Saturday, March 24, 2007

J. K. Ingalls, Labor, Wages, And Capital

Joshua King Ingalls, "Labor, Wages, And Capital. Division Of Profits Scientifically Considered," Brittan's Quarterly Journal, I (1873), 66-79.


LABOR, WAGES, AND CAPITAL:

DIVISION OF PROFITS SCIENTIFICALLY CONSIDERED.

BY J. K. INGALLS.

THE right of Property, or private control over accumulated wealth, rests ultimately upon the principle that such wealth is the product of one's labor; and since, in society as at present existing, little or nothing is the product of unaided individual effort, but the result of the labor of numbers combined, the correct division of this product becomes the great underlying question, upon the proper solution of which depends all exactness in social or economical science.

The system of traffic for gain, or for profits, is older than civilization. Wages followed inevitably the emancipation of the worker from slavery and serfdom. That such a change was the best thing possible, in that stage of social development, may be admitted without raising the question as to the scientific importance of such an improvement; for all science, as we understand it, is by many thousands of years younger. In a general way we must recognize the several steps which have been necessary in the attainment of true knowledge. The astrology of the Arabs was as near the truth of an exact science of the stars as was the system of wages and profits—resorted to in utter ignorance of social and economic law—in its approach to a correct method of division. With the attainments already made in economics, and with the methods of analysis we have applied with so much success in other fields of investigation, it ought not to be regarded presumptuous if we attempt to determine the true value of a custom, ancient in its origin and general in its adoption.

It will be necessary to consider these subjects somewhat in detail. I propose to treat of wages as the system is found in actual operation; not as to whether it is just and equitable between individuals and classes. The question is as to whether it effects the results proposed, and which social economy requires. I wish it borne in mind, that more than specific and temporary results must be secured in order to justify any custom. Those results must be uniform and continuous. Bribery and subsidies will produce specific effects; but they can never insure continuous results. Their ultimate consequences will be precisely opposite to their immediate effects; and instead of promoting the contemplated purpose, will finally render it impossible to be done at all. They are therefore economically as well as morally unjustifiable. Now, if the system of wages is lacking in permanent and uniform influence upon human industry, we may rest assured that it has been at best but an expedient, resorted to in the ignorance and barbarism of earlier times, and which must certainly pass away as soon as society is prepared to profit by its advancement in knowledge.

Labor, the source of all social and individual wealth, consists in those efforts which man puts forth to produce whatever is necessary to his subsistence, and the realization of his aims in life. For the purpose of this discussion we need not distinguish between the labor of the hand and that of the brain; or whether it be devoted to actual production, or to any of the services required by society. With regard to the product which results solely from individual effort, there is of course no question of division; and with that we have nothing to do. In a general view, the whole social wealth is the result of the united effort, and therefore society, in its collective capacity, has a voice, rightfully, in determining the method by which the common product shall be subdivided among its members.

Having defined Labor, I must refer to Capital, in order to be fully understood. Capital, according to political economists, is "that stock in business which is made the basis of profit." But this defines nothing, and means nothing more than the appropriation of a certain proportion of the labor product under certain conditions.

The conserved, or accumulated labor product may be used directly as the passive agent in production; indirectly, by supplying the wants of the laborer while he is employed on other material; or be used in the form of machinery, tools, and otherwise in increased facilities for business. But we must not lose sight of the fact, that however employed, it is still nothing but the product of labor; and as truly so, as the more perishable things which are immediately consumed. In the place of Labor and Capital, we simply have only Labor and its product. Now the claim for profits from invested Capital assumes this untenable position: That the labor of yesterday, or of last year, is more valuable than the labor of to-day, or of the present year. And here arises the question of abstinence; a term with which our cowardly moral scientists and political economists attempt to conjure up a spirit that will justify the greed of our land and money systems; by a casuistry similar to that which once would have justified human slavery.

But it can be shown that the principle of abstinence can be utilized, without any such resort being necessary, as is assumed by these apologists. The man who has produced a surplus of some perishable article, finds a pressing necessity to put it into a more durable form, if he would preserve it. This he can do by direct exchange with some one who has a more enduring product, but requires the perishable product for immediate consumption; or he may permit another to use what he possesses, returning the same at some future time when it may be required. We see, therefore, that he has all rational inducements to preserve his surplus, and indeed to constantly increase it.

All forms of the labor product arc subject to constant change if they do not absolutely decay. The precious metals, by very slow degrees, to be sure (and this is why they became the "tender for choice"), lose value by attrition; the great mass of the animal and vegetable products of the earth maintain their values only for a short season; while houses, fabrics, machinery, tools, and all the implements of industry and the conveniences of life decline constantly in their power to serve and please. Now, no one can naturally receive more for his abstinence than the thing he abstains from using or consuming; but always less, according to the time of his abstinence and the nature of his surplus. It follows, therefore, that a man has every healthful motive to conserve his surplus, by changing it into renewed forms of use, without the idea of profit or gain in so doing; and the assumption that he will not do it unless enabled to lay other labor under tribute, is as impertinent as it is gratuitous.

An abundant motive being shown to produce and conserve the surplus product of labor, any system that offers a greater inducement must partake of the nature of a bribe, subsidy, or hazard, and cannot, on the whole, work beneficially, however plausible the instances which may be cited to prove certain desirable results.

The claim of the political economists, that profits constitute the great main-spring of all economic action, is as philosophically absurd as it is morally degrading. But, for the moment, admitting the proposition in their sense, how does it bear upon our main question of wages as an economic force? No one, say they, will do anything but for profits. But the man who works for wages has no profits; and is not only destitute of this stimulus, but his labor product is minus the profits of the capitalist, landlord, and forestaller. A rational economy would seem to require, that if any one received extra inducement to act, it should be that one who did the most laborious and repulsive work. It is thus seen, that while exorbitant profits afford an unnatural stimulus, in mere wages we have an inadequate motive to action.

Not only does our current system fail in the above-mentioned particulars, but it also fails to secure the wages system itself from the most palpable discrepancies. The ratio of wages for various kinds of service, and for different individuals, is in inverse rather than direct ratio to the service and the thing produced. One will be struck with astonishment at the disproportion in the compensation of those who are engaged in the actual production of the wealth of society, and those who are employed in light and frivolous duties, and even in services which are useless and destructive.

That such a system can be productive of economic results, none can be so demented as to suppose. What, to-day, is the universal complaint with regard to those who work for wages? Are we not told that they have no proper interest in their work? From the kitchen-maid to the bank president the cry is, that they are not faithful or honest, do not attend to their business, but improve every advantage which offers to promote their own purposes. Profits are seen to be more tempting than wages; and if, in addition to the economic argument, I may be allowed to refer to the moral one, I should add, that the result has been to infect our whole social fabric with dishonesty, from the servant-girl who helps herself and next friend to the tea and conserves, to the public functionary who appropriates to his own use the public funds, the contents of safes, the stocks of railroad companies, and whatever else he finds loosely lying around.

Let us now proceed to consider more closely the history and nature of wages. I have already stated that the system followed of necessity the emancipation of the laborer from chattel slavery. The earliest disposition of the labor product was by the strong arm. The one took who had the power, having destroyed the producer. After the era of mere brute force, came ownership of the laborer. He was held as a slave, and his labor compelled by stripes. We will find no one now to justify such a system. It became impracticable hundreds of years ago, except for a rude and barbaric race, preserved in the freshness of its primitive condition by importation.

To refer again to profits, let mc now say, that through all the different ages of savageism, barbarism, and our inchoate civilization, trade, or dealing for profit, has existed in essence unchanged. If we analyze it we shall see that the purpose of gain is inseparable from the idea of compelling another to produce for our advantage. The mere robber had a very uncertain dependence. Those whom he had destroyed could not produce more. He slaughtered "the goose that laid the golden egg;" and other producers were discouraged by witnessing their fate. The slaveholder had a more economic system; but still there was much uncertainty in his method, since at times he might have to change places with his bondman. Thus hazard still entered largely into all the industrial affairs of social life.

As slavery disappeared, the worker was allowed wages. This word is derived from the same root as wager, and has a similar signification:—"a thing laid down," to abide or be staked upon the result of a certain action or event. In those early times the result or the actual product of a certain number of days' or years' effort was a matter of much uncertainty; as instance Jacob's service with Laban. As they could not trust each other for a just division after the event, they previously bound themselves by contract. And thus in the barbarism of our industrial system we still follow a similar method; only we may have shortened the period, and now stake the money on one hand and labor on the other, upon the productive result that shall follow.

If this hazard were conducted by an open and fair method, then the laborer's chance to obtain more than he had produced, would be just as good as the employer's to realize a profit. But wages and profits result from different mathematical processes, as will be seen by a simple analyzation of the elements involved in each. Wages are determined by the employment of two factors, viz., the rate, and the number of days. Profits, on the other hand, are calculated by rate, time, and amount of principal. This last factor is the one which is potentially an increasing series, and by a duplicate geometrical ratio. What is purely profit, has the ability to double itself in definite periods. Thus while one's utmost effort and toil can not yield him over one thousand dollars value per year, for whatever term of years, the income from profits, or usual interest, or rent, may increase from one to ten, or to a hundred thousand dollars; nay, to millions. Take a most expert laborer or mechanic, and it is perhaps possible he can produce double what the average man in his calling can do. But by profits, one man is enabled to claim an amount, the production of which requires the incessant labor of a hundred men. Nay, there are men, even in this country, whose income absorbs the entire product of thousands of men.

With small capital, but insignificant profits can be realized; so the small operator finds scanty support. Yet the smaller transaction is frequently as serviceable to society as the larger. Take an instance in finance. It takes a Bank President no longer to sign a thousand-dollar bill than a one-dollar bill; nor does the paper and printing of the one cost more than that of the other; yet the profit on one is seventy dollars per annum, and on the other seven cents. The latter has effected the greatest number of useful exchanges, and, on account of its rapid circulation, perhaps to an equal amount. Could the excessive profits here shown, be accumulated and conserved, and reƫmployed in production, the result might be economically justified. But in accordance with a well-known law governing distribution, this absorption of the labor-product inevitably begets and fosters a class of parasites and sinecurists, who consume the wealth and corrupt the habits of society, without contributing in any respect to its support. And yet we are told by professed scientists, that unless, through laws of land-tenure and inheritance, etc., men are privileged to place their children in such conditions that no necessity shall exist to require from them any useful service to society, they will put forth no effort to create wealth and increase production. We need not go to the offices of our State and National governments, to find the evidence of parasitic growth in our system. Sinecures arc not confined to Church or State. They exist in your Banks, Insurance Offices, Manufactories, Railroad Companies, and in fact, every branch of business. Nay, they enter the homes of the people, and the self-assertion, which claims the right to do what it will with its own, incites parents to guard their offspring from the remotest suspicion of ever having done anything useful or serviceable, while encouraging in them the most exacting temper and extravagant habits.

Now no one can maintain sinecures, unless he has some resource other than his own effort. With the absorbed product of a hundred men's labor, however, he may indulge in the luxury; and lackeys, favorites, and pets, are the logical concomitants of such absorption. Strictly speaking, economical principles are best subserved where the utmost freedom is given to every available productive force in society, and where none are either repressed, wasted or corrupted. In a broad philosophy, to be sure, we may see the wildest departures from wisdom resulting in progress; but even such philosophy assumes that we grow wiser by suffering the consequences of misdirection, and hence cease to repeat the follies we deplore.

One thing is certain; no one who is interested in the future of human society can look with unconcern upon the present aspect of our industrial affairs. The worker is beginning to realize his position as the creator of society's wealth, and to feel that hazard, rather than any system of justice or science, determines his share in the wealth he alone has produced. He discovers that he is the victim of a system—could it be reduced to any certain rule—which can never be made to favor the toiler; and that he it is who must pay all the profits and shoulder all the risks of every venture, and though often losing can never win.

I know our political economists claim that there may be gains without corresponding losses. I am not ignorant of the sophistry by which it is attempted to sustain this claim. It is assumed that under certain conditions of privation, results cannot be obtained by the same amount of effort as they can under more favorable conditions. Hence the standard of real service is not determined by the amount of effort put forth, but rather by the measure of labor saved to the one who has been supplied with more favorable conditions. The economical objection to this is plain; the moment n-e admit that the need or the condition of the one served, is to enter into the question of exchange of services, we involve a new element in purpose or motive. It will then become a mutual struggle not to supply each other's demands, but each will strive to subject the other to such conditions as will render his own service of paramount value.

The system of values and profits effectually accomplishes this result: the one depressing the condition of the laborer and the other improving the fortunes of the employer. It may be sometimes necessary to give enormous salvage for the saving of ships and cargoes placed in perilous positions; but the effect must be to cause the wreckers to desire more wrecks, and it is not the fault of the system if they do not show false lights to lure mariners to destruction. When our service to another is to be measured, not by the amount of effort put forth, but the necessity to which he is reduced, our study may then be to keep him in that necessitous condition rather than render him the required service. The system of profits, however, obviates the necessity for any intentional effort in this direction; for its inevitable operation is to force labor into more and yet more necessitous conditions, wherein the increased exactions are shown—of course by the same rule—to be wise and salutary. The inequalities relied upon at the start to justify this unequal dealing are perpetuated thereby, and rendered more and more intolerable; thus increasing the demand for the unequal exchange, or, as Mr. Kellogg says, "compelling consent as it operates."

No fact is better established by political economy than the normal industry and frugality of mankind. Industrious habits and judicious accumulations and appropriations are found to take place almost in direct ratio to the proportion of the labor product which they are enabled to enjoy. As this proportion diminishes improvidence and idleness prevail. It is equally true, that while profits often stimulate to great penuriousness and greed in individuals, they also, on the whole, excite to great extravagance and dissipation, and to the engendering of parasites and sinecurists; and hence, to increase the desire for expense and diminish the tendency to conservation. Thus we see that the general operation of the system of profits is to discourage industry, incite to extravagant consumption, and beget indifference to judicious accumulation. No wonder that useful labor is held in such contempt by both extremes of society, and that the attainment of the means of extravagant living, by whatever dishonest method, is respected and encouraged.

I have already answered the argument of the economists, that unless the capitalist could be awarded profits, he would not allow his accumulations to be used productively. He has no other means of preserving them in existence. It is sometimes urged that inasmuch as the tool, the machine, or seed lent, enables the borrower to do so much more than he could possibly do without them; that in paying usance he is not subjected to any loss, but he is actually benefited. Bastiat makes a very labored and specious plea from this premise; but it is a most puerile, inconsequent, and one-sided argument, from a mind so able and clear on other points.

Please bear in mind that this is all hypothesis. Now for the facts. Notwithstanding the great advantage to be derived hypothetically under these circumstances, the lending of tools among workmen, both in country and city, is practiced widely, yet payment for their use is wholly unknown. Let a stranger go into the country and be destitute of tools, and he has little trouble in borrowing. The lender will be only too glad to get them again in reasonable time and with moderate wear. On the frontier neighbors will turn out and assist the new-comer in rearing a cabin, and only ask that he shall take his turn in helping some other settler. But let him want the loan of a hundred dollars, or of a piece of land which is made monopolizable under our laws of tenure, and he will be required to pay ten to thirty per cent., although he returns all that he borrows—not as he did the tools, more or less worn—but uninjured as well as unconsumed. This payment will tend to keep him in the same condition of need, because the amount of land and money do not increase by labor; and whatever is paid for their use is by so much labor's loss, whoever says to the contrary.

These views of the industrial problem beget no feeling of hostility against the wealthy, for many of them are useful workers; nor of especial interest in those who work for wages, merely on that account. Many of them are employed not in adding to the genuine wealth of society, but in pernicious and destructive pursuits. They do, however, awaken an interest in those who produce in contradistinction to those who merely absorb and consume the labor-product of society. No especial blame attaches to any class. No one with true manly feeling can contemplate occupying the position of a hireling all his life without disgust. Nor can any true man feel that the account is wholly settled between him and his life-long helpers when he has merely paid them the current wages during his prosperity and business success.

If asked what remedy I propose, I answer none. I have no faith in quacks and nostrums. The world must acquaint itself with the science of Industry and Economics, and apply the knowledge so obtained in the interest of labor, which underlies all social order and progress. Moralize wealth, as the Positivists say, not merely through the exercise of benevolence and bestowment of charities. These are already magnificent. Let us supplement and complement benevolence with a justice which shall divide the labor-product according to work, and have more wealth little to bestow in charity, and labor nothing to ask of alms.

Society has advanced to our present state of civilization through one grand conception:—the right of private property—the public acknowledgment of one's right to control his own labor-product. This idea is not yet so inwrought into our social and civil system as to supersede the older idea of force, particularly its subtler manifestations of cunning and mere intellectual domination. We have only just freed ourselves of slavery, which totally ignored this idea, though arrogantly pretending to proceed therefrom; and in Land monopoly and other systems of class legislation, we have still the relics of the older barbarism. But the idea stands acknowledged in our theory of law and science of economics. Indeed, both the one and the other proceed from it, and could have no logical existence upon any other basis.

The beneficent effects and the progress of society resulting from the recognition of this right have been falsely referred by the political economists to the love of traffic and passion for profits. A scientific analysis of the principles will show that they are wholly incompatible with each other. The individual is protected in his private right to property, upon no other principle than because it is the actual product of his labor. If then another has produced something that I want, the science of economy, no less than that of morals, teaches me that to obtain it I must produce an equivalent in order to exchange with him. On the contrary, the theory of profits suggests, that although I may not take the whole of another's product by superior muscular force, I may take a part of it by guile, by duplicity, or superior intellectual activity. To the clear vision of reason, however, this latter conception is essentially the same unscientific, crude and barbarous notion, which in the earlier ages prompted the robbery and enslavement of labor.

We have now to supplement the right of private property with the recognition of the general truth that individual effort is of limited extent; that the wealth of society is the result of the united effort of aggregate labor. And it logically follows that those who represent the labor of the past, or capitalists, and those who do the labor of the present, are equal partners, and should be rewarded in proportion to the labor performed.

The remedy, then, lies in the direction of coƶperation; not after any specific plan, but by giving place in our thought to the grand idea that the useful industries of society are carried on under a widely-extended copartnership. At present the products of this partnership are unwisely as well as unjustly distributed. Wages and profits partake of the character of hazard, bribery, and subsidies, and arc not subject to any rational or equitable division. We must recognize the social as w ell as the private right in property. Industries of every kind, which do not begin and terminate with the individual, have a social as well as a private side. Especially must we recognize the fact that exchange, finance, and distribution, are public rather than private functions.

We see a great discrepancy between classes who are employed at wages; but when we contrast the income of the producers with that of the individuals who accumulate profits, the inequality of the method is most glaringly conspicuous. Skilled mechanics do not realize over $1,000 per year. Many useful laborers do not realize more than one-quarter of that sum. The agricultural laborer, whose work is, in fact, the most serviceable of all, is generally the most poorly paid.

In contrast with this, there arc persons with hundreds of thousands and even millions of income, who render no useful labor. They only speculate in the products of others' labor; monopolize the land which the poor need for homes and cultivation; make a "corner in Erie," or lock up some millions of greenbacks, and so profit by the general distress they produce. By our class laws they are thus enabled to plunder society of its wealth, and to impoverish most those who have produced the common treasure by their persistent toil.

The banker or merchant essays the performance of a public function, as truly such as the mayoralty or presidency. When these functionaries are unprincipled enough to grasp and lay by a few thousands or millions from the public funds, we justly regard them as malefactors. A broker, merchant, or landlord, lays aside an equal or greater amount annually from the results of the general industry, and we honor him as one of our "merchant princes," "bank barons," or "railroad kings." Really they have made society just as much poorer, by their transactions, as the official delinquent; and there is no certainty that they will employ this accumulation to any better purpose than he.

Science must despair of any intelligible method for the division of the labor-product, or for any relief to society, from the existing conditions of poverty, venality and corruption, until the principle is practically recognized, that all genuine service has a social as well as a private interest; and our industrial, commercial, and financial affairs, are regulated upon this basis.

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