John Bates Clark

“ Capital is this permanent fund of productive goods, the identity of whose component elements is forever changing. Capital goods are the shifting component parts of this permanent aggregate. They are the particular instruments that, each during its own brief economic lifetime, take their places in the endless procession of things which in its entirety is an abiding productive agent—the co-worker of labor and its perpetual assistant in creating consumers' wealth. ”

“ Monopoly may do it, or bad government, or extensive wars, or anarchy growing out of a struggle of classes; but every one of these things, not excepting monopoly, would naturally be temporary, and even in spite of them, the upward trend in the earning power of labor should assert itself. Instead of being hopelessly sunk by a weight that it cannot throw off, the labor of the future bids fair to be buoyed up by an influence that is irrepressible. ”

“ How is it when a tribunal of arbitration has studied the case and announced a decision? Though the workmen may be as free to strike as ever, such an action would put them at a fatal disadvantage. The arbitration has given to the public a basis for a judgment as to the equities of the dispute. If the tribunal is one which commands respect, a refusal to abide by its decision puts the men prima facie in the wrong. If they strike now, they reject a rate which is authoritatively pronounced just. ”

“ Enlarging the product of labor has caused the standard of pay to go steadily upward and the actual rate to follow it; and the prospect of a future and perpetual rise in the laborers' standard of living depends almost entirely on a continuance of this product-multiplying process. A single man maintaining himself in isolation would gain by everything that made his efforts fruitful, and society, as a whole, is like such an isolated man. It gains by means of every effective tool that is devised and by every bit of added efficiency in the hands that wield it. ”

“ Profits Nil in a Static Society.—We shall see that if labor and capital can move about in the system of groups so freely that each agent is as productive in one place as it is in another, there will be no product anywhere in excess of wages and interest. Labor and capital then create and claim for themselves the whole output of their industries. When the entrepreneur has given them their shares, by paying wages and interest, and has paid for raw materials, he has nothing left. ”

“ There is no danger whatever that the public will justify cutting down the wages now received by men in the employment of a monopoly to a much lower level. That in itself would not right the wrongs of the poorly paid workers or those of the public itself. The employer would go on getting high prices for his products and would pocket the new gain which the reduction of wages gave him. If a great corporation is now taxing the public, even those who suffer would rather see the proceeds of the grab shared with the men than see it all held by the employing corporation. ”

“ The effort to maintain an excessive premium on labor of any kind defeats itself by inducing free labor to break over the barrier that is erected against it. The same thing happens when we reduce the productive power of organized labor. If, at a time when the premium that union labor bears above the non-union kind is at a maximum, the policy of restricting products is introduced, it so increases the inducement to depend on an independent working force that there is no resisting it. The palisade which union labor has built about its field gives way, and other labor comes freely in. ”

“ What the employer-capitalist gets for capital the employer, pure and simple, pays. As the furnisher of instruments the man is a vender of the product of these instruments, while as an entrepreneur proper he is the buyer. He must purchase the product of his own capital just as he purchased the product of his own labor. In paying, therefore, wages for all labor, including what he performs himself, interest on all capital, including his own, and the price of raw materials, he gets something which, if competition does a perfect work, he has to sell for what he gives for it. ”

“ While there is some excuse for abandoning a purpose when long and determined effort to execute it has failed, there is no possible excuse for concluding, in advance of such effort, that a systematic policy which gives a promise of saving us from an intolerable outcome is impracticable. All the props of monopoly should be taken away and not one merely, and before this shall be tried radical measures will not be in order. Socialism will not be fairly before the people's parliament till it shall come as the only escape from a condition of private monopoly. ”

“ Capital.—It might seem that we have already described the nature of capital, but we have not. We have described the kinds of goods of which it consists. A sharp distinction is to be drawn between two ways of treating capital goods, and only one of these ways affords a treatment of capital properly so called. To attain that concept we must think of goods as in some way constituting a stock which abides as long as the business continues. And yet the things themselves separately considered do not abide. Goods are perishable things; no one lasts forever, and some last only a very short time. ”

“ The product of the final unit of labor—an amount which in practice is measured without any tracing of the previous growth of the working force—sets the standard of the rate of wages. We have now to see that the rate of interest has a similar basis; and yet it is worth while to build up, wholly in imagination, a fund of capital, just as we have made up the force of laborers, increment by increment. ”

“ If, after paying wages, there is any more left in the entrepreneur's hands than competition compels him to pay out as interest, he is realizing a net profit; he is selling his goods for more than they cost him, and this, as we saw at the outset, is a condition that under perfect competition cannot continue. The natural price of goods is the cost price. If the market price of anything is in excess of cost, entrepreneurs receive a profit, and in order to do more business and make a larger aggregate of such profit they bring new labor and capital into their industry. ”

“ Society as a whole produces an infinite variety of things, and the individual member of it secures for himself goods of very many kinds. The typical modern worker is, in his production, a very narrow specialist, but in his consumption he is far less a specialist than was the rude hunter who was able to enjoy only the few goods which he himself produced. The modern worker's tastes are omnivorous, for he has developed an immense variety of wants and, through social organization, he has acquired the means of satisfying many of them. ”

“ It is the procession that is always there—a moving series of individual goods, not one of which has more than a transient economic career. Each one helps to keep up the supply of permanent capital just as each man, taking his turn in an endless succession of laborers, serves during his brief life to keep up the permanent force of laboring humanity. Men come and go, but "labor"—a mass of working humanity—abides; and so capital goods come and go, but a stock of them abides, kept up by perpetual replacement. We may trace the career of any single instrument from a beginning to an end ”

“ Prices do not conform to the standards of cost, wages do not conform to the standard of final productivity of labor, and interest does not conform to the marginal product of capital. The system of industrial groups and subgroups is thrown out of balance by putting too much labor and capital at certain points and too little at others. Profits become, not altogether a temporary premium for improvement,—the reward for giving to humanity a dynamic impulse,—but partly the spoils of men whose influence is hostile to progress. ”

“ If, in any great department of production, it creates a true monopoly which cannot be otherwise controlled, the demand that the business be taken over by the government and worked for the benefit of the public will become irresistible. If it does not become a true monopoly, the business may remain in private hands. Inevitable consolidation with a choice between governmental production and private production is offered to us. We are at liberty to select the latter only if potential competition shall be made to be a satisfactory regulator of the action of the great corporations. ”

“ When men, whose predecessors may have lived in isolated families or in a society organized for defense or for the mere pleasures of association, now develop a truly economic society, the individual depends on other individuals as well as on nature for the supply of his wants. Economic independence gives way to interdependence, because the fortune of each man is largely dependent, not merely on his own efforts, but on the relations which he sustains to other men. Simple laws of nature still largely control his income, but social laws also have a certain control over it. ”

“ We want the industry because it is progressive in its wealth-creating power and will, one day, make an important addition to our national income. It is a dynamic agent—a factor in the progress we are making toward the unrealized goal of universal comfort. We do not want the other part of the duty, first, because we do not want monopoly. Any feature of our industrial system which is convicted of being simply a monopoly-building element is condemned by that fact to extinction, if the power of the people suffices to destroy it. ”

“ In any case it will, in the absence of all trace of monopoly on the side of the employers, end by giving to the men what they are worth. It is, in fact, such a bidding for new labor by employers in any branch of business that moves labor from point to point in the industrial system. The entrepreneur is the agent in the case, profits are the lure, and competition—rivalry in buying—is the means; and competition is, as we use terms, absolutely free whenever it is certain that the smallest margin of net profit will set it working and draw labor or capital to the profit-yielding point. ”

“ Can we even say that general wealth will, without much doubt, redound to the permanent well-being of the working class, and that the more there is of this prosperity, the less there is of danger that they will throw it away by any conduct of their own? ”

“ Actual pay and standard pay are like a vessel and a tug attached to each other by a hawser, which allows one to drift far from the other but does not let them part company. In the long run the tug takes the tow with it. Even the wages which a trust gives to a fighting union—wages paid by a monopoly to a monopoly—are governed by the law of final productivity, since there is a limit on what the trust can extort from the public, and there is a limit on what the union can extort from the trust. ”

“ The most noticeable fact about organized production is that man is forever letting go the thing he has made or helped to make and allowing it to pass out of sight and reach without losing or greatly imperiling his title to the amount of wealth it represents. He casts his bread on the waters, but they bring him a return for it. Under these circumstances it is impossible for him to protect his product as the savage protects his tools, his clothing, and his hut. What a modern worker makes passes into the hands of other men and gets completely out of the maker's direct personal control. ”

“ We instinctively speak of a value—a given number of dollars—in describing a man's capital, but it is dollars "invested in" productive instruments; and we instinctively speak of labor when we mean an abiding force of workingmen. Neither capital nor labor is like an immaterial soul that can live apart from its body. Each consists of a permanent body with a shifting composition. A permanent sum, on the one hand, a permanent amount of working energy, on the other, are always present, but they are in goods and men respectively. ”

“ The Economic Necessity of Doing what is legally Difficult.—From the point of view of an economic theorist it is enough to show that the practices which cut off the potential competitor from a safe entrance into the field of production so pervert the economic system as to hold in abeyance its most fundamental force, that of competition. They vitiate the action of every law which depends on competition. Value, wages, interest, profits, and the very structure of society feel the perverting effect of this repression of the force that under normal conditions serves to adjust them. ”

“ How Competition fixes Interest.—We can now see how it is that the capitalist can make the entrepreneur pay over to him the amount left in his hands after paying wages. Every unit of capital that any one offers for hire has a productive power. It can call into existence a certain amount of goods. The offer of it to any entrepreneur is virtually an offer of a fresh supply of the kinds of goods which he is making for sale. Loaning ten thousand dollars to a woolen manufacturer is really selling him the amount of cloth that ten thousand dollars put into his equipment will bring into existence. ”

“ So we can study a particular bit of ore or wool or leather or a particular hammer or spindle or sewing machine, and in those cases we shall be studying capital goods and finding how perishable they are; but we shall also see that a stock of them always abides as the capital of economic society. We can cease to look at individual things and study the permanent fund of productive wealth, which is made up of goods like ore, wool, leather, hammers, spindles, and sewing machines. The identity of the things which make up this stock is forever changing. ”