Wealth In Political Economy
Epigraphs to Book II
Definitions are the basis of systematic reasoning.
The mixture of those things by speech which are by nature divided is the mother of all error.
Bacon made us sensible of the emptiness of the Aristotelian philosophy; Smith, in like manner, caused us to perceive the fallaciousness of all the previous systems of political economy; but the latter no more raised the superstructure of this science, than the former created logic.... We are, however, not yet in possession of an established text-book on the science of political economy, in which the fruits of an enlarged and accurate observation are referred to general principles that can be admitted by every reflecting mind; a work in which these results are so complete and well arranged as to afford to each other mutual support, and that many everywhere and at all times be studied with advantage.
-- J.B. Say, 1803
We may cite as examples of such inchoate but yet incomplete discoveries the great Wealth of Nations by Adam Smith -- a work which still stands out, and will ever stand out, as that of a pioneer, and the only book on political economy which displays its genius to every kind of intelligent reader. But among the specialists and the schools, this work of genius which swayed all Europe in its day, is laid upon the shelf as an antiquated affair, superseded by the smaller and duller men who have pulled his system to pieces and are offering us the fragments as a science most of whose first principles are still under dispute.
-- Professor (Greek) J.P. Mahaffy, "The Present Position of Egyptology," "Nineteenth Century," August, 1894.
Putting this book online was underwritten by The Robert Schalkenbach Foundation, publisher of Henry George's works.
Bringing prosperity through freedom, equality, local autonomy and respect for the commons.
The Science of Political Economy
Book II, The Nature of Wealth
The Meaning of Wealth In Political Economy
Showing How Value From Production Is Wealth In Political Economy
Wealth as fixed in Progress and Poverty -- Course of the scholastic political economy -- The reverse method of this work -- The conclusion the same -- Reason of the disposition to include all value as wealth -- Metaphorical meanings -- Bull and pun -- Metaphorical meaning of wealth -- Its core meaning -- Its use to express exchangeability -- Similar use of money -- Ordinary core meaning the proper meaning of wealth -- Its use in individual economy and in political economy -- What is meant by increase of wealth -- Wealth and labor -- Its factors nature and man -- Wealth their resultant -- Of Adam Smith -- Danger of carrying into political economy a meaning proper in individual economy -- Example of "money" -- "Actual wealth" and "relative wealth" -- "Value from production" and "value from obligation" -- The English tongue has no single word for an article of wealth -- Of "commodities" -- Of "goods" -- Why there is no singular in English -- The attempt to form one by dropping the "s" and Anglo-German jargon
We are now in a position to fix the meaning of wealth as an economic term.
In Progress and Poverty, which I desired to make as brief as possible, and where my main purpose was to fix the meaning of the word capital, I fixed the meaning of the word wealth directly, as "natural products so secured, moved, combined or altered by human labor as to fit them for human satisfaction." This also was the way in which, as I understand it, the Physiocrats, who came substantially to the same conclusion, had defined it. But the scholastic political economists, instead of either discovering for themselves or taking my hint, continued on the road by which Adam Smith had avoided saying finally what wealth was. They continued to discuss the word value, so confused in its various senses, in such manner as to give not only no conclusion as to the real meaning of wealth, but finally to actually destroy political economy itself.
Thus the confusion into which, after more than a hundred years of cultivation, the teaching of political economy has fallen as to the meaning of its principal term -- a confusion which is in reality even greater than in ordinary speech, that makes no pretensions to exactness in the use of the word -- is clearly due to confusions as to the meaning of the term value. The scholastic development of political economy since Adam Smith has not only confused the distinction between value in use and value in exchange, but it has tended to cover up the vital distinction between the two sources of value in exchange; that originating in the storing up of labor, and that originating in what I have called obligation -- often power, devoid of moral right, to compel the expenditure of labor.
This is the condition in which the orthodox political economy now is. It has not only not discovered what its principal term, wealth in the economic sense, really is, but it has so confounded other terms as to give little light on the search.
In this work therefore I have adopted a different method from that employed in Progress and Poverty. Finding it necessary to discuss the meaning of the term value in a fuller way than I had before done, and seeing that in the current political economy the only consensus of opinion was that all wealth had value, I adopted a method the reverse of that of Progress and Poverty, and instead of beginning with wealth, began with value. Commencing with Adam Smith and inquiring what was meant by value, I found that in value were included two absolutely different things, namely, the quality of value from production, and the quality of value from obligation, one of which kinds of value resulted in wealth and the other of which did not. Now, value from production, which is the only kind of value which gives wealth, consists in application of labor in the production of wealth which adds to the common stock of wealth. Wealth, therefore, in political economy consists in natural products so secured, moved, combined or altered by human labor as to fit them for human satisfaction. Value from obligation, on the other hand, though a most important element of value, does not result in increase in the common stock, or in the production of wealth. It has nothing whatever to do with the production of wealth, but only with the distribution of wealth, and its proper place is under that heading.
Thus in the way I have in this work adopted, that of proceeding analytically from value, we come to precisely the same conclusion as that reached in Progress and Poverty, where we proceeded directly and by deduction -- we come to the result that wealth in the politico-economic sense consists in natural substances that have been so secured, moved, combined or altered by human labor as to fit them for human satisfaction. Such substances are wealth and always have value. When they cease to have value they of course cease to be wealth.
Thus, proceeding by the way adopted in this work, we reach precisely the same conclusion as to wealth as by the way adopted in my previous work. The advantages of adopting this mode here are that a conclusion reached by the methods familiar to the students of the scholastic political economy can with difficulty be ignored by them, and that in going in this way over the subject of value much has been seen both for the present and the future that was necessary to a full treatise on the science of political economy and that may elsewhere be dispensed with.
I wish therefore particularly to call the attention of the reader to what has been here done. Not that I hope that anything that I can do, unaccompanied or unsucceeded by a great change in general conditions, can long keep down the disposition which this tendency of political economy that I have alluded to shows.
As there is a reason for everything, in the mental world as truly as in the physical world, so there is a reason for this disposition to include in the term wealth everything that has value, without regard to the origin of that value. It springs at bottom from the desire on the part of those who dominate the accredited organs of education and opinion (who wherever there is inequality in the distribution of wealth are necessarily the wealthy class) to give to the mere legal right of property the same moral sanction that justly attaches to the natural right of property, or at the very least to ignore anything that would show that the recognition of a legal right may involve the denial of a moral right. As the defenders of chattel slavery, and those who did not wish to offend the slave power, not long since dominant in the United States, were obliged to stop their examination of ownership with purchase, assuming that the purchase of a slave carried with it the same right of ownership as did the purchase of a mule or of a bale of cotton, so those who would defend the industrial slavery of today, or at least not offend the wealth power, are obliged to stop their examination of the nature of wealth with value, assuming that everything that has value is therefore wealth, thus involving themselves and leaving their students in a fog of confusions as to the nature of the thing whose laws they profess to examine.
But to whomsoever wishes really to understand political economy there is now no difficulty in coming to a clear and precise determination of the nature of wealth, whichever way he may elect to begin.
The power of the imagination, nay even that power of recognizing likeness and unlikeness, in which perception itself consists, always expands by metaphor the primary or fundamental meaning of a word in common use, and it is by reason of this, even more than by the adoption of new root words, that a language grows in copiousness, flexibility and beauty. Thus such words as light and darkness, sunshine and rain, to eat and to drink, are put by metaphor and simile to a multiplicity of uses in common speech. We speak of the light of hope, or the light that beats upon a throne, or the light of events; of a dark purpose, or a dark saying, or a darkened intellect; of the sunshine of love or prosperity, or of a sunny countenance; of a rain of bullets, or a rain of misfortunes, or a rain of questions or epithets; of a ship eating into the wind, of rust eating iron, or of a man eating his own words; of a sword drinking blood, or of a lover drinking in the looks, words or actions of a loved one. But such use of words in common speech causes no confusion as to their original and fundamental meaning, the core from which all figurative use of them proceeds. The broad humor of the Irish bull comes from our prompt recognition of the difference between core meaning and figurative meaning; and the offensiveness of the deliberate pun, from the impertinence of the implied assumption that we will not quickly recognize this difference.
Now, in common speech the word wealth takes on such figurative meanings as do all other words in common use. We speak of the night's wealth of stars, of a poet's wealth of imagery, of an orator's wealth of expression, of a woman's wealth of hair, of a student's wealth of knowledge, or of the wealth of resource of a general, a statesman or an inventor; of a porcupine's wealth of quills or a bear's wealth of fur. But such uses of the word wealth impose no difficulty. They are merely metaphorical expressions of abundance. So, too, it is with what is called natural wealth. We speak of rich ore and poor ore, of rich land and poor land, of a naturally rich country and a naturally poor country; of a wealth of forest or mines or fisheries; of a wealth of lakes or rivers, or a wealth of beautiful scenery. But where anything more than abundance is expressed in such uses of the word wealth it is that of natural opportunity, or that of utility, or value in use, with which in its fundamental sense wealth has nothing to do. With that fundamental or core meaning of the word wealth, from which all such figurative uses spring, is inextricably blended the idea of human production. Whatever exists without man's agency, was here before he came, and will, so far as we can see, be here after he is gone; or whatever is included in man himself, however well the figurative use of the word wealth may serve to express its abundance or usefulness, cannot be wealth in the fundamental or core meaning of the word.
So, too, is the still more common use of the word wealth to express the power of exchangeability or of commanding exertion. As commonly used the word wealth when applied to the possessions of an individual includes all purchasing power, and is indeed in most cases synonymous with exchange value. But this use of the word is really representative, like the similar use we make of the word money. We say that a man has so much money, or so many dollars or pounds, without meaning, or being understood as meaning, that he has in his possession so much actual money. We mean only that he has what would exchange for so much money. Such representative use of the word money or of the terms of money does not, in everyday affairs, in the least confuse us as to the real meaning of the word. If asked to explain what money is, no one would think of saying that sheep and ships, and lands and houses are money, although he is in the constant habit of speaking of their possession as the possession of money.
So it is with the common use of the word wealth. Many things are commonly spoken of as wealth which we all know, in the true and fundamental meaning of the word, are not wealth at all.
If you take an ordinarily intelligent man whose powers of analysis have not been muddled by what the colleges call the teaching of political economy, and ask him what he understands at bottom by wealth, it will be found at last, though it may require repeated questioning to eliminate metaphor and representation, that the kernel of his idea of wealth is that of natural substances or products so changed in place, form or combination by the exertion of human labor as to fit them or fit them better for the satisfaction of human desire.
This, indeed, is the true meaning of wealth, the meaning of what I have called "value from production." It is the meaning to which in political economy the word wealth must be carefully restricted. For political economy is the economy of communities or nations. In the economy of individuals, to which our ordinary speech usually refers, the word wealth is commonly applied to anything having an exchange value as between individuals. But when used as a term of political economy the word wealth must be limited to a much more definite meaning. Many things are commonly spoken of as wealth in the hands of the individual, which in taking account of collective or general wealth cannot be included. Such things having exchange value, are commonly spoken of as wealth, since as between individuals or between sets of individuals they represent the power of obtaining wealth. But they are not really wealth, inasmuch as their increase or decrease does not affect the sum of wealth. Such are bonds, mortgages, promissory notes, bank -- bills, or other stipulations for the transfer of wealth. Such are franchises, which represent special privileges, accorded to some and denied to others. Such were slaves, whose value represented merely the power of one class to appropriate the earnings of another class. Such are lands or other natural opportunities, the value of which results from the acknowledgment in favor of certain persons of an exclusive legal right to their use, and the profit of their use, and which represents only the power thus given to the mere owner to demand a share of the wealth produced by use. Increase in the value of bonds, mortgages, notes or bank-bills cannot increase the wealth of a community that includes as well those who promise to pay as those who are entitled to receive. Increase in the value of franchises cannot increase the wealth of a community that includes those who are denied special privileges as well as those who are accorded them. The enslavement of a part of their number could not increase the wealth of a people, for more than the enslavers gained the enslaved would lose. Increase in land values does not represent increase in the common wealth, for what landowners gain by higher prices the tenants or ultimate users, who must pay them, are deprived of. And all this value which, in common thought and speech, in legislation and law, is undistinguished from wealth, could, without the destruction or consumption of anything more than a few drops of ink and a piece of paper, be utterly annihilated. By enactment of the sovereign political power debts might be canceled, franchises abolished or taken by the state, slaves emancipated, and land returned to the general usufructuary ownership of the whole people, without the aggregate wealth being diminished by the value of a pinch of snuff, for what some would lose others would gain. There would be no more destruction of wealth than there was creation of wealth when Elizabeth Tudor enriched her favorite courtiers by the grant of monopolies or when Boris Godoonof made Russian peasants merchantable property.
All articles of wealth have value. If they lose value, they cease to be wealth. But all things having value are not wealth, as is erroneously taught in current economic works.* Only such things can be wealth the production of which increases and the destruction of which decreases the aggregate of wealth. If we consider what these things are, and what their nature is, we shall have no difficulty in defining wealth.
When we speak of a community increasing in wealth -- when we say that England has increased in wealth since the accession of Victoria, or that California is now a wealthier country than when it was a Mexican territory -- we do not mean to say that there is more land, or that the natural powers of the land are greater, for the land is the same and its natural powers are the same. Nor yet do we mean that there are more people in the same area, for when we wish to express that idea we speak of increase of population. Nor yet do we mean that the debts or dues owing by some of these people to others of their number have increased. But we mean that there is an increase of certain tangible things, having a value that comes from production, such as buildings, cattle, tools, machinery, agricultural and mineral products, manufactured goods, ships, wagons, furniture and the like. The increase of such things is an increase of wealth; their decrease is a lessening of wealth; and the community that, in proportion to its numbers, has most of such things is the wealthiest community. The common character of these things is that of natural substances or products which have been adapted by human labor to the satisfaction of human desire.
Thus, wealth, as alone the term can be used in political economy, consists of natural products that have been secured, moved or combined, so as to fit them for the gratification of human desires. It is, in other words, labor impressed upon matter in such a way as to store up, as the heat of the sun is stored up in coal, its power to minister to human desires. Nothing that nature supplies to man without the expenditure of labor is wealth; nor yet does the expenditure of labor result in wealth unless there is a tangible product which retains the power of ministering to desire; nor yet again can man himself, nor any of his powers, capabilities or acquirements, nor any obligation to bestow labor or yield up the products of labor from one to another, constitute any part of wealth. Nature and man -- or, in economic terminology, land and labor -- are the two necessary factors in the production of wealth. Wealth is the resultant of their joint action.
And though Adam Smith nowhere formally defined wealth, being mainly occupied with showing that it did not consist exclusively in money or the precious metals; and though incidentally he fell into confusion in regard to it, yet, as may be seen from the passages in the Wealth of Nations before quoted,** this was his idea of wealth when he came to look at it directly -- the idea of products of labor, still retaining the power, impressed on them by labor, of ministering to human desire.
Now in our common use of the word wealth we make no distinction between the various kinds of things that have value, as to the origin of that value, but class them all together under the one word, wealth, speaking of the sum of value which an individual may have at his command as his wealth, or sometimes as his money. This metaphorical use of words is so embedded in common speech that it would be hopeless to object to it in common usage.
So far indeed as such use of the word wealth is confined to the province of individual economy, the relations of man to man, no harm whatever results. But as I said in the introductory, of all the sciences, political economy is that which comes closest to the thought of the masses of men. All men living in society have some sort of political economy, even though they do not recognize it by that name; and no matter how much they may profess ignorance, there is nothing as to which they less feel ignorance. From this comes a danger that the loose use of a word in common thought, where it does no harm, may be insensibly transferred to thought on economic questions, where it may do great harm.
To take an example: Our common habit of estimating possessions in terms of money does no harm whatever, so long as it is confined to the sphere of individual affairs, in which that use has grown up. When, sticking strictly to the idea of the individual, we speak of a man owning, or making or obtaining so much money, we are perfectly well understood, both in our own minds and by others, as meaning not really money, but money's -- worth. Yet, in passing insensibly into the field of political economy, this habit of speaking of money's-worth as money gave enormous strength to what Adam Smith called the mercantile system of political economy, or what is now called the protective system -- a system which has for centuries molded the polity of nations of the European civilization, and which, though now more than a hundred years after the publication of the Wealth of Nations, still continues largely to mold it. Both on this account and on account of other delusions which have taken root in the sphere of economic thought from the habit of commonly using the word money as synonymous with money's-worth, it is to be wished there were some word or phrase in common use that would express the distinction even when not absolutely necessary, between actual money and money's-worth.
The occasional use of some such distinction in common speech between wealth and wealth's-worth is even more to be wished for. There is more danger of injurious confusion from the insensible transference to the economic sphere of the vague uses of the word wealth which suffice for the individual sphere than is the case with similar common uses of the word money. And although the scholastic political economists have been since the time of Adam Smith largely alive to the confusions introduced into political economy by treating money and money's worth as synonymous, and thus, so far as their influence has reached, helped to guard against any danger from the transference of the common use of the word money to economic thought; the sanction of the most respectable colleges and universities is now given to uses of the economic term wealth in a way that only conscious metaphor permits in common speech.
Now since our metaphorical use of the word wealth in the sense of wealth's-worth or value is so deeply rooted, it is to be wished that in common speech, or at least wherever common speech tends into the province of political economy, as it continually does, we should distinguish between true wealth and metaphorical or representative wealth, by the use of such words as "actual wealth"*** and "relative wealth," meaning by the one that which is actually wealth, as being a product of labor, and by the other that which is not in itself wealth, although, possessing value, it will exchange for wealth. Yet this would be too much to try, and I think all may be had that it is possible to gain by clearly showing, as I have tried to do, that there are two kinds of value, one the value from production that adds to wealth, and the other the value from obligation that does not.
The sum of wealth in civilized society consists of things of many different kinds having the common character of holding in store, as it were, the ability of labor to minister to desire. Yet there is in English no single word which will clearly and definitely express the idea of an article of wealth, nor has the usage of economists yet fairly adapted any single word to that meaning as an economic term.
The word "commodity" will serve in many cases. But while it would be hard to speak of such an article of wealth as a railroad, a bridge, a massive building, or the result of the plowing of a field as a commodity, there are other things, usually accounted commodities, since they have value in exchange, that are not properly articles of wealth -- such as lands, bonds, mortgages, franchises, etc.
The word "goods" as commonly used also comes near to the idea of "articles of wealth." But it has connotations if not limitations which make its meaning too narrow fully to express the idea. And even if these were set aside, as they are by a friend of mine, the wife of the superintendent of a Western zoological garden, who, coming to New York with her husband on the annual trip he makes to buy wild animals, jokingly speaks of "shopping for menagerie goods," there would still remain an insuperable difficulty. "Goods," in the meaning of articles of wealth, has in English no singular, and it is impossible to make any, because the singular form of the same word already holds the place with a different meaning. While we cannot speak of "a single goods," still less can we make a singular by dropping the "s." Even though usage should confirm our speaking of the stock of a dealer in wild animals as goods, it would be to destroy the well-established use of the word to speak of a tiger, a hyena or a cobra-de-capello as "a good."
In its most general use "good" is an adjective, expressing a quality which can be thought of only as an attribute of a thing. As a noun, "good" does not mean a tangible thing at all, but a state or condition or quality of being. To try to force either a noun of accepted meaning or an adjective of accepted meaning to do duty as the singular of a noun of totally different meaning is to injure our English tongue, both as a vehicle of intelligible speech and an instrument of precise thought.
To what confusions of thought as well as of speech the attempt to force a singular of the word "goods" leads, may be seen in recent university text-books of political economy; such as that of Professor Marshall of Cambridge University, England. Whoever tries to discover what they mean by wealth will find himself struggling with a jargon in which he will have more difficulty in recognizing his mother tongue than in pigeon-English -- a jargon of such terms as "material goods" and "immaterial goods," "internal goods" and "external goods," "free goods" and "economic goods," "personal goods" and "collective goods," "transferable goods " and "non-transferable goods," with occasional bursts of such thunderous sound as "external-material-transferable goods," "internal-non-transferable goods," "material-external-non-transferable goods" and "personal-external-transferable goods," with all their respective singulars.
There is in English no singular of the word "goods," and the reason is that there is no need for one, since when we want to express the idea of a single item or article in a lot of goods, it is better to use the specific noun, and to speak of a needle or an anchor, a ribbon or a blanket, as the case may be; and where I shall have occasion to speak of a single item of wealth, without reference to kind, or of the plural forms of the same idea, I shall speak of an article or of articles of wealth.
* See, for instance, a book used as a text-book in many of the American and English colleges, the Political Economy, by Francis A. Walker, third edition, New York, 1888, Sec. 7. "Wealth comprises all articles of value and nothing else."
** Book 2, Chapter 11, Paragraphs 8-11
*** With a certain justification which will be indicated in the next chapter the lawyers have already appropriated the term "real estate," or real wealth, to what is in greater part not wealth at all.
How You Can Help
- Transcribing Documents
- Donating Money
- Training for Responsibility
- Public Officials
- Small Businesses
- Family Farms
- Organic Farms
- Real Estate Leaders
- Innovative Land Speculators
- Ethnic Minorities
- Ideological Groups
- Decentralism and Freedom
- Focusing on Local Reform
- Government as Referee
- Government as Public Servant
- Earth as a Commons
- Money as a Common Medium
- Property Derives from Labor
- Wealth Concentration
- Globalization and Trade
- Economic Stagnation
- Boom-Bust Cycles
- Development Subsidies
- Pollution and Depletion
- Public Services
- Health Care
- Shared Services
- Orwellian Economics
- Corporate Efficiency
- Democracy vs. Elections
- Big Government Solutions
- Founding Fathers
- Politics of Fear
- Politics of Least Resistance
- Radical vs. Militant
- Left vs. Right
- Common vs. Collective
- Analysis vs. Vilification
- Influence vs. Power
631 Melwood Avenue
Pittsburgh, PA 15213