IT IS SURPRISING that so many educated thinkers could have accepted a theory of wages that our analysis has shown to be utterly baseless. The explanation for this baffling fact can be found in the general acceptance of another theory. The theory of wages was never adequately examined because it seemed self-evident in the minds of economists when backed by the Malthusian theory.
This theory — published in 1798 by Rev. Thomas Malthus — postulates that population naturally tends to increase faster than nature can provide subsistence. The two doctrines, fitted together, frame the answer to the problem of poverty given by current economic thought.
Both theories derive additional support from a principle in Ricardo's theory of rent. Namely, that past a certain point, applying capital and labor to land yields a diminishing return. Together, these ideas provide a likely explanation for the phenomena of a highly organized, advanced society. This has prevented closer investigation.
Malthus based his theory on the growth of the North American colonies. This, he concluded, showed that population naturally tended to double every twenty-five years. Thus, population would increase at a geometrical ratio. Meanwhile, subsistence from land, under the most favorable circumstances, could not possibly increase faster than in an arithmetical ratio. That is, to increase the same amount every twenty-five years. In other words, population increases as 1, 2, 4, 8; while subsistence increases as 1, 2, 3, 4.
"The necessary effects of these two different rates of increase, when brought together," Mr. Malthus naively goes on to say, "will be very striking." He concludes that at the end of only the first century, two thirds of the population will be "totally unprovided for"; while in two thousand years, "the difference would be almost incalculable."
Such a result is, of course, prevented by the physical fact that no more people can exist than can find food. Hence, Malthus concludes that the tendency of population to indefinite increase may be held back by two means. Population may be limited by "moral restraint" [i.e., sexual abstinence]. Otherwise, various causes of increased mortality will do the job. He calls restraints on propagation the "preventive check." Increased mortality he names the "positive check."
This is the famous Malthusian doctrine, as promulgated by Malthus himself in his Essay on Population. The fallacious reasoning in assuming geometrical and arithmetical rates of increase, is hardly worth discussing. It merely provides a high-sounding formula that carries far more weight with many people than the clearest reasoning. But this assumption is not essential. It is expressly repudiated by some who otherwise accept the doctrine.
Regardless, the essence of Malthusian theory is that population tends to increase faster than the food supply. Malthus claims that population constantly tends towards increase. Unless restrained, it will ultimately press against the limits of subsistence, although such limits are elastic, not fixed. Nonetheless, it becomes increasingly difficult to produce subsistence. Thus, whenever growth, over time, is unchecked by conscious restraint, population will be kept in check by a corresponding degree of deprivation.
Malthus unashamedly makes vice and suffering the necessary result of natural instinct and affection. Despite being silly and offensive, as well as repugnant to our sense of a harmonious nature, it has withstood the refutations and denunciations, the sarcasm, ridicule, and sentiment directed against it. It demands recognition even from those who do not believe it. Today it stands as an accepted truth (though I will show it is false).
The reasons for its acceptance are not hard to find. It appears to be backed by an indisputable mathematical truth — that a continuously increasing population must eventually exceed the capacity of the earth to furnish food, or even standing room. It is supported by analogies in the animal and vegetable kingdoms, where life beats wastefully against the barriers holding different species in check.
Many obvious facts seem to corroborate it. For instance, the prevalence of poverty, vice, and misery amid dense populations. In addition, the general effect of material progress is to increase population without relieving poverty. It is pointed out that population grows rapidly in newly settled counties. It slows in more densely settled ones, apparently because of mortality among those condemned to poverty.
Malthusian theory furnishes a general principle to explain these facts. Moreover, it accounts for them in a way that harmonizes with the doctrine that wages are drawn from capital — and with all the principles deduced from it. Current wage theory says that wages fall as more workers compel a finer division of capital. Malthusian theory claims poverty arises as increased population forces further division of subsistence. It requires little to make the two propositions as identical formally as they already are substantially. Merely identify capital with subsistence, and the number of workers with population. This identification is already made in current economic writing, where the terms are often interchanged.
Ricardo furnished additional support a few years later, by correcting the mistake Adam Smith had made regarding the nature and cause of rent. Ricardo showed that rent increases as a growing population extends cultivation to less and less productive land.
This formed a triple combination of interlocking theories. The previous doctrine of wages and the subsequent doctrine of rent can be seen, in this view, as special examples of the general principle of the Malthusian theory of population. Wages fall and rents rise with increasing population. Both show the pressure of population against subsistence.
To a factory worker, the obvious cause of low wages and lack of work appears to be too much competition. And in the squalid ghettos, what seems clearer than that there are too many people? We may also note that, in our present state of society, most workers appear to depend upon a separate class of capitalists for employment. Under these conditions, we may pardon the masses — who rarely bother to separate the real from the apparent.
But the real reason for the triumph of the theory is that it does not threaten any vested right or antagonize any powerful interest. Malthus was eminently reassuring to the classes who wield the power of wealth and, thus, largely dominate thought. The French Revolution had aroused intense fear. At a time when old supports were falling away, his theory came to the rescue. It saved the special privileges by which only a few monopolize so much of this world.
It proclaimed a natural cause for want and misery. Malthus' purpose was to justify existing inequality by shifting the responsibility from human institutions to the laws of the Creator. For if those things were attributed to political institutions, they would condemn every government. Instead, he provided a philosophy to shield the rich from the unpleasant image of the poor; to shelter selfishness from question by interposing an inevitable necessity. Poverty, want, and starvation are not the result of greed or social maladjustment, it said. They are the inevitable result of universal laws, as certain as gravity. Even if the rich were to divide their wealth among the poor, nothing would be gained. Population would increase until it again pressed the limits of subsistence. Any equality that might result would be only common misery.
Thus, any reform that might interfere with the interests of any powerful class is discouraged as hopeless. Nothing can really be done, individually or socially, to reduce poverty. This theory, while exploiting the erroneous thoughts of the poor, justifies the greed of the rich and the selfishness of the powerful. Such a theory will spread quickly and strike deep roots.Recently, this theory has received new support from Darwin's theory on the origin of species. Malthusian theory seems but the application to human society of "survival of the fittest." Only "the struggle for existence," cruel and remorseless, has differentiated humans from monkeys, and made our century succeed the stone age.*
Thus seemingly proved, linked, and buttressed, Malthusian theory is now generally accepted as an unquestionable truth: Poverty is due to the pressure of population against subsistence. Or in its other form, the number of laborers will always increase until wages are reduced to the minimum of survival.
All social phenomena are now to be explained in this light — as for years the heavens were explained by supposing the earth was at the center of the universe. If authority were the only consideration, argument would be futile. This theory has received almost universal acceptance in the intellectual world, endorsed by economists and statesmen, historians and scientists, psychologists and clergy, conservatives and radicals. It is held, and habitually reasoned from, by many who have never even heard of Malthus, and haven't the slightest idea what his theory is.
Nevertheless, upon our investigation, the supporting arguments for wage theory evaporated. So too, I believe, will vanish the grounds for this doctrine, which is its twin.