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II.—The Distribution of Wealth

The laws and conditions of the production of wealth partake of the character of physical truths. There is nothing optional or arbitrary about them. It is not so with the distribution of wealth. That is a matter of human institution solely.

Among the different modes of distributing the produce of land and labour which have been adopted, attention is first claimed by the primary institution on which the economical arrangements of society have always rested—private property.

The institution of property consists in the recognition, in each person, of a right to the exclusive disposal of the fruits of their own labour and abstinence, and implies the right of the possessor of the fruits of previous labour to what has been produced by others by the co-operation between present labour and those fruits of past labour—that is, the freedom of acquiring by contract.

We now proceed to the hypothesis of a threefold division of the produce, among labourers, landlords, and capitalists, beginning with the subject of wages.

Wages depend mainly upon the demand and supply of labour, or, roughly, on the proportion between population and capital. It is a common saying that wages are high when trade is good. Capital which was lying idle is brought into complete efficiency, and wages, in the particular occupation concerned, rise. But this is but a temporary fluctuation, and nothing can permanently alter general wages except an increase or diminution of capital itself compared with the quantity of labour offering itself to be hired.

Again, high prices can only raise wages if the producers and dealers, receiving more, are induced to add to their capital or, at least, to their purchases of labour. But high prices of this sort, if they benefit one class of labourers, can only do so at the expense of others, since all other people, by paying those high prices, have their purchasing power reduced by an equal degree.

Another common opinion, which is only partially true, is that wages vary with the price of food, rising when it rises and falling when it falls. In times of scarcity, people generally compete more violently for employment, and lower the labour market against themselves. But dearness or cheapness of food, when of a permanent character, may affect wages. If food grows permanently dearer without a rise of wages, a greater number of children will prematurely die, and thus wages will ultimately be higher; but only because the number of people will be smaller than if food had remained cheap. Certain rare circumstances excepted, high wages imply restraints on population.

As the wages of the labourer are the remuneration of labour, so the profits of the capitalist are properly the remuneration of abstinence. They are what he gains by forbearing to consume his capital for his own uses and allowing it to be consumed by productive labourers for their uses. Of these gains, however, a part only is properly an equivalent for the use of the capital itself; namely, so much as a solvent person would be willing to pay for the loan of it. This, as everybody knows, is called interest. What a person expects to gain who superintends the employment of his own capital is always more than this. The rate of profit greatly exceeds the rate of interest. The surplus is partly compensation for risk and partly remuneration for the devotion of his time and labour. Thus, the three parts into which profit may be regarded as resolving itself, may be described, respectively, as interest, insurance, and wages of superintendence.

The requisites of production being labour, capital, and natural agents, the only person besides the labourer and the capitalist whose consent is necessary to production is he who possesses exclusive power over some natural agent. The land is the principal natural agent capable of being so appropriated, and the consideration paid for its use is called rent.