Saving Communities

Bringing prosperity through freedom, equality, local autonomy and respect for the commons.

The Ethics of Democracy

by Louis F. Post

Part 5, Politico-Economic Principles
Chapter 6, An Economic Exploration and Survey

TO know how a loaf of bread is made and distributed is to know more of political economy than all the text books and all the statistics can teach. That was Emerson's idea, and Emerson was right. But his idea does not imply that one must know all the chemical and mechanical processes. They are manifold and complex, and it would be impossible for one head, large or small, to hold so much. Even if there were a human brain of this extraordinary capacity, it would very likely be incapable of intelligently using the knowledge it held. Fortunately, therefore, what is necessary is not comprehensive knowledge of technical processes, which is impossible, but intelligent apprehension of familiar economic phenomena, which is not difficult.

The Economic Mysteries

A child who knows how to get candy can be inducted into the economic mysteries. Isn't candy got at the store with pennies? So is bread. A child can understand that. But the same is true of everything else with which the human family satisfy their material wants. Whether their wants be of the stomach for food, of the body for clothing and shelter, of the taste for superior qualities of food and clothing and shelter, or of any of the desires for any other of the infinite variety of material things, those wants are all satisfied by buying objects as candy and bread are bought - by buying them, so to speak, at the store with pennies. In civilized society every material desire can be satisfied as it arises, simply by giving money for the things that satisfy it.

But why is that true? Why do pennies so easily fetch us candy or bread or other good things? They wouldn't if we were not living in civilized society. On a desert island no amount of money could procure a satisfaction for even the least of human desires. It cannot be, then, that money is the final explanation of economic processes. It is evidently only a superficial expression of something more fundamentally characteristic of civilized life.

What that thing is should appear upon a moment's reflection. If money will procure satisfaction for any want, in civilized society where trade is a universal phenomenon, and only for a few in savage society where there is but little trade, and none at all on a desert island where there is no trade, then money must be merely a trade token. It must be something, that is, which passes current among civilized people not because anyone wants it for itself, but because it will buy other things - things that are wanted for themselves. And isn't this a fact which every thoughtful man knows? It is not money but trade that enables the child to buy candy, and his mother to buy bread, or his father to buy a house. If the child's penny could not serve the storekeeper in trade when he goes to buy what he wants for himself, he would not take it in trade when he offers to sell candy to the child. He does not want it except to trade it again. It is simply a token whereby he swaps what he sells for it for what he buys with it. And this fact about the penny is true of all money. The economic phenomenon, therefore, which is more fundamental than money, without which money would be of no use and the object of no one's desire, is trade.

Of course we know that trade consists in swapping things. But why is anything swapped for another thing? Why are things traded? You cannot trade the free air. You cannot trade the waters of the Great Lakes. There are kinds of things, certainly, which cannot be traded. Yet there are other kinds of things in great abundance and bewildering variety which not only can be traded, but are in continual process of trade. Why? What is it that distinguishes the tradable from the untradable?

Isn't it obviously value? Things having no value are not tradable, but things having value are tradable.

As value is commonly expressed in terms of money, it being customary to say of a valuable thing that it is worth so many pennies or so many dollars, it might seem that we had now got back again to money. But that is not the fact. Though value is expressed in terms of money, it does not depend upon money. Things would have value all the same even if there were no money to express their values. Money bears much the same relation to value that the alphabet bears to language or to thought. It furnishes convenient symbols for expression, but is not the thing expressed.

Value is the expression of a comparison. As exemplified in trade it is the name of the ratio at which tradable things are exchanged. If, for illustration, one loaf of bread exchanges for five sticks of candy, the ratio of bread to candy is as one to five. It follows that if you give one penny for your stick of candy you must give five for your bread; or, expressing these values in terms of money, that bread loaves are worth five pennies and candy sticks are worth one penny. Yet it is value itself, and not its capability of expression in terms of money, that makes things tradable. The immediate cause of trade is value.

It cannot be, however, that value is the final explanation of economic processes. There must be something still more fundamental. To say that value is the economic base, is almost as superficial as to say that money is. Value is not economically self-existent. It in turn must have an economic cause.

The cause of value is serviceability, in the restricted sense of capability of serving a human purpose. Unless an object is capable of ministering to some human desire, unless, that is, it possesses the quality of serviceability, it cannot exhibit the phenomenon of value. Value rests upon serviceability. But upon serviceability plus something else. For the air is incalculably serviceable, the waters of the Great Lakes and of the oceans are immensely so, the sunlight is indispensably so; yet none of these has value. It will be observed, however, that while they are serviceable they are not difficult to get. . They are not scarce. On the other hand, serviceable objects which are difficult to get, serviceable objects which are scarce, invariably exhibit value. The cause of value, then, is serviceability in a condition of scarcity. Inasmuch, however, as it is not scarcity but serviceability that causes normal desire for anything, serviceability and not scarcity is the active or inciting cause of value.

True, however, as this obviously is, we have not yet reached the end of our economic exploration. For serviceability, though the inciting cause of value, is itself an effect of anterior causes. If bread were not valuable it wouldn't be tradable. If it were not serviceable it wouldn't have value. But if it didn't exist it couldn't be serviceable. So its serviceability, its value, and its tradability, all depend in turn upon its existence. This seems rather obtrusively obvious, but the most obvious facts are sometimes ignored.

Now, bread does not exist naturally. It is an artificial object. And that is true of the great mass of tradable objects. They are artificial. Some tradable objects, it is true, are not artificial; but these are tradable for a secondary reason - because they are capable of securing in some way service from articles that are artificial. It is the serviceability that is embodied or is capable of being embodied in artificial objects, that makes anything tradable. We find, therefore, that beneath all the economic phenomena we have thus far explored - beneath money, trade, value and serviceability; beneath all these, in the sense of being their cause - are the artificial objects which possess the quality of serviceability, to which value therefore attaches in conditions of scarcity, which are consequently tradable, and which may for that reason be bought with money.

What technical name we give to such objects is of no moment, provided we always use the same name to designate those objects, and use it for nothing else. Then why not distinguish them as "wealth," which is a good old economic term? Using the term strictly in that sense, we are able to say that all the economic levels thus far explored rest upon wealth.

But the end is not yet, for wealth is not self-existent. Consisting of artificial objects it cannot be. As the term "artificial" implies, such objects are produced (which means drawn forth) by human art. If man didn't exist, they would not appear. If man didn't labor, they would not come forth. Without human exertion of brain and brawn, there would be no wealth. Wealth, therefore, is properly called a labor product. So we trace all economic processes back to human labor.

Every material thing is brought to us by human labor - our own labor or some one else's; and if at any stage in the process labor were to stop, our desires would forthwith begin to go unsatisfied. At first we should have to stint ourselves, perhaps, only a little; but soon a little more, and then more, until almost every want would plead in vain for even the least satisfaction. The whole process of production and distribution is a process of labor. The raw materials are produced by labor; the tools and machinery, simple and complex, little and big, are made and repaired and re-made by labor; the transportation facilities are constructed and operated by labor; the factories and store buildings are erected and utilized by labor.

In the loaf of bread there are the labor of the farmer who raises and harvests grain, and of the miller who grinds it; of the mechanics who make the tools and machinery for both farmer and miller, and of those who make the tools and machinery for these mechanics; of the miner who unearths the metals and the woodmen who cut the lumber; and then again of those who make miners' and lumbermen's tools; of the labor that builds railroads and the labor that operates them; of the labor of the baker and that which equips bakeries; of the labor of the banker and the banker's clerks in giving mobility to capital, and of that which constructs and cares for their buildings, as well as that which through other complexities of trade furnishes them with stationery and with business furniture; and so on to the labor that slices the loaf at last and that which produces the knife with which it is sliced. From beginning to end it is all a labor process. Nor is it the labor of the past that keeps the process going; it is the labor of the present.

The wealth we buy with money, then, for the satisfaction of our desires, is in the last analysis the product of current human labor.

The Fundamental Factors

We have now reached a final explanation. Beginning with the economic phenomenon next at hand, and therefore most familiar, that of buying satisfactions with money, we have proceeded, step by step, to the consideration of related phenomena more remote. Thus we have accounted for money by trade, for trade by value, for value by serviceability, for serviceability by artificial objects, and for artificial objects by human labor. It is as if in making a subterranean exploration, we had first laid off the surface soil and then cut through the layers of different material, one after another, down to rock bottom. And human labor is the rock bottom of economic research. It supports all the super-incumbent layers - artificial objects, serviceability, value, trade and money.

Unlike the other economic phenomena through which we have picked our way, labor is economically self-existent. It has no anterior cause on the economic plane. For labor is a technical term descriptive of the human family producing satisfactions for human desires. And while that phenomenon is indeed an effect (as what short of Omnipotence is not?), yet its cause lies beyond the field of economic inquiry. It is not an effect of anterior economic causes. On the economic plane it is itself the cause of all effects.

Nevertheless, labor cannot create. It cannot make something out of nothing. It cannot say, "Let there be bread!" and there is bread. So far from creating, labor has only the power to produce. That is, it can draw forth artificial objects by so adapting the matter and forces which nature supplies as to fit them for serving human purposes. It can change the shape and place of natural things.

For instance, it can produce coal by changing its shape from the mass in the vein to broken pieces in the mining chamber; it can still further produce it by changing its place from the bottom of the mine to the mouth; it can produce it further yet by changing its place from the mouth of the mine to the coal bin, and finally to the stove or grate of the distant consumer. Or, it can produce houses by changing the forms of trees, rock, sand, clay and ore, and assembling them at one point and in one form or shape from many distant points and different shapes.

But labor can produce nothing without natural resources. Tools it does not need. For labor, considered as a cooperative whole, makes all its own tools. They are artificial objects - wealth. But it does need raw materials and working places upon the earth. To use the inclusive economic term, it does need "land." Land is the one thing, the only thing, that labor must have and cannot make. Land is the sole condition of all the economic processes that labor generates. For mining, it must have access to mining land; for farming, to agricultural land; for urban building, to urban land sites; for railroading, to rights of way over land; for sailing, to docks; and so on. Labor without land, even if life were possible, would be utterly powerless to generate the economic processes. On the other hand, land without labor is unproductive of artificial satisfactions. It only furnishes the natural storehouse and workshop for labor, leaving labor to do the rest. Though labor generates the economic processes, it must have access to land to do so. And land it cannot produce. Land is not an artificial object, but a natural one. But with access to land, labor produces in abundance all those artificial objects having value, which we have called "wealth."

Labor is fundamental and land is fundamental. They are the prime factors of all economic processes; labor being the initial or active force and land the responsive or passive condition. Thus labor produces wealth from land, and land yields wealth to labor.

Land, Labor and Wealth, then, are the three subjects of first importance in all economic problems. Land passively yields matter, space and force to the knowledge and skill of man. The active application of that knowledge and skill to those passive elements is Labor; and its product the natural matter and energy so shaped and adjusted as to satisfy the desires that stirred the laborer to activity is Wealth. From this starting point the steps we have taken may be retraced, and the way be more minutely surveyed. Back to money and its functions, through all the mazes of serviceability, value and trade, it is now possible to go with a certainty born of confidence in familiarity with the route. We have discovered the most fundamental of economic principles, and in their light problems otherwise perplexing may be easily and correctly solved.

Land

Let us begin this survey with a somewhat more extended examination into the economic characteristics of Land, which, as we have seen, is the sole condition of the economic processes that Labor at any time generates or maintains.

Land is the natural storehouse from which man draws all his supplies, and the one foundation upon which he rests all his structures. It includes everything except the human family, and such objects as the human family have altered in condition so as to adapt them to human desires. Not only the soil, but the water, the atmosphere, the sunlight, building sites, railway sites, mineral deposits, forests, and even the birds of the air, the fishes of the sea, and the wild animals that roam the earth, are included in this economic category.

It may seem absurd to designate animals and water and air and sunlight as "land," a term habitually associated with the soil and used in contradistinction to air and water. But we are not now considering physics or natural history. The subject of our inquiry is the economic relations of the human family to its environment. We must distinguish things, therefore, by their economic peculiarities.

For that purpose some term having no colloquial connotations might be much better than "land"; some word meaning, for example, "material environment" or "earth chance." But one word will do as well as another if we are careful to think of it in the sense in which we agree to use it. So in economic matters we may speak of "land" without limiting our meaning to what the farmer means when he speaks of plowing "land," or the sailor when upon sighting a shore line he announces the fact with a "land, ho!" or the ocean traveler when he puts his foot upon the dock and tells you he has "landed." We use it as a technical term to distinguish sharply from all other things the natural environment of the human family. As all must agree, man has a natural environment without which he could not work, could not produce satisfactions, could not live at all - an environment which is to his life of wonderful variety what bodies of water are to the simple life of fish and the upper air to that of birds. This environment includes every natural thing that man needs, ranging from air for breathing to all the matter and all the forces of nature, including animal life, which he may alter in condition so as to adapt it to the satisfaction of any of his desires. For convenient reference to that environment, some simple technical term is needed, and the one with which political economists have long been familiar is Land.

This, as already explained, is the sole passive or responsive condition of economic processes. No economic process is possible without it. It always has been, is now, and, though human achievement accomplish untold wonders, always must be, one of the two indispensable factors of producing satisfactions for human desires. Any other conclusion is unthinkable.

Labor

Without Labor, however, Land would yield no artificial thing. Labor is the other indispensable factor. As Land is the passive economic condition, so Labor is the initial economic force. It is Labor applied to and operating upon and in conjunction with Land that causes every other economic process. Or, to put the same thought in another form, it is by means of the energies of man, mental and physical, applied to and operating upon and in conjunction with the material energies of his natural environment, that all artificial satisfactions of human desires are produced. For Labor, like Land, is a technical term of political economy, and as such must be understood more comprehensively than in common speech. It designates human energies, mental and physical, in so far at least as they are devoted to economic processes. So it comprehends all serviceable work - of mind or muscle, with skill or without, as hired man or "boss"; and whether on farms or in factories, out upon the sea or down in the mine, up in the high stories of skyscrapers or away from civilization in the depths of primeval forests, in the hospital or the pulpit, at the bar or the easel or the teacher's desk, in store or warehouse or railroad train or street car or public office. All service is Labor, whether it be a service rendered directly, like that of the barber who shaves you, or one rendered indirectly, like that of the mechanic who impresses his energy upon matter, thereby producing exchangeable objects. Wherever or however human energy responds to the cravings of human desire, the expenditure of that energy for that purpose is Labor.

Wealth

When this application of the energies of man to his natural environment produces substantial results, those results are distinguished by the technical term Wealth.

Wealth is drawn from external nature by man, who, by changing natural materials in form or place or both, produces such artificial objects as tend to satisfy human desire. In technical phrase: from Land, Labor produces Wealth. To call in the aid of metaphor: as father to mother and children to parents, so is Labor to Land and Wealth to both.

Among the distinguishing characteristics of Wealth is its tendency to revert. Not only does it consist of artificial objects produced by man from his natural environment, but with use or lapse of time it loses its artificial quality and passes back again into the great reservoir of matter and force whence it came. A loaf of bread is Wealth. So were the flour of which it was made, the wheat from which the flour was ground, and all the artificial implements which were utilized to bring the grain to fruition, to grind the flour, to bake the bread, and to transport grain, flour and implements in the form of a loaf of bread to the consumer. In raising the grain, agricultural implements were subjected to a "wear and tear" which returned them in degree to the natural reservoirs of supply; while the seed, produced by previous effort, was wholly returned. In grinding the flour, milling implements were returned in degree by their "wear and tear"; and so with baking implements and transporting agencies. At last the bread itself is eaten or wasted. In either case it also returns to the natural sources.

What is thus true of bread and its artificial constituents is true of all other artificial objects. Sooner or later, and with most of them much sooner than later, all artificial objects revert to their original economic condition as part of the natural environment of man.

In technical phrase, therefore, not only is all Wealth produced by Labor from Land, but in natural course it all tends to pass back into Land. This is the never varying result of economic processes.

Serviceability

But why do men produce by Labor from Land artificial objects, or Wealth, if those objects inevitably go back to Land again? Simply, as we have already casually observed, because the consumption of those objects, which is one of the ways in which they revert, satisfies human desire.


Consuming bread satisfies a desire for food; wearing out clothing satisfies desires for covering and ornament; occupying houses, driving horses and carriages, carrying a watch, wearing a jewel, and so on, satisfy other desires. Men systematically produce these things because consuming them gives satisfaction.

It is not because the labor of producing them is itself a pleasure. On the contrary, men instinctively shrink from systematic labor for its own sake. Under natural law - in this connection a law of human nature - men instinctively seek the satisfaction of their desires in the easiest way. Their object is to get the most and the best with the least effort. This is the natural law that inflicts upon us predatory crime when it is perverted, but blesses us with labor-saving invention when it operates normally.

Translated into economic terms, that law, the most fundamental of all the laws of political economy, would read: "In producing Wealth from Land, Labor seeks the easiest way - the line of least resistance."

Since production is irksome and Labor instinctively seeks the line of least resistance, the things it produces must either have, or seem to have, the power of giving some kind of satisfaction, else it will not produce them. That is to say, Wealth must possess the quality of Serviceability. It must be capable of serving some purpose, of ministering to some desire, whether good or bad, doubtful or indifferent. Wealth adapted to serve normal human wants, giving no one pain in order to give others pleasure, may be distinguished as useful, that is, as possessing the quality of utility. Bread would come in this category. But Wealth adapted to serve the purpose of giving pleasure or satisfaction to one by giving pain or causing loss to another (such as instruments of torture), is lacking in the quality of utility. Nevertheless it may be accounted as serviceable, in the restricted sense of the term. It serves to satisfy a desire.

Serviceability as a quality of Wealth is exhibited in two general aspects. An artificial object may be serviceable either in satisfying desire directly, or as a tool or material in aiding to produce such objects. A loaf of bread upon the table satisfies a desire directly; it appeases hunger. But wheat, flour, agricultural implements, mills, cars, wagons, ovens, warehouses, etc., the various artificial materials and artificial implements whereby the loaf of bread is produced to the table of the consumer, these do not satisfy desire directly. They are artificial means whereby objects that do satisfy it directly may be realized.

These two kinds of Serviceability give distinctive character to the articles of Wealth to which they respectively attach. For the articles of Wealth which have the kind of Serviceability that satisfies desire directly, are finished; whereas those that do so indirectly, something being yet necessary to be done to give them final Serviceability, are unfinished. Bread in the possession of the consumer is finished. But wheat, flour, ovens, cars, and the other materials and mechanism for making bread and delivering it to the consumer, and also the bread in the store, are in the other category. Something remains yet to be done by Labor before they have the final kind of Serviceability. To the degree, therefore, that they are used in or are devoted to satisfying the desire for bread, mediately, they are unfinished bread.

With reference to its economic Serviceability, then, there are two kinds of Wealth, namely, Finished and Unfinished. This distinction is important, as we shall see when we get back to Trade; for in Trade it is unfinished wealth that constitutes capital.

Value

Value as well as Serviceability attaches to Wealth. Since artificial objects, or Wealth, have Serviceability - are capable, that is, of satisfying desire - they have possibilities of Value. But they do not for that reason alone actually exhibit Value. They must be scarce as well as serviceable.

If artificial objects could be produced by simple fiat, they would have as much Serviceability as if produced laboriously; but they would have no Value, because they would never be scarce. But why wouldn't they be scarce? Because their acquisition in abundance by everybody would be irksome to nobody. Inasmuch, then, as man is not endowed with magical power; as he cannot say, "Let there be bread!" and there is bread; as, on the contrary, every artificial object is produced only at the expense of human exertion, often severe, and always irksome if frequently repeated - this being the commonplace fact, artificial objects are always scarce except as irksome labor modifies their scarcity.

Their possibilities of Value are realized or made manifest through scarcity; but nothing, however scarce, can have Value unless it possesses the quality of Serviceability. It may have no utility, and still have Value. It may be incapable, that is, of serving any useful purpose, and yet be valuable. But it must have Serviceability of some kind. It must be capable of serving some purpose, or it will be valueless. Value cannot rest upon nor coexist with non-Serviceability. This does not mean that Serviceability and Value are the same thing. They are different things. Nor does it mean that the measure of one is the measure of the other. A given degree of Serviceability has different degrees of Value according to circumstances. What is meant is that Serviceability is the immediate active cause, the immediate generating force, of Value; that no object can under any circumstances have any Value unless it is or seems to be capable of serving some purpose.

Scarcity being necessary to make manifest the Value that resides potentially in Serviceability, all the elements of the Value of Wealth spring from Labor. It is a resultant of two Labor forces - the dynamic of productive power, and the inertia of irksomeness. Productive power can generate Serviceability; irksomeness restrains productive power; the equilibrium is indicated by Value. The application of Labor artificially invests objects with Serviceability, and the irksomeness of Labor invests their Serviceability with Value.

Even to Robinson Crusoe, alone upon his island, this phenomenon of Value was present, though he might not have recognized it by name. He certainly would have valued more those of his artificial possessions that would have cost him great exertion to replace, than those that would have cost him less. The point is admirably made by Henry George.* Referring to Crusoe, he writes that the essential idea of Value "would be brought out in Crusoe's mind by any question of getting or saving one of two or more things. Of several things to him equally useful, which he might find in the wreck of his ship, or on the shore line under conditions which would enable him to secure but one; or of several equally useful to him, which were threatened by a deluge of rain or an incursion of savages, it is evident that he would 'set the most store' by that which would represent to him the greatest effort to replace. Thus, in a tropical island his valuation of a quantity of flour, which he could replace only by cultivating, gathering and pounding the grain, would be much greater than of an equal quantity of bananas, which he might replace at the cost of plucking and carrying them; but on a more northern island this estimate of relative value might be reversed. And so all things which to get or retain would require of him toil, would come to assume in his mind a relation of value distinct from and independent of their usefulness, a relation based on the greater or less degree of exertion that their possession would enable him to avoid in the gratification of his desires.... In the last analysis, value is but an expression of exertion avoided."

The last sentence of that quotation furnishes probably the most exact explanation of Value to be found anywhere in the books: "an expression of exertion avoided" - an expression, that is, of Labor saved. It throws a bright light upon the whole subject of economic Value, whether of artificial or other objects, making it perfectly clear why some things are more valuable than others, and why the degrees of difference are so numerous and extreme. It is not the Labor saved-up or stored in a serviceable object, but the Labor to be saved or avoided by possession of the serviceable object, that gives it Value; and degrees of Value are regulated by the degrees of Labor to be saved by possession of the objects, respectively, to which Value attaches.

Primarily, the objects to which Value attaches are artificial - those objects distinguished as Wealth. This is because such objects are primarily non-existent. They come into being only through Labor, which must be exerted to modify the natural scarcity; and since that exertion is irksome, its results are valuable in the degree that they will serve to save the possessor further exertion.

But secondarily, Value attaches also to natural objects - those distinguished as Land. It does so only secondarily, because primarily Land is not non-existent. On the contrary, primarily it is superabundant. But when some parts of it yield easier returns to Labor than other parts, those parts are capable relatively of saving Labor in the production of Wealth. Consequently, if such Land is made scarce by monopolization it becomes valuable; and the degree of its value is in accordance with the degree of Labor it is capable of saving its possessor.

Trade

Such being the nature of Value, nothing but a peculiarity of Labor not yet considered, is necessary to cause Trade. This peculiarity is best known as Division of Labor, though the better term is Cooperation. It results from the law of human nature already mentioned, that men try to satisfy their desires in the easiest known way.

Evidently a larger general result, a greater volume of Wealth, can be produced with less Labor if some men work regularly at one or some parts of one thing, and others at other things or some of their parts, than if each man works at everything. If, for instance, armies of workmen devote their time and energies to preparing leather, separate groups doing over and over some particular act in the process from raising the cattle to tanning hides; if other armies, also divided into specialized groups, turn the leather into shoes; if still others do the transporting and others the storekeeping, while others divide up into groups to make and maintain the machinery, and so on, more and better shoes will be made and brought to consumers than if each of these men were to devote the same energy to all the processes of making and delivering shoes. This is true of all artificial objects. It is, therefore, economical to make and deliver Wealth by the process which should be known as Cooperation, but is known as Division of Labor.

This process may be observed in two aspects. Sometimes men literally divide their efforts, to produce results which would otherwise waste time and energy. Thus, two men having two errands each to do, two to the eastward a mile and two to the westward a mile, will do them more easily and quickly if one attends to both in one direction and the other to both in the opposite direction, than if each does one errand in each direction. By dividing their efforts, they economize time and energy. The other aspect of Division of Labor is exhibited when men join their efforts to produce results which none of them could accomplish alone. Thus our two men could build two houses, each of which would be better than either man could build alone. So Division of Labor means not only division, but also union, of labor; which is in itself a good reason for preferring the term Cooperation.

Now the things so done would, as we have seen, have Serviceability. Otherwise, they would not be done - certainly not systematically or regularly, which is of the essence of political economy. These two houses, for example, would serve to live in; and if bread were the object of two of those errands and meat of the other two, the meat and bread would serve for food.

Having Serviceability, under circumstances which would enable their possession to save necessary Labor in order to satisfy desire (which implies Scarcity), they would also have Value. The Value of the houses would be greater than that of the lumber, etc., which would be greater than that of the timber, etc., because each in its order would be a labor-saver. So of the bread and meat. After being brought to the central point where they were desired, else the errands would not have been done they would have more Value than before the errands, because they would save the Labor of bringing that much bread and meat to that point to satisfy the desire which caused the errands to be undertaken.

We now have a grasp of the conditions of Trade.

To recur for illustration to the examples: When those houses are finished, their possession will save equal Labor. Consequently they have equal Value, and the two men will exchange their respective undivided interests equally. Each will swap his undivided interest in the house he gives, for the other's undivided interest in the house he gets. So each comes to own, as the result of his own labor, a whole house, which neither is capable of building by himself.

Likewise with the errands. When they are done, the two men have at the central point, where they are wanted, two loaves of bread fetched a mile in one direction, and two pieces of meat fetched a mile in another. As the possession of either loaf will save further Labor in equal degree, they have equal Value. Similarly of the pieces of meat. But how much Labor would each loaf of bread save over and above its cost at the mile-away bakery? Obviously not more than a two-mile walk. Precisely so with the pieces of meat. Consequently, as a rule, no one would give more for either than the equivalent of a two-mile walk. Therefore, the man who fetched the bread would trade even, his extra loaf for the other's extra piece of meat, and vice versa, provided each had cost the same at the point from which it was carried. If either had cost more at that point, the men would adjust this difference and then trade even.

Now, it is the same in principle whether two men do each other's errands and swap the results, thus securing bread and meat with economy of Labor; or whether two men help build each other's houses and swap their Labor interests therein, thus securing better houses than either can build by himself; or whether millions upon millions of men help get one another's bread and meat, help build one another's houses, help make one another's clothes, help furnish one another's luxuries in a word, contribute to the making and delivery of every variety of artificial objects, by cooperatively dividing and uniting Labor, and then swap their respective interests. The principle is identical.

It is by means of this Division of Labor that the social body economizes Labor in the production of Wealth, and by means of this swapping that the Wealth which Labor draws forth is distributed. The whole process of making and swapping is Cooperation, or Division of Labor and Trade. Whoever gets any species of Wealth in free exchange for his Labor has in effect produced the thing he gets. It is the same in principle as if he had made it himself; for, exchanges being voluntary and in free conditions, what one gives is as a rule the equivalent in Value of what he gets.

It is a mistake to suppose that in our day the individual cannot rightfully own any kind of Wealth because no individual now completely produces any kind. When the Value of what he contributes in Trade to the volume of Wealth in one form is equivalent to the Value of what he draws in Trade from the volume of Wealth in another form, it cannot be fairly said that he has no moral or economic title to what he draws out.

As we have already found, there are two kinds of Serviceability - mediate and final, a flouring mill being typical of the one and a loaf of bread in the larder of the other. We have distinguished these as Finished Wealth and Unfinished Wealth. It is only in conditions of Trade that this difference becomes important. For it is only in those conditions that these two different kinds of Wealth fall into different ownerships.

In Trade, however, Unfinished Wealth, that is Wealth having distinctively mediate or indirect Serviceability as distinguished from final, the Serviceability of the mill in contradistinction to that of the loaf of bread, becomes a distinctive class of property and is therefore subject to different ownerships. Whereas Robinson Crusoe, of Selkirk's firm island in the sea, was only one individual and owned 'in common," so to speak, all his Wealth, unfinished as well as finished, tools as well as final satisfactions, the Robinson Crusoe of Galileo's floating island in space, is composed of millions of individuals, some of whom own one kind of unfinished Wealth, some other kinds, and some others still, and all own, in greater or less degree, at least now and then, a supply of finished Wealth. When Unfinished Wealth is thus differentiated by Trade into a distinctive class of property it is known as capital Wealth - for short, Capital.

Other things are often called Capital. But it is technically wrong and logically misleading to call them by that name if we give the name to Unfinished Wealth. Money, for instance, is not Capital. The fact that it will trade for Capital does not make it such, any more than the fact that a new pair of shoes will trade for a five-dollar greenback makes them money. Though money may represent Capital it is itself something else. Neither is a building site Capital, nor a mineral deposit, nor any other natural object. Natural objects are distinguished as Land. In a slave country slaves might be called Capital, but they are not Capital. Slaves are workingmen. They are therefore distinguished as Labor. Capital is the distinctive term for that form of Wealth (which means artificial objects adapted to satisfy human desires) that has mediate or indirect as distinguished from final Serviceability. It is Wealth which is not yet in the hands of the consumer - Wealth which is, therefore, in the economic sense, unfinished.

Out of this segregation of Capital Wealth from Final Wealth, arise all problems with reference to interest, or the so-called earnings of Capital. These problems are too much involved in confusions of Capital with things that are not Capital, to admit of examination in this general survey of first principles. It will be enough here to say that inasmuch as Capital is a class of Wealth, and all classes of Wealth are produced by Labor, the earnings of Capital, if such there be, must be earnings of Labor. They therefore belong, in fairness, to whoever has either made the earning-Capital with his own Labor or acquired the ownership of it in free exchange, Value for Value, for what he has made with his own labor. Interest on Capital is but a form of Wages for Labor.

This brings us to a consideration of the earnings of Labor in conditions of Trade, for which Wages is the technical term. But as "wages" means colloquially only the hire of certain classes of subordinate workmen, another caution is necessary. Since Labor comprehends all human effort, whether of brain or muscle, in producing satisfactions for human desires, and not merely hired labor, so the compensation for Labor comprehends more than the pay of hired laborers. That proportion of the whole volume of Wealth that flows to Labor as its share is what is meant by the technical term Wages.

If Labor were the only factor in the production of Wealth, that is, if human exertion could create artificial objects out of nothing, needing neither raw materials nor standing room nor natural environment of any kind, then all the Wealth created would go to laborers as Wages in return for their expenditure of effort in producing it. In other words, Wealth and Wages would then coincide. The non-laborer could take nothing except by theft or as a voluntary gift from his toiling brethren.

But Labor cannot create Wealth. It can only produce or draw forth Wealth from external nature - from Land. It must go to Land alike for materials and implements and final product - for capital Wealth, as well as final Wealth, - and to Land also for a working place.

Yet, so long as there is no scarcity of the best quality of requisite Land, it is the same with reference to compensation as if no Land were needed. For one place being as good as another, and every place offering opportunity in excess of the need, there would be no premiums for place, and the entire product would go to Labor as Wages. Wealth and Wages would still coincide.

But with the monopolization and consequent scarcity of superior places, there enters the possibility of diverting some proportion of Wealth, or premiums for place, to another category than Wages. This proportion is classified apart from the rest because it represents an economic difference - a saving of Labor which the better but scarce sites offer over the abundant but poorer ones. The term for that class or category is Rent, which means, of course, not merely what tenants pay to landlords for real estate, but comprehensively what can be exacted for Land as distinguished from real estate - what can be exacted for superior places. It is in this manner that Land acquires Value, the Rent of Land and the Value of Land being only different manifestations of the same economic fact. Land Value is simply the capitalization of Land Rent.

Rent attaches to Land as Wages attach to Labor. Consequently, the laborer on a specially desirable and scarce site may differentiate his Rent from his Wages by transferring his Land, or he may have it differentiated against his will by expropriation.

When this differentiation is made we have that most fundamental phenomenon of Trade, the distribution of artificial objects or Wealth in two categories: Wages, which is all the Wealth that remains after what is due to the advantages of exceptional and scarce places has been deducted; and Rent, which is the proportion of Wealth that is due to the advantages of those places. This primary division is regulated by competition for Land.

A secondary division, also regulated by competition, divides Rent among land owners in proportion to the value of their land holdings, respectively, and the Wages fund among workers in proportion to the value of their services respectively.

As Labor becomes more and more productive of Wealth, exceptionally desirable Land becomes relatively more and more scarce; consequently the Rent fund tends to increase side by side with the Wages fund. This makes it highly desirable to own such Land. For one may thus satisfy his wants with least exertion, or with no exertion at all; a patent fact which generates a tendency to monopolize Land in advance of general need for it, with the expectation or hope that it may come to command exceptional advantages for Labor - that a city may spring up near it or on it, or a mine be discovered under its surface, or a farming population grow thick in the region. But this tendency has the effect of abnormally lessening the general market supply of Land, and thereby, so to speak, of inflating or "watering" Rent.

Now, Rent proper represents a normal advantage. It does not press upon the Wages fund, but equalizes Wages up to the standard of Labor done without peculiar advantages of place. Laborers thereby get equal returns for equal work, regardless of location.

But the "water" in Rent does make a pressure upon Wages. It can be traded for Wealth only at the expense of the Wages fund. This is the condition when most of the Land having superior Serviceability is monopolized. Rent, expanded by "water," presses more and more upon the Wages fund until that fund is so compressed that Labor refuses to continue production for the abnormally reduced compensation. Then the "water" bag collapses. When this happens we call it industrial depression; and we call the readjusting process "hard times."

Taxation may play an effective part in the economic pressure of "watered" Rent - upon Wages. If trading transactions are taxed, the Wages fund will be diminished, and Labor thereby weakened so as to be able all the less to resist the pressure of "watered" Rent the political moral of which would seem to be that trading ought to be exempt from taxation. If the owning of Land having Value (which is the equivalent of rentyielding power) is taxed, the Rent fund will be diminished, thereby weakening the force of its pressure upon Wages - the political moral of which would seem to be that such Land-owning ought to be taxed.

Either Trade or Land monopoly may be obstructed by taxation to a far greater extent than the amount of the tax. This may happen if trading is so heavily taxed that it is checked, or land monopolizing so heavily taxed as to be discouraged. In comparing these differing effects of taxation it might be wise to observe that trading serves mankind best when it is not obstructed, and that land monopoly does not serve mankind at all.

As Labor can use Land effectively without owning it or hiring it, doubtless the ideal adjustment of land tenure would be one under which men would refuse to take title save for occupancy and use. This can be best secured by taxing Rent into the common purse, which, by removing temptations to forestall Land, would at once let out the "water" - and keep it out. There would thus be left no other motive for seeking title than desire to use.

It would be ideal also in this, that it would leave to Labor in the Wages fund for competitive distribution, the earnings of individual effort, while taking for Labor in the Rent fund, for public or common use, the undistributable earnings of social effort as an indivisible whole. Wealth would then coincide with the sum of two kinds of earnings Wages, or the distributable mass of individual earnings; and Rent, or the undistributable mass of social earnings. The nearer this distribution is realized, the nearer do we approach the economic ideal.

Money

Coming now back again to the surface where our exploration began, we are again confronted with the phenomenon of Money.

In the concrete, Money is a token of Trade. For a metal disc called a cent we get a stick of candy, and the storekeeper passes the disc on to others in exchange for whatever he wants maybe two sticks of candy, to be sold again at a profit. We may do the same thing in larger transactions with a silver dime, or quarter, or half, or dollar, or with gold coins or paper money. All these are tokens of trade, which close transactions and leave no obligation of debt behind.

But comparatively little of the world's trading is done by the actual passing of such tokens. Checks and drafts, which are orders upon bookkeepers directing them to shift credits upon their ledgers, are used for the most part. Yet money terms are retained, checks and drafts being drawn and all commercial books being kept in the language of Money.

It is characteristic of Trade that the terminology of Serviceability, as pounds and ounces, or feet and inches, or quarts and pints, is translated into the terminology of Value, as francs and centimes, or pounds, shillings and pence, or marks and pfennigs, or dollars and cents. Consequently, confusion of thought often arises. It is said, for instance, that some man is worth a million dollars, and the imagination pictures him as possessing that much Money. But he has nothing like it. What is really meant is that he has property the Value of which is equal to a million dollars of Money.

This use of money terms for measuring property is a prolific cause of crooked thinking regarding economic relationships. It confuses just and unjust property in a bewildering muddle. When we say that two men, are each worth ten thousand dollars, we think of their property rights as identical. Yet the property rights of the one might be utterly indefensible, while those of the other might be wholly unobjectionable. Could we examine their inventories we might find that the one owns thousands of dollars' worth of slaves (who are in justice entitled to own themselves); thousands of dollars' worth of private taxing power (which is a privilege of extortion); and thousands of dollars' worth of land (which is a common inheritance); while the entire fortune of the other might consist of buildings, machinery and the like (which are justly his if he has made them himself or has swapped his labor for them, directly or indirectly, to their makers). These fundamental moral and economic distinctions are covered up by the use of money terms for indiscriminately measuring Serviceability in Trade.

For that reason it is necessary to examine, as we have done, into the nature of Trade, where the language of Money prevails; to probe Value, which makes Trade possible; to consider Serviceability, from which Value proceeds; and to analyze Wealth, which embodies Serviceability. Having done that, we find that Wealth, from which spring all these phenomena - Serviceability, Value, Trade and Money - is the product of Labor applied to Land. A diagram of the route and ramifications of this economic exploration and survey is given in connection with this chapter for the purpose of refreshing the memory and aiding the understanding of the reader.

[insert diagram, between pp 246, 247]

Property Rights

We are able now clearly to see that the justice of any property right, though its Value be expressed in terms of Money regardless of its economic character, depends at last upon its relations to Labor and Land. These things lie back of all kinds of "vested rights."

And they determine infallibly whether any of those rights are just or unjust. For there are two ways, and, broadly speaking, only two, whereby man enslaves his fellow man. He may do so by acquiring "vested rights" in Labor, which enable him to compel workingmen to work for him. This is called chattel slavery. Or he may do so by acquiring "vested rights" in Land, which enable him to deny life to workingmen unless they work for him. This is called land monopoly. In the one case the slavery is active; in the other it is passive.

In either there may be great varieties of form. Ownership of Labor does not consist alone in title deeds to slaves. Any taxing power for private profit is of the same nature. It compels men to give up part of their earnings for nothing. Neither does ownership of Land consist alone in the title deeds to particular parcels of earth laid off by metes and bounds. All public franchises, as street car privileges, railroad rights of way, dock privileges, and the like, are in their nature the same. The essence of slavery, active or passive, is in every one of them.

"Slavery," someone has said, "is the sum of all sin." He only put into other phrase the sentiment of Paul: "The love of money is the root of all evil." To love money, and not the earning of it, is to love slavery. And that is the sum and substance of all economic problems and of all civic morality.

* "Science of Political Economy," page 248.