Progress and Poverty (George)/Chapter XI

by Henry George

Chapter XI The effect of material progress on the distribution of wealth

To say that wages remain low because rent advances is like saying that a steam-boat moves because its wheels turn round. The further question is, what causes rent to advance? What is the force or necessity that, as productive power increases, distributes a greater and greater proportion of the produce as rent?

The only cause pointed out by Ricardo as advancing rent is the increase of population, which by requiring larger supplies of food necessitates the extension of cultivation to inferior lands, or to points of inferior production on the same lands. Now while it is unquestionably true that the increasing pressure of population, which compels a resort to inferior points of production, will raise rents and does raise rents, I do not think that it fully accounts for the increase of rent as material progress goes on. There are evidently other causes which conspire to raise rent but which seem to have been wholly or partially hidden by erroneous views as to the functions of capital and genesis of wages. To see what these are, and how they operate, let us trace the effect of material progress upon the distribution of wealth.

The changes that constitute or contribute to material progress are three: (i) increase in population; (2) improvements in the arts of production and exchange; and (3) improvements in knowledge, education, government, manners and morals, so far as they increase the power of producing wealth. Material progress, as commonly understood, consists of those three elements or directions of progression, in all of which the progressive nations have for some time past been advancing, though in different degrees.

Considered in the light of material forces or economies, the increase of knowledge, the betterment of government, etc., have the same effect as improvement in the arts. It will therefor not be necessary in this view to consider them separately. What bearing intellectual or moral progress, merely as such, has upon our problem we may hereafter consider. We are at present dealing with material progress, to which these things contribute only as they increase wealth-producing power, and we shall see their effects when we see the effects of improvements in the arts.

Effect of increases in population

The manner in which increasing population enhances rent, as it is generally explained and illustrated, is that the increased demand for subsistence forces production to inferior soils or to inferior productive points. Thus if, with a given population, the margin of cultivation is at 30, all lands of productive power over 30 will pay rent. If the population be doubled, an additional supply of land is required and that can be obtained only by an extension of cultivation, causing other lands to yields rent that before yielded none. If the extension be to 20, then all the land between 20 and 30 will yield rent and have a value, and all land over 30 will yield increased rent and have increased value.

But a misapprehension arises which it is necessary to clear up for a proper understanding of the effect of increase of population upon the distribution of wealth. It is the presumption that the recourse to lower points of production involves a smaller aggregate produce in proportion to the labour expended.

Increased population, of itself, and without any advance in the arts, implies an increase in the productive power of labour. The labour of 100 men, other things being equal, will produce more than 100 times as much as the labour of one man, and the labour of 1,000 men much more than ten times as much as the labour of 100 men; and so, with every additional pair of hands which increasing population brings, there is a more than proportionate addition to the productive power of labour. Thus with an increasing population there may be a recourse to lower natural powers of production, not only without any diminution in the average production of wealth, but without any diminution at the lowest point. If population be doubled, land of but 20 productiveness may yield to the same amount of labour as much as land Of 30 productiveness could before yield. For it must not be forgotten (what often is forgotten) that the productiveness either of land or of labour is not to be measured in any one thing, but in all desired things. A settler and his family may raise as much corn on land a hundred miles away from the nearest habitation as they could raise were their land in the centre of a populous district. But in the populous district they could obtain with the same labour as good a living from much poorer land, or they could make as good a living from land of equal quality after paying a high rent, because in the midst of a large population their labour would have become more effective; not, perhaps, in the production of corn, but in the production of wealth generally-or the obtaining of all the commodities and services that are the real object of their labour.

Wages as a quantity and as a proportion

Let us suppose land of diminishing qualities. The best would naturally be settled first, and as population increased production would take in the next lower quality, and so on. But as the increase of population, by permitting greater economies, adds to the effectiveness of labour, the cause which brought each quality of land successively into cultivation would at the same time increase the amount of wealth that the same quantity of labour could produce from that land. But it would also do more than this - it would increase the power of producing wealth on all the superior lands already in cultivation. If the relations of quantity and quality were such that increasing population added to the effectiveness of labour faster than it compelled a resort to less productive qualities of land, though the margin of cultivation would fall and rent would rise, the minimum return to labour would increase. That is to say though wages as a proportion would fall, wages as a quantity would rise. The average production of wealth would increase.

If the relations were such that the increasing effectiveness of labour just compensated for the diminishing productiveness of the land as it was called into use, the effect of increasing population would be to increase rent by lowering the margin of cultivation without reducing wages as a quantity, and to increase the average production.

If we now suppose population still increasing but that the difference between the poorest land in use and the land next below that in quality is so great that it cannot be compensated by the increased power of labour that comes with the increased population - the minimum return to labour will be reduced, and with the rise of rents wages will fall, not only as a proportion, but as a quantity. But unless the descent in the quality of land is far more precipitous than we can well imagine, or than, I think, ever exists, the average production will still be increased. The increased effectiveness which comes by reason of the increased population attaches to all labour, and the gain on the superior qualities of land will more than compensate for the diminished production on the quality last brought in. The aggregate wealth production, as compared with the aggregate expenditure of labour, will be greater, though its distribution will be more unequal.

Thus increase of population, as it operates to extend production to lower natural levels, operates to increase rent and reduce wages as a proportion, and may or may not reduce wages as a quantity; increase of population seldom can, and probably never does, reduce the aggregate production of wealth as compared with the aggregate expenditure of labour; on the contrary it increases and frequently largely increases the aggregate production.

The effect of inventions and improvements

The effect of inventions and improvements in the productive arts is to save labour-that is, to enable the same result to be secured with less labour, or a greater result with the same labour.

In a state of society in which the existing power of labour served to satisfy all material desires, and there was no possibility of new desires being called forth by the opportunity of gratifying them, the effect of labour-saving improvements would be simply to reduce the amount of labour expended.

In the state of society called civilized, with which in this inquiry we are concerned, the very reverse is the case. Demand is not a fixed quantity, which increases only as population increases. In each individual it rises with his power of getting the things demanded. The amount of wealth produced is nowhere commensurate with the desire for wealth, and desire mounts with every additional opportunity for gratification. This being the case, the effect of labour-saving improvements will be to increase the production of wealth.

Let me ask the reader to bear in mind that the possession or production of any form of wealth is virtually the possession or production of any other form of wealth for which it will exchange. The object of labour on the part of any individual is not the obtainment of wealth in one particular form, but the obtainment of wealth in all the forms that consort with his desires. Hence an improvement which effects a saving in the labour required to produce one of the things desired is tantamount to an increase in the power of producing all the other things.

If it take half a man's labour to keep him in food, and the other half to provide him clothing and shelter, an improvement which would increase his power of producing food would also increase his power of providing clothing and shelter. If his desires for more or better food, and for more or better clothing and shelter, were equal, an improvement in one department of labour would be precisely equivalent to a like improvement in the other. If the improvement consisted in a doubling of the power of his labour in producing food, he would give one-third less labour to the production of food, and one-third more to the providing of clothing and shelter. If the improvement doubled his power to provide clothing and shelter, he would give one-third less labour to the production of those things, and one-third more to the production of food. In either case, the result would be the same-he would be enabled with the same labour to get one-third more in quantity or quality of all the things he desired.

And so, where production is carried on by the division of labour between individuals, an increase in the power of producing one of the things sought by production in the aggregate adds to the power of obtaining others. It will increase the production of the other things to an extent determined by the proportion that the saving of labour bears to the total amount of labour expended, and by the relative strength of desires.

Increased effectiveness absorbed in increased rent

To illustrate this effect of labour-saving machinery and improvements, let us suppose a country where, as in all the countries of the civilized world, the land is in the possession of but a portion of the people. Let us suppose a permanent barrier fixed to prevent further increase of population. Let the margin of cultivation, or production, be represented by 20. Thus land with its natural opportunities which, from the application of labour and capital, will yield a return of 20, will just give the ordinary rate of wages and interest, without yielding any rent; while all lands yielding more than 20 to equal applications of labour and capital will yield the excess as rent.

Population remaining fixed, let there be made inventions and improvements which will reduce by one-tenth the expenditure of labour and capital necessary to produce the same amount of wealth. Now, either one-tenth of the labour and capital may be freed, and production remain the same as before; or the same amount of labour and capital may be employed, and production be correspondingly increased. But the industrial organization, as in all civilized countries, is such that any reduction in the application of labour to production will, at first at least, take the form, not of giving each labourer the same amount of produce for less work, but of throwing some of the labourers out of work and giving them none of the produce. Now, owing to the increased efficiency of labour secured by the new improvements, as great a return can be secured at the point of natural productiveness represented by 18, as before at 20. Thus the effect of the unsatisfied desire for wealth and the competition of labour and capital for employment would be to extend the margin of production, we will say to 18. Accordingly, rent would be increased by the difference between 18 and 20, while wages and interest, in quantity, would be no more than before and, in proportion to the whole produce, would be less.

If invention and improvement still go on, the efficiency of labour will be still further increased, and the amount of labour and capital necessary to produce a given result will be further diminished. The same causes will lead to the utilization of this new gain in productive power for the production of more wealth; the margin of cultivation will be again extended, and rent will increase, both in proportion and amount.

In what has preceded, I have, of course, spoken of inventions and improvements when generally diffused. It is hardly necessary to say that as long as an invention or an improvement is used by so few that they derive a special advantage from it, it does not, to the extent of this special advantage, affect the general distribution of wealth. So, in regard to the limited monopolies created by patent laws. Although generally mistaken for profits of capital, the special profits thus arising are really the returns of monopoly and, to the extent that they subtract from the benefits of an improvement, they do not primarily affect general distribution. For instance, the benefits of a railway or similar improvement in cheapening transportation are diffused or monopolized, according as its charges are reduced to a rate which will yield ordinary interest on the capital invested, or as its charges are kept up to a point which will yield an extraordinary return. And, as is well known, the rise in land values corresponds with the reduction in the charges.

As has been said before, there are to be included in the improvements which increase the value of land not only the improvements which directly increase productive power, but also such improvements in government, manners and morals as indirectly increase it. Considered as material forces, the effect of all these is to increase productive power and, like improvements in the productive arts, their benefit is ultimately monopolized by the possessors of the land.