 CHAPTER XI. The argument of the preceding Ten Chapters may now be summarised. It falls far short of a complete solution of the problem before us, for that involves questions relating to foreign trade, to fluctuations of credit and employment, and to the influences of associated and collective action in its many forms. But yet, it extends to the broad action of the most fundamental and permanent influences which govern distribution in exchange. In the summary, at the end of Book 5, we traced a continuous thread running through and connecting the applications of the general theory of equilibrium of demand and supply to different periods of time, from those so short that cost of production could exercise no direct influence on value to those so long that the supply of the appliances of production could be fairly well adjusted to the indirect demand for them, which is derived from the direct demand for the commodities which they produce. In the present book, we have been concerned with another thread of continuity which lies transversely to the thread connecting different periods of time. It connects the various agents and appliances for production, material and human, and establishes a fundamental unity between them in spite of their important differences of outward feature. Firstly, wages and other earnings of effort have much in common with interest on capital, for there is a general correspondence between the causes that govern the supply prices of material and of personal capital. The motives which induce a man to accumulate personal capital in his son's education are similar to those which control his accumulation of material capital for his son. There is a continuous transition from the father, who works and waits in order that he may bequeathed to his son a rich and firmly established manufacturing or trading business, to one who works and waits in order to support his son while he is slowly acquiring a thorough medical education, and ultimately to buy for him a lucrative practice. Again, there is the same continuous transition from him to one who works and waits in order that his son may stay long at school and may afterwards work for some time almost without pay while learning a skilled trade, instead of being forced to support himself early in an occupation such as that of an errand boy which offers comparatively high wages to young lads, because it does not lead the way to a future advance. It is indeed true that the only persons who, as society is now constituted, are very likely to invest much in developing the personal capital of a youth's abilities are his parents, and that many first rate abilities go forever uncultivated because no one who can develop them has had any special interest in doing so. This fact is very important practically for its effects accumulative, but it does not give rise to a fundamental difference between material and human agents of production, for it is analogous to the fact that much good land is poorly cultivated because those who would cultivate it well have not access to it. Again, since human beings grow up slowly and are slowly worn out and parents in choosing an occupation for their children must as a rule look forward a whole generation, changes in demand take a longer time to work out their full effects on supply in the case of human agents than of most kinds of material appliances for production, and especially long period is required in the case of labour to give full play to the economic forces which tend to bring about a normal adjustment between demand and supply. Thus on the whole the money cost of any kind of labour to the employer corresponds in the long run fairly well to the real cost of producing that labour. Section 2. The efficiency of human agents of production on the one hand, and that of material agents on the other, are weighed against one another and compared with their money costs, and each tends to be applied as far as it is more efficient than the other in proportion to its money cost. A chief function of business enterprise is to facilitate the free action of this great principle of substitution. Generally to the public benefit, but sometimes in opposition to it, businessmen are constantly comparing the services of machinery and of labour, and again of unskilled and skilled labour, and of extra foremen and managers. They are constantly devising and experimenting with new arrangements which involve the use of different factors of production, and selecting those most profitable for themselves. The efficiency as compared with the cost of almost every class of labour is thus continually being weighed in the balance in one or more branches of production against some other classes of labour, and each of these in its turn against others. This competition is primarily vertical. It is a struggle for the field of employment between groups of labour belonging to different grades, but engaged in the same branch of production, and enclosed as it were between the same vertical walls. But meanwhile, horizontal competition is always at work and by simpler methods. For firstly, there is great freedom of movement of adults from one business to another within each trade, and secondly, parents can generally introduce their children into almost any other trade of the same grade with their own in their neighbourhood. By means of this combined vertical and horizontal competition, there is an effective and closely adjusted balance of payments to services as between labour in different grades, in spite of the fact that the labour in any one grade is mostly recruited even now from the children of those in the same grade. The working of the principle of substitution is thus chiefly indirect. When two tanks containing fluid are joined by a pipe, the fluid which is near the pipe in the tank with the higher level will flow to the other, even though it be rather viscous. And thus the general levels of the tanks will tend to be brought together, though no fluid may flow from the further end of the one to the further end of the other, and if several tanks are connected by pipes the fluid in all will tend to the same level, though some tanks have no direct connection with others. And similarly, the principle of substitution is constantly tending by indirect routes to apportion earnings to efficiency between trades, and even between grades, which are not directly in contact with one another, and which appear at first sight to have no way of competing with one another. Section 3 There is no breach of continuity as we ascend from the unskilled labour to the skilled, thence to the foreman, to the head of a department, to the general manager of a large business, paid partly by a share of the profits, to the junior partner and lastly to the head partner of a large private business. And in a joint stock company there is even somewhat of an anti-climax when we pass from the directors to the ordinary shareholders who undertake the chief ultimate risks of the business. Nevertheless, business undertakers are to a certain extent a class apart, for while it is through their conscious agency that the principle of substitution chiefly works in balancing one factor of production against another, with regard to them it has no other agency than the indirect influence of their own competition, so it works blindly, or rather, wastefully. It forces many to succumb who might have done excellent work if they had been favoured at first, and in conjunction with the tendency to increasing return it strengthens those who are strong and hands over the businesses of the weak to those who have already obtained a partial monopoly. But on the other hand there is also a constant increase in the forces which tend to break up old monopolies and to offer to men who have but little capital of their own openings both for starting new businesses and for rising into post of command in large public and private concerns, and these forces tend to put business ability in command of the capital required to give it scope. On the whole, the work of business management is done cheaply, not indeed as cheaply as it may be in the future, when men's collective instincts, their sense of duty and their public spirit are more fully developed, when society exerts itself more to develop the latent faculties of those who are born into a humble station of life and to diminish the secrecy of business, and when the more wasteful forms of speculation and of competition are held in check, but yet it is done so cheaply as to contribute to production more than the equivalent of its pay. For the business undertaker, like the skilled artisan, render services which society needs and which it would probably have to get done at a higher cost if he were not there to do them. The similarity between the causes that determine the normal rewards of ordinary ability on the one hand and of business power in command of capital on the other does not extend to the fluctuations of their current earnings. For the employer stands as a buffer between the buyer of goods and all the various classes of labour by which they are made. He receives the whole price of the one and pays the whole price of the others. The fluctuations of his profits go with fluctuations of the prices of the things he sells and are more extensive, while those of the wages of his employees come later and are less extensive. The earnings at any particular time of his capital and ability are sometimes large but sometimes also a negative quantity, whereas those of the ability of his employees are never very large and are never a negative quantity. The wage receiver is likely to suffer much when out of work but that is because he has no reserve, not because he is a wage receiver. That part of a man's income which he owes to the possession of extraordinary natural abilities is a free boon to him and from an abstract point of view bears some resemblance to the rent of other free gifts of nature such as the inherent properties of land. But in reference to normal prices it is to be classed rather with the profits derived by free settlers from the cultivation of new land or again with the find of the pearl fisher. The plot of one settler turns out better and that of another worse than was expected. The good find of one dive of the pearl fisher compensates for many others that are fruitless and the high income which one barrister or engineer or trader earns by his natural genius has to be counted with the comparative failures of many others who perhaps appeared of no less promise when young and received as costly an education and start in life but whose services to production were less than his in proportion to their cost. The ablest businessmen are generally those who get the highest profits and at the same time do their work most cheaply and it would be as wasteful if society were to give their work to inferior people who would undertake to do it more cheaply as it would be to give a valuable diamond to be cut by a low waged but unskilled cutter. Returning to the point of view of the second chapter of this book we may call to mind the double relation in which the various agents of production stand to one another on the one hand they are often rivals for employment anyone that is more efficient than another in proportion to its cost tending to be substituted for it and thus limiting the demand price for the other and on the other hand they all constitute the field of employment for each other there is no field of employment for anyone except insofar as it is provided by the others the national dividend which is the joint product of all and which increases with the supply of each of them is also the sole source of demand for each of them thus an increase of material capital causes it to push its way into new uses and though in so doing it may occasionally diminish the field of employment for manual labour in a few trades yet on the whole it will very much increase the demand for manual labour and all other agents of production for it will much increase the national dividend which is the common source of the demand for all and since by its increased competition for employment it will have forced down the rate of interest therefore the joint product of a dose of capital and labour will now be divided more in favour of the labour than before this new demand for labour will partly take the form of the opening out of new undertakings which hitherto could not have paid their way while a new demand will come from the makers of new and more expensive machinery for when it is said that machinery is substituted for labour this means that one class of labour combined with much weighting is substituted for another combined with less weighting and for this reason alone it would be impossible to substitute capital for labour in general except indeed locally by the importation of capital from other places it remains true however that the chief benefit which an increase of capital confers upon labour is not by opening out to it new employments but by increasing the joint product of land labour and capital or of land labour and weighting and by reducing the share of that product which any given amount of capital or of weighting can claim as its reward in discussing the influence which a change in the supply of work of any one industrial group exerts on the field of employment for other kinds of labour there was no need to raise the question whether the increase of work came from an increase in the numbers or in the efficiency of those in the group for that question is of no direct concern to the others in either case there is the same addition to the national dividend in either case competition will compel them to force themselves to the same extent into uses in which their marginal utility is lower and will thus lessen to the same extent the share of the joint product which they are able to claim in return for a given amount of work of a given kind but the question is of vital importance to the members of that group for if the change is an increase of one tenth in their average efficiency then each ten of them will have as high an aggregate income as each eleven of them would have if their numbers had increased by one tenth their efficiency remaining unchanged footnote suppose for instance that an increase in the supply of work of the group by one tenth forced them into work in which their marginal uses were lower and thus lowered by a thirteenth their wages for any given amount of work then if the change came from an increase in their numbers their average wages would fall by a thirteenth but if it came from an increase in their efficiency their wages would rise by about a sixteenth more exactly they would be eleven over ten multiplied by twenty nine over thirty equals one and nineteen three hundredths of what they were before end footnote this dependence of the wages of each group of workers on the numbers and efficiency of others is a special case of the general rule that the environment or conjuncture plays a part at least coordinate with a man's energy and ability in governing that net product to which his wages ever approximate under the influence of competition the net product to which the normal wages of any group of workers approximate must be estimated on the assumption that production has been pushed to that limit at which the output can be just marketed with normal profits but not more and it must be estimated with reference to a worker of normal efficiency whose additional output repays an employer of normal ability and normal good fortune and normal resources with normal profits but not more something must be added to or subtracted from this net product to find the normal wages of a worker whose efficiency is more or less than normal the time chosen must be one of normal prosperity and when the supplies of different kinds of labour are relatively appropriate for instance if the building trade is exceptionally depressed or exceptionally prosperous or if its development is checked by an inadequate supply of bricklayers or carpenters while the supply of other classes of building operatives is superabundant then the occasion is one which does not afford a convenient opportunity for estimating the relations of net product to normal wages of either bricklayers or carpenters footnote as regards the relation between wages and the marginal net product of labour see book 6 chapters 1 and 2 the matter is further discussed in book 6 chapter 13 as regards the need to seek a truly representative margin see book 5 chapter 8 where it is argued that when that has been reached the influence of the supply of any group of workers on the wages of others has already been reckoned and that the influence which any one individual worker exerts on the general economic environment of the industries of a country is infinitesimal and is not relevant to an estimate of his net product in relation to his wages in book 5 chapter 12 and appendix H something is said of the hindrances to a rapid increase of output even where such an increase would theoretically yield great economies and of the special care needed in the use of the term margin in regard to them end footnote end of chapter 11 chapter 12 of principles of economics book 6 this is a LibriVox recording all LibriVox recordings are in the public domain for more information or to volunteer please visit LibriVox.org recording by Philippa Jevons principles of economics book 6 by Alfred Marshall chapter 12 general influences of economic progress the field of employment which any place offers for labour and capital depends firstly on its natural resources secondly on the power of turning them to good account derived from its progress of knowledge and of social and industrial organisation and thirdly on the access that it has to markets in which it can sell those things of which it has the superfluity the importance of this last condition is often underrated but it stands out prominently when we look at the history of new countries it is commonly said that wherever there is abundance of good land to be had free of rent and the climate is not unhealthy the real earnings of labour and the interest on capital must both be high but this is only partially true the early colonists of America lived very hardly nature gave them wood and meat almost free but they had very few of the comforts and luxuries of life and even now there are especially in South America and Africa many places to which nature has been abundantly generous which are nevertheless shunned by labour and capital because they have no ready communications with the rest of the world on the other hand high rewards may be offered to capital and labour by a mining district in the midst of an alkaline desert when once communications have been opened up with the outer world or again by a trading centre on a barren sea coast though if limited to their own resources they could support but a scanty population and that in abject poverty and the splendid markets which the old world has offered to the products of the new since the growth of steam communication have rendered North America, Australia and parts of Africa and South America the richest large fields for the employment of capital and labour that they have ever been but after all the chief cause of the modern prosperity of new countries lies in the markets that the old world offers not for goods delivered on the spot but for promises to deliver goods at a distant date a handful of colonists having assumed rights of perpetual property in vast tracts of rich land are anxious to reap in their own generation its future fruits and as they cannot do this directly they do it indirectly by selling in return for the ready goods of the old world promises to pay much larger quantities of the goods that their own soil will produce in a future generation in one form or another they mortgage their new property to the old world at a very high rate of interest Englishmen and others who have accumulated the means of present enjoyment hasten to barter them for larger promises in the future than they can get at home a vast stream of capital flows to the new country and its arrival there raises the rate of wages very high the new capital filtered but slowly towards the outlying districts it is so scarce there and there are so many persons eager to have it that it often commands for a long time two percent a month from which it falls by gradual stages down to six or perhaps even five percent a year for the settlers being full of enterprise and seeing their way to acquiring private title deeds to property that will shortly be of great value are eager to become independent undertakers and if possible employers of others so wage earners have to be attracted by high wages which are paid in a great measure out of the commodities borrowed from the old world on mortgages or in other ways it is however difficult to estimate exactly the real rate of wages in outlying parts of new countries the workers are picked men with a natural bias towards adventure, hardy, resolute and enterprising, men in the prime of life who do not know what illness is and the strain of one kind and another which they go through is more than the average English and much more than the average European labourer could sustain there are no poor among them because there are none who are weak if anyone becomes ailing he is forced to retire to some more thickly peopled place where there is less to be earned but where also a quieter and less straining life is possible their earnings are very high if reckoned in money but they have to buy at very high prices or altogether dispense with many of the comforts and luxuries which they would have obtained freely or at low prices if they had lived in more settled places many of these things however meet only artificial wants and they can be easily foregone where no one has them and no one expects them as population increases the best situations being already occupied nature gives generally less return of raw produce to the marginal effort of the cultivators and this tends a little to lower wages but even in agriculture the law of increasing return is constantly contending with that of diminishing return and many of the lands which were neglected at first give a generous response to careful cultivation and meanwhile the development of roads and railroads and the growth of varied markets and varied industries render possible innumerable economies in production thus the tendencies to increasing and diminishing return appear pretty well balanced sometimes the one sometimes the other being the stronger if labour and capital increase at equal rates and if taking one thing with another the law of production is that of constant return there will be no change in the reward to be divided between a dose of capital and labour that is between capital and labour working together in the same proportions as before there need not therefore be any change in wages or interest if however capital increases much faster than labour the rate of interest is likely to fall and then the rate of wages will probably rise at the expense of the share of a given quantum of capital but yet the aggregate share of capital may increase faster than the aggregate share of labour but whether the law of production of commodities be one of constant return or not that of the production of new title deeds to land is one of rapidly diminishing return the influx of foreign capital though perhaps as great as ever becomes less in proportion to the population wages are no longer paid largely with commodities borrowed from the old world and this is the chief reason of the subsequent fall in the necessaries, comforts and luxuries of life which can be earned by work of a given efficiency but two other causes tend to lower average daily wages measured in money for as the comforts and luxuries of civilisation increase the average efficiency of labour is generally lowered by the influx of immigrants of a less sturdy character than the earlier settlers and many of these new comforts and luxuries do not enter directly into money wages but are in addition to it footnote we took account of them when arriving at the conclusion that the tendency to increasing return would on the whole counter veil that to diminishing return and we ought to count them in at their full value when tracing the changes in real wages many historians have compared wages at different epochs with exclusive reference to those things which have always been in common consumption but from the nature of the case these are just the things to which the law of diminishing return applies and which tend to become scarce as population increases and the view thus got is therefore one sided and misleading in its general effect end of footnote England's present economic condition is the direct result of tendencies to production on a large scale and to wholesale dealings in labour as well as in goods which had long been slowly growing but which in the eighteenth century received a two fold impetus from mechanical inventions and the growth of consumers beyond the seas who imported large quantities of goods of the same pattern then were the first beginnings of machine made interchangeable parts and the application of special machinery to make special machinery for use in every branch of industry then first was seen the full force which the law of increasing return gives in a manufacturing country with localised industries and large capitals particularly when many of the large stocks of capital are combined together either into joint stock or regulated companies or into modern trusts and then began that careful grading of goods for sale in distant markets which has already led to national and even international speculative combinations in produce markets and stock exchanges and the future of which no less than that of more lasting combinations among producers whether undertakers of industry or working men is the source of some of the gravest practical problems with which the coming generation will have to deal the keynotes of the modern movement are the reduction of a great number of tasks to one pattern the diminution of friction of every kind which might hinder powerful agencies from combining their action and spreading their influence over vast areas and the development of transport by new methods and new forces the macadamised roads and the improved shipping of the eighteenth century broke up local combinations and monopolies and offered facilities for the growth of others extending over a wider area and in our own age the same double tendency is resulting from every new extension and cheapening of communication by land and sea by printing press and telegraph and telephone but though in the eighteenth century as now the real national dividend of England depended much on the action of the law of increasing return with regard to her exports the mode of dependence has very much changed then England had something approaching to a monopoly of the new methods of manufacture and each bale of her goods would be sold at all events when their supply was artificially limited in return to a vast amount of the produce of foreign countries but partly because the time was not yet ripe for carrying bulky goods great distances her imports from the far east and far west consisted chiefly of comforts and luxuries for the well-to-do they had but little direct effect in lowering the labour cost of necessaries to the English workmen indirectly indeed her new trade lowered the cost of hardware clothing and such other English manufacturers as he consumed because the production on a large scale of these things for consumers beyond the sea cheapened them for him but it had very little effect on the cost of his food and that was left to rise under the tendency to diminishing return which was called into action by the rapid increase of population in new manufacturing districts where the old customary restraints of a narrow village life did not exist a little later the great French war and a series of bad harvests raised that cost to much the highest point it has ever reached in Europe but gradually the influence of foreign trade began to tell on the cost of production of our staple food as the population of America spread westward from the Atlantic richer and still richer wheat soils have come under cultivation and the economies of transport have increased so much especially in recent years that the total cost of importing a quarter of wheat from the farms on the outskirts of cultivation has diminished rapidly though the distance of that margin has been increasing and thus England has been saved from the need of more and more intensive cultivation the bleak hillsides at which the wheat fields were laboriously climbing in Ricardo's time have returned to pasture and the ploughman works now only where land will yield plentiful returns to his labour whereas if England had been limited to her own resources he must have plodded over ever poorer and poorer soils and must have gone on continually re-plowing land that had already been well plowed in the hope of adding by this heavy toil an extra bushel or two to the produce of each acre perhaps in an average year now the plowing which only just pays its expenses the plowing on the margin of cultivation gives twice as much produce as it gave in Ricardo's time and fully five times as much as it would have given now if with her present population England had been compelled to raise all her own food every improvement in the manufacturing arts increased England's power of meeting the various wants of backward countries so that it answered their purpose to divert their energy from making things by hand for their own use to growing raw material with which to buy manufacturers from her in this way the progress of invention opened a wider field for the sale of her special products and enabled her more and more to confine her own production of food to conditions under which the law of diminishing return did not make itself much felt but this good fortune has been short lived her improvements have been followed and latterly often anticipated by America and Germany and other countries and her special products have lost nearly all their monopoly value thus the amount of food and other raw material which can be bought in America with a ton of steel cannot be more than the produce of as much capital and labour as would make a ton of steel there by the new processes and therefore it has fallen as the efficiency of English and American labour in making steel has increased it is for this reason as well as because of the heavy tariffs levied on her goods by many countries that in spite of England's large trade the progress of invention in the manufacturing arts has added less than might have been otherwise expected to her real national dividend it is no slight gain that she can make cheaply clothes and furniture and other commodities for her own use but those improvements in the arts of manufacture which she has shared with other nations have not directly increased the amount of raw produce which she can obtain from other countries with the product of a given quantity of her own capital and labour probably more than three-fourths of the whole benefit she has derived from the progress of manufacturers during the nineteenth century has been through its indirect influences in lowering the cost of transport of men and goods of water and light and of electricity and news for the dominant economic fact of our own age is the development not of the manufacturing but of the transport industries it is these that are growing most rapidly in aggregate volume and in individual power and which are giving rise to the most anxious questions as to the tendencies of large capitals to turn the forces of economic freedom to the destruction of that freedom but on the other hand it is they also which have done by far the most towards increasing England's wealth thus the new economic age has brought with it great changes in the relative values of labour and the chief requisites of life and many of these changes are of a character which could not have been anticipated at the beginning of last century the America then known was ill-suited for growing wheat and the cost of carrying it great distances by land was prohibitive the labour value of wheat that is the amount of labour which will purchase a peck of wheat was then at its highest point and now is at its lowest it would appear that agricultural wages have been generally below a peck of wheat a day but that in the first half of the eighteenth century they were about a peck in the fifteenth a peck and a half or perhaps a little more while now they are two or three pecks Professor Rogers's estimates for the Middle Ages are higher but he seems to have taken the wages of the more favoured part of the population as representative of the whole in the Middle Ages even after a fairly good harvest the wheat was of a lower quality than the ordinary wheat of today while after a bad harvest much of it was so musty that nowadays it would not be eaten at all and the wheat seldom became bread without paying a high monopoly charge to the mill belonging to the Lord of the Manor it is true that where population is very sparse nature supplies grass and therefore animal food almost gratis and in South America beggars pursue their calling on horseback during the Middle Ages however the population of England was always dense enough to give a considerable labour value to meat though it was of poor quality for cattle though only about a fifth as heavy as now had very large frames their flesh was chiefly in those parts from which the coarsest joints come and since they were nearly starved in the winter and fed up quickly on the summer grass the meat contained a large percentage of water and lost a great part of its weight in cooking at the end of the summer they were slaughtered and salted and salt was dear even the well-to-do scarcely tasted fresh meat during the winter a century ago very little meat was eaten by the working classes while now though its price is a little higher than it was then they probably consume more of it on the average than at any other time in English history turning next to the rent of house room we find that ground rents in town have risen both extensively and intensively for an increasing part of the population is living in houses on which ground rents at an urban scale have to be paid and that scale is rising but house rent proper that is what remains of the total rent after deducting the full rental value of the ground is probably little if at all higher than at any previous time for similar accommodation for the rate of profits on the turnover which is earned by capital engaged in building is now low and the labour cost of building materials has not much altered and it must be remembered that those who pay the high town rents get in return the amusements and other advantages of modern town life which many of them would not be willing to forego for the sake of a much greater gain than their total rent the labour value of wood though lower than at the beginning of the century is higher than in the middle ages but that of mud brick or stone walls has not much changed while that of iron to say nothing of glass has fallen much and indeed the popular belief that house rent proper has risen appears to be due to an imperfect acquaintance with the way in which our forefathers were really housed the modern suburban artisan's cottage contains sleeping accommodation far superior to that of the gentry in the middle ages and the working classes had then no other beds than loose straw reeking with vermin and resting on damp mud floors even these were probably less unwholesome when better and shared between human beings and livestock than when an attempt at respectability covered them with rushes which were nearly always vile with long accumulated refuse but it is undeniable that the housing of the very poorest classes in our towns now is destructive both of body and soul and that with our present knowledge and resources we have neither cause nor excuse for allowing it to continue footnote the evils of the past were however greater than is commonly supposed see for example the striking evidence of the late Lord Shaftesbury and of Miss Octavia Hill upon the commission on housing of 1885 London air is full of smoke but it is probably less unwholesome than it was before the days of scientific sanitation even though the population was then relatively small end of footnote fuel like grass is often a free gift of nature to a sparse population and during the middle ages the cottages could generally though not always get the little brushwood fire needed to keep them warm as they huddled together around it in huts which had no chimney through which the heat could go to waste but as population increased the scarcity of fuel pressed heavily on the working classes and would have arrested England's progress altogether had not coal been ready to take the place of wood as fuel for domestic purposes as well as for smelting iron it is now so cheap that even the comparatively poor can keep themselves warm indoors without living in an unwholesome and stupefying atmosphere this is one of the great services that coal has wrought from modern civilisation another is to provide cheap underclothing without which cleanliness is impossible for the masses of the people in a cold climate and that is perhaps the chief of the benefits that England has gained from the direct application of machinery to making commodities for her own use another and not less important service is to provide abundant water even in large towns and another to supply with the aid of mineral oil that cheap and artificial light which is needed not only for some of man's work but what is of higher moment for the good use of his evening leisure footnote to abundant water even in large towns primitive appliances will bring water from high ground to a few public fountains but the omnipresent water supply which both in its coming and in its going performs essential services for cleanliness and sanitation would be impossible without coal driven steam pumps and coal made iron pipes end of footnote to this group of requisites for a civilised life derived from coal on the one hand and modern means of transport on the other we must add as has just been noticed the cheap and thorough means of communication of news and thought by steam presses by steam carried letters and steam made facilities for travel these agencies aided by electricity are rendering possible the civilisation of the masses in countries the climate of which is not so warm as to be innovating and are preparing the way for true self-government and united action by the whole people not merely of a town such as Athens Florence or Bruges but a broad country and even in some respects of the whole civilised world we have seen that the national dividend is at once the aggregate net product of and the sole source of payment for all the agents of production within the country that the larger it is the larger other things being equal will be the share of each agent of production and there's an increase in the supply of any agent will generally lower its price to the benefit of other agents this general principle is specially applicable to the case of land an increase of the amount of productiveness of the land that supplies any market redounds in the first instance to the benefit of those capitalists and workers who are in possession of other agents of production for the same market and the influence on values which has been exerted in the modern age by the new means of transport is nowhere so conspicuous as in the history of land its value rises with every improvement in its communications with markets in which its produce can be sold and its value falls with every new access to its own markets of produce from more distant places it is not very long ago that the home counties were full of fears that the making of good roads would enable the more distant parts of England to compete with them in supplying London with food and now the differential advantages of English farms are in some respects being lowered by the importation of food that has travelled on Indian and American railroads and been carried in ships made of steel and driven by steam turbines but as Malthus contended and Ricardo admitted anything that promotes the prosperity of the people promotes also in the long run that of the landlords of the soil it is true that English rents rose very fast when at the beginning of last century a series of bad harvests struck down a people that could not import their food but a rise so caused could not from the nature of the case have gone very much further and the adoption of free trade in corn in the middle of the century followed by the expansion of American wheat fields is rapidly raising the real value of the land urban and rural taken together that is it is raising the amount of the necessary comforts and luxuries of life which can be purchased by the aggregate rental of all the landowners urban and rural taken together footnote Mr. W. Sturge in an instructive paper read before the Institute of Surveys December 1872 estimates that the agricultural money rent of England doubled between 1795 and 1815 and then fell by a third until 1822 after that time it has been alternately rising and falling and it is now about 45 or 50 millions as against 50 or 55 millions about the year 1873 that was at its highest it was about 30 millions in 1810 16 millions in 1770 and 6 millions in 1600 compare Giffin's growth of capital chapter 5 and Porter's progress of the nation section 2 chapter 1 but the rental of urban land in England is now much greater than the rent of agricultural land and in order to estimate the full gain of the landlords from the expansion of population and general progress we must reckon in the values of the land on which there are now railroads, mines, docks etc. taken altogether the money rental of England's soil is more than twice as high and its real rental is perhaps four times as high as it was when the Corn Laws were repealed end of footnote but though the development of the industrial environment tends on the whole to raise the value of land it more often than not lessens the value of machinery and other kinds of fixed capital insofar as their value can be separated from that of the sites on which they rest a sudden burst of prosperity may indeed enable the existing stock of appliances in any trade to earn for a time a very high income but things which can be multiplied without limit cannot retain for long a scarcity value and if they are fairly durable as for instance ships and blast furnaces and textile machinery they are likely to suffer great depreciation from the rapid progress of improvement the value of such things as railways and docks however depends in the long run chiefly on their situation if that is good the progress of their industrial environment will raise their net value even after allowance has been made for the charges to which they may be put in keeping their appliances abreast of the age footnote of course there are exceptions economic progress may take the form of building new railways that will draw off much of the traffic of some of those already existing or of increasing the size of ships till they can no longer enter docks the entrance to which it is through shallow waters end of footnote the political arithmetic may be said to have begun in England in the 17th century and from that time onwards we find a constant and nearly steady increase in the amount of accumulated wealth per head of the population man though still somewhat impatient of delay has gradually become more willing to sacrifice ease or other enjoyment in order to obtain them in the future he has acquired a greater telescopic faculty that is he has acquired an increased power of realising the future and bringing it clearly before his mind's eye he is more prudent and has more self-control and is therefore more inclined to estimate at a high rate future ills and benefits these terms being used broadly to include the highest and lowest affections of the human mind he is more unselfish and therefore more inclined to work and save in order to secure a future provision for his family and there are already faint signs of a brighter time to come in which there will be a general willingness to work and save in order to increase the stores of public wealth and of public opportunities for leading a higher life but though he is more willing than in earlier ages to incur present ills for the sake of future benefits it is doubtful whether we can now trace a continued increase in the amount of exertion which he is willing to undergo for the sake of obtaining positive pleasures whether present or future during many generations the industry of the western world has steadily become more sedulous holidays have diminished, the hours of work have increased and people have from choice or necessity contented themselves with less and less search for pleasure outside their work but it would seem that this movement has reached its maximum and is now declining in all grades of work except the very highest people are getting to prize relaxation more highly than before and are becoming more impatient of the fatigue that results from excessive strain and they are perhaps on the whole less willing than they used to be to undergo the constantly increasing discomodity of very long hours of work for the sake of obtaining present luxuries these causes would make them less willing than before to work hard in order to provide against distant needs were it not that there is an even more rapid increase in their power of realising the future and perhaps though this is more doubtful in their desire for that social distinction which comes from the possession of some small store of accumulated wealth this increase of capital per head tended to diminish its marginal utility and therefore the rate of interest on new investments fell though not uniformly it was reported to be ten percent during a great part of the Middle Ages but it fell to three percent in the earlier half of the eighteenth century the subsequent vast industrial and political demand for capital raised it again and it was relatively high during the Great War it fell when the political drain had ceased the gold supply being at that time very small but it rose in the third quarter of last century when new gold abounded and capital was much needed for railways and the development of new countries after 1873 an era of peace combined with the slackening of the gold supply lowered interest but now it is rising again partly in consequence of an increased gold supply the growth of general enlightenment and of a sense of responsibility towards the young has turned a great deal of the increasing wealth of the nation from investment as material capital to investment as personal capital there has resulted a largely increased supply of trained abilities which has much increased the national dividend and raised the average income of the whole people but it has taken away from these trained abilities much of that scarcity value which they used to possess and has lowered their earnings not indeed absolutely but relatively to the general advance and it has caused many occupations which not long ago were accounted skilled and which are still spoken of as skilled to rank with unskilled labor as regards wages a striking instance is that of writing it is true that many kinds of office work require a rare combination of high mental and moral qualities but almost anyone can be easily taught to do the work of a copying clerk and probably there will soon be few men or women in England who cannot write fairly well when all can write the work of copying which used to earn higher wages than almost any kind of manual labor will rank among unskilled trades in fact the better kinds of artisan work educate a man more and will be better paid than those kind of clerks work which call for neither judgment nor responsibility and as a rule the best thing that an artisan can do for his son is to bring him up to do thoroughly the work that lies at his hand so that he may understand the mechanical, chemical or other scientific principles that bear upon it and may enter into the spirit of any new improvement that may be made in it if his son should prove to have good natural abilities he is far more likely to rise to a higher position in the world from the bench of an artisan than from the desk of a clerk again a new branch of industry is often difficult simply because it is unfamiliar and men of great force and skill are required to do work which can be done by men of ordinary capacity or even by women and children when the track has once been well beaten its wages are high at first but they fall as it becomes familiar and this has caused the rise of average wages to be underrated because it so happens that many of the statistics which seem typical of general movements of wages are taken from trades which were comparatively new a generation or two ago and are now within the grasp of men of much less real ability than those who pioneered the way for them footnote as the trade progresses improvements in machinery are sure to lighten the strain of accomplishing any given task and therefore to lower task wages rapidly but meanwhile the pace of the machinery and the quantity of it put under the charge of each worker may be increased to much that the total strain involved in the day's work is greater than before on this subject employers and employed frequently differ it is for instance certain that time wages have risen in the textile trades but the employees of them in contradiction to the employers that the strain imposed on them has increased more than in proportion in this controversy wages have been estimated in money but when account is taken of the increase in the purchasing power of money there is no doubt that real efficiency wages have risen that is the exertion of a given amount of strength skill and energy is rewarded by a greater command over commodities than formally end of footnote the consequence of such changes as these is to increase the number of those employed in occupations which are called skilled whether the term is now properly applied or not and this constant increase in the numbers of workers in the higher classes of trades has caused the average of all labour to rise much faster than the average of representative wages in each trade footnote this may be made clearer by an example if there are 500 men in grade A earning 12 shillings a week 400 in grade B earning 25 shillings and 100 in grade C earning 40 shillings the average wages of the thousand men are 20 shillings if after a time 300 from grade A have passed on to grade B and 300 from grade B to grade C the wages in each grade remaining stationary then the average wages of the whole thousand men will be about 28 shillings and sixpence and even if the rate of wages in each grade had meanwhile fallen 10% the average wages of all would still be about 25 shillings and sixpence that is would have risen more than 25% neglect of such facts as these as Sir R. Giffin has pointed out is apt to cause great errors end of footnote in the middle ages though some men of great ability remained artisans all their lives and became artists yet as a class the artisans ranked more nearly with the unskilled labourers than they do now at the beginning of the new industrial era in the middle of the 18th century the artisans had lost much of their old artistic traditions and had not yet acquired that technical command over their instruments that certainty and facility in the exact performance of difficult tasks which belong to the modern skilled artisan a change set in early last century and observers were struck by the social gulf that was opening out between skilled and unskilled labour and the rise of the wages of the artisan to about double those of ordinary labour for indeed the great increase in the demand for highly skilled labour especially in the metal trades stimulated a rapid absorption of the strongest characters among the labourers and their children into the ranks of the artisans the breaking down just at that time of the old exclusiveness of the artisans was making them less than before an aristocracy by birth and more than before an aristocracy by worth and this rise in the quality of artisans enabled them to maintain a rate of wages much above that of ordinary labour for a long while but gradually some of the simpler forms of skilled trades began to lose their scarcity value as their novelty wore off and at the same time continually increasing demands began to be made on the ability of those in some trades that were traditionally ranked as unskilled the navi for instance and the agricultural labourer have been increasingly trusted with expensive and complicated machinery which had been thought to belong only to the skilled trades and the real wages of those two representative occupations has risen fast the rise of wages of agricultural labourers would be more striking than it is did not the spread of modern notions to agricultural districts cause many of the ablest children born there to leave the fields for the railway or the workshop to become policemen or to act as carters or porters in towns those who are left behind in the fields have received a better education than was to be had in earlier times and though having perhaps less than an average share of natural ability they earn much higher real wages than their fathers there are some skilled and responsible occupations such as those of the head heaters and rollers in ironworks which require great physical strength and involve much discomfort and in them wages are very high for the temper of the age makes those who can do high-class work and can earn good wages easily refused to undergo hardship except for a very high reward we may next consider the changes in the relative wages of old and young men of women and children the conditions of industry change so fast that long experience is in some trades almost a disadvantage and in many it is of far less values and a quickness in taking hold of new ideas and adapting one's habits to new conditions a man is likely to earn less after he is fifty years old than before he is thirty and the knowledge of this is tempting artisans to follow the example of unskilled labourers whose natural inclination to marry early has always been encouraged by the desire that their family expenses may begin to fall off before their own wages begin to shrink a second and even more injurious tendency of the same kind is that of the wages of children to rise relatively to those of their parents machinery has displaced many men but not many boys the customary restrictions which excluded them from some trades are giving way and these changes together with the spread of education while doing good in almost every other direction are doing harm in this so that they are enabling boys and even girls to set their parents at defiance and start in life on their own account the wages of women are for similar reasons rising fast relatively to those of men and this is a great gain insofar as it tends to develop their faculties but an injury insofar as it tempts them to neglect their duty of building up a true home and of investing their efforts in the personal capital of their children's character and abilities the relative fall in the incomes to be earned by moderate ability however carefully trained is accentuated by the rise in those that are obtained by many men of extraordinary ability there never was a time at which moderately good oil paintings sold more cheaply than now and there never was a time at which first rate paintings sold so dearly a businessman of average ability and average good fortune now gets a lower rate of profits on his capital than at any previous time while yet the operations in which a man exceptionally favoured by genius and good luck can take part are so extensive as to enable him to amass a huge fortune with a rapidity hitherto unknown the causes of this change are chiefly two firstly the general growth of wealth and secondly the development of new facilities for communication by which men who have once attained a commanding position are enabled to apply their constructive or speculative genius to undertakings vaster and extending over a wider area than ever before it is the first cause almost alone that enables some barristers to command very high fees for a rich client whose reputation or fortune or both are at stake will scarcely count any price too high to secure the services of the best man he can get and it is this again that enables jockies and painters and musicians of exceptional ability to get very high prices in all these occupations the highest incomes earned in our own generation are the highest that the world has yet seen but so long as the number of persons who can be reached by a human voice is strictly limited it is not very likely that any singer will make an advance on the ten thousand pounds said to have been earned in a season by mrs. Billington at the beginning of last century nearly as great as that which the business leaders of the present generation have made on those of the last for the two causes have cooperated to put enormous power and wealth in the hands of those businessmen of our own generation in America and elsewhere who have had first rate genius and have been favored by fortune it is true that a great part of these gains have come in some cases from the wrecks of the rival speculators who had been worsted in the race but in others they were earned mainly by the supreme economizing force of a great constructive genius working at a new and large problem with a free hand for instance the founder of the Vanderbilt family who evolved the New York central railroad system out of chaos probably saved to the people of the United States more than he accumulated himself footnote it should be noticed however that some of these gains may be traced to those opportunities for the formation of trade combinations engineered by a few able wealthy and daring men to exploit for their own benefit a great body of manufacturers or the trade and traffic of a large district that part of this power which depends on political conditions and especially on the protective tariff may pass away but the area of America is so large and its condition so changeful that the slow and steady going management of a great joint stock company on the English plan is at a disadvantage in competition with the vigorous and original scheming the rapid and resolute force of a small group of wealthy capitalists who are willing and able to apply their own resources in great undertakings to a much greater extent than is the case in England the ever shifting conditions of business life in America enable natural selection to bring to the front the best minds for the purpose from their vast population almost every one of whom as he enters on life resolves to be rich before he dies the modern developments of business and of business fortunes are of exceptional interest and instruction to Englishmen but their lessons will be misread unless the essentially different conditions of business life in the old world and the new are constantly born in mind end of footnote but these fortunes are exceptional the diffusion of education and prudent habits among the masses of people and the opportunities which the new methods of business offer for the safe investment of small capitals are telling on the side of moderate incomes the returns of the income tax and the house tax the statistics of consumption of commodities the records of salaries paid to the higher and the lower ranks of employees of government and public companies all indicate that middle class incomes are increasing faster than those of the rich that the earnings of artisans are increasing faster than those of the professional classes and that the wages of healthy and vigorous unskilled labourers are increasing faster even than those of the average artisan the aggregate income of the very rich is perhaps not a larger part of the whole in England now than in earlier times but in America the aggregate value of land is rising fast the higher strains of the working population are yielding ground to lower strains of immigrants and great financiers are acquiring vast power and it may possibly be true that the aggregate income from property is rising relatively to that from labour and that the aggregate income of the very rich is rising fastest of all it must be admitted that a rise in wages would lose part of its benefit if it were accompanied by an increase in the time spent in enforced idleness inconstancy of employment is a great evil and rightly attracts public attention but several causes combine to make it appear to be greater than it really is when a large factory goes on half time rumour brutes the news over the whole neighbourhood and perhaps the newspapers spread it all over the country but few people know when an independent workman or even a small employer gets only a few days work in a month and in consequence whatever suspensions of industry there are in modern times are apt to seem more important than they are relatively to those of earlier times in earlier times some labourers were hired by the year but they were not free and were kept to their work by personal chastisement there is no good cause for thinking that the medieval artisan had constant employment and the most persistently inconstant employment now to be found in Europe is in those non-agricultural industries of the west which are most nearly medieval in their methods and in those industries of eastern and southern Europe in which medieval traditions are strongest footnote an instance which came under the present writer's observation may be mentioned here in Palermo there is a semi-feudal connection between the artisans and their patrons each carpenter or tailor has one or more large houses to which he looks for employment and so long as he behaves himself fairly well he is practically secure from competition there are no great waves of depression of trade the newspapers are never filled with accounts of the sufferings of those out of work because their condition changes very little from time to time but a larger percentage of artisans are out of employment at the best of times in Palermo than in England in the centre of the worst depression of recent years end of footnote in many directions there is a steady increase in the proportion of employees who are practically hired by the year this is for instance the general rule in many of those trades connected with transport which are growing fastest and which are in some respects the representative industries of the second half of the 19th century as the manufacturing trades were of the first half and though the rapidity of invention the fickleness of fashion and above all the instability of credit do certainly introduce disturbing elements into modern industry yet as we shall see presently other influences are working strongly in the opposite direction and there seems to be no good reason for thinking that inconstancy of employment is increasing on the whole end of chapter 12 sections 1 to 8 of chapter 8 of principles of economics book 6 this is the LibriVox recording all LibriVox recordings are in the public domain for more information or to volunteer please visit LibriVox.org recording by Icy Jumbo principles of economics book 6 by Alfred Marshall chapter 8 progress in relation to standards of life section 1 let us begin by pursuing a little further the line of thought on which we started in book 3 when considering wants in relation to activities we there saw reasons for thinking that the true keynote of economic progress is the development of new activities rather than of new wants and we may now make some study of a question that is of special urgency in our own generation vis what is the connection between changes in the manner of living and the rate of earnings how far is either to be regarded as the cause of the other and how far is the effect the term the standard of life is here taken to mean the standard of activities adjusted to wants thus a rise in the standard of life implies an increase of intelligence and energy and self respect leading to more care and judgment in expenditure and to an avoidance of food and drink that gratify the appetite but afford no strength and of ways of living that are unwholesome physically and morally a rise in the standard of life for the whole population will much increase the national dividend and the share of it which accrues to each grade and to each trade a rise in the standard of life for any one trade or grade will raise their efficiency and therefore their own real wages it will increase the national dividend a little and it will enable others to obtain their assistance at a cost somewhat less in proportion to its efficiency but many writers have spoken of the influence exerted on wages by a rise not in a standard of life but in that of comfort a term that may suggest a mere increase of artificial wants among which perhaps the grosser wants may predominate it is true that every broad improvement in the standard of comfort is likely to bring with it a better manner of living and to open the way to new and higher activities while people who have hitherto had neither the necessaries nor the decencies of life can hardly fail to get some increase of vitality and energy from an increase of comfort however gross and material the view which they may take of it thus a rise in the standard of comfort will probably involve some rise in the standard of life and insofar as this is the case it tends to increase the national dividend and to improve the condition of the people some writers however of our own and of earlier times have gone further than this and have implied that a mere increase of wants tends to raise wages but the only direct effect of an increase of wants is to make people more miserable than before and if we put aside its possible indirect effect in increasing activities and otherwise raising the standard of life it can raise wages only by diminishing the supply of labour it will be well to go into this matter more closely Section 2 it has already been noted that if population increased in high geometrical progression uninterruptedly for many generations together in a country which could not import food easily then the total produce of labour and capital working on the resources provided by nature would barely cover the cost of rearing and training each generation as it came this would be true even if we suppose that nearly the whole of the national dividend went to labour scarcely any share being allotted to capitalists or land owner if the allowance fell below that level the rate of increase of the population must necessarily shrink unless indeed the expenses of their nurture and rearing were curtailed with a resulting lowering of efficiency and therefore of the national dividend and therefore of earnings but in fact the check to the rapid growth of population would probably come earlier because the population at large would not be likely to limit its consumption to bare necessaries some part of the family income would almost certainly be spent on gratifications which contributed but little to the maintenance of life and efficiency that is to say the maintenance of a standard of comfort raised more or less above that which was necessary for life and efficiency would necessarily involve a check to the growth of population at a rather earlier stage than would have been reached if family expenditure had been directed on the same principles as is the expenditure on the nurture and training of horses or slaves this analogy reaches further three necessaries for full efficiency hope freedom and change cannot easily be brought within the slaves reach but as a rule the shrewd slave owner goes to some trouble and expense to promote rough musical and other entertainments on the same principle that he provides medicines for experience shows that melancholy in a slave is as wasteful as disease or as cinders that clog the furnace of a boiler now if the standard of comfort of the slaves were to rise in such a way that neither punishment nor the fear of death would make them work unless provided with expensive comforts and even luxuries they would get those comforts and luxuries or else they would disappear in the same way as would a breed of horses that did not earn their keep and if it were true that the real wages of labour were forced down chiefly by the difficulty of obtaining food as was in fact the case in England a hundred years ago then indeed the working classes might relieve themselves from the pressure of diminishing return by reducing their numbers but they cannot do so now because there is no such pressure the opening of England's ports in 1846 was one among many causes of the development of railways connecting the vast agricultural lands of North and South America and Australia with the sea wheat grown under the most advantageous circumstances is brought to the English working man in sufficient quantities for his family at a total cost equal to but a small part of his wages an increase in numbers gives many new opportunities for increased efficiency of labour and capital working together to meet men's wants and thus may raise wages in one direction as much as it lowers them in another provided only the stock of capital required for the new developments increases fast enough of course the Englishman is not unaffected by the law of diminishing return he cannot earn his food with as little labour as if he were near spacious virgin prairies but its cost to him being now governed mainly by the supplies which come from new countries would not be greatly affected either by an increase or by a diminution in the population of this country if he can make his labour more efficient in producing things which can be exchanged for imported food then he will get his food at less real cost to himself whether the population of England grows fast or not when the wheat fields of the world are worked at their full power or even earlier if the free entry of food into England's ports should ever be obstructed then indeed an increase of her population may lower wages or at all events check the rise that would otherwise have come from the continued improvement in the arts of production and in such a case a rise in the standard of comfort may raise wages merely by stinting the growth of numbers but while the present good fortune of abundant imported food attends on the English people a rise in their standard of comfort could not increase their wages merely by its action on their numbers and further if it were obtained by measures which forced down the rate of profits on capital even further below the level which can be got in countries which have a greater power of absorbing capital than England has it might both check accumulation in England and hasten the exportation of capital and in that case wages in England would fall both absolutely and relatively to the rest of the world if on the other hand a rise in the standard of comfort went together with a great increase in efficiency then whether it were accompanied by an increase in numbers or not it would enlarge the national dividend relatively to population and establish a rise of real wages on an enduring basis thus a diminution by one tenth of the number of workers each doing as much work as before would not materially raise wages and therefore a diminution by one tenth in the amount of work done by each the number remaining unchanged would lower wages in general by one tenth this argument is of course consistent with the belief that a compact group of workers can for a time raise their wages at the expense of the rest of the community by making their labour scarce but such strategy seldom succeeds for more than a short time however strong the antisocial obstacles which they erect against those who would like a share of their gains interlopers find their way in some over the obstacles some under them and some through them meanwhile invention is set on foot to obtain in some other way or from some other place things of the production of which the compact group thought to have a partial monopoly and what is even more dangerous to them new things are invented and brought into general use which satisfy nearly the same wants and yet make no use of their labour thus after a while those who have striven to make a shrewd use of the monopoly are apt to find their numbers swollen rather than reduced while the total demand for their labour has shrunk in that case their wages fall heavily section three the relations between industrial efficiency and the hours of labour are complex if the strain is very great a man is apt to be so tired by long work that he is seldom at his best and is often much below it or even idling as a general though not a universal rule his work is more intense when paid by peace than when paid by time and in so far as this is the case short hours are specially suitable to industries in which peace work prevails footnote the facts are much in question partly because they vary much from one industry to another and those who have the most intimate knowledge of them are apt to be biased when peace work can be brought under collective bargaining by trade unions the first effect of an improvement in plant is to raise real wages and the owners of claiming a readjustment of peace rates in order to keep wages in just proportion to those which are being earned by equally difficult and responsible work in other occupations is thus thrown upon the employers in such cases peace work is generally in favour with employees and where their organisation is good as in some classes of mining work they approve it even in regard to work that is not uniform but in many other cases it arouses their suspicion of unfair advantage see below in section 8 according to Professor Schmoller it is estimated that peace work increases output by 20 to 100% according to the race of the workers and the character and technique of the industry an instructive detailed statement of the causes which lead workers generally to oppose payment by results in certain industries while welcoming it in others is given by Cole the payment of wages chapter 2 end of footnote when the hours the nature of the work done the physical conditions under which it is done and the method by which it is remunerated are such as to cause great wear and tear of body or mind or both and to lead to a low standard of living when there has been a want of that leisure rest and repose which are among the necessaries for efficiency then the labour has been extravagant from the point of view of society at large just as it would be extravagant on the part of the individual capitalist to keep his horses or slaves overworked or underfed in such a case a moderate diminution of the hours of labour would diminish the national dividend only temporarily for as soon as the improved standard of life had had time to exert its full effect on the efficiency of the workers their increased energy intelligence and force of character would enable them to do as much as before in less time and thus even from the point of view of material production there would be no ultimate loss any more than there would be in sending a sick worker into hospital to get his strength renovated the coming generation is interested in the rescue of men and still more in that of women from excessive work at least as much as it is in the handing down to it of a good stock of material wealth this argument assumes that the new rest and leisure raise the standard of life and such a result is almost certain to follow in the extreme cases of overwork which we have been now considering for in them a mere lessening of tension is a necessary condition for taking the first step upwards the lowest grade of honest workers seldom work very hard but they have little stamina and many of them are so overstrained that they might probably after a time do as much in a shorter day as they do now in a long one footnote the history of British industries offers the most various the most clearly defined and the most generally instructive experiments as to the influence of variations in the hours of labour on output but international studies on the subject seem to be specially German for instance see Bernard her hair our bytes intensitate by could zero and our bytes tight 1909 end of footnote again there are some branches of industry which at present turn to account expensive plant during nine or ten hours a day and in which the gradual introduction of two shifts of eight hours or even less would be again the change would need to be introduced gradually for there is not enough skilled labour in existence to allow such a plan to be adopted at once in all the workshops and factories for which it is suited but some kinds of machinery when worn out or antiquated might be replaced on a smaller scale and on the other hand much new machinery that cannot be profitably introduced for a ten hours day would be introduced for a 16 hours day and when once introduced it would be improved on thus the arts of production would progress more rapidly the national dividend would increase working men would be able to earn higher wages without checking the growth of capital or tempting it to migrate to countries where wages are lower and all classes of society would reap benefit from the change the importance of this consideration is more apparent every year since the growing expansiveness of machinery and the quickness with which it is rendered obsolete are constantly increasing the wastefulness of keeping the untiring iron and steel resting in idleness during 16 hours out of the 24 in any country such a change would increase the net produce and therefore the wages of each worker because much less than before would have to be deducted from his total output on account of charges for machinery plant factory rent etc but Anglo-Saxon artisans unsurpassed in accuracy of touch and surpassing all in sustained energy would more than any others increase their net produce if they would keep their machinery going at its full speed for 16 hours a day although they themselves worked only eight footnote on the whole of this subject see professor Chapman's address at the British Association 1909 published in the economic journal volume 19 double shifts are used more on the continent than in England but they have not a fair trial there for the hours of labour are so long that double shifts involve work nearly all the night through and night work is never so good as day work partly because those who work at night do not rest perfectly during the day no doubt certain practical objections can be urged against the plan for instance a machine is not so well cared for when two men share the responsibility of keeping it in order as when one man has the whole management of it and there is sometimes a difficulty about fixing responsibility for imperfections in the work done but these difficulties can be in a great measure overcome by putting the machine and the work in charge of two partners again there would be a little difficulty in readjusting the office arrangements to suit a day of 16 hours but employers and their foremen do not regard these difficulties as insuperable and experience shows that workmen soon overcome the repugnance which they feel at first to double shifts one set might end its work at noon and the other begin then or what would perhaps be better one shift might work say from 5am to 10am and from 1.30pm to 4.30pm the second set working from 10.15am to 1.15pm and from 4.45pm to 9.45pm the two sets might change places at the end of each week or month a general adoption of double shifts will be necessary if the extension of the marvellous powers of expensive machinery into every branch of manual work is to exercise the full influence of which it is capable in reducing the hours of labour much below 8 end of footnote it must however be remembered that this particular plea for a reduction of the hours of labour applies only to those trades which use or can use expensive plant and that in many cases as for instance in some mines and some branches of railway work the system of shifts is already applied so as to keep the plant almost constantly at work there remain therefore many trades in which a reduction of the hours of labour would certainly lessen the output in the immediate present and would not certainly bring about at all quickly any such increase of efficiency as would raise the average work done per head up to the old level in such cases the change would diminish the national dividend and the greater part of the resulting material loss would fall on the workers whose hours of labour were diminished it is true that in some trades a scarcity of labour would raise its price for a good long while at the expense of the rest of the community but as a rule a rise in the real price of labour would cause a diminished demand for the product partly through the increased use of substitutes and would also cause an inrush of new labour from less favoured trades Section 4 it may be well to try to explain the great vitality of the common belief that wages could be raised generally by merely making labour scarce to begin with it is difficult to realise how different and often even opposed are the immediate and permanent effects of a change people see that when there are competent men waiting for work outside the offices of a tramway company those already at work think more of keeping their posts than of striving for a rise of wages and that if these men were away the employers could not resist a demand for higher wages they dwell on the fact that if tramway men work short hours and there is no diminution in the number of miles run by the cars on existing lines then more men must be employed probably at higher wages per hour and possibly at higher wages per day they see that when an enterprise is on foot as for instance the building of a house or a ship it must be finished at any cost since there is nothing to be gained by stopping halfway and the larger the slices of work on it done by any one man the fewer slices of work on it will be left for other people but there are other consequences more important though less obtrusive which need to be considered for instance if tram workers and building operatives stint their labour artificially tramway extensions will be checked fewer men will be employed in making and working tramways many work people and others will walk into town who might have ridden many will live closely packed in the cities who might have had gardens and fresher air in the suburbs the working classes among others will be unable to pay for as good housing accommodation as they would otherwise have had and there will be less building to be done in short the argument that wages can be raised permanently by stinting labour rests on the assumption that there is a permanent fixed work fund i.e. a certain amount of work which has to be done whatever the price of labour and for this assumption there is no foundation on the contrary the demand for work comes from the national dividend that is it comes from work the less work there is of one kind the less demand there is for work of other kinds and if labour were scarce fewer enterprises would be undertaken again constancy of employment is dependent on the organisation of industry and trade and on the success with which those who arrange supply are able to forecast coming movements of demand and of price and to adjust their actions accordingly but this would not be better done with a short day's work than with a long one and indeed the adoption of a short day not accompanied by double shifts would discourage the use of that expensive plant the presence of which makes employers very unwilling to close their works almost every artificial stinting of work involves friction and therefore tends not to lessen but to increase the inconstancy of employment it is true that if plasterers or shoemakers could exclude external competition they would have a fair chance of raising their wages by a mere diminution of the amount of work done by each whether by shortening the hours of labour or in any other way but these gains can be got only at the expense of a greater aggregate loss to other sharers in the national dividend which is the source of wages and profits in all industries in the country this conclusion is emphasised by the fact to which experience testifies and which analysis explains that the strongest instances of a rise in wages attained by trade union strategy are found in branches of industry the demand for whose labour is not direct but derived from the demand for a product in making which many branches of industry cooperate for any one branch which is strong in strategy can absorb to itself some share of the price of the ultimate product which might have gone to other branches Section 5 we now come to a second cause of the vitality of the belief that wages can be raised generally and permanently by checking the supply of labour this cause is an underestimate of the effects of such a change on the supply of capital it is a fact and so far as it goes an important fact that some share of the loss resulting from the lessening of output by say plasterers or shoemakers will fall on those who do not belong to the working classes part of it will no doubt fall on employers and capitalists whose personal and material capital is sunk in building or shoemaking and part on well to do users or consumers of houses or shoes and further if there were a general attempt by all of the working classes to obtain high wages by restricting the effective supply of their labour a considerable part of the burden resulting from the shrinkage of the national dividend would doubtless be thrown on other classes of the nation and especially on the capitalists for a time but only for a time for a considerable diminution in the net return to investments of capital would speedily drive new supplies of it abroad in regard to this danger it is indeed sometimes urged that the railways and factories of the country cannot be exported but nearly all of the materials and a large part of the appliances of production are consumed or worn out or it becomes obsolete every year and they need to be replaced and a reduction in the scale of this replacement combined with the exportation of some of the capital thus set free might probably so lessen the effective demand for labour in the country in a few years that in reaction wages generally would be reduced much below their present level footnote to take an illustration let us suppose that shoemakers and hatters are in the same grade working equal hours and receiving equal wages before and after a general reduction in the hours of labour then both before and after the change the hatter could buy with a month's wages as many shoes as were the net product of the shoemaker's work for a month if the shoemaker worked less hours than before and in consequence did less work the net product of his labour for a month would have diminished unless either by a system of working double shifts the employer and his capital earned profits on two sets of workers or his profits could be cut down by the full amount of the diminution in output the last supposition is inconsistent with what we know of the causes which govern the supply of capital and business power and therefore the hatter's wages would go less far than before in buying shoes and so all round for other trades end of footnote but though the emigration of capital would not in any case be attended by much difficulty owners of capital have good business reasons as well as a sentimental preference in favour of investing it at home and therefore a rise in the standard of life which makes a country more attractive to live in is sure to counteract to some extent the tendency of a fall in the net return on investments to cause capital to be exported on the other hand an attempt to raise wages by antisocial contrivances for stinting output is certain to drive abroad well to do people in general and especially just that class of capitalists whose enterprise and delight in conquering difficulties is of the most importance to the working classes for their ceaseless initiative makes for national leadership and enables man's work to raise real wages while promoting an increased supply of those appliances which make for efficiency and thus sustain the growth of the national dividend it is true also that a general rise in wages however attained if spread over the whole world could not cause capital to migrate from any one part of it to another and it is to be hoped that in time the wages of manual labour will rise all over the world mainly through increased production but partly also in consequence of a general fall in the rate of interest and of a relative, if not absolute, diminution of incomes larger than are necessary to supply the means of efficient work and culture even in the highest and broadest senses of these terms but methods of raising wages which make for a higher standard of comfort by means that lessen rather than promote efficiency are so anti-social and short-sighted as to invoke a speedy retribution and there is perhaps little chance of there being adopted over any great part of the world if several countries adopted such methods the others going straight for raising the standards of life and of efficiency would speedily attract to themselves much of the capital and of the best vital force away from those who followed an ignoble restrictive policy in this discussion it has been necessary to adhere to general reasoning for a direct appeal to experience is difficult and if made lightly it can but mislead whether we watch the statistics of wages and production immediately after the change or for a long period following it the prominent facts are likely to be due chiefly to causes other than that which we are wishing to study thus if a reduction of hours resulted from a successful strike the chances are that the occasion chosen for the strike was one when the strategical position of the workmen was good and when the general conditions of trade would have enabled them to obtain a rise of wages if there had been no change in the hours of labour and therefore the immediate effects of the change on wages are likely to appear more favourable than they really were and again many employers having entered into contracts which they are bound to fulfil may for the time offer higher wages for a short day than before for a long day but this is a result of the suddenness of the change and is a mere flash in the pan and as has just been observed the immediate results of such a change are likely to be in the opposite direction to those which follow later and are more enduring on the other hand if men have been overworked the shortening of the hours of labour will not at once make them strong the physical and moral improvement of the condition of the workers with its consequent increase of efficiency and therefore of wages cannot show itself at once further the statistics of production and wages several years after the reduction of hours are likely to reflect changes in the prosperity of the country and especially of the trade in question of the methods of production and of the purchasing power of money and it may be as difficult to isolate the effects of reduction of the hours of labour as it is to isolate the effects on the waves of a noisy sea caused by throwing a stone among them footnote for instance when we look at the history of the introduction of the eight hours day in Australia we find great fluctuations in the prosperity of the mines and the supply of gold in the prosperity of the sheep farms and the price of wool in the borrowing from old country's capital with which to employ Australian labour to build railways etc in immigration and in commercial credit and all these have been such powerful causes of change in the condition of the Australian working man as to completely overlay and hide from view the effects of a reduction of the hours of labour from ten gross eight and three quarter net after deducting mealtimes to eight net money wages in Australia are much lower than they were before the hours were shortened and though it may be true that the purchasing power of money has increased so that real wages have not fallen yet there seems no doubt that the real wages of labour in Australia are not nearly as much above those in England as they were before the reduction in the hours of labour and it has not been proved that they are not lower than they would have been if that change had not taken place the commercial troubles through which Australia passed shortly after the change were no doubt mainly caused by a series of droughts supervening on a reckless inflation of credit but a contributory cause appears to have been an over sanguine estimate of the economic efficiency of short hours of labour which led to a premature reduction of hours in industries not well adapted for it End of footnote we must then be careful not to confuse the two questions whether a cause tends to produce a certain effect and whether that cause is sure to be followed by that effect opening the sluice of a reservoir tends to lower the level of the water in it but if meanwhile larger supplies of water are flowing in at the other end the opening of the sluice may be followed by a rising of the level of the water in the system and so although a shortening of the hours of labour would tend to diminish output in those trades which are not overworked and in which there is no room for double shifts yet it might very likely be accompanied by an increase of production arising from the general progress of wealth and knowledge but in that case the rise of wages would have been obtained in spite of and not in consequence of a shortening of hours In more modern England nearly all movements of the kind which we have just been discussing are directed by trade unions a full appreciation of their aims and results lies beyond the scope of the present volume for it must be based on a study of combinations in general of industrial fluctuations and of foreign trade but a few words may be said here on that part of their policy which is most closely connected with standards of life and work and wages footnote a short provisional description of trade unions is affixed to volume one of my elements of economics which is in other respects an abridgment of the present volume and the account of their aims and methods given in the final report of the Labour Commission, 1893 has the unique authority derived from the cooperation of employers and trade union leaders of exceptional ability and experience end of footnote the increasing changefulness and mobility of industry obscure the influences both for good and for evil which the earnings and industrial policy of any group of workers in one generation exert on the efficiency and earning power of the same group in a later generation the family income from which the expenses of rearing and training its younger members must be defrayed seldom comes now from a single trade the sons are less frequently found in their father's occupation the stronger and more strenuous of those to whose nurture the earnings of any occupation have contributed are likely to seek higher fortunes elsewhere while the weak and the dissolute are likely to descend below it it is therefore becoming increasingly difficult to bring the test of experience to bear on the question whether the efforts which any particular trade union has made to raise the wages of its members have borne rich fruit in raising the standard of life and work of the generation reared by aid of those high wages but some broad facts stand out clearly the original aims of British trade unions were almost as closely connected with the standard of life as with the rate of wages they derived their first great impulse from the fact that the law partly directly and partly indirectly sustained combinations among employers to regulate wages in their own supposed interest and prohibited under severe penalties similar combinations on the part of employees this law depressed wages a little but it depressed much more the strength and richness of character of the workmen his horizon was generally so limited that he could not be fully drawn out of himself by a keen and intelligent interest in national affairs so he thought and cared little about any mundane matters except the immediate concerns of himself, his family and his neighbours freedom to combine with others in his own occupation would have widened his horizon and given him larger matters to think about it would have raised a standard of social duty even though this duty might have been tainted with a good deal of class selfishness thus the early struggle for the principle that workmen should be free to do in combination the counterpart of anything which employers were free to do in combination was in effect an effort to obtain conditions of life consistent with true self-respect and broad social interests as much as a struggle for higher wages on this side of the field victory has been complete trade unionism has enabled skilled artisans and even many classes of unskilled workers to enter into negotiations with their employers with the same gravity self-restraint dignity and forethought as are observed in the diplomacy of great nations it has led them generally to recognise that a simply aggressive policy is a foolish policy and that the chief use of military resources is to preserve an advantageous peace in many British industries boards for the adjustment of wages work steadily and smoothly because there is a strong desire to avoid waste of energy on trifles if an employee disputes the justice of any judgement passed by his employer or foreman on his work or his remuneration for it the employer in the first instance calls in the trade union secretary as arbiter his verdict is generally accepted by the employer and of course it must be accepted by the operative if beneath this particular personal dispute there is a question of principle on which no clear agreement has been reached by the board the matter may be referred for discussion to the secretaries of the employers association and the trade union in conference if they cannot agree it may be passed on to the board at last if the stake at issue is large enough and neither side will give way the issue is relegated by strike or a lockout to the decision of force but even then the good services of several generations of organised trade unions are seen in the conduct of the contest which generally differs in method from the contest waged between employers and employed a century ago very much as honourable war between modern civilised peoples does from fierce guerrilla war among wild peoples self control and moderation of manner overlying resolute purpose distinguish the British delegates above others at an international labour conference but the very greatness of the services which trade unions have rendered imposes on them corresponding obligations no bless oblige and they are bound to look with suspicion on those who exaggerate their power of raising wages by particular devices especially when such devices contain an antisocial element there are indeed but few movements which are without reproach some destructive influence lurks in nearly every great and good effort but the evil should be stripped of all gloss and carefully examined so that it may be kept down Section 8 the chief instrument by which trade unions have obtained their power of negotiating on even terms with their employers is a common rule as regards the standard wage to be paid for an hour's work of a given class or again for peace work of a given class custom and the rather ineffective assessments of wages by justices of the peace while hindering the workmen from rising had also defended him from extreme pressure but when competition became free the isolated workmen was at a disadvantage in bargaining with employers for even in Adam Smith's time they were generally in agreement formal or informal not to outbid one another in the hire of labour and when as time went on a single firm was often able to employ several thousands of workmen and that firm by itself became a larger as well as a more compact bargaining force than a small trade union it is true that the agreements and understandings of employers not to overbid one another were not universal and were often evaded or broken it is true that when the net product due to the labour of additional workers was largely in excess of the wages that were being paid to them the pushing employer would brave the indignation of his peers and attract workers to him by the offer of higher wages and it is true that in progressive industrial districts this competition was sufficient to secure that no considerable body of workers should remain for long with wages much below the equivalent of their net product it is necessary to reassert here the fact that this net product to which the wages of a worker of normal efficiency approximate is the net product of a worker of normal efficiency for a suggestion has indeed been made by some advocates of extreme enforcements of the common rule that competition tends to make the wages of the efficient worker equal to the net product of that worker who is so inefficient that the employer can barely be induced to employ him at all footnote the wholesome influences on social well-being which are exercised by trade union leaders in many directions are apt to be marred by a misunderstanding on this matter they commonly give as their authority the very weighty and able treaties on industrial democracy by Mr. and Mrs. Webb where the misunderstanding is suggested thus they say on page 710 it is now theoretically demonstrated as we saw in our chapter on the verdict of the economists that under perfect competition and complete mobility between one occupation and another the common level of wages tends to be no more than the net produced due to the labour of the marginal labourer who is on the verge of not being employed at all and in a footnote on page 787 they refer to this marginal labourer as an industrial invalid or pauper saying if the wages of every class of labour under perfect competition tend to be no more than the net produced due to the additional labour of the marginal labourer of that class who is on the verge of not being employed at all the abstraction of the paupers not necessarily from productive labour for themselves but from the competitive labour market by raising the capacity of the marginal wage labourer would seem to increase the wages of the entire labouring class end of footnote but in fact competition does not act in this way it does not tend to make weekly wages in similar employments equal it tends to adjust them to the efficiency of the workers if A will do twice as much work as B an employer on the margin of doubt as to whether it is worth his while to take on additional workers will make just as good a bargain by taking on A at four shillings as by taking on B and another at two shillings each and the causes which govern wages are indicated as clearly by watching the marginal case of A at four shillings as that of B at two footnote it is really an understatement to say that competition tends to make the employer willing to pay twice as high wages to A as to B under these conditions for an efficient worker who will make the same factory space and plant and supervision serve for twice as much production as an inefficient worker is worth more than twice as much wages to the employer he may really be worth three times as much of course the employer may be afraid to offer to the more efficient worker wages proportionate to his true net product lest inefficient workers supported by their unions should overestimate his rate of profits and claim a rise in wages but in this case the cause which makes the employer pay attention to the net product of the less efficient worker when considering how much it is worth his while to offer to the more efficient is not free competition but that resistance to free competition which is offered by the misapplication of the common rule some modern schemes for gain sharing aim at raising the wages of efficient workers nearly in proportion to their true net product that is more in proportion to the piecework rate but trade unions do not always favour such schemes