and so made accessible to poorer classes than before, the capital engaged in manufactures has increased so as to allow a vastly greater number of persons to be employed, as will be seen by the following comparison of 1860 with 1880 taken from the last census returns. (Compendium, 1880, pp. 928, 930.)

Number of Capital Average Total amount establishments. (Thousands). number of paid in hands wages during employed. the year. 1860 140,433 $1,009,855 1,311,246 $378,878,966 1880 253,852 2,790,272 2,732,595 947,953,795

"A hundred years ago, one person in every family of five or six must have been absolutely needed to spin and weave by hand the fabrics required for the scanty clothing of the people; now one person in two hundred or two hundred and fifty only need work in the factory to produce the cotton and woolen fabrics of the most amply clothed nation of the world."(112)

To these considerations must be added, that, even if improvements did for a time decrease the aggregate produce and the circulating capital of the community, they would not the less tend in the long run to augment both. This tendency of improvements in production to cause increased accumulation, and thereby ultimately to increase the gross produce, even if temporarily diminishing it, will assume a still more decided character if it should appear that there are assignable limits both to the accumulation of capital and to the increase of production from the land, which limits once attained, all further increase of produce must stop; but that improvements in production, whatever may be their other effects, tend to throw one or both of these limits farther off. Now, these are truths which will appear in the clearest light in a subsequent stage of our investigation. It will be seen that the quantity of capital which will, or even which can, be accumulated in any country, and the amount of gross produce which will, or even which can, be raised, bear a proportion to the state of the arts of production there existing; and that every improvement, even if for the time it diminish the circulating capital and the gross produce, ultimately makes room for a larger amount of both than could possibly have existed otherwise. It is this which is the conclusive answer to the objections against machinery; and the proof thence arising of the ultimate benefit to laborers of mechanical inventions, even in the existing state of society, will hereafter be seen to be conclusive.(113)



Chapter VI. Of Causes Affecting The Efficiency Of Production.



1. General Causes of Superior Productiveness.

The most evident cause of superior productiveness is what are called natural advantages. These are various. Fertility of soil is one of the principal. The influence of climate [is another advantage, and] consists in lessening the physical requirements of the producers.

In spinning very fine cotton thread, England's natural climate gives in some parts of the country such advantages in proper moisture and electric conditions that the operation can be carried on out-of-doors; while in the United States it is generally necessary to create an artificial atmosphere. In ordinary spinning in our country more is accomplished when the wind is in one quarter than in another. The dry northwest wind in New England reduces the amount of product, while the dry northeast wind in England has a similar effect, and it is said has practically driven the cotton-spinners from Manchester to Oldham, where the climate is more equably moist. The full reasons for these facts are not yet ascertained.

Experts in the woolen industry, also, explain that the quality and fiber of wool depend upon the soil and climate where the sheep are pastured. When Ohio sheep are transferred to Texas, in a few years their wool loses the distinctive quality it formerly possessed, and takes on a new character belonging to the breeds of Texas. The wool produced by one set of climatic conditions is quite different from that of another set, and is used by the manufacturers for different purposes.

In hot regions, mankind can exist in comfort with less perfect housing, less clothing; fuel, that absolute necessary of life in cold climates, they can almost dispense with, except for industrial uses. They also require less aliment. Among natural advantages, besides soil and climate, must be mentioned abundance of mineral productions, in convenient situations, and capable of being worked with moderate labor. Such are the coal-fields of Great Britain, which do so much to compensate its inhabitants for the disadvantages of climate; and the scarcely inferior resource possessed by this country and the United States, in a copious supply of an easily reduced iron-ore, at no great depth below the earth's surface, and in close proximity to coal-deposits available for working it. But perhaps a greater advantage than all these is a maritime situation, especially when accompanied with good natural harbors; and, next to it, great navigable rivers. These advantages consist indeed wholly in saving of cost of carriage. But few, who have not considered the subject, have any adequate notion how great an extent of economical advantage this comprises.

As the second of the [general] causes of superior productiveness, we may rank the greater energy of labor. By this is not to be understood occasional, but regular and habitual energy. The third element which determines the productiveness of the labor of a community is the skill and knowledge therein existing, whether it be the skill and knowledge of the laborers themselves or of those who direct their labor. That the productiveness of the labor of a people is limited by their knowledge of the arts of life is self-evident, and that any progress in those arts, any improved application of the objects or powers of nature to industrial uses, enables the same quantity and intensity of labor to raise a greater produce. One principal department of these improvements consists in the invention and use of tools and machinery.(114)

The deficiency of practical good sense, which renders the majority of the laboring-class such bad calculators—which makes, for instance, their domestic economy so improvident, lax, and irregular—must disqualify them for any but a low grade of intelligent labor, and render their industry far less productive than with equal energy it otherwise might be. The moral qualities of the laborers are fully as important to the efficiency and worth of their labor as the intellectual. Independently of the effects of intemperance upon their bodily and mental faculties, and of flighty, unsteady habits upon the energy and continuity of their work (points so easily understood as not to require being insisted upon), it is well worthy of meditation how much of the aggregate effect of their labor depends on their trustworthiness.

Among the secondary causes which determine the productiveness of productive agents, the most important is Security. By security I mean the completeness of the protection which society affords to its members.



2. Combination and Division of Labor Increase Productiveness.

In the enumeration of the circumstances which promote the productiveness of labor, we have left one untouched, which is co-operation, or the combined action of numbers. Of this great aid to production, a single department, known by the name of Division of Labor, has engaged a large share of the attention of political economists; most deservedly, indeed, but to the exclusion of other cases and exemplifications of the same comprehensive law. In the lifting of heavy weights, for example, in the felling of trees, in the sawing of timber, in the gathering of much hay or corn during a short period of fine weather, in draining a large extent of land during the short season when such a work may be properly conducted, in the pulling of ropes on board ship, in the rowing of large boats, in some mining operations, in the erection of a scaffolding for building, and in the breaking of stones for the repair of a road, so that the whole of the road shall always be kept in good order: in all these simple operations, and thousands more, it is absolutely necessary that many persons should work together, at the same time, in the same place, and in the same way. [But] in the present state of society, the breeding and feeding of sheep is the occupation of one set of people; dressing the wool to prepare it for the spinner is that of another; spinning it into thread, of a third; weaving the thread into broadcloth, of a fourth; dyeing the cloth, of a fifth; making it into a coat, of a sixth; without counting the multitude of carriers, merchants, factors, and retailers put in requisition at the successive stages of this progress.

Without some separation of employments, very few things would be produced at all. Suppose a set of persons, or a number of families, all employed precisely in the same manner; each family settled on a piece of its own land, on which it grows by its labor the food required for its own sustenance, and, as there are no persons to buy any surplus produce where all are producers, each family has to produce within itself whatever other articles it consumes. In such circumstances, if the soil was tolerably fertile, and population did not tread too closely on the heels of subsistence, there would be, no doubt, some kind of domestic manufactures; clothing for the family might, perhaps, be spun and woven within it, by the labor, probably, of the women (a first step in the separation of employments); and a dwelling of some sort would be erected and kept in repair by their united labor. But beyond simple food (precarious, too, from the variations of the seasons), coarse clothing, and very imperfect lodging, it would be scarcely possible that the family should produce anything more.

Suppose that a company of artificers, provided with tools, and with food sufficient to maintain them for a year, arrive in the country and establish themselves in the midst of the population. These new settlers occupy themselves in producing articles of use or ornament adapted to the taste of a simple people; and before their food is exhausted they have produced these in considerable quantity, and are ready to exchange them for more food. The economical position of the landed population is now most materially altered. They have an opportunity given them of acquiring comforts and luxuries. Things which, while they depended solely upon their own labor, they never could have obtained, because they could not have produced, are now accessible to them if they can succeed in producing an additional quantity of food and necessaries. They are thus incited to increase the productiveness of their industry. The new settlers constitute what is called a market for surplus agricultural produce; and their arrival has enriched the settlement, not only by the manufactured articles which they produce, but by the food which would not have been produced unless they had been there to consume it.

There is no inconsistency between this doctrine and the proposition we before maintained,(115) that a market for commodities does not constitute employment for labor. The labor of the agriculturists was already provided with employment; they are not indebted to the demand of the new-comers for being able to maintain themselves. What that demand does for them is to call their labor into increased vigor and efficiency; to stimulate them, by new motives, to new exertions.

From these considerations it appears that a country will seldom have a productive agriculture unless it has a large town population, or, the only available substitute, a large export trade in agricultural produce to supply a population elsewhere. I use the phrase "town population" for shortness, to imply a population non-agricultural.

It is found that the productive power of labor is increased by carrying the separation further and further; by breaking down more and more every process of industry into parts, so that each laborer shall confine himself to an ever smaller number of simple operations. And thus, in time, arise those remarkable cases of what is called the division of labor, with which all readers on subjects of this nature are familiar. Adam Smith's illustration from pin-making, though so well known, is so much to the point that I will venture once more to transcribe it: "The business of making a pin is divided into about eighteen distinct operations. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper.... I have seen a small manufactory where ten men only were employed, and where some of them, consequently, performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upward of four thousand pins of a middling size. Those ten persons, therefore, could make among them upward of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day."



3. Advantages of Division of Labor.

The causes of the increased efficiency given to labor by the division of employments are some of them too familiar to require specification; but it is worth while to attempt a complete enumeration of them. By Adam Smith they are reduced to three: "First, the increase of dexterity in every particular workman; secondly, the saving of the time which is commonly lost in passing from one species of work to another; and, lastly, the invention of a great number of machines which facilitate and abridge labor, and enable one man to do the work of many."

(1.) Of these, the increase of dexterity of the individual workman is the most obvious and universal. It does not follow that because a thing has been done oftener it will be done better. That depends on the intelligence of the workman, and on the degree in which his mind works along with his hands. But it will be done more easily. This is as true of mental operations as of bodily. Even a child, after much practice, sums up a column of figures with a rapidity which resembles intuition. The act of speaking any language, of reading fluently, of playing music at sight, are cases as remarkable as they are familiar. Among bodily acts, dancing, gymnastic exercises, ease and brilliancy of execution on a musical instrument, are examples of the rapidity and facility acquired by repetition. In simpler manual operations the effect is, of course, still sooner produced.

(2.) The second advantage enumerated by Adam Smith as arising from the division of labor is one on which I can not help thinking that more stress is laid by him and others than it deserves. To do full justice to his opinion, I will quote his own exposition of it: "It is impossible to pass very quickly from one kind of work to another, that is carried on in a different place, and with quite different tools. A country weaver, who cultivates a small farm, must lose a good deal of time in passing from his loom to the field, and from the field to his loom. When the two trades can be carried on in the same workhouse, the loss of time is no doubt much less. It is even in this case, however, very considerable. A man commonly saunters a little in turning his hand from one sort of employment to another." I am very far from implying that these considerations are of no weight; but I think there are counter-considerations which are overlooked. If one kind of muscular or mental labor is different from another, for that very reason it is to some extent a rest from that other; and if the greatest vigor is not at once obtained in the second occupation, neither could the first have been indefinitely prolonged without some relaxation of energy. It is a matter of common experience that a change of occupation will often afford relief where complete repose would otherwise be necessary, and that a person can work many more hours without fatigue at a succession of occupations, than if confined during the whole time to one.(116) Different occupations employ different muscles, or different energies of the mind, some of which rest and are refreshed while others work. Bodily labor itself rests from mental, and conversely. The variety itself has an invigorating effect on what, for want of a more philosophical appellation, we must term the animal spirits—so important to the efficiency of all work not mechanical, and not unimportant even to that.

(3.) The third advantage attributed by Adam Smith to the division of labor is, to a certain extent, real. Inventions tending to save labor in a particular operation are more likely to occur to any one in proportion as his thoughts are intensely directed to that occupation, and continually employed upon it.

This also can not be wholly true. "The founder of the cotton manufacture was a barber. The inventor of the power-loom was a clergyman. A farmer devised the application of the screw-propeller. A fancy-goods shopkeeper is one of the most enterprising experimentalists in agriculture. The most remarkable architectural design of our day has been furnished by a gardener. The first person who supplied London with water was a goldsmith. The first extensive maker of English roads was a blind man, bred to no trade. The father of English inland navigation was a duke, and his engineer was a millwright. The first great builder of iron bridges was a stone-mason, and the greatest railway engineer commenced his life as a colliery engineer."(117)

(4.) The greatest advantage (next to the dexterity of the workmen) derived from the minute division of labor which takes place in modern manufacturing industry, is one not mentioned by Adam Smith, but to which attention has been drawn by Mr. Babbage: the more economical distribution of labor by classing the work-people according to their capacity. Different parts of the same series of operations require unequal degrees of skill and bodily strength; and those who have skill enough for the most difficult, or strength enough for the hardest parts of the labor, are made much more useful by being employed solely in them; the operations which everybody is capable of being left to those who are fit for no others.

The division of labor, as all writers on the subject have remarked, is limited by the extent of the market. If, by the separation of pin-making into ten distinct employments, forty-eight thousand pins can be made in a day, this separation will only be advisable if the number of accessible consumers is such as to require, every day, something like forty-eight thousand pins. If there is only a demand for twenty-four thousand, the division of labor can only be advantageously carried to the extent which will every day produce that smaller number. The increase of the general riches of the world, when accompanied with freedom of commercial intercourse, improvements in navigation, and inland communication by roads, canals, or railways, tends to give increased productiveness to the labor of every nation in particular, by enabling each locality to supply with its special products so much larger a market that a great extension of the division of labor in their production is an ordinary consequence. The division of labor is also limited, in many cases, by the nature of the employment. Agriculture, for example, is not susceptible of so great a division of occupations as many branches of manufactures, because its different operations can not possibly be simultaneous.

(5.) "In the examples given above the advantage obtained was derived from the mere fact of the separation of employments, altogether independently of the mode in which the separated employments were distributed among the persons carrying them on, as well as of the places in which they were conducted. But a further gain arises when the employments are of a kind which, in order to their effective performance, call for special capacities in the workman, or special natural resources in the scene of operation. There would be a manifest waste of special power in compelling to a mere mechanical or routine pursuit a man who is fitted to excel in a professional career; and similarly, if a branch of industry were established on some site which offered greater facilities to an industry of another sort, a waste, analogous in character, would be incurred. In a word, while a great number of the occupations in which men engage are such as, with proper preparation for them, might equally well be carried on by any of those engaged in them, or in any of the localities in which they are respectively established, there are others which demand for their effective performance special personal qualifications and special local conditions; and the general effectiveness of productive industry will, other things being equal, be proportioned to the completeness with which the adaptation is accomplished between occupation on the one hand and individuals and localities on the other."(118)



4. Production on a Large and Production on a Small Scale.

Whenever it is essential to the greatest efficiency of labor that many laborers should combine, the scale of the enterprise must be such as to bring many laborers together, and the capital must be large enough to maintain them. Still more needful is this when the nature of the employment allows, and the extent of the possible market encourages, a considerable division of labor. The larger the enterprise the further the division of labor may be carried. This is one of the principal causes of large manufactories. Every increase of business would enable the whole to be carried on with a proportionally smaller amount of labor.

As a general rule, the expenses of a business do not increase by any means proportionally to the quantity of business. Let us take as an example a set of operations which we are accustomed to see carried on by one great establishment, that of the Post-Office. Suppose that the business, let us say only of the letter-post, instead of being centralized in a single concern, were divided among five or six competing companies. Each of these would be obliged to maintain almost as large an establishment as is now sufficient for the whole. Since each must arrange for receiving and delivering letters in all parts of the town, each must send letter-carriers into every street, and almost every alley, and this, too, as many times in the day as is now done by the Post-Office, if the service is to be as well performed. Each must have an office for receiving letters in every neighborhood, with all subsidiary arrangements for collecting the letters from the different offices and redistributing them. To this must be added the much greater number of superior officers who would be required to check and control the subordinates, implying not only a greater cost in salaries for such responsible officers, but the necessity, perhaps, of being satisfied in many instances with an inferior standard of qualification, and so failing in the object.

Whether or not the advantages obtained by operating on a large scale preponderate in any particular case over the more watchful attention and greater regard to minor gains and losses usually found in small establishments, can be ascertained, in a state of free competition, by an unfailing test. Wherever there are large and small establishments in the same business, that one of the two which in existing circumstances carries on the production at greatest advantage will be able to undersell the other. The power of permanently underselling can only, generally speaking, be derived from increased effectiveness of labor; and this, when obtained by a more extended division of employment, or by a classification tending to a better economy of skill, always implies a greater produce from the same labor, and not merely the same produce from less labor; it increases not the surplus only, but the gross produce of industry. If an increased quantity of the particular article is not required, and part of the laborers in consequence lose their employment, the capital which maintained and employed them is also set at liberty, and the general produce of the country is increased by some other application of their labor.

A considerable part of the saving of labor effected by substituting the large system of production for the small, is the saving in the labor of the capitalists themselves. If a hundred producers with small capitals carry on separately the same business, the superintendence of each concern will probably require the whole attention of the person conducting it, sufficiently, at least, to hinder his time or thoughts from being disposable for anything else; while a single manufacturer possessing a capital equal to the sum of theirs, with ten or a dozen clerks, could conduct the whole of their amount of business, and have leisure, too, for other occupations.

Production on a large scale is greatly promoted by the practice of forming a large capital by the combination of many small contributions; or, in other words, by the formation of stock companies. The advantages of the principle are important, [since] (1) many undertakings require an amount of capital beyond the means of the richest individual or private partnership. [Of course] the Government can alone be looked to for any of those works for which a great combination of means is requisite, because it can obtain those means by compulsory taxation, and is already accustomed to the conduct of large operations. For reasons, however, which are tolerably well known, government agency for the conduct of industrial operations is generally one of the least eligible of resources when any other is available. Of [the advantages referred to above] one of the most important is (2) that which relates to the intellectual and active qualifications of the directing head. The stimulus of individual interest is some security for exertion, but exertion is of little avail if the intelligence exerted is of an inferior order, which it must necessarily be in the majority of concerns carried on by the persons chiefly interested in them. Where the concern is large, and can afford a remuneration sufficient to attract a class of candidates superior to the common average, it is possible to select for the general management, and for all the skilled employments of a subordinate kind, persons of a degree of acquirement and cultivated intelligence which more than compensates for their inferior interest in the result. It must be further remarked that it is not a necessary consequence of joint-stock management that the persons employed, whether in superior or in subordinate offices, should be paid wholly by fixed salaries. In the case of the managers of joint-stock companies, and of the superintending and controlling officers in many private establishments, it is a common enough practice to connect their pecuniary interest with the interest of their employers, by giving them part of their remuneration in the form of a percentage on the profits.

The possibility of substituting the large system of production for the small depends, of course, in the first place, on the extent of the market. The large system can only be advantageous when a large amount of business is to be done: it implies, therefore, either a populous and flourishing community, or a great opening for exportation.

In the countries in which there are the largest markets, the widest diffusion of commercial confidence and enterprise, the greatest annual increase of capital, and the greatest number of large capitals owned by individuals, there is a tendency to substitute more and more, in one branch of industry after another, large establishments for small ones. These are almost always able to undersell the smaller tradesmen, partly, it is understood, by means of division of labor, and the economy occasioned by limiting the employment of skilled agency to cases where skill is required; and partly, no doubt, by the saving of labor arising from the great scale of the transactions; as it costs no more time, and not much more exertion of mind, to make a large purchase, for example, than a small one, and very much less than to make a number of small ones. With a view merely to production, and to the greatest efficiency of labor, this change is wholly beneficial.

A single large company very often, instead of being a monopoly, is generally better than two large companies; for there is little likelihood of competition and lower prices when the competitors are so few as to be able to agree not to compete. As Mr. Mill says in regard to parallel railroads: "No one can desire to see the enormous waste of capital and land (not to speak of increased nuisance) involved in the construction of a second railway to connect the same places already united by an existing one; while the two would not do the work better than it could be done by one, and after a short time would probably be amalgamated." The actual tendency of charges to diminish on the railways, before the matter of parallel railways was suggested is clearly seen by reference to Chart V (p. 137).



Chapter VII. Of The Law Of The Increase Of Labor.



1. The Law of the Increase of Production Depends on those of Three Elements—Labor. Capital, and Land.

Production is not a fixed but an increasing thing. When not kept back by bad institutions, or a low state of the arts of life, the produce of industry has usually tended to increase; stimulated not only by the desire of the producers to augment their means of consumption, but by the increasing number of the consumers.

We have seen that the essential requisites of production are three—labor, capital, and natural agents; the term capital including all external and physical requisites which are products of labor, the term natural agents all those which are not. The increase of production, therefore, depends on the properties of these elements. It is a result of the increase either of the elements themselves, or of their productiveness. We proceed to consider the three elements successively, with reference to this effect; or, in other words, the law of the increase of production, viewed in respect of its dependence, first on Labor, secondly on Capital, and lastly on Land.



2. The Law of Population.

The increase of labor is the increase of mankind; of population. The power of multiplication inherent in all organic life may be regarded as infinite. There are many species of vegetables of which a single plant will produce in one year the germs of a thousand; if only two come to maturity, in fourteen years the two will have multiplied to sixteen thousand and more. It is but a moderate case of fecundity in animals to be capable of quadrupling their numbers in a single year; if they only do as much in half a century, ten thousand will have swelled within two centuries to upward to two millions and a half. The capacity of increase is necessarily in a geometrical progression: the numerical ratio alone is different.

To this property of organized beings, the human species forms no exception. Its power of increase is indefinite, and the actual multiplication would be extraordinarily rapid, if the power were exercised to the utmost. It never is exercised to the utmost, and yet, in the most favorable circumstances known to exist, which are those of a fertile region colonized from an industrious and civilized community, population has continued, for several generations, independently of fresh immigration, to double itself in not much more than twenty years.

Years. Population. Food. 25 11 mills x 25 22 mills 2x 25 44 mills 3x 25 88 mills 4x 25 176 mills 5x

By this table it will be seen that if population can double itself in twenty-five years, and if food can only be increased by as much as x (the subsistence of eleven millions) by additional application of another equal quantity of labor on the same land in each period, then at the end of one hundred years there would be the disproportion of one hundred and seventy-six millions of people, with subsistence for only fifty-five millions. Of course, this is prevented either by checking population to the amount of the subsistence; by sending off the surplus population; or by bringing in food from new lands.

In the United States to 1860 population has doubled itself about every twenty years, while in France there is practically no increase of population. It is stated that the white population of the United States between 1790 and 1840 increased 400.4 per cent, deducting immigration. The extraordinary advance of population with us, where subsistence is easily attainable, is to be seen in the chart on the next page (No. III), which shows the striking rapidity of increase in the United States when compared with the older countries of Europe. The steady demand for land can be seen by the gradual westward movement of the center of population, as seen in chart No. IV (p. 116), and by the rapid settlement of the distant parts of our country, as shown by the two charts (frontispieces), which represent to the eye by heavier colors the areas of the more densely settled districts in 1830 and in 1880.



Chart III: Population of European Countries, XIXth Century.



3. By what Checks the Increase of Population is Practically Limited.

The obstacle to a just understanding of the subject arises from too confused a notion of the causes which, at most times and places, keep the actual increase of mankind so far behind the capacity.

The conduct of human creatures is more or less influenced by foresight of consequences, and by some impulses superior to mere animal instincts; and they do not, therefore, propagate like swine, but are capable, though in very unequal degrees, of being withheld by prudence, or by the social affections, from giving existence to beings born only to misery and premature death.

Malthus found an explanation of the anomaly that in the Swiss villages, with the longest average duration of life, there were the fewest births, by noting that no one married until a cow-herd's cottage became vacant, and precisely because the tenants lived so long were the new-comers long kept out of a place.

In proportion as mankind rise above the condition of the beast, population is restrained by the fear of want, rather than by want itself. Even where there is no question of starvation, many are similarly acted upon by the apprehension of losing what have come to be regarded as the decencies of their situation in life. Among the middle classes, in many individual instances, there is an additional restraint exercised from the desire of doing more than maintaining their circumstances—of improving them; but such a desire is rarely found, or rarely has that effect, in the laboring-classes. If they can bring up a family as they were themselves brought up, even the prudent among them are usually satisfied. Too often they do not think even of that, but rely on fortune, or on the resources to be found in legal or voluntary charity.



Chart IV: Westward Movement of Center of Population.

This, in effect, is the well-known Malthusian doctrine. The thorough reader will also consult the original "Essay" of Malthus. Mr. Bowen(119) and other writers oppose it, saying it has "no relation to the times in which we live, or to any which are near at hand." He thinks the productive power of the whole world prevents the necessity of considering the pressure of population upon subsistence as an actuality now or in the future. This, however, does not deny the existence of Malthus's principles, but opposes them only on the methods of their action. Mr. Rickards(120) holds that man's food—as, e.g., wheat—has the power to increase geometrically faster than man; but he omits to consider that for the growth of this food land is demanded; that land is not capable of such geometrical increase; and that without it the food can not be grown. Of course, any extension of the land area, as happened when England abolished the corn laws and drew her food from our prairies, removes the previous pressure of population on subsistence. No believer in the Malthusian doctrine is so absurd as to hold that the growth of population actually exceeds subsistence, but that there is a "constant tendency in all animated life to increase beyond the nourishment prepared for it," no one can possibly doubt. This is not inconsistent with the fact that subsistence has at any time increased faster than population. It is as if a block of wood on the floor were acted on by two opposing forces, one tending to move it forward, one backward: if it moves backward, that does not prove the absence of any force working to move it forward, but only that the other force is the stronger of the two, and that the final motion is the resultant of the two forces. It is only near-sighted generalization to say that since the block moves forward, there is therefore no opposing force to its advance.(121) Mr. Doubleday maintains that, as people become better fed, they become unprolific. Mr. Mill's answer, referring to the large families of the English peerage, is unfortunate.(122) In Sweden the increase of the peasantry is six times that of the middle classes, and fourteen times that of the nobility. The diminishing fertility of New England families gives a truer explanation, when it is seen that with the progress in material wealth later marriages are the rule. When New-Englanders emigrate to the Western States, where labor is in demand and where it is less burdensome to have large families, there is no question as to their fertility.(123)

(1.) In a very backward state of society, like that of Europe in the middle ages, and many parts of Asia at present, population is kept down by actual starvation. The starvation does not take place in ordinary years, but in seasons of scarcity, which in those states of society are much more frequent and more extreme than Europe is now accustomed to. (2.) In a more improved state, few, even among the poorest of the people, are limited to actual necessaries, and to a bare sufficiency of those: and the increase is kept within bounds, not by excess of deaths, but by limitation of births.(124) The limitation is brought about in various ways. In some countries, it is the result of prudent or conscientious self-restraint. There is a condition to which the laboring-people are habituated; they perceive that, by having too numerous families, they must sink below that condition, or fail to transmit it to their children; and this they do not choose to submit to.

There are other cases in which the prudence and forethought, which perhaps might not be exercised by the people themselves, are exercised by the state for their benefit; marriage not being permitted until the contracting parties can show that they have the prospect of a comfortable support. There are places, again, in which the restraining cause seems to be not so much individual prudence, as some general and perhaps even accidental habit of the country. In the rural districts of England, during the last century, the growth of population was very effectually repressed by the difficulty of obtaining a cottage to live in. It was the custom for unmarried laborers to lodge and board with their employers; it was the custom for married laborers to have a cottage: and the rule of the English poor-laws, by which a parish was charged with the support of its unemployed poor, rendered land-owners averse to promote marriage. About the end of the century, the great demand for men in war and manufactures made it be thought a patriotic thing to encourage population: and about the same time the growing inclination of farmers to live like rich people, favored as it was by a long period of high prices, made them desirous of keeping inferiors at a greater distance, and, pecuniary motives arising from abuses of the poor-laws being superadded, they gradually drove their laborers into cottages, which the landowners now no longer refused permission to build.

It is but rarely that improvements in the condition of the laboring-classes do anything more than give a temporary margin, speedily filled up by an increase of their numbers. Unless, either by their general improvement in intellectual and moral culture, or at least by raising their habitual standard of comfortable living, they can be taught to make a better use of favorable circumstances, nothing permanent can be done for them; the most promising schemes end only in having a more numerous but not a happier people. There is no doubt that [the standard] is gradually, though slowly, rising in the more advanced countries of Western Europe.(125) Subsistence and employment in England have never increased more rapidly than in the last forty years, but every census since 1821 showed a smaller proportional increase of population than that of the period preceding; and the produce of French agriculture and industry is increasing in a progressive ratio, while the population exhibits, in every quinquennial census, a smaller proportion of births to the population.

This brings forward the near connection between land-tenures and population. France is pre-eminently a country of small holdings, and it is undoubtedly true that the system has checked the thoughtless increase of numbers. On his few hectares, the French peasant sees in the size of his farm and the amount of its produce the limit of subsistence for himself and his family; as in no other way does he see beforehand the results of any lack of food from his lack of prudence.(126) From 1790 to 1815 the average yearly increase of population was 120,000; from 1815 to 1846, the golden age of French agriculture, 200,000; from 1846 to 1856, when agriculture was not prosperous, 60,000; from 1856 to 1880 the increase has been not more than 36,000 yearly. In France the question shapes itself to the peasant proprietor, How many can be subsisted by the amount of produce, not on an unlimited area of land in other parts of the world, but on this particular property of a small size? While in England there are ten births to six deaths, in France there are about ten births to every nine deaths.(127) In no country has the doctrine of Malthus been more attacked than in France, and yet in no other country has there been a more marked obedience to its principles in actual practice. Since the French are practically not at all an emigrating people, population has strictly adapted itself to subsistence. For the relative increase of population in France and the United States, see also the movement of lines indicating the increase of population in chart No. III (p. 114).



Chapter VIII. Of The Law Of The Increase Of Capital.



1. Means for Saving in the Surplus above Necessaries.

The requisites of production being labor, capital, and land, it has been seen from the preceding chapter that the impediments to the increase of production do not arise from the first of these elements. But production has other requisites, and, of these, the one which we shall next consider is Capital. There can not be more people in any country, or in the world, than can be supported from the produce of past labor until that of present labor comes in [although it is not to be supposed that capital consists wholly of food]. We have next, therefore, to inquire into the conditions of the increase of capital: the causes by which the rapidity of its increase is determined, and the necessary limitations of that increase.

Since all capital is the product of saving, that is, of abstinence from present consumption for the sake of a future good, the increase of capital must depend upon two things—the amount of the fund from which saving can be made, and the strength of the dispositions which prompt to it.

(1.) The fund from which saving can be made is the surplus of the produce of labor, after supplying the necessaries of life to all concerned in the production (including those employed in replacing the materials, and keeping the fixed capital in repair). More than this surplus can not be saved under any circumstances. As much as this, though it never is saved, always might be. This surplus is the fund from which the enjoyments, as distinguished from the necessaries of the producers, are provided; it is the fund from which all are subsisted who are not themselves engaged in production, and from which all additions are made to capital. The capital of the employer forms the revenue of the laborers, and, if this exceeds the necessaries of life, it gives them a surplus which they may either expend in enjoyments or save.

It is evident that the whole unproductive consumption of the laborer can be saved. When it is considered how enormous a sum is spent by the working-classes in drink alone (and also in the great reserves of the Trades-Unions collected for purposes of strikes), it is indisputable that the laborers have the margin from which savings can be made, and by which they themselves may become capitalists. The great accumulations in the savings-banks by small depositors in the United States also show somewhat how much is actually saved. In 1882-1883 there were 2,876,438 persons who had deposited in the savings-banks of the United States $1,024,856,787, with an average to each depositor of $356.29. The unproductive consumption, however, of all classes—not merely that of the working-men—is the possible fund which may be saved. That being the amount which can be saved, how much will be saved depends on the strength of the desire to save.

The greater the produce of labor after supporting the laborers, the more there is which can be saved. The same thing also partly contributes to determine how much will be saved. A part of the motive to saving consists in the prospect of deriving an income from savings; in the fact that capital, employed in production, is capable of not only reproducing itself but yielding an increase. The greater the profit that can be made from capital, the stronger is the motive to its accumulation.



2. Motive for Saving in the Surplus above Necessaries.

But the disposition to save does not wholly depend on the external inducement to it; on the amount of profit to be made from savings. With the same pecuniary inducement, the inclination is very different, in different persons, and in different communities.

(2.) All accumulation involves the sacrifice of a present, for the sake of a future good.

This is the fundamental motive underlying the effective desire of accumulation, and is far more important than any other. It is, in short, the test of civilization. In order to induce the laboring-classes to improve their condition and save capital, it is absolutely necessary to excite in them (by education or religion) a belief in a future gain greater than the present sacrifice. It is, to be sure, the whole problem of creating character, and belongs to sociology and ethics rather than to political economy.

In weighing the future against the present, the uncertainty of all things future is a leading element; and that uncertainty is of very different degrees. "All circumstances," therefore, "increasing the probability of the provision we make for futurity being enjoyed by ourselves or others, tend" justly and reasonably "to give strength to the effective desire of accumulation. Thus a healthy climate or occupation, by increasing the probability of life, has a tendency to add to this desire. When engaged in safe occupations and living in healthy countries, men are much more apt to be frugal, than in unhealthy or hazardous occupations and in climates pernicious to human life. Sailors and soldiers are prodigals. In the West Indies, New Orleans, the East Indies, the expenditure of the inhabitants is profuse. The same people, coming to reside in the healthy parts of Europe, and not getting into the vortex of extravagant fashion, live economically. War and pestilence have always waste and luxury among the other evils that follow in their train. For similar reasons, whatever gives security to the affairs of the community is favorable to the strength of this principle. In this respect the general prevalence of law and order and the prospect of the continuance of peace and tranquillity have considerable influence."(128)

It is asserted that the prevalence of homicide in certain parts of the United States has had a vital influence in retarding the material growth of those sections. The Southern States have received but a very small fraction (from ten to thirteen per cent) of foreign immigration. "A country where law and order prevail to perfection may find its material prosperity checked by a deadly and fatal climate; or, on the other hand, a people may destroy all the advantages accruing from matchless natural resources and climate by persistent disregard of life and property. A rather startling confirmation of this economic truth is afforded by the fact that homicide has been as destructive of life in the South as yellow fever. Although there have been forty thousand deaths from yellow fever since the war, the deaths from homicide, for the same period, have been even greater."(129) The influence of the old slave regime, and its still existing influences, in checking foreign immigration into the South can be seen by the colored chart, No. VIII, showing the relative density of foreign-born inhabitants in the several parts of the United States. The deeper color shows the greater foreign-born population.

The more perfect the security, the greater will be the effective strength of the desire of accumulation. Where property is less safe, or the vicissitudes ruinous to fortunes are more frequent and severe, fewer persons will save at all, and, of those who do, many will require the inducement of a higher rate of profit on capital to make them prefer a doubtful future to the temptation of present enjoyment.

In the circumstances, for example, of a hunting tribe, "man may be said to be necessarily improvident, and regardless of futurity, because, in this state, the future presents nothing which can be with certainty either foreseen or governed.... Besides a want of the motives exciting to provide for the needs of futurity through means of the abilities of the present, there is a want of the habits of perception and action, leading to a constant connection in the mind of those distant points, and of the series of events serving to unite them. Even, therefore, if motives be awakened capable of producing the exertion necessary to effect this connection, there remains the task of training the mind to think and act so as to establish it."



3. Examples of Deficiency in the Strength of this Desire.

For instance: "Upon the banks of the St. Lawrence there are several little Indian villages. The cleared land is rarely, I may almost say never, cultivated, nor are any inroads made in the forest for such a purpose. The soil is, nevertheless, fertile, and, were it not, manure lies in heaps by their houses. Were every family to inclose half an acre of ground, till it, and plant it in potatoes and maize, it would yield a sufficiency to support them one half the year. They suffer, too, every now and then, extreme want, insomuch that, joined to occasional intemperance, it is rapidly reducing their numbers. This, to us, so strange apathy proceeds not, in any great degree, from repugnance to labor; on the contrary, they apply very diligently to it when its reward is immediate. It is evidently not the necessary labor that is the obstacle to more extended culture, but the distant return from that labor. I am assured, indeed, that among some of the more remote tribes, the labor thus expended much exceeds that given by the whites. On the Indian, succeeding years are too distant to make sufficient impression; though, to obtain what labor may bring about in the course of a few months, he toils even more assiduously than the white man."

This view of things is confirmed by the experience of the Jesuits, in their interesting efforts to civilize the Indians of Paraguay. The real difficulty was the improvidence of the people; their inability to think for the future; and the necessity accordingly of the most unremitting and minute superintendence on the part of their instructors. "Thus at first, if these gave up to them the care of the oxen with which they plowed, their indolent thoughtlessness would probably leave them at evening still yoked to the implement. Worse than this, instances occurred where they cut them up for supper, thinking, when reprehended, that they sufficiently excused themselves by saying they were hungry."

As an example intermediate, in the strength of the effective desire of accumulation, between the state of things thus depicted and that of modern Europe, the case of the Chinese deserves attention. "Durability is one of the chief qualities, marking a high degree of the effective desire of accumulation. The testimony of travelers ascribes to the instruments formed by the Chinese a very inferior durability to similar instruments constructed by Europeans. The houses, we are told, unless of the higher ranks, are in general of unburnt bricks, of clay, or of hurdles plastered with earth; the roofs, of reeds fastened to laths. A greater degree of strength in the effective desire of accumulation would cause them to be constructed of materials requiring a greater present expenditure, but being far more durable. From the same cause, much land, that in other countries would be cultivated, lies waste. All travelers take notice of large tracts of lands, chiefly swamps, which continue in a state of nature. To bring a swamp into tillage is generally a process to complete which requires several years. It must be previously drained, the surface long exposed to the sun, and many operations performed, before it can be made capable of bearing a crop. Though yielding, probably, a very considerable return for the labor bestowed on it, that return is not made until a long time has elapsed. The cultivation of such land implies a greater strength of the effective desire of accumulation than exists in the empire. The amount of self-denial would seem to be small. It is their great deficiency in forethought and frugality in this respect which is the cause of the scarcities and famines that frequently occur."

That it is defect of providence, not defect of industry, that limits production among the Chinese, is still more obvious than in the case of the semi-agriculturized Indians. "Where the returns are quick, where the instruments formed require but little time to bring the events for which they were formed to an issue," it is well known that "the great progress which has been made in the knowledge of the arts suited to the nature of the country and the wants of its inhabitants" makes industry energetic and effective. "What marks the readiness with which labor is forced to form the most difficult materials into instruments, where these instruments soon bring to an issue the events for which they are formed, is the frequent occurrence, on many of their lakes and rivers, of structures resembling the floating gardens of the Peruvians, rafts covered with vegetable soil and cultivated. Labor in this way draws from the materials on which it acts very speedy returns. Nothing can exceed the luxuriance of vegetation when the quickening powers of a genial sun are ministered to by a rich soil and abundant moisture. It is otherwise, as we have seen, in cases where the return, though copious, is distant. European travelers are surprised at meeting these little floating farms by the side of swamps which only require draining to render them tillable."

When a country has carried production as far as in the existing state of knowledge it can be carried with an amount of return corresponding to the average strength of the effective desire of accumulation in that country, it has reached what is called the stationary state; the state in which no further addition will be made to capital, unless there takes place either some improvement in the arts of production, or an increase in the strength of the desire to accumulate. In the stationary state, though capital does not on the whole increase, some persons grow richer and others poorer. Those whose degree of providence is below the usual standard become impoverished, their capital perishes, and makes room for the savings of those whose effective desire of accumulation exceeds the average. These become the natural purchasers of the lands, manufactories, and other instruments of production owned by their less provident countrymen.

In China, if that country has really attained, as it is supposed to have done, the stationary state, accumulation has stopped when the returns to capital are still as high as is indicated by a rate of interest legally twelve per cent, and practically varying (it is said) between eighteen and thirty-six. It is to be presumed, therefore, that no greater amount of capital than the country already possesses can find employment at this high rate of profit, and that any lower rate does not hold out to a Chinese sufficient temptation to induce him to abstain from present enjoyment. What a contrast with Holland, where, during the most flourishing period of its history, the government was able habitually to borrow at two per cent, and private individuals, on good security, at three!



4. Examples of Excess of this Desire.

In [the United States and] the more prosperous countries of Europe, there are to be found abundance of prodigals: still, in a very numerous portion of the community, the professional, manufacturing, and trading classes, being those who, generally speaking, unite more of the means with more of the motives for saving than any other class, the spirit of accumulation is so strong that the signs of rapidly increasing wealth meet every eye: and the great amount of capital seeking investment excites astonishment, whenever peculiar circumstances turning much of it into some one channel, such as railway construction or foreign speculative adventure, bring the largeness of the total amount into evidence.

There are many circumstances which, in England, give a peculiar force to the accumulating propensity. The long exemption of the country from the ravages of war and the far earlier period than elsewhere at which property was secure from military violence or arbitrary spoliation have produced a long-standing and hereditary confidence in the safety of funds when trusted out of the owner's hands, which in most other countries is of much more recent origin, and less firmly established.

The growth of deposit-banking in Great Britain, therefore, advances with enormous strides, while in Continental countries it makes very little headway. The disturbed condition of the country in France, owing to wars, leads the thrifty to hoard instead of depositing their savings. But in the United States the same growth is seen as among the English. The net deposits of the national banks of the United States in 1871 were $636,000,000, but in 1883 they had increased more than 83 per cent to $1,168,000,000. Deposit accounts are the rule even with small tradesmen; and the savings-banks of Massachusetts alone show deposits in 1882-1883 of $241,311,362, and those of New York of $412,147,213. The United States also escapes from the heavy taxation which in Europe is imposed to maintain an extravagant army and navy chest. The effect of institutions, moreover, in stimulating the growth of material prosperity is far more true of the United States than of England, for the barriers raised against the movement from lower to higher social classes in the latter country are non-existent here, and consequently there is more stimulus toward acquiring the means of bettering a man's social condition.

The geographical causes which have made industry rather than war the natural source of power and importance to Great Britain [and the United States] have turned an unusual proportion of the most enterprising and energetic characters into the direction of manufactures and commerce; into supplying their wants and gratifying their ambition by producing and saving, rather than by appropriating what has been produced and saved. Much also depended on the better political institutions of this country, which, by the scope they have allowed to individual freedom of action, have encouraged personal activity and self-reliance, while, by the liberty they confer of association and combination, they facilitate industrial enterprise on a large scale. The same institutions, in another of their aspects, give a most direct and potent stimulus to the desire of acquiring wealth. The earlier decline of feudalism [in England] having removed or much weakened invidious distinctions between the originally trading classes and those who had been accustomed to despise them, and a polity having grown up which made wealth the real source of political influence, its acquisition was invested with a factitious value independent of its intrinsic utility. And, inasmuch as to be rich without industry has always hitherto constituted a step in the social scale above those who are rich by means of industry, it becomes the object of ambition to save not merely as much as will afford a large income while in business, but enough to retire from business and live in affluence on realized gains.

In [the United States,] England, and Holland, then, for a long time past, and now in most other countries in Europe, the second requisite of increased production, increase of capital, shows no tendency to become deficient. So far as that element is concerned, production is susceptible of an increase without any assignable bounds. The limitation to production, not consisting in any necessary limit to the increase of the other two elements, labor and capital, must turn upon the properties of the only element which is inherently, and in itself, limited in quantity. It must depend on the properties of land.



Chapter IX. Of The Law Of The Increase Of Production From Land.



1. The Law of Production from the Soil, a Law of Diminishing Return in Proportion to the Increased Application of Labor and Capital.

Land differs from the other elements of production, labor, and capital, in not being susceptible of indefinite increase. Its extent is limited, and the extent of the more productive kinds of it more limited still. It is also evident that the quantity of produce capable of being raised on any given piece of land is not indefinite. This limited quantity of land and limited productiveness of it are the real limits to the increase of production.

The limitation to production from the properties of the soil is not like the obstacle opposed by a wall, which stands immovable in one particular spot, and offers no hindrance to motion short of stopping it entirely. We may rather compare it to a highly elastic and extensible band, which is hardly ever so violently stretched that it could not possibly be stretched any more, yet the pressure of which is felt long before the final limit is reached, and felt more severely the nearer that limit is approached.

After a certain, and not very advanced, stage in the progress of agriculture—as soon, in fact, as mankind have applied themselves to cultivation with any energy, and have brought to it any tolerable tools—from that time it is the law of production from the land, that in any given state of agricultural skill and knowledge, by increasing the labor, the produce is not increased in an equal degree; doubling the labor does not double the produce; or, to express the same thing in other words, every increase of produce is obtained by a more than proportional increase in the application of labor to the land. This general law of agricultural industry is the most important proposition in political economy. Were the law different, nearly all the phenomena of the production and distribution of wealth would be other than they are.

It is not generally considered that in the United States, where in many sparsely settled parts of the country new land is constantly being brought into cultivation, an additional population under existing conditions of agricultural skill can be maintained with constantly increasing returns up to a certain point before the law of diminishing returns begins to operate. Where more laborers are necessary, and more capital wanted, to co-operate in a new country before all the land can give its maximum product, in such a stage of cultivation it can not be said that the law of diminishing returns has yet practically set in.

When, for the purpose of raising an increase of produce, recourse is had to inferior land, it is evident that, so far, the produce does not increase in the same proportion with the labor. The very meaning of inferior land is land which with equal labor returns a smaller amount of produce. Land may be inferior either in fertility or in situation. The one requires a greater proportional amount of labor for growing the produce, the other for carrying it to market. If the land A yields a thousand quarters of wheat to a given outlay in wages, manure, etc., and, in order to raise another thousand, recourse must be had to the land B, which is either less fertile or more distant from the market, the two thousand quarters will cost more than twice as much labor as the original thousand, and the produce of agriculture will be increased in a less ratio than the labor employed in procuring it.

Instead of cultivating the land B, it would be possible, by higher cultivation, to make the land A produce more. It might be plowed or harrowed twice instead of once, or three times instead of twice; it might be dug instead of being plowed; after plowing, it might be gone over with a hoe instead of a harrow, and the soil more completely pulverized; it might be oftener or more thoroughly weeded; the implements used might be of higher finish, or more elaborate construction; a greater quantity or more expensive kinds of manure might be applied, or, when applied, they might be more carefully mixed and incorporated with the soil.

The example of market-gardens in the vicinity of great cities and towns shows how the intensive culture permits an increase of labor and capital with larger returns. These lands, by their situation, are superior lands for this particular purpose, although they might be inferior lands as regards absolute productiveness when compared with the rich wheat-lands of Dakota. New England and New Jersey farms, generally speaking, no longer attempt the culture of grains, but (when driven out of that culture by the great railway lines which have opened up the West) they have arranged themselves in a scale of adaptability for stock, grass, fruit, dairy, or vegetable farming; and have thereby given greater profits to their owners than the same land did under the old regime. Even on lands where any grain can still be grown, corn, buckwheat, barley, oats, and rye, cover the cultivated areas instead of wheat.

Inferior lands, or lands at a greater distance from the market, of course yield an inferior return, and an increasing demand can not be supplied from them unless at an augmentation of cost, and therefore of price. If the additional demand could continue to be supplied from the superior lands, by applying additional labor and capital, at no greater proportional cost than that at which they yield the quantity first demanded of them, the owners or farmers of those lands could undersell all others, and engross the whole market. Lands of a lower degree of fertility or in a more remote situation might indeed be cultivated by their proprietors, for the sake of subsistence or independence; but it never could be the interest of any one to farm them for profit. That a profit can be made from them, sufficient to attract capital to such an investment, is a proof that cultivation on the more eligible lands has reached a point beyond which any greater application of labor and capital would yield, at the best, no greater return than can be obtained at the same expense from less fertile or less favorably situated lands.

"It is long," says a late traveler in the United States,(130) "before an English eye becomes reconciled to the lightness of the crops and the careless farming (as we should call it) which is apparent. One forgets that, where land is so plentiful and labor so dear as it is here, a totally different principle must be pursued from that which prevails in populous countries, and that the consequence will of course be a want of tidiness, as it were, and finish, about everything which requires labor." Of the two causes mentioned, the plentifulness of land seems to me the true explanation, rather than the dearness of labor; for, however dear labor may be, when food is wanted, labor will always be applied to producing it in preference to anything else. But this labor is more effective for its end by being applied to fresh soil than if it were employed in bringing the soil already occupied into higher cultivation.

The Western movement of what might be called the "wheat-center" is quite perceptible. Until recently Minnesota has been a great wheat-producing State, and vast tracts of land were there planted with that grain when the soil was first broken. The profits on the first few crops have been enormous, but it is now said to be more desirable for wheat-growers to move onward to newer lands, and to sell the land to cultivators of a different class (of fruit and varied products), who produce for a denser population. So that (in 1884) Dakota, instead of Minnesota, has become the district of the greatest wheat production.(131)

Only when no soils remain to be broken up, but such as either from distance or inferior quality require a considerable rise of price to render their cultivation profitable, can it become advantageous to apply the high farming of Europe to any American lands; except, perhaps, in the immediate vicinity of towns, where saving in cost of carriage may compensate for great inferiority in the return from the soil itself.

The principle which has now been stated must be received, no doubt, with certain explanations and limitations. Even after the land is so highly cultivated that the mere application of additional labor, or of an additional amount of ordinary dressing, would yield no return proportioned to the expense, it may still happen that the application of a much greater additional labor and capital to improving the soil itself, by draining or permanent manures, would be as liberally remunerated by the produce as any portion of the labor and capital already employed. It would sometimes be much more amply remunerated. This could not be, if capital always sought and found the most advantageous employment.



2. Antagonist Principle to the Law of Diminishing Return; the Progress of Improvements in Production.

That the produce of land increases, caeteris paribus, in a diminishing ratio to the increase in the labor employed, is, as we have said (allowing for occasional and temporary exceptions), the universal law of agricultural industry. This principle, however, has been denied. So much so, indeed, that (it is affirmed) the worst land now in cultivation produces as much food per acre, and even as much to a given amount of labor, as our ancestors contrived to extract from the richest soils in England.

The law of diminishing returns is the physical fact upon which the economic doctrine of rent is based, and requires careful attention. Carey asserts, instead, that there is a law of increasing productiveness, since, as men grow in numbers and intelligence, there arises an ability to get more from the soil.(132) Some objectors even deny that different grades of land are cultivated, and that there is no need of taking inferior soils into cultivation. If this were true, why would not one half an acre of land be as good as a whole State? Johnston(133) says: "In a country and among poor settlers ... poor land is a relative term. Land is called poor which is not suitable to a poor man, which on mere clearing and burning will not yield good first crops. Thus that which is poor land for a poor man may prove rich land to a rich man."(134) Moreover, as is constantly the case in our country, it often happens that a railway may bring new lands into competition with old lands in a given market; of which the most conspicuous example is the competition of Western grain-fields with the Eastern farms. In these older districts, before the competition came, there was a given series of grades in the cultivated land; after the railway was built there was a disarrangement of the old series, some going out of cultivation, some remaining, and some of the new lands entering the list. The result is a new series of grades better suited to satisfy the wants of men.

This, however, does not prove that the law of which we have been speaking does not exist, but only that there is some antagonizing principle at work, capable for a time of making head against the law. Such an agency there is, in habitual antagonism to the law of diminishing return from land; and to the consideration of this we shall now proceed. It is no other than the progress of civilization. The most obvious [part of it] is the progress of agricultural knowledge, skill, and invention. Improved processes of agriculture are of two kinds: (1) some enable the land to yield a greater absolute produce, without an equivalent increase of labor; (2) others have not the power of increasing the produce, but have that of diminishing the labor and expense by which it is obtained. (1.) Among the first are to be reckoned the disuse of fallows, by means of the rotation of crops; and the introduction of new articles of cultivation capable of entering advantageously into the rotation. The change made in agriculture toward the close of the last century, by the introduction of turnip-husbandry, is spoken of as amounting to a revolution. Next in order comes the introduction of new articles of food, containing a greater amount of sustenance, like the potato, or more productive species or varieties of the same plant, such as the Swedish turnip. In the same class of improvements must be placed a better knowledge of the properties of manures, and of the most effectual modes of applying them; the introduction of new and more powerful fertilizing agents, such as guano, and the conversion to the same purpose of substances previously wasted; inventions like subsoil-plowing or tile-draining, by which the produce of some kinds of lands is so greatly multiplied; improvements in the breed or feeding of laboring cattle; augmented stock, of the animals which consume and convert into human food what would otherwise be wasted; and the like. (2.) The other sort of improvements, those which diminish labor, but without increasing the capacity of the land to produce, are such as the improved construction of tools; the introduction of new instruments which spare manual labor, as the winnowing and thrashing machines. These improvements do not add to the productiveness of the land, but they are equally calculated with the former to counteract the tendency in the cost of production of agricultural produce, to rise with the progress of population and demand.



3. —In Railways.

Analogous in effect to this second class of agricultural improvements are improved means of communication. Good roads are equivalent to good tools. It is of no consequence whether the economy of labor takes place in extracting the produce from the soil, or in conveying it to the place where it is to be consumed.

The functions performed by railways in the system of production is highly important. They are among the most influential causes affecting the cost of producing commodities, particularly those which satisfy the primary wants of man, of which food is the chief. The amount of tonnage carried is enormous; and the cost of this service to the producers and consumers of the United States is a question of very great magnitude. The serious reduction in the cost of transportation on the railways will be a surprise to all who have not followed the matter very closely; the more so, that it has been brought about by natural causes, and independent of legislation. Corn, meat, and dairy products form, it is said, at least 50 per cent, and coal and timber about 30 per cent, of the tonnage moved on all the railways of the United States. If a lowered cost of transportation has come about, it has then cost less to move the main articles of immediate necessity. Had the charge in 1880 remained as high even as it was from 1866 to 1869, the number of tons carried in 1880 would have cost the United States from $500,000,000 to $800,000,000 more than the charge actually made, owing to the reductions by the railways. It seems, however, that this process of reduction culminated about 1879. In order to show the facts of this process, note the changes in the following chart, No. V. The railways of the State of New York are taken, but the same is also true of those of Ohio:

Chart V.

Cost of 20 Barrels of Flour, 10 Beef, 10 Pork, 100 Bushels Wheat, 100 Corn, 100 Oats, 100 Pounds Butter, 100 Lard, and 100 Fleece Wool, in New York City, at the Average of each Year, Compiled by Months, in Gold; Compared Graphically with the Decrease in the Charge per Ton per Mile, on all the Railroads of the State of New York, during the Same Period.

Year. Price in Charge for Decrease in Decrease in gold of carrying one the railroad the profits staple farm ton one expenses per of the products. mile. ton. (Cents) railroads (Dollars) (Cents) for carrying one ton. (Cents) 1870 776.02 1.7016 1.1471 .5545 1871 735.33 1.7005 1.1450 .5555 1872 675.92 1.6645 1.1490 .5155 1873 662.50 1.6000 1.0864 .5136 1874 748.54 1.4480 .9730 .4750 1875 696.40 1.3039 .9587 .3452 1876 651.74 1.1604 .8561 .3043 1877 751.95 1.0590 .7740 .2850 1878 569.81 .9994 .6900 .3094 1879 568.34 .8082 .5847 .2295 1880 631.32 .9220 .6030 .3190 1881 703.10 .8390 .5880 .2510 1882 776.12 .8170 .6010 .2160 1883 662.11 .8990 .6490 .2500

In 1855 the charge per ton per mile was 3.27 cents, as compared with 0.89 in 1883.

Tons moved 1 m. in 1883 by 9,286,216,628 railroads of N.Y. At rate of 1855, would cost $303,659,283 Actual cost in 1883 83,464,919 Saving to the State $220,194,364

The explanation of this reduced cost is given by Mr. Edward Atkinson(135) as (1) the competition of water-ways, (2) the competition of one railway with another, and (3) the competition of other countries, which forces our railways to try to lay our staple products down in foreign markets at a price which will warrant continued shipment. Besides these reasons, much ought also (4) to be assigned to the progress of inventions and the reduced cost of steel and all appliances necessary to the railways.

The large importance of the railways shows itself in an influence on general business prosperity, and as a place for large investments of a rapidly growing capital. The building of railways, however, has been going on, at some times with greater speed than at others. Instead of 33,908 miles of railways at the close of our war, we have now (1884) over 120,000 miles. How the additional mileage has been built year by year, with two distinct eras of increased building—one from 1869 to 1873, and another from 1879 to 1884—may be seen by the shorter lines of the subjoined chart, No. VI.

That speculation has been excited at different times by the opening up of our Western country, there can be no doubt. And if a comparison be made with Chart No. XVII (Book IV, Chap. III), which gives the total grain-crops of the United States, it will be seen that since 1879, although our population has increased from 12-1/2 per cent to 14 per cent, our grain-crops only 5 per cent, yet our railway mileage has increased 40 per cent.