Progress and Poverty (George)/Chapter III

by Henry George

Chapter III Wages and capital

The cause that produces poverty in the midst of advancing wealth is evidently the cause that exhibits itself in the tendency, everywhere recognized, of wages to a minimum. Let us, therefore, put our inquiry into this compact form:

Why, in spite of increase in productive power, do wages tend to a minimum that will give but a bare living?

The scholastic answer has been that wages are fixed by the ratio between the number of labourers and the amount of capital devoted to the employment of labour; and, because the increase in the number of labourers tends naturally to follow and overtake any increase in capital, wages constantly tend to the lowest amount on which labourers are able to live.

The proposition I shall endeavour to prove is: That wages, instead of being drawn from capital, are in reality drawn from the product of the labour for which they are paid.

Inasmuch as the theory that wages are provided by capital also holds that capital is reimbursed from production, this at first glance may seem a distinction without a difference. But that it is much more than a formal distinction will be apparent when it is considered that upon the difference between the two propositions are deduced doctrines that, themselves regarded as axiomatic, bound, direct, and govern the ablest minds in the discussion of the most momentous questions. For, upon the assumption that wages are drawn directly from capital, and not from the product of labour, is based, not only the doctrine that wages depend upon the ratio between capital and labour, but the doctrine that industry is limited by capital - that capital must be accumulated before labour is employed, and labour cannot be employed except as capital is accumulated; the doctrine that every increase of capital gives or is capable of giving additional employment to industry; the doctrine that the conversion of circulating capital into fixed capital lessens the fund applicable to the maintenance of labour; the doctrine that more labourers can be employed at low than at high wages; the doctrine that capital applied to agriculture will maintain more labourers than if applied to manufactures; the doctrine that profits are high or low as wages are low or high, or that they depend upon the cost of the subsistence of labourers - in short, all the teachings that are based more or less directly upon the assumption that labour is maintained and paid out of existing capital before the product, which constitutes the ultimate object, is secured:

If it be shown that this is an error, and that on the contrary the maintenance and payment of labour do not even temporarily trench on capital, but are directly drawn from the product of labour, then all this vast superstructure is left without support and must fall. And so likewise must fall the vulgar theories which also have their base in the belief that the sum to be distributed in wages is a fixed one, the individual shares in which must necessarily be decreased by an increase in the number of labourers.

Principles common to all societies

The fundamental truth, which 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. Principles that are 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 labour 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 labour to the same purpose that the prehistoric savage had when he 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-endeavouring 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 the whole production of a community as the cooperation of all to satisfy the various desires of each, we see plainly that the reward each obtains for his exertion comes as truly and certainly from nature as the result of that exertion, as did the reward of the first man.

To illustrate: In the simplest state we can conceive of, each man digs his own bait and catches his own fish. The advantages of the division of labour soon become apparent, and one digs bait while the others fish. Yet evidently the one who digs bait is in reality doing as much towards 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 labour to the taking of fish as much as the actual fishermen, and the fish that he eats at night when the fishermen come home are as truly the product of his labour as of theirs. And thus when the division of labour 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 to the extent he exchanges the direct product of his own labour for the direct product of the labour of others is really applying his own labour to the production of the things he uses. He 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.

What wages really represent

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 labour is exchanged for commodities, production really precedes enjoyment. We shall see that wages are the earnings-that is to say, the makings - of labour, not the advances of capital, and that the labourer who receives his wages in money (coined or printed, it may be, before his labour commenced) really receives in return for the addition his labour 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.

Neither the money, which is but the draft, nor the particular form of wealth that he calls for by use of the draft, represents advances of capital for his maintenance; on the contrary it represents the wealth, or a portion of the wealth, his labour has already added to the general stock.

Keeping these principles in view, we see that a draughtsman drawing the plans for a great marine engine in some dingy office on the banks of the Thames is in reality devoting his labour 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. He is as truly making his own clothing as though he were shearing sheep in Australia or weaving cloth in Parsley. The miner digging out silver ore in the heart of the high Comstock is in effect by virtue of a thousand exchanges, harvesting crops in the valleys below; 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; or making quaint wooden toys in the Hartz Mountains, for his children.

The wages he receives at the end of the week, what are they but the certificate to all the world that he has done these things-the primary exchanges in the long series that transmutes his labour into the things he has really been labouring for?