Low Wages and Pauperism

Alfred Russell Wallace :
Land Nationalisation
Its necessity and its aims (1882)

CHAPTER VII – 
Low wages and pauperism the direct consequences of unrestricted private property in land.

Progress and poverty—labour, not capital, the first mover in production—industry not limited by capital but by restricted access to the land—interest determined by land monopoly and rent—capital and labour not antagonistic—progress of society causes a rise of rents—private property in land leads to an inequitable division of wealth—speculative increase in land values—Mr. George’s work supplements and enforces the conclusions arrived at in the present volume.

Since the greater part of this volume was in MSS., the writer has become acquainted with the remarkable work of Mr. Henry George—Progress and Poverty—in which, among other valuable matter, the statement at the head of this chapter is demonstrated by an irresistible appeal to logic and to facts. This demonstration, as a part of the science of political economy, so well supplements and supports the conclusions here arrived at that a short account of Mr. George’s treatment of the subject may be appropriately given.

Mr. George first shows that political economists, from Adam Smith downwards, have adopted an erroneous starting-point, through making their observations in a state of society in which a capitalist generally rents land and hires labour. The capitalist therefore appears to be the first mover in production, and capital a necessity before labour can be employed. Our author points out that this is not the natural sequence of the three essentials to the production of wealth. He says:—”There must be land before labour can be exerted, and labour must be exerted before capital can be produced. Capital is a result of labour, and is used by labour to assist it in further production. Labour is the active and initial force, and labour is therefore the employer of capital. Labour can only be exerted upon land, and it is from land that the matter, which it transmutes into wealth, must be drawn. Land, therefore, is the condition precedent, the field and material of labour. The natural order is land, labour, capital; and instead of starting from capital as our initial point, we should start from land. There is another thing to be observed. Capital is not a necessary factor in production. Labour can produce wealth without the aid of capital, and in the necessary genesis of things must so produce wealth before capital can exist.”

Capital, therefore, in the hands of a capitalist, is not necessary before labour can reap its reward, in other words, earn wages, for “where land is free, and labour is unassisted by capital, the whole produce will go to the labourer as wages.” Thus the natural wages of labour is the whole of the produce of that labour. But, “where land is free and labour is assisted by capital, wages will consist of the whole produce, less that part necessary to induce the storing up of labour as capital.” Here again there is no need for the labourer to be employed by the capitalist for wages, for the labourer will employ the capital himself, paying interest for it. It is only when land is all monopolised and rent has to be paid for the use of it that the labourer, unable to obtain land to exert his labour upon, is forced to work for wages for the capitalist who hires the land; and then “wages may be forced by the competition among labourers to the minimum at which labourers will consent to live.”

This important conclusion becomes clear if we consider that, were the monopoly not complete, and any considerable quantity of land left open for labourers to work on for themselves, wages would certainly rise, since no man would consent to work for another unless he could get considerably more than he could earn when working for himself. It is when all natural opportunities are taken away from him, that he is compelled to labour for whatever wages he can obtain, and thus, when labourers are superabundant, wages are always kept down to the minimum at which life can be supported.

An elaborate enquiry as to the true use and function of capital leads Mr. George to the conclusion that it does not limit industry, as is erroneously taught; the only limit to industry being the access to natural material. But capital may limit the form of industry and the productiveness of industry, by limiting the use of tools and the division of labour. As illustrative of this important conclusion, he observes:—”But whether the amount of capital ever does limit the productiveness of industry, and fix a maximum which wages cannot exceed, it is evident that it is not from any scarcity of capital that the poverty of the masses in civilised countries proceeds. For, not only do wages nowhere reach the limit fixed by the productiveness of industry, but wages are relatively the lowest where capital is most abundant. The tools and machinery of production are in all the most progressive countries evidently in excess of the use made of them, and any prospect of remunerative employment brings out more than the capital needed. The bucket is not only full; it is overflowing. So evident is this that, not only among the ignorant, but by men of high economic reputation, is industrial depression attributed to the abundance of machinery and the accumulation of capital; and war, which is the destruction of capital, is looked upon as the cause of brisk trade and high wages—an idea, strangely enough, so great is the confusion of thought on such matters, countenanced by many who hold that capital employs labour and pays wages.”

Exactly the same thing happens with interest. Its variations in different countries, and at different times, depend, primarily, on the average profits that can be made by labour, when applied to land or other natural opportunities which can be had free of rent. When, however, land is monopolised and rent has to be paid for the use of even the poorest land, then interest, like wages, is kept down to the lowest point which will tempt its investment; and this point becomes lower and lower, in proportion as rent, ever growing higher and higher, absorbs a larger proportion of the joint produce of labour and capital.

As Mr. George well puts it:—”Wages and interest do not depend upon the produce of labour and capital, but upon what is left after rent is taken out; or, upon the produce which they could obtain without paying rent—that is, from the poorest land in use. And hence, no matter what would be the increase in productive power, if the increase of rent keeps pace with it, neither wages nor interest can increase. The moment this simple relation is recognised, a flood of light streams in upon what was before inexplicable, and seemingly discordant facts range themselves under an obvious law. The increase of rent, which goes on in progressive countries is at once seen to be the key which explains why wages and interest fail to increase with increase of productive power. For the wealth produced in every community is divided into two parts by what may be called the rent line, which is fixed by the margin of cultivation, or the return which labour and capital could obtain from such natural opportunities as are free to them without the payment of rent. From the part of the produce below this line wages and interest must be paid. All that is above goes to the owners of land. Thus, where the value of land is low, there may be a small production of wealth, and yet a high rate of wages and interest, as we see in new countries. And when the value of land is high, there may be a very large production of wealth, and yet a low rate of wages and interest, as we see in old countries. And when productive power increases, as it is increasing in all progressive countries, wages and interest will be affected, not by the increase, but by the manner in which rent is affected. If the value of land increases proportionally, the increased production will be swallowed up by rent, and wages and interest will remain as before. If the value of land increases in greater ratio than productive power, rents will swallow up even more than the increase; and while the produce of labour and capital will be much larger, wages and interest will fall. It is only when the value of land fails to increase as rapidly as productive power that wages and interest can increase with the increase of productive power.”

It follows that the old idea, so prevalent still among workmen, that capital and labour are antagonistic, is a mistake. Both alike suffer from the common enemy—the landlord; and rent absorbs the profits, which the steady increase of productive power in all civilised countries should give to labour and capital. And the facts strictly agree with this conclusion. For, though neither wages nor interest anywhere increase as material progress goes on, yet the invariable accompaniment and mark of material progress is the increase of rent—the rise of land values. “It is the general fact, observable everywhere, that as the value of land increases, so does the contrast between wealth and want appear. It is the universal fact that, where the value of land is highest, civilisation exhibits the greatest luxury side by side with the most piteous destitution. To see human beings in the most abject, the most helpless and hopeless condition, you must go, not to the unfenced prairies and the log cabins of new clearings in the backwoods, where man single-handed is commencing the struggle with Nature, and land is yet worth nothing, but to the great cities, where the ownership of a little patch of ground is a fortune.”

Mr. George then goes on to show that increase of population and improvements in the arts necessarily cause a steady increase of the rent of land; and that this is so is shown both by fact and by reasoning. It is a fact that Free Trade has enormously increased the wealth of England; and this increase of wealth has not diminished pauperism, but has simply increased rent. This same result may be arrived at logically, by supposing that the labour-saving machinery which has had so large a share in increasing the wealth of all civilised countries arrives at such absolute perfection that the necessity for labour in the production of wealth is entirely done away with, so that everything the earth can yield may be obtained without labour. “Wages then would be nothing, and interest would be nothing, while rent would take everything. For the owners of land being enabled without labour to obtain all the wealth that could be procured from nature, there would be no use for either labour or capital, and no possible way in which either could compel any share of the wealth produced. And no matter how small population might be, if anybody but the landowners continued to exist, it would be at the whim or by the mercy of the landowners—they would be maintained either for the amusement of the landowners, or, as paupers, by their bounty.” Now as labour-saving machinery is ever improving, and man’s power over nature ever increasing, the tendency is towards this state of things, that is, to the greater wealth and greater power of the landowners, to the more complete dependence or the more abject poverty of the rest of the community.

One more quotation still further to elucidate this point:—”The recognition of individual proprietorship of land is the denial of the natural rights of other individuals—it is a wrong which must show itself in the inequitable division of wealth. For, as labour cannot produce without the use of land, the denial of the equal right to the use of land is necessarily the denial of the right of labour to its own produce. If one man can command the land upon which others must labour, he can appropriate the produce of their labour as the price of his permission to labour. The fundamental law of nature, that her enjoyment by man shall be consequent upon his exertion, is thus violated. The one receives without producing; the others produce without receiving. The one is unjustly enriched; the others are robbed. To this fundamental wrong we have traced the unjust distribution of wealth which is separating modern society into the very rich and the very poor. It is the continuous increase of rent—the price that labour is compelled to pay for the use of land, which strips the many of the wealth they justly earn, to pile it up in the hands of the few who do nothing to earn it.”

The only political economist who, so far as I know, has independently arrived at these results is the late Professor Cairnes. He says:—

“The soil is, over the greater portion of the inhabited globe, cultivated by very humble men, with very little disposable wealth, and whose career is practically marked out for them by irresistible circumstances as tillers of the ground. In a contest between vast bodies of people so circumstanced and the owners of the soil—between the purchasers without reserve, constantly increasing in numbers, of an indispensable commodity, and the monopolist dealers in that commodity—the negotiation could have but one issue, that of transferring to the owners of the soil the whole produce, minus what was sufficient to maintain in the lowest state of existence the race of cultivators. This is what has happened wherever the owners of the soil, discarding all considerations but those dictated by self-interest, have really availed themselves of the full strength of their position. It is what has happened under rapacious Governments in Asia; it is what has happened under rapacious landlords in Ireland; it is what now happens under the bourgeois proprietors of Flanders; it is, in short, the inevitable result which cannot but happen in the great majority of all societies now existing on earth where land is given up to be dealt with on commercial principles, unqualified by public opinion, custom, or law” (J. E. Cairnes, Fortnightly Review, Jan., 1870).

Again, in a later work, Some Leading Principles of Political Economy Newly Expounded, published in 1874, he still further illustrates the same views, distinctly laying down the proposition that neither profits nor wages have advanced with the increasing wealth of the community due to advancing civilisation and increased power over the forces of nature:—

“Not indeed that the introduction of improved processes into agriculture has been for nought: it has resulted in a large augmentation of the aggregate return obtained from the soil, but without permanently lowering its price, and, therefore, without permanent advantage to either capitalist or labourer, or to other consumers. The large addition to the wealth of the country has gone neither to profits nor to wages, nor yet to the public at large, but to swell a fund ever growing, even while its proprietors sleep—the rent-roll of the owners of the soil. Accordingly we find that, notwithstanding the vast progress of agricultural industry effected within a century, there is scarcely an important agricultural product that is not at least as dear now as it was a hundred years ago—as dear not merely in money price but in real cost. The aggregate return from the land has immensely increased; but the cost of the costliest portion of the produce, which is that which determines the price of the whole, remains pretty nearly as it was. Profits, therefore, have not risen at all, and the real remuneration of the labourer, taking the whole field of labour, in but a slight degree—at all events in a degree very far from commensurate with the general progress of industry” (p. 333).

In these passages from the works of an English writer of established reputation we have a very remarkable and quite independent accordance with the special views of Mr. George—an accordance which must add greatly to the weight of their teaching.

There is, however, another important consideration, which tends still further to intensify the monopoly of land and the consequent helplessness and poverty of the labourer. This is, the constant expectation of a further rise in land value, due to its steady increase with increase of population and advance of industrial development. This expectation leads to speculation in land; and it has all the effect of a combination among landowners to keep up the price. The result is, that land is constantly held for an advance in price, based, not upon present value, but upon the added value that will come with the further growth of population. Hence it happens that—”Labour cannot reap the benefits which advancing civilisation brings, because they are intercepted. Land being necessary to labour, and being reduced to private ownership, every increase in the productive power of labour but increases rent—the price that labour must pay for the opportunity to realise its powers; and thus all the advantages gained by the march of progress go to the owners of land, and wages do not increase. Wages cannot increase, for the greater the earnings of labour the greater the price that labour must pay out of its earnings for the opportunity to make any earnings at all … Begotten of the continuous advance of rent, arises a speculative tendency which discounts the effect of further improvements by a still further advance in rent, to drive wages down to the slave point—the point at which the labourer can just live.”

It is not necessary here to go further in this very imperfect exposition of Mr. George’s views. It will be seen that they afford a most remarkable theoretical confirmation of the conclusions here reached by an examination of the actual condition of the people under different kinds of land-tenure; and if, as I maintain, these conclusions have now been demonstrated by induction from facts, that demonstration acquires the force of absolute proof when exactly the same conclusion is reached by a totally distinct line of deductive reasoning founded on the admitted principles of political economy and the general facts of social and industrial development. I will now only add the striking passage with which Mr. George concludes that part of his work which specially discusses “The Persistence of Poverty amid Advancing Wealth”:—”The ownership of land is the great fundamental fact which ultimately determines the social, the political, and consequently the intellectual and moral condition of a people. And it must be so; for land is the habitation of man, the storehouse upon which he must draw for all he needs; the material to which his labour must be applied for the supply of all his desires; for even the products of the sea cannot be taken, the light of the sun enjoyed, or any of the forces of nature utilised without the use of land or its products. On the land we are born, from it we live, to it we return again—children of the soil as truly as is the blade of grass or the flower of the field. Take away from man all that belongs to land, and he is but a disembodied spirit. Material progress cannot rid us of our dependence upon land; it can but add to the power of producing wealth from land; and hence, when land is monopolised, it might go on to infinity without increasing wages or improving the condition of those who have but their labour. It can but add to the value of land and the power which its possession gives. Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the source of power. As said the Brahmins ages ago:—To whomsoever the soil at any time belongs, to him belong the fruits of it. White parasols and elephants mad with pride are the flowers of a grant of land.”

We have now to consider the important question, how our present system can be best exchanged for a better one; and also, how we can secure all the benefits which occupying ownership confers, how we can extend those benefits to the largest number and over the widest area, and how most effectually prevent the economical and moral evils of landlordism from again asserting themselves.