Progress and Poverty (George)/Chapter V

by Henry George

Chapter V The functions of capital

Capital increases the power of labour to produce wealth: (1) By enabling labour to apply itself in more effective ways, as by digging up clams with a spade instead of the hand, or moving a vessel by shovelling coal into a furnace, instead of tugging at an oar. (2) By enabling labour 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 labour and thus, on the one hand, increasing the efficiency of the human factor by the utilization of special capabilities, the acquisition of skill and the reduction of waste; and on the other hand, 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 favourable to its production.

Capital does not limit industry, the only limit to industry being the access to natural material. But capital may limit the form of industry and the productiveness of industry, by limiting the use of tools and the division of labour.

That capital may limit the form of industry is clear. Without the factory, there could be no factory operatives; without the sewing machine, no machine sewing; without the plough, no ploughman; and without a great capital engaged in exchange, industry could not take the many special forms that are concerned with exchanges.

It is also as clear that the want of tools must greatly limit the productiveness of industry. If the farmer must use the spade because he has not capital enough for a plough, the sickle instead of the reaping machine, the flail instead of the thresher; if the machinist must rely upon the chisel for cutting iron, the weaver upon the handloom, and so on, the productiveness of industry cannot be a tithe of what it is when aided by capital in the shape of the best tools now in use. The division of labour could not go further than the very rudest and almost imperceptible beginnings; nor could the exchanges, which make possible the division of labour, extend beyond the nearest neighbours, unless a portion of the things produced were constantly kept in stock or in transit.

To enable the resident of a civilized community to exchange his labour at option with the labour of those around him and with the labour of men in the most remote parts of the globe, there must be stocks of goods in warehouses, in stores, in the holds of ships, and in railway cars. To enable the denizens of a great city to draw at will a cupful of water, there must be thousands of millions of gallons stored in reservoirs and moving through miles of pipe.

We can, of course, imagine a community in which the want of capital would be the only obstacle to an increased productiveness of labour; only, however, by imagining a conjunction of conditions that seldom, if ever, occurs, except by accident or as a passing phase. A community in which capital has been swept away by war, conflagration, or convulsion of nature, and, possibly, a community composed of civilized people just settled in a new land, seem to furnish the only examples. Yet how quickly the capital it habitually uses is reproduced in a community that has been swept by war has long been noticed, while the rapid production of the capital it can use, or is disposed to use:, is equally noticeable in the case of a new community.

It would be a mistake to attribute the simple modes of production and exchange which are resorted to in new communities solely to a want of capital. These modes, which require little capital, are in themselves rude and inefficient, but when the conditions of such communities are considered, they will be found in reality the most effective. A great factory with all the latest improvements is the most efficient instrument that has yet been devised for turning wool or cotton into cloth, but only so where large quantities are to be made. The cloth required only for a little village could be made with far less labour by the spinning wheel and handloom. To carry occasionally two or three passengers, a canoe is a better instrument than a steamboat; a few sacks of flour can be transported with less expenditure of labour by a pack horse than by a railway train; to put a great stock of goods into a crossroads store in the backwoods would be but to waste capital.

Generally speaking, no greater amount of wealth will be used as capital than is required by the machinery of production and exchange that, under all the existing conditions such as intelligence, habit, security and density of population, best suits the people.

Wages and capital - general conclusions

Our purpose in this inquiry is to solve the problem to which so many self-contradictory answers are given. In ascertaining clearly what capital really is and what capital really does, we have made the first, and an all-important step.

We have seen that capital does not advance wages or subsist labourers, but that its functions are to assist labour in production with tools, seed, etc., and with the wealth required to carry on exchanges.

We are irresistibly led to practical conclusions so important as amply to justify the pains taken to make sure of them. For if wages are drawn, not from capital, but from the produce of labour, all remedies, whether proposed by professors of Political Economy or working men, that look to the alleviation of poverty either by the increase of capital or the restriction of the number of labourers or the efficiency of their work, must be condemned.

If each labourer in performing the labour really creates the fund from which his wages are drawn, then wages cannot be diminished by the increase of labourers. On the contrary, as the efficiency of labour manifestly increases with the number of labourers, the more labourers, other things being equal, the higher should wages be. But this necessary proviso, other things being equal, brings us to a question which must be considered and disposed of before we can proceed further. That question is: Do the productive powers of nature tend to diminish with the increasing drafts made upon them by increasing population?