THE PRIMARY CAUSE OF INDUSTRIAL DEPRESSIONS
There is a cause, not yet adverted to, that must be taken into consideration to explain fully the influence of material progress upon the distribution of wealth. That cause is the confident expectation of the future enhancement of land values which arises in all progressive countries from the steady increase of rent and which leads to speculation, or the holding of land for a higher price than it would otherwise bring.
We have hitherto assumed, as is generally assumed in elucidations of the theory of rent, that cultivation extends to less productive points only as opportunities at the more productive points are fully utilized. But in rapidly progressing communities, where the steady increase of rent gives confidence to calculations of further increase, this is not the case. The confident expectation of increased prices produces, to a greater or less extent, the effects of a combination among landholders and tends to the withholding of land from use in expectation of higher prices, thus, forcing the margin of cultivation farther than required by the necessities of production.
This may be seen in every rapidly growing city. If the land of superior quality as to location were always fully used before land of inferior quality was resorted to, no vacant lots would be left as the city extended nor would we find miserable shanties in the midst of costly buildings. These lots, some of them extremely valuable, are withheld from use or from the full use to which they might be put, because their owners, not being able or not wishing to develop them, prefer, in expectation of the advance of land values, to hold them for a higher rate than could now be obtained from those willing to develop them. And in consequence of this land being withheld from use, or from the full use of which it is capable, the margin of the city is pushed away so much farther from the centre.
But when we reach the limits of the growing city - the actual margin of building which corresponds to the margin of cultivation in agriculture - we shall not find the land purchasable at its value for agricultural purposes, as it would be were rent determined simply by present requirements; but we shall find that, for a long distance beyond the city, land bears a speculative value based upon the belief that it will be required in the future for urban purposes; we shall find that, to reach the point at which land can be purchased at a price not based upon urban rent, we must go very far beyond the actual margin of urban use.
Production therefore begins to stop. There is not necessarily, or even probably, an absolute diminution ia production; but there is what in a progressive community would be equivalent to an absolute diminution of production in a stationary community - a failure in production to increase proportionately, owing to the failure of new increments of labour and capital to find employment at the accustomed rates.
This stoppage of production at some points must necessarily show itself at other points of the industrial network in a cessation of demand which would again check production there and thus the paralysis would communicate itself through all the interlacings of industry and commerce producing everywhere a partial disjointing of production and exchange and resulting in the phenomena that see to show over-production or over-consumption, according to the standpoint from which they are viewed.
The period of depression thus ensuing would continue until (1) the speculative advance in rents had subsided; or (2) the increase in the efficiency of labour, owing to the growth of population and the progress of improvement, had enabled the normal rent line to overtake the speculative rent line; or (3) labour and capital had become reconciled to engaging in production for smaller returns. Or, most probably, all three of these causes would cooperate to produce a new equilibrium, at which all the forces of production would again engage, and a season of activity ensue; whereupon rent would begin to advance again, a speculative advance would again take place, production be again checked, and the same round be gone over.
These seasons of depression are always preceded by seasons of activity and speculation, and on all hands the connection between the two is admitted - the depression being looked upon as the reaction from the speculation, as the headache of the morning is the reaction from the debauch of the night. But as to the manner in which the depression results from the speculation, there are two classes or schools of opinion.
One school say that the speculation produced the depression by causing over-production and they point to warehouses filled with goods that cannot be sold at remunerative prices, to mills closed or working on half-time, to mines shut down and steamers laid up, to money lying idly in bank vaults and to workmen compelled to idleness and privation. They point to these facts as showing that the production has exceeded the demand for consumption and they point moreover to the fact that when government during war enters the field as an enormous consumer brisk times prevail
The other school say that the speculation has produced the depression by leading to over-consumption, and point to full warehouses, rusting steamers, closed mills, and idle workmen as evidences of a cessation of effective demand, which, they say, evidently results from the fact that people, made extravagant by a fictitious prosperity, have lived beyond their means and are now obliged to retrench - that is, to consume less wealth. They point, moreover, to the enormous consumption of wealth by wars, by the building of unremunerative railways, by loans to bankrupt governments, etc., as extravagances which, though not felt at the time, just as the spendthrift does not at the moment feel the impairment of his fortune, must now be made up by a season of reduced consumption.
Each of these theories evidently expresses one side or phase of a general truth, but each of them evidently fails to comprehend the full truth. As an explanation of the phenomena, each is equally and utterly preposterous.
For while the great masses of men want more wealth than they can get, how can there be over-production? And while the machinery of production wastes and producers are condemned to unwilling idleness, how can there be over-consumption?
When, with the desire to consume more, there coexist the ability and willingness to produce more, industrial and commercial paralysis cannot be charged either to over-production or to over-consumption. Manifestly, the trouble is that production and consumption cannot meet and satisfy each other.
How does this inability arise? It is evidently and by common consent the result of speculation. But of speculation in what? Certainly not of speculation in things which are the products of labour - in agricultural or mineral productions or manufactured goods, for the effect of speculation in such things is simply to equalize supply and demand, and to steady the interplay of production and consumption by an action analogous to that of a fly-wheel in a machine.
If speculation be the cause of these industrial depressions, it must be speculation in things not the production of labour, but yet necessary to the exertion of labour in the production of wealth - of things of fixed quantity; that is to say, it must be speculation in land.
All trade, let it be remembered, is the exchange of commodities for commodities, and hence the cessation of demand for some commodities, which marks the depression of trade, is really a cessation in the supply of other commodities. That dealers find their sales declining and manufacturers find orders falling off, while the things which they have to sell, or stand ready to make, are things for which there is yet a widespread desire, simply shows that the supply of other things, which in the course of trade would be given for them, has declined. In common parlance we say that "buyers have no money," or that "money is becoming scarce," but in talking in this way we ignore the fact that money is but the medium of exchange. What the would-be buyers really lack is not money, but commodities which they can turn into money - what is really becoming scarcer is produce of some sort. The diminution of the effective demand of consumers is therefore but a result of the diminution of production.
This is seen very clearly by storekeepers in a manufacturing town when the mills are shut down and operatives are thrown out of work. It is the cessation of production that deprives the operatives of means to make the purchases they desire and thus leaves the storekeeper with what, in view of lessened demand his a superabundant stock, forcing him to discharge some of his clerks and otherwise reduce his demands. And the cessation of demand (I am speaking, of course, of general cases and not of any alteration in relative demand from such causes as change of fashion) which has left the manufacturer with superabundant stock and compelled him to discharge his hands, must arise in the same way. Somewhere, it may be at the other end of the world, a check in production has produced a check in the demand for consumption. The lessening of demand without want being satisfied shows that production is somewhere checked.
People want as much as ever the things the manufacturer makes just as the operatives want the things the storekeeper has to sell. But they do not have as much to give for them. Production has somewhere been checked and this reduction in the supply of some things has shown itself in cessation of demand for others, the check propagating itself through the whole framework of industry and exchange.
This check to production, beginning at the basis of interlaced industry, propagates itself from exchange point to exchange point, cessation of supply becoming failure of demand, until, so to speak, the whole machine is thrown out of gear, and the spectacle is everywhere presented of labour going to waste while labourers suffer from want. Though custom has dulled us to it, it is a strange and unnatural thing that men who wish to labour, in order to satisfy their wants, cannot find the opportunity.
We talk about the supply of labour and the demand for labour, but evidently these are only relative terms. The supply of labour is everywhere the same - two hands always come into the world with one mouth; and the demand for labour must always exist as long as men want things which labour alone can procure.
We talk about the "want of work," but evidently it is not work that is short while want continues; the supply of labour cannot be too great, nor the demand for labour too small, when people suffer for the lack of things that labour produces. The real trouble must be that supply is somehow prevented from satisfying demand, that somewhere there is an obstacle which prevents labour from producing the things that labourers want.
When we speak of labour creating wealth, we speak metaphorically. Man creates nothing. The whole human race, were they to labour for ever, could not create the tiniest mote that floats in a sunbeam - could not make this rolling sphere one atom heavier or one atom lighter. In producing wealth, labour with the aid of natural forces but works up preexisting matter into the forms desired and must therefore have access to this matter and to these forces - that is to say, to land. The land is the source of all wealth. It is the mine from which must be drawn the ore that labour fashions. It is the substance to which labour gives the form. And hence, when labour cannot satisfy its wants, may we not with certainty infer that it can be from no other cause than that labour is denied access to land?
When in all trades there is what we call scarcity of employment, when everywhere labour wastes while desire is unsatisfied, must not the obstacle that prevents labour from producing the wealth it needs lie at the foundation of the industrial structure? That foundation is land. Milliners, optical instrument makers, gilders and polishers are not the pioneers of new settlements. Miners did not go to California or Australia because shoemakers, tailors, machinists and printers were there. But those trades followed the miners. It is not the storekeeper who is the cause of the farmer; it is the farmer who brings the storekeeper. It is not the growth of the city that develops the country - it is the development of the country that makes the city grow.
If men now unemployed were given the opportunity to produce wealth from the land, they would not only be employing themselves, but would be employing all the mechanics of the city, giving custom to the storekeepers, trade to the merchants, audiences to the theatres and subscribers and advertisements to the newspapers. I do not mean to say that every unemployed man could turn farmer or build himself a house, if he had the land; but that enough could and would do so to give employment to the rest. What is it, then, that prevents labour from employing itself on this land? Simply, that it has been monopolized and is held at speculative prices, based not upon present value, but upon the added value that will come with the future growth of population.
Let the reader remember that it is only the main causes and general courses of industrial depressions that we are seeking to trace or in fact that it is possible to trace with any exactness. Political Economy can only deal, and has only need to deal, with general tendencies. The derivative forces are so multiform, the actions and reactions are so various, that the exact character of the phenomena cannot be predicted. We know that if a tree is cut through it will fall, but precisely in what direction will be determined by the inclination of the trunk, the spread of the branches, the impact of the blows, the quarter and force of the wind; and even a bird lighting on a twig, or a frightened squirrel leaping from bough to bough, will not be without its influence. We know that an insult will arouse a feeling of resentment in the human breast, but to say how far and in what way it will manifest itself, would require a synthesis which would build up the entire man and all his surroundings, past and present.
The social phenomena which all over the civilized world appall the philanthropist and perplex the statesman, which hang with clouds the future of the most advanced races and suggest doubts of the reality and ultimate goal of what we have fondly called progress, are now explained.
The reason why, in spite of the increase of productive power, wages constantly tend to a minimum that will give but a bare living, is that, with increase in productive power, rent tends to even greater increase, thus producing a constant tendency to the forcing down of wages.
This explanation is in accordance with all the facts.
THE PERSISTENCE OF POVERTY
Look over the world today. In countries the most widely differing - under conditions the most diverse as to government, as to industries, as to tariffs, as to currency - you will find distress among the working-classes; but everywhere that you thus find distress and destitution in the midst of wealth you will find that the land is monopolized; that, for its use by labour, large revenues are extorted from the earnings of labour.
Look over the world today, comparing different countries with each other, and you will see that it is not the abundance of capital nor the productiveness of labour that makes wages high or low, but the extent to which the monopolizers of land can, in rent, levy tribute upon the earnings of labour.
Is it not a fact that new countries, where the aggregate wealth is small but where land is cheap, are always better countries for the labouring classes than the rich countries, where land is dear?
In the new settlements, where land is cheap, you will find no beggars, and the inequalities in condition are very slight. In the great cities, where land is so valuable that it is measured by the foot, you will find the extremes of poverty, and of luxury. And this disparity in condition between the two extremes of the social scale may always be measured by the price of land. Compare the same country in different times, and the same, relation is obvious.
There is no mystery for example as to the cause to which so suddenly and so largely raised wages in California in 1849. It was the discovery of the placer mines in unappropriated land to which labour was free that raised the wages of cooks in San Francisco restaurants to $500 a month, and left ships to rot in the harbour without officers or crew until their owners would consent to pay rates that in any other part of the globe seemed fabulous. Had those mines been on appropriated land, or had they been immediately monopolized so that rent could have arisen, it would have been land values that would have leaped upwards, not wages. The Comstock Lode (1) has been richer than the placers, but the Comstock Lode was readily monopolized, and it was only by virtue of the strong organization of the miners' association and the fears of the damage which it might do, that men were enabled to get four dollars a day before they would parboil themselves two thousand feet underground, where the air that they breathed had to be pumped down to them. The wealth of the Comstock Lode has added to rent. The selling price of those mines has run into hundreds of millions, and it has produced individual fortunes whose monthly returns can only be estimated in hundreds of thousands, if not in millions.
Nor is there any mystery about the cause which has operated to reduce wages in California from the maximum of the early days to very nearly a level with wages in the Eastern States. The productiveness of labour did not decrease, on the contrary it increased; but out of what it produced, labour had to pay rent. As the placer deposits were exhausted, labour had to resort to the deeper ones and to agricultural land, but monopolization of those resources being permitted, men walked the streets of San Francisco ready to go to work for almost anything - for natural opportunities were no longer free to labour.
(1) The Comstock Lode, a famous silver mine in Nevada, U.S.A., discovered in 1859.
Put to any one capable of consecutive thought this question: "Suppose there should arise from the English Channel or the North Sea a No-man's Land, on which common labour to an unlimited amount should be able to earn twice or thrice its present wage, the land remaining unappropriated and of free access, like the commons which once comprised so large a part of English soil. What would be the effect upon wages in England?"
He would at once tell you that common wages throughout England must soon increase to the equivalent of what could be gained on that island.
And in response to another question, "What would be the effect on rents?" he would at a moment's reflection say that rents must necessarily fall; and if he thought out the next step he would tell you that all this would happen without any very large part of English labour being diverted to the new natural opportunities, or the forms and direction of industry being much changed; only that kind of production being abandoned which now yields to labour and to landlord together less than labour could secure on the new opportunities. The rise in wages would be at the expense of rent.
Take now the same man or another - some hard-headed business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city - in ten years it will abound with all the machinery and improvements that so enormously multiply the effective power of labour, will, in ten years, interest be any higher?"
He will tell you, "No!"
"Will the wages of common labour be any higher; will it be easier for a man who has nothing but his labour to make an independent living?"
He will tell you, "No; the wages of common labour will not be any higher; on the contrary, all the chances are that they will be lower; it will not be easier for the mere labourer to make an independent living; the chances are that it will be harder."
"What, then, will be higher?"
"Rent; the value of land. Go, get yourself a piece of ground, and hold possession."
And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse.
In our investigation we have been advancing to the truth: That as land is necessary to the exertion of labour in the production of wealth, to command the land that is necessary to labour is to command all the fruits of labour save enough to enable labour to exist. This simple truth, in its application to social and political problems, is hid from the great masses of men partly by its very simplicity, and in greater part by widespread fallacies and erroneous habits of thought that lead them to look in every direction but the right one for an explanation of the evils that oppress and threaten the civilized world. And back of these elaborate fallacies and misleading theories is an active, energetic power, a power that in every country, be its political forms what they may, writes laws and moulds thought - the power of a vast and dominant pecuniary interest.
But so simple and so clear is this truth, that fully to see it once is always to recognize it. There are pictures which, though looked at again and again, present only a confused labyrinth of lines or scroll work - a landscape, trees, or something of the kind - until once the attention is called to the fact that these things make up a face or a figure. This relation once recognized, is always afterwards clear. It is so in this case.
In the light of this truth all social facts group themselves in an orderly relation, and the most diverse phenomena are seen to spring from one great principle. It is not in the relations of capital and labour, it is not in the pressure of population against subsistence, that an explanation of the unequal development of our civilization is to be found. The great cause of inequality in the distribution of wealth is inequality in the ownership of land.
The ownership of land is the great fundamental fact that ultimately determines the social, tile political, and consequently the intellectual and moral condition of a people. And it must be so. For land is the habitation of man, the storehouse upon which he must draw for all his needs, the material to which his labour must be applied for the supply of all his desires; for even the products of the sea cannot be taken, the light of the sun enjoyed, or any of the forces of nature utilized, without the use of land or its products. On the land we are born, from it we live, to it we return again - children of the soil as truly as is the blade of grass or the flower of the field. Take away from man all that belongs to land, and he is but a disembodied spirit.
Material progress cannot rid us of our dependence upon land; it can but add to the power of producing wealth from land; and hence, when land is monopolized, it might go on to infinity without increasing wages or improving the condition of those who have but their labour. It can but add to the value of land and to the power that its possession gives.
Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the foundation of great fortunes, the source of power. As said the Brahmins, ages ago:
"To whomsoever the soil at any time belongs, to him belong the fruits of it. White parasols and elephants mad with pride are the flowers of a grant of land."