"The dry superficial area of the earth being the only medium through
which external nature becomes accessible to man; being not merely his only
foothold and resting-place, but also the means through which he obtains access
to all the matter which he, through the exercise of his faculties, changes into
objects fit to satisfy his desires and maintain his life,--it follows that
freedom to use the earth is the indispensable condition for the exercise of
man's faculties and the maintenance of his life. Hence the right to the use of
the earth is a natural right, the denial of which involves the denial of the
right to the exercise of any faculty, that is, the denial of the right to live.
"The right of any one to the exercise of his faculties
being limited only by the equal right of every one else, the exercise of any
faculty being dependent upon the use of the earth, it follows that the right of
any one to use the earth is limited only by the equal right of every one else.
The natural right to the use of the earth, therefore, is an equal right,
inherent in all. If there were only one man upon this earth he would obviously
be free to use the whole earth; the right of any second man to do the like must
be equal to that of the former. Nor can further multiplication bring about any
change in this relation. Of all the millions inhabiting the earth to-day, each
is free to use the whole earth or any part of it, provided he infringes not the
equal right of any other man. And conversely, it is equally true that no one of
them may so use the earth as to prevent any other from similarly using it. For
to do so implies a claim to greater opportunities for the exercise of his
faculties than others can enjoy....No arrangements made, even with the consent
of all living men, can deprive any member of any future generation of his or her
equal rights to the use of the earth. Likewise no arrangements made by past
generations, even if all their members had consented to them, can deprive any
one now living of his equal right. For every such arrangement, if enforced,
would offend against the law of equal freedom, would deprive some of their right
to an equal opportunity for the exercise of their faculties and the maintenance
of their lives" (pp. 228-9).
"Admitted that all men, without distinction of race or colour, have equal rights to all the earth, it by no means follows that none of them may take possession of any part of it; what does follow is, that no one of them may take more than his equal share of land, without compensating all others for the special privilege which he assumes" (p. 362).
"All men have equal rights to the use of land, and each of them is entitled to the exclusive possession of all the wealth which his labour produces or his services procure, provided he infringes not the equal right of all others. Disregard of the equal right to land necessarily involves violations of the unequal right to wealth" (p. 372).
"The fifth contention is, that priority of claim, and not the securing
of each the product of his labour, is the basis of property, because in this way
alone can perpetual fighting be avoided. The question arises at once,
priority of claim to what? To the whole earth, to a continent, to a
province, or to how much less of the earth's surface? It might be said
that it can be left to each society to regulate the extent to which it will
admit any one's priority of claim. That, however, is no answer to the
question to what extent ethics enforce the recognition of priority of claim.
"Nor is it possible to answer this question, for
ethics cannot recognize priority of claim as a basis of property. Even if,
between two contemporaries, priority of claim could confer a valid title, their
action or non-action cannot affect the rights of succeeding generations. A
child cannot be held to have lost its natural rights because its father failed
to claim his own. Otherwise men might be rightfully refused their freedom
because their remote forefathers had sold themselves into slavery or because
they had failed to claim their freedom" (pp. 363-4).
"The conception which Socialism has formed with regard to the relations existing between individuals and the social entity to which they belong, is totally opposed to that formed by [classical] Liberalism and Democratic Radicalism....It consists in the denial of the existence of abstract or natural human rights, and its converse, the assertion that all individual rights are derived from the State, as well as in the logical deduction from these premises, that any and all such rights may justly be cancelled by the State, if the latter is of opinion that its interests will be served thereby....This denial of individual rights within the Society and independent of that Society, naturally has, as correlative, the conception, that the State does not exist for the benefit of the individuals composing it, at any given time; that it is an independent organism, possessing an entity and purpose of its own, and that therefore the will, not only of any one individual, but of all individuals, is subordinate to the will of the State" (pp. 33-35).
"To the labourer belongs the fruit of his toil, is generally regarded as the only ethical standard of economic justice. Socialism utterly denies the truth of this proposition, and teaches that the fruits of individual labour belong, not to the labourer, but to the society of which he forms part, to be used by it in such manner as may, in its opinion, promise the best social results" (p. 36).
"The ultimate social and political outcome of Socialism, therefore, must be an all-pervading despotism on the part of the rulers, and a degree of slavery on the part of the ruled masses" (p. 316).
"Instead of raising the material condition of this unfortunate minority, Socialism must lower to their level the material condition of all. A monotonous equality in unavoidable poverty will be the condition of the whole people in the socialised State" (p. 326).
"The members of the socialised State, becoming mentally and morally adapted to this State, become unadapted for any other. Instead of honesty, truthfulness, chastity, unselfishness, a high sense of justice and of independence, being regarded as the highest attributes, implicit obedience, faith in and submission to authority, must come to be regarded as supreme virtues; and injustice, unchastity, selfishness, untruthfulness, and dishonesty will provoke no censure and no repulsion" (p. 342).
"This process of roundabout or capitalistic production is made possible through the voluntary co-operation of vast numbers of men, extending in time and space, a co-operation of their physical as well as of their mental powers. Two kinds of co-operation are possible. One is the co-operation of many men, who, for the time, abandoning most of their mental activities, obey the will of one man in their physical exertions, leaving mental guidance to the one. This is the compulsory co-operation at which Socialism aims. The other is a voluntary co-operation, where every man more or less utilises both his physical and mental powers in the production of goods, which, through the act of exchange, shall satisfy the desires of all of them. This is the capitalistic system, world-wide in its extension, upon which our civilisation is based. While socialistic, i.e. enforced co-operation, tends to the repression of the mental energies of most of the co-operators, this voluntary co-operation tends to excite them, and thus, in its results, no less than in its character, far surpasses the former. Capitalistic production, so contemptuously called chaotic and anarchic by the men who cannot conceive of any co-operation except that which is enforced, and of which the lowest savage is capable, is, in reality, the most marvelous system of co-operation which the human mind can conceive; a voluntary, world-wide co-operation of independent units, which alone has enabled mankind to raise itself above a state of savagery, which has enormously increased the sum of human happiness, and which, when freedom from the incubus of monopolism which the interference of the State has grafted upon it, will lift mankind above want and the fear of want into a sphere of as yet unimaginable intellectual and moral activity" (pp. 89-90).
"Social injustice, therefore, prevails, not on account, nor in spite, of
Individualism, but through the absence of Individualism, through the active and
passive disregard of equal individual freedom by the State. The removal of
social injustice, therefore, is not to be obtained by still further interference
with equal individual freedom, and still less by the abolition of individual
freedom which Socialism contemplates; it can be obtained only by the removal of
all interferences with individual freedom which exceeds that necessary for the
maintenance of equal freedom for all.
"This conclusion is not invalidated by the admission
that remedial measures involving further restrictions of individual
freedoms...may have had beneficial results. For if State limitations of
individual and equal freedom have deprived the majority of the people of
independence and power to resist capitalistic oppression, as they have done and
are still doing, restrictions placed upon the oppressors, otherwise unnecessary,
may to some extent alleviate the oppression. Nevertheless, it is clear that such
consequential interferences would be unnecessary if, through the removal of the
original interferences, the balance of power were restored. At their best,
moreover, they are merely attempts to alleviate symptoms without touching the
cause of social disease" (pp. 254-5).
"Utility and value are not...convertible terms,
for a thing may possess utility without possessing value. In order that a useful thing may acquire value, the desire for it must
be strong enough to provoke action; and in order to do this the thing must be an
indispensable condition of the satisfaction of desire. Water as such is capable
of quenching thirst. But if I want a cup of water from a flowing stream,
any particular cupful has no more utility than any of the other thousand cupfuls
of water which every minute are flowing by. I would lose no satisfaction by the
loss of any particular cup of water. It is capable of satisfying my desire, but
its possession is not an indispensable condition of satisfaction. Therefore,
water, though useful, possesses no value in this place.
"In a desert, however, where water is scarce, the
loss of any single cup of water may compel some of my desire for water to go
unsatisfied. Where this is the case, every cupful of water is an indispensable
condition of satisfaction, and, therefore, water does possess value here.
"It follows: in order that utility shall evolve
into value, the available quantity of the useful thing must be so limited that
some desire for it may have to go unsatisfied unless the available quantity is
increased.
"The value of goods, therefore, is a consequence
of their utility. Their relative utility was classed by the classical school of
economists according to the kind of desire which they could satisfy. First in
the order of importance they placed necessaries, next superfluities, and last
luxuries. Hence they came to the conclusion, adopted by Marx, that the use-value
and exchange-value of things has no necessary connection with each other. For
according to this classification the use-value of bread infinitely exceeds that
of diamonds; yet the exchange-value of diamonds is enormously in excess of that
of bread. This, however, is a purely academic manner of looking at the conduct
of men. They do not feel the promptings of desire according to this scale. Many
a family has stinted itself in food in order to keep a carriage; women
constantly deprive themselves of necessaries in order to save money for a new
dress or a coveted ornament; and men will deprive themselves of food or go about
in old and shabby clothes in order to get tobacco, beer, or tuition. It,
therefore, is not the kind of desire which determines the value of the object of
that desire, but the degree of desire for that object.
"Any given kind of desire is felt in differing
degrees of urgency, and may, for a time, be extinguished by satisfaction and
even by the assurance of satisfaction. To come back to the former illustration,
the man who has drunk enough water and sees more of it flowing by him, has no
longer any desire for water. Even in a desert, if conscience that he has more
than sufficient water with him, his desire for any particular gallon of this
water is small. But should he lose so much of it, that the remainder is barely
sufficient for the rest of his journey, he will feel a more urgent desire for
what is left and will value it more highly. The loss of every additional gallon
will increase the desire which he feels for, and the value which he sets on, the
rest.
"Not the kind but the degree or urgency of desire,
therefore, measures the utility and the value of the desired object; and as goods
of the same kind are interchangeable, the least urgent degree of desire which
can be satisfied with the available quantity, i.e. the marginal desire,
determines the value of the entire available quantity. Or, in other words, the
value of any commodity in the market is determined by the
valuation of the marginal buyer, i.e. the buyer whose effective desire is least
urgent" (pp. 70-72).
"No cost of production can give value to a thing the desire for which
has ceased; if goods are out of fashion, i.e. if the desire for them has
lessened, they fall in value regardless of their cost of production. Merchants
and retailers whose shelves are encumbered with 'dead stock' know this to their
cost.
"Common experience, however, suggests that if the
cost of producing an article of general consumption falls, such as iron, steel,
wool, or cotton, there will sooner or later be a corresponding fall in its
value. The fact is true, but the compelling force does not arise from the
lessened cost of production. The producers are not anxious to lower the price as
long as they can dispose of all their products. If they could combine to prevent
an increase in supply, they could prevent, as in protectionist countries they
have frequently reduced, the fall in value. When, however, such a fall in the
cost of production takes place, the supply generally does increase, either
through the desire of previous producers to reap the increased profit from a
greater number of sales; or through the desire of capitalists to share in the
exceptionally high profit, by joining in the production of the article in
question; or from both these causes. As a consequence, the wants which
previously were fully supplied cannot absorb the additional supply; lower levels
of wants must be appealed to, and can only be induced to take up the new supply
if it can be obtained with a smaller sacrifice, i.e. at less cost. But as all
parts of the whole stock are interchangeable, no one will give more for any of
them than the marginal buyers offer for the new supply. Hence the value imposed
upon this new supply by the new and lower wants to which it appeals, fixes the
value of the whole supply, and not its cost of production, and the marginal cost
of production must assimilate itself to this new value.
"Similarly, if the desire for a commodity
declines, the cost of production will tend to assimilate itself to the lower
value. Marginal producers, i.e. those who produce at the highest cost of
production, and who find the new value unprofitable, will curtail and eventually
abandon production. A lower cost of production thus forms the margin, while the
lessened supply may and ultimately will produce a higher
marginal utility, either preventing a further fall in value or raising value
again. From both ends, therefore, tendencies arise which assimilate the cost of
production to the new marginal utility of the product. It is not the cost of
production, but the anticipated value of the product, which is the dynamic force
and determines the course of industry. For cost of production, that is the sum
exertions, merely acts as a brake; the active cause of all economic actions is
consumption, the satisfaction of human desires, the well-being of man" (pp.
75-76).
"In the heart of the city of Melbourne is a
block of land, which, except that the trees which grew upon it have been cut
down, is in exactly the same state as when the blacks roamed over the site of
the future city. No labour has ever been expanded on it; no wealth has ever been
created there. Fifty years ago the present owner of the land paid $57 for it to
the government; lately he was offered and refused $60,000 for the same land.
What is the cause of this increase in the value of land? It is this. When the
land was originally sold, Melbourne was a village on the outskirts of the
wilderness and no one would have given the owner more than $3 a year for the
privilege of using it. Since that time the country has been populated, the soil
has been subjected to the plough, roads and railways, centring upon Melbourne,
have opened the interior of the country, and as a consequence Melbourne has
become a great trading centre. The volume of trade has enormously increased, and
with it has increased the demand for such land as gives access to trading
facilities. Any one wanting a trading location, such as this land presents,
therefore, is compelled, and can afford, to pay at least $2,000 a year for the
privilege of using it. The owner of this land has taken no part in the
activities which have resulted in the value which his land now possesses. Even
if he had he would have done so as a worker and not as own owner, and would have
earned no more title to this land-value than any like worker who is not a
landowner. For reasons which do not concern us here the owner of this land
has never made use of his power to levy a tribute of $2,000 a year upon the
industry of the Victorian people without rendering them any service in return.
He has preferred to withhold from his fellow-citizens the privilege of using
this specially favourable opportunity to produce wealth. But he can exact this
tribute any time he chooses, and therefore he can sell the power to do so, the
annual value of land, for $60,000. This sum of $60,000 is now considered to
be part of the wealth of the country. As a matter of fact, it is neither wealth
nor capital, but the caplitalised value of the power to levy tribute from labour
and capital without rendering or having rendered any service in return.
"Moreover, this power of landowners to exact
tribute is not conferred upon them by any past services of the community, but by
its present and anticipated future services and necessities. The frequently ephemeral
gold-fields of Australia illustrate one phase of this feature. As long
as the field promises well and the population increases, the value of land in
the vicinity rises, and frequently rises enormously. As soon as its
disappointing nature is ascertained, and the exodus of the population has begun,
the value of the land begins to decline again, and if the field is altogether
unremunerative, the land declines to its former grazing value.
"The concentration of roads and railways upon any
centre enormously enhances the land-values there. Not, however, because they
have been built, but because they continue to be used. If, acting similarly as
Eastern despots have acted, a government were to discontinue the use of these
roads by building sapping lines to another centre to which the traffic was
directed, land-values in the old centre would decline, and would rise in the new
one. Hence it is clear that land-values are not the result of past action, but
the capitalised value of the tribute which the present and anticipated future
action of the community enables landowners to impose upon the productive
activities of the people.
"The value of all land, and not merely of that
which is withheld from use, is of exactly the same nature. To revert to the
former illustration, the great majority of the owners of Melbourne land have
made full use of their power to levy tribute. They have either themselves built
on the land, or have sold to others permission to build upon it against payment
of ground-rent. Where this has been done, wealth and capital, represented by
the value of the buildings, has been produced, and...the income derived from the
letting of the buildings is a legitimate return for services rendered. But apart
from the value of, and income from, such buildings, there is in every case a
value of, and an income from, the land...This land-value represents nothing but
monopoly, the right to levy tribute from labour for the privilege of using
advantages not created by the owner of the land, but which are being created by
the community of which his tenants form part as well as himself, if he is
not an absentee, as frequently is the case." (pp. 94-97).
"The value of labour-products is the measure of the service which their rightful owner has rendered to the community. The value of land is the measure of the service which the community is expected to render to the owners of land" (p. 348).
"The foregoing examination has made clear the nature of capital. It consists of all those forms of wealth which are produced, not for the direct satisfaction of the desires of the producer, but for their indirect satisfaction, through the assistance which they render in the satisfaction of desire, either as material, instruments, or final product; till, when the productive process is completed by delivery of the final product to its ultimate consumer, this final product loses the special character of capital and becomes simply wealth. Capital is thus seen to consist of labour-products, and it must be obvious that to press under the same description privileges, rights, and possessions, which are not the produce of labour, because their possession entails some consequences akin to those which arise from the possession of capital, is as misleading as to class canaries amongst herbivore because they like to nibble lettuce leaves" (p. 87).
"The legal rights, which in some respects simulate capital, are
either rights of debt or monopolies. Their similarity to real capital is,
however, confined to the facts that, like real capital, they may be exchanged
and may yield an income to their possessors. In every other respect they
absolutely differ from capital.
"A right of debt arises when existing wealth is
exchanged for a legal right to demand other wealth at a future date. The wealth
to which the legal right refers may be in existence at the time the exchange
takes place, or it may come into existence at some future date. But whether it
already exists or not, the mere engagement of the borrower to hand over wealth
to the lender at some future date does not add to the existing stock of wealth
or capital. The stock is the same before and after the loan is made; nay, not
infrequently, the wealth by which the right of debt has been purchased has
disappeared before the right terminates. To illustrate: A, a manufacturer, sells
goods to the value of $100 to B, a wholesale merchant, on credit; B sells these
same goods on credit to C, a shopkeeper, for $120; C sells these same goods on
credit to his various customers, the ultimate consumers, for $160. The capital
has then disappeared, but it is represented by legal rights of debt, aggregating
no less than $380.
"This element is so conspicuous in the greater
part of all public debts as to approximate the same to monopolies. The National
Debt of Great Britain is a case in point. The wealth originally borrowed has
disappeared without leaving any material representatives, such as part of the
wealth borrowed by a railway company finds in the road, rolling-stock, and other
labour-products on which it was expended. All that exists, and all that was
originally purchased by the lenders, is a claim on the labour of the people of
Great Britain -- the right to demand a share in the revenue which Government
extracts from them by taxation.
"Unlike real capital, therefore, rights of debt
can render no service, can give no assistance in production. The capital with
which they were purchased may have rendered such service in the past; if it was
used productively, its representative may be rendering such service in the
present; but the right of debt can render no such service at any time. It is a
mere claim to wealth or capital, and, therefore, in its origin and nature so
different from capital that the application of the same term to both must lead
to the utmost confusion of thought.
"It is the same with shares and similar documents.
These are mere certificates of part-ownership in capital or legal rights. The
share itself has no value apart from the capital or legal right to which it
refers. Mere duplication of the number of shares, though it may deceive some
into the belief that the capital which the shares represents has been
duplicated, has no influence whatever on the amount of capital in existence. But
because the legal possession of the share entitles its holder to part of the
income earned by the use of the capital, or by the exercise of the legal right
to which it refers, therefore it is confounded with capital.
"Legal rights of debt, such as book-debts,
promissory notes, bills of exchange, bank-notes, treasury bills, debentures,
mortgages, government and municipal bonds, as well as certificates of part or
full ownership, such as shares and certificates of title, are, therefore, not
real capital. It must, however, be admitted that they are inseparable from
private ownership of capital and wealth, and the writer must also provide
against the supposition that he objects to the existence of such rights. Though
they are not capital, they, with the sole exception of public debts, the
creation of which does involve injustice, are legitimate complements of the
private ownership of wealth. For a private debtor has himself received the
wealth the purchase of which created the obligation, or has voluntarily taken
upon himself the obligation of the original debtor. Whereas the wealth paid for
public obligations was not received by the taxpayers, but, at best, by one
generation of them; nor was the wealth, so received, necessarily used for the
benefit of subsequent generations of taxpayers. The moral right of a government
to impose on subsequent generations the duty of repaying debts incurred by it as
the representative of one generation is, to say the least, doubtful. Its
admission in full would justify one generation of men in enslaving all future
generations by mortgaging their productive power to the fullest extent, a
doctrine which carries with it its own refutation.
"The essential character of all monopolies is, that,
without causing their possessors to be treated as criminals, they enable them to
exact wealth from others without rendering any service in return, or to exact
more wealth for such service as they do render than the recipients could be
compelled to yield if free competition prevailed. A monopoly, therefore, must be
established by law, or the law must have failed to efficiently provide against
it" (pp. 92-94).
"This distinction between real and spurious
capital, between material products of human labour applied to land, and the
immaterial products of legal enactments, must...be carried one step further.
"All products of labour are destined to be
consumed either in the direct satisfaction of human desires, as wealth, or in
their indirect satisfaction, as capital; either in one act, as food, or in a
series of acts extending over shorter or longer periods, as clothing, furniture,
tools, machines, buildings, and others. The object aimed at in the production of
all such things is the satisfaction of human wants, and the only way to achieve
this object is by their destruction by consumption. Even if this object fails to
be achieved, these products of human labour nevertheless disappear sooner or
later. Either they are lost, as in shipwrecks, or destroyed in accidents, as in
fires, or they gradually disappear under the influence of mechanical decay and
chemical disintegration....
"Real capital, in common with all
labour-products, is subject to this consumption, decay, and destruction. Legal
enactments, however, are not subject to these influences. Unless they are
repealed by another act of the Legislature they exist as long as the nation
exists; and as long as they remain in force, every monopoly-right which they
create continues to exist as well. There is today in Great Britain scarcely any
wealth, and certainly no form of capital, which dates back to the Norman
Conquest; but the monopoly of the land of Great Britain, then initiated, has
continued to exist and has been extended and intensified. Many secondary
monopoly-rights also, created centuries ago, continue to exist at the present
time, of which the New River Company, which levies tribute upon a large section
of the inhabitants of London, is only a prominent example.
"The creation of new monopoly-rights, to which
nearly all legislatures devote a considerable part of their time and energies,
is, therefore, not necessarily counteracted, as is the case with real capital,
by the disappearance of older creations, and, therefore, their mass is steadily
increasing.
"Moreover, social progress constantly tends to
reduce the value of real wealth and capital, while it similarly tends to
increase the value of all monopoly-rights. For social progress, consisting of
increase in population, advance in the arts and sciences, lengthening of
processes of production and multiplication of exchanges, tends steadily to
facilitate and increase production of all useful things, and thus to reduce
their value, while it frequently leads also to the sudden destruction of value
in forms of capital which have been rendered obsolete by new inventions and
discoveries.
"The same cause, however, tends to enormously
increase the value of land and other monopoly-rights. To revert to previous
examples, the land of England does not materially differ in extent, does not
differ at all in character, from what it was at the time of the Conquest. Yet
the whole of its capital value at the former time would be covered over and over
again by the tribute which Englishmen now pay for its use within a single year.
In the city of Adelaide a piece of land was lately sold at a rate which, for
10-feet frontage, exceeded the price which the government received some
half-century ago for the whole area of that city. The same advance in value is
conferred by the same cause upon secondary monopolies. Depending, like land, for
their value upon the tribute which they can exact from individual consumers of
the goods and services to which they relate, increase of population adds to the
number of tributaries which they can exploit, while all progress tends to reduce
the cost of producing the goods or services which they render. Their annual net
income, and, therefore, their capital value, is thus constantly enhanced by
social progress.
"The value of all real capital is thus
constantly declining, and all of it has only an ephemeral existence,
disappearing soon after labour has created it, and depending upon further labour
for its recreation. Monopoly-rights, on the contrary, are constantly increasing
in value and number and have permanent existence. It follows that what Socialism
terms capital consists in every country to by far its largest extent of mere
monopoly-rights and to a small extent only of real capital....It is,
therefore, obvious that the diagnosis of the social malady upon which the
doctrines of Socialism are founded is faulty in the highest degree, and that,
therefore, the remedy for which it proposes cannot be the true remedy. Making no
distinction between real and spurious capital, between what is permanent and
obviously unjust and injurious, and what is ephemeral and has never been proved
to be unjust or injurious, it condemns both alike. By combining, under one
denomination, these two widely differing classes of property, socialists obscure
the action of both, and have, therefore, been unable to see that the relations
between labour and the owners of real capital are profoundly affected by the
existence of these monopoly-rights. That the power which the capitalist
possesses over labour is not due to his possession of real capital, but to the
weakening of the economic position of labour through the baneful action of
monopoly-rights, will be shown in subsequent chapters" (pp. 113-117).
"As space is a relation of extension, so time is a relation of succession.
Every individual act follows upon or precedes some other act. If the sequence of
one act upon another is immediate we speak of their succeeding each other in a
short time; if the sequence is remote we speak of long time. All production
consists of a series of acts following upon each other, and all production
therefore requires more or less time. The production of bread, for instance,
requires the successive accomplishments at different intervals of sowing,
reaping, grinding, and baking. Similarly the production of a chair requires the
felling of a tree, cutting it into boards, planing them, cutting them into the
requisite pieces, turning some of these, fitting all the pieces together, and finishing
the rough chair. No two of these acts can be performed
simultaneously, they all stand in the relation of sequence to each other, and
the series therefore requires considerable time in its accomplishment. In like
manner every other productive process requires more or less time. It follows
that only those productive processes which require little time for their
accomplishment can be directed to the satisfaction of present wants, i.e. of
wants existing at their initiation. By far the greatest number of productive
processes, all those requiring more than a short time for their accomplishment,
are necessarily directed to the satisfaction of wants which are expected to
arise in the future, i.e. after the process is completed. Present wants,
therefore, are mostly dependent for their satisfaction upon productive processes
which were initiated in the more or less remote past, and the fruits of which
are now maturing or have matured, while present labour is mostly directed to the
satisfaction of future wants through the production or goods which will become
available at such future date. Every increase in the length of productive
processes postpones the time when their fruits will be available for the
satisfaction of human wants while, as has been already shown, it increases the
number of wants which can be satisfied.
All but the most primitive processes of production,
therefore, imply the capacity of men to anticipate future wants and their desire
to provide for them. The worldwide, roundabout, or co-operative system of
production implies the possession of a high degree of these faculties. These
faculties are part of the imaginative process. In order that many may be able to
provide for future wants, they must be able to form a mental picture of the
state of their future desires, of the quantity and kind of the goods necessary
to satisfy these desires, and of the time when these desires will arise and
these goods will become available, i.e. they must form some present conception
of the value of goods which will only become available at a given future date.
The only principle on which such goods can be valued is that of their marginal
utility under the mutual action of our wants and the provision for these wants
as we anticipate them to be at some future date. Apart from the element of risk,
our present valuation of future goods is, therefore, made on the same principle
as that of present goods, i.e. goods available at the present time. As these two
sets of goods, however, become available at different times, under different
circumstances, and serve different sets of wants, it is inevitable that a
different valuation should be placed upon them at the present time. With a few
and unimportant exceptions this difference shows itself in a higher present
value being placed on goods which are available at present than on goods of like
quantity and kind which only become available at some future time. This
difference in value is the cause of interest, which therefore arises from the
extension of man's labour in time.
"The following are the main reasons for the higher
value of present than of future goods:
"All persons who expect or hope that they will be
better off in the future than in the present, that is the vast majority of men,
will naturally value a given quantity of present goods more highly than an equal
quantity of goods in the future. For while their present wants are pressing upon
their means to satisfy them they expect a less pressure in the future. The case
of musical students who mortgage a great part of their future earnings in order
to obtain present tuition is an extreme case in point.
"On the other hand, persons who enjoy a good
income in the present, but who anticipate that it may fall off or altogether
cease in the future, such as employees with fixed salaries which may cease, will
value goods becoming available at this future period more highly than goods
available at present. This feeling, however, exerts no influence, because
present goods can be preserved for use at such future period especially in the
shape of money, and can thus be used either for the satisfaction of present or
of such future wants; whereas goods which do not become available till such
future time cannot be used for the satisfaction for present wants. Hence, even
in these cases, present goods valued more highly or, at least, as highly as
future goods of like quantity and kind.
"This difference in provision for wants between
present and future is sufficient to give a higher subjective, and therefore a
higher objective, value to present than to future goods. This tendency is,
however, increased by other causes.
"This first of these is a tendency towards the
undervaluation of future wants inherent in all men. That which lies nearest
looms largest. Future wants are underestimated because they are distant and in
the measure of their distance, and, therefore, the goods which can satisfy none
but such future wants are undervalued. This underestimation of future wants
differs in different men. Savages and children scarcely take any thought of
distant wants, and among adult civilised men wide differences also appear.
Nearly all men, however, give way to it to some extent.
"This second cause is cumulative with the first.
Not only the persons who expect to be better off in the future than they are in
the present, but all, or nearly all, other men make this underestimate of their
future wants, and hence the lower valuations placed on future than on present
goods is made more intensive and more extensive.
"A third and independent cause for the same
phenomenon arises from the technical superiority of present over future goods,
i.e. from the fact that that, as a rule, goods which are available now give,
when used as instruments for the production of other goods, a greater return
than goods which become available in the future for such use.
"As already explained, lengthier methods of
production are, on the whole, more productive than shorter methods. Given the
same quantity of productive instruments and labour, the lengthier the method of
production in which they are employed the greater will be the quantity or the
better the quality of the resulting product.
"Suppose now that we have available in the year
1898 a quantity of productive instruments equivalent to one month's labour. We
can employ this one month's labour in methods of production which will give an
immediate return, or in such as will give a more or less remote future return
through the application of more labour, -- with this difference, however, that
as we chose a lengthier method, so the future product of this month's labour, as
well as that of every other month's labour successively employed in this
particular process, will be increased. Let it be supposed that its product in
immediate production will be 100 units of wealth; in a one year's process 200
units; in a two years' process 280; in a three years' process 350; in a four
years' process 400; in a five years process 440; in a six years' process 470;
and in a seven years' process 490. Any other figures will do as well, as long as
the principle is observed that longer processes give greater return, but that
the return increases at a less ratio than the length of process.
"The following table will show when these units of
wealth, the product of one month's labour, will become:
|
Length of process. |
Units of Product. |
Time of Availability |
|
Immediate |
100 | 1898 |
|
One year |
200 | 1899 |
| Two years | 280 | 1900 |
| Three years | 350 | 1901 |
| Four years | 400 | 1902 |
| Five years | 440 | 1903 |
| Six years | 470 | 1904 |
| Seven years | 490 | 1905 |
"Suppose now, that in addition to the production-goods equivalent to one month's labour, which are available today, we expect an equal quantity of such goods to become available in each of the years 1899, 1900, and 1901, let us see what will be the relative result at any future time of these four separate months of labour when employed in production:
| 1898 | 1899 | 1900 | 1901 | |
| Yield in units of product for the year: |
||||
|
1898 |
100 |
... |
... |
... |
| 1899 | 200 | 100 |
... |
... |
| 1900 | 280 | 200 | 100 |
... |
| 1901 | 350 | 280 | 200 | 100 |
| 1902 | 400 | 350 | 280 | 200 |
| 1903 | 440 | 400 | 350 | 280 |
| 1904 | 470 | 440 | 400 | 350 |
| 1905 | 490 | 470 | 440 | 400 |
"The above table clearly shows that present
production-goods yield at any given time a greater return than goods of like
quantity and kind which become available at a later period.
"It is also obvious that the possibility of
engaging in lengthier and, therefore, more profitable processes of production
arises from the present possession of consumption-goods. If these were not
available in sufficient quantities, labour and capital would be compelled to
engage in shorter processes, giving forth their products at earlier period,
though in smaller quantities compared with the exertion employed. The increased
result of the lengthier processes, therefore, is in this measure due the
possession of consumption-goods available in the present, not because they are
capital, because they enable capital to be used in processes of greater utility.
Therefore, present consumption-goods possess the same technical superiority over
future consumption-goods which present production-goods possess over future
production-goods.
"The three causes enumerated for the higher value
of goods available in the present than of goods which will become available at
any future time, are:
(1) The difference in the circumstances of provision for wants between present and future.
(2) The underestimate of future wants and of the importance of future goods.
(3) The greater productiveness of lengthier methods of production and consequent technical superiority of present goods.
"While the two first causes are cumulative, the
third cause acts independently and largely alternatively. To show this in detail
here would lead too far; suffice it to say, that this alternative action gives
to the phenomenon of higher valuation of present goods a varying intensity but
universal validity. The varying intensity of subjective valuations enables
exchanges of present against future goods to take place. Those who place a
relatively high value on future goods are buyers of future goods, i.e. lenders.
Those who place a relatively low value on future goods are sellers of such
goods, i.e. borrowers. A market price, resulting from their higgling, once
established, exerts a reflex action on all subjective valuations, so that even
those few who, from their economic circumstances, would value future goods
equally with present goods are influenced by the general position of the market,
which assures them also a preference for present goods. The same levelling
tendencies of the market bring the lower value of future goods into a regular
proportion with their remoteness in time, establishing everywhere a rate of
interest which is the general measure for the difference between the value of
present goods and that of goods which become available at a future time.
"Of the three causes, the combined action of which
gives rise to interest, one only, the technical superiority of present goods, is
invariable in its action. Of the others, the underestimation of future wants
declines in intensity and extensity as men become better adapted to the
conditions of social life. The third cause, difference in the provision for
wants between present and future, also will be less active when a just system of
distributing wealth is adopted. For, in such case, the present needs of all will
be more easily met, while a great majority will be able to and desirous to
retire from productive labour at a comparatively early age. Present needs will,
therefore, be less pressing and future needs more pressing, leading to a
reduction, from both sides, of the difference of valuation of present and future
goods.
"The causes which have resulted in a decline of
the rate of interest in the past, will therefore continue and may be reinforced
in the future, leading to a further, permanent, and large decline of the rate of
interest. That interest ever will or can disappear entirely, however, does not
seem probable, in view of the persistence of the technical superiority of
present goods, and of the improbability of the entire disappearance of the two
other causes which gave it existence.
"In a former chapter it has been shown that the
value of productive instruments is determined by the marginal utility (value) of
the sum of the consumption-goods which form their ultimate product. This
ultimate product, however, is not contemporaneous with the productive
instruments; it appears as these disappear in it. Compared with the productive
instruments which give it being, the final product is a group of future
commodities; of goods which will become available in the future. The present
value of this final product, i.e. its value measured in present goods, is
therefore lower than its future value, and therefore the value of the productive
instruments is also lower than the future value of the consumption-goods into
which they become embodied. It is equal to the present, and not to the future,
value of these future goods.
"The capitalist, therefore, buys productive
instruments at the present value of the sum of their ultimate products, and
waiting till these latter have arrived at maturity, till what is now the future
has in its turn become the present, becomes possessed of their higher value.
This increment in value is the interest which he receives.
"To illustrate this sequence of events, take the case
of a capitalist who purchases productive instruments, material, tools, and
labour; and in order to simplify the illustration, let us assume that he
purchases them all at once and the same time, i.e. at the beginning of the
productive process. The circumstance that this is not quite true does not affect
the principle but only the amount of interest which he will receive. Let it be
further assumed, that the sum of the final products of these productive
instruments has a total value, when they are available, of 500 units; and,
further, that of these total ultimate products, equal parts become available at
the end of each of five successive years, and possess at that time a value of
100 units, so that at the end of five years the whole product has been realised
and the productive instruments have disappeared.
"All these products are future goods at the time
the capitalist purchases his productive instruments. Their present value,
therefore, i.e. their value measured in present consumption-goods, is less than
that which they will possess when they in their turn will be available for the
satisfaction of human wants, when they will have become present
consumption-goods. That part of the total product which will become available at
the end of one year, and which then will have a value of 100 units, possesses
now a value of say 95 units only; the second part available at the end of two
years has a present value of 90 units; the third year's product equals 85 units;
the fourth year's product equals 80 units; and the fifth year's product equals
75 units. The total present value of these consumption-goods, the future product
of the group of productive instruments in question, and having a value of 500
units when they become available, is 425 units only. Therefore, the value of
these productive instruments is 425 units, equal to the present value of their
ultimate product. Our capitalist purchases them at this price, and the
interest which he receives arises from the fact that he has purchased with a
smaller quantity of mature goods, possessing a present high value, a larger
quantity of immature goods, possessing a present low value, and that he waits
until this latter in its turn has ripened into high value.
"This interest, therefore, is not taken from any
one. It arises, as has here been proved, when the capitalist pays full value for
all the productive instruments, labour included, i.e. when he pays a price for
them equal to the value of the sum of their products. It had no existence
before; it came into existence in the hands of the capitalist, because he is a
capitalist, i.e. because he, possessing more goods at present available for the
satisfaction of human desires than he himself needs, exchanges them for goods
which, in their turn, will be able to satisfy human wants at some future time.
As, in the continuous process of production, those future goods gradually
approach usefulness, and the more pressing, because more proximate, human wants,
their value increases, until at last this utility and value reach their highest
point, that of goods which can satisfy the most urgent wants, i.e. wants
actually existing. Interest, therefore, is not, as Socialism posits, a
robbery of labour, but an increment of value which arises from the natural
extension of human labour in time and separately from the exertion of labour."
(pp. 135-143)
"There remains but Henry George's Single Tax method, consisting of the gradual appropriation of the rent of land and of natural monopolies and the similarly gradual removal of all other taxation....The masses of the people would derive a great advantage from the first introduction of the system, an advantage which, growing with its extension, would culminate with its completion. For the imposition of even a small tax on land values, especially if its augmentation be apprehended, would lower rents, induce a more efficient use of land, increase the demand for labour, and therefore tend to increase wages. For these reasons: The owners having to pay the tax on the rental value of land, and not according to the income which the use of the land yields--having to pay the same amount whether the land is used and yields and income, or whether it is unused and yields no income--would either themselves use the land in the most advantageous way, or let or sell it to others who would so use it. There would thus arise a greater competition between landowners for tenants and buyers, and consequently a fall in the capital and rental value of land; there would arise a greater demand for labour to work upon land--whether urban, agricultural, or mining land--and consequently an increase in the reward of labour. Other forms of taxation being simultaneously reduced, the increased earnings of labour would be less infringed upon by the State, and monopolies based upon such taxation would gradually disappear. Higher money wages and lower prices of labour-products would thus combine to enhance the well-being of the masses of the people, and the consequent increase in their consumptive power would strengthen these tendencies, until, with the completion of the system, there would have arisen an enormous consumption and production of wealth, an illimitable demand for labour, and a distribution of wealth which, denying reward without service rendered, would secure to every one a reward equal to the value of the service rendered by him" (pp. 379-380).
"The Single Tax method of securing equal rights to land, therefore, avoids the objections which adhere to all other methods. There would be no avoidable hardship, no sudden and profound change in social relations, no interference by State officials with the allotment and use of land, and no power to fix rents arbitrarily or enforce rack-rents. The exaction of the rent charge would compel holders to make the most profitable use of all land, and at the same time there would arise the most absolute security of possession by the users of land" (p. 382).
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