population amounts to 24 millions. Performing the required operation, we find that the average wages of the labouring population are £2 1s. 8d. per head!! The first error in this mode of statement is evident. The amount of the "Wages fund" does not practically consist of the amount of specie only, but of the amount multiplied into the velocity of its circulation. The same piece of money pays wages in endless succession. Five pounds transferred twenty times is equivalent in Economic effect to £100 transferred once. Consequently the amount of wages will be the amount of specie multiplied into the number of times it is paid. And when this is done, we should find an average more consistent with common sense. In the next place such a question as this is one to which averages do not apply. Wages differ in every trade; and also for the same trade in different parts of the country. If an artisan in one place in some parts of the year earns more and at other times less, it would be right enough to strike an average in his But if wages are usually 20s. a week in Yorkshire and 10s. a week in Dorsetshire, it would be absurd to say that the average is 15s. a week. Or if a skilled watchmaker gets 15s. a day and a hodman gets 3s., it would be absurd to say that wages are on an average 98. a day. case. 66 Again, nothing can be more absurd than to suppose that all the labouring population enter into a general competition for the Wages fund." As this point has been well enforced by Mr. Longe, we will quote him." Lastly, assuming that the amount of the funds applicable for paying wages of any particular class or all the different classes of labourers, within any geographical, political, or commercial field, such as either Dorsetshire, or England, or Europe, at any given time, or within any given period, are limited and defined by certain causes, it would be impossible for such funds to be distributed by competition among all the labourers who may happen to be seeking employment in the field or country in which such particular or aggregate wage fund exists. "The number of labourers whom any class of employers engaged in trade, as, for instance, the Dorsetshire farmers, can employ (unless their capital is to be distributed as the Lancashire relief 1 Refutation of the Wages Fund theory, p. 54. fund was applied, viz., without any view to its producing any profit or increase of wealth) is determined by the quantity of work they require to be done. If ten thousand labourers did all the work they wanted to have done, i. e., all the ploughing, and harrowing and reaping, there might be any number of surplus labourers in the country, and their competition might reduce wages to sixpence a day, but the farmers would not employ more labour than they wanted, however cheap it was. "If instead of taking the capital of the farmers of a country, we take the aggregate capital at the disposal of the employers engaged in the different trades of a country as the supposed wage fund, the absurdity of the supposition that the whole of such aggregate fund could be distributed by competition among the different classes of labourers composing its dependent population becomes still more glaring, How could the shoemakers compete with the tailors, or the blacksmith with the glass blowers? or how should the capital which a master shoemaker saved by reducing the wages of his journeymen get into the hands of the master tailor? or why should the money which a reduction in the price of clothes enables the private consumer to spend on other things go to pay or refund the wages of any other class of labourers belonging to his own country? It would clearly be just as likely to be spent in the purchase of foreign wine or in a trip to Switzerland. "The notion of all the labourers of a country constituting a body of general labourers, capable of competing with each other, and whose 'general' or average wage depends upon the ratio between their number and the aggregate wage fund, is just as absurd as the notion of all the different goods existing in a country at any given time, e. g., the ships, and the steam engines, and the cloth, &c., constituting a stock of general commodities, the general or average price of which is determined by the ratio between the supposed quantity of the whole aggregate stock and the total purchase fund of the community." 23. Thus we see that the true "Wages fund is not the actual amount of specie in the manufacturers' pocket but the price which the consumers pay for the complete product. And how is this to be obtained before it has been actually received? By means of Banking Credits. This is the precise use and function of Banks which issue notes. It is to issue notes to form this "Wages fund" in anticipation of the prices paid by the consumers. And thus we see the gigantic importance of a solid banking system to the labouring classes. It multiplies the "Wages fund" a hundred fold, and provides continuous employment for them, so long as there is a prospect of a demand for their products. And now may be seen the reason why we took so much pains to expose the self-contradictions of Mill on the subject of Credit in a previous chapter. Mill says that wages depend on the ratio of population to capital. But what is Capital? Mill sneers at the imbecility of those who say that Credit is capital. And yet he himself says "When paper currency [i. e., Credit] is supplied, as in our own country, by bankers and banking companies, the amount is almost wholly turned into PRODUCTIVE CAPITAL. . . A banker's profession being that of a money lender, his issue of notes is a simple extension of his ordinary occupation. He lends the amount to farmers, manufacturers, or dealers, who employ it in their several businesses. So employed it yields, like any other CAPITAL, wages of labour and profits of stocks. The profit is shared between the banker, who receives interest, and a succession of borrowers, mostly for short periods, who, after paying the interest, gain a profit in addition, or a convenience equivalent to profit. The CAPITAL itself, in the long run, becomes entirely wages, and when replaced by the sale of the produce, becomes wages again: thus affording a perpetual fund for the maintenance of productive labour, and increasing the annual produce of the country by all that can be produced through the means of a CAPITAL of that value." And among many other passages which might be cited, he says? -“Now an effect of this latter character naturally attends some extensions of CREDIT, especially when taking place in the form of Bank Notes, or other instruments of exchange. The additional Bank Notes are in ordinary course first issued to producers or dealers to be employed as CAPITAL.” And it is the same Mill who says also, sneering at the confused notion of those who say that Credit is Capital-" Credit has a great, but not as many people seem to suppose, a magical power; it cannot make something out of nothing. How often is an 1 Principles of Political Economy, B. II., ch. 12, § 5. Ibid., B. III., ch. 2, § 1, Note. extension of Credit talked of as equivalent to a creation of Capital, or as if Credit actually were Capital!!" Now we see that Mill expressly includes Bank Notes under the title of Capital and as part of the "Wages fund"; but he asks how can Credit make something out of Nothing. Now we have shewn that the Roman jurists expressly class Rights as Wealth; Mill allows bank notes, mere rights, to be Capital. Now what are these Rights created out of? Are they formed out of primordial atoms? And what do our readers think of Mill's wonderful logic? Mill and a number of writers constantly inculcate the doctrine that Capital is solely the accumulation of past labour, and can only increase by abstinence, and they call profit the reward of abstinence. But when Banks issue Notes in anticipation of future profits, which Mill himself says are productive Capital, how are these notes the result of past labour and the fruits of saving? As a matter of fact, the profits made by using Credit exceed the profits made by money many thousand fold. 24. Thus we see at every turn in Economics the indispensable necessity of first establishing clear and distinct conceptions and definitions of Wealth, Capital, Credit, &c. We see in modern commerce the effect of the Roman definition-" Under the title of Wealth RIGHTS are included "-which we shall proceed to develope at greater length in the next chapter. Modern commerce is utterly unintelligible unless Credit be included under the title of Capital; and we see how utterly impossible it is to restrict the term "Wealth" to material objects only. In Thus the fund employed in purchasing Labour consists, like the fund employed in purchasing anything else, of Money and Credit. Mill says a man's purchasing power consists of all his Money and of all his Credit; and this is as true of Labour as of anything else. And it is wholly impossible to say what proportion of the "Wages fund" consists of Money and what of Credit. Scotland, certainly, the ratio of Credit to money is many thousand fold; and in fact the quantity of industry paid in money in that country is absolutely infinitesimal. And thus we see verified the saying of Daniel Webster-" Credit has done more, a thousand times, to enrich nations than all the mines of all the world." Nothing can shew more clearly how Credit forms the leading part of the "Wages fund" than the state of a country after a great commercial collapse. Hundreds of thousands of labourers are thrown out of employment and reduced to destitution in the United States of America at the present moment in consequence of the great commercial crisis of 1873, because their "Wages fund" has collapsed, and been annihilated. 25. Having thus shown that Money and Credit are the fund out of which Wages are paid, we have next to consider what circumstances determine the amount of Wages. It was long stoutly maintained that Wages are governed by the price of food; and this, indeed, was one of the assertions on which the Protectionist system which formerly prevailed in this country was based. Burke said" The squires of Norfolk had dined when they gave it as their opinion that it (Labour) might or ought to rise or fall with the market of provisions. The rate of wages, in truth, has no direct relation to that price. Labour is a commodity like every other, and rises or falls according to the demand. This is in the nature of things." Nevertheless, Smith says 2-" The money price of corn regulates that of all other home-made commodities. "It regulates the money price of labour, which must always be such as to enable the labourer to purchase a quantity of corn sufficient to maintain him and his family. "But regulating the money price of all the other parts of the rude produce of land, it regulates that of the materials of almost all manufactures. By regulating the money price of labour, it regulates that of manufacturing art and industry; and by regulating both, it regulates that of the complete manufacture. The money price of labour, and of everything that is the produce either of land or labour, must necessarily either rise or fall in proportion to the money price of corn." Thus it will be seen that Smith explicitly asserts that the price of corn regulates the value of Labour and of all other commodities. And yet the same Smith also says 3" The wages of labour do not in Great Britain fluctuate with the price of provisions (!) These vary everywhere from year to year, frequently from month 1 Thoughts and Details on Scarcity, Vol. II., p. 248. Bohn's Edit. K |