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rent of the land which he has hired. Having struck off these portions, there ought to remain a certain profit, part of which he uses to live upon. But even this profit consists of more than interest upon his capital. It should include also a payment for his labour in superintending the business. The manager of a factory may seldom touch the cotton, flax, iron, or other material, which is manufactured; nevertheless, he works with his head and his pen, calculating the prices at which he can produce goods, inquiring where he can buy the materials most cheaply, choosing good workmen, keeping the accounts straight, and so on. Severe mental labour is really far more difficult and exhausting than manual labour; and in raising up a good business, and carrying it through times of danger, a manager has to undergo great anxiety and mental fatigue. Thus, it is necessary that a successful manager should receive à considerable share of the produce, so as to make it

worth his while to give this labour. His share is called Ahe wages of superintendence, and, although

usually much larger than the share of a common labourer, it is really wages of the same nature.

Another part of the capitalist's so-called profit ought to be laid aside as recompense for risk. There is always more or less uncertainty in trade, and even the most skilful and careful manager may lose money by circumstances over which he has no control. Sometimes, after building a factory, the demand for the goods which he is going to produce falls off; sometimes the materials cannot be bought; perhaps it is discovered, when too late, that the factory has been built in an unsuitable place; occasionally, too, the workmen are discontented, and refuse to work for such wages as the capitalist can afford to pay. Now, whenever any of these mistakes or misfortunes happen, it is the capitalist who mainly suffers, because he loses a great deal of money, on which he might otherwise have lived

comfortably. Sometimes men who have worked hard all their lives, and grown rich by degrees, lose all their wealth again in the end, by some error of judgment or by some unfortunate event due to no fault of their own.

A capitalist, then, must have some inducement for running into these disagreeable risks; by lending his capital to the government he might get interest for it, and be nearly sure not to lose. If, then, he puts it into trade, and runs the risk of loss, he must have a recompense for the risk. This ought to be at least enough to make the profits of the successful business balance the losses of the unfortunate ones, so that on the average capitalists will get the interest of capital and the wages of superintendence free from loss. We may say, then, thatprofit = wages of superintendence

+ interest + recompense for risk. 42. About Interest. That which is paid for the use of capital altogether apart from what is due for the trouble and risk of the person conducting the business, is called interest. This interest, of course, will be greater or less according as the amount of capital is greater or less; it will also be greater or less according as the capital is employed for a longer or shorter time. Thus the rate of interest is always stated in proportion to the capital sum and to the time; five per cent. per annum means that, for every hundred pounds of capital, five pounds are paid during every year in which the capital is used, and in the same proportion for longer or shorter times.

The rates of interest actually paid in business vary very much, from one or two per cent up to fifty per cent. or more.

When the rate is above five or six per cent., it will be to some extent not true interest, but compensation for the risk of losing the capital altogether. To learn the true average rate of interest, we must inquire what is paid for money lent to those who are sure to pay it back, and who give property in

pledge, so that there may be no doubt about the matter. It seems probable that the true average rate of interest in England is at present about four per cent., but it varies in different countries, being lower in England and Holland than anywhere else. In the United States it is probably six or seven per cent.

The most important fact about interest is that it is the same in one business as in another. The rates of profit differ very much, it is true, but this is because the labour of superintendence is different, or because there is greater risk in one trade than another. But the true interest is the same, because capital, being lent in the form of money, can be lent to one trade just as easily as to another. There is nothing in circulating capital which fits it for one trade more than another : accordingly it will be lent to that trade which offers ever so little more interest than other trades. Thus there is a constant tendency to the equality of interest in all branches of industry.



43. Money Wages and Real Wages. Wages, as we have already learnt, are the payments received by a labourer in return for his labour. It does not matter whether these payments are received daily, weekly, monthly, quarterly, or yearly. A day gardener is, perhaps, paid every evening ; an artisan is usually paid on Saturday or Friday night, or sometimes fortnightly; clerks receive their salaries monthly; managers, officers, secretaries, and others, are paid quarterly, or sometimes half-yearly. When the wages are paid monthly, or at longer intervals, they are generally called salary (Latin, salarium, money given to Roman soldiers for salt); but if the salary is paid for labour and nothing else, it is exactly the same in nature as wages.

I said, in the last chapter, that wages consist of a share of the produce of labour, land, and capital; in the preceding paragraph, I have been saying that it consists of payments. Here arises one of the great difficulties of our subject. As a matter of fact, the wages received by labourers, in the present day, consist almost always of money. A person working in a cotton mill produces cotton yarn ; but he does not receive at the end of the week so much cotton yarn ; he receives so many shillings. This is much more convenient; for if the labourer received cotton yarn, or any other commodity which he produces, he would have to go and sell it in order to buy food and clothes, and to pay the rent of his house. Instead, then, of receiving an actual share of the produce, he receives from the capitalist as much money as is supposed to be equal in value to his share.

Now, we shall see that it is requisite to distinguish between money wages and real wages. What a labourer really works for is the bread, clothes, beer, tobacco, or other things which he consumes; these form the real wages. If he gets more of these, it does not matter whether he gets more or less money wages; he cannot eat money, or use it in any way except to spend it at shops. If corn or cotton becomes dearer, the wages of every workman are really lessened; because he can buy less corn or cotton with his money wages. On the other hand, everything which makes goods cheaper, increases the real wages of workmen ; because they can get more of the goods in exchange for the same money wages. People are accustomed to think far too much about the number of shillings they get for a day's work; they fancy that, if they get 25 per cent. more money wages, they must be 25 per cent. more wealthy. But this is not necessarily the case ; for if the prices of goods on the average have also risen 25 per cent., they will be really no richer nor poorer than before.

We now begin to see that to increase the produc

tiveness of labour is really the important thing for everybody. For if anything, such as cotton cloth, can be made with less labour, it can be sold more cheaply, and everybody can buy more of it for the same money, and thus be better clothed. If the same were the case with other goods, so that linen, stockings, boots, bricks, houses, chairs, tables, clocks, books, &c., were all made in larger quantities than before, with the same labour, everybody in the country would be better supplied with the things which he really wishes to have.

It is certain that a real increase of wages to the people at large is to be obtained only by making things cheaply. No doubt a tradesman gains sometimes when the goods he deals in become dearer, but to the extent that they are dearer, all consumers of the goods lose, because they can enjoy less comforts and necessaries. But, if goods are made cheaply, all consumers gain thereby, and, all people being consumers, all gain so far as they use the cheapened articles. Nor does it follow that artisans and tradespeople suffer by the cheapening of goods. If, owing to some invention, much greater quantities are made with the same labour, the artisan will probably be able to sell his share of the produce for more than before, that is, his wages will rise instead of falling by the cheapening of the produce. The tradesman, again, may gain less on each separate article that he sells, but he may sell so much more than before, that his total profits may be increased. The result to which we come is, then, that all increase of produce, and cheapening of goods tends to the benefit of the public, and this is the true way in which people are made richer.

44. How Differences of Wages arise. It is very important to understand rightly the reasons of the great differences which exist between the rates of wages paid in different occupations. Some kinds of

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