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that laborers are assumed to be hired by capitalists, that the existing possessions of the community are supposed to be the property of a limited number of such capitalists, and that the mechanism by which wages are adjusted is a hiring of laborers by these owners, or capitalists.
There is here, obviously, a close resemblance to the surplus value” version of the Marxian socialists. In that, also, all gains of the capitalist class—whether considered as one homogeneous mass or classified under the heads of interest, rent, business profits, monopoly gainsarise from a surplus. The socialists go further, and say that no part of this surplus has justification. The strict Marxians, too, maintain doctrines as to the abstract relation of “value" to the labor embodied or applied. These corollaries drawn by the socialists do not bring them into inconsistency or difference with the original proposition; namely, that the source of all capitalist gains is an excess of the product of labor over and above what is received by the laborers.
This proposition seems to me sound. A recognition of it, an acceptance of its consequences, and reasoning based upon it seem to me essential to an understanding of the phenomena.
The grounds on which the proposition itself rests are simple. They are, on the one hand, that production takes time, and, on the other hand, that there is inequality of possessions. These are facts so patent that no proof of them can be needed. The time-using character of highly organized production has been repeatedly dwelt on by writers of all schools, and has been especially illustrated and emphasized in the brilliant exposition of Böhm-Bawerk. The inequality of possessions is a great historic fact, doubtless not in accord with ideals of the best human progress, but to be faced as a characteristic
of almost all developed societies, and not least of modern societies. Resting on it is the other great fact, comparatively modern, of the preponderance of hired labor. Inequality has been somewhat mitigated during the last half-century by some accumulations on the part of hired laborers through savings-bank deposits and the like. But these accumulations are still insignificant as compared with those of the possessing classes. Much the greater part of the property in society is owned by the comparatively small number of the latter. Hence it follows that the support and reward of most laborers during the period of production are secured through advances made (i.e., wages paid) to them by the owners of existing wealth. Recurrently, those owners get into their hands the wealth newly produced, and turn part of it over to the laborers again. They steadily retain for themselves a surplus, which is the source of all capitalistic gains.
At least one fundamental assumption in all this has been questioned. It has been maintained, most explicitly by Professor Clark, that there is no such thing as an “advance" by capitalists to laborers. Before proceeding further, it will be well to consider the objections raised by him.
The only advances made, according to Professor Clark, are by the producers of finished articles to the producers of articles not finished. The producers are represented by him as being in groups A, A', A", A'". The group A
" is supposed to turn out raw materials; group A' transforms that raw material somewhat; A" brings it still nearer completion; A'" finally “produces” finished or consumable commodity. Now, says Professor Clark, there may be an advance by A'"' to the other groups, but there is no other advance. “The whole question whether
“ goods are advanced by one class of persons to another, in order to tide that other class over an interval of waiting, clearly has reference, not to the relation of capitalists in general to laborers in general, but to the relation of certain sub-groups to other sub-groups in the producing se
Professor Clark here seems to me to confound two essentially different things: on the one hand, the division of labor between different groups of successive producers; on the other hand, the relations of laborers and capitalists to one another in each single group and in all the groups taken as a whole.
The division of labor between different sets of successive producers is a familiar matter. The illustration of the groups A, A', A", A" (with the addition, if you please, of other similar groups,-B, B', B", B'"', and so on), fits it perfectly. All this is part of “the roundabout or timeusing mode of using labor,” to quote Professor Clark himself. But to suppose, as Professor Clark does, that such a
? time-using process brings also a "synchronizing" of labors and return seems to me quite erroneous. I find myself in complete accord, on this subject, with what has been said by other critics, notably by Professor Carvers and more recently by Professor Böhm-Bawerk. What A does is to put the finishing touches on work brought nearly to the stages of completion by the previous labor of A, A', A”. If one wishes to use a method
1 Distribution of Wealth, p. 305. I have simplified Professor Clark's illustration by referring only to one series of producers, A, A,' A", A", as he has himself done at p. 315. The case is the same if there be supposed several series, A, A', A"..., B, B', B" ..., C, C', C", ..., and finally H, H', H" ..., in which case the A group stands for the successive workers on wheat, flour, and bread, the B group for the workers on wool, cloth, and garments, the C group for those on logs, lumber, houses, and the H group finally for those on ore, iron, tools. This more elaborate supposition is made by Professor Clark at pp. 268, 269.
2 Page 309. 3 In his review of Distribution of Wealth in this Journal, vol. xv., p. 594. * In this Journal, vol. xxi., p. 266.
of letters and diagrams, the following indicates the actual situation
During any one period (say in 1907) all four A's are working simultaneously (say growing wool, erecting spindles and looms, manufacturing cloth, making garments). But the material on which A has worked in 1907 is passed on to A' in 1908. That which A' has partly fashioned is passed on to A" in 1909. A" finally gives the finishing touches in 1910. It is not the horizontal line running through 1907 that represents the course of production, but the oblique line that runs through all four periods.
Probably Professor Clark would say, with reference to the above illustration, that it really fits into his own view. He would maintain I trust I am right in interpreting his reasoning-that, when once the preparatory work of A, A', A", has been done, it makes no difference which order we consider. Both lines—the horizontal and the oblique-show the same series of A, A', A", A". When once the wool has been grown and is in existence, when once the looms and factories are made and ready for use, it is as if the present work of A brought an immediate consumable product in the garments to which A" is now giving the finishing touches.
But it is not as if. There are essential differences. There is not, in fact, any “synchronizing” of production or any "instantaneous” clothing of the people. The difference appears perhaps most strikingly in another closely related matter, on which again I must differ with Professor Clark; one, too, which brings into view the whole conception of capital and labor. It is the relation of "abstinence" to the genesis of new capital and the maintenance of existing capital.
1 This mode of representation is used in my Wages and Capital, chap. i., p. 23. I repeat it here, as the briefest way of stating my opinion.
Elsewhere in his book Professor Clark maintains that “abstinence originates new capital,” but that, “once the series of capital-goods is created and set working, there is no further waiting to be done." This is because "the keeping up of the series of capital-goods is, in a sense, automatic. The mill, the ship, virtually replace themselves as they are worn out.” "Abstinence is confined to the genesis of true capital; none of it is involved in maintaining an endless series of capital goods.
This seems to me fundamentally untrue. And the insertion by Professor Clark of the qualifying phrases "in a sense" and "virtually” indicates, as Professor BöhmBawerk remarks of their use in other parts of the book, an uneasy sense of the inaccuracy.
Turn again to the set A, A', A", A". In what sense can it be said there is abstinence in the maintenance of the sheep and wool, the looms and spindles, on which A and A' are working? Evidently, in this sense: A" is turning out in each period enough to supply all of them, not only A" himself, but A, A', A". These workers in the earlier stages might knock off, and during the whole current period not suffer thereby. We may imagine either that A, A', A", drop their work completely, leaving A" to continue, as before, with the finishing touches, or that they help A" on his finishing work, each of the four
1 I quote from pp. 133, 134, and from the summary of the chapter at p. Xviü.