Division of Labor

The Savannah

Henry George: Progress & Poverty: The Current Doctrine of Wages — Its Insufficiency

But the fundamental truth, that in all economic reasoning must be firmly grasped, and never let go, is that society in its most highly developed form is but an elaboration of society in its rudest beginnings, and that principles obvious in the simpler relations of men are merely disguised and not abrogated or reversed by the more intricate relations that result from the division of labor and the use of complex tools and methods. The steam grist mill, with its complicated machinery exhibiting every diversity of motion, is simply what the rude stone mortar dug up from an ancient river bed was in its day — an instrument for grinding corn. And every man engaged in it, whether tossing wood into the furnace, running the engine, dressing stones, printing sacks or keeping books, is really devoting his labor to the same purpose that the prehistoric savage did when be used his mortar — the preparation of grain for human food.

And so, if we reduce to their lowest terms all the complex operations of modern production, we see that each individual who takes part in this infinitely subdivided and intricate network of production and exchange is really doing what the primeval man did when he climbed the trees for fruit or followed the receding tide for shellfish — endeavoring to obtain from nature by the exertion of his powers the satisfaction of his desires. If we keep this firmly in mind, if we look upon production as a whole — as the co-operation of all embraced in any of its great groups to satisfy the various desires of each, we plainly see that the reward each obtains for his exertions comes as truly and as directly from nature as the result of that exertion, as did that of the first man.

To illustrate: in the simplest state of which we can conceive, each man digs his own bait and catches his own fish. The advantages of the division of labor soon become apparent, and one digs bait while the others fish. Yet evidently the one who digs bait is in reality doing as much toward the catching of fish as any of those who actually take the fish. So when the advantages of canoes are discovered, and instead of all going a-fishing, one stays behind and makes and repairs canoes, the canoe-maker is in reality devoting his labor to the taking of fish as much as the actual fishermen, and the fish which he eats at night when the fishermen come home are as truly the product of his labor as of theirs. And thus when the division of labor is fairly inaugurated, and instead of each attempting to satisfy all of his wants by direct resort to nature, one fishes, another hunts, a third picks berries, a fourth gathers fruit, a fifth makes tools, a sixth builds huts, and a seventh prepares clothing -- each one is to the extent he exchanges the direct product of his own labor for the direct product of the labor of others really applying his own labor to the production of the things be uses -- is in effect satisfying his particular desires by the exertion of his particular powers; that is to say, what be receives be in reality produces. If he digs roots and exchanges them for venison, he is in effect as truly the procurer of the venison as though be had gone in chase of the deer and left the huntsman to dig his own roots. The common expression, "I made so and so," signifying "I earned so and so," or "I earned money with which I purchased so and so," is, economically speaking, not metaphorically but literally true. Earning is making.

Now, if we follow these principles, obvious enough in a simpler state of society, through the complexities of the state we call civilized, we shall see clearly that in every case in which labor is exchanged for commodities, production really precedes enjoyment; that wages are the earnings — that is to say, the makings of labor — not the advances of capital, and that the laborer who receives his wages in money (coined or printed, it may be, before his labor commenced) really receives in return for the addition his labor has made to the general stock of wealth, a draft upon that general stock, which he may utilize in any particular form of wealth that will best satisfy his desires; and that neither the money, which is but the draft, nor the particular form of wealth which he uses it to call for, represents advances of capital for his maintenance, but on the contrary represents the wealth, or a portion of the wealth, his labor has already added to the general stock.

Keeping these principles in view we see that

• the draughtsman, who, shut up in some dingy office on the banks of the Thames, is drawing the plans for a great marine engine, is in reality devoting his labor to the production of bread and meat as truly as though he were garnering the grain in California or swinging a lariat on a La Plata pampa; that he is as truly making his own clothing as though he were shearing sheep in Australia or weaving cloth in Paisley, and just as effectually producing the claret he drinks at dinner as though he gathered the grapes on the banks of the Garonne.
• The miner who, two thousand feet under ground in the heart of the Comstock, is digging out silver ore, is, in effect, by virtue of a thousand exchanges, harvesting crops in valleys five thousand feet nearer the earth's center; chasing the whale through Arctic icefields; plucking tobacco leaves in Virginia; picking coffee berries in Honduras; cutting sugar cane on the Hawaiian Islands; gathering cotton in Georgia or weaving it in Manchester or Lowell; making quaint wooden toys for his children in the Hartz Mountains; or plucking amid the green and gold of Los Angeles orchards the oranges which, when his shift is relieved, he will take home to his sick wife.

The wages which he receives on Saturday night at the mouth of the shaft, what are they but the certificate to all the world that he has done these things — the primary exchange in the long series which transmutes his labor into the things he has really been laboring for? ... read the entire chapter

Henry George: The Increasing Importance of Social Questions (Chapter 1 of Social Problems, 1883)

[08] In the rude beginning, each family produces its own food, makes its own clothes, builds its own house, and, when it moves, furnishes its own transportation. Compare with this independence the intricate interdependence of the denizens of a modern city. They may supply themselves with greater certainty, and in much greater variety and abundance, than the savage; but it is by the cooperation of thousands. Even the water they drink, and the artificial light they use, are brought to them by elaborate machinery, requiring the constant labor and watchfulness of many men. They may travel at a speed incredible to the savage; but in doing so resign life and limb to the care of others. A broken rail, a drunken engineer, a careless switchman, may hurl them to eternity. And the power of applying labor to the satisfaction of desire passes, in the same way, beyond the direct control of the individual. The laborer becomes but part of a great machine, which may at any time be paralyzed by causes beyond his power, or even his foresight. Thus does the well-being of each become more and more dependent upon the well-being of all — the individual more and more subordinate to society.

[09] And so come new dangers. The rude society resembles the creatures that though cut into pieces will live; the highly civilized society is like a highly organized animal: a stab in a vital part, the suppression of a single function, is death. A savage village may be burned and its people driven off — but, used to direct recourse to nature, they can maintain themselves. Highly civilized man, however, accustomed to capital, to machinery, to the minute division of labor, becomes helpless when suddenly deprived of these and thrown upon nature. Under the factory system, some sixty persons, with the aid of much costly machinery, cooperate to the making of a pair of shoes. But, of the sixty, not one could make a whole shoe. This is the tendency in all branches of production, even in agriculture. How many farmers of the new generation can use the flail? How many farmers' wives can now make a coat from the wool? Many of our farmers do not even make their own butter or raise their own vegetables! There is an enormous gain in productive power from this division of labor, which assigns to the individual the production of but a few of the things, or even but a small part of one of the things, he needs, and makes each dependent upon others with whom he never comes in contact; but the social organization becomes more sensitive. A primitive village community may pursue the even tenor of its life without feeling disasters which overtake other villages but a few miles off; but in the closely knit civilization to which we have attained, a war, a scarcity, a commercial crisis, in one hemisphere produces powerful effects in the other, while shocks and jars from which a primitive community easily recovers would to a highly civilized community mean wreck. ... read the entire essay

Henry George: Political Dangers (Chapter 2 of Social Problems, 1883)

[08] But to the changes produced by growth are, with us, added the changes brought about by improved industrial methods. The tendency of steam and of machinery is to the division of labor, to the concentration of wealth and power. Workmen are becoming massed by hundreds and thousands in the employ of single individuals and firms; small storekeepers and merchants are becoming the clerks and salesmen of great business houses; we have already corporations whose revenues and pay-rolls belittle those of the greatest States. And with this concentration grows the facility of combination among these great business interests. How readily the railroad companies, the coal operators, the steel producers, even the match manufacturers, combine, either to regulate prices or to use the powers of government! The tendency in all branches of industry is to the formation of rings against which the individual is helpless, and which exert their power upon government whenever their interests may thus be served. ... read the entire essay

Henry George: The Condition of Labor — An Open Letter to Pope Leo XIII in response to Rerum Novarum (1891)

God’s laws do not change. Though their applications may alter with altering conditions, the same principles of right and wrong that hold when men are few and industry is rude also hold amid teeming populations and complex industries. In our cities of millions and our states of scores of millions, in a civilization where the division of labor has gone so far that large numbers are hardly conscious that they are land-users, it still remains true that we are all land animals and can live only on land, and that land is God’s bounty to all, of which no one can be deprived without being murdered, and for which no one can be compelled to pay another without being robbed. But even in a state of society where the elaboration of industry and the increase of permanent improvements have made the need for private possession of land wide-spread, there is no difficulty in conforming individual possession with the equal right to land. For as soon as any piece of land will yield to the possessor a larger return than is had by similar labor on other land a value attaches to it which is shown when it is sold or rented. Thus, the value of the land itself, irrespective of the value of any improvements in or on it, always indicates the precise value of the benefit to which all are entitled in its use, as distinguished from the value which, as producer or successor of a producer, belongs to the possessor in individual right.

To combine the advantages of private possession with the justice of common ownership it is only necessary therefore to take for common uses what value attaches to land irrespective of any exertion of labor on it. The principle is the same as in the case referred to, where a human father leaves equally to his children things not susceptible of specific division or common use. In that case such things would be sold or rented and the value equally applied.

It is on this common-sense principle that we, who term ourselves single-tax men, would have the community act.

We do not propose to assert equal rights to land by keeping land common, letting any one use any part of it at any time. We do not propose the task, impossible in the present state of society, of dividing land in equal shares; still less the yet more impossible task of keeping it so divided.

We propose — leaving land in the private possession of individuals, with full liberty on their part to give, sell or bequeath it — simply to levy on it for public uses a tax that shall equal the annual value of the land itself, irrespective of the use made of it or the improvements on it. And since this would provide amply for the need of public revenues, we would accompany this tax on land values with the repeal of all taxes now levied on the products and processes of industry — which taxes, since they take from the earnings of labor, we hold to be infringements of the right of property.

This we propose, not as a cunning device of human ingenuity, but as a conforming of human regulations to the will of God.

God cannot contradict himself nor impose on his creatures laws that clash.

If it be God’s command to men that they should not steal — that is to say, that they should respect the right of property which each one has in the fruits of his labor;

And if he be also the Father of all men, who in his common bounty has intended all to have equal opportunities for sharing;

Then, in any possible stage of civilization, however elaborate, there must be some way in which the exclusive right to the products of industry may be reconciled with the equal right to land.

If the Almighty be consistent with himself, it cannot be, as say those socialists referred to by you, that in order to secure the equal participation of men in the opportunities of life and labor we must ignore the right of private property. Nor yet can it be, as you yourself in the Encyclical seem to argue, that to secure the right of private property we must ignore the equality of right in the opportunities of life and labor. To say the one thing or the other is equally to deny the harmony of God’s laws.

But, the private possession of land, subject to the payment to the community of the value of any special advantage thus given to the individual, satisfies both laws, securing to all equal participation in the bounty of the Creator and to each the full ownership of the products of his labor. ... read the whole letter

Rev. A. C. Auchmuty: Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

The "Greater Leviathan"

THE famous treatise in which the English philosopher Hobbes, during the revolt against the tyranny of the Stuarts in the seventeenth century, sought to give the sanction of reason to the doctrine of the absolute authority of kings, is entitled Leviathan. It thus begins: "Nature, the art whereby God hath made and governs the world, is by the art of man, as in many other things, so in this also imitated, that it can make an artificial animal. . . For by art is created that great Leviathan called a commonwealth or state, in Latin civitas, which is but an artificial man; though of greater stature and strength than the natural, for whose protection and defense it was intended. . ."

Without stopping now to comment further on Hobbes's suggestive analogy, there is, it seems to me, in the system or arrangement into which men are brought in social life by the effort to satisfy their material desires — an integration which goes on as civilization advances — something which even more strongly and more clearly suggests the idea of a gigantic man, formed by the union of individual men, than any merely political integration. This Greater Leviathan is to the political structure or conscious commonwealth what the unconscious functions of the body are to the conscious activities. It is not made by pact or covenant, it grows; as the tree grows, as the man himself grows, by virtue of natural laws inherent in human nature and in the constitution of things. . . . It is this natural system or arrangement, this adjustment of means to ends, of the parts to the whole and the whole to the parts, in the satisfaction of the material desires of men living in society, which, in the same sense as that in which we speak of the economy of the solar system, is the economy of human society, or what in English we call political economy. It is as human units, individuals or families, take their place as integers of this higher man, this Greater Leviathan, that what we call civilization begins and advances. . . . The appearance and development of the body politic, the organized state, the Leviathan of Hobbes, is the mark of civilization already in existence. — The Science of Political Economy — unabridged: Book I, Chapter 3, The Meaning of Political Economy: How Man's Powers Are Extended • abridged: Chapter 2: The Greater Leviathan

... go to "Gems from George"

Louis Post: Outlines of Louis F. Post's Lectures, with Illustrative Notes and Charts (1894)

2. THE PRODUCTION OF WEALTH

When considered in connection with primitive modes of production, the vital importance of this truth is self-evident. 55 If those modes prevailed, involuntary poverty would be readily traced either to direct enslavement through ownership of Labor, or to indirect enslavement through ownership of Land. 56 There could be no other cause. If both causes were absent, every individual might, if he wished, enjoy all the Wealth that his own powers were capable of producing in 'the primitive modes of production and under the limitations of common knowledge that belonged to his environment.57

But in the civilized state this principle is so entangled in the complexities of division of labor and trade as to be almost lost in the maze. Many, even of those who recognize it, fail to grasp it as a fundamental truth. Yet it is no less vital in civilized than in primitive modes of production.

a. Division of Labor

The essential difference between primitive and civilized modes of production is not in the accumulation of capital which characterizes the latter, but in the greater scope and minuteness of its division of labor.58 Capital is an effect of division of labor rather than a cause. Division of labor, by enhancing labor power and relieving man from the perpetual pursuit of mere subsistence, utilizes capital and makes civilization possible.59

58. It is his failure to realize this that accounts for the theory of the socialist that laborers in the civilized state are dependent upon accumulated capital as well as upon land for opportunities to produce. See ante, note 49, and post, note 81.

59. Here are two men at a given point. Each has an errand to do a mile to the east, and each has one to do a mile to the west. If each goes upon his own errand each will travel a mile out and a mile back in one direction and the same in the other, making four miles' travel apiece, or eight miles in all. But if one does both errands to the east and the other does both to the west, they will travel but two miles apiece, or four in all. By division of labor they free half their energy and half their time for devotion to other work, or to study, or to play, as their inclinations dictate.

The productive power of division of labor may be illustrated by considering it as a means for utilizing differences of soil and climate. If, for example, the soil and the climate of two sections of a country, or of two different countries (for the effects of division of labor are not dependent upon political geography 60), differ inversely, one being better adapted to the production of corn than of sugar, and the other, on the contrary, being better adapted to the production of sugar than of corn, they will yield more wealth in corn and sugar with division of labor than without it.

6o. No more than are the effects of a healthful climate. Protectionists who argue that there should be free trade between villages, cities, counties and states in the same nation, but protection for nations, thus making the effect of trade to depend upon the invisible political boundary line that separates communities, are like the colored woman who, when her house, without being physically removed, had been politically shifted from North Carolina to Virginia by a change of the boundary line, expressed her satisfaction in the remark that she was very glad of it, because she "allus yearn tail dot dat yah Nof Kline was an a'mighty sickly State," and she was glad that she didn't "live dyeah no me'!"

Let us imagine a Mainland and an Island, which, as to the adaptability of their soil and climate to the production of corn and sugar, so differ that if the people of each should raise their own corn and their own sugar they would produce, with a given unit of labor force, but 22 of Wealth — 11 in corn and 11 in sugar. Thus: [chart]

Production in that manner would ignore the opportunities afforded by nature to man for utilizing differences of soil and climate; but by such a wise division as Labor would adopt in similar circumstances, if unrestrained, the same unit of labor force almost doubles the product. Thus: [chart]

Nor is it alone because it utilizes differences of soil and climate that division of labor is so effective. Its effectiveness is enhanced in still higher degree by its lessening of the labor force necessary to accomplish any industrial result, whether in mining, manufacturing, transporting, store-keeping, professional employments, agriculture, or the incidental occupations. Minute division of labor, instead of accounting for poverty in the civilized state, makes it all the more unaccountable. ...

b. Trade

But division of labor is dependent upon trade. If trade were wholly stopped there would be no division of labor; 61 if it be interfered with, division of labor is obstructed. 62 In the last preceding chart, which illustrates the effect of division of labor without trade, the Mainland gets 20 of corn, but no sugar, and the Island gets 20 of sugar, but no corn. Yet each wants both sugar and corn; and if they freely trade, their wants in these respects will be better satisfied than if each raises its own corn and sugar.

61. Men who devoted themselves to specialties, unable to exchange their products for the objects of their desire, which alone would be the motive for their special labor, would abandon specialties and resort to less civilized methods of supplying their wants.

62. Division of labor, whether adopted to take advantage of the different varieties of land or to secure the benefits of special skill in labor, cannot continue without trade; and to the degree that trade is impeded, to that degree division of labor will languish. It is only under absolute free trade between all people and in respect of all products that division of labor can flourish. Any interference with it is economically an enslavement of labor in a degree proportioned to the degree of interference.

Compare the first chart of this series with the following: 63 [chart]

The comparison 64 illustrates the advantage to each individual, community and country, of division of labor and trade over more primitive modes of production. It is like the difference between raising weights by direct application of power, and by means of block and tackle.65

63. It will be seen from this chart that the people of the two places, by dividing their given expenditure of labor in such a manner as to utilize the natural advantage peculiar to each place, secure a clear profit of 18. And this is a substantial profit, consisting not merely of figures upon paper, but of real wealth — artificial external objects which serve to satisfy human desires.

64. The people of the Mainland have now sent 10 of their corn to the Island, and the people of the Island have paid for it by sending 10 of their sugar to the Mainland.

For simplicity. the cost of effecting the trade is omitted. It does not affect the principle. If the cost were so high that more sugar and corn could be got without division of labor than with, division of labor would be abandoned as unprofitable; if low enough to admit of any profit at all, the trading would go on, unless restrained, precisely as if it involved no cost. It may be well to state, however, that the nearer we get to no cost in trading, the better are we off. Hence, any tariff on trading, whether domestic or foreign, like railroad and shipping rates for freight, is prejudicial; for tariffs add to the cost of trading just as freight rates do. Protection has that for its object. When it does not add enough to the price of a foreign product to prevent importation it fails of its purpose. And though revenue tariffs have no such object they produce the same effect, only in minor degree.

65. If every man were obliged, unassisted by the co-operation of others, to supply his own needs directly by his own labor, few could more than meagerly satisfy even the simplest of those desires which we have in common with lower animals. Though each labored diligently the aggregate of wealth would be exceedingly small compared with the necessities of those who wished to consume it, while in variety it would be very limited and in quality of the poorest kind. But by division of labor, which has been carried to marvelous lengths and is still developing, productive power is so enormously increased that the annual wealth products of the present time, in quantity and quality, in variety, usefulness and beauty, almost appear to be the work of giants and fairies.

And what this series of charts illustrates regarding two places and two forms of wealth, is true in principle of all places and all forms of wealth. That every one is better served when each does for others what relatively he does best, in exchange for what relatively they do best, is as true of communities and nations as it is of individuals. Indeed, it is true of communities and nations because it is true of individuals; for it is individuals that trade, and not communities or nations as such.66

66. Mankind as a whole may be likened to a great man, with eyes to see, brain to invent and direct, nerves for intercommunication, and various muscles for various actions. As different parts of the bodies of men do different things, each part contributing co-operatively to a general result, so it is with the body politic, whose different parts — individual men — contribute in different ways to the common good. Trade is to the body politic what digestion is to the physical body. To prohibit it is to deprive the great man of his stomach; to restrict it is to give him dyspepsia.

Says Emerson in the "American Scholar," an oration delivered at Cambridge in 1837: "It is one of those fables which out of an unknown antiquity convey an unlocked-for wisdom, that the gods, in the beginning, divided man into men, that he might be more helpful to himself; just as the hand was divided into fingers, the better to answer its ends."

Reflection upon the labor-saving power of trade makes it clear that the notion of protectionists that free trade is prejudicial to home industry has no foundation. It would interfere with "home industries" that could be better conducted elsewhere; but by that very fact it would strengthen the industries that belonged at home.

When we decide to buy foreign goods we do not thereby decide to employ foreign labor instead of American labor; we decide that the American labor shall be employed in making things to trade for what we buy, instead of making the things that we buy. And we get a better net result or we wouldn't do it.

Free trade and labor-saving machinery, which belong in the same industrial category, increase the aggregate wealth of the country where they flourish. Whether or not they tend to impoverish individuals or classes, depends upon the manner in which the increased wealth is distributed. If they do so tend, the remedy surely does not lie in the direction of obstructing trade and smashing machines so that less wealth may be produced with given labor, but in altering the conditions that promote unjust distribution.

c. The Law of Division of Labor and Trade

Now, what is it that leads men to conform their conduct to the principle illustrated by the last chart? Why do they divide their labor, and trade its products? A simple, universal and familiar law of human nature moves them. Whether men be isolated, or be living in primitive communities, or in advanced states of civilization, their demand for consumption determines the direction of Labor in production.67 That is the law. Considered in connection with a solitary individual, like Robinson Crusoe upon his island, it is obvious. What he demanded for consumption he was obliged to produce. Even as to the goods he collected from stranded ships — desiring to consume them, he was obliged to labor to produce them to places of safety. His demand for consumption always determined the direction of his labor in production.68 And when we remember that what Robinson Crusoe was to his island in the sea, civilized man as a whole is to this island in space, we may readily understand the application of the same simple law to the great body of labor in the civilized world.69 Nevertheless, the complexities of civilized life are so likely to obscure its operation and disguise its relations to social questions like that of the persistence of poverty as to make illustration desirable.

67. The term " production" means not creation but adaptation. Man cannot add an atom to the universe of matter; but he can so modify the condition of matter, both in respect of form and of place, as to adapt it to the satisfaction of human desires. To do this is to produce wealth.

"Consumption" is the ultimate object of all production. We produce because we desire to consume. But consumption does not mean destruction. Man has no more power to destroy than to create. His power in consumption, like his power in production, is limited to changing the condition of things. As by production man changes things from natural to artificial conditions to satisfy his desires, so by consumption he changes things from artificial to natural conditions in the process of satisfying his desires.

Production is the drawing forth of desired things, of Wealth, from the Land; consumption is the returning back of those things to the Land.

"All labor is but the movement of particles of matter from one place to another." — Dick's Outlines, p. 25.

Production consists merely in changing things — Ely's Intro., part ii, ch. i; Mill's Prin., book i, ch. i, sec. 2.

"As man creates no new matter but only utilities, so he destroys no matter, but only utilities. Consumption means the destruction of a utility." — Ely's Intro., part v. ch. i., p. 268.

Production means "drawing forth." — Jevons's Primer, sec. 17.

"Man cannot create material things. . . His efforts and sacrifices result in changing the form or arrangement of matter to adapt it better for the satisfaction of wants." — Marshall's Prin., book ii, ch. iii, sec. i.

"It is sometimes said that traders do not produce; that while the cabinet maker produces furniture, the furniture dealer merely sells what is already produced. But there is no scientific foundation for this distinction." — Id.

"As his [man's] production of material products is really nothing more than a rearrangement of matter which gives it new utilities, so his consumption of them is nothing more than a disarrangement of matter which diminishes or destroys its utilities." — Id.

"In like manner as by production is meant the creation not of substance but of utility, so by consumption is meant the destruction of utility and not of substance or matter." — Say's Trea., book ii, ch. i.

"All that man can do is to reproduce existing materials under another form, which may give them a utility they did not before possess, or merely enlarge one they may have before presented. So that in fact there is a creation not of matter but of utility ; and this I call production of wealth. . . There is no actual production of wealth without a creation or augmentation of utility."— Say's Trea., book i, ch. i.

68. It is highly significant that while Robinson Crusoe had unsatisfied wants he was never out of a job.

69. Demand for consumption is satisfied not from hoards of accumulated wealth, but from the stream of current production. Broadly speaking there can be no accumulation of wealth in the sense of saving up wealth from generation to generation. Imagine a man's satisfying his demand for eggs from the accumulated stores of his ancestors! Yet eggs do not differ in this respect from other forms of wealth, except that some other forms will keep a little longer, and some not so long.

The notion that a saving instinct must be aroused before the great and more lasting forms of wealth can be brought forth is a mistake. Houses and locomotives, for example, are built not because of any desire to accumulate wealth, but because we need houses to live in and locomotives to transport us and our goods. It is not the saving, but the serving, instinct that induces the production of these things; the same instinct that induces the production of a loaf of bread.

Artificial things do not save. No sooner are the processes of production from land complete than the products are on their way back to the land. If man does not return them by means of consumption, then through decay they return themselves. Mankind as a whole lives literally from hand to mouth. What is demanded for consumption in the present must be produced by the labor of the present. From current production, and from that alone, can current consumption be satisfied.

"Accumulated wealth" is, in fact, not wealth at all in any great degree. It is merely titles to wealth yet to be produced. A share in a mining company, for example, is but a certificate that the owner is legally entitled to a proportion of the wealth to be produced in the future from a certain mine.

Titles to future wealth may be both morally and legally valid. This is so when they represent past labor or its products loaned in free contract for future labor or its products; for example, a contract for the delivery of goods of any kind today to be paid for next week or next month, or next year, or in ten years, or later.

They may be legally but not morally valid. This is so when they represent the product of a franchise (whether paid for in labor or not) to exact tribute from future labor; for example, a franchise to confiscate a man's labor through ownership of his body, as in slavery, or a franchise to confiscate the products of labor in general through ownership of land.

Or they may be both legally and morally invalid, as when they are obtained by illegal force or fraud from the rightful owner.

The poverty of Food-makers as to clothing is thus removed. They are working all they care to at food-making, their own chosen employment, and they are paid in clothing, their own chosen compensation. So long as Personal Servants withdraw food and Clothing-makers supply clothing, Food-makers cannot be poor. With them business will be brisk, labor will be in demand, and wages will be high. That all the other workers may enjoy the same prosperity we shall see in a moment. Clothing-makers pour clothing into the commercial reservoir because they wish to take something out, and know that in this way they can get a larger quantity and better quality of what they require than if they undertake to make it themselves. They are skilled in making clothing; they are not skilled in other ways. Accordingly they utilize the claim against Personal Servants, which has passed to their credit in exchange for clothing, by drawing from the commercial reservoir the particular commodity they desire. Suppose it to be shelter. They proceed as Personal Servants and Food-makers have already done, and so set Shelter-makers at work. Shelter-makers in turn utilize the claim against Personal Servants which has now been credited to them, by taking luxuries out of the reservoir. This sets Luxury-makers at work. Luxury-makers then pass the claim over in exchange for services, and Personal Servants redeem it by rendering such services as Luxury-makers demand.72 Everybody is now paid for his own products with the products of others; and by demanding more food, Personal Servants may perpetuate the interchange indefinitely.73 And Personal Servants will continue to demand more food until their wants as to food are wholly and finally satisfied.74

72. The mechanism of these exchanges should be explained.

Personal Servants upon demanding food may pay money for it. The retailers might thereupon pass the money along, and it would ultimately return to Personal Servants. Or the Personal Servants may give notes payable at a future time, which being endorsed over would at last be redeemed by them in services. Or they may give checks on banks, which assumes previous work done by them or the discounting of their notes by the banks. As the world's exchanges are almost wholly adjusted by means of checks, and other commercial paper which is in economic effect the same as checks, let us illustrate that mode by a series of charts adapted from Jevons.

We will begin with two traders, A and B. They have no money, but every time that one demands anything of the other he must offer in exchange something that the other wants. There must be what is called "a double coincidence" of demand and supply; each must want what the other has. This is primitive barter. It may be represented by the following chart :

In the civilized state, even in its beginnings, primitive barter must be obstructive to trade, and it gives way to the use of currency — some common medium which is taken for goods not because the taker wants it but because he knows that be can readily exchange it for the goods that he does want. With currency in use, when A wants anything of B he is not obliged to find something that B wants. All he needs is currency. Thus currency reduces the friction of trading.

But as the volume of trade augments, demand for currency increases; and because it is scarce, or troublesome or dangerous to transmit, or all together, easier means of exchange are resorted to, and bookkeeping takes the place of currency as currency took the place of primitive barter. At this stage, when A wants anything of B, B charges him; and when B wants anything of A, A charges him. Their mutual accounts being adjusted, the small balance is paid with currency. Thus the demand for currency is greatly lowered by bookkeeping, and the friction of trading is correspondingly reduced.

Now let us bring in two more traders, C and D:

Though all four of these traders keep mutual accounts, the settlement of balances requires more currency than before, and scarcity of currency, together with the danger and expense of transmission, evolves an extension of bookkeeping. A common bookkeeper, called a "Bank," is employed, and all need for currency disappears:

Balances are now settled by checks, and all accounts are adjusted in the central ledger at the bank.

But the introduction of another group of traders, another community, renews the demand for currency, and another bank appears. Thus:

And now the two banks are in the same position that A and B were in before any bank came. They keep mutual accounts, but they must have currency to settle their balances. And if we bring in more communities the demand for currency further increases. Thus:

Now the four banks are in the same situation that A, B, C and D were in before there were any banks. This evolves a bank of banks — a clearing-house.

All necessity for currency once more disappears.

These charts illustrate the principle by which mutual trading is effected. In practice, the need of currency is never wholly done away with, but the tendency is constantly in the direction of doing away with it. And it is said that over ninety per cent of the trading transactions of the world are adjusted in this manner, and less than ten per cent by means of currency.

The clearing-house principle extends over the civilized world. In illustration of this, observe the following chart:

These five cities are like the five banks. The bookkeeping of each city is conducted by local banks and clearing-houses, and the central bookkeeping by those of the market town of the world, which at present is London.

In this way the mobility of labor is in effect enormously increased. Labor in every corner of the world is brought into close trading relations with labor everywhere else, so that only war, pestilence, protection, and land monopoly interfere with the full freedom of its movement.

73. Personal Servants, on the basis of their employment by Luxury-makers, demand more food, which keeps Food-makers at work; Food-makers demand more clothing, which keeps Clothing-makers at work; Clothing-makers demand more shelter, which keeps Shelter-makers at work; Shelter-makers demand more luxuries, which keeps Luxury-makers at work; Luxury-makers demand more services, which keeps Personal Servants at work. And so on indefinitely.

If now we add progressive invention, so that every one produces more and more wealth with less and less labor, instead of finding poverty upon the increase, instead of being harried by periodical "hard times," we shall find business brisk and every one becoming richer and richer. That is to say, though all labor less than before, each obtains better results from others while giving better results in exchange.

And should we improve the verisimilitude of the illustration by bringing in the fact that all workers in civilized society are specialists in a much more minute degree than the division into Clothing-makers, Food-makers, etc., would imply — that every one who works does over and over some one thing in one of these branches, as the making of shoes or the baking of bread, or even only part of a thing, as the cutting of shoe soles, and that while giving out a great deal of his own product he demands in pay a little of every other kind of product — the same effect would naturally result.

Every man who demands anything for consumption thereby determines the direction of labor toward the production not only of that thing, but also of all the artificial materials and implements, from the simplest tool to the most expensive and complex machine, that are used in its production. The actual process is much more intricate than that of the charts, but the charts illustrate the principle so that any intelligent person who understands them can apply — it to the most complex affairs of industrial life.

"This principle is so simple and obvious that it needs no further illustration, yet in its light all the complexities of our subject disappear, and we thus reach the same view of the real objects and rewards of labor in the intricacies of modern production that we rained by observing in the first beginnings of society the simpler forms of production and exchange. We see that now, as then, each laborer is endeavoring to obtain by his exertions the satisfaction of his own desires; we see that although the minute division of labor assigns to each producer the production of but a small part, or perhaps nothing at all, of the particular things he labors to get, yet, in aiding in the production of what other producers want, he is directing other labor to the production of the things he wants — in effect, producing them himself. And thus, if he makes jackknives and eats wheat, the wheat is really as much the produce of his labor as if he had grown it for himself and left wheat-growers to make their own jackknives." — Progress and Poverty. book i, ch. iv.

74. There is no end to man's wants.

"The demand for quantity once satisfied, he seeks quality. The very desires that he has in common with the beast become extended, refined, exalted. It is not merely hunger, but taste, that seeks gratification in food; in clothes, he seeks not merely comfort, but adornment; the rude shelter becomes a house; the undiscriminating sexual attraction begins to transmute itself into subtle influences, and the hard and common stock of animal life to blossom and to bloom into shapes of delicate beauty." — Progress and Poverty, book ii, ch. iii.

A labor agitator was arguing the labor question with a rich man, the judge of his county, when the judge as a clincher asked:

"what do workingmen want, anyway, that they haven't got?"

Promptly the agitator replied with the counter-question

"Judge, what have you got that you don't want?"
...

Let us now complete this chart. When we began it a distinction was noted between Personal Servants, who render mere intangible services, and the other classes, who produce tangible wealth. But essentially there is no difference. By referring to the chart and observing the course of the arrows, Food-makers are seen working for Personal Servants precisely as Personal Servants work for Luxury-makers. We may therefore abandon the distinction. This makes it no longer necessary to mention particular classes of products in the chart; it is enough to distinguish the different kinds of labor.76 Thus:

76. "This, then, we may say is the great law which binds society — 'service for service.' "— Dick's Outlines, p. 9.

For simplicity the workers have been divided into great classes, and each class has been supposed to serve only one other class. But the actual currents of trade are much more complex. It would be practically impossible to follow them in detail, or to illustrate their particular movements in any simple way. And it is unnecessary. The principle illustrated in the chart is the principle of all division of labor and trade, however minute the details and intricate the movement; and any person of ordinary intelligence who wishes to understand will need only to grasp the principle as illustrated by the chart to be able to apply it to the experiences of everyday industrial life. All legitimate trade is the interchange of Labor for Labor.77

77. In the light of this principle how absurd are some of the explanations of hard times.

Overproduction! when an infinite variety of wants are unsatisfied which those who are in want are anxious and able to satisfy for one another. Hatters want bread, and bakers want hats, and farmers want both, and they all want machines, and machinists want bread and hats and machines, and so on without end. Yet while men are against their will in partial or complete idleness, their wants go unsatisfied! Since producers are also consumers, and production is governed by demand for consumption, there can be no real overproduction until demand ceases. The apparent overproduction which we see — overproduction relatively to "effective demand" — is in fact a congestion of some things due to an abnormal underproduction of other things, the underproduction being caused by obstructions in the way of labor.

Scarcity of capital! when makers of capital in all its forms are involuntarily idle. Scarcity of capital, like scarcity of money, is only an expression for lack of employment. But why should there be any lack of employment while men have unsatisfied wants which they can reciprocally satisfy?

Too much competition! when competition and freedom are the same. It is not freedom but restraint, not competition but protection, that obstructs the action and reaction of demand and supply which we have illustrated in the chart.

b. Normal Effect of Social Progress upon Wages and Rent

In the foregoing charts the effect of social growth is ignored, it being assumed that the given expenditure of labor force does not become more productive.93 Let us now try to illustrate that effect, upon the supposition that social growth increases the productive power of the given expenditure of labor force as applied to the first closed space, to 100; as applied to the second, to 50; as applied to the third, to 10; as applied to the fourth, to 3, and as applied to the open space, to 1. 94 If there were no increased demand for land the chart would then be like this: [chart]

93. "The effect of increasing population upon the distribution of wealth is to increase rent .. . in two ways: First, By lowering the margin of cultivation. Second, By bringing out in land special capabilities otherwise latent, and by attaching special capabilities to particular lands.

"I am disposed to think that the latter mode, to which little attention has been given by political economists, is really the more important." — Progress and Poverty, book iv, ch. iii.

"When we have inquired what it is that marks off land from those material things which we regard as products of the land, we shall find that the fundamental attribute of land is its extension. The right to use a piece of land gives command over a certain space — a certain part of the earth's surface. The area of the earth is fixed; the geometric relations in which any particular part of it stands to other parts are fixed. Man has no control over them; they are wholly unaffected by demand; they have no cost of production; there is no supply price at which they can be produced.

"The use of a certain area of the earth's surface is a primary condition of anything that man can do; it gives him room for his own actions, with the enjoyment of the heat and the light, the air and the rain which nature assigns to that area; and it determines his distance from, and in great measure his relations to, other things and other persons. We shall find that it is this property of land, which, though as yet insufficient prominence has been given to it, is the ultimate cause of the distinction which all writers are compelled to make between land and other things." — Marshall's Prin., book iv, ch. ii, sec. i.

94. Of course social growth does not go on in this regular way; the charts are merely illustrative. They are intended to illustrate the universal fact that as any land becomes a center of trade or other social relationship its value rises.

Though Rent is now increased, so are Wages. Both benefit by social growth. But if we consider the fact that increase in the productive power of labor increases demand for land we shall see that the tendency of Wages (as a proportion of product if not as an absolute quantity) is downward, while that of Rent is upward. 95 And this conclusion is confirmed by observation. 96

95. "Perhaps it may be well to remind the reader, before closing this chapter, of what has been before stated — that I am using the word wages not in the sense of a quantity, but in the sense of a proportion. When I say that wages fall as rent rises, I do not mean that the quantity of wealth obtained by laborers as wages is necessarily less, but that the proportion which it bears to the whole produce is necessarily less. The proportion may diminish while the quantity remains the same or increases." — Progress and Poverty, book iii, ch. vi.

96. The condition illustrated in the last chart would be the result of social growth if all land but that which was in full use were common land. The discovery of mines, the development of cities and towns, and the construction of railroads, the irrigation of and places, improvements in government, all the infinite conveniences and laborsaving devices that civilization generates, would tend to abolish poverty by increasing the compensation of labor, and making it impossible for any man to be in involuntary idleness, or underpaid, so long as mankind was in want. If demand for land increased, Wages would tend to fall as the demand brought lower grades of land into use; but they would at the same time tend to rise as social growth added new capabilities to the lower grades. And it is altogether probable that, while progress would lower Wages as a proportion of total product, it would increase them as an absolute quantity.... read the book

Gems from George, a themed collection of excerpts from the writings of Henry George (with links to sources)

THE aggregate produce of the labor of a savage tribe is small, but each member is capable of an independent life. He can build his own habitation, hew out or stitch together his own canoe, make his own clothing, manufacture his own weapons, snares, tools and ornaments. He has all the knowledge of nature possessed by his tribe — knows what vegetable productions are fit for food, and where they maybe found; knows the habits and resorts of beasts, birds, fishes and insects; can pilot himself by the sun or the stars, by the turning of blossoms or the mosses on the trees; is, in short, capable of supplying all his wants. He may be cut off from his fellows and still live; and thus possesses an independent power which makes him a free contracting party in his relations to the community of which he is a member.

Compare with this savage the laborer in the lowest ranks of civilized society, whose life is spent in producing but one thing, or oftener but the infinitesimal part of one thing, out of the multiplicity of things that constitute the wealth of society and go to supply even the most primitive wants; who not only cannot make even the tools required for his work, but often works with tools that he does not own, and can never hope to own. Compelled to even closer and more continuous labor than the savage, and gaining by it no more than the savage gets — the mere necessaries of life — he loses the independence of the savage. He is not only unable to apply his own powers to the direct satisfaction of his own wants, but, without the concurrence of many others, he is unable to apply them indirectly to the satisfaction of his wants. He is a mere link in an enormous chain of producers and consumers, helpless to separate himself, and helpless to move, except as they move. The worse his position in society, the more dependent is he on society; the more utterly unable does he become to do anything for himself. The very power of exerting his labor for the satisfaction of his wants passes from his own control, and may be taken away or restored by the actions of others, or by general causes over which he has no more influence than he has over the motions of the solar system. The primeval curse comes to be looked upon as a boon, and men think, and talk, and clamor, and legislate as though monotonous manual labor in itself were a good and not an evil, an end and not a means. Under such circumstances, the man loses the essential quality of manhood — the godlike power of modifying and controlling conditions. He becomes a slave, a machine, a commodity — a thing, in some respects, lower than the animal.

I am no sentimental admirer of the savage state. I do not get my ideas of the untutored children of nature from Rousseau, or Chateaubriand, or Cooper. I am conscious of its material and mental poverty, and its low and narrow range. I believe that civilization is not only the natural destiny of man, but the enfranchisement, elevation, and refinement of all his powers, and think that it is only in such moods as may lead him to envy the cud-chewing cattle, that a man who is free to the advantages of civilization could look with regret upon the savage state. But, nevertheless, I think no one who will open his eyes to the facts, can resist the conclusion that there are in the heart of our civilization large classes with whom the veriest savage could not afford to exchange. It is my deliberate opinion that if, standing on the threshold of being, one were given the choice of entering life as a Terra del Fuegan, a black fellow of Australia, an Esquimaux in the Arctic Circle, or among the lowest classes in such a highly civilized country as Great Britain, he would make infinitely the better choice in selecting the lot of the savage. For those classes who in the midst of wealth are condemned to want, suffer all the privations of the savage, without his sense of personal freedom; they are condemned to more than his narrowness and littleness, without opportunity for the growth of his rude virtues; if their horizon is wider, it is but to reveal blessings that they cannot enjoy. — Progress & Poverty — Book V, Chapter 2: The Problem Solved: The Persistence of Poverty Amid Advancing Wealth

DOES not the fact that all of the things which furnish man's subsistence have the power to multiply many fold — some of them many thousand fold, and some of them many million or even billion fold — while he is only doubling his numbers, show that, let human beings increase to the full extent of their reproductive power, the increase of population can never exceed subsistence? This is clear when it is remembered that though in the vegetable and animal kingdoms each species, by virtue of its reproductive power, naturally and necessarily presses against the conditions which limit its further increase, yet these conditions are nowhere fixed and final. No species reaches the ultimate limit of soil, water, air, and sunshine; but the actual limit of each is in the existence of other species, its rivals, its enemies, or its food. Thus the conditions which limit the existence of such of these species as afford him subsistence man can extend (in some cases his mere appearance will extend them), and thus the reproductive forces of the species which supply his wants, instead of wasting themselves against their former limit, start forward in his service at a pace which his powers of increase cannot rival. If he but shoot hawks, food-birds will increase: if he but trap foxes the wild rabbits will multiply; the bumble bee moves with the pioneer, and on the organic matter with which man's presence fills the rivers, fishes feed. — Progress & Poverty — Book II, Chapter 3: Population and Subsistence: Inferences from Analogy

IF bears instead of men had been shipped from Europe to the North American continent, there would now be no more bears than in the time of Columbus, and possibly fewer, for bear food would not have been increased nor the conditions of bear life extended, by the bear immigration, but probably the reverse. But within the limits of the United States alone, there are now forty-five millions of men where then there were only a few hundred thousand, and yet there is now within that territory much more food per capita for the forty-five millions than there was then for the few hundred thousand. It is not the increase of food that has caused this increase of men; but the increase of men that has brought about the increase of food. There is more food, simply because there are more Man. — Progress & Poverty — Book II, Chapter 3: Population and Subsistence: Inferences from Analogy

TWENTY men working together will, where nature is niggardly, produce more than twenty times the wealth that one man can produce where nature is most bountiful. The denser the population the more minute becomes the subdivision of labor, the greater the economies of production and distribution, and, hence, the very reverse of the Malthusian doctrine is true; and, within the limits in which we have any reason to suppose increase would still go on, in any given state of civilization a greater number of people can produce a larger proportionate amount of wealth and more fully supply their wants, than can a smaller number. — Progress & Poverty — Book II, Chapter 4: Population and Subsistence: Disproof of the Malthusian Theory

CAPITAL, which is not in itself a distinguishable element, but which it must always be kept in mind consists of wealth applied to the aid of labor in further production, is not a primary factor. There can be production without it, and there must have been production without it, or it could not in the first place have appeared. It is a secondary and compound factor, coming after and resulting from the union of labor and land in the production of wealth. It is in essence labor raised by a second union with land to a third or higher power. But it is to civilized life so necessary and important as to be rightfully accorded in political economy the place of a third factor in production. — The Science of Political Economy unabridged: Book III, Chapter 17, The Production of Wealth: The Third Factor of Production — Capital • abridged: Part III, Chapter 10: Order of the Three Factors of Production

IT is to be observed that capital of itself can do nothing. It is always a subsidiary, never an initiatory, factor. The initiatory factor is always labor. That is to say, in the production of wealth labor always uses capital, is never used by capital. This is not merely literally true, when by the term capital we mean the thing capital. It is also true when we personify the term and mean by it not the thing capital, but the men who are possessed of capital. The capitalist pure and simple, the man who merely controls capital, has in his hands the power of assisting labor to produce. But purely as capitalist he cannot exercise that power. It can be exercised only by labor. To utilize it he must himself exercise at least some of the functions of labor, or he must put his capital, on some terms, at the use of those who do. — The Science of Political Economy unabridged: Book III, Chapter 17, The Production of Wealth: The Third Factor of Production — Capital • abridged: Part III, Chapter 10: Order of the Three Factors of Production

THUS we must exclude from the category of capital everything that may be included either as land or labor. Doing so, there remain only things which are neither land nor labor, but which have resulted from the union of these two original factors of production. Nothing can be properly capital that does not consist of these — that is to say, nothing can be capital that is not wealth. — Progress & Poverty — Book I, Chapter 2: Wages and Capital: The Meaning of the Terms

THUS, a government bond is not capital, nor yet is it the representative of capital. The capital that was once received for it by the government has been consumed unproductively — blown away from the mouths of cannon, used up in war ships, expended in keeping men marching and drilling, killing and destroying. The bond cannot represent capital that has been destroyed. It does not represent capital at all. It is simply a solemn declaration that the government will, some time or other, take by taxation from the then existing stock of the people, so much wealth, which it will turn over to the holder of the bond; and that, in the meanwhile, it will, from time to time, take, in the same way, enough to make up to the holder the increase which so much capital as it some day promises to give him would yield him were it actually in his possession. The immense sums which are thus taken from the produce of every modern country to pay interest on public debts are not the earnings or increase of capital — are not really interest in the strict sense of the term, but are taxes levied on the produce of labor and capital, leaving so much less for wages and so much less for real interest. — Progress & Poverty — Book III, Chapter 4: The Laws of Distribution: Of Spurious Capital and of Profits Often Mistaken For Interest

CAPITAL, as we have seen, consists of wealth used for the procurement of more wealth, as distinguished from wealth used for the direct satisfaction of desire; or, as I think it may be defined, of wealth in the course of exchange.

Capital, therefore, increases the power of labor to produce wealth: (1) By enabling labor to apply itself in more effective ways, as by digging up clams with a spade instead of the hand, or moving a vessel by shoveling coal into a furnace, instead of tugging at an oar. (2) By enabling labor to avail itself of the reproductive forces of nature, as to obtain corn by sowing it, or animals by breeding them. (3) By permitting the division of labor, and thus, on the one hand, increasing the efficiency of the human factor of wealth, by the utilization of special capabilities, the acquisition of skill, and the reduction of waste; and, on the other, calling in the powers of the natural factor at their highest, by taking advantage of the diversities of soil, climate and situation, so as to obtain each particular species of wealth where nature is most favorable to its production.

Capital does not supply the materials which labor works up into wealth, as is erroneously taught; the materials of wealth are supplied by nature. But such materials partially worked up and in the course of exchange are capital. — Progress & Poverty — Book I, Chapter 5: Wages and Capital: The Real Functions of Capital

THE laborer who receives his wages in money (coined or printed, it may be, before his labor commenced) really receives in return for the addition his labor has made to the general stock of wealth, a draft upon that general stock, which he may utilize in any particular form of wealth that will best satisfy his desires; and neither the money, which is but the draft, nor the particular form of wealth which he uses it to call for, represents advances of capital for his maintenance, but on the contrary represents the wealth, or a portion of the wealth, his labor has already added to the general stock. — Progress & Poverty — Book I, Chapter 1: Wages and Capital: The Current Doctrine of Wages — Its Insufficiency

THE miner who, two thousand feet underground in the heart of the Comstock, is digging out silver ore, is in effect; by virtue of a thousand exchanges, harvesting crops in valleys five thousand feet nearer the earth's center; chasing the whale through Arctic icefields; plucking tobacco leaves in Virginia; picking coffee berries in Honduras; cutting sugar cane on the Hawaiian Islands; gathering cotton in Georgia or weaving it in Manchester or Lowell; making quaint wooden toys for his children in the Hartz Mountains; or plucking amid the green and gold of Los Angeles orchards the oranges which, when his shift is relieved, he will take home to his sick wife. The wages which he receives on Saturday night at the mouth of the shaft, what are they but the certificate to all the world that he has done these things — the primary exchange in the long series which transmutes his labor into the things he has really been laboring for? — Progress & Poverty — Book I, Chapter 1: Wages and Capital: The Current Doctrine of Wages — Its Insufficiency

LABOR always precedes wages. This is as universally true of wages received by the laborer from an employer as it is of wages taken directly by the laborer who is his own employee. In the one class of cases as in the other, reward is conditioned upon exertion. Paid sometimes by the day, oftener by the week or month, occasionally by the year, and in many branches of production by the piece, the payment of wages by an employer to an employee always implies the previous rendering of labor by the employee for the benefit of the employer, for the few cases in which advance payments are made for personal services are evidently referable either to charity or to guarantee and purchase. — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

THE payment of wages always implies the previous rendering of labor. Now, what does the rendering of labor in production imply? Evidently the production of wealth, which, if it is to be exchanged or used in production, is capital. Therefore, the payment of capital in wages pre-supposes a production of capital by the labor for which the wages are paid. And as the employer generally makes a profit, the payment of wages is, so far as he is concerned, but the return to the laborer of a portion of the capital he has received from the labor. So far as the employee is concerned, it is but the receipt of a portion of the capital his labor has previously produced. As the value paid in the wages is thus exchanged for a value brought into being by the labor, how can it be said that wages are drawn from capital or advanced by capital? As in the exchange of labor for wages the employer always gets the capital created by the labor before he pays out capital in the wages, at what point is his capital lessened even temporarily? — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

To recapitulate: The man who works for himself gets his wages in the things he produces, as he produces them, and exchanges this value into another form whenever he sells the produce. The man who works for another for stipulated wages in money, works under a contract of exchange. He also creates his wages as he renders his labor, but he does not get them except at stated times, in stated amounts and in a different form. In performing the labor he is advancing in exchange; when he gets his wages the exchange is completed. During the time he is earning the wages he is advancing capital to his employer, but at no time, unless wages are paid before work is done, is the employer advancing capital to him. Whether the employer who receives this produce in exchange for the wages, immediately re-exchanges it, or keeps it for awhile, no more alters the character of the transaction than does the final disposition of the product made by the ultimate receiver, who may, perhaps, be in another quarter of the globe and at the end of a series of exchanges numbering hundreds. — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

HERE, let us imagine, is an unbounded savannah, stretchIng off in unbroken sameness of grass and flower, tree and rill, till the traveler tires of the monotony. Along comes the wagon of the first immigrant. Where to settle he cannot tell — every acre seems as good as every other acre. As to wood, as to water, as to fertility, as to situation, there is absolutely no choice, and he is perplexed by the embarrassment of richness. Tired out with the search for one place that is better than another, he stops — somewhere, anywhere — and starts to make himself a home. The soil is virgin and rich, game is abundant, the streams flash with the finest trout. Nature is at her very best. He has what, were he in a populous district, would make him rich; but he is very poor. To say nothing of the mental craving, which would lead him to welcome the sorriest stranger, he labors under all the material disadvantages of solitude. He can get no temporary assistance for any work that requires a greater union of strength than that afforded by his own family, or by such help as he can permanently keep. Though he has cattle, he cannot often have fresh meat, for to get a beefsteak he must kill a bullock. He must be his own blacksmith, wagonmaker, carpenter, and cobbler — in short a "jack of all trades and master of none." He cannot have his children schooled, for, to do so, he must himself pay and maintain a teacher. Such things as he cannot produce himself, he must buy in quantities and keep on hand, or else go without, for he cannot be constantly leaving his work and making a long journey to the verge of civilization; and when forced to do so, the getting of a vial of medicine or the replacement of a broken auger may cost him the labor of himself and horses for days. Under such circumstances, though nature is prolific, the man is poor. It is an easy matter for him to get enough to eat; but beyond this, his labor will only suffice to satisfy the simplest wants in the rudest way.

Soon there comes another immigrant. Although every quarter section of the boundless plain is as good as every other quarter section, he is not beset by any embarrassment as to where to settle. Though the land is the same, there is one place that is clearly better for him than any other place, and that is where there is already a settler and he may have a neighbor. He settles by the side of the first comer, whose condition is at once greatly improved, and to whom many things are now possible that were before impossible, for two men may help each other to do things that one man could never do.

Another immigrant comes, and, guided by the same attraction, settles where there are already two. Another and another, until around our first comer there are a score of neighbors. Labor has now an effectiveness which, in the solitary state, it could not approach. If heavy work is to be done, the settlers have a log-rolling, and together accomplish in a day what singly would require years. When one kills a bullock the others take part of it, returning when they kill, and thus they have fresh meat all the time. Together they hire a schoolmaster, and the children of each are taught for a fractional part of what similar teaching would have cost the first settler. It becomes a comparatively easy matter to send to the nearest town, for some one is always going. But there is less need for such journeys. A blacksmith and a wheelwright soon set up shops, and our settler can have his tools repaired for a small part of the labor they formerly cost him. A store is opened and he can get what he wants as he wants it; a post-office, soon added, gives him regular communication with the rest of the world. Then comes a cobbler, a carpenter, a harnessmaker, a doctor; and a little church soon arises. Satisfactions become possible that in the solitary state were impossible. There are gratifications for the social and the intellectual nature — for that part of the man that rises above the animal. The power of sympathy, the sense of companionship, the emulation of comparison and contrast, open a wider and fuller and more varied life. In rejoicing, there are others to rejoice; in sorrow, the mourners do not mourn alone. There are husking bees, and apple parings, and quilting parties. Though the ballroom be unplastered and the orchestra but a fiddle, the notes of the magician are yet in the strain, and Cupid dances with the dancers. At the wedding, there are others to admire and enjoy; in the house of death, there are watchers; by the open grave, stands human sympathy to sustain the mourners. Occasionally, comes a straggling lecturer to open up glimpses of the world of science, of literature, or of art; in election times, come stump speakers, and the citizen rises to a sense of dignity and power, as the cause of empires is tried before him in the struggle of John Doe and Richard Roe for his support and vote. And, by and by, comes the circus, talked of months before, and opening to children, whose horizon has been the prairie, all the realms of the imagination — princes and princesses of fairy tale, mail-clad crusaders and turbaned Moors, Cinderella's fairy coach, and the giants of nursery lore; lions such as crouched before Daniel, or in circling Roman amphitheater tore the saints of God; ostriches who recall the sandy deserts; camels such as stood around when the wicked brethren raised Joseph from the well and sold him into bondage; elephants such as crossed the Alps with Hannibal, or felt the sword of the Maccabees; and glorious music that thrills and builds in the chambers of the mind as rose the sunny dome of Kubla Khan.

Go to our settler now, and say to him: "You have so many fruit trees which you planted; so much fencing, such a well, a barn, a house — in short, you have by your labor added so much value to this farm. Your land itself is not quite so good. You have been cropping it, and by and by it will need manure. I will give you the full value of all your improvements if you will give it to me, and go again with your family beyond the verge of settlement." He would laugh at you. His land yields no more wheat or potatoes than before, but it does yield far more of all the necessaries and comforts of life. His labor upon it will bring no heavier crops, and, we will suppose, no more valuable crops, but it will bring far more of all the other things for which men work. The presence of other settlers — the increase of population — has added to the productiveness, in these things, of labor bestowed upon it, and this added productiveness gives it a superiority over land of equal natural quality where there are yet no settlers. If no land remains to be taken up, except such as is as far removed from population as was our settler's land when he first went upon it, the value or rent of this land will be measured by the whole of this added capability. If, however, as we have supposed, there is a continuous stretch of equal land, over which population is now spreading, it will not be necessary for the new settler to go into the wilderness, as did the first. He will settle just beyond the other settlers, and will get the advantage of proximity to them. The value or rent of our settler's land will thus depend on the advantage which it has, from being at the center of population, over that on the verge. In the one case, the margin of production will remain as before; in the other, the margin of production will be raised.

Population still continues to increase, and as it increases so do the economies which its increase permits, and which in effect add to the productiveness of the land. Our first settler's land, being the center of population, the store, the blacksmith's forge, the wheelwright's shop, are set up on it, or on its margin, where soon arises a village, which rapidly grows into a town, the center of exchanges for the people of the whole district. With no greater agricultural productiveness than it had at first, this land now begins to develop a productiveness of a higher kind. To labor expended in raising corn, or wheat, or potatoes, it. will yield no more of those things than at first; but to labor expended in the subdivided branches of production which require proximity to other producers, and, especially, to labor expended in that final part of production, which consists in distribution, it will yield much larger returns. The wheat-grower may go further on, and find land on which his labor will produce as much wheat, and nearly as much wealth; but the artisan, the manufacturer, the storekeeper, the professional man, find that their labor expended here, at the center of exchanges, will yield them much more than if expended even at a little distance away from it; and this excess of productiveness for such purposes the landowner can claim, just as he could an excess in its wheat-producing power. And so our settler is able to sell in building lots a few of his acres for prices which it would not bring for wheat growing if its fertility had been multiplied many times. With the proceeds he builds himself a fine house, and furnishes it handsomely. That is to say, to reduce the transaction to its lowest terms, the people who wish to use the land, build and furnish the house for him, on condition that he will let them avail themselves of the superior productiveness which the increase of population has given the land.

Population still keeps on increasing, giving greater and greater utility to the land, and more and more wealth to its owner. The town has grown into a city — a St. Louis, a Chicago, or a San Francisco — and still it grows. Production is here carried on upon a great scale, with the best machinery and the most favorable facilities; the division of labor becomes extremely minute, wonderfully multiplying efficiency; exchanges are of such volume and rapidity that they are made with the minimum of friction and loss. Here is the heart, the brain, of the vast social organism that has grown up from the germ of the first settlement; here has developed one of the great ganglions of the human world. Hither run all roads, hither set all currents, through all the vast regions round about. Here, if you have anything to sell, is the market; here, if you have anything to buy, is the largest and the choicest stock. Here intellectual activity is gathered into a focus, and here springs that stimulus which is born of the collision of mind with mind. Here are the great libraries, the storehouses and granaries of knowledge, the learned professors, the famous specialists. Here are museums and art galleries, collections of philosophical apparatus, and all things rare and valuable, the best of their kind. Here come great actors, and orators, and singers, from all over the world. Here, in short, is a center of human life, in all its varied manifestations.

So enormous are the advantages which this land now offers for the application of labor, that, instead of one man with a span of horses scratching over acres, you may count in places thousands of workers to the acre, working tier on tier, on floors raised one above the other, five, six, seven, and eight stories from the ground, while underneath the surface of the earth engines are throbbing with pulsations that exert the force of thousands of horses. All these advantages adhere to the land; it is on this land, and no other, that they can be utilized, for here is the center of population — the focus of exchanges, the market-place and workshop of the highest forms of industry. The productive powers which density of population has attached to this land are equivalent to the multiplication of its original fertility by the hundredfold and the thousandfold. And rent, which measures the difference between this added productiveness and that of the least productive land in use, has increased accordingly. Our settler, or whoever has succeeded to his right to the land, is now a millionaire. Like another Rip Van Winkle, he may have lain down and slept; still he is rich — not from anything he has done, but from the increase of population. There are lots from which for every foot of frontage the owner may draw more than an average mechanic can earn; there are lots that will sell for more than would suffice to pave them with gold coin. In the principal streets are towering buildings, of granite, marble, iron, and plate-glass, finished in the most expensive style, replete with every convenience. Yet they are not worth as much as the land upon which they rest — the same land, in nothing changed, which, when our first settler came upon it, had no value at all. That this is the way in which the increase of population powerfully acts in increasing rent, whoever, in a progressive country, will look around him, may see for himself. The process is going on under his eyes. The increasing difference in the productiveness of the land in use, which causes an increasing rise in rent, results not so much from the necessities of increased population compelling the resort to inferior land, as from the increased productiveness which increased population gives to the lands already in use. The most valuable lands on the globe, the lands which yield the highest rent, are not lands of surpassing natural fertility, but lands to which a surpassing utility has been given by the increase of population. — Progress & Poverty — Book IV, Chapter 2: Effect of Material Progress on the Distribution of Wealth: The Effect of Increase of Population upon the Distribution of Wealth

ALL increase in the productive power of man over that with which nature endows the individual comes from the co-operation of individuals. But there are two ways in which this co-operation may take place. 1. By the combination of effort. In this way individuals may accomplish what exceeds the full power of the individual. 2. By the separation of effort. In this way the individual may accomplish for more than one what does not require the full power of the individual. . . . To illustrate: The first way of co-operation, the combination of labor, enables a number of men to remove a rock or to raise a log that would be too heavy for them separately. In this way men conjoin themselves, as it were, into one stronger man. Or, to take an example so common in the early days of American settlement that "log-rolling" has become a term for legislative combination: Tom, Dick, Harry and Jim are building near each other their rude houses in the clearings. Each hews his own trees, but the logs are too heavy for one man to get into place. So the four unite their efforts, first rolling one man's logs into place and then another's, until, the logs of all four having been placed, the result is the same as if each had been enabled to concentrate into one time the force he could exert in four different times. . . . But, while great advantages result from the ability of individuals, by the combination of labor to concentrate themselves, as it were, into one larger man, there are other times and other things in which an individual could accomplish more if he could divide himself, as it were, into a number of smaller men. . . . What the division of labor does, is to permit men, as it were, so to divide themselves, thus enormously increasing their total effectiveness. To illustrate from the example used before: While at times Tom, Dick, Harry and Jim might each wish to move logs, at other times they might each need to get something from a village distant two days' journey. To satisfy this need individually would thus require two days' effort on the part of each. But if Tom alone goes, performing the errands for all, and the others each do half a days' work for him, the result is that all get at the expense of half a day's effort on the part of each what otherwise would have required two days' effort. — The Science of Political Economy — unabridged: Book III, Chapter 9, The Production of Wealth: Cooperation — Its Two Ways • abridged: Part III, Chapter 7, The Production of Wealth: Co-operation: Its Two Ways

WE have seen that there are two ways or modes in which co-operation increases productive power. If we ask how co-operation is itself brought about, we see that there is in this also a distinction, and that co-operation is of two essentially different kinds. . .. There is one kind of co-operation, proceeding, as it were, from without, which results from the conscious direction of a controlling will to a definite end. This we may call directed or conscious co-operation. There is another kind of co-operation, proceeding, as it were, from within, which results from a correlation in the actions of independent wills, each seeking but its own immediate purpose, and careless, if not indeed ignorant, of the general result. This we may call spontaneous or unconscious co-operation. The movement of a great army is a good type of co-operation of the one kind. Here the actions of many individuals are subordinated to, and directed by, one conscious will, they becoming, as it were, its body and executing its thought. The providing of a great city with all the manifold things which are constantly needed by its inhabitants is a good type of co-operation of the other kind. This kind of co-operation is far wider, far finer, far more strongly and delicately organized, than the kind of co-operation involved in the movements of an army, yet it is brought about not by subordination to the direction of one conscious will, which knows the general result at which it aims, but by the correlation of actions originating in many independent wills, each aiming at its own small purpose without care for, or thought of; the general result. The one kind of co-operation seems to have its analogue in those related movements of our body which we are able consciously to direct. The other kind of co-operation seems to have its analogue in the correlation of the innumerable movement, of which we are unconscious, that maintain the bodily frame — motions which in their complexity, delicacy and precision far transcend our powers of conscious direction, yet by whose perfect adjustment to each other and to the purpose of the whole, that co-operation of part and function, that makes up the human body and keeps it in life and vigor, is brought about and supported. — The Science of Political Economy — unabridged: Book III, Chapter 10, The Production of Wealth: Cooperation — Its Two Kinds • abridged: Part III, Chapter 8, Cooperation: Its Two Kinds

To attempt to apply that kind of co-operation which requires direction from without to the work proper for that kind of co-operation which requires direction from within, is like asking the carpenter who can build a chicken-house to build a chicken also. — The Science of Political Economy — unabridged: Book III, Chapter 10, The Production of Wealth: Cooperation — Its Two Kinds • abridged: Part III, Chapter 8, Cooperation: Its Two Kinds

THE term labor includes all human exertion in the production of wealth, and wages, being that part of the produce which goes to labor, includes all reward for such exertion. There is, therefore, in the politico-economic sense of the term wages no distinction as to the kind of labor, or as to whether its reward is received through an employer or not, but wages means the return received for the exertion of labor, as distinguished from the return received for the use of capital, and the return received by the landholder for the use of land. — Progress & Poverty — Book I, Chapter 2: Wages and Capital: The Meaning of the Terms

I AM aware that the theorem that wages are drawn from capital is one of the most fundamental and apparently best settled of current political economy, and that it has been accepted as axiomatic by all the great thinkers who have devoted their powers to the elucidation of the science. Nevertheless, I think it can be demonstrated to be a fundamental error — the fruitful parent of a long series of errors, which vitiate most important practical conclusions. — Progress & Poverty — Book I, Chapter 3: Wages and Capital: Wages not drawn from capital, but produced by the labor

THE fundamental truth, that in all economic reasoning must be firmly grasped and never let go, is that society in its most highly developed form is but an elaboration of society in its rudest beginnings, and that principles obvious in the simpler relations of men are merely disguised and not abrogated or reversed by the more intricate relations that result from the division of labor and the use of complex tools and methods. . . . And so, if we reduce to their lowest terms all the complex operations of modern production, we see that each individual who takes part in this infinitely subdivided and intricate network of production and exchange is really doing what the primeval man did when he climbed the trees for fruit or followed the receding tide for shellfish — endeavoring to obtain from nature by the exertion of his powers the satisfaction of his desires. If we keep this firmly in mind, if we look upon production as a whole — as the co-operation of all embraced in any of its great groups to satisfy the various desires of each, we plainly see that the reward each obtains for his exertions comes as truly and as directly from nature as the result of that exertion, as did that of the first man.

To illustrate: In the simplest state of which we can conceive, each man digs his own bait and catches his own fish. The advantage of the division of labor soon becomes apparent, and one digs bait while the others fish. Yet evidently the one who digs bait is in reality doing as much toward the catching of fish as any of those who actually take the fish. So when the advantages of canoes are discovered, and instead of all going a-fishing, one stays behind and makes and repairs canoes, the canoe-maker is in reality devoting his labor to the taking of fish as much as the actual fishermen, and the fish which he eats at night when the fishermen come home, are as truly the product of his labor as of theirs. And thus when the division of labor is fairly inaugurated, and instead of each attempting to satisfy all of his wants by direct resort to nature, one fishes, another hunts, a third picks berries, a fourth gathers fruit, a fifth makes tools, a sixth builds huts, and a seventh prepares clothing — each one is, to the extent he exchanges the direct product of his own labor for the direct product of the labor of others, really applying his own labor to the production of the things he uses — is in effect satisfying his particular desires by the exertion of his particular powers; that is to say, what he receives he in reality produces. — Progress & Poverty — Book I, Chapter 1: Wages and Capital: The Current Doctrine of Wages — Its Insufficiency ... go to "Gems from George"