 CHAPTER VI. INDUSTRIAL TRAINING. Having discussed the causes which govern the growth of a numerous and vigorous population, we have next to consider the training that is required to develop its industrial efficiency. The natural vigour that enables a man to attain great success in any one pursuit would generally have served him in good stead in almost any other. But there are exceptions. Some people, for instance, seem to be fitted from birth for an artistic career and for no other, and occasionally a man of great practical genius is found to be almost devoid of artistic sensibility. But a race that has great nervous strength seems generally able, under favourable conditions, to develop in the course of a few generations ability of almost any kind that it holds in specially high esteem. A race that has acquired vigour in war or in the rudor forms of industry sometimes gains intellectual and artistic power of a high order very quickly, and nearly every literary and artistic epoch of classical and medieval times has been due to a people of great nervous strength who have been brought into contact with noble thoughts before they have acquired much taste for artificial comforts and luxuries. The growth of this taste in our own age has prevented us from taking full advantage of the opportunities our largely increased resources give us of consecrating the greater part of the highest abilities of the race to the highest aims. But perhaps the intellectual vigour of the age appears less than it really is, in consequence of the growth of scientific pursuits. For in art and literature success is often achieved while genius still wears the fascinating aspect of youth. But in modern science so much knowledge is required for originality that before a student can make his mark in the world his mind has often lost the first bloom of its freshness, and further the real value of his work is not often patented to the multitude as that of a picture or poem generally is. In this connection it is worthwhile to notice that the full importance of an epoch-making idea is often not perceived in the generation in which it is made. It starts the thoughts of the world on a new track, but the change of direction is not obvious until the turning point has been left some way behind. In the same way the mechanical inventions of every age are apt to be underrated relatively to those of earlier times. For a new discovery is seldom fully effective for practical purposes till many minor improvements and subsidiary discoveries have gathered themselves around it. An invention that makes an epoch is very often a generation older than the epoch which it makes. Thus it is that each generation seems to be chiefly occupied in working out the thoughts of the preceding one while the full importance of its own thoughts is as yet not clearly seen. End of footnote. In the same way the solid qualities of the modern machine-tending artisan are rated more cheaply than the lighter virtues of the medieval handicraftsmen. This is partly because we are apt to regard as commonplace those excellences which are common in our own time and to overlook the fact that the term unskilled labourer is constantly changing its meaning. Section 2 Very backward races are unable to keep on at any kind of work for a long time and even the simplest form of what we would regard as unskilled work is skilled work relatively to them. For they have not the requisite aciduity and they can acquire it only by a long course of training. But where education is universal an occupation may fairly be classed as unskilled though it requires a knowledge of reading and writing. Again in districts in which manufacturers have long been domiciled a habit of responsibility of carefulness and promptitude in handling expensive machinery and materials becomes the common property of all. And then much of the work of tending machinery is said to be entirely mechanical and unskilled and to call forth no human faculty that is worthy of esteem. But in fact it is probable that not one tenth of the present populations of the world have the mental and moral faculties, the intelligence and the self-control that are required for it. Perhaps not one half could be made to do the work well by steady training for two generations. Even of a manufacturing population only a small part are capable of doing many of the tasks that appear at first sight to be entirely monotonous. Machine weaving, for instance, simple as it seems, is divided into higher and lower grades. And most of those who work in the lower grades have not the stuff in them that is required for weaving with several colours. And the differences are even great in industries that deal with hard materials, wood, metals or ceramics. Some kinds of manual work require long continued practice in one set of operations, but these cases are not very common and they are becoming rarer. For machinery is constantly taking over work that requires manual skill of this kind. It is indeed true that a general command over the use of one's fingers is a very important element of industrial efficiency. But this is the result chiefly of nervous strength and self-mastery. It is, of course, developed by training, but the greater part of this may be of a general character and not special to the particular occupation. Just as a good cricketer soon learns to play tennis well, so a skilled artisan can often move into other trades without any great and lasting loss of efficiency. Manual skill that is so specialised that it is quite incapable of being transferred from one occupation to another is becoming steadily a less and less important factor in production. Putting aside for the present the faculties of artistic perception and artistic creation, we may say that what makes one occupation higher than another, what makes the workers of one town or country more efficient than those of another, is chiefly a superiority in general sagacity and energy which are not specialised to any one occupation. To be able to bear in mind many things at a time, to have everything ready when wanted, to act promptly and show resource when anything goes wrong, to accommodate oneself quickly to changes in detail of the work done, to be steady and trustworthy, to have always a reserve of force which will come out in emergency, these are the qualities which make a great industrial people. They are not peculiar to any occupation, but are wanted in all. And if they cannot always be easily transferred from one trade to other kindred trades, the chief reason is that they require to be supplemented by some knowledge of materials and familiarity with special processes. We may then use the term general ability to denote those faculties and that general knowledge and intelligence which are in varying degrees the common property of all the higher grades of industry. While that manual dexterity and that acquaintance with particular materials and processes which are required for the special purposes of individual trades may be classed as specialised ability. Section 3 General ability depends largely on the surroundings of childhood and youth. In this the first and far the most powerful influence is that of the mother. Next comes the influence of the father, of other children, and in some cases of servants. Footnotes For the influence of the mother. According to Galton the statement that all great men have had great mothers goes too far, but that shows only that the mother's influence does not outweigh all others, not that it is not greater than any one of them. He says that the mother's influence is most easily traceable among theologians and men of science because an earnest mother leads her child to feel deeply about great things and a thoughtful mother does not repress but encourages that childish curiosity which is the raw material of scientific habits of thought. For the other influences. There are many fine natures among domestic servants, but those who live in very rich houses are apt to get self-indulgent habits, to overestimate the importance of wealth and generally to put the lower aims of life above the higher in a way that is not common with independent working people. The company in which the children of some of our best houses spend much of their time is less ennobling than that of the average cottage, yet in these very houses no servant who is not specially qualified is allowed to take charge of a young retriever or a young horse. End of Footnotes As years pass on the child of the working man learns a great deal from what he sees and hears going on around him and when we inquire into the advantages for starting in life which children of the well-to-do classes have over those of artisans and which these in their turn have over the children of unskilled labourers We shall have to consider these influences of home in more detail, but at present we may pass to consider the more general influences of school education. Little need be said of general education, though the influence even of that on industrial efficiency is greater than it appears. It is true that the children of the working classes must very often leave school when they have but learnt the elements of reading, writing, arithmetic and drawing, and it is sometimes argued that part of the little time spent on these subjects would be better given to practical work. But the advance made at school is important not so much on its own account as for the power of future advance which a school education gives. For a truly liberal general education adapts the mind to use its best faculties in business and to use business itself as a means of increasing culture, though it does not concern itself with the details of particular trades. That is left for technical education. Footnote The absence of a careful general education for the children of the working classes has been hardly less detrimental to industrial progress than the narrow range of the old grammar school education of the middle classes. Till recently, indeed, it was the only one by which the average schoolmaster could induce his pupils to use their minds in anything higher than the absorption of knowledge. It was therefore rightly called liberal because it was the best that was to be had, but it failed in its aim of familiarising the citizen with the great thoughts of antiquity. It was generally forgotten as soon as school time was over, and it raised an injurious antagonism between business and culture. Now, however, the advance of knowledge is enabling us to use science and art to supplement the curriculum of the grammar school, and to give to those who can afford it an education that develops their best faculties and starts them on the track of thoughts which will most stimulate the higher activities of their minds in afterlife. The time spent on learning to spell is almost wasted. If spelling and pronunciation are brought into harmony in the English language, as in most others, about a year will be added to the effective school education without any additional cost. End of footnote Section 4 Technical education has, in like manner, raised its aims in recent years. It used to mean little more than imparting that manual dexterity and that elementary knowledge of machinery and processes which an intelligent lad quickly picks up for himself when his work has begun. Though if he has learnt it beforehand he can perhaps earn a few shillings more at starting than if he had been quite ignorant. But such so-called education does not develop faculties. It rather hinders them from being developed. A lad who has picked up the knowledge for himself has educated himself by so doing, and he is likely to make better progress in the future than one who has been taught in a school of this old-fashioned kind. Technical education is, however, outgrowing its mistakes, and is aiming firstly at giving a general command over the use of eyes and fingers, though there are signs that this work is being taken over by general education to which it properly belongs, and secondly at imparting artistic skill and knowledge and methods of investigation which are useful in particular occupations but are seldom properly acquired in the course of practical work. It is, however, to be remembered that every advance in the accuracy and versatility of automatic machinery narrows the range of manual work in which command over hand and eye is at high premium, and that those faculties which are trained by general education in its best forms are ever rising in importance. Footnote. As Naismith says, if a lad having dropped two P's at random on a table can readily put a third P midway in a line between them, he is on the way to becoming a good mechanic. Command over eye and hand is gained in the ordinary English games, no less than in the playful work of the kindergarten. Drawing has always been on the borderline between work and play. End of footnote. According to the best English opinions, technical education for the higher ranks of industry should keep the aim of developing the faculties almost as constantly before it as general education does. It should rest on the same basis as a thorough general education but should go on to work out in detail special branches of knowledge for the benefit of particular trades. Our aim should be to add the scientific training in which the countries of Western Europe are ahead of us to that daring and restless energy and those practical instincts which seldom flourish unless the best years of youth are spent in the workshop. Recollecting always that whatever a youth learns for himself by direct experience in well-conducted works teaches him more and stimulates his mental activity more than if it were taught him by a master in a technical school with model instruments. Footnotes. For training to benefit particular trades. One of the weakest points of technical education is that it does not educate the sense of proportion and the desire for simplicity of detail. The English, and to an even greater extent the Americans, have acquired in actual business the faculty of rejecting intricacies in machinery and processes which are not worth what they cost and practical instinct of this kind often enables them to succeed in competition with continental rivals who are much better educated for the benefit of training in a workshop. A good plan is that of spending the six winter months of several years after leaving school in learning science in college and the six summer months as article pupils in large workshops. The present writer introduced this plan about forty years ago at University College Bristol, now the University of Bristol. But it has practical difficulties which can be overcome only by the cordial and generous cooperation of the heads of large firms with the college authorities. Another excellent plan is that adopted in the school attached to the works of Messer's Mather and Platt at Manchester. Quotes, the drawings made in the school are of work actually in progress in the shops. One day the teacher gives the necessary explanations and calculations and the next day the scholars see, as it were on the Anvil, the very thing which has been the subject of his lecture. End quote. End of footnote. The old apprenticeship system is not exactly suited to modern conditions and it has fallen into disuse, but a substitute for it is wanted. Within the last few years many of the ablest manufacturers have begun to set the fashion of making their sons work through every stage in succession of the business they will ultimately have to control. But this splendid education can be had only by a few. So many and various are the branches of any great modern industry that it would be impossible for the employers to undertake, as they used to do, that every youth committed to their care should learn all. And indeed a lad of ordinary ability would be bewildered by the attempt. But it does not seem impracticable to revive the apprenticeship system in a modified form. Footnote. The employer binds himself to see that the apprentice is thoroughly taught in the workshop all the subdivisions of one great division of his trade, instead of letting him learn only one of these subdivisions, as too often happens now. The apprentice's training would then often be as broad as if he had been taught the whole of the trade as it existed a few generations ago, and it might be supplemented by a theoretical knowledge of all branches of the trade, acquired in a technical school. Something resembling the old apprenticeship system has recently come into vogue for young Englishmen who desire to learn the business of farming under the peculiar conditions of a new country. And there are some signs that the plan may be extended to the business of farming in this country, for which it is in many respects admirably adapted. But there remains a great deal of education suitable to the farmer and to the farm labourer which can best be given in agricultural colleges and dairy schools. Meanwhile, many great agencies for the technical education of adults are being rapidly developed, such as public exhibitions, trade associations and congresses, and trade journals. Each of them has its own work to do. In agriculture and some other trades the greatest aid to progress is perhaps found in public shows. But those industries, which are more advanced and in the hands of persons of studious habits, owe more to the diffusion of practical and scientific knowledge by trade journals, which, aided by changes in the methods of industry and also in its social conditions, are breaking up trade secrets and helping men of small means in competition with their richer rivals. End of footnote The great epoch-making inventions in industry came till recently almost exclusively from England. But now other nations are joining in the race. The excellence of the common schools of the Americans, the variety of their lives, the interchange of ideas between different races among them, and the peculiar conditions of their agriculture have developed a restless spirit of inquiry, while technical education is now being pushed on with great vigor. On the other hand, the diffusion of scientific knowledge among the middle and even the working classes of Germany, combined with their familiarity with modern languages, and their habits of travelling in pursuit of instruction, has enabled them to keep up with the English and American mechanics and to take the lead in many of the applications of chemistry to business. Footnote The heads of almost every progressive firm on the continent have carefully studied processes and machinery in foreign lands. The English are great travellers, but partly perhaps on account of their ignorance of other languages, they seem hardly to set enough store on the technical education that can be gained by the wise use of travel. End of footnote Section 5 It is true that there are many kinds of work which can be done as efficiently by an uneducated as by an educated workman, and that the higher branches of education are of little direct use except to employers and foremen and a comparatively small number of artisans. But a good education confers great indirect benefits even on the ordinary workman. It stimulates his mental activity. It fosters in him a habit of wise inquisitiveness. It makes him more intelligent, more ready, more trustworthy in his ordinary work. It raises the tone of his life in working hours and out of working hours. It is thus an important means towards the production of material wealth. At the same time that, regarded as an end in itself, it is inferior to none of those which the production of material wealth can be made to subserve. We must however look in another direction for a part, perhaps the greater part, of the immediate economic gain which the nation may derive from an improvement in the general and technical education of the mass of the people. We must look not so much at those who stay in the rank and file of the working classes, as at those who rise from a humble birth to join the higher ranks of skilled artisans, to become foremen or employers, to advance the boundaries of science, or possibly to add to the national wealth in art and literature. The laws which govern the birth of genius are inscrutable. It is probable that the percentage of children of the working classes who are endowed with natural abilities of the highest order is not so great as that of the children of people who have attained or have inherited a higher position in society. But since the manual labour classes are four or five times as numerous as all other classes put together, it is not unlikely that more than half of the best natural genius that is born into the country belongs to them, and of this a great part is fruitless for want of opportunity. There is no extravagance more prejudicial to the growth of national wealth than that wasteful negligence which allows genius that happens to be born of lowly parentage to expend itself in lowly work. No change would conduce so much to the rapid increase of material wealth as an improvement in our schools, and especially those of the middle grades, provided it be combined with an extensive system of scholarships which will enable the clever son of a working man to rise gradually from school to school till he has the best theoretical and practical education which the age can give. To the abilities of children of the working classes may be ascribed the greater part of the success of the free towns in the middle ages and of Scotland in recent times. Even within England itself there is a lesson of the same kind to be learnt. Progress is most rapid in those parts of the country in which the greatest proportion of the leaders of industry are the sons of working men. For instance the beginning of the manufacturing era found social distinctions more closely marked and more firmly established in the south than in the north of England. In the south something of a spirit of caste has held back the working men and the sons of working men from rising to posts of command, and the old established families have been wanting in that elasticity and freshness of mind which no social advantage can supply and which comes only from natural gifts. This spirit of caste and this deficiency of new blood among the leaders of industry have mutually sustained one another, and there are not a few towns in the south of England whose decadence within living memory can be traced in a great measure to this cause. Education in art stands on a somewhat different footing from education in hard thinking. For while the latter nearly always strengthens the character the former not unfrequently fails to do this. Nevertheless the development of the artistic faculties of the people is in itself an aim of the very highest importance and is becoming a chief factor of industrial efficiency. We are here concerned almost exclusively with those branches of art which appeal to the eye. For though literature and music combine as much and more to the fullness of life, yet their development does not directly affect and does not depend upon the methods of business, the processes of manufacture and the skill of artisans. The artisan of Europe in the Middle Ages and of Eastern countries now has perhaps obtained credit for more originality than he has really possessed. Eastern carpets for instance are full of grand conceptions, but if we examine a great many examples of the art of any one place, selected perhaps from the work of several centuries, we often find very little variety in their fundamental ideas. But in the modern era of rapid changes, some caused by fashion and some by the beneficial movements of industrial and social progress, everyone feels free to make a new departure. Everyone has to rely in the main on his own resources. There is no slowly matured public criticism to guide him. Footnote. In fact every designer in a primitive age is governed by precedent. Only very daring people depart from it. Even when they do not depart far, and their innovations are subjected to the test of experience, which in the long run is infallible. For though the crudest and most ridiculous fashions in art and in literature will be accepted by the people for a time at the bidding of their social superiors, nothing but true artistic excellence has enabled a ballad or a melody, a style of dress or a pattern of furniture to retain its popularity among a whole nation for many generations together. These innovations then, which were inconsistent with the true spirit of art, were suppressed, and those that were on the right track were retained and became the starting point for further progress, and thus traditional instincts played a great part in preserving the purity of the industrial arts in Oriental countries, and to a less extent in medieval Europe. End of footnote. This is however not the only, perhaps not the chief disadvantage, under which artistic design labours in our own age. There is no good reason for believing that the children of ordinary workmen in the Middle Ages had more power of artistic origination than those of ordinary village carpenters or blacksmiths of today. But if one among ten thousand happened to have genius, it found vent in his work, and was stimulated by the competition of the guilds and in other ways. But the modern artisan is apt to be occupied in the management of machinery, and though the faculties which he develops may be more solid and may help more in the long run towards the highest progress of the human race than did the taste and fancy of his medieval predecessor, yet they do not contribute directly towards the progress of art. And if he should find in himself a higher order of ability than among his fellows, he will probably endeavour to take a leading part in the management of a trades union or some other society, or to collect together a little store of capital and to rise out of that trade in which he was educated. These are not ignoble aims, but his ambition would perhaps have been nobler and more fruitful of good to the world if he had stayed in his old trade and striven to create works of beauty which should live after he had gone. It must however be admitted that he would have great difficulties in doing this. The shortness of the time which we allow ourselves for changes in the arts of decoration is scarcely a greater evil than the width of the area of the world over which they are spread. For that causes a further distraction of the hasty and hurried efforts of the designer by compelling him to be always watching the world movements of the supply of and demand for art products. This is a task for which the artisan, who worked with his own hands, is not well fitted, and in consequence nowadays the ordinary artisan finds it best to follow and not to lead. Even the supreme skill of the lion's weaver shows itself now almost exclusively in an inherited power of delicate manipulation and fine perception of colour that enable him to carry out perfectly the ideas of professional designers. Increasing wealth is enabling people to buy things of all kinds to suit the fancy, but with a secondary regard to their powers of wearing, so that in all kinds of clothing and furniture it is every day more true that it is the pattern which sells the things. The influence of the late William Morris and others, combined with the lead which many English designers have derived from Oriental and especially Persian and Indian masters of colour, is acknowledged by Frenchmen themselves to have attained the first rank for certain classes of English fabrics and decorative products. But in other directions France is supreme. Some English manufacturers, who hold their own against the world, would, it is said, be driven out of the market if they had to depend on English patterns. This is partly due to the fact that Paris, having the lead in fashions, as the result of an inherited quick and subtle taste in women's dress, a Parisian design is likely to be in harmony with the coming fashions and to sell better than a design of equal intrinsic worth from elsewhere. Footnote. French designers find it best to live in Paris. If they stay for long out of contact with the central movements of fashion they seem to fall behind hand. Most of them have been educated as artists, but have failed of their highest ambition. It is only in exceptional cases, as for instance for the Sevres China, that those who have succeeded as artists find it worth their while to design. Englishmen can, however, hold their own in designing for oriental markets, and there is evidence that the English are at least equal to the French in originality, that they are inferior in quickness in seeing how to group forms and colours so as to obtain an effective result. It is probable that the profession of the modern designer has not yet risen to the best position which is incapable of holding, for it has been to a disproportionate extent under the influence of one nation, and that nation is one whose works in the highest branches of art have seldom borne to be transplanted. They have indeed often been applauded and imitated at the time by other nations, but they have as yet seldom struck a keynote for the best work of later generations. End of footnote. Technical education then, though it cannot add much directly to the supply of genius in art any more than it can in science or in business, can yet save much natural artistic genius from running to waste. And it is called on to do this all the more, because the training that was given by the older forms of handicraft can never be revived on a large scale. Footnote. The painters themselves have put on record in the portrait galleries the fact that in medieval times, and even later, there art attracted a larger share of the best intellect than it does now, when the ambition of youth is tempted by the excitement of modern business. When its zeal for imperishable achievements finds a field in the discoveries of modern science. And lastly, when a great deal of excellent talent is insensibly diverted from high aims by the ready pay to be got by hastily writing half-thoughts for periodical literature. End of footnote. Section 7. We may then conclude that the wisdom of expending public and private funds on education is not to be measured by its direct fruits alone. It will be profitable, as a mere investment, to give the masses of the people much greater opportunities than they can generally avail themselves of. For by this means many, who would have died unknown, are enabled to get the start needed for bringing out their latent abilities. And the economic value of one great industrial genius is sufficient to cover the expenses of the education of a whole town. For one new idea, such as Bessemer's Chief Invention, adds as much to England's productive power as the labour of a hundred thousand men. Less direct, but not less in importance, is the aid given to production by medical discoveries, such as those of Jenner or Pasteur, which increase our health and working power. And again, by scientific work such as that of mathematics or biology, even though many generations may pass away before it bears visible fruit in greater material well-being. All that is spent during many years in opening the means of higher education to the masses would be well paid for if it called out one more Newton or Darwin, Shakespeare or Beethoven. There are few practical problems in which the economist has a more direct interest than those relating to the principles on which the expense of the education of children should be divided between the state and the parents. But we must now consider the conditions that determine the power and the will of the parents to bear their share of the expense, whatever it may be. Most parents are willing to do for their children what their own parents did for them, and perhaps even to go a little beyond it if they find themselves among neighbours who happen to have a rather higher standard. But to do more than this requires, in addition to the moral qualities of unselfishness and a warmth of affection that are perhaps not rare, a certain habit of mind which is as yet not very common. It requires the habit of distinctly realising the future of regarding a distant event as of nearly the same importance as if it were close at hand, discounting the future at low rate of interest. This habit is at once a chief product and a chief cause of civilisation and is seldom fully developed except among the middle and upper classes of the more cultivated nations. 8. Parents generally bring up their children to occupations in their own grade, and therefore the total supply of labour in any grade in any one generation is in a great measure determined by the numbers in that grade in the preceding generation, yet within the grade itself there is a greater mobility. If the advantages of any one occupation in it rise above the average, there is a quick influx of youth from other occupations within the grade. The vertical movement from one grade to another is seldom very rapid or on a very large scale. But when the advantages of a grade have risen relatively to the difficulty of the work required of it, many small streams of labour, both youthful and adult, will begin to flow towards it, and though none of them may be very large, they will together have a sufficient volume to satisfy before long the increased demand for labour in that grade. We must defer to a later stage fuller discussion of the obstacles which the conditions of any place and time oppose to the free mobility of labour, and also of the inducements which they offer to anyone to change his occupation or to bring up his son to an occupation different from his own. But we have seen enough to conclude that, other things being equal, an increase in the earnings that are to be got by labour increases its rate of growth, or in other words, a rise in its demand price increases the supply of it. If the state of knowledge, and of ethical, social and domestic habits be given, then the vigour of the people as a whole, if not their numbers, and both the numbers and vigour of any trade in particular, may be said to have a supply price in this sense, that there is a certain level of the demand price which will keep them stationary, that a higher price would cause them to increase, and that a lower price would cause them to decrease. Thus economic causes play a part in governing the growth of population as a whole, as well as the supply of labour in any particular grade. But their influence on the numbers of the population as a whole is largely indirect, and is exerted by way of the ethical, social and domestic habits of life. For these habits are themselves influenced by economic causes deeply, though slowly, and in ways some of which are difficult to trace and impossible to predict. Mille was so much impressed by the difficulties that beset a parent in the attempt to bring up his son to an occupation widely different in character from his own, that he said, So complete indeed has hitherto been the separation, so strongly marked the line of demarcation between the different grades of labourers as to be almost equivalent to an hereditary distinction of caste. Each employment being chiefly recruited from the children of those already employed in it, or in employments of the same rank with it in social estimation, or from the children of persons who, if originally of a lower rank, have succeeded in raising themselves by their exertions. The liberal professions are mostly supplied by the sons of either the professional or the idle classes. The more highly skilled manual employments are filled up from the sons of skilled artisans, or the class of tradesmen who rank with them. The lower classes of skilled employments are in a similar case, and unskilled labourers, with occasional exceptions, remain from father to son in their pristine condition. Consequently the wages of each class have hitherto been regulated by the increase of its own population rather than that of the general population of the country. But he goes on, the changes however, now so rapidly taking place in usages and ideas, are undermining all these distinctions. His prescience has been vindicated by the progress of change since he wrote. The broad lines of division which he pointed out have been almost obliterated by the rapid action of those causes which, as we saw earlier in the chapter, are reducing the amount of skill and ability required in some occupations and increasing it in others. We cannot any longer regard different occupations as distributed among four great planes, but we may perhaps think of them as resembling a long flight of steps of unequal breadth, some of them being so broad as to act as landing stages. Or even better still, we might picture to ourselves two flights of stairs, one representing the hard-handed industries and the other the soft-handed industries, because the vertical division between these two is in fact as broad and as clearly marked as the horizontal division between any two grades. Mill's classification had lost a great part of its value when Keynes adopted it. A classification more suited to our existing conditions is offered by Giddings. It is open to the objection that it draws broad lines of division where nature has made no broad lines, but it is perhaps as good as any division of industry into four grades can be. His divisions are 1. automatic manual labour, including common labourers and machine tenders. 2. responsible manual labour, including those who can be entrusted with some responsibility and labour of self-direction. 3. automatic brain-workers, such as bookkeepers. And 4. responsible brain-workers, including the superintendents and directors. The conditions and methods of the large and incessant movement of the population upwards and downwards from grade to grade are studied more fully below. The growing demand for boys to run errands, and to do other work that has no educational value, has increased the danger that parents may send their sons into avenues that have no outlook for good employment in later years, and something is being done by public agency, and more by the devotion and energy of men and women in unofficial association in giving out notes of warning against such blind alley occupations and assisting lads to prepare themselves for skilled work. These efforts may be of great national value, but care must be taken that this guidance and help as accessible to the higher strains of the working class population when in need of it as to the lower, lest the race should degenerate. End of footnote. End of Chapter 6. Chapter 7 of Principles of Economics, Book 4. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, visit LibriVox.org. Principles of Economics, Book 4. By Alfred Marshall. Chapter 7. The Growth of Wealth. In this chapter, it is not necessary to distinguish the points of view in which wealth is regarded as the object of consumption and as an agent of production. We are concerned with the growth of wealth simply, and we have no need to emphasize its uses as capital. The earliest forms of wealth were probably implements for hunting and fishing, and personal ornaments, and in cold countries, clothing and huts. During this stage, the domestication of animals began. But at first they were probably cared for chiefly for their own sake, because they were beautiful, and it was pleasant to have them. They were, like articles of personal ornament, desired because of the immediate gratification to be derived from their possession, rather than as a provision against future needs. Gradually the herds of domesticated animals increased, and during the pastoral stage they were at once the pleasure and the pride of their possessors, the outward emblems of social rank, and by far the most important store of wealth accumulated as provision against future needs. As numbers thickened and the people settled down to agriculture, cultivated land took the first place in the inventory of wealth, and that part of the value of the land which was due to improvements, among which wells held a conspicuous place, became the chief element of capital in the narrower sense of the term. Next in importance came houses, domesticated animals, and in some places boats and ships. But the implements of production, whether for use in agriculture or in domestic manufacturers, remained for a long time of little value. In some places however, precious stones and the precious metals in various forms became early a leading object of desire and a recognized means of hoarding wealth. While to say nothing of the palaces of monarchs, a large part of social wealth in many comparatively rude civilizations took the form of edifices for public purposes, chiefly religious, and of roads and bridges, of canals and irrigation works. For some thousands of years these remained the chief forms of accumulated wealth. In towns indeed houses and household furniture took the first place, and stocks of the more expensive of raw materials counted for a good deal. But though the inhabitants of the towns had often more wealth per head than those of the country, their total numbers were small, and their aggregate wealth was very much less than that of the country. During all this time the only trade that used very expensive implements was the trade of carrying goods by water. The weavers looms, the husbandmen's plows, and the blacksmith's anvils were of simple construction and were of little account beside the merchant's ships. But in the eighteenth century England inaugurated the era of expensive implements. The implements of the English farmer had been rising slowly in value for a long time, but the progress was quickened in the eighteenth century. After a while the use first of water power and then of steam power caused the rapid substitution of expensive machinery for inexpensive hand tools in one department of production after another. As in earlier times the most expensive implements were ships, and in some cases canals for navigation and irrigation. So now they are the means of locomotion in general. Railways and tramways, canals, docks and ships, telegraph and telephone systems, and waterworks. Even gas works might almost come under this head, on the ground that a great part of their plant is devoted to distributing the gas. After these come mines and iron and chemical works, ship-building yards, printing presses, and other large factories full of expensive machinery. On whichever side we look, we find that the progress and diffusion of knowledge are constantly leading to the adoption of new processes and new machinery, which economize human effort on condition that some of the effort is spent a good while before the attainment of the ultimate ends to which it is directed. It is not easy to measure this progress exactly, because many modern industries had no counterpart in ancient times. But let us compare the past and present conditions of the four great industries the products of which have not changed their general character, namely agriculture, the building, the cloth making, and the carrying trades. In the first two of these hand work still retains an important place, but even in them there is a great development of expensive machinery. Compare, for instance, the rude implements of an Indian riot even of today with the equipment of a progressive lowland farmer, and consider the brick-making, mortar-making, sawing, planing, molding, and slotting machines of a modern builder, his steam-cranes, and his electric light. And if we turn to the textile trades, or at least to those of them which make the simpler products, we find each operative in early times content with implements the cost of which was equivalent to but a few months of his labor. While in modern times it is estimated that for each man, woman, and child employed there is a capital implant alone of more than two hundred pounds, or say the equivalent of five years labor. Again the cost of a steamship is perhaps equivalent to the labor for fifteen years or more of those who work her. While a capital of about one billion pounds invested in railways in England and Wales is equivalent to the work for more than twenty years of the three hundred thousand wage earners employed on them. As civilization has progressed man has always been developing new wants and new and more expensive ways of gratifying them. The rate of progress has sometimes been slow and occasionally there has even been a great retrograde movement. But now we are moving on at a rapid pace that grows quicker every year and we cannot guess where it will stop. On every side further openings are sure to offer themselves, all of which will tend to change the character of our social and industrial life, and to enable us to turn to account vast stores of capital in providing new gratifications and new ways of economizing effort by expending it in anticipation of distant wants. There seems to be no good reason for believing that we are anywhere near a stationary state in which there will be no new important wants to be satisfied, in which there will be no more room for profitably investing present effort in providing for the future, and in which the accumulation of wealth will cease to have any reward. The whole history of man shows that his wants expand with the growth of his wealth and knowledge. And with the growth of openings for the investment of capital there is a constant increase in that surplus of production over the necessaries of life, which gives the power to save. When the arts of production were rude there was very little surplus, except where a strong ruling race kept the subject masses hard at work on the bare necessaries of life, and where the climate was so mild that those necessaries were small and easily obtained. But every increase in the arts of production, and in the capital accumulated to assist and support labor in future production, increased the surplus out of which more wealth could be accumulated. After a time civilization became possible in temperate and even in cold climates. The increase of material wealth was possible under conditions which did not enervate the worker, and did not therefore destroy the foundations on which it rested. Thus from step to step wealth and knowledge have grown, and with every step the power of saving wealth and extending knowledge has increased. The habit of distinctly realizing the future and providing for it has developed itself slowly and fitfully in the course of man's history. Travelers tell us of tribes who might double their resources and enjoyments without increasing their total labor, if they would only apply a little in advance the means that lie within their power and their knowledge, as for instance by fencing in their little plots of vegetables against the intrusion of wild animals. But even this apathy is perhaps less strange than the wastefulness that is found now among some classes in our own country. Cases are not rare of men who alternate between earning two or three pounds a week and being reduced to the verge of starvation. The utility of a shilling to them when they are in employment is less than that of a penny when they are out of it, and yet they never attempt to make provision for the time of need. At the opposite extreme there are misers, in some of whom the passion for saving borders on insanity. While even among peasant proprietors and some other classes we meet not unfrequently with people who carry thrift so far as to stint themselves of necessaries and to impair their power of future work. Thus they lose every way. They never really enjoy life, while the income which their stored up wealth brings them is less than they would have got from the increase of their earning power if they had invested in themselves the wealth that they have accumulated in a material form. In India and to a less extent in Ireland we find people who do indeed abstain from immediate enjoyment and save up considerable sums with great self-sacrifice, but spend all their savings in lavish festivities at funerals and marriages. They make intermittent provision for the near future, but scarcely any permanent provision for the distant future. The great engineering works by which their productive resources have been so much increased have been made chiefly with the capital of the much less self-denying race of Englishmen. Thus the causes which control the accumulation of wealth differ widely in different countries and different ages. They are not quite the same among any two races and perhaps not even among any two social classes in the same race. They depend much on social and religious sanctions, and it is remarkable how when the binding force of custom has been in any degree loosened differences of personal character will cause neighbors brought up under like conditions to differ from one another more widely and more frequently in their habits of extravagance or thrift than in almost any other respect. The thriftlessness of early times was in a great measure due to the want of security that those who made provision for the future would enjoy it. Only those who were already wealthy were strong enough to hold what they had saved. The laborious and self-denying peasant who had heaped up a little store of wealth only to see it taken from him by a stronger hand was a constant warning to his neighbors to enjoy their pleasure and their rest when they could. The border country between England and Scotland made little progress so long as it was liable to incessant forays. There was very little saving by the French peasants in the 18th century when they could escape the plunder of the tax-gatherer only by appearing to be poor. Or by Irish courtiers who on many estates even forty years ago were compelled to follow the same course in order to avoid the landlord's claims of exorbitant rents. Insecurity of this kind has nearly passed away from the civilized world. But we are still suffering in England from the effects of the poor law which ruled in the beginning of the last century and which introduced a new form of insecurity for the working classes. For it arranged that part of their wages should, in effect, be given in the form of poor relief and that this should be distributed among them in inverse proportion to their industry and thrift and forethought so that many thought it foolish to make provision for the future. The traditions and instincts which were fostered by that evil experience are even now a great hindrance to the progress of the working classes and the principle which nominally at least underlies the present poor law that the state should take account only of destitution and not at all of merit acts in the same direction, though with less force. Insecurity of this kind also is being diminished. The growth of enlightened views as to the duties of the state and of private persons towards the poor is tending to make it every day more true that those who have helped themselves and endeavored to provide for their own future will be cared for by society better than the idle and the thoughtless. But the progress in this direction is still slow and there remains much to be done yet. The growth of a money economy and of modern habits of business does indeed hinder the accumulation of wealth by putting new temptations in the way of those who are inclined to live extravagantly. In old times, if a man wanted a good house to live in, he must build it himself. Now he finds plenty of good houses to be hired at a rent. Formally, if he wanted good beer, he must have a good brew house. Now he can buy it more cheaply and better than he could brew it. Now he can borrow books from a library instead of buying them. And he can even furnish his house before he is ready to pay for his furniture. Thus in many ways the modern systems of buying and selling and lending and borrowing together with the growth of new wants lead to new extravagances and to a subordination of the interests of the future to those of the present. But on the other hand, a money economy increases the variety of the uses between which a person can distribute his future expenditure. A person who in a primitive state of society stores up some things against a future need may find that after all he does not need those things as much as others which he has not stored up. And there are many future wants against which it is impossible to provide directly by storing up goods. But he who has stored up capital from which he derives a money income can buy what he will to meet his needs as they arise. Again, modern methods of business have brought with them opportunities for the safe investment of capital in such ways as to yield a revenue to persons who have no good opportunity of engaging in any business, not even in that of agriculture, where the land will under some conditions act as a trustworthy savings bank. These new opportunities have induced some people who would not otherwise have attempted it to put by something for their old age. And, what has had a far greater effect on the growth of wealth, it has rendered it far easier for a man to provide a secure income for his wife and children after his death. For, after all, family affection is the main motive of saving. There are indeed some who find an intense pleasure in seeing their hordes of wealth grow up under their hands with scarcely any thought for the happiness that may be got from its use by themselves or by others. They are prompted partly by the instincts of the chase, by the desire to outstrip their rivals, by the ambition to have shown ability in getting the wealth and to acquire power and social position by its possession. And sometimes the force of habit, started when they are really in need of money, has given them by a sort of reflex action, an artificial and un-reasoning pleasure in amassing wealth for its own sake. But were it not for the family affections, many who now work hard and save carefully, would not exert themselves to do more than secure a comfortable annuity for their own lives, either by purchase from an insurance company or by arranging to spend every year, after they had retired from work, part of their capital as well as all their income. In the one case, they would leave nothing behind them. In the other, only provision for that part of their hoped for old age from which they have been cut off by death. That men, labor and save chiefly for the sake of their families and not for themselves, is shown by the fact that they seldom spend, after they have retired from work, more than the income that comes in from their savings, preferring to leave their stored up wealth intact for their families. While in this country alone, twenty millions a year are saved in the form of insurance policies and are available only after the death of those who save them. A man can have no stronger stimulus to energy and enterprise than the hope of rising in life and leaving his family to start from a higher round of the social ladder than that on which he began. It may even give him an over-mastering passion which reduces to insignificance the desire for ease and for all ordinary pleasures, and sometimes even destroys in him the finer sensibilities and nobler aspirations. But as is shown by the marvelous growth of wealth in America during the present generation, it makes him a mighty producer and accumulator of riches, unless indeed he is in too great a hurry to grasp the social position which his wealth will give him. For his ambition may then lead him into as great extravagance as could have been induced by an improvident and self-indulgent temperament. The greatest savings are made by those who have been brought up on narrow means to stern hard work, who have retained their simple habits in spite of success in business, and who nourish a contempt for showy expenditure and a desire to be found at their death richer than they had been thought to be. This type of character is frequent in the quieter parts of old but vigorous countries, and it was very common among the middle classes in the rural districts of England for more than a generation after the pressure of the great French war and the heavy taxes that lingered in its wake. Next as to the sources of accumulation. The power to save depends on an excess of income over necessary expenditure, and this is greatest among the wealthy. In this country most of the larger incomes but only a few of the smaller are chiefly derived from capital. And early in the present century the commercial classes in England had much more saving habits than either the country gentlemen or the working classes. These causes combined to make English economists of the last generation regard savings as made almost exclusively from the profits of capital. But even in modern England rent and the earnings of professional men and hired workers are an important source of accumulation and they have been the chief source of it in all the earlier stages of civilization. Moreover the middle and especially the professional classes have always denied themselves much in order to invest capital in the education of their children. While a great part of the wages of the working classes is invested in the physical health and strength of their children. The older economists took too little account of the fact that human faculties are as important a means of production as any other kind of capital. And we may conclude, in opposition to them, that any change in the distribution of wealth which gives more to the wage receivers and less to the capitalists is likely, other things being equal, to hasten the increase of material production and that it will not perceptibly retard the storing up of material wealth. Of course other things would not be equal if the change were brought about by violent methods which gave a shock to public security. But a slight and temporary check to the accumulation of material wealth need not necessarily be an evil, even from a purely economic point of view. If being made quietly and without disturbance it provided better opportunities for the great mass of the people, increase their efficiency, and developed in them such habits of self-respect as to result in the growth of a much more efficient race of producers in the next generation. For then it might do more in the long run to promote the growth of even material wealth than great additions to our stock of factories and steam engines. A people among whom wealth is well distributed and who have high ambitions are likely to accumulate a great deal of public property and the savings made in this form alone by some well-to-do democracies form no inconsiderable part of the best possessions which our own age has inherited from its predecessors. The growth of the cooperative movement in all its many forms of building societies, friendly societies, trades unions, of working men's savings banks, etc. Suppose that, even so far as the immediate accumulation of material wealth goes, the resources of the country are not, as the older economists assumed, entirely lost when they are spent in paying wages. Having looked at the development of the methods of saving and the accumulation of wealth, we may now turn to that analysis of the relations between present and deferred gratifications which we began from another point of view in our study of demand. We there saw that anyone who has a stock of a commodity which is applicable to several uses endeavors to distribute it between them all in such a way as to give him the greatest satisfaction. If he thinks he could obtain more satisfaction by transferring some of it from one use to another, he will do so. If, therefore, he makes his distribution rightly, he stops in applying it to each several use at such a point that he gets an equal amount of good out of the application that he is only just induced to make of it to each separate use. In other words, he distributes it between the different uses in such a way that it has the same marginal utility in each. We saw further that the principle remains the same whether all the uses are present or some are present and others deferred, but that in this latter case some new considerations enter of which the chief are, firstly, that the deferring of a gratification necessarily introduces some uncertainty as to its ever being enjoyed, and secondly, that, as human nature is constituted, a present gratification is generally, though not always, preferred to a gratification that is expected to be equal to it, and is as certain as anything can be in human life. A prudent person who thought that he would derive equal gratifications from equal means at all stages of his life would perhaps endeavor to distribute his means equally over his whole life, and if he thought there was a danger that his power of earning income at a future date would run short, he would certainly save some of his means for a future date. He would do this not only if he thought that his savings would increase in his hands, but even if he thought they would diminish. He would put by a few fruit and eggs for the winter because they would then be scarce, though they would not improve by keeping. If he did not see his way to investing his earnings in trade or on loan, so as to derive interest or profits from them, he would follow the example of some of our own forefathers who accumulated small stores of guineas which they carried into the country when they retired from active life. They reckoned that the extra gratification which they could get by spending a few more guineas while money was coming in fast would be of less service to them than the comfort which those guineas would buy for them in their old age. The care of the guineas cost them a great deal of trouble, and no doubt they would have been willing to pay some small charge to anyone who would have relieved them from the trouble of reasoning them any sort of risk. We can therefore imagine a state of things in which stored-up wealth could be put to but little good use, in which many persons wanted to make provision for their own future. While but few of those who wanted to borrow goods were able to offer good security for returning them or equivalent goods at a future date, in such a state of things the postponement of and waiting for enjoyments would be an action that incurred a penalty rather than reaped a reward. By handing over his means to another to be taken care of, a person could only expect to get a sure promise of something less, and not of something more than that which he lent. The rate of interest would be negative. Such a state of things is conceivable, but it is also conceivable and almost equally probable that people may be so anxious to work that they will undergo some penalty as a condition of obtaining leave to work, for as deferring the consumption of some of his means is a thing which a prudent person would desire on its own account, so doing some work is a desirable object on its own account to a healthy person. Political prisoners, for instance, generally regarded as a favor to be allowed to do a little work, and human nature being what it is, are justified in speaking of the interest on capital as the reward of the sacrifice involved in the waiting for the enjoyment of material resources, because few people would save much without reward, just as we speak of wages as the reward of labor, because few people would work hard without reward. The sacrifice of present pleasure for the sake of future has been called abstinence by economists, but this term has been misunderstood. For the greatest accumulators of wealth are very rich persons, some of whom live in luxury, and certainly do not practice abstinence in that sense of the term in which it is convertible with abstemiousness. What economists meant was that when a person abstained from consuming anything, which he had the power of consuming, with the purpose of increasing his resources in the future, his abstinence from that particular act of consumption increased the accumulation of wealth. Since, however, the term is liable to be misunderstood, we may with advantage avoid its use, and say that the accumulation of wealth is generally the result of a postponement of enjoyment, or of a waiting for it, or, in other words, again, it is dependent on man's prospectiveness, that is, his faculty of realizing the future. The demand price of accumulation, that is, the future pleasure which his surroundings enable a person to obtain by working and waiting for the future, takes many forms, but the substance is always the same. The extra pleasure which a peasant who has built a weather-proof hut derives from its usance, while the snow is drifting into those of his neighbors and at less labor on building theirs, is the price earned by his working and waiting. It represents the extra productiveness of efforts wisely spent in providing against distant evils, or for the satisfaction of future wants, as compared with that which would have been derived from an impulsive grasping at immediate satisfactions. Thus it is similar in all fundamental respects to the interest which the retired physician derives from the capital he has lent to a factory, or a mine, to enable it to improve its machinery. And on account of the numerical definiteness of the form in which it is expressed, we may take that interest be the type of and to represent the usance of wealth in other forms. It matters not for our immediate purpose whether the power over the enjoyment for which the person waits was earned by him directly by labor, which is the original source of nearly all enjoyment, or was acquired by him from others by exchange or by inheritance, by legitimate trade or by unscrupulous forms of speculation, by spoliation or by fraud. The only points with which we are just now concerned are that the growth of wealth involves in general a deliberate waiting for a pleasure which a person has, rightly or wrongly, the power of commanding in the immediate present and his willingness so to wait depends on his habit of vividly realizing the future and providing for it. But let us look more closely at the statement that, as human nature is constituted, an increase in the future pleasure which can be secured by a present given sacrifice will in general increase the amount of present sacrifice that people will make. Let us suppose, for instance, that villagers have to get timber for building their cottages from the forests. The more distant these are, the smaller will be the return of future comfort got by each day's work in fetching the wood. The less will be their future gain from the wealth accumulated probably by each day's work. And this smallness of the return of future pleasure to be got at a given present sacrifice and to prevent them from increasing the size of their cottages and will perhaps diminish on the whole the amount of labor they spend in getting timber. But this rule is not without exception, for if custom has made them familiar with cottages of only one fashion, the further they are from the woods and the smaller the usance to be got from the produce of one day's work, the more day's work will they give. And similarly, if a person expects not to use his wealth himself but to let it out on interest, the higher the rate of interest the higher his reward for saving. If the rate of interest on sound investments is four percent and he gives up one hundred pounds worth of enjoyment now, he may expect an annuity of four pounds worth of enjoyment. But he can expect only three pounds worth if the rate is three percent. And a fall in the rate of interest will generally lower the margin at which a person finds it just not worthwhile to give up present pleasures for the sake of those future pleasures that are to be secured by saving some of his means. It will therefore generally cause people to consume a little more now and to make less provision for future enjoyment. But this rule is not without exception. Sir Josiah Child remarked more than two centuries ago that in countries in which the rate of interest is high merchants, when they have gotten great wealth, leave trading and lend out their money at interest, the gain thereof being so easy, certain, and great. Whereas in other countries where interest is at a lower rate they continue merchants from generation to generation and enrich themselves and the state. And it is true now, as it was then, that many men retire from business when they are yet almost in the prime of life and when their knowledge of men and things might enable them to conduct their business more efficiently than ever. Again, as Sargent has pointed out, if a man has decided to go on working and saving till he has provided a certain income for his old age or for his family after his death he will find that he has to save more if the rate of interest is low than if it is high. Suppose, for instance, that he wishes to provide an income of 400 pounds a year on which he may retire from business or to ensure 400 pounds a year for his wife and children after his death. If, then, the current rate of interest is 5%, he need only put by 8,000 pounds or ensure his life for 8,000 pounds. But, if it is 4%, he must save 10,000 pounds or ensure his life for 10,000 pounds. It is then possible that a continued fall in the rate of interest may be accompanied by a continued increase in the yearly additions to the world's capital. But, nonetheless, it is true that a fall in the distant benefits to be got by a given amount of working and waiting for the future does tend on the whole to diminish the provision which people make for the future. Or, in more modern phrase, that a fall in the rate of interest tends to check the accumulation of wealth. For though with man's growing command over the resources of nature, he may continue to save much even with a low rate of interest. Yet, while human nature remains as it is, every fall in that rate is likely to cause many more people to save less than to save more than they would otherwise have done. The causes which govern the accumulation of wealth and its relation to the rate of interest have so many points of contact with various parts of economic science that the study of them cannot easily be brought together in one part of our inquiry. And although in the present book we are concerned mainly with the site of supply, it has seemed necessary to indicate provisionally here something of the general relations between the demand for and the supply of capital. And we have seen that the accumulation of wealth is governed by a great variety of causes, by custom, by habits of self-control and realizing the future, and above all by the power of family affection. Security is a necessary condition for it, and the progress of knowledge and intelligence furthers it in many ways. A rise in the rate of interest offered for capital, that is, in the demand price for saving, tends to increase the volume of saving. For in spite of the fact that a few people who have determined to secure an income of a certain fixed amount for themselves or their family will save less with a high rate of interest than with a low rate, it is a nearly universal rule that a rise in the rate increases the desire to save. And it often increases the power to save, or rather it is often an indication of an increased efficiency of our productive resources. But the older economists went too far in suggesting that a rise of interest, or of profits, at the expense of wages always increased the power of saving. They forgot that from the national point of view the investment of wealth in the child of the working man is as productive as its investment in horses or machinery. It must, however, be recollected that the annual investment of wealth is a small part of the already existing stock, and that therefore the stock would not be increased perceptibly in any one year by even a considerable increase in the annual rate of saving. Note on the statistics of the growth of wealth. The statistical history of the growth of wealth is singularly poor and misleading. This is partly due to difficulties inherent in any attempt to give a numerical measure of wealth which shall be applicable to different places and times. Partly to the absence of systematic attempts to collect the necessary facts. The government of the United States does indeed ask for returns of every person's property, and though the results thus obtained are not satisfactory, yet they are perhaps the best we have. Estimates of the wealth of other countries have to be based almost exclusively on estimates of income, which are capitalized at various numbers of year's purchase. This number being chosen with reference, one, to the general rate of interest current at the time, two, to the extent to which the income derived from the use of wealth in any particular form is to be credited, A, to the permanent income-yielding power of the wealth itself, and B, to either the labor spent in applying it or the using up of the capital itself. This last head is specially important in the case of ironworks which depreciate rapidly, and still more in the case of such mines as are likely to be speedily exhausted. Both must be capitalized at only a few years' purchase. On the other hand, the income-yielding power of land is likely to increase. And where that is the case, the income from land has to be capitalized at a greater number of years' purchase, which may be regarded as making a negative provision under the head of 2B. Land, houses, and livestock are the three forms of wealth which have been in the first rank of importance always and everywhere. But land differs from other things in this, that an increase in its value is often chiefly due to an increase in its scarcity, and is therefore a measure rather of growing once than of growing means of meeting once. Thus the land of the United States in 1880 counted as of about equal value with the land of the United Kingdom, and about half that of France. Its money value was insignificant a hundred years ago, and if the density of population two or three hundred years hence is nearly the same in the United States as in the United Kingdom, the land of the former will then be worth at least 20 times as much as that of the latter. In the early Middle Ages, the whole value of the land of England was much less than that of the few large-boned but small-sized animals that starved through the winter on it. Now, though much of the best land is entered under the heads of houses, railways, etc., though the livestock is now probably more than ten times as heavy in aggregate weight and of better quality, and though there is now abundant farming capital of kinds which were then unknown, yet agricultural land is now worth more than three times as much as the farm stock. The few years of the pressure of the Great French War nearly doubled the nominal value of the land of England. Since then, free trade, improvements in transport, the opening of new countries, and other causes have lowered the nominal value of that part of the land which is devoted to agriculture. And they have made the general purchasing power of money in terms of commodities rise in England relatively to the continent. Early in the last century, 25 francs would buy more and especially more of the things needed by the working classes in France and Germany than one pound would in England. But now the advantage is the other way and this causes the recent growth of the wealth of France and Germany to appear to be greater relatively to that of England than it really is. When a count is taken of facts of this class and also of the fact that a fall in the rate of interest increases the number of years purchase at which any income has to be capitalized and therefore increases the value of a property which yields a given income. We see that the estimates of national wealth would be very misleading, even if the statistics of income on which they are based were accurate. But still such estimates are not wholly without value. Sir R. Giffens, Growth of Capital, and Mr. Chiotza Money's Riches and Poverty contain suggestive discussions on many of the figures in the following table. But their divergences show the great uncertainty of all such estimates. Mr. Money's estimate of the value of land, that is, agricultural land with farm buildings, is probably too low. Sir R. Giffens estimates the value of public property at 500 million pounds and he omits public loans held at home on the ground that the entries for them would cancel one another, as much being debited under the head of public property as is credited under that of private property. Mr. Money reckons the gross value of public roads, parks, buildings, bridges, sewers, lighting and waterworks, tramways, et cetera at 1,650 million pounds. And after deducting from this 1,200 million pounds for public loans he gets 450 million pounds for the net value of public property and he thus becomes free to count public loans held at home under private property. He estimates the value of foreign stock exchange securities and other foreign property held in the United Kingdom at 1,821 million pounds. These estimates of wealth are mainly based on estimates of income. And, as regards the statistics of income, attention may be directed to Mr. Bowley's instructive analysis in national progress since 1882 and in the Economic Journal for September 1904. Country and Author of Estimate England 1679 Petty Land 144 million pounds Houses, et cetera 30 million pounds Farm Capital 36 million pounds Other Wealth 40 million pounds Total Wealth 250 million pounds Wealth Per Capita 42 pounds 1690 Gregory King Land 180 million pounds Houses, et cetera 45 million pounds Farm Capital 25 million pounds Other Wealth 70 million pounds Total Wealth 320 million pounds Wealth Per Capita 58 pounds 1812 Kolkuhun Land 750 million pounds Houses, et cetera 300 million pounds Farm Capital 143 million pounds Other Wealth 653 million pounds Total Wealth 1846 million pounds Wealth Per Capita 180 pounds 1885 Giffen Land 1333 million pounds Houses, et cetera 1700 million pounds Farm Capital 382 million pounds Other Wealth 3012 million pounds Total Wealth 6427 million pounds Wealth Per Capita 315 pounds United Kingdom 1812 Kolkuhun Land 1200 million pounds Houses, et cetera 400 million pounds Farm Capital 228 million pounds Other Wealth 908 million pounds Total Wealth 2736 million pounds Wealth Per Capita 160 pounds 1855 Edelston Land 1700 million pounds Houses, et cetera 550 million pounds Farm Capital 472 million pounds Other Wealth 1048 million pounds Total Wealth 3760 million pounds Wealth Per Capita 130 pounds 1865 Giffen Land 1864 million pounds Houses, et cetera 1031 million pounds Farm Capital 620 million pounds Other Wealth 2598 million pounds Total Wealth 6113 million pounds Wealth Per Capita 200 pounds Total Wealth Land 2007 million pounds Houses, et cetera 1420 million pounds Farm Capital 668 million pounds Other Wealth 4453 million pounds Total Wealth 8548 million pounds Wealth Per Capita 1875 Land 2007 million pounds Wealth Per Capita 260 pounds 1885 Land 1691 million pounds Houses, et cetera 1,927 million pounds Farm Capital 522 million pounds Other Wealth 5897 million pounds Total Wealth 1037 million pounds Total Wealth 1037 million pounds Wealth Per Capita 270 pounds 1905 Money Land 966 million pounds Houses, et cetera 2,827 million pounds Farm Capital 285 million pounds Other Wealth 7,326 million pounds Total Wealth 11,413 million pounds Wealth Per Capita 265 pounds United States 1880 Census Land 2040 million pounds Houses, et cetera 2,000 million pounds Farm Capital 480 million pounds Other Wealth 4208 million pounds Total Wealth 8,728 million pounds Wealth Per Capita 175 pounds 1890 Total Wealth 13,200 million pounds Wealth Per Capita 208 pounds 1900 Total Wealth 18,860 million pounds Wealth Per Capita 240 million pounds Wealth Per Capita 247 pounds France 1892 De Feuville Land 3,000 million pounds Houses, et cetera 2,000 million pounds Farm Capital 400 million pounds Other Wealth 4,000 million pounds Total Wealth Capita 247 pounds Italy 1884 Panteleoni Land 1,160 million pounds Houses, et cetera 360 million pounds Total Wealth 1,920 million pounds Wealth Per Capita 65 pounds Sir R. Giffen estimates 1903 Statistical Journal Volume 66 Page 584 Thus United Kingdom 15,000 million pounds Canada 1,350 million pounds Australia 1,100 million pounds India 3,000 million pounds South Africa 600 million pounds 1,200 million pounds A tentative history of changes in the relative wealth of different parts of England has been deduced by Rogers from the assessment of several counties for the purpose of taxation. La Vaicombe de Avonelle's great work Les Trois Economiques de la propriété, et cetera 1200 to 1800 contains a rich store of materials as to France and comparative studies on the wealth in France and other nations have been made by La Voisseur Le Roy Berlieu Neymarck Mr. Crammond addressing the Institute of Bankers in March 1919 estimated the national wealth of the United Kingdom to be 24,000 million pounds and the national income to be 3,600 million pounds. He reckoned the net value of the country's foreign investments to have fallen to 1,600 million pounds she having recently sold securities amounting to 1,600 million pounds and borrowing another 1,400 million pounds. On the balance she appeared to be a creditor to the amount of 2,600 million pounds but a great part of this amount cannot be reckoned as adequately secured. End of Chapter 7 Chapter 8 Of Principles of Economics Book 4 This is a LibriVox recording All LibriVox recordings are in the public domain For more information or to volunteer please visit LibriVox.org Principles of Economics Book 4 by Alfred Marshall Chapter 8 Industrial Organization Writers on social science from the time of Plato downwards have delighted to dwell on the increased efficiency which labor derives from organization but in this as in other cases Adam Smith gave a new and larger significance to an old doctrine by the philosophic thurness with which he explained it and the practical knowledge with which he illustrated it after insisting on the advantages of the division of labor and pointing out how they render it possible for increased numbers to live in comfort on a limited territory he argued that the pressure of population on the means of subsistence tends to weed out those races who, through want of organization or for any other cause are unable to turn to the best account the advantages of the place in which they live Before Adam Smith's book had yet found many readers biologists were already beginning to make great advances towards understanding the real nature of the differences in organization which separate the higher from the lower animals and before two more generations had elapsed Malthus's historical account of man's struggle for existence started Darwin on that inquiry as to the effects of the struggle for existence in the animal and vegetable world which issued in his discovery of the selective influence constantly played by it Since that time biology has more than repaid her debt and economists have, in their turn owed much to the many profound analogies which have been discovered by the central and especially industrial organization on the one side and the physical organization of the higher animals on the other In a few cases, indeed the apparent analogies disappeared on closer inquiry but many of those which seemed at first sight most fanciful have gradually been supplemented by others and have at last established their claim to illustrate a fundamental unity of action between the laws of nature in the physical and in the moral world This central unity is set forth in the general rule to which there are not very many exceptions that the development of the organism whether social or physical involves an increasing subdivision of functions between its separate parts on the one hand and on the other a more intimate connection between them Each part gets to be less and less self-sufficient to depend for its well-being more and more on other parts so that any disorder in any part of a highly developed organism will affect other parts also This increased subdivision of functions or differentiation as it is called manifests itself with regard to industry in such forms as the division of labor and the development of specialized skill knowledge and machinery While integration that is a growing intimacy and firmness of the connections between the separate parts of the industrial organism shows itself in such forms as the increase of security of commercial credit and of the means and habits of communication by sea and road by railway and telegraph by post and printing press The doctrine that those organisms which are the most highly developed in the sense in which we have just used the phrase are those which are the most likely to survive in the struggle for existence is itself in process of development It is not yet completely thought out either in its biological or its economic relations But we may pass to consider the main bearings and economics of the law that the struggle for existence causes those organisms to multiply which are best fitted to derive benefit from their environment The law requires to be interpreted carefully for the fact that a thing is beneficial to its environment will not by itself secure its survival in the physical or in the moral world The law of survival of the fittest states that those organisms tend to survive which are best fitted to utilize the environment for their own purposes Those that utilize the environment most often turn out to be those that benefit those around them most but sometimes they are injurious Conversely, the struggle for survival may fail to bring into existence organisms that would be highly beneficial In the economic world, the demand for any industrial arrangement is not certain to call forth a supply unless it is something more than a mere desire for the arrangement or a need for it It must be an efficient demand that is, it must take effect by offering adequate payment or some other benefit to those who supply it A mere desire on the part of employees for a share in the management and the profits of the factory in which they work with clever youths for a good technical education is not a demand in the sense in which the term is used when it is said that supply naturally and surely follows demand This seems a hard truth but some of its harshest features are softened down by the fact that those races whose members render services to one another without exacting direct recompense are not only the most likely to flourish for the time but most likely to rear a large number of descendants inherent their beneficial habits Even in the vegetable world a species of plants, however vigorous in its growth which should be neglectful of the interest of its seeds would soon perish from the earth The standard of family and race duty is often high in the animal kingdom and even those predatory animals which we are accustomed to regard as the types of cruelty which fiercely utilize the environment and do nothing for it in return must yet be willing as individuals to exert themselves for the benefit of their offspring and going beyond the narrower interests of the family to those of the race we find that among so-called social animals such as bees and ants those races survive in which the individual is most energetic in performing varied services for the society without the prompting of direct gain to himself But when we come to human beings endowed with reason and speech the influence of a tribal sense of duty in strengthening the tribe take some more varied form It is true that in the ruder stages of human life many of the services rendered by the individual to others are nearly as much due to hereditary habit and unreasoning impulse as are those of the bees and ants But deliberate and therefore moral self-sacrifice soon makes its appearance it is fostered by the far-seeing guidance of prophets and priests and legislators and is inculcated by parable and legend Gradually the unreasoning sympathy of which there are germs in the lower animals extends its area and gets to be deliberately adopted as a basis of action tribal affection starting from a level hardly higher than that which prevails in a pack of wolves or a horde of bandetti gradually grows into a noble patriotism and religious ideals are raised and purified The races in which these qualities are the most highly developed are sure other things being equal to be stronger than others in war and in contests with famine and disease and ultimately to prevail Thus the struggle for existence causes in the long run those races of men to survive in which the individual is most willing to sacrifice himself for the benefit of those around him and which are consequently the best adapted collectively to make use of their environment Unfortunately however not all the qualities which enable one race to prevail over another benefit mankind as a whole it would no doubt be wrong to lay very much stress on the fact that war like habits have often enabled half savage races to reduce to submission others who were their superiors in every peaceful virtue for such conquests have gradually increased the physical vigor of the world and its capacity for great things and ultimately perhaps have done more good than harm but there is no such qualification to the statement that a race does not establish its claim to deserve well of the world by the mere fact that it flourishes in the midst or on the surface of another race for though biology and social science alike show that parasites sometimes benefit in unexpected ways the race on which they thrive yet in many cases they turn the peculiarities of that race to good account for their own purposes without giving any good return the fact that there is an economic demand for the services of Jewish and Armenian money dealers in Eastern Europe and Asia or for Chinese labor in California is not by itself a proof nor even a very strong ground for believing that such arrangements tend to raise the quality of human life as a whole for though a race entirely dependent on its own resources can scarcely prosper unless it is fairly out with the most important social virtues yet a race which has not these virtues and which is not capable of independent greatness may be able to thrive on its relations with another race but on the whole and subject to grave exceptions those races survive and predominate in which the best qualities are most strongly developed this influence of heredity shows itself nowhere more markedly than in social organization for that must necessarily be a slow growth the product of many generations it must be based on those customs and aptitudes of the great mass of the people which are incapable of quick change in early times when religious ceremonial political military and industrial organization were intimately connected and were indeed but different sides of the same thing nearly all those nations which were leading to the van of the world's progress were found to agree in having adopted a more or less strict system of case and this fact by itself proved that the distinction of case was well suited to its environment and that on the whole it strengthened the races or nations which adopted it for since it was a controlling factor of life the nations which adopted it could not have generally prevailed over others if the influence exerted by it had not been in the main beneficial their preeminence proved not that it was free and defects but that its excellences relative to that particular stage of progress outweighed its defects again we know that an animal or vegetable species may differ from its competitors by having two qualities one of which is of great advantage to it while the other is unimportant perhaps even slightly injurious and that the former of these qualities will make the species succeed in spite of its having the latter the survival of which it will then be no proof that it is beneficial similarly the struggle for existence has kept alive many qualities and habits in the human race which were in themselves of no advantage but which are associated by a more or less permanent bond with others which are a great source of strength such instances are found in the tendency to an overbearing demeanor and a scorn for patient industry among nations that owe their advance chiefly to military victories and again in the tendency among commercial nations to think too much of wealth and to use it for purposes of display but the most striking instances are found in matters of organization the excellent adaptation of the system of case for the special work which it had to do enabled it to flourish in spite of its great faults the chief of which were its rigidity and its sacrifice of the individual to the interests of society or rather to a certain special exigencies of society passing over intermediate stages and coming at once to the modern organization of the western world we find it offering a striking contrast and a no less striking resemblance to the system of case on the one hand rigidity has been seceded by plasticity the methods of industry which were then stereotyped now change with bewildering quickness the social relations of classes and the position of the individual class which were then definitely fixed by traditional rules are now perfectly variable and change their forms with the changing circumstances of the day but on the other hand the sacrifice of the individual to the exigencies of society as regards the production of material wealth seems in some respects to be a case of atavism a reversion to conditions which prevailed in the far away times of the rule of case for the division of labor between the different industry and between different individuals in the same rank is so thorough and uncompromising that the real interests of the producer are sometimes in danger of being sacrificed for the sake of increasing the addition which his work makes to the aggregate production of material wealth Adam Smith while insisting on the general advantages of that minute division of labor and of that subtle industrial organization which were being developed with his time was yet careful to indicate many points in which the system failed and many incidental evils which it involved but many of his followers with less philosophic insight and in some cases with less real knowledge of the world argued boldly that whatever is is right they argued for instance that if a man had a talent for managing business he would be surely led to use that talent for the benefit of mankind that meanwhile a like pursuit of their own interests would lead others to provide for his use such capital as he could turn to best account and that his own interest would lead him to so arrange those in his employment that everyone should do the highest work of which he was capable and no other and that it would lead him to purchase and use all machinery and other aids to production which could in his hands contribute more than the equivalent of their own cost to making the wands of the world this doctrine of natural organization contains more truth of the highest importance to humanity than almost any other which is equally likely to evade the comprehension of those who discuss grave social problems without adequate study and it had a singular fascination for earnest and thoughtful minds but its exaggeration worked much harm especially to those who delighted most in it for it prevented seeing and removing the evil that was intertwined with the good in the changes that were going on around them it hindered them from inquiring whether many even of the broader features of modern industry might not be transitional having indeed good work to do in their time as the case system had in its time but being like it serviceable chiefly in leading the way towards better arrangements for a happier age and it did harm by preparing the way for exaggerated reaction against it moreover the doctrine took no account of the manner in which organs are strengthened by being used Herbert Spencer has assisted with much force on the rule that if any physical or mental exercise gives pleasure and is therefore frequent those physical or mental organs which are used in it are likely to grow rapidly among the lower animals indeed the action of this rule is so intimately interwoven with that of the fittest that the distinction between the two need not often be emphasized for as it might be guessed a priori and as seems to be proved by observation the struggle for survival tends to prevent animals from taking much pleasure in the exercise of functions which do not contribute to their well-being but man with his strong individuality has greater freedom he delights in the use of his faculties for their own sake sometimes using them nobly whether with the abandon of the great Greek burst of life or under the control of a deliberate and steadfast driving towards important ends sometimes ignobley as in the case of a morbid development of the taste for drink the religious the moral the intellectual and the artistic faculties on which the progress of industry depends are not acquired solely for the sake of the things that may be got by them but are developed by exercise for the sake of the pleasure and the happiness which they themselves bring and in the same way that greater factor of economic prosperity the organization of a well-ordered state is the product of an infinite variety of motives many of which have no direct connection with the pursuit of national wealth no doubt it is true that physical peculiarities acquired by the parents during their lifetime are seldom if ever transmitted to their offspring but no conclusive case seems to have been made out for the assertion that the children of those who have led healthy lives physically and morally will not be born with a former fiber than they would have had the same parents grown up under unwholesome influences which had enfeebled the fiber of their minds and their bodies and it is certain that in the former case the children are likely after birth to be better nourished and better trained to acquire more wholesome instincts and to have more of that regard for others and that self-respect which are the mainsprings of human progress than in the latter case it is needful then diligently to inquire whether the present industrial organization might not with advantage be so modified as to increase the opportunities which the lower grades of industry have for using latent mental faculties for deriving pleasure from their use and for strengthening them by use since the argument that such a change had been beneficial it would have been already brought about by the struggle for survival must be rejected as invalid man's prerogative extends to limited but effective control over natural development by forecasting the future and preparing the way for the next step thus progress may be hastened by thought and work by the application of the principles of eugenics to the replenishment of the race from its higher and by the appropriate education of the faculties of either sex but however hastened it must be gradual and relatively slow it must be slow relative to man's growing command over technique and the forces of nature a command which is making ever-growing calls for courage and caution for resource and stead fastness for penetrating insight and for breadth of view and it must be very much too slow to keep pace with the rapid inflow of proposals for the prompt reorganization of society on a new basis in fact our new command over nature while opening the door to much larger schemes for industrial organization than were physically possible even a short time ago places greater responsibilities on those who would advocate new developments of social and industrial structure for though institutions may be changed rapidly yet if they are to endure they must be appropriate to man they cannot retain their stability if they change very much faster than he does thus progress itself increases the urgency of the warning that in the economic world natura non facet seldom progress must be slow but even from the merely material point of view it is to be remembered that changes which add only a little to the immediate efficiency of production may be worth having if they make mankind ready and fit for civilization which will be more effective in the production of wealth and more equal in its distribution and that every system which allows the higher faculties of the lower grades of industry to go to waste is open to grave suspicion end of chapter 8