By Victor Yarros

The vexed question of the right of capital to reward having been settled, it remained for the author to unfold his plan of removing poverty without affecting the income of the capitalist. We have seen that extension of the use of machinery is the only means of increasing wealth. Now, what conditions the use of machinery? For an answer we are referred to Chapter Second, and in it we are told that there are two necessary requirements to be fulfilled to induce the capitalist to invest more and more in machinery. First, that the entire produce meet a demand, and, second, that it be sold. But perhaps only Socialists cannot see that, after a thing is sold at a profit, it cannot be unsold.) Considering that the working population consumes about eighty per cent. of the machine-made products of the world, it is clear that, unless the great majority of consumers are able to buy the increased quantity of goods, there is no market for them. And as the consuming capacity of the wage receivers who constitute that majority is limited by the rate of wages, that rate must be permanently raised in order to enable them to enlarge their consumption.

Gradually thus we are brought to the question of the law governing wages. But before we follow the author into Part Second of his book, we must point out a contradiction in his argument. When contending for the right of the tool-lender to a share (and a lion’s share) of the increase in the total product due to the use of the tool, Mr. Gunton was obliged to suppose that the inventor of the tool was the first to make the offer to his fellow-laborer to lend him the tool for a share of the benefit of its use, and that the laborer, seeing a chance to get a greater return from the same amount of labor, readily and gratefully accepted the offer. Now, when speaking of the consuming power of the laborers, he lays it down that all introduction of new and better methods in production has invariably been preceded by a demand for higher wages on the part of the laborer, which demand grows out as an inevitable result of unconscious social influences and changes. If this last be true, the question of the reward of the idle tool-lender will have to be reopened and reconsidered. For it is evident that, if employers are forced, in the interest of self-protection, to utilize all new improvements, and are not permitted to do it leisurely and as a matter of choice, the argument of extra inducements and increasing returns being a condition of extension of machinery falls to the ground.

With the critical analysis of various theories of the law of wages with which Part Second opens we are not concerned. Suffice it to say that its criticisms of Mr. George’s theory of wages are very strong, though not new. Readers of Liberty will recall Mr. Tucker’s articles against Mr. George, in which he contended that mere land had no practical use to the moneyless proletaire, who would rather starve or work for extremely low wages in the centres of trade and wealth than go out into the wilderness and lead a semi-barbarous life. Mr. Gunton’s argument is very similar to this, but not as conclusive. He refutes Mr. George’s imaginary and ungrounded theory of wages by pointing to the fact that employers pay higher wages to their laborers than they ought to according to Mr. George’s theory; but Mr. Tucker shows that even those who live most miserably on scant earnings and those who, having no employment, earn nothing and have only the hope of securing employment, would rather endure hardships in the cities than settle on unoccupied land.

After some preliminary remarks the author proceeds to state his idea of the law governing wages. We will not undertake to describe the confusion and muddle into which he gets himself by his valorous and bold defiance of all known theories of political economy. Arguing that labor, being a commodity and consequently subject to all the conditions of exchange, must have its price determined by the same general law governing all other things in the domain of exchange, the author accordingly first gives us a general law of prices: The ratio in which quantities of different commodities will exchange for one another . .  . is determined by the cost of production. Not by the relations between supply and demand, as it is popularly, but erroneously, held among economists, and not by the amount of labor socially necessary to produce them, as the Socialists teach, but by the cost of the portion of the supply which is produced under the greatest disadvantages. Of all the parties engaged in the manufacture of a given article, that which has to struggle with the greatest difficulties and is least favorably situated as regards that line of production is the one which fixes the price of that article in the market. The author in advancing this theory, puts himself in opposition both to the economists and the Socialists and reveals his own mental disorder. The economists have a half-truth on their side, and so have the Socialists, and in order to clearly perceive Mr. Gunton’s enormous offence against elementary economic knowledge, it is necessary to bring together the two theories mentioned and show their inherent harmony. When it is said that supply and demand govern prices of commodities in the market, it is not to be taken as a denial that there are other factors by which prices are and can be determined. On the contrary, it is just because there are several such factors, and because they are constantly operating, conflicting and clashing with one another, that some general, though superficial, and, strictly speaking, meaningless formula, as supply and demand, was found necessary to express at any given moment the play of these factors in the market. The real fight is between labor cost and monopoly greed. In a natural state of the market, when competition is free and unlimited, the prices of things are reduced to and kept at the cost price. And not the cost to those who produce under the greatest disadvantages, but the cost of those who produce under the most advantageous conditions; for competition does not satisfy itself with securing greater profits to those who produce with better facilities, but tends to drive out of the circle the unsuccessful and backward, leaving none except the most enterprising and economical producers in the field. In a market hopelessly controlled and ruled by monopoly, prices are as far removed from the labor cost limit as prudence and the narrowest of self-interest will allow. When monopoly is enabled to suspend the rules of ordinary transactions, it will have no hesitation in taxing the people’s patience and endurance to the most extreme point compatible with its own immediate safety. The prices are then kept at the maximum that consumers are willing to pay rather than deprive themselves of the product altogether. But no sooner is competition allowed to march against its foe, monopoly, than the latter takes a hurried retreating step in the direction of cost. Weak and insufficient competition (such as we have today), while unable to kill the monopolies which are protected in their disadvantageous conditions, serves to check their greed and to indicate the tendency of more complete freedom. It is perfectly correct to say that supply and demand regulate prices, though the natural limit of price is that of cost.

Dimly realizing the fact that competition tends to reduce prices to average labor cost, but confused at the same time by the contradictory fact of profits, Mr. Gunton tries to save himself by the straw of cost of production under greatest disadvantages, which seems to him to afford a sure basis for a permanent system of profits. But the straw of course fails to save him, and he sinks, intellectually, in view of all who witness his desperate and frantic effort. Profit exists because monopoly and protection and privilege exist and freedom does not, or is but slightly tolerated; and also because the backward and poorer manufacturers find the means of holding their own in the otherwise unequal fight with their betters by making their help supply the deficiency. It is notorious that poorer employers who are without improved and perfected methods seek and contrive to keep themselves above water by grinding out more surplus value from their laborers. Mr. Gunton discusses the law of prices without the least recognition of the all-important difference between the natural operation of economic laws in a free market and the conditions of trade as we find them today. He is not aware that in establishing fundamental principles it is illegitimate and illogical to apply for evidence either for or against an abstract scientific proposition to the present industrial muddle, which cannot be analyzed and understood except in the light of those very fundamental principles.

Our author is now prepared to deal with the question of wages. In the first place, he takes issue with Marx, Proudhon, Bakounine, and Lassalle, who have heaped damnation upon what they all thought to be, and the last mentioned called, the iron law of wages. Asserting that there is nothing iron about wages, but that, on the contrary, there is nothing more flexible and elastic, the author, as conclusive and crushing evidence against the soundness of the Socialistic doctrine, points out that there are different rates of wages, and that cheap labor does not, as the iron law would seem to imply, entirely crowd out expensive laborers, but that numerous classes of laborers get very high wages and live up to a high standard. Whether in the supply of labor or that of other commodities, observes the author, the actual state of things is not that those who produce at the very lowest prices sell at cost and all others do not sell at all, as it should be according to the pessimistic iron law, but that there are various degrees of high and low wages as well as of profits. Far from being fixed by the minimum absolutely necessary for subsistence, wages, claims Mr. Gunton, are determined by the minimum amount upon which the most expensive laborers will consent to live. As in the case of other commodities, so in the supply of the labor-commodity, those who produce under the greatest disadvantages—that is, those who require a high standard of living—fix the prices at which all other laborers in their line will be employed, enabling those who are satisfied with a lower order of living to make accumulations and invest in real estate, etc.

Since the author is an entire stranger to the thought of Marx, Proudhon, Bakounine, and Lasalle, and knows nothing whatever of either their positive or negative positions, as I have already said and as I shall prove later on, I am relieved from the necessity and responsibility of defending them against their new assailant. His patronizing references to them and polemical remarks I will simply pass in undisturbed peace of mind. But with regard to the iron law of wages in general it may not be amiss to say a word or two for the benefit of Mr. Gunton and the uncritical reader who is liable to be misled. First, then, Mr. Gunton evidently is under the impression that the iron law of wages is a Socialistic invention, a result of pessimistic exaggeration, which does not describe any real phenomenon, either past or present. Yet the Socialists (in the person of Lasalle) have only, so to speak, an etymological share in the matter, for the iron law of wages refers to and embodies the Ricardo-Malthusian conclusions concerning the effect of fluctuations of wages upon population, and vice versa. Mr. Gunton, for no obvious reason, leaves out the subject of population altogether from the discussion of wages; yet if he had glanced into the writings of Lasalle (whom he feels at liberty to censure), he would have known that it is futile, thoughtless, and inexcusably arbitrary to dissociate the iron law of wages from the question of population and criticise it in its isolated and meaningless form. Again, the iron law of wages does not pretend to be an exact and absolutely accurate description of actual facts, but merely an approximately true indication of the tendency of wages under the present capitalistic system. Mr. Gunton, further, interprets it to mean that the laborers are reduced to the lowest conceivable point at which a human being can subsist, and, making his own rendering the basis for abundant talk about the differences of the standards of living in different civilizations, demands to be told why, if this law be true, wages in this country do not fall to the Chinese and Indian level and why American laborers are not reduced to the extremity of subsisting on rice and fish. No Socialist of course is obliged to answer this question, for the iron law does not necessarily imply or involve such a consummation. It only affirms that the tendency is to reduce the laborer to the minimum at which he, at a given time, will consent to live and what he considers the necessaries of existence. Thus far and no farther can the ruling order drive him; beyond that the red terror and revolution reign supreme. Among unskilled workers naturally the reality of this tendency is displayed in its most palpable form. Those who know the life of some classes of common laborers in mining regions and of working women and children in large cities surely could give Mr. Gunton valuable information regarding the lowness of the level of some portions of American wage-workers. At any rate, even if extreme degradation were really unknown here, the iron law would not be disproven by it. For there are still numerous influences at work which check the downward movement and slacken its velocity. A patient may be doomed to a slow and gradual decline while yet allowed temporary breathing spells now and then. Need Mr. Gunton be told that in all statements of what a certain law is bound to effect, the qualification, if unchecked or counteracted, is implied?

Wages, as Mr. Gunton truly says, are determined in the same way that the prices of other commodities are determined. Competition among laborers tends to bring wages down to the cost of production,—that is, the least amount upon which existence is considered desirable and preferable to suicide or the dangers of war and social chaos. Thus we see that where competition is freest and bitterest, as among the low unskilled laborers, wages are at this point where the iron law reaches its culmination. The less competition in the supply of labor, the higher the wages. Skilled laborers, enjoying a species of monopoly, command their prices precisely as sellers of other monopoly-commodities do. But the difference is that machinery and minute division of labor are constantly rendering skill less and less necessary and thus make monopoly in the supply of labor an exception which becomes rarer and rarer every day. Labor, indeed, is the only commodity in the supply of which competition promises to soon be at its fullest and the price of which consequently will sink to the cost limit. (And herein, by the way, is to be found the condemnation of capitalism, for of all commodities labor should always be—and, under a rational and free industrial system, could not fail to be—the one exceptional commodity for which demand would greatly exceed the supply and of which the sellers would command the terms.) Victim of a patent-remedy, Mr. Gunton scornfully ignores every-day facts and experiences of the labor world. Unsuccessful strikes, defeats and failures of organizations, seem to contain no lesson for him. And the immense army of starving unemployed is entirely left out of the classification of the factors operating on wages. It were interesting to know what Mr. Gunton thinks of the condition of the unemployed: whether they are literally worse off than the laborers of past times or whether their poverty is only more intense in kind.

But we must follow Mr. Gunton’s argument and let him make out his case. The standard of living being the regulator of the price of labor, no permanent increase in the rate of wages is possible except through raising that standard. The habits of the working population must be improved and refined, their opportunities enlarged, their wants multiplied, their appetite developed. A loud and emphatic demand for more of the pleasures of life must arise before the capitalists will be moved to action. As long hours of hard toil are destructive of high aspirations and refined cravings, a reduction of the hours of labor is the first step toward a new order of life. This step taken, a number of others in the same direction would necessarily follow. The employer, in order to satisfy the demand for higher wages without loss to himself, would cheapen the process of production,—that is, would introduce new machinery. But even then he would not be equal to the task of supplying the increased demand for commodities. He would have to call in all idle hands and give them employment at good wages. In short, once begun, this movement would steadily gain in vigor and solidity, ever making new and still greater reforms indispensable, finally working out the solution of the labor problem. This reform, however, must not begin where it is most sadly needed. There is no immediate help for those who are most disastrously wrecked by our industrial war. Sentiment must submit to economic necessity, and those who are least pinched must first be attended to and surrounded with greater comforts. Only slowly and imperceptibly will the amelioration spread among the lower classes of laborers, for their degradation and brutality are too deep to allow them any rapid elevation and development.

To be continued.