The Exchange of Distributed for Undistributed Wealth.

BUT it may be asked, what avails it to show that the wages classes, instead of being co-extensive with the labor class, as is assumed in the current theories respecting wages, is only a small fraction of it, communicating with those other great masses of labor, only in the exchange of its completed and marketed products? How can this fact bear on the question, whether wages may be increased actually and permanently? Are not wages governed by exactly the same principles as if the wages class constituted the whole of the labor class, instead of one-fifth, one-sixth, or one-seventh?

I answer, in the first place, that if the wages class is only a fraction of the labor class, that fact should be clearly set forth in discussions of the wages question, and the extent of the interests involved should be, as nearly as possible, indicated. The reader has a right to know whether the principles laid down govern the fortunes of substantially the whole human race, or of only one-fifth or one-seventh of it. The confusion of the labor question with the wages question, is as unnecessary as it is unscientific.

But secondly, I answer that the fact of the production of a vast body of undistributed wealth, portions of which are subject to exchange with distributed wealth, may, and does, powerfully affect the condition of the wages class.

Let us discriminate. So far as undistributed wealth, that is, wealth which is produced entire by one person, who owns the whole product, is not exchanged but is consumed by the producer, as is the case with probably the major part of such wealth, the world over, no effect on the wages class can be wrought thereby. That wealth, being neither distributed nor exchanged, neither its production nor its consumption concerns other classes of producers. But so far as undistributed wealth is exchanged against distributed wealth, there is a distinct possibility, therein, of gain or loss to the wages class.

It was remarked in our first chapter, that it is as truly impossible to explain all the phenomena of wages, without reference to this outside body of undistributed wealth, as it would be to account for the Gulf Stream, without reference to the colder waters between which, and over which, it flows. We are now in a position to justify this remark. We have seen (chap. x,) that the theory that all burdens are divided and all benefits diffused equally throughout industrial society, rests on the assumption of perfect competition. Industrial society is taken, for the purposes of this reasoning, as composed of economical atoms, absolutely equivalent, possessing complete mobility and elasticity. Given this condition, all that Bastiat has claimed for the economical harmonies, is happily true. The laborer and the employer feel the force of competition equally, and neither has a natural advantage over the other. The laborer feels the force of competition alike as seller of labor and as buyer of commodities. Labor and capital flow freely to their best market. The highest price which any employer can afford to give will be the lowest which any laborer will consent to receive; while, as between any two departments of production, the advantages enjoyed by the laborers, capitalists and employees engaged will be absolutely equalized.

But, on the other hand, it is evident that the least viscosity of material, the slightest idiosyncrasy of structure must, in a degree, defer, if not entirely defeat, the tendency to the propagation, through economic media, of any economic impulse. Just so far as men differ in their industrial quality, or are diversely organized in natural or artificial groups, just so far there is the possibility that one person or class of persons may be disproportionately affected by an economic force; may receive more or receive less of the benefit, may suffer less or suffer more of the burden, than his or their just distributive share.

Now the division of the body of laborers into the employed and the non-employed, or independent workmen, is a great structural fact which cannot but profoundly influence the propagation of economic impulses. Doubtless there are compensations in the condition of the wages class; while nothing could exceed the misery of whole nations of peasant proprietors or tenant occupiers, where the government fails to render the protection to which the subject is entitled, or where, as too often happens, the government becomes the plunderer of the people. Yet, through all, we discern in the fact that the wages class are dependent on others for the opportunity and the means to labor, not having, in their own right, possession of the agencies and instrumentalities of production, the possibility of deep and lasting detriment.

I have already expressed the opinion, in criticism of Prof. Cairnes' doctrine of non-competing groups, that competition never becomes nil, for practical purposes. But let us for the moment inquire what would be the effects, did the employed and the non-employed constitute two great non-competing groups; that is, did not the employed ever become an independent workman; or the independent workman ever seek employment. We will also suppose competition to be perfect within the employed class.

It is evident that upon these assumptions any economical impulse, for good or for evil, which should be experienced anywhere in the latter class, would extend at once and without loss through the whole body of the employed, that the burden would be divided or the benefit diffused among the entire mass, action and reaction continuing until equilibrium was everywhere restored. But this impulse would not be propagated across the dividing line between the employed and the non-employed. The economical movement would cease in this direction as abruptly as a vein of gold stops at a new geologic formation. For good or for evil, the non-employed would feel no economical sympathy with the employed. Each group would meet its own fate, individually, by itself. Certain "exchanging proportions" would be established for the surplus products of the two groups; a scale of relative prices would be reached by trade between them; but so long as labor was not free to flow across the line of demarcation there would not be even a tendency to the equalization of the wages of the employed to the average production of the independent workman.

Now, as has been said, there is no such utter failure of competition as is here assumed for the purposes of illustration. The employed do come, in greater or less degree, to be independent workmen; independent workmen do come under employment. The facility with which these interchanges are made depends much upon the nature of special industries, much upon the character of the individual workman, much upon the state of legislation and the social condition of the country. In some lands the movement across the line dividing the employed and the nonemployed is very free, many laborers alternating between their own little farms or shops, where they work for themselves by themselves, receiving all advantages and suffering all losses, and the larger estates or factories where they come under direction and control, and receive wages at stipulated rates. In other lands the transition is slow and painful; in some it can scarcely be said to be effected at all. On the whole, it is notorious that interchanges between the two groups are comparatively rare; the great mass of the employed never have the choice whether they will set up for themselves; they abide in their lot and share, because they have no resource, the fortune of their class, be that good or evil. The division we have indicated remains incontestibly the greatest structural fact in modern industrial society, telling powerfully upon the rate and direction in which economic impulses shall be propagated.

If this be so, and I do not look to see it questioned by any one, then there clearly is the possibility that one of these groups may profit at the expense of the other, since the only security which could exist for their sharing equally the benefits and burdens of production would be found in the unimpeded interchange of labor. Which of the two is more likely to be the gainer in the exchange of its marketed products, whether it be the independent workman who has possession of the means and materials of production, who can create wealth in his own name and right, and has to ask no man's leave to labor, or the employed workman, will more clearly appear the further we carry our discussion of the conditions of the wages class in modern industrial society.