Economic base

“ Economists argue against government restrictions on trade and manufacture.
The economists wrote treatises on taxation, scattered pamphlets about, and conducted a magazine or two. They not only brought the existing economic evils home to the intelligent reader, but suggested remedies for them. ”

“ As the net national income, following the three great factors of all economic production, is divided into three great branches, rent, wages and interest on capital, the net income from any private business may be reduced to one or more of these branches. ”

“ Economic conditions require readjustment, important matters of trade must be regulated, vital questions of finance and taxation must be handled, in fact, the whole country must settle down to production, manufacture, distribution of merchandise, and the transaction of the nation’s regular business. ”

“ Industry, commerce, shipping, and banking concentrated in the narrow area of less than 200,000 square miles, earned yearly returns equal as a rule to the total of the capital invested. Money changed hands rapidly, credits did the work of capital, and the rapid growth of population added large unearned increments to the fortunes of those who owned land or had established themselves in trade. ”

“ It is to these subgroups that a large portion of the new capital itself will come, and the labor will come with it. Larger incomes, more luxury, more labor spent in elaborating goods as compared with that required for procuring crude materials,—such is the order. ”

“ But with the increasing division of labor, production for direct personal consumption becomes of less and less importance compared with the production of means of production, and therewith also the sphere of governmental production increases. On the other side this field is extended by the development of commerce and of the great industries, which bursts the local bonds of the market for each branch of production one after another, and transforms one after another from a local into a national industry. ”

“ But these two influencing circumstances are in reality reducible to one: for the capital which a country has to spare from the production of domestic commodities for its own use, is in proportion to its own demand for foreign commodities: whatever proportion of its collective income it expends in purchases from abroad, that same proportion of its capital is left without a home market for its productions. ”

“ Trade had developed under the new rule, and had expanded with improved means of communication. Capital had begun to accumulate, and the moneyed classes were in favour of a government that would support public credit and refrain from extortion. The mass of the people were contented, prices being cheap, wages on the rise and employment brisk. ”

“ We may, therefore, consider the capital of a producer as measured by the means which he has of possessing himself of the different essentials of production: namely, labour, and the various articles which labour requires as materials, or of which it avails itself as aids. ”

“ What capital does for production is, to afford the shelter, protection, tools, and materials which the work requires, and to feed and otherwise maintain the laborers during the process. These are the services which present labor requires from past, and from the produce of past, labor. Whatever things are destined for this use—destined to supply productive labor with these various prerequisites—are Capital. ”

“ We have investigated the laws which determine the value of two classes of commodities: the small class which, being limited to a definite quantity, have their value entirely determined by demand and supply, save that their cost of production (if they have any) constitutes a minimum below which they cannot permanently fall; and the large class, which can be multiplied ad libitum by labour and capital, and of which the cost of production fixes the maximum as well as the minimum at which they can permanently exchange. ”

“ It will be seen that the quantity of capital which will, or even which can, be accumulated in any country, and the amount of gross produce which will, or even which can, be raised, bear a proportion to the state of the arts of production there existing; and that every improvement, even if for the time it diminish the circulating capital and the gross produce, ultimately makes room for a larger amount of both than could possibly have existed otherwise. ”

“ If the additional demand could continue to be supplied from the superior lands, by applying additional labour and capital, at no greater proportional cost than that at which they yield the quantity first demanded of them, the owners or farmers of those lands could undersell all others, and engross the whole market. ”

“ Capital does not limit industry, the only limit to industry being the access to natural material. But capital may limit the form of industry and the productiveness of industry, by limiting the use of tools and the division of labour. ”

“ The use of capital consists in its advance. It goes before all operations of labour and trade. It is the power that sets labour and trade in motion; just as the power of wind, or water, or steam, gives movement to wheels and pistons.
Let us briefly see how capital operates upon the three great branches of human industry, namely, upon agriculture, manufactures, and commerce.
A farmer having acquired capital, either by the former savings of himself or his fathers, or by borrowing from the savings of others, takes a certain number of acres of land. ”

“ Land, labour and capital are the factors of production. The term land includes all natural opportunities and forces; the term labour, all human exertion; and the term capital, all wealth used to produce more wealth. In returns to these three factors is the whole produce distributed. The part that goes to landowners as payment for the use of natural opportunities is called rent; the part that constitutes the reward of human exertion is called wages; and the part that constitutes the return for the use of capital is called interest. ”

“ That capital may limit the form of industry is clear. Without the factory, there could be no factory operatives; without the sewing machine, no machine sewing; without the plough, no ploughman; and without a great capital engaged in exchange, industry could not take the many special forms that are concerned with exchanges. ”

“ We propose to show what Labour can effect, and how it is to be encouraged and economized and rewarded: to treat of Capital, its nature and operation, and the proportions of its increase; and to exhibit the union of these two mighty agents of Production. Under the second head, Distribution, occur the great questions of Rent, Profits, Wages, and Population, the various modes of Interchange at home and abroad, including the consideration of all Monopolies, domestic and foreign. Under the third head, Consumption, are considered the modes of Demand and Supply, and of Taxation. ”

“ We propose to own the commodities we produce ourselves and to exchange commodities containing a certain quantity of necessary social labor, for other commodities representing an equal quantity of necessary social labor.
You and I work for the boss because he owns the factory or mine or railroad or the mill. Ownership of the means of production and distribution (the factories, land, mines, mills—the machinery that produces things) makes masters of capitalists and wage-workers of you and me. ”

“ They would fall, because a less quantity of labour was necessary to their production, and would therefore exchange for a smaller quantity of those things in which no such abridgement of labour had been made.
"Economy in the use of labour never fails to reduce the relative value of a commodity, whether the saving be in the labour necessary to the manufacture of the commodity itself, or in that necessary to the formation of the capital, by the aid of which it is produced. ”

“ The profit of the firm, a fair interest on capital taken into account, shall be applied preferably to the formation of the reserves necessary for its stability, to the improvement of production, and to the betterment of the working and living conditions of the workers. ”

“ The possibility of substituting the large system of production for the small, depends, of course, in the first place, on the extent of the market. The large system can only be advantageous when a large amount of business is to be done: it implies, therefore, either a populous and flourishing community, or a great opening for exportation. ”

“ The producer furnishes the goods, the consumer the money. Trade furnishes credit, [54] founded on little or no actual capital, and the different members of the commercial body are in no way responsible for one another. ”

“ It is thus that the same capital will in any country put into motion a greater or smaller quantity of productive labor, and add a greater or smaller value to the annual produce of its land and labor, according to the different proportions in which it is employed in agriculture, manufactures, and wholesale trade. ”

“ The real price of manufactures, the quantity of labour and capital necessary to produce a given quantity of them, is almost constantly diminishing; while the quantity of labour and capital, necessary to procure the last addition that has been made to the raw produce of a rich and advancing country, is almost constantly increasing. ”

“ Production is not a fixed but an increasing thing. When not kept back by bad institutions, or a low state of the arts of life, the produce of industry has usually tended to increase; stimulated not only by the desire of the producers to augment their means of consumption, but by the increasing number of the consumers.
We have seen that the essential requisites of production are three—labor, capital, and natural agents; the term capital including all external and physical requisites which are products of labor, the term natural agents all those which are not. ”

“ All this capital is now lent at interest, and made available for production. Capital thus circumstanced forms a large portion of the productive resources of any commercial country; and is naturally attracted to those producers or traders who, being in the greatest business, have the means of employing it to most advantage; because such are both the most desirous to obtain it, and able to give the best security. Although, therefore, the productive funds of the country are not increased by credit, they are called into a more complete state of productive activity. ”

“ In your valuable article of to-day on the strike of the colliers, while you lay down the true and just law [33] respecting all such combinations, you take your stand, in the outset, on a maxim of political economy, which, however trite, stands yet—if I am not deceived—in need of much examination and qualification. "Labor," you say, like every other vendible commodity, "depends for its value on the relation of supply to demand." ”

“ We have surveyed the field of economical facts, and have examined how they stand related to one another as causes and effects; what circumstances determine the amount of production, of employment for labour, of capital and population; what laws regulate rent, profits, and wages; under what conditions and in what proportions commodities are interchanged between individuals and between countries. We have thus obtained a collective view of the economical phenomena of society, considered as existing simultaneously. ”

“ The circulating medium existing in a country at a given time, is partly employed in purchases for productive, and partly for unproductive consumption. According as a larger proportion of it is employed in the one way or in the other, the real capital of the country is greater or less. ”

“ What supports and employs productive labour, is the capital expended in setting it to work, and not the demand of purchasers for the produce of the labour when completed. Demand for commodities is not demand for labour. The demand for commodities determines in what particular branch of production the labour and capital shall be employed; it determines the direction of the labour; but not the more or less of the labour itself, or of the maintenance or payment of the labour. These depend on the amount of the capital, or other funds directly devoted to the sustenance and remuneration of labour. ”

“ We may confine our attention to the system of distribution which is the most complex, and which virtually includes all others—that in which the produce of manufactures is shared between two classes, labourers and capitalists, and the produce of agriculture among three, labourers, capitalists, and landlords.
The characteristic features of what is commonly meant by industrial progress, resolve themselves mainly into three, increase of capital, increase of population, and improvements in production ”

“ As I said, we've got experts from a wide range of business sectors, and what we're going to talk about is, are there mechanisms that we can start putting in place where we see the kind of growth that used to characterize the U.S. economy -- export-driven growth, manufacturing growth, growth that pays high wages and provides high living standards for a broad-based middle class. ”

“ The capital thus thrown out of employment in an industry in which we had no comparative advantage (when competition became free) would necessarily be employed in the industries in which we had an advantage, and would supply—and the transferred capital would be the only means of supplying—the commodities which would be sent abroad to pay for those, which by the supposition are now imported, but were formerly produced at home. ”

“ The capital employed in purchasing foreign goods for home consumption, when this purchase is made with the produce of domestic industry, replaces also, by every such operation, two distinct capitals, but one of them only is employed in supporting domestic industry. ”