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The Intellectual Foundations of Political Economy

19th Century Classical Economists

Principles of Economics: An Introductory Volume

Book 4:  The Agents of Production

Alfred Marshall


Chapter I Chapter V Chapter IX Chapter XIII
Chapter II Chapter VI Chapter X  
Chapter III Chapter VII Chapter XI  
Chapter IV Chapter VIII Chapter XII  

Chapter 1, Introductory

1. The agents of production are commonly classed as Land, Labour and Capital. By Land is meant the material and the forces which Nature gives freely for man's aid, in land and water, in air and light and heat. By Labour is meant: the economic work of man, whether with the hand or the head. (1) By Capital is meant all stored-up provision for the production of material goods, and for the attainment of those benefits which are commonly reckoned as part of income. It is the main stock of wealth regarded as an agent of production rather than as a direct source of gratification.

Capital consists in a great part of knowledge and organization: and of this some part is private property and other part is not. Knowledge is our most powerful engine of production; it enables us to subdue Nature and force her to satisfy our wants. Organization aids knowledge; it has many forms, e.g. that of a single business, that of various businesses in the same trade, that of various trades relatively to one another, and that of the State providing security for all and help for many. The distinction between public and private property in knowledge and organization is of great and growing importance: in some respects of more importance than that between public and private property in material things; and partly for that reason it seems best sometimes to reckon Organization apart as a distinct agent of production. It cannot be fully examined till a much later stage in our inquiry; but something has to be said of it in the present Book.

In a sense there are only two agents of production, nature and man. Capital and organization are the result of the work of man aided by nature, and directed by his power of forecasting the future and his willingness to make provision for it. If the character and powers of nature and of man be given, the growth of wealth and knowledge and organization follow from them as effect from cause. But on the other hand man is himself largely formed by his surroundings, in which nature plays a great part: and thus from every point of view man is the centre of the problem of production as well as that of consumption; and also of that further problem of the relations between the two, which goes by the twofold name of Distribution and Exchange.

The growth of mankind in numbers, in health and strength, in knowledge, ability, and in richness of character is the end of all our studies: but it is an aim to which economics can do no more than contribute some important elements. In its broader aspects therefore the study of this growth belongs to the end, if to any part of a treatise on economics: but does not properly belong even there. Meanwhile we cannot avoid taking account of the direct agency of man in production, and of the conditions which govern his efficiency as a producer. And on the whole it is perhaps the most convenient course, as it certainly is that most in accordance with English tradition, to include some account of the growth of population in numbers and character as a part of the general discussion of production.

2. It is not possible at this stage to do more than indicate very slightly the general relations between demand and supply, between consumption and production. But it may be well, while the discussion of utility and value is fresh in our minds, to take a short glance at the relations between value and the disutility or discommodity that has to be overcome in order to obtain those goods which have value because they are at once desirable and difficult of attainment. All that can be said now must be provisional; and may even seem rather to raise difficulties than to solve them: and there will be an advantage in having before us a map, in however slight and broken outline, of the ground to be covered.

While demand is based on the desire to obtain commodities, supply depends mainly on the overcoming of the unwillingness to undergo "discommodities." These fall generally under two heads: — labour, and the sacrifice involved in putting off consumption. It must suffice here to give a sketch of the part played by ordinary labour in supply. It will be seen hereafter that remarks similar, though not quite the same, might have been made about the work of management and the sacrifice which is involved (sometimes, but not always) in that waiting which is involved in accumulating the means of production.

The discommodity of labour may arise from bodily or mental fatigue, or from its being carried on in unhealthy surroundings, or with unwelcome associates, or from its occupying time that is wanted for recreation, or for social or intellectual pursuits. But whatever be the form of the discommodity, its intensity nearly always increases with the severity and the duration of labour. Of course much exertion is undergone for its own sake, as for instance in mountaineering, in playing games and in the pursuit of literature, of art, and of science; and much hard work is done under the influence of a desire to benefit others. (2) But the chief motive to most labour, in our use of the term, is the desire to obtain some material advantage; which in the present state of the world appears generally in the form of the gain of a certain amount of money. It is true that even when a man is working for hire he often finds pleasure in his work: but he generally gets so far tired before it is done that he is glad when the hour for stopping arrives. Perhaps after he has been out of work for some time, he might, as far as his immediate comfort is concerned, rather work for nothing than not work at all; but he will probably prefer not to spoil his market, any more than a manufacturer would, by offering what he has for sale much below its normal price. On this matter much will need to be said in another volume.

In technical phrase this may be called the marginal disutility of labour. For, as with every increase in the amount of a commodity its marginal utility falls; and as with every fall in that desirableness, there is a fall in the price that can be got for the whole of the commodity, and not for the last part only; so the marginal disutility of labour generally increases, with every increase in its amount.

The unwillingness of anyone already in an occupation to increase his exertions depends, under ordinary circumstances, on fundamental principles of human nature which economists have to accept as ultimate facts. As Jevons remarks, (3) there is often some resistance to be overcome before setting to work. Some little painful effort is often involved at starting; but this gradually diminishes to zero, and is succeeded by pleasure; which increases for a while until it attains a certain low maximum. after which it diminishes to zero, and is succeeded by increasing weariness and craving for relaxation and change. In intellectual work, however, the pleasure and excitement, after they have once set in, often go on increasing till progress is stopped of necessity or by prudence. Everyone in health has a certain store of energy on which he can draw, but which can only be replaced by rest; so that if his expenditure exceed his income for long, his health becomes bankrupt; and employers often find that in cases of great need a temporary increase of pay will induce their workmen to do an amount of work which they cannot long keep up, whatever they are paid for it. One reason of this is that the need for relaxation becomes more urgent with every increase in the hours of labour beyond a certain limit. The disagreeableness of additional work increases; partly because, as the time left for rest and other activities diminishes, the agreeableness of additional free time increases.

Subject to these and some other qualifications, it is broadly true that the exertions which any set of workers will make, rise or fall with a rise or fall in the remuneration which is offered to them. As the price required to attract purchasers for any given amount of a commodity, was called the demand price for that amount during a year or any other given time; so the price required to call forth the exertion necessary for producing any given amount of a commodity, may be called the supply price for that amount during the same time. And if for the moment we assumed that production depended solely upon the exertions of a certain number of workers, already in existence and trained for their work, we should get a list of supply prices corresponding to the list of demand prices which we have already considered. This list would set forth theoretically in one column of figures various amounts of exertion and therefore of production; and in a parallel column the prices which must be paid to induce the available workers to put forth these amounts of exertion. (4)

But this simple method of treating the supply of work of any kind, and consequently the supply of goods made by that work, assumes that the number of those who are qualified for it is fixed; and that assumption can be made only for short periods of time. The total numbers of the people change under the action of many causes. Of these causes only some are economic; but among them the average earnings of labour take a prominent place; though their influence on the growth of numbers is fitful and irregular.

But the distribution of the population between different trades is more subject to the influence of economic causes. In the long run the supply of labour in any trade is adapted more or less closely to the demand for it: thoughtful parents bring up their children to the most advantageous occupations to which they have access; that is to those that offer the best reward, in wages and other advantages, in return for labour that is not too severe in quantity or character, and for skill that is not too hard to be acquired. This adjustment between demand and supply can however never be perfect; fluctuations of demand may make it much greater or much less for a while, even for many years, than would have been just sufficient to induce parents to select for their children that trade rather than some other of the same class. Although therefore the reward to be had for any kind of work at any time does stand in some relation to the difficulty of acquiring the necessary skill combined with the exertion, the disagreeableness, the waste of leisure, etc. involved in the work itself; yet this correspondence is liable to great disturbances. The study of these disturbances is a difficult task; and it will occupy us much in later stages of our work. But the present Book is mainly descriptive and raises few difficult problems.


1. Labour is classed as economic when it is "undergone partly or wholly with a view to some good other than the pleasure directly derived from it." See p. 65 and footnote. Such labour with the head as does not tend directly or indirectly to promote material production, as for instance the work of the schoolboy at his tasks, is left out of account, so long as we are confining our attention to production in the ordinary sense of the term. From some points of view, but not from all, the phrase Land, Labour, Capital would be more symmetrical if labour were interpreted to mean the labourers, i.e. mankind. See Walras, Économie Politique Pure, Leçon 17, and Prof. Fisher, Economic Journal, VI, p. 529.

2. We have seen (p. 124) that, if a person makes the whole of his purchases at the price which he would be just willing to pay for his last purchases, he gains a surplus of satisfaction on his earlier purchases; since he gets them for less than he would have paid rather than go without them. So, if the price paid to him for doing any work is an adequate reward for that part which he does most unwillingly; and if, as generally happens, the same payment is given for that part of the work which he does less unwillingly and at less real cost to himself; then from that part he obtains a producer's surplus. Some difficulties connected with this notion are considered in Appendix K.

The labourer's unwillingness to sell his labour for less than its normal price resembles the unwillingness of manufacturers to spoil their market by pushing goods for sale at a low price; even though, so far as the particular transaction is concerned, they would rather take the low price than let their works stand idle.

3. Theory of Political Economy, Ch. V. This doctrine has been emphasized and developed in much detail by Austrian and American economists.

4. See above III, iii, section 4.

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Chapter 2, The Fertility of Land


1. The requisites of production are commonly spoken of as land, labour and capital: those material things which owe their usefulness to human labour being classed under capital, and those which owe nothing to it being classed as land. The distinction is obviously a loose one: for bricks are but pieces of earth slightly worked up; and the soil of old settled countries has for the greater part been worked over many times by man, and owes to him its present form. There is however a scientific principle underlying the distinction. While man has no power of creating matter, he creates utilities by putting things into a useful form; (1) and the utilities made by him can be increased in supply if there is an increased demand for them: they have a supply price. But there are other utilities over the supply of which he has no control; they are given as a fixed quantity by nature and have therefore no supply price. The term "land" has been extended by economists so as to include the permanent sources of these utilities; (2) whether they are found in land, as the term is commonly used, or in seas and rivers, in sunshine and rain, in winds and waterfalls.

When we have inquired what it is that marks off land from those material things which we regard as products of the land, we shall find that the fundamental attribute of land is its extension. The right to use a piece of land gives command over a certain space — a certain part of the earth's surface. The area of the earth is fixed: the geometric relations in which any particular part of it stands to other parts are fixed. Man has no control over them; they are wholly unaffected by demand; they have no cost of production, there is no supply price at which they can be produced.

The use of a certain area of the earth's surface is a primary condition of anything that man can do; it gives him room for his own actions, with the enjoyment of the heat and the light, the air and the rain which nature assigns to that area; and it determines his distance from, and in a great measure his relations to, other things and other persons. We shall find that it is this property of "land" which, though as yet insufficient prominence has been given to it, is the ultimate cause of the distinction which all writers on economics are compelled to make between land and other things. It is the foundation of much that is most interesting and most difficult in economic science.

Some parts of the earth's surface contribute to production chiefly by the services which they render to the navigator: others are of chief value to the miner; others — though this selection is made by man rather than by nature — to the builder. But when the productiveness of land is spoken of our first thoughts turn to its agricultural use.

2. To the agriculturist an area of land is the means of supporting a certain amount of vegetable, and perhaps ultimately of animal, life. For this purpose the soil must have certain mechanical and chemical qualities.

Mechanically, it must be so far yielding that the fine roots of plants can push their way freely in it; and yet it must be firm enough to give them a good hold. It must not err as some sandy soils do by affording water too free a passage: for then it will often be dry, and the plant food will be washed away almost as soon as it is formed in the soil or put into it. Nor must it err, as stiff clays do, by not allowing the water a fairly free passage. For constant supplies of fresh water, and of the air that it brings with it in its journey through the soil, are essential: they convert into plant food the minerals and gases that otherwise would be useless or even poisonous. The action of fresh air and water and of frosts are nature's tillage of the soil; and even unaided they will in time make almost any part of the earth' s surface fairly fertile if the soil that they form can rest where it is, and is not torn away down-hill by rain and torrents as soon as it is formed. But man gives great aid in this mechanical preparation of the soil. The chief purpose of his tillage is to help nature to enable the soil to hold plant roots gently but firmly, and to enable the air and water to move about freely in it. And farmyard manure subdivides clay soils and makes them lighter and more open; while to sandy soils it gives a much needed firmness of texture, and helps them, mechanically as well as chemically, to hold the materials of plant food which would otherwise be quickly washed out of them.

Chemically the soil must have the inorganic elements that the plant wants in a form palatable to it; and in some cases man can make a great change with but little labour. For he can then turn a barren into a very fertile soil by adding a small quantity of just those things that are needed; using in most cases either lime in some of its many forms, or those artificial manures which modern chemical science has provided in great variety: and he is now calling in the aid of bacteria to help him in this work.

3. By all these means the fertility of the soil can be brought under man's control. He can by sufficient labour make almost any land bear large crops. He can prepare the soil mechanically and chemically for whatever crops he intends to grow next. He can adapt his crops to the nature of the soil and to one another; selecting such a rotation that each will leave the land in such a state, and at such a time of year, that it can be worked up easily and without loss of time into a suitable seed bed for the coming crop. He can even permanently alter the nature of the soil by draining it, or by mixing with it other soil that will supplement its deficiencies. Hitherto this has been done only on a small scale; chalk and lime, clay and marl have been but thinly spread over the fields; a completely new soil has seldom been made except in gardens and other favoured spots. But it is possible, and even as some think probable, that at some future time the mechanical agencies used in making railways and other great earthworks may be applied on a large scale to creating a rich soil by mixing two poor soils with opposite faults.

All these changes are likely to be carried out more extensively and thoroughly in the future than in the past. But even now the greater part of the soil in cold countries owes much of its character to human action; all that lies just below the surface has in it a large element of capital, the produce of man's past labour. Those free gifts of nature which Ricardo classed as the "inherent" and "indestructible" properties of the soil, have been largely modified; partly impoverished and partly enriched by the work of many generations of men.

But it is different with that which is above the surface. Every acre has given to it by nature an annual income of heat and light, of air and moisture; and over these man has but little control. He may indeed alter the climate a little by extensive drainage works or by planting forests, or cutting them down. But, on the whole, the action of the sun and the wind and the rain are an annuity fixed by nature for each plot of land. Ownership of the land gives possession of this annuity: and it also gives the space required for the life and action of vegetables and animals; the value of this space being much affected by its geographical position.

We may then continue to use the ordinary distinction between the original or inherent properties, which the land derives from nature, and the artificial properties which it owes to human action; provided we remember that the first include the space-relations of the plot in question, and the annuity that nature has given it of sunlight and air and rain; and that in many cases these are the chief of the inherent properties of the soil. It is chiefly from them that the ownership of agricultural land derives its peculiar significance, and the Theory of Rent its special character.

4. But the question how far the fertility of any soil is due to the original properties given to it by nature, and how far to the changes in it made by man, cannot be fully discussed without taking account of the kind of produce raised from it. Human agency can do much more to promote the growth of some crops than of others. At one end of the scale are forest trees; an oak well planted and with plenty of room has very little to gain from man's aid: there is no way of applying labour to it so as to obtain any considerable return. Nearly the same may be said of the grass on some rich river bottoms which are endowed with a rich soil and good natural drainage; wild animals feeding off this grass without man's care will farm it nearly as well as he does; and much of the richest farm land in England (paying a rent of £6 an acre and upwards) would give to unaided nature almost as great a return as is got from it now. Next comes land which, though not quite so rich, is still kept in permanent pasture; and after this comes arable land on which man does not trust to nature's sowing, but prepares for each crop a seed bed to suit its special wants, sows the seed himself and weeds away the rivals to it. The seeds which he sows are selected for their habit of quickly maturing and fully developing just those parts which are most useful to him; and though the habit of making this selection carefully is only quite modern, and is even now far from general, yet the continued work of thousands of years has given him plants that have but little resemblance to their wild ancestors. Lastly, the kinds of produce which owe most to man's labour and care are the choicer kinds of fruits, flowers and vegetables, and of animals, particularly those which are used for improving their own breeds. For while nature left to herself would select those that are best able to take care of themselves and their offspring, man selects those which will provide him most quickly with the largest supplies of the things he most wants; and many of the choicest products could not hold their own at all without his care.

Thus various then are the parts which man plays in aiding nature to raise the different kinds of agricultural produce. In each case he works on till the extra return got by extra capital and labour has so far diminished that it will no longer remunerate him for applying them. Where this limit is soon reached he leaves nature to do nearly all the work; where his share in the production has been great, it is because he has been able to work far without reaching this limit. We are thus brought to consider the law of diminishing return.

It is important to note that the return to capital and labour now under discussion is measured by the amount of the produce raised independently of any changes that may meanwhile take place in the exchange value or price of produce; such, for instance, as might occur if a new railway had been made in the neighbourhood, or the population of the county had increased much, while agricultural produce could not be imported easily. Such changes will be of vital importance when we come to draw inferences from the law of diminishing return, and particularly when we discuss the pressure of increasing population on the means of subsistence. But they have no bearing on the law itself, because that has to do not with the value of the produce raised, but only with its amount. (3)


1. See Book II, Chapter iii.

2. In Ricardo's famous phrase "the original and indestructible powers of the soil." Von Thünen, in a noteworthy discussion of the basis of the theory of rent, and of the positions which Adam Smith and Ricardo took with regard to it, speaks of "Der Boden an sich"; a phrase which unfortunately cannot be translated, but which means the soil as it would be by itself, if not altered by the action of man (Der Isolierte Staat, 1, i, 5).

3. But see the latter part of IV, iii, section 8; also IV, xiii, section 2.

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Chapter 3, The Fertility of Land, Continued, The Tendency to Diminishing Return


1. The law of or statement of tendency to Diminishing Return may be provisionally worded thus:

An increase in the capital and labour applied in the cultivation of land causes in general a less than proportionate increase in the amount of produce raised, unless it happens to coincide with an improvement in the arts of agriculture.

We learn from history and by observation that every agriculturist in every age and clime desires to have the use of a good deal of land; and that when he cannot get it freely, he will pay for it, if he has the means. If he thought that he would get as good results by applying all his capital and labour to a very small piece, he would not pay for any but a very small piece.

When land that requires no clearing is to be had for nothing, everyone uses just that quantity which he thinks will give his capital and labour the largest return. His cultivation is "extensive," not "intensive." He does not aim at getting many bushels of corn from any one acre, for then he would cultivate only a few acres. His purpose is to get as large a total crop as possible with a given expenditure of seed and labour; and therefore he sows as many acres as he can manage to bring under a light cultivation. Of course he may go too far: he may spread his work over so large an area that he would gain by concentrating his capital and labour on a smaller space; and under these circumstances if he could get command over more capital and labour so as to apply more to each acre, the land would give him an Increasing Return; that is, an extra return larger in proportion than it gives to his present expenditure. But if he has made his calculations rightly, he is using just so much ground as will give him the highest return; and he would lose by concentrating his capital and labour on a smaller area. If he had command over more capital and labour and were to apply more to his present land, he would gain less than he would by taking up more land; he would get a Diminishing Return, that is, an extra return smaller in proportion than he gets for the last applications of capital and labour that he now makes, provided of course that there is meanwhile no perceptible improvement in his agricultural skill. As his sons grow up they will have more capital and labour to apply to land; and in order to avoid obtaining a diminishing return, they will want to cultivate more land. But perhaps by this time all the neighbouring land is already taken up, and in order to get more they must buy it or pay a rent for the use of it, or migrate where they can get it for nothing. (1)

This tendency to a diminishing return was the cause of Abraham's parting from Lot, (2) and most of the migrations of which history tells. And wherever the right to cultivate land is much in request, we may be sure that the tendency to a diminishing return is in full operation. Were it not for this tendency every farmer could save nearly the whole of his rent by giving up all but a small piece of his land, and bestowing all his capital and labour on that. If all the capital and labour which he would in that case apply to it, gave as good a return in proportion as that which he now applies to it, he would get from that plot as large a produce as he now gets from his whole farm; and he would make a net gain of all his rent save that of the little plot that he retained.

It may be conceded that the ambition of farmers often leads them to take more land than they can properly manage: and indeed almost every great authority on agriculture from Arthur Young downwards, has inveighed against this mistake. But when they tell a farmer that he would gain by applying his capital and labour to a smaller area, they do not necessarily mean that he would get a larger gross produce. It is sufficient for their argument that the saving in rent would more than counterbalance any probable diminution of the total returns that he got from the land. If a farmer pays a fourth of his produce as rent, he would gain by concentrating his capital and labour on less land, provided the extra capital and labour applied to each acre gave anything more than three-fourths as good a return in proportion, as he got from his earlier expenditure.

Again, it may be granted that much land, even in a country as advanced as England, is so unskilfully cultivated that it could be made to give more than double its present gross produce if twice the present capital and labour were applied to it skilfully. Very likely those are right who maintain that if all English farmers were as able, wise and energetic as the best are, they might profitably apply twice the capital and labour that is now applied. Assuming rent to be one-fourth of the present produce, they might get seven hundredweight of produce for every four that they now get: it is conceivable that with still more improved methods they might get eight hundredweight, or even more. But this does not prove that, as things are, further capital and labour could obtain from land an increasing return. The fact remains that, taking farmers as they are with the skill and energy which they actually have, we find as the result of universal observation that there is not open to them a short road to riches by giving up a great part of their land, by concentrating all their capital and labour on the remainder, and saving for their own pockets the rent of all but that remainder. The reason why they cannot do this is told in the law of diminishing return; that return being measured, as has already been said by its quantity, not its exchange value.

We may now state distinctly the limitations which were implied under the words "in general" in our provisional wording of the law. The law is a statement of a tendency which may indeed be held in check for a time by improvements in the arts of production and by the fitful course of the development of the full powers of the soil; but which must ultimately become irresistible if the demand for produce should increase without limit. Our final statement of the tendency may then be divided into two parts, thus: —

Although an improvement in the arts of agriculture may raise the rate of return which land generally affords to any given amount of capital and labour; and although the capital and labour already applied to any piece of land may have been so inadequate for the development of its full powers, that some further expenditure on it even with the existing arts of agriculture would give a more than proportionate return; yet these conditions are rare in an old country: and, except when they are present, the application of increased capital and labour to land will add a less than proportionate amount to the produce raised, unless there be meanwhile an increase in the skill of the individual cultivator. Secondly, whatever may be the future developments of the arts of agriculture, a continued increase in the application of capital and labour to land must ultimately result in a diminution of the extra produce which can be obtained by a given extra amount of capital and labour.

2. Making use of a term suggested by James Mill, we may regard the capital and labour applied to land as consisting of equal successive doses. (3) As we have seen, the return to the first few doses may perhaps be small and a greater number of doses may get a larger proportionate return; the return to successive doses may even in exceptional cases alternately rise and fall. But our law states that sooner or later (it being always supposed that there is meanwhile no change in the arts of cultivation) a point will be reached after which all further doses will obtain a less proportionate return than the preceding doses. The dose is always a combined dose of labour and capital, whether it is applied by a peasant owner working unaided on his own land, or at the charges of a capitalist farmer who does no manual labour himself. But in the latter case the main body of the outlay presents itself in the form of money; and when discussing the business economy of farming in relation to English conditions, it is often convenient to consider the labour converted at its market value into a money equivalent, and to speak of doses of capital simply, rather than of doses of labour and capital.

The dose which only just remunerates the cultivator may be said to be the marginal dose, and the return to it the marginal return. If there happens to be in the neighbourhood land that is cultivated but only just pays its expenses, and so gives no surplus for rent we may suppose this dose applied to it. We can then say that the dose applied to it is applied to land on the margin of cultivation, and this way of speaking has the advantage of simplicity. But it is not necessary for the argument to suppose that there is any such land: what we want to fix our minds on is the return to the marginal dose; whether it happens to be applied to poor land or to rich does not matter; all that is necessary is that it should be the last dose which can profitably be applied to that land. (4)

When we speak of the marginal, or the "last" dose applied to the land, we do not mean the last in time, we mean that dose which is on the margin of profitable expenditure; that is, which is applied so as just to give the ordinary returns to the capital and labour of the cultivator, without affording any surplus. To take a concrete instance, we may suppose a farmer to be thinking of sending the hoers over a field once more; and after a little hesitation he decides that it is worth his while, but only just worth his while to do it. The dose of capital and labour spent on doing it, is then the last dose in our present sense, though there are many doses still to be applied in reaping the crop. Of course the return to this last dose cannot be separated from the others; but we ascribe to it all that part of the produce which we believe would not have been produced if the farmer had decided against the extra hoeing. (5)

Since the return to the dose on the margin of cultivation just remunerates the cultivator, it follows that he will be just remunerated for the whole of his capital and labour by as many times the marginal return as he has applied doses in all. Whatever he gets in excess of this is the surplus produce of the land. This surplus is retained by the cultivator if he owns the land himself. (6)

It is important to note that this description of the nature of surplus produce is not a theory of rent: we shall not be ready for that till a much later stage. All that can be said here, is that this surplus produce may, under certain conditions, become the rent which the owner of the land can exact from the tenant for its use. But, as we shall see hereafter, the full rent of a farm in an old country is made up of three elements: the first being due to the value of the soil as it was made by nature; the second to improvements made in it by man; and the third, which is often the most important of all, to the growth of a dense and rich population, and to facilities of communication by public roads, railroads, etc. It is to be noted also that in an old country it is impossible to discover what was the original state of the land before it was first cultivated. The results of some of man's work are for good and evil fixed in the land, and cannot be distinguished from those of nature's work: the line of division is blurred, and must be drawn more or less arbitrarily. But for most purposes it is best to regard the first difficulties of coping with nature as pretty well conquered before we begin to reckon the farmer's cultivation. Thus the returns that we count as due to the first doses of capital and labour are generally the largest of all, and the tendency of the return to diminish shows itself at once. Having English agriculture chiefly in view, we may fairly take, as Ricardo did, this as the typical case. (7)

3. Let us next inquire on what depends the rate of diminution or of increase of the returns to successive doses of capital and labour. We have seen that there are great variations in the share of the produce which man may claim as the additional result of his own work over what unaided nature would have produced; and that man's share is much larger with some crops and soils and methods of cultivation than with others. Thus broadly speaking it increases as we pass from forest to pasture land, from pasture to arable, and from plough land to spade land; and this is because the rate of diminution of the return is as a rule greatest in forests, rather less in pasture, still less in arable land, and least of all in spade land. There is no absolute measure of the richness or fertility of land. Even if there be no change in the arts of production, a mere increase in the demand for produce may invert the order in which two adjacent pieces of land rank as regards fertility. The one which gives the smaller produce, when both are uncultivated, or when the cultivation of both is equally slight, may rise above the other and justly rank as the more fertile when both are cultivated with equal thoroughness. In other words, many of those lands which are the least fertile when cultivation is merely extensive, become among the most fertile when cultivation is intensive. For instance, self-drained pasture land may give a return large in proportion to a very slight expenditure of capital and labour, but a rapidly diminishing return to further expenditure: as population increases it may gradually become profitable to break up some of the pasture and introduce a mixed cultivation of roots and grains and grasses; and then the return to further doses of capital and labour may diminish less quickly.

Other land makes poor pasture, but will give more or less liberal returns to a great deal of capital and labour applied in tilling and in manuring it; its returns to the early doses are not very high, but they diminish slowly. Again, other land is marshy. It may, as did the fens of east England, produce little but osiers and wild fowl. Or, as is the case in many tropical districts, it may be prolific of vegetation, but so shrouded with malaria that it is difficult for man to live there, and still more to work there. In such cases the returns to capital and labour are at first small, but as drainage progresses, they increase; afterwards perhaps they again fall off. (8)

But when improvements of this kind have once been made, the capital invested in the soil cannot be removed; the early history of the cultivation is not repeated; and the produce due to further applications of capital and labour shows a tendency to diminishing return. (9)

Similar though less conspicuous changes may occur on land already well cultivated. For instance, without being marshy, it may be in need of a little drainage to take off the stagnant water from it, and to enable fresh water and air to stream through it. Or the subsoil may happen to be naturally richer than the soil at the surface: or again, though not itself rich, it may have just those properties in which the surface soil is deficient, and then a thorough system of deep steam-ploughing may permanently change the character of the land.

Thus we need not suppose that when the return to extra capital and labour has begun to diminish, it will always continue to do so. Improvements in the arts of production may, it has always been understood, raise generally the return which can be got by any amount of capital and labour; but this is not what is meant here. The point is that, independently of any increase in his knowledge, and using only those methods with which he has long been familiar, a farmer finding extra capital and labour at his command, may sometimes obtain an increasing return even at a late stage in his cultivation. (10)

It has been well said that as the strength of a chain is that of its weakest link, so fertility is limited by that element in which it is most deficient. Those who are in a hurry, will reject a chain which has one or two very weak links, however strong the rest may be: and prefer to it a much slighter chain that has no flaw. But if there is heavy work to be done, and they have time to make repairs, they will set the larger chain in order, and then its strength will exceed that of the other. In this we find the explanation of much that is apparently strange in agricultural history.

The first settlers in a new country generally avoid land which does not lend itself to immediate cultivation. They are often repelled by the very luxuriance of natural vegetation, if it happens to be of a kind that they do not want. They do not care to plough land that is at all heavy, however rich it might become if thoroughly worked. They will have nothing to do with water-logged land. They generally select light land which can easily be worked with a double plough, and then they sow their seed broadly, so that the plants when they grow up may have plenty of light and air, and may collect their food from a wide area.

When America was first settled, many farming operations that are now done by horse machinery were still done by hand; and though now the farmers have a strong preference for flat prairie land, free from stumps and stones, where their machines can work easily and without risk, they had then no great objection to a hill-side. Their crops were light in proportion to their acreage, but heavy in proportion to the capital and labour expended in raising them.

We cannot then call one piece of land more fertile than another until we know something about the skill and enterprise of its cultivators, and the amount of capital and labour at their disposal; and till we know whether the demand for produce is such as to make intensive cultivation profitable with the resources at their disposal. If it is, those lands will be the most fertile which give the highest average returns to a large expenditure of capital and labour; but if not, those will be the most fertile which give the best returns to the first few doses. The term fertility has no meaning except with reference to the special circumstances of a particular time and place.

But even when so limited there is some uncertainty as to the usage of the term. Sometimes attention is directed chiefly to the power which land has of giving adequate returns to intensive cultivation and so bearing a large total produce per acre; and sometimes to its power of yielding a large surplus produce or rent, even though its gross produce is not very large: thus in England now rich arable land is very fertile in the former sense, rich meadow in the latter. For many purposes it does not matter which of these senses of the term is understood: in the few cases in which it does matter, an interpretation clause must be supplied in the context. (11)

4. But further, the order of fertility of different soils is liable to be changed by changes in the methods of cultivation and in the relative values of different crops. Thus when at the end of last century Mr Coke showed how to grow wheat well on light soils by preparing the way with clover, they rose relatively to clay soils; and now though they are still sometimes called from old custom "poor", some of them have a higher value, and are really more fertile, than much of the land that used to be carefully cultivated while they were left in a state of nature.

Again, the increasing demand in central Europe for wood to be used as fuel and for building purposes, has raised the value of the pine-covered mountain slopes relatively to almost every other kind of land. But in England this rise has been prevented by the substitution of coal for wood as fuel, and of iron for wood as a material for ship-building, and lastly by England's special facilities for importing wood. Again, the cultivation of rice and jute often gives a very high value to lands that are too much covered with water to bear most other crops. And again, since the repeal of the Corn Laws the prices of meat and dairy produce have risen in England relatively to that of corn. Those arable soils that would grow rich forage crops in rotation with corn, rose relatively to the cold clay soils; and permanent pasture recovered part of that great fall in value relatively to arable land, which had resulted from the growth of population. (12)

Independently of any change in the suitability of the prevailing crops and methods of cultivation for special soils, there is a constant tendency towards equality in the value of different soils. In the absence of any special cause to the contrary, the growth of population and wealth will make the poorer soils gain on the richer. Land that was at one time entirely neglected is made by much labour to raise rich crops; its annual income of light and heat and air, is probably as good as those of richer soils: while its faults can be much lessened by labour. (13)

As there is no absolute standard for fertility, so there is none of good cultivation. The best cultivation in the richest parts of the Channel Islands, for instance, involves a lavish expenditure of capital and labour on each acre: for they are near good markets and have a monopoly of an equable and early climate. If left to nature the land would not be very fertile, for though it has many virtues, it has two weak links (being deficient in phosphoric acid and potash). But, partly by the aid of the abundant seaweed on its shores, these links can be strengthened, and the chain thus becomes exceptionally strong. Intense, or as it is ordinarily called in England "good" cultivation, will thus raise £100 worth of early potatoes from a single acre. But an equal expenditure per acre by the farmer in Western America would ruin him; relatively to his circumstances it would not be good, but bad cultivation.

5. Ricardo' s wording of the law of diminishing return was inexact. It is however probable that the inaccuracy was due not to careless thinking but only to careless writing. In any case he would have been justified in thinking that these conditions were not of great importance in the peculiar circumstances of England at the time at which he wrote, and for the special purposes of the particular practical problems he had in view. Of course he could not anticipate the great series of inventions which were about to open up new sources of supply, and, with the aid of free trade, to revolutionize English agriculture; but the agricultural history of England and other countries might have led him to lay greater stress on the probability of a change. (14)

He stated that the first settlers in a new country invariably chose the richest lands, and that as population increased, poorer and poorer soils were gradually brought under cultivation, speaking carelessly as though there were an absolute standard of fertility. But as we have already seen, where land is free, everyone chooses that which is best adapted for his own purpose, and that which will give him, all things considered, the best return for his capital and labour. He looks out, therefore, for land that can be cultivated at once, and passes by land that has any weak links in the chain of its elements of fertility, however strong it may be in some other links. But besides having to avoid malaria, he must think of his communication with his markets and the base of his resources; and in some cases the need for security against the attacks of enemies and wild beasts outweighs all other considerations. It is therefore not to be expected that the lands which were first chosen, should turn out always to be those which ultimately come to be regarded as the most fertile. Ricardo did not consider this point, and thus laid himself open to attacks by Carey and others, which, though for the greater part based on a misinterpretation of his position, have yet some solid substance in them.

The fact that, in new countries, soils which an English farmer would regard as poor, are sometimes cultivated before neighbouring soils which he would regard as rich, is not inconsistent, as some foreign writers have supposed, with the general tenor of Ricardo's doctrines. Its practical importance is in relation to the conditions under which the growth of population tends to cause increased pressure on the means of subsistence: it shifts the centre of interest from the mere amount of the farmer's produce to its exchange value in terms of the things which the industrial population in his neighbourhood will offer for it. (15)

6. Ricardo, and the economists of his time generally were too hasty in deducing this inference from the law of diminishing return; and they did not allow enough for the increase of strength that comes from organization. But in fact every farmer is aided by the presence of neighbours whether agriculturists or townspeople. (16) Even if most of them are engaged like himself in agriculture, they gradually supply him with good roads, and other means of communication: they give him a market in which he can buy at reasonable terms what he wants, necessaries, comforts and luxuries for himself and his family, and all the various requisites for his farm work: they surround him with knowledge: medical aid, instruction and amusement are brought to his door; his mind becomes wider, and his efficiency is in many ways increased. And if the neighbouring market town expands into a large industrial centre, his gain is much greater. All his produce is worth more; some things which he used to throw away fetch a good price. He finds new openings in dairy farming and market gardening, and with a larger range of produce he makes use of rotations that keep his land always active without denuding it of any one of the elements that are necessary for its fertility.

Further, as we shall see later on, an increase of population tends to develop the organization of trade and industry; and therefore the law of diminishing return does not apply to the total capital and labour spent in a district as sharply as to that on a single farm. Even when cultivation has reached a stage after which each successive dose applied to a field would get a less return than the preceding dose, it may be possible for an increase in the population to cause a more than proportional increase in the means of subsistence. It is true that the evil day is only deferred: but it is deferred. The growth of population, if not checked by other causes, must ultimately be checked by the difficulty of obtaining raw produce; but in spite of the law of diminishing return, the pressure of population on the means of subsistence may be restrained for a long time to come by the opening up of new fields of supply, by the cheapening of railway and steamship communication, and by the growth of organization and knowledge.

Against this must be set the growing difficulty of getting fresh air and light, and in some cases fresh water, in densely peopled places. The natural beauties of a place of fashionable resort have a direct money value which cannot be overlooked; but it requires some effort to realize the true value to men, women and children of being able to stroll amid beautiful and varied scenery.

7. As has already been said the land in economic phrase includes rivers and the sea. In river-fisheries, the extra return to additional applications of capital and labour shows a rapid diminution. As to the sea, opinions differ. Its volume is vast, and fish are very prolific; and some think that a practically unlimited supply can be drawn from the sea by man without appreciably affecting the numbers that remain there; or in other words, that the law of diminishing return scarcely applies at all to sea-fisheries: while others think that experience shows a falling-off in the productiveness of those fisheries that have been vigorously worked, especially by steam trawlers. The question is important, for the future population of the world will be appreciably affected as regards both quantity and quality, by the available supply of fish.

The produce of mines again, among which may be reckoned quarries and brickfields, is said to conform to the law of diminishing return; but this statement is misleading. It is true that we find continually increasing difficulty in obtaining a further supply of minerals, except in so far as we obtain increased power over nature's stores through improvements in the arts of mining, and through better knowledge of the contents of the earth's crust; and there is no doubt that, other things being equal, the continued application of capital and labour to mines will result in a diminishing rate of yield. But this yield is not a net yield, like the return of which we speak in the law of diminishing return. That return is part of a constantly recurring income, while the produce of mines is merely a giving up of their stored-up treasures. The produce of the field is something other than the soil; for the field, properly cultivated, retains its fertility. But the produce of the mine is part of the mine itself.

To put the same thing in another way, the supply of agricultural produce and of fish is a perennial stream; mines are as it were nature' s reservoir. The more nearly a reservoir is exhausted, the greater is the labour of pumping from it; but if one man could pump it out in ten days, ten men could pump it out in one day: and when once empty, it would yield no more. So the mines that are being opened this year might just as easily have been opened many years ago: if the plans had been properly laid in advance, and the requisite specialized capital and skill got ready for the work, ten years' supply of coal might have been raised in one year without any increased difficulty; and when a vein had once given up its treasure, it could produce no more. This difference is illustrated by the fact that the rent of a mine is calculated on a different principle from that of a farm. The farmer contracts to give back the land as rich as he found it: a mining company cannot do this; and while the farmer's rent is reckoned by the year, mining rent consists chiefly of "royalties" which are levied in proportion to the stores that are taken out of nature's storehouse. (17)

On the other hand, services which land renders to man, in giving him space and light and air in which to live and work, do conform strictly to the law of diminishing return. It is advantageous to apply a constantly increasing capital to land that has any special advantages of situation, natural or acquired. Buildings tower up towards the sky; natural light and ventilation are supplemented by artificial means, and the steam lift reduces the disadvantages of the highest floors; and for this expenditure there is a return of extra convenience, but it is a diminishing return. However great the ground rent may be, a limit is at last reached after which it is better to pay more ground rent for a larger area than to go on piling up storey on storey any further; just as the farmer finds that at last a stage is reached at which more intensive cultivation will not pay its expenses, and it is better to pay more rent for extra land, than to face the diminution in the return which he would get by applying more capital and labour to his old land. (18) From this it results that the theory of ground rents is substantially the same as that of farm rents. This and similar facts will presently enable us to simplify and extend the theory of value as given by Ricardo and Mill.

And what is true of building land is true of many other things. If a manufacturer has, say, three planing machines there is a certain amount of work which he can get out of them easily. If he wants to get more work from them he must laboriously economize every minute of their time during the ordinary hours, and perhaps work overtime. Thus after they are once well employed, every successive application of effort to them brings him a diminishing return. At last the net return is so small that he finds it cheaper to buy a fourth machine than to force so much work out of his old machines: just as a farmer who has already cultivated his land highly finds it cheaper to take in more land than to force more produce from his present land. Indeed there are points of view from which the income derived from machinery partakes of the nature of rent: as will be shown in Book V.


8. The elasticity of the notion of diminishing return cannot be fully considered here; for it is but an important detail of that large general problem of the economic distribution of resources in the investment of capital, which is the pivot of the main argument of Book V and indeed of a great part of the whole Volume. But a few words about it seem now to be called for in this place, because much stress has recently been laid on it under the able and suggestive leadership of Professor Carver. (19)

If a manufacturer expends an inappropriately large amount of his resources on machinery, so that a considerable part of it is habitually idle; or on buildings, so that a considerable part of his space is not well filled; or on his office staff, so that he has to employ some of them on work that it is not worth what it costs; then his excessive expenditure in that particular direction will not be as remunerative as his previous expenditure had been: and it may be said to yield him a "diminishing return." But this use of the phrase, though strictly correct is apt to mislead unless used with caution. For when the tendency to a diminishing return from increased labour and capital applied to land is regarded as a special instance of the general tendency to diminishing return from any agent of production, applied in excessive proportion to the other agents, one is apt to take it for granted that the supply of the other factors can be increased. That is to say, one is apt to deny the existence of that condition — the fixedness of the whole stock of cultivable land in an old country — which was the main foundation of those great classical discussions of the law of diminishing return, which we have just been considering. Even the individual farmer may not always be able to get an additional ten or fifty acres adjoining his own farm, just when he wants them, save at a prohibitive price. And in that respect land differs from most other agents of production even from the individual point of view. This difference may indeed be regarded as of little account in regard to the individual farmer. But from the social point of view, from the point of view of the following chapters on population it is vital. Let us look into this.

In every phase of any branch of production there is some distribution of resources between various expenditures which yields a better result than any other. The abler the man in control of any business, the nearer he will approach to the ideally perfect distribution; just as the abler the primitive housewife in control of a family's stock of wool, the nearer she will approach to an ideal distribution of wool between the different needs of the family. (20)

If his business extends he will extend his uses of each requisite of production in due proportion; but not, as has sometimes been said, proportionately; for instance the proportion of manual work to machine work, which would be appropriate in a small furniture factory would not be appropriate in a large one. If he makes the best possible apportionment of his resources, he gets the greatest (marginal) return from each appliance of production of which his business is capable. If he uses too much of any one he gets a diminishing return from it; because the others are not able to back it up properly. And this diminishing return is analogous to that which a farmer obtains, when he cultivates land so intensively that he obtains a diminishing return from it. If the farmer can get more land at the same rent as he has paid for the old, he will take more land, or else lie open to the imputation of being a bad business man: and this illustrates the fact that land from the point of view of the individual cultivator is simply one form of capital.

But when the older economists spoke of the Law of Diminishing Return they were looking at the problems of agriculture not only from the point of view of the individual cultivator but also from that of the nation as a whole. Now if the nation as a whole finds its stock of planing machines or ploughs inappropriately large or inappropriately small, it can redistribute its resources. It can obtain more of that in which it is deficient, while gradually lessening its stock of such things as are superabundant: but it cannot do that in regard to land: it can cultivate its land more intensively, but it cannot get any more. And for that reason the older economists rightly insisted that, from the social point of view, land is not on exactly the same footing as those implements of production which man can increase without limit.

No doubt in a new country where there is an abundance of rich land not yet brought under cultivation, this fixedness of the total stock of land is not operative. American economists often speak of the value, or rent, of land as varying with the land's distance from good markets, because even now there is a great deal rather than with its fertility; of rich land in their country which is not fully cultivated. And in like manner they lay but little stress on the fact that the diminishing return to labour and capital in general applied to the land by discreet farmers, in such a country as England, is not exactly on the same footing as the diminishing return to an inappropriate investment of their resources by indiscreet farmers or manufacturers in a disproportionately large number of ploughs or planing machines.

It is true that when the tendency to diminishing return is generalized, the return is apt to be expressed in terms of value, and not of quantity. It must however be conceded that the older method of measuring return in terms of quantity often jostled against the difficulty of rightly interpreting a dose of labour and capital without the aid of a money measure: and that, though helpful for a broad preliminary survey, it cannot be carried very far.

But even the recourse to money fails us, if we want to bring to a common standard the productiveness of lands in distant times or places; and we must then fall back on rough, and more or less arbitrary modes of measurement, which make no aim at numerical precision, but will yet suffice for the broader purposes of history. We have to take account of the facts that there are great variations in the relative amounts of labour and capital in a dose: and that interest on capital is generally a much less important item in backward than in advanced stages of agriculture, in spite of the fact that the rate of interest is generally much lower in the latter. For most purposes it is probably best to take as a common standard a day's unskilled labour of given efficiency: we thus regard the dose as made up of so much labour of different kinds, and such charges for the use and replacement of capital, as will together make up the value of, say, ten days' such labour. the relative proportions of these elements and their several values in terms of such labour being fixed according to the special circumstances of each problem. (21)

A similar difficulty is found in comparing the returns obtained by labour and capital applied under different circumstances. So long as the crops are of the same kind, the quantity of one return can be measured off against that of another: but, when they are of different kinds, they cannot be compared till they are reduced to a common measure of value. When, for instance, it is said that land would give better returns to the capital and labour expended on it with one crop or rotation of crops than with another, the statement must be understood to hold only on the basis of the prices at the time. In such a case we must take the whole period of rotation together, assuming the land to be in the same condition at the beginning and the end of the rotation; and counting on the one hand all the labour and capital applied during the whole period, and on the other the aggregate returns of all the crops.

It must be remembered that the return due to a dose of labour and capital is not here taken to include the value of the capital itself. For instance, if part of the capital on a farm consists of two-year-old oxen, then the returns to a year's labour and capital will include not the full weight of these oxen at the end of the year, but only the addition that has been made to it during the year. Again, when a farmer is said to work with a capital of £10 to the acre, this includes the value of everything that he has on the farm; but the total volume of the doses of labour and capital applied to a farm during, say, a year, does not include the whole value of the fixed capital, such as machinery and horses, but only the value of their use after allowing for interest, depreciation and repairs; though it does include the whole value of the circulating capital, such as seed.

The above is the method of measuring capital generally adopted, and it is to be taken for granted if nothing is said to the contrary; but another method is more suitable occasionally. Sometimes it is convenient to speak as though all the capital applied were circulating capital applied at the beginning of the year or during it: and in that case everything that is on the farm at the end of the year is part of the produce. Thus, young cattle are regarded as a sort of raw material which is worked up in the course of time into fat cattle ready for the butcher. The farm implements may even be treated in the same way, their value at the beginning of the year being taken as so much circulating capital applied to the farm, and at the end of the year as so much produce. This plan enables us to avoid a good deal of repetition of conditioning clauses as to depreciation, etc., and to save the use of words in many ways. It is often the best plan for general reasonings of an abstract character, particularly if they are expressed in a mathematical form.

The law of diminishing return must have occupied thoughtful men in every densely peopled country. It was first stated clearly by Turgot (OEuvres, ed. Daire I, pp. 420-1), as Prof. Cannan has shown; and its chief applications were developed by Ricardo.


1. Increasing return in the earlier stages arises partly from economy of organization, similar to that which gives an advantage to manufacture on a large scale. But it is also partly due to the fact that where land is very slightly cultivated the farmer's crops are apt to be smothered by nature's crop of weeds. The relation between Diminishing and Increasing Return is discussed further in the last chapter of this Book.

2. "The land was not able to bear them, that they might dwell together: for their substance was great, so that they could not dwell together." Genesis xiii, 6.

3. As to this term see the Note at the end of the Chapter.

4. Ricardo was well aware of this: though he did not emphasize it enough. Those opponents of his doctrine who have supposed that it has no application to places where all the land pays a rent, have mistaken the nature of his argument.

5. An illustration from recorded experiments may help to make clearer the notion of the return to a marginal dose of capital and labour. The Arkansas experimental station (see The Times, 18 Nov. 1889) reported that four plots of an acre each were treated exactly alike except in the matter of ploughing and harrowing, with the following result: — Plot Cultivation Crop yields

bushels per

acre 1 Ploughed once 16 2 Ploughed once and

harrowed once 18 1/3 3 Ploughed twice and

harrowed once 21 2/3 4 Ploughed twice and

harrowed twice 23 1/4

This would show that the dose of capital and labour applied in harrowing a second time an acre which had already been ploughed twice gave a return of 1 7/12 bushels. And if the value of these bushels, after allowing for expenses of harvesting, etc. just replaced that dose with profits, then that dose was a marginal one; even though it was not the last in point of time, since those spent on harvesting must needs come later.

6. Let us seek a graphical illustration. {Figure 11} It is to be remembered that graphical illustrations are not proofs. They are merely pictures corresponding very roughly to the main conditions of certain real problems. They obtain clearness of outline, by leaving out of account many considerations which vary from one practical problem to another, and of which the farmer must take full account in his own special case. If on any given field there were expended a capital of £50, a certain amount of produce would be raised from it: a certain amount larger than the former would be raised if there were expended on it a capital of £51. The difference between these two amounts may be regarded as the produce due to the fifty-first pound; and if we suppose the capital to be applied in successive doses of £1 each we may speak of this difference as the produce due to the fifty-first dose. Let the doses be represented in order by successive equal divisions of the line OD. Let there now be drawn from the division of this line representing the fifty-first dose M, a line MP at right angles to OD, in thickness equal to the length of one of the divisions, and such that its length represents the amount of the produce due to the fifty-first dose. Suppose this done for each separate division up to that corresponding to the last dose which it is found profitable to put on the land. Let this last dose be the 110th at D, and DC the corresponding return that only just remunerates the farmer. The extremities of such lines will lie on a curve APC. The gross produce will be represented by the sum of these lines: i.e., since the thickness of each line is equal to the length of the division on which it stands, by the area ODCA. Let CGH be drawn parallel to DO, cutting PM in G; then MG is equal to CD; and since DC just remunerates the farmer for one dose, MG will just remunerate him for another: and so for all the portions of the thick vertical lines cut off between OD and HC. Therefore the sum of these, that is, the area ODCH, represents the share of the produce that is required to remunerate him; while the remainder, AHGCPA, is the surplus produce, which under certain conditions becomes the rent.

7. That is, we may substitute (fig. 11) the dotted line BA' for BA and regard A' BPC as the typical curve for the return to capital and labour applied in English agriculture. No doubt crops of wheat and some other annuals cannot be raised at all without some considerable labour. But natural grasses which sow themselves will yield a good return of rough cattle to scarcely any labour.

It has already been noticed (Book iii, ch. iii, 1), the law of diminishing return bears a close analogy to the law of demand. The return which land gives to a dose of capital and labour may be regarded as the price which land offers for that dose. Land's return to capital and labour is, so to speak, her effective demand for them: her return to any dose is her demand price for that dose, and the list of returns that she will give to successive doses may thus be regarded as her demand schedule: but to avoid confusion we shall call it her "Return Schedule." Corresponding to the case of the land in the text is that of a man who may be willing to pay a larger proportionate price for a paper that would cover the whole of the walls of his room than for one that would go only half way; and then his demand schedule would at one stage show an increase and not a diminution of demand price for an increased quantity. But in the aggregate demand of many individuals these unevennesses destroy one another; so that the aggregate demand schedule of a group of people always shows the demand price as falling steadily with every increase in the amount offered. In the same way, by grouping together many pieces of land we might obtain a return schedule that would show a constant diminution for every increase of capital and labour applied. But it is more easy to ascertain, and in some ways more important to take note of, the variations of individual demand in the case of plots of land than in the case of people. And therefore our typical return schedule is not drawn out so as to show as even and uniform a diminution of return as our typical demand schedule does of demand price.

8. This case may be represented by diagrams. If the produce rises in real value in the ratio of OH' to OH (so that the amount required to remunerate the farmer for a dose of capital and labour has fallen from OH to OH'), the surplus produce rises only to AH'C', which is not very much greater than its old amount AHC, fig. 12, representing the first case. The second case is represented in fig. 13, where a similar change in the price of produce makes the new surplus produce AH'C' about three times as large as the old surplus, AHC; and the third in fig. 14. The earliest doses of capital and labour applied to the land give so poor a return, that it would not be worth while to apply them unless it were intended to carry the cultivation further. But later doses give an increasing return which culminates at P, and afterwards diminishes. If the price to be got for produce is so low that an amount OH" is required to remunerate the cultivator for a dose of capital and labour, it will then be only just profitable to cultivate the land. For then cultivation will be carried as far as D"; there will be a deficit on the earlier doses represented by the area H"AE", and a surplus on the later doses represented by the area E" PC": and as these two are about equal, the cultivation of the land so far will only just pay its way. But if the price of produce rises till OH is sufficient to remunerate the cultivator for a dose of capital and labour, the deficit on the earlier doses will sink to HAE, and the surplus on the later doses will rise to EPC. the net surplus (the true rent in case the land is hired out) will be the excess of EPC over HAE. Should the price rise further till OH' is Sufficient to remunerate the cultivator for a dose of capital and labour, this net surplus will rise to the very large amount represented by the excess of E'PC' over H'AE'.

9. In such a case as this the earlier doses are pretty sure to be sunk in the land; and the actual rent paid, if the land is hired out, will then include profits on them in addition to the surplus produce or true rent thus shown. Provision can easily be made in the diagrams for the returns due to the landlord's capital.

10. Of course his return may diminish and then increase and then diminish again; and yet again increase when he is in a position to carry out some further extensive change, as was represented by fig. 11. But more extreme instances, of the kind represented by fig. 15, are not very rare.

11. If the price of produce is such that an amount of it OH (figs. 12, 13, 14) is required to pay the cultivator for one dose of capital and labour, the cultivation will be carried as far as D. and the produce raised, AODC, will be greatest in fig. 12, next greatest in fig. 13, and least in fig. 14. But if the demand for agricultural produce so rises that OH' is enough to repay the cultivator for a dose, the cultivation will be carried as far as D', and the produce raised will be AOD'C', which is greatest in fig. 14, next in fig. 13, and least in fig. 12. The contrast would have been even stronger if we had considered the surplus produce which remains after deducting what is sufficient to repay the cultivator, and which becomes under some conditions the rent of the land. For this is AHC in figs. 12 and 13 in the first case and AH'C' in the second; while in fig. 14 it is in the first case the excess of AODCPA over ODCH, i.e. the excess of PEC over AHE; and in the second case the excess of PE'C' over AH'E'.

12. Rogers (Six Centuries of Work and Wages, p. 73) calculates that rich meadow had about the same value, estimated in grain, five or six centuries ago as it has now; but that the value of arable land, similarly estimated, has increased about fivefold in the same time. This is partly due to the great importance of hay at a time when roots and other modern kinds of winter food for cattle were unknown.

13. Thus we may compare two pieces of land represented in figs. 16 and 17, with regard to which the law of diminishing return acts in a similar way, so that their produce curves have similar shapes, but the former has a higher fertility than the other for all degrees of intensity of cultivation. The value of the land may generally be represented by its surplus produce or rent, which is in each case represented by AHC when OH is required to repay a dose of capital and labour; and by AH'C' when the growth of numbers and wealth have made OH' sufficient. It is clear that AH'C' in fig. 17 bears a more favourable comparison with AH'C' in fig. 16 than does AHC in fig. 17 with AHC in fig. 16. In the same way, though not to the same extent, the total produce AOD'C' in fig. 17 bears a more favourable comparison with AOD'C' in fig. 16, than does AODC in fig. 17 with AODC in fig. 16. (It is ingeniously argued in Wicksteed's Coordinates of Laws of Distribution, pp. 51-2 that rent may be negative. Of course taxes may absorb rent: but land which will not reward the plough will grow trees or rough grass. See above, pp. 157-8.)

Leroy Beaulieu (Répartition des Richesses, chap. II) has collected several facts illustrating this tendency of poor lands to rise in value relatively to rich. He quotes the following figures, showing the rental in francs per hectare (2 1/2 acres) of five classes of land in several communes of the Départements de l'Eure et de l'Oise in 1829 and 1852 respectively.

Class I. Class II. Class III. Class IV. Class V. A.D. 1829 58 48 34 20 8 A.D. 1852 80 78 60 50 40

14. As Roscher says (Political Economy, Sect. CLV), "In judging Ricardo, it must not be forgotten that it was not his intention to write a text-book on the science of Political Economy, but only to communicate to those versed in it the result of his researches in as brief a manner as possible. Hence he writes so frequently making certain assumptions, and his words are to be extended to other cases only after due consideration, or rather re-written to suit the changed case."

15. Carey claims to have proved that "in every quarter of the world cultivation has commenced on the sides of the hills where the soil was poorest, and where the natural advantages of situation were the least. With the growth of wealth and population, men have been seen descending from the high lands bounding the valley on either side, and coming together at its feet." (Principles of Social Science, chap. IV, 4.) He has even argued that whenever a thickly peopled country is laid waste, "whenever population, wealth, and the power of association decline, it is the rich soil. that is abandoned by men who fly again to the poor ones" (Ib. ch. v, 3); the rich soils being rendered difficult and dangerous by the rapid growth of jungles which harbour wild beasts and banditti, and perhaps by malaria. The experience of more recent settlers in South Africa and elsewhere does not however generally support his conclusions, which are indeed based largely on facts relating to warm countries. But much of the apparent attractiveness of tropical countries is delusive: they would give a very rich return to hard work: but hard work in them is impossible at present, though some change in this respect may be made by the progress of medical and especially bacteriological science. A cool refreshing breeze is as much a necessary of vigorous life as food itself. Land that offers plenty of food but whose climate destroys energy, is not more productive of the raw material of human wellbeing, than land that supplies less food but has an invigorating climate.

The late Duke of Argyll described the influence of insecurity and poverty in compelling the cultivation of the hills before that of the valleys of the Highlands was feasible, Scotland as it is and was, II, 74-5.

16. In a new country an important form of this assistance is to enable him to Venture on rich land that he would have otherwise shunned, through fear of enemies or of malaria.

17. As Ricardo says (Principles, chap. II) "The compensation given (by the lessee) for the mine or quarry is paid for the value of the coal or stone which can be removed from them, and has no connection with the original or indestructible Powers of the land." But both he and others seem sometimes to lose sight of these distinctions in discussing the law of diminishing return in its application to wines. Especially is this the case in Ricardo's criticism of Adam Smith's theory of rent (Principles, chap. XXIV).

18. Of course the return to capital spent in building increases for the earlier doses. Even where land can be had for almost nothing, it is cheaper to build houses two stories high than one; and hitherto it has been thought cheapest to build factories about four stories high. But a belief is growing up in America, that where land is not very dear factories should be only two stories high, partly in order to avoid the evil effects of vibration, and of the expensive foundations and walls required to prevent it in a high building, that is, it is found that the return of accommodation diminishes perceptibly after the capital and labour required to raise two stories have been spent on the land.

19. See also the writings of Professors Bullock and Landry.

20. In this he will make large use of what is called below the "substitution" of more for less appropriate means. Discussions bearing directly on this paragraph will be found in III, V, 1-3; IV, VII, 8; and XIII, 2: V, III, 3; IV, 1-4; V, 6-8; VIII, 1-5; X, 3; VI, 1, 7; and II, 5.

The tendencies of diminishing utility and of diminishing return have their roots, the one in qualities of human nature, the other in the technical conditions of industry. But the distributions of resources, to which they point, are governed by exactly similar laws. In mathematical phrase, the problems in maxima and minima to which they give rise are expressed by the same general equations; as may be seen by reference to Mathematical Note XIV.

21. The labour-part of the dose is of course current agricultural labour; the capital-part is itself also the product of labour in past times rendered by workers of many kinds and degrees, accompanied by "waiting."

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Chapter 4, The Growth of Population


1. The production of wealth is but a means to the sustenance of man; to the satisfaction of his wants; and to the development of his activities, physical, mental, and moral. But man himself is the chief means of the production of that wealth of which he is the ultimate aim: (1) and this and the two following chapters will be given to some study of the supply of labour; i.e. of the growth of population in numbers, in strength, in knowledge, and in character.

In the animal and vegetable world the growth of numbers is governed by the tendency of individuals to propagate their species on the one hand, and on the other hand by the struggle for life which thins out the young before they arrive at maturity. In the human race alone the conflict of these two opposing forces is complicated by other influences. On the one hand regard for the future induces many individuals to control their natural impulses; sometimes with the purpose of worthily discharging their duties as parents; sometimes, as for instance at Rome under the Empire, for mean motives. And on the other hand society exercises pressure on the individual by religious, moral and legal sanctions, sometimes with the object of quickening, and sometimes with that of retarding, the growth of population.

The study of the growth of population is often spoken of as though it were a modern one. But in a more or less vague form it has occupied the attention of thoughtful men in all ages of the world. To its influence, often unavowed, sometimes not even clearly recognized, we can trace a great part of the rules, customs and ceremonies that have been enjoined in the Eastern and Western world by law-givers, by moralists, and those nameless thinkers, whose far-seeing wisdom has left its impress on national habits. Among vigorous races, and in times of great military conflict, they aimed at increasing the supply of males capable of bearing arms; and in the higher stages of progress they have inculcated a great respect for the sanctity of human life; but in the lower stages, they have encouraged and even compelled the ruthless slaughter of the infirm and the aged, and sometimes of a certain proportion of the female children.

In ancient Greece and Rome, with the safety-valve of the power of planting colonies, and in the presence of constant war, an increase in the number of citizens was regarded as a source of public strength; and marriage was encouraged by public opinion, and in many cases even by legislation: though thoughtful men were even then aware that action in the contrary sense might be necessary if the responsibilities of parentage should ever cease to be burdensome. (2) In later times there may be observed, as Roscher says, (3) a regular ebb and flow of the opinion that the State should encourage the growth of numbers. It was in full flow in England under the first two Tudors, but in the course of the sixteenth century it slackened and turned; and it began to ebb, when the abolition of the celibacy of the religious orders, and the more settled state of the country had had time to give a perceptible impetus to population; the effective demand for labour having meanwhile been diminished by the increase of sheep runs, and by the collapse of that part of the industrial system which had been organized by the monastic establishments. Later on the growth of population was checked by that rise in the standard of comfort which took effect in the general adoption of wheat as the staple food of Englishmen during the first half of the eighteenth century. At that time there were even fears, which later inquiries showed to be unfounded, that the population was actually diminishing. Petty (4) had forestalled some of Carey's and Wakefield's arguments as to the advantages of a dense population. Child had argued that "whatever tends to the depopulating of a country tends to the impoverishment of it;" and that "most nations in the civilized parts of the world are more or less rich or poor proportionably to the paucity or plenty of their people, and not to the sterility or fruitfulness of their land." (5) And by the time that the world-struggle with France had attained its height, when the demands for more and more troops were ever growing, and when manufacturers were wanting more men for their new machinery; the bias of the ruling classes was strongly flowing in favour of an increase of population. So far did this movement of opinion reach that in 1796 Pitt declared that a man who had enriched his country with a number of children had a claim on its assistance. An Act, passed amid the military anxieties of 1806, which granted exemptions from taxes to the fathers of more than two children born in wedlock, was repealed as soon as Napoleon had been safely lodged in St Helena. (6)

2. But during all this time there had been a growing feeling among those who thought most seriously on social problems, that an inordinate increase of numbers, whether it strengthened the State or not, must necessarily cause great misery: and that the rulers of the State had no right to subordinate individual happiness to the aggrandizement of the State. In France in particular a reaction was caused, as we have seen, by the cynical selfishness with which the Court and its adherents sacrificed the wellbeing of the people for the sake of their own luxury and military glory. If the humane sympathies of the Physiocrats had been able to overcome the frivolity and harshness of the privileged classes of France, the eighteenth century would probably not have ended in tumult and bloodshed, the march of freedom in England would not have been arrested, and the dial of progress would have been more forward than it is by the space of at least a generation. As it was, but little attention was paid to Quesnay's guarded but forcible protest: — "one should aim less at augmenting the population than at increasing the national income, for the condition of greater comfort which is derived from a good income, is preferable to that in which a population exceeds its income and is ever in urgent need of the means of subsistence." (7)

Adam Smith said but little on the question of population, for indeed he wrote at one of the culminating points of the prosperity of the English working classes; but what he does say is wise and well balanced and modern in tone. Accepting the Physiocratic doctrine as his basis, he corrected it by insisting that the necessaries of life are not a fixed and determined quantity, but have varied much from place to place and time to time; and may vary more. (8) But he did not work out this hint fully. And there was nothing to lead him to anticipate the second great limitation of the physiocratic doctrine, which has been made prominent in our time by the carriage of wheat from the centre of America to Liverpool for less than what had been the cost of its carriage across England.

The eighteenth century wore on to its close and the next century began; year by year the condition of the working classes in England became more gloomy. An astonishing series of bad harvests, (9) a most exhausting war, (10) and a change in the methods of industry that dislocated old ties, combined with an injudicious poor law to bring the working classes into the greatest misery they have ever suffered, at all events since the beginning of trustworthy records of English social history. (11) And to crown all, well-meaning enthusiasts, chiefly under French influence, were proposing communistic schemes which would enable people to throw on society the whole responsibility for rearing their children. (12)

Thus while the recruiting sergeant and the employer of labour were calling for measures tending to increase the growth of population, more far-seeing men began to inquire whether the race could escape degradation if the numbers continued long to increase as they were then doing. Of these inquirers the chief was Malthus, and his Essay on the Principle of Population is the starting-point of all modern speculations on the subject.

3. Malthus' reasoning consists of three parts, which must be kept distinct. The first relates to the supply of labour. By a careful study of facts he proves that every people, of whose history we have a trustworthy record, has been so prolific that the growth of its numbers would have been rapid and continuous if it had not been checked either by a scarcity of the necessaries of life, or some other cause, that is, by disease, by war, by infanticide, or lastly by voluntary restraint.

His second position relates to the demand for labour. Like the first it is supported by facts, but by a different set of facts. He shows that up to the time at which he wrote no country (as distinguished from a city, such as Rome or Venice) had been able to obtain an abundant supply of the necessaries of life after its territory had become very thickly peopled. The produce which Nature returns to the work of man is her effective demand for population: and he shows that up to this time a rapid increase in population when already thick had not led to a proportionate increase in this demand. (13)

Thirdly, he draws the conclusion that what had been in the past, was likely to be in the future; and that the growth of population would be checked by poverty or some other cause of suffering unless it were checked by voluntary restraint. He therefore urges people to use this restraint, and, while leading lives of moral purity, to abstain from very early marriages. (14)

His position with regard to the supply of population, with which alone we are directly concerned in this chapter, remains substantially valid. The changes which the course of events has introduced into the doctrine of population relate chiefly to the second and third steps of his reasoning. We have already noticed that the English economists of the earlier half of last century overrated the tendency of an increasing population to press upon the means of subsistence; and it was not Malthus' fault that he could not foresee the great developments of steam transport by land and by sea, which have enabled Englishmen of the present generation to obtain the products of the richest lands of the earth at comparatively small cost.

But the fact that he did not foresee these changes makes the second and third steps of his argument antiquated in form; though they are still in a great measure valid in substance. It remains true that unless the checks on the growth of population in force at the end of the nineteenth century are on the whole increased (they are certain to change their form in places that are as yet imperfectly civilized) it will be impossible for the habits of comfort prevailing in Western Europe to spread themselves over the whole world and maintain themselves for many hundred years. But of this more hereafter. (15)

4. The growth in numbers of a people depends firstly on the Natural Increase, that is, the excess of their births over their deaths; and secondly on migration.

The number of births depends chiefly on habits relating to marriage, the early history of which is full of instruction; but we must confine ourselves here to the conditions of marriage in modern civilized countries.

The age of marriage varies with the climate. In warm climates where childbearing begins early, it ends early, in colder climates it begins later and ends later; (16) but in every case the longer marriages are postponed beyond the age that is natural to the country, the smaller is the birth-rate; the age of the wife being of course much more important in this respect than that of the husband. (17) Given the climate, the average age of marriage depends chiefly on the ease with which young people can establish themselves, and support a family according to the standard of comfort that prevails among their friends and acquaintances; and therefore it is different in different stations of life.

In the middle classes a man's income seldom reaches its maximum till he is forty or fifty years old; and the expense of bringing up his children is heavy and lasts for many years. The artisan earns nearly as much at twenty-one as he ever does, unless he rises to a responsible post, but he does not earn much before he is twenty-one: his children are likely to be a considerable expense to him till about the age of fifteen; unless they are sent into a factory, where they may pay their way at a very early age; and lastly the labourer earns nearly full wages at eighteen, while his children begin to pay their own expenses very early. In consequence, the average age at marriage is highest among the middle classes: it is low among the artisans and lower still among the unskilled labourers. (18)

Unskilled labourers, when not so poor as to suffer actual want and not restrained by any external cause, have seldom, if ever, shown a lower power of increase than that of doubling in thirty years; that is, of multiplying a million-fold in six hundred years, a billion-fold in twelve hundred: and hence it might be inferred a priori that their increase has never gone on without restraint for any considerable time. This inference is confirmed by the teaching of all history. Throughout Europe during the Middle Ages, and in some parts of it even up to the present time, unmarried labourers have usually slept in the farmhouse or with their parents; while a married pair have generally required a house for themselves: when a village has as many hands as it can well employ, the number of houses is not increased, and young people have to wait as best they can.

There are many parts of Europe even now in which custom exercising the force of law prevents more than one son in each family from marrying; he is generally the eldest, but in some places the youngest: if any other son marries he must leave the village. When great material prosperity and the absence of all extreme poverty are found in old-fashioned corners of the Old World, the explanation generally lies in some such custom as this with all its evils and hardships. (19) It is true that the severity of this custom may be tempered by the power of migration; but in the Middle Ages the free movement of the people was hindered by stern regulations. The free towns indeed often encouraged immigration from the country: but the rules of the gilds were in some respects almost as cruel to people who tried to escape from their old homes as were those enforced by the feudal lords themselves. (20)

5. In this respect the position of the hired agricultural labourer has changed very much. The towns are now always open to him and his children; and if he betakes himself to the New World he is likely to succeed better than any other class of emigrants. But on the other hand the gradual rise in the value of land and its growing scarcity is tending to check the increase of population in some districts in which the system of peasant properties prevails, in which there is not much enterprise for opening out new trades or for emigration, and parents feel that the social position of their children will depend on the amount of their land. They incline to limit artificially the size of their families and to treat marriage very much as a business contract, seeking always to marry their sons to heiresses. Francis Galton pointed out that, though the families of English peers are generally large, the habits of marrying the eldest son to an heiress who is presumably not of fertile stock, and sometimes dissuading younger sons from marriage, have led to the extinction of many peerages. Similar habits among French peasants, combined with their preference for small families, keep their numbers almost stationary.

On the other hand there seem to be no conditions more favourable to the rapid growth of numbers than those of the agricultural districts of new countries. Land is to be had in abundance, railways and steamships carry away the produce of the land and bring back in exchange implements of advanced types, and many of the comforts and luxuries of life. The "farmer," as the peasant proprietor is called in America, finds therefore that a large family is not a burden, but an assistance to him. He and they live healthy out-of-door lives; there is nothing to check but everything to stimulate the growth of numbers. The natural increase is aided by immigration; and thus, in spite of the fact that some classes of the inhabitants of large cities in America are, it is said, reluctant to have many children, the population has increased sixteen-fold in the last hundred years. (21)

On the whole it seems proved that the birth-rate is generally lower among the well-to-do than among those who make little expensive provision for the future of themselves and their families, and who live an active life: and that fecundity is diminished by luxurious habits of living. Probably it is also diminished by severe mental strain; that is to say, given the natural strength of the parents, their expectation of a large family is diminished by a great increase of mental strain. Of course those who do high mental work, have as a class more than the average of constitutional and nervous strength; and Galton has shown that they are not as a class unprolific. But they commonly marry late.

6. The growth of population in England has a more clearly defined history than that in the United Kingdom, and we shall find some interest in noticing its chief movements.

The restraints on the increase of numbers during the Middle Ages were the same in England as elsewhere. In England as elsewhere the religious orders were a refuge to those for whom no establishment in marriage could be provided; and religious celibacy while undoubtedly acting in some measure as an independent check on the growth of population, is in the main to be regarded rather as a method in which the broad natural forces tending to restrain population expressed themselves, than as an addition to them. Infectious and contagious diseases, both endemic and epidemic, were caused by dirty habits of life which were even worse in England than in the South of Europe; and famines by the failures of good harvests and the difficulties of communication; though this evil was less in England than elsewhere.

Country life was, as elsewhere, rigid in its habits; young people found it difficult to establish themselves until some other married pair had passed from the scene and made a vacancy in their own parish; for migration to another parish was seldom thought of by an agricultural labourer under ordinary circumstances. Consequently whenever plague or war or famine thinned the population, there were always many waiting to be married, who filled the vacant places; and, being perhaps younger and stronger than the average of newly married couples, had larger families. (22)

There was however some movement even of agricultural labourers towards districts which had been struck more heavily than their neighbours by pestilence, by famine or the sword. Moreover artisans were often more or less on the move, and this was especially the case with those who were engaged in the building trades, and those who worked in metal and wood; though no doubt the "wander years" were chiefly those of youth, and after these were over the wanderer was likely to settle down in the place in which he was born. Again, there seems to have been a good deal of migration on the part of the retainers of the landed gentry, especially of the greater barons who had seats in several parts of the country. And lastly, in spite of the selfish exclusiveness which the gilds developed as years went on, the towns offered in England as elsewhere a refuge to many who could get no good openings for work and for marriage in their own homes. In these various ways some elasticity was introduced into the rigid system of medieval economy; and population was able to avail itself in some measure of the increased demand for labour which came gradually with the growth of knowledge, the establishment of law and order, and the development of oceanic trade. (23)

In the latter half of the seventeenth and the first half of the eighteenth century the central government exerted itself to hinder the adjustment of the supply of population in different parts of the country to the demand for it by Settlement laws, which made any one chargeable to a parish who had resided there forty days, but ordered that he might be sent home by force at any time within that period. (24) Landlords and farmers were so eager to prevent people from getting a "settlement" in their parish that they put great difficulties in the way of building cottages, and sometimes even razed them to the ground. In consequence the agricultural population of England was stationary during the hundred years ending with 1760; while the manufactures were not yet sufficiently developed to absorb large numbers. This retardation in the growth of numbers was partly caused by, and partly a cause of, a rise in the standard of living; a chief element of which was an increased use of wheat in the place of inferior grains as the food of the common people. (25)

From 1760 onwards those who could not establish themselves at home found little difficulty in getting employment in the new manufacturing or mining districts, where the demand for workers often kept the local authorities from enforcing the removal clauses of the Settlement Act. To these districts young people resorted freely, and the birthrate in them became exceptionally high; but so did the death-rate also; the net result being a fairly rapid growth of population. At the end of the century, when Malthus wrote, the Poor Law again began to influence the age of marriage; but this time in the direction of making it unduly early. The sufferings of the working classes caused by a series of famines and by the French War made some measure of relief necessary; and the need of large bodies of recruits for the army and navy was an additional inducement to tender-hearted people to be somewhat liberal in their allowances to a large family, with the practical effect of making the father of many children often able to procure more indulgences for himself without working than he could have got by hard work if he had been unmarried or had only a small family. Those who availed themselves most of this bounty were naturally the laziest and meanest of the people, those with least self-respect and enterprise. So although there was in the manufacturing towns a fearful mortality, particularly of infants, the quantity of the people increased fast; but its quality improved little, if at all, till the passing of the New Poor Law in 1834. Since that time the rapid growth of the town population has, as we shall see in the next chapter, tended to increase mortality, but this has been counteracted by the growth of temperance, of medical knowledge, of sanitation and of general cleanliness. Emigration has increased, the age of marriage has been slightly raised and a somewhat less proportion of the whole population are married; but, on the other hand, the ratio of births to a marriage has risen; (26) with the result that population has been growing very nearly steadily. (27) Let us examine the course of recent changes a little more closely.

7. Early in this century, when wages were low and wheat was dear, the working classes generally spent more than half their income on bread: and consequently a rise in the price of wheat diminished marriages very much among them: that is, it diminished very much the number of marriages by banns. But it raised the income of many members of the well-to-do classes, and therefore often increased the number of marriages by licence. (28) Since however these were but a small part of the whole, the net effect was to lower the marriage-rate. (29) But as time went on, the price of wheat fell and wages rose, till now the working classes spend on the average less than a quarter of their incomes on bread; and in consequence the variations of commercial prosperity have got to exercise a preponderating influence on the marriage-rate. (30)

Since 1873 though the average real income of the population of England has indeed been increasing, its rate of increase has been less than in the preceding years, and meanwhile there has been a continuous fall of prices, and consequently a continuous fall in the money incomes of many classes of society. Now people are governed in their calculations as to whether they can afford to marry or not, more by the money income which they expect to be able to get, than by elaborate calculations of changes in its purchasing power. And therefore the standard of living among the working classes has been rising rapidly, perhaps more rapidly than at any other time in English history; their household expenditure measured in money has remained about stationary, and measured in goods has increased very fast. Meanwhile the price of wheat has also fallen very much, and a marked fall in the marriage-rate for the whole country has often accompanied a marked fall in the price of wheat. The marriage-rate is now reckoned on the basis that each marriage involves two persons and should therefore count for two. The English rate fell from 17.6 per thousand in 1873 to 14.2 in 1886. It rose to 16.5 in 1899; in 1907 it was 15.8, but in 1908 only 14.9. (31)

There is much to be learnt from the history of population in Scotland and in Ireland. In the lowlands of Scotland a high standard of education, the development of mineral resources, and close contact with their richer English neighbours have combined to afford a great increase of average income to a rapidly increasing population. On the other hand, the inordinate growth of population in Ireland before the potato-famine in 1847, and its steady diminution since that time, will remain for ever landmarks in economic history.

Comparing the habits of different nations (32) we find that in the Teutonic countries of Central and Northern Europe, the age of marriage is kept late, partly in consequence of the early years of manhood being spent in the army; but that it has been very early in Russia; where, at all events under the old régime, the family group insisted on the son's bringing a wife to help in the work of the household as early as possible, even if he had to leave her for a time and go to earn his living elsewhere. In the United Kingdom and America there is no compulsory service, and men marry early. In France, contrary to general opinion, early marriages on the part of men are not rare; while on the part of women they are more common than in any country for which we have statistics, except the Slavonic countries, where they are much the highest.

The marriage-rate, the birth-rate and the death-rate are diminishing in almost every country. But the general mortality is high where the birth-rate is high. For instance, both are high in Slavonic countries, and both are low in the North of Europe. The death-rates are low in Australasia, and the "natural" increase there is fairly high, though the birth-rate is low and falling very fast. In fact its fall in the various States ranged from 23 to 30 per cent in the period 1881-1901. (33)


1. See IV, i, section 1.

2. Thus Aristotle (Politics, II, 6) objects to Plato's scheme for equalizing property and abolishing poverty on the ground that it would be unworkable unless the State exercised a firm control over the growth of numbers. And as Jowett points out, Plato himself was aware of this (see Laws, v, 740: also Aristotle, Politics, VII, 16). The opinion, formerly held that the population of Greece declined from the seventh century B.C., and that of Rome from the third, has recently been called in question, see "Die Bevölkerung des Altertums" by Edouard Meyer in the Handwörterbuch der Staatswissenschaften.

3. Political Economy, section 254.

4. He argues that Holland is richer than it appears to be relatively to France, because its people have access to many advantages that cannot be had by those who live on poorer land, and are therefore more scattered. "rich land is better than coarse land of the same rent." Political Arithmetick, ch. 1.

5. Discourses on Trade, ch. X. Harris, Essay on Coins, pp. 32-3, argues to a similar effect, and proposes to "encourage matrimony among the lower classes by giving some privileges to those who have children," etc.

6. "Let us," said Pitt, "make relief, in cases where there are a large number of children, a matter of right and an honour, instead of a ground for opprobrium and contempt. This will make a large family a blessing and not a curse, and this will draw a proper line of distinction between those who are able to provide for themselves by labour, and those who after having enriched their country with a number of children have a claim on its assistance for their support." Of course he desired "to discourage relief where it was not wanted." Napoleon the First had offered to take under his own charge one member of any family which contained seven male children; and Louis XIV his predecessor in the slaughter of men, had exempted from public taxes all those who married before the age of 20 or had more than ten legitimate children. A comparison of the rapid increase in the population of Germany with that of France was a chief motive of the order of the French Chamber in 1885 that education and board should be provided at the public expense for every seventh child in necessitous families: and in 1913 a law was passed giving bounties under certain conditions to parents of large families. The British Budget Bill of 1909 allowed a small abatement of income tax for fathers of families.

7. The Physiocratic doctrine with regard to the tendency of population to increase up to the margin of subsistence may be given in Turgot's words: — the employer "since he always has his choice of a great number of working men, will choose that one who will work most cheaply. Thus then the workers are compelled by mutual competition to lower their price; and with regard to every kind of labour the result is bound to be reached and it is reached as a matter of fact — that the wages of the worker are limited to that which is necessary to procure his subsistence." (Sur la formation et la distribution des richesses, VI) Similarly Sir James Steuart says (Inquiry, Bk. 1, ch. III), "The generative faculty resembles a spring loaded with a weight, which always exerts itself in proportion to the diminution of resistance: when food has remained some time without augmentation or diminution, generation will carry numbers as high as possible; if then food comes to be diminished the spring is overpowered; the force of it becomes less than nothing, inhabitants will diminish at least in proportion to the overcharge. If, on the other hand, food be increased, the spring which stood at 0, will begin to exert itself in proportion as the resistance diminishes; people will begin to be better fed; they will multiply, and in proportion as they increase in numbers the food will become scarce again." Sir James Steuart was much under the influence of the Physiocrats, and was indeed in some respects imbued with Continental rather than English notions of government: and his artificial schemes for regulating population seem very far off from us now. See his Inquiry, Bk. I, ch. XII, "Of the great advantage of combining a well-digested Theory and a perfect Knowledge of Facts with the Practical Part of Government in order to make a People multiply."

8. See Wealth of Nations, Bk. I, ch. VIII, and Bk. V, ch. II. See also supra, Bk. II, ch. III.

9. The average price of wheat in the decade 1771-80 in which Adam Smith wrote was 34s. 7d.; in 1781-90 it was 37s. 1d.; in 1791-1800 it was 63s. 6d.; in 1801-10 it was 83s. 11d.; and in 1811-20 it was 87s. 6d.

10. Early in the last century the Imperial taxes for the greater part war taxes amounted to one-fifth of the whole income of the country; whereas now they are not much more than a twentieth, and even of this a great part is spent on education and other benefits which Government did not then afford.

11. See below section 7 and above Bk. I, ch. III, section 5.

12. Especially Godwin in his Inquiry concerning Political Justice (1792). It is interesting to compare Malthus' criticism of this Essay (Bk. III, ch. II) with Aristotle's comments on Plato's Republic (see especially Politics, II, 6).

13. But many of his critics suppose him to have stated his position much less unreservedly than he did; they have forgotten such passages as this: — "From a review of the state of society in former periods compared with the present I should certainly say that the evils resulting from the principle of population have rather diminished than increased, even under the disadvantage of an almost total ignorance of their real cause. And if we can indulge the hope that this ignorance will be gradually dissipated, it does not seem unreasonable to hope that they will be still further diminished. The increase of absolute population, which will of course take place, will evidently tend but little to weaken this expectation, as everything depends on the relative proportions between population and food, and not on the absolute number of the people. In the former part of this work it appeared that the countries which possessed the fewest people often suffered the most from the effects of the principle of population." Essay, Bk. IV, ch. XII.

14. In the first edition of his essay, 1798, Malthus gave his argument without any detailed statement of facts, though from the first he regarded it as needing to be treated in direct connection with a study of facts; as is shown by his having told Pryme (who afterwards became the first Professor of Political Economy at Cambridge) "that his theory was first suggested to his mind in an argumentative conversation which he had with his father on the state of some other countries" (Pryme's Recollections, p. 66). American experience showed that population if unchecked would double at least once in twenty-five years. He argued that a doubled population might, even in a country as thickly peopled as England was with its seven million inhabitants, conceivably though not probably double the subsistence raised from the English soil: but that labour doubled again would not suffice to double the produce again. "Let us then take this for our rule, though certainly far beyond the truth; and allow that the whole produce of the island might be increased every twenty five years [that is with every doubling of the population] by a quantity of subsistence equal to that which it at present produces"; or in other words, in an arithmetical progression. His desire to make himself clearly understood made him, as Wagner says in his excellent introduction to the study of Population (Grundlegung, Ed. 3, p. 453), "put too sharp a point on his doctrine, and formulate it too absolutely." Thus he got into the habit of speaking of production as capable of increasing in an arithmetical ratio: and many writers think that he attached importance to the phrase itself: whereas it was really only a short way of stating the utmost that he thought any reasonable person could ask him to concede. What he meant, stated in modern language, was that the tendency to diminishing return, which is assumed throughout his argument, would begin to operate sharply after the produce of the island had been doubled. Doubled labour might give doubled produce: but quadrupled labour would hardly treble it: octupled labour would not quadruple it.

In the second edition, 1803, he based himself on so wide and careful a statement of facts as to claim a place among the founders of historical economics; he softened and explained away many of the "sharp points" of his old doctrine, though he did not abandon (as was implied in the earlier editions of this work) the use of the phrase "arithmetical ratio." In particular he took a less despondent view of the future of the human race; and dwelt on the hope that moral restraint might hold population in check, and that "vice and misery," the old check, might thus be kept in abeyance. Francis Place, who was not blind to his many faults, wrote in 1822 an apology for him, excellent in tone and judgment. Good accounts of his work are given in Bonar's Malthus and his Work, Cannan's Production and Distribution, 1776-1848, and Nicholson's Political Economy, Bk. 1, ch. XII.

15. Taking the present population of the world at one and a half thousand millions; and assuming that its present rate of increase (about 8 per 1000 annually, see Ravenstein's paper before the British Association in 1890) will continue, we find that in less than two hundred years it will amount to six thousand millions; or at the rate of about 200 to the square mile of fairly fertile land (Ravenstein reckons 28 million square miles of fairly fertile land, and 14 millions of poor grass lands. The first estimate is thought by many to be too high: but, allowing for this, if the less fertile land be reckoned in for what it is worth, the result will be about thirty million square miles as assumed above). Meanwhile there will probably be great improvements in the arts of agriculture; and, if so, the pressure of population on the means of subsistence may be held in check for about two hundred years, but not longer.

16. Of course the length of a generation has itself some influence on the growth of population. If it is 25 years in one place and 20 in another; and if in each place population doubles once in two generations during a thousand years, the increase will be a million-fold in the first place, but thirty million-fold in the second.

17. Dr Ogle (Statistical Journal, Vol. 53) calculates that if the average age of marriage of women in England were postponed five years, the number of children to a marriage, which is now 4.2 would fall to 3.1. Korösi, basing himself on the facts of the relatively warm climate of Buda Pest, finds 18-20 the most prolific age for women, 24-26 that for men. But he concludes that a slight postponement of weddings beyond these ages is advisable mainly on the ground that the vitality of the children of women under 20 is generally small. See Proceedings of Congress of Hygiene and Demography, London 1892, and Statistical Journal, Vol 57.

18. The term marriage in the text must be taken in a wide sense so as to include not only legal marriages, but all those informal unions which are sufficiently permanent in character to involve for several years at least the practical responsibilities of married life. They are often contracted at an early age, and not unfrequently lead up to legal marriages after the lapse of some years. For this reason the average age at marriage in the broad sense of the term, with which alone we are here concerned, is below the average age at legal marriage. The allowance to be made on this head for the whole of the working classes is probably considerable; but it is very much greater in the case of unskilled labourers than of any other class. The following statistics must be interpreted in the light of this remark, and of the fact that all English industrial statistics are vitiated by the want of sufficient care in the classification of the working classes in our official returns. The Registrar-General's forty-ninth Annual Report states that in certain selected districts the returns of marriages for 1884-5 were examined with the following results; the number after each occupation being the average age of bachelors in it at marriage, and the following number, in brackets, being the average age of spinsters who married men of that occupation: — Miners 24.06 (22.46); Textile hands 24.38 (23.43); Shoemakers, Tailors 24.92 (24.31); Artisans 25.35 (23.70); Labourers 15.56 (23.66); Commercial Clerks 16.15 (24.43); Shopkeepers, Shopmen 26.67 (24.22); Farmers and sons 29.23 (26.91); Professional and Independent Class 31.22 (26.40).

Dr Ogle, in the paper already referred to, shows that the marriage-rate is greatest generally in those parts of England in which the percentage of those women between 15 and 25 years of age who are industrially occupied is the greatest. This is no doubt due, as he suggests, partly to the willingness of men to have their money incomes supplemented by those of their wives; but it may be partly due also to an excess of women of a marriageable age in those districts.

19. Thus a visit to the valley Jachenau in the Bavarian Alps about 1880 found this custom still in full force. Aided by a great recent rise in the value of their woods, with regard to which they had pursued a farseeing policy, the inhabitants lived prosperously in large houses, the younger brothers and sisters acting as servants in their old homes or elsewhere. They were of a different race from the workpeople in the neighbouring valleys, who lived poor and hard lives, but seemed to think that the Jachenau purchased its material prosperity at too great a cost.

20. See e.g. Rogers, Six Centuries, pp. 106-7.

21. The extreme prudence of peasant proprietors under stationary conditions was noticed by Malthus; see his account of Switzerland (Essay, Bk. II, ch. v). Adam Smith remarked that poor Highland women frequently had twenty children of whom not more than two reached maturity (Wealth of Nations, Bk. 1, ch. VIII); and the notion that want stimulated fertility was insisted on by Doubleday, True Law of Population. See also Sadler, Law of Population. Herbert Spencer seemed to think it probable that the progress of civilization will of itself hold the growth of population completely in check. But Malthus' remark, that the reproductive power is less in barbarous than in civilized races, has been extended by Darwin to the animal and vegetable kingdom generally.

Mr Charles Booth (Statistical Journal, 1893) has divided London into 27 districts (chiefly Registration districts); and arranged them in order of poverty, of overcrowding, of high birth-rate and of high death-rate. He finds that the four orders are generally the same. The excess of birth rate over death-rate is lowest in the very rich and the very poor districts.

The birth-rate in England and Wales is nominally diminishing at about an equal rate in both town and country. But the continuous migration of young persons from rural to industrial areas has considerably depleted the ranks of young married women in the rural districts; and, when allowance is made for this fact, we find that the percentage of births to women of childbearing ages is much higher in them than in the towns: as is shown in the following table published by the Registrar-General in 1907.

Mean Annual Birth Rates in Urban and Rural Areas Urban: 20 large towns, with an aggregate population of 9,742,404 persons at the date of the Census of 1901. Period Calculated on the total population

Rate per 1000 Compared with rate in

1870-72 taken as 100 1870-72 36.7 100.0 1880-82 35.7 97.3 1890-92 32.0 87.2 1900-02 28.8 81.2

Calculated on the female population, aged 15-45 years

Rate per 1000 Compared with rate in

1870-72 taken as 100 1870-72 143.1 100.0 1880-82 140.6 98.3 1890-92 124.6 87.1 1900-02 111.4 77.8 Rural: 112 entirely rural registration districts, with an aggregate population of 1,330,319 persons at the date of the Census of 1901.

Calculated on the total population

Rate per 1000 Compared with rate in

1870-72 taken as 100 1870-72 31.6 100.0 1880-82 30.3 95.6 1890-92 27.8 88.0 1900-02 26.0 83.3

Calculated on the female population, aged 15-45 years

Rate per 1000 Compared with rate in

1870-72 taken as 100 1870-72 158.9 100.0 1880-82 153.5 96.6 1890-92 135.6 85.3 1900-02 120.7 76.0

The movements of the population of France have been studied with exceptional care: and the great work on the subject by Levasseur, La Population Française, is a mine of valuable information as regards other nations besides France. Montesquieu, reasoning perhaps rather a priori, accused the law of primogeniture which ruled in his time in France of reducing the number of children in a family: and le Play brought the same charge against the law of compulsory division. Levasseur (l.c. Vol. iii, pp. 171-7) calls attention to the contrast; and remark that Malthus' expectations of the effect of the Civil Code on population were in harmony with Montesquieu's rather than le Play's diagnosis. But in fact the birthrate varies much from one part of France to another. It is generally lower where a large part of the population owns land than where it does not. If however the Departments of France be arranged in groups in ascending order of the property left at death (valeurs successorales par tête d'habitant), the corresponding birth-rate descends almost uniformly, being 23 per hundred married women between 15 and 50 years for the ten Departments in which the property left is 48-57 fr.; and 13.2 for the Seine, where it is 412 fr. And in Paris itself the arrondissements inhabited by the well-to-do show a smaller percentage of families with more than two children than the poorer arrondissements show. There is much interest in the careful analysis which Levasseur gives of the connection between economic conditions and birth-rate; his general conclusion being that it is not direct but indirect, through the mutual influence of the two on manners and the habit of life (moeurs). He appears to hold that, however much the decline in the numbers of the French relatively to surrounding nations may be regretted from the political and military points of view, there is much good mixed with the evil in its influences on material comfort and even social progress.

22. Thus we are told that after the Black Death of 1349 most marriages were very fertile (Rogers, History of Agriculture and Prices, Vol. 1, p. 301).

23. There is no certain knowledge to be had as to the density of population in England before the eighteenth century. but the following estimates, reproduced from Steffen (Geschichte der englischen Lohn-arbeiter, 1, pp. 463 ff.), are probably the best as yet available. Domesday Book suggests that in 1086 the population of England was between two, and two-and-a-half millions. Just before the Black Death (1348) it may have been between three-and-a-half, and four-and-a-half millions; and just afterwards two-and-a-half millions. It began to recover quickly; but made slow progress between 1400 and 1550: it increased rather fast in the next hundred years, and reached five-and-a half millions in 1700.

If we are to trust Harrison (Description of England, Bk. II, ch. XVI), the muster of men able for service in 1574 amounted to 1,172,674.

The Black Death was England's only very great calamity. She was not, like the rest of Europe, liable to devastating wars, such as the Thirty Years' War, which destroyed more than half the population of Germany, a loss which it required a full century to recover. (See Rümelin's instructive article on Bevölkerungslehre in Schönberg's Handbuch.)

24. Adam Smith is justly indignant at this. (See Wealth of Nations, Bk. I, ch. X, Part II, and Book IV, ch. II.) The Act recites (14 Charles II, c. 12, A.D. 1662) that " by reason of some defects in the law, poor people are not restrained from going from one parish to another, and thereby do endeavour to settle themselves in those parishes where there is the best stock, the largest wastes or commons to build cottages, and the most woods for them to burn and destroy: etc." and it is therefore ordered " that upon complaint made... within forty days after any such person or persons coming, so as to settle as aforesaid, in any tenement under the yearly value of ten pounds... it shall be lawful for any two justices of the Peace... to remove and convey such person or persons to such parish where he or they were last legally settled." Several Acts purporting to soften its harshness had been passed before Adam Smith's time; but they had been ineffective. In 1795 however it was ordered that no one should be removed until he became actually chargeable.

25. Some interesting remarks on this subject are made by Eden, History of the Poor, I, pp. 560-4.

26. But this increase in the figures shown is partly due to improved registration of births. (Farr, Vital Statistics, p. 97.)

27. The following tables show the growth of the population of England and Wales from the beginning of the eighteenth century. The figures before 1801 are computed from the registers of births and deaths, and the poll and hearth tax returns: those since 1801 from Census returns. It will be noticed that the numbers increased nearly as much in the twenty years following 1760 as in the preceding sixty years. The pressure of the great war and the high price of corn is shown in the slow growth between 1790 and 1801; and the effects of indiscriminate poor law allowances, in spite of greater pressure, is shown by the rapid increase in the next ten years, and the still greater increase when that pressure was removed in the decade ending 1821. The third column shows the percentage which the increase during the preceding decade was of the population at the beginning of that decade.

Year Population

000s omitted Increase

per cent

1700 5,475

1710 5,240 -4.9

1720 5,565 6.2

1730 5,796 4.1

1740 6,064 4.6

1750 6,467 6.6

1760 6,736 4.1

1770 7,428 10.3

1780 7,953 7.1

1790 8,675 9.1

1801 8,892 2.5

1811 10,164 14.3

1821 12,000 18.1

1831 13,897 15.8

1841 15,909 14.5

1851 17,928 12.7

1861 20,066 11.9

1871 22,712 13.2

1881 25,974 14.4

1891 29,022 11.7

1901 32,527 11.7

The great growth of emigration during recent years makes it important to correct the figures for the last three decades so as to show the "natural increase," viz. that due to the excess of births over deaths. The net emigration from the United Kingdom during the decades 1871-81 and 1881-91 was 1,480,000, and 1,747,000 respectively.

28. See Farr's 17th Annual Report for 1854 as Registrar-General, or the abstract of it in Vital Statistics (pp. 72-5).

29. For instance, representing the price of wheat in shillings and the number of marriages in England and Wales in thousands, we have for 1801 wheat at 119 and marriages at 67, for 1803 wheat at 59 and marriages at 94; for 1805 the numbers are 90 and 80, for 1807 they are 75 and 84, for 1812 they are 126 and 82, for 1815 they are 66 and 100, for 1917 they are 97 and 88, for 1822 they are 45 and 99.

30. Since 1820 the average price of wheat has seldom exceeded 60s. and never 75s.: and the successive inflations of commerce which culminated and broke in 1826, 1836-9, 1848, 1856, 1866 and 1873 exercised an influence on the marriage rate about equal with changes in the price of corn. When the two causes act together the effects are very striking: thus between 1829 and 1834, there was a recovery of prosperity accompanied by a steady fall in the price of wheat and marriages rose from a hundred and four to a hundred and twenty-one thousand. The marriage-rate rose again rapidly between 1842 and 1845 when the price of wheat was a little lower than in the preceding years, and the business of the country was reviving; and again under similar circumstances between 1847 and 1853 and between 1862 and 1865.

A comparison of the marriage-rate with the harvests in Sweden for the years 1749 to 1883 is given by Sir Rawson Rawson in the Statistical Journal for December 1885. The harvest does not declare itself till part of the year's tale of marriages is made up; and further the inequalities of harvests are to some extent compensated for by the storage of grain; and therefore the individual harvest figures do not correspond closely with the marriage-rate. But when several good or bad harvests come together, the effect in increasing or diminishing the marriage-rate is very clearly marked.

31. Statistics of exports are among the most convenient indications of the fluctuations of commercial credit and industrial activity: and in the article already quoted, Ogle has shown a correspondence between the marriage-rate and the exports per head. Compare diagrams in Vol. II, p. 12 of Levasseur's La Population Française; and with regard to Massachusetts by Willcox in the Political Science Quarterly, Vol. VIII, pp. 76-82. Ogle's inquiries have been extended and corrected in a paper read by R. H. Hooker before the Manchester Statistical Society, in January 1898; who points out that if the marriage-rate fluctuates, the birth-rate during an ascending phase of the marriage-rate is apt to correspond to the marriage-rate not for that phase, but for the preceding phase when the marriage-rate was declining: and vice versâ. "Hence the ratio of births to marriages declines when the marriage-rate is rising and rises when the marriage-rate falls. A curve representing the ratio of births to marriages will move inversely to the marriage-rate." He points out that the decline in the ratio of births to marriages is not great, and is accounted for by the rapid decline of illegitimate births. The ratio of legitimate births to marriages is not declining perceptibly.

32. The following statements are based chiefly on statistics arranged by the late Signor Bodio, by M. Levasseur, La Population Française, and by the English Registrar-General in his Report for 1907.

33. Much instructive and suggestive matter connected with the subject of this chapter is contained in the Statistical Memoranda and Charts relating to Public Health and Social Conditions published by the Local Government Board in 1909 [Cd. 4671].

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Chapter 5, The Health and Strength of the Population


1. We have next to consider the conditions on which depend health and strength, physical, mental and moral. They are the basis of industrial efficiency, on which the production of material wealth depends; while conversely the chief importance of material wealth lies in the fact that, when wisely used, it increases the health and strength, physical, mental and moral of the human race.

In many occupations industrial efficiency requires little else than physical vigour; that is, muscular strength, a good constitution and energetic habits. In estimating muscular, or indeed any other kind of strength for industrial purposes, we must take account of the number of hours in the day, of the number of days in the year, and the number of years in the lifetime, during which it can be exerted. But with this precaution we can measure a man's muscular exertion by the number of feet through which his work would raise a pound weight, if it were applied directly to this use; or in other words by the number of "foot pounds" of work that he does. (1)

Although the power of sustaining great muscular exertion seems to rest on constitutional strength and other physical conditions, yet even it depends also on force of will, and strength of character. Energy of this kind, which may perhaps be taken to be the strength of the man, as distinguished from that of his body, is moral rather than physical; but yet it depends on the physical condition of nervous strength. This strength of the man himself, this resolution, energy and self-mastery, or in short this "vigour" is the source of all progress: it shows itself in great deeds, in great thoughts and in the capacity for true religious feeling. (2)

Vigour works itself out in so many forms, that no simple measure of it is possible. But we are all of us constantly estimating vigour, and thinking of one person as having more "backbone," more "stuff in him," or as being "a stronger man" than another. Business men even in different trades, and University men even when engaged in different studies, get to estimate one another's strength very closely. It soon becomes known if less strength is required to get a "first class" in one study than another.

2. In discussing the growth of numbers a little has been said incidentally of the causes which determine length of life: but they are in the main the same as those which determine constitutional strength and vigour, and they will occupy our attention again in the present chapter.

The first of these causes is the climate. In warm countries we find early marriages and high birth-rates, and in consequence a low respect for human life: this has probably been the cause of a great part of the high mortality that is generally attributed to the insalubrity of the climate. (3)

Vigour depends partly on race qualities: but these, so far as they can be explained at all, seem to be chiefly due to climate. (4)

3. Climate has also a large share in determining the necessaries of life; the first of which is food. Much depends on the proper preparation of food; and a skilled housewife with ten shillings a week to spend on food will often do more for the health and strength of her family than an unskilled one with twenty. The great mortality of infants among the poor is largely due to the want of care and judgment in preparing their food; and those who do not entirely succumb to this want of motherly care often grow up with enfeebled constitutions.

In all ages of the world except the present, want of food has caused wholesale destruction of the people. Even in London in the seventeenth and eighteenth centuries the mortality was eight per cent greater in years of dear corn than in years of cheap corn. (5) But gradually the effects of increased wealth and improved means of communication are making themselves felt nearly all over the world; the severity of famines is mitigated even in such a country as India; and they are unknown in Europe and in the New World. In England now want of food is scarcely ever the direct cause of death: but it is a frequent cause of that general weakening of the system which renders it unable to resist disease; and it is a chief cause of industrial inefficiency.

We have already seen that the necessaries for efficiency vary with the nature of the work to be done, but we must now examine this subject a little more closely.

As regards muscular work in particular there is a close connection between the supply of food that a man has, and his available strength. If the work is intermittent, as that of some dock labourers, a cheap but nutritious grain diet is sufficient. But for very heavy continuous strain such as is involved in puddlers' and the hardest navvies' work, food is required which can be digested and assimilated even when the body is tired. This quality is still more essential in the food of the higher grades of labour, whose work involves great nervous strain; though the quantity required by them is generally small.

After food, the next necessaries of life and labour are clothing, house-room and firing. When they are deficient, the mind becomes torpid, and ultimately the physical constitution is undermined. When clothing is very scanty, it is generally worn night and day; and the skin is allowed to be enclosed in a crust of dirt. A deficiency of house-room, or of fuel, causes people to live in a vitiated atmosphere which is injurious to health and vigour; and not the least of the benefits which English people derive from the cheapness of coal, is the habit, peculiar to them, of having well-ventilated rooms even in cold weather. Badly-built houses with imperfect drainage cause diseases which even in their slighter forms weaken vitality in a wonderful way; and overcrowding leads to moral evils which diminish the numbers and lower the character of the people.

Rest is as essential for the growth of a vigorous population as the more material necessaries of food, clothing, etc. Overwork of every form lowers vitality; while anxiety, worry, and excessive mental strain have a fatal influence in undermining the constitution, in impairing fecundity and diminishing the vigour of the race.

4. Next come three closely allied conditions of vigour, namely, hopefulness, freedom, and change. All history is full of the record of inefficiency caused in varying degrees by slavery, serfdom, and other forms of civil and political oppression and repression. (6)

In all ages colonies have been apt to outstrip their mother countries in vigour and energy. This has been due partly to the abundance of land and the cheapness of necessaries at their command; partly to that natural selection of the strongest characters for a life of adventure, and partly to physiological causes connected with the mixture of races: but perhaps the most important cause of all is to be found in the hope, the freedom and the changefulness of their lives. (7)

Freedom so far has been regarded as freedom from external bonds. But that higher freedom, which comes of self-mastery, is an even more important condition for the highest work. The elevation of the ideals of life on which this depends, is due on the one side to political and economic causes, and on the other to personal and religious influences; among which the influence of the mother in early childhood is supreme.

5. Bodily and mental health and strength are much influenced by occupation. (8) At the beginning of this century the conditions of factory work were needlessly unhealthy and oppressive for all, and especially for young children. But Factory and Education Acts have removed the worst of these evils from factories; though many of them still linger about domestic industries and the smaller workshops.

The higher wages, the greater intelligence, and the better medical facilities of townspeople should cause infant mortality to be much lower among them than in the country. But it is generally higher, especially where there are many mothers who neglect their family duties in order to earn money wages.

6. In almost all countries there is a constant migration towards the towns. (9) The large towns and especially London absorb the very best blood from all the rest of England; the most enterprising, the most highly gifted, those with the highest physique. and the strongest characters go there to find scope for their abilities. An increasing number of those who are most capable and have most strength of character, live in suburbs, where excellent systems of drainage, water supply and lighting, together with good schools and opportunities for open air play, give conditions at least as conducive to vigour as are to be found in the country; and though there are still many town districts only a little less injurious to vitality than were large towns generally some time ago, yet on the whole the increasing density of population seems to be for the present a diminishing source of danger. The recent rapid growth of facilities for living far from the chief centres of industry and trade must indeed slacken in time. But there seems no sign of any slackening in the movement of industries outwards to suburbs and even to new Garden Cities to seek and to bring with them vigorous workers.

Statistical averages are indeed unduly favourable to urban conditions, partly because many of the town influences which lower vigour do not much affect mortality; and partly because the majority of immigrants into the towns are in the full strength of youth, and of more than average energy and courage; while young people whose parents live in the country generally go home when they become seriously ill. (10)

There is no better use for public and private money than in providing public parks and playgrounds in large cities, in contracting with railways to increase the number of the workmen's trains run by them, and in helping those of the working classes who are willing to leave the large towns to do so, and to take their industries with them. (11)

7. And there are yet other causes for anxiety. For there is some partial arrest of that selective influence of struggle and competition which in the earlier stages of civilization caused those who were strongest and most vigorous to leave the largest progeny behind them; and to which, more than any other single cause, the progress of the human race is due. In the later stages of civilization the rule has indeed long been that the upper classes marry late, and in consequence have fewer children than the working classes: but this has been compensated for by the fact that among the working classes themselves the old rule was held; and the vigour of the nation that is tending to be damped out among the upper classes is thus replenished by the fresh stream of strength that is constantly welling up from below. But in France for a long time, and recently in America, and England, some of the abler and more intelligent of the working class population have shown signs of a disinclination to have large families; and this is a source of danger. (12)

Thus there are increasing reasons for fearing, that while the progress of medical science and sanitation is saving from death a continually increasing number of the children of those who are feeble physically and mentally; many of those who are most thoughtful and best endowed with energy, enterprise and self-control are tending to defer their marriages and in other ways to limit the number of children whom they leave behind them. The motive is sometimes selfish, and perhaps it is best that hard and frivolous people should leave but few descendants of their own type. But more often it is a desire to secure a good social position for their children. This desire contains many elements that fall short of the highest ideals of human aims, and in some cases, a few that are distinctly base; but after all it has been one of the chief factors of progress, and those who are affected by it include many of those whose children would probably be among the best and strongest of the race.

It must be remembered that the members of a large family educate one another, they are usually more genial and bright, often more vigorous in every way than the members of a small family. Partly, no doubt, this is because their parents were of unusual vigour; and for a like reason they in their turn are likely to have large and vigorous families. The progress of the race is due to a much greater extent than appears at first sight to the descendants of a few exceptionally large and vigorous families.

But on the other hand there is no doubt that the parents can often do better in many ways for a small family than a large one. Other things being equal, an increase in the number of children who are born causes an increase of infantile mortality; and that is an unmixed evil. The birth of children who die early from want of care and adequate means is a useless strain to the mother and an injury to the rest of the family. (13)

8. There are other considerations of which account ought to be taken; but so far as the points discussed in this chapter are concerned, it seems prima facie advisable that people should not bring children into the world till they can see their way to giving them at least as good an education both physical and mental as they themselves had; and that it is best to marry moderately early provided there is sufficient self-control to keep the family within the requisite bounds without transgressing moral laws. The general adoption of these principles of action, combined with an adequate provision of fresh air and of healthy play for our town populations, could hardly fail to cause the strength and vigour of the race to improve. And we shall presently find reasons for believing that if the strength and vigour of the race improves, the increase of numbers will not for a long time to come cause a diminution of the average real income of the people.

Thus then the progress of knowledge, and in particular of medical science, the ever-growing activity and wisdom of Government in all matters relating to health, and the increase of material wealth, all tend to lessen mortality and to increase health and strength, and to lengthen life. On the other hand, vitality is lowered and the death-rate raised by the rapid increase of town life, and by the tendency of the higher strains of the population to marry later and to have fewer children than the lower. If the former set of causes were alone in action, but so regulated as to avoid the danger of over-population, it is probable that man would quickly rise to a physical and mental excellence superior to any that the world has yet known; while if the latter set acted unchecked, he would speedily degenerate.

As it is, the two sets hold one another very nearly in balance, the former slightly preponderating. While the population of England is growing nearly as fast as ever, those who are out of health in body or mind are certainly not an increasing part of the whole: the rest are much better fed and clothed, and, except in over-crowded industrial districts, are generally growing in strength. The average duration of life both for men and women has been increasing steadily for many years.


1. This measure can be applied directly to most kinds of navvies' and porters' work, and indirectly to many kinds of agricultural work. In a controversy that was waged after the great agricultural lock out as to the relative efficiency of unskilled labour in the South and North of England, the most trustworthy measure was found in the number of tons of material that a man would load into a cart in a day. Other measures have been found in the number of acres reaped or mown, or the number of bushels of corn reaped, etc.: but these are unsatisfactory, particularly for comparing different conditions of agriculture: since the implements used, the nature of the crop and the mode of doing the work all vary widely. Thus nearly all comparisons between medieval and modern work and wages based on the wages of reaping, mowing, etc. are valueless until we have found means to allow for the effects of changes in the methods of agriculture. It costs for instance less labour than it did to reap by hand a crop that yields a hundred bushels of corn; because the implements used are better than they were: but it may not cost less labour to reap an acre of corn; because the crops are heavier than they were.

In backward countries, particularly where there is not much use of horses or other draught animals, a great part of men's and women's work may be measured fairly well by the muscular exertion involved in it. But in England less than one-sixth of the industrial classes are now engaged on work of this kind; while the force exerted by steam-engines alone is more than twenty times as much as could be exerted by the muscles of all Englishmen.

2. This must be distinguished from nervousness, which, as a rule, indicates a general deficiency of nervous strength; though sometimes it proceeds from nervous irritability or want of balance. A man who has great nervous strength in some directions may have but little in others; the artistic temperament in particular often develops one set of nerves at the expense of others: but it is the weakness of some of the nerves, not the strength of the others, that leads to nervousness. The most perfect artistic natures seem not to have been nervous: Leonardo da Vinci and Shakespeare for example. The term "nervous strength" corresponds in some measure to Heart in Engel's great division of the elements of efficiency into (a) Body, (b) Reason, and (c) Heart (Leib, Verstand und Herz). He classifies activities according to the permutations a, ab, ac, abc, acb, b, ba, bc, bca, bac; c, ca, cb, cab, cba: the order in each case being that of relative importance, and a letter being omitted where the corresponding element plays only a very small part.

In the war of 1870 Berlin University students, who seemed to be weaker than the average soldier, were found to be able to bear fatigue better.

3. A warm climate impairs vigour. It is not altogether hostile to high intellectual and artistic work: but it prevents people from being able to endure very hard exertion of any kind for a long time. More sustained hard work can be done in the cooler half of the temperate zone than anywhere else; and most of all in places such as England and her counterpart New Zealand, where sea-breezes keep the temperature nearly uniform. The summer heats and winter colds of many parts of Europe and America, where the mean temperature is moderate, have the effect of shortening the year for working purposes by about two months. Extreme and sustained cold is found to dull the energies, partly perhaps because it causes people to spend much of their time in close and confined quarters: inhabitants of the Arctic regions are generally incapable of long-continued severe exertion. In England popular opinion has insisted that a "warm Yule tide makes fat churchyard"; but statistics prove beyond question that it has the opposite effect: the average mortality is highest in the coldest quarter of the year, and higher in cold winters than in warm.

4. Race history is a fascinating but disappointing study for the economist: for conquering races generally incorporated the women of the conquered; they often carried with them many slaves of both sexes during their migrations, and slaves were less likely than freemen to be killed in battle or to adopt a monastic life. In consequence nearly every race had much servile, that is mixed blood in it: and as the share of servile blood was largest in the industrial classes, a race history of industrial habits seems impossible.

5. This was proved by Farr, who eliminated disturbing causes by an instructive statistical device (Vital Statistics, p. 139).

6. Freedom and hope increase not only man's willingness but also his power for work; physiologists tell us that a given exertion consumes less of the store of nervous energy if done under the stimulus of pleasure than of pain: and without hope there is no enterprise. Security of person and property are two conditions of this hopefulness and freedom; but security always involves restraints on freedom, and it is one of the most difficult problems of civilization to discover how to obtain the security which is a condition of freedom without too great a sacrifice of freedom itself. Changes of work, of scene, and of personal associations bring new thoughts, call attention to the imperfections of old methods, stimulate a "divine discontent," and in every way develop creative energy.

7. By converse with others who come from different places, and have different Customs, travellers learn to put on its trial many a habit of thought or action which otherwise they would have always acquiesced in as though it were a law of nature. Moreover, a shifting of places enables the more powerful and original minds to find full scope for their energies and to rise to important positions: whereas those who stay at home are often over much kept in their places. Few men are prophets in their own land; neighbours and relations are generally the last to pardon the faults and to recognize the merits of those who are less docile and more enterprising than those around them. It is doubtless chiefly for this reason that in almost every part of England a disproportionately large share of the best energy and enterprise is to be found among those who were born elsewhere.

But change may be carried to excess; and when population shifts so rapidly, that a man is always shaking himself loose from his reputation, he loses some of the best external aids to the formation of a high moral character. The extreme hopefulness and restlessness of those who wander to new countries lead to much waste of effort in half acquiring technical skill, and half finishing tasks which are speedily abandoned in favour of some new occupation.

8. The rate of mortality is low among ministers of religion and schoolmasters; among the agricultural classes, and in some other industries such as those of wheelwrights, shipwrights and coal miners. It is high in lead and tin mining, in file-making and earthenware manufacture. But neither these nor any other regular trade show as high a rate of mortality as is found among London general labourers and costermongers; while the highest of all is that of servants in inns. Such occupations are not directly injurious to health, but they attract those who are weak in physique and in character and they encourage irregular habits. A good account of the influence of occupation on death-rates is given in the supplement to the forty-fifth (1885) Annual Report of the Registrar-General, pp. xxv-lxiii. See also Farr's Vital Statistics, pp. 392-411, Humphreys' paper on Class Mortality Statistics in the Statistical Journal for June 1887, and the literature of the Factory Acts generally.

9. Davenant (Balance of Trade, A.D. 1699, p. 20), following Gregory King, proves that according to official figures London has an excess of deaths over births of 2000 a year, but an immigration of 5000; which is more than half of what he calculates, by a rather risky method, to be the true net increase of the population of the country. He reckons that 530,000 people live in London, 870,000 in the other cities and market towns, and 4,100,000 in villages and hamlets. Compare these figures with the census of 1901 for England and Wales; where we find London with a population of over 4,500,000; five more towns with an average of over 500,000; and sixty-nine more exceeding 50,000 with an average of over 100,000. Nor is this all: for many suburbs whose population is not counted in, are often really parts of the big towns; and in some cases the suburbs of several adjacent towns run into one another, making them all into one gigantic, though rather scattered town. A suburb of Manchester is counted as a large town with 220,000 inhabitants; and the same is true of West Ham, a suburb of London with 275,000. The boundaries of some large towns are extended at irregular intervals to include such suburbs: and consequently the true population of a large town may be growing fast, while its nominal population grows slowly or even recedes, and then suddenly leaps forwards. Thus the nominal population of Liverpool was 552,000 in 1881; 518,000 in 1891; and 685,000 in 1901.

Similar changes are taking place elsewhere. Thus the population of Paris has grown twelve times as fast during the nineteenth century as that of France. The towns of Germany are increasing at the expense of the country by one half per cent. of the population yearly. In the United States there was in 1800 no town with more than 75,000 inhabitants; in 1905 there were three which together contained more than 7,000,000 and eleven more with above 300,000 each. More than a third of the population of Victoria are collected in Melbourne.

It must be recollected that the characteristics of town life increase in intensity for good and for evil with every increase in the size of a town, and its suburbs. Fresh country air has to pass over many more sources of noisome vapour before it reaches the average Londoner than before it reaches the average inhabitant of a small town. The Londoner has generally to go far before he can reach the freedom and the restful sounds and sights of the country. London therefore with 4,500,000 inhabitants adds to the urban character of England's life far more than a hundred times as much as a town of 45,000 inhabitants.

10. For reasons of this kind Welton (Statistical Journal, 1897) makes the extreme proposal to omit all persons between 15 and 35 years of age in comparing the rates of mortality in different towns. The mortality of females in London between the ages of fifteen and thirty-five is, chiefly for this reason, abnormally low. If however a town has a stationary population its vital statistics are more easily interpreted; and selecting Coventry as a typical town, Galton has calculated that the adult children of artisan townsfolk are little more than half as numerous as those of labouring people who live in healthy country districts. When a place is decaying, the young and strong and hearty drift away from it; leaving the old and the infirm behind them, and consequently the birth-rate is generally low. On the other hand, a centre of industry that is attracting population is likely to have a very high birth-rate, because it has more than its share of people in the full vigour of life. This is especially the case in the coal and iron towns, partly because they do not suffer, as the textile towns do, from a deficiency of males; and partly because miners as a class marry early. In some of them, though the death-rate is high, the excess of the birth-rate over it exceeds 20 per thousand of the population. The death rate is generally highest in towns of the second order, chiefly because their sanitary arrangements are not yet as good as those of the very largest towns.

Prof. Haycraft (Darwinism and Race Progress) argues in the opposite direction. He lays just stress on the dangers to the human race which would result from a diminution of those diseases, such as phthisis and scrofula, which attack chiefly people of weak constitution, and thus exercise a selective influence on the race, unless it were accompanied by corresponding improvements in other directions. But phthisis does not kill all its victims; there is some net gain in a diminution of its power of weakening them.

11. See an article entitled "Where to House the London Poor" by the present writer in the Contemporary Review, Feb. 1884.

12. In the Southern States of America, manual work became disgraceful to the white man; so that, if unable to have slaves himself, he led a paltry degenerate life, and seldom married. Again, on the Pacific Slope, there were at one time just grounds for fearing that all but highly skilled work would be left to the Chinese; and that the white men would live in an artificial way in which a family became a great expense. In this case Chinese lives would have been substituted for American, and the average quality of the human race would have been lowered.

13. The extent of the infant mortality that arises from preventable causes may be inferred from the facts that the percentage of deaths under one year of age to births is generally about a third as much again in urban as in rural districts; and yet in many urban districts which have a well-to-do population it is lower than the average for the whole country (Registrar General's Report for 1905, pp. xlii-xlv). A few years ago it was found that, while the annual death rate of children under five years of age was only about two per cent in the families of peers and was less than three per cent for the whole of the upper classes, it was between six and seven per cent for the whole of England. On the other hand Prof Leroy Beaulieu says that in France the parents of but one or two children are apt to indulge them, and be over-careful about them to the detriment of their boldness, enterprise and endurance. (See Statistical Journal, Vol. 54, pp. 378-9.)

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Chapter 6, Industrial Training


1. Having discussed the causes which govern the growth of a numerous and vigorous population, we have next to consider the training that is required to develop its industrial efficiency.

The natural vigour that enables a man to attain great success in any one pursuit would generally have served him in good stead in almost any other. But there are exceptions. Some people, for instance, seem to be fitted from birth for an artistic career, and for no other; and occasionally a man of great practical genius is found to be almost devoid of artistic sensibility. But a race that has great nervous strength seems generally able, under favourable conditions, to develop in the course of a few generations ability of almost any kind that it holds in specially high esteem. A race that has acquired vigour in war or in the ruder forms of industry sometimes gains intellectual and artistic power of a high order very quickly; and nearly every literary and artistic epoch of classical and medieval times has been due to a people of great nervous strength, who have been brought into contact with noble thoughts before they have acquired much taste for artificial comforts and luxuries.

The growth of this taste in our own age has prevented us from taking full advantage of the opportunities our largely increased resources give us of consecrating the greater part of the highest abilities of the race to the highest aims. But perhaps the intellectual vigour of the age appears less than it really is, in consequence of the growth of scientific pursuits. For in art and literature success is often achieved while genius still wears the fascinating aspect of youth; but in modern science so much knowledge is required for originality, that before a student can make his mark in the world, his mind has often lost the first bloom of its freshness; and further the real value of his work is not often patent to the multitude as that of a picture or poem generally is. (1) In the same way the solid qualities of the modern machine-tending artisan are rated more cheaply than the lighter virtues of the medieval handicraftsman. This is partly because we are apt to regard as commonplace those excellences which are common in our own time; and to overlook the fact that the term "unskilled labourer" is constantly changing its meaning.

2. Very backward races are unable to keep on at any kind of work for a long time; and even the simplest form of what we regard as unskilled work is skilled work relatively to them; for they have not the requisite assiduity, and they can acquire it only by a long course of training. But where education is universal, an occupation may fairly be classed as unskilled, though it requires a knowledge of reading and writing. Again, in districts in which manufactures have long been domiciled, a habit of responsibility, of carefulness and promptitude in handling expensive machinery and materials becomes the common property of all; and then much of the work of tending machinery is said to be entirely mechanical and unskilled, and to call forth no human faculty that is worthy of esteem. But in fact it is probable that not one-tenth of the present populations of the world have the mental and moral faculties, the intelligence, and, the self-control that are required for it: perhaps not one-half could be made to do the work well by steady training for two generations. Even of a manufacturing population only a small part are capable of doing many of the tasks that appear at first sight to be entirely monotonous. Machine-weaving, for instance, simple as it seems, is divided into higher and lower grades; and most of those who work in the lower grades have not "the stuff in them" that is required for weaving with several colours. And the differences are even greater in industries that deal with hard materials, wood, metals, or ceramics.

Some kinds of manual work require long-continued practice in one set of operations, but these cases are not very common, and they are becoming rarer: for machinery is constantly taking over work that requires manual skill of this kind. It is indeed true that a general command over the use of one's fingers is a very important element of industrial efficiency; but this is the result chiefly of nervous strength, and self-mastery. It is of course developed by training, but the greater part of this may be of a general character and not special to the particular occupation; just as a good cricketer soon learns to play tennis well, so a skilled artisan can often move into other trades without any great and lasting loss of efficiency.

Manual skill that is so specialized that it is quite incapable of being transferred from one occupation to another is becoming steadily a less and less important factor in production. Putting aside for the present the faculties of artistic perception and artistic creation, we may say that what makes one occupation higher than another, what makes the workers of one town or country more efficient than those of another, is chiefly a superiority in general sagacity and energy which are not specialized to any one occupation.

To be able to bear in mind many things at a time, to have everything ready when wanted, to act promptly and show resource when anything goes wrong, to accommodate oneself quickly to changes in detail of the work done, to be steady and trustworthy, to have always a reserve of force which will come out in emergency, these are the qualities which make a great industrial people. They are not peculiar to any occupation, but are wanted in all; and if they cannot always be easily transferred from one trade to other kindred trades, the chief reason is that they require to be supplemented by some knowledge of materials and familiarity with special processes.

We may then use the term general ability to denote those faculties and that general knowledge and intelligence which are in varying degrees the common property of all the higher grades of industry; while that manual dexterity and that acquaintance with particular materials and processes which are required for the special purposes of individual trades may be classed as specialized ability.

3. General ability depends largely on the surroundings of childhood and youth. In this the first and far the most powerful influence is that of the mother. (2) Next comes the influence of the father, of other children, and in some cases of servants. (3) As years pass on the child of the working man learns a great deal from what he sees and hears going on around him; and when we inquire into the advantages for starting in life which children of the well-to-do classes have over those of artisans, and which these in their turn have over the children of unskilled labourers, we shall have to consider these influences of home more in detail. But at present we may pass to consider the more general influences of school education.

Little need be said of general education; though the influence even of that on industrial efficiency is greater than it appears. It is true that. the children of the working classes must very often leave school, when they have but learnt the elements of reading, writing, arithmetic and drawing; and it is sometimes argued that part of the little time spent on these subjects would be better given to practical work. But the advance made at school is important not so much on its own account, as for the power of future advance which a school education gives. For a truly liberal general education adapts the mind to use its best faculties in business and to use business itself as a means of increasing culture; though it does not concern itself with the details of particular trades: that is left for technical education. (4)

4. Technical education has in like manner raised its aims in recent years. It used to mean little more than imparting that manual dexterity and that elementary knowledge of machinery and processes which an intelligent lad quickly picks up for himself when his work has begun; though if he has learnt it beforehand, he can perhaps earn a few shillings more at starting than if he had been quite ignorant. But such so-called education does not develop faculties; it rather hinders them from being developed. A lad, who has picked up the knowledge for himself, has educated himself by so doing; and he is likely to make better progress in the future than one who has been taught in a school of this old-fashioned kind. Technical education is however outgrowing its mistakes; and is aiming, firstly, at giving a general command over the use of eyes and fingers (though there are signs that this work is being taken over by general education, to which it properly belongs); and secondly at imparting artistic skill and knowledge, and methods of investigation, which are useful in particular occupations, but are seldom properly acquired in the course of practical work. It is however to be remembered that every advance in the accuracy and versatility of automatic machinery narrows the range of manual work in which command over hand and eye is at a high premium; and that those faculties which are trained by general education in its best forms are ever rising in importance. (5)

According to the best English opinions, technical education for the higher ranks of industry should keep the aim of developing the faculties almost as constantly before it as general education does. It should rest on the same basis as a thorough general education, but should go on to work out in detail special branches of knowledge for the benefit of particular trades. (6) Our aim should be to add the scientific training in which the countries of Western Europe are ahead of us to that daring and restless energy and those practical instincts, which seldom flourish unless the best years of youth are spent in the workshop; recollecting always that whatever a youth learns for himself by direct experience in well-conducted works, teaches him more and stimulates his mental activity more than if it were taught him by a master in a technical school with model instruments. (7)

The old apprenticeship system is not exactly suited to modern conditions and it has fallen into disuse; but a substitute for it is wanted. Within the last few years many of the ablest manufacturers have begun to set the fashion of making their sons work through every stage in succession of the business they will ultimately have to control; but this splendid education can be had only by a few. So many and various are the branches of any great modern industry that it would be impossible for the employers to undertake, as they used to do, that every youth committed to their care should learn all; and indeed a lad of ordinary ability would be bewildered by the attempt. But it does not seem impracticable to revive the apprenticeship system in a modified form. (8)

The great epoch-making inventions in industry came till recently almost exclusively from England. But now other nations are joining in the race. The excellence of the common schools of the Americans, the variety of their lives, the interchange of ideas between different races among them, and the peculiar conditions of their agriculture have developed a restless spirit of inquiry; while technical education is now being pushed on with great vigour. On the other hand, the diffusion of scientific knowledge among the middle and even the working classes of Germany, combined with their familiarity with modern languages and their habits of travelling in pursuit of instruction, has enabled them to keep up with English and American mechanics and to take the lead in many of the applications of chemistry to business. (9)

5. It is true that there are many kinds of work which can be done as efficiently by an uneducated as by an educated workman: and that the higher branches of education are of little direct use except to employers and foremen and a comparatively small number of artisans. But a good education confers great indirect benefits even on the ordinary workman. It stimulates his mental activity; it fosters in him a habit of wise inquisitiveness; it makes him more intelligent, more ready, more trustworthy in his ordinary work; it raises the tone of his life in working hours and out of working hours; it is thus an important means towards the production of material wealth; at the same time that, regarded as an end in itself, it is inferior to none of those which the production of material wealth can be made to subserve.

We must however look in another direction for a part, perhaps the greater part, of the immediate economic gain which the nation may derive from an improvement in the general and technical education of the mass of the people. We must look not so much at those who stay in the rank and file of the working classes, as at those who rise from a humble birth to join the higher ranks of skilled artisans, to become foremen or employers, to advance the boundaries of science, or possibly to add to the national wealth in art and literature.

The laws which govern the birth of genius are inscrutable. It is probable that the percentage of children of the working classes who are endowed with natural abilities of the highest order is not so great as that of the children of people who have attained or have inherited a higher position in society. But since the manual labour classes are four or five times as numerous as all other classes put together, it is not unlikely that more than half the best natural genius that is born into the country belongs to them; and of this a great part is fruitless for want of opportunity. There is no extravagance more prejudicial to the growth of national wealth than that wasteful negligence which allows genius that happens to be born of lowly parentage to expend itself in lowly work. No change would conduce so much to a rapid increase of material wealth as an improvement in our schools, and especially those of the middle grades, provided it be combined with an extensive system of scholarships, which will enable the clever son of a working man to rise gradually from school to school till he has the best theoretical and practical education which the age can give.

To the abilities of children of the working classes may be ascribed the greater part of the success of the free towns in the Middle Ages and of Scotland in recent times. Even within England itself there is a lesson of the same kind to be learnt: progress is most rapid in those parts of the country in which the greatest proportion of the leaders of industry are the sons of working men. For instance, the beginning of the manufacturing era found social distinctions more closely marked and more firmly established in the South than in the North of England. In the South something of a spirit of caste has held back the working men and the sons of working men from rising to posts of command; and the old established families have been wanting in that elasticity and freshness of mind which no social advantages can supply, and which comes only from natural gifts. This spirit of caste, and this deficiency of new blood among the leaders of industry, have mutually sustained one another; and there are not a few towns in the South of England whose decadence within living memory can be traced in a great measure to this cause.

6. Education in art stands on a somewhat different footing from education in hard thinking: for while the latter nearly always strengthens the character, the former not unfrequently fails to do this. Nevertheless the development of the artistic faculties of the people is in itself an aim of the very highest importance, and is becoming a chief factor of industrial efficiency.

We are here concerned almost exclusively with those branches of art which appeal to the eye. For though literature and music contribute as much and more to the fulness of life, yet their development does not directly affect, and does not depend upon, the methods of business, the processes of manufacture and the skill of artisans.

The artisan of Europe in the Middle Ages, and of eastern countries now, has perhaps obtained credit for more originality than he has really possessed. Eastern carpets, for instance, are full of grand conceptions: but if we examine a great many examples of the art of any one place, selected perhaps from the work of several centuries, we often find very little variety in their fundamental ideas. But in the modern era of rapid changes — some caused by fashion and some by the beneficial movements of industrial and social progress — everyone feels free to make a new departure, everyone has to rely in the main on his own resources: there is no slowly matured public criticism to guide him. (10)

This is however not the only, perhaps not the chief disadvantage under which artistic design labours in our own age. There is no good reason for believing that the children of ordinary workmen in the Middle Ages had more power of artistic origination than those of ordinary village carpenters or blacksmiths of to-day; but if one among ten thousand happened to have genius, it found vent in his work and was stimulated by the competition of the gilds and in other ways. But the modern artisan is apt to be occupied in the management of machinery; and though the faculties which he develops may be more solid and may help more in the long run towards the highest progress of the human race, than did the taste and fancy of his medieval predecessor, yet they do not contribute directly towards the progress of art. And if he should find in himself a higher order of ability than among his fellows, he will probably endeavour to take a leading part in the management of a trades-union or some other society, or to collect together a little store of capital and to rise out of that trade in which he was educated. These are not ignoble aims; but his ambition would perhaps have been nobler and more fruitful of good to the world, if he had stayed in his old trade and striven to create works of beauty which should live after he had gone.

It must however be admitted that he would have great difficulties in doing this. The shortness of the time which we allow ourselves for changes in the arts of decoration is scarcely a greater evil than the width of the area of the world over which they are spread; for that causes a further distraction of the hasty and hurried efforts of the designer, by compelling him to be always watching the world movements of the supply of and demand for art products. This is a task for which the artisan, who works with his own hands, is not well fitted; and in consequence now-a-days the ordinary artisan finds it best to follow and not to lead. Even the supreme skill of the Lyons weaver shows itself now almost exclusively in an inherited power of delicate manipulation, and fine perception of colour, that enable him to carry out perfectly the ideas of professional designers.

Increasing wealth is enabling people to buy things of all kinds to suit the fancy, with but a secondary regard to their powers of wearing; so that in all kinds of clothing and furniture it is every day more true that it is the pattern which sells the things. The influence of the late William Morris and others, combined with the lead which many English designers have derived from Oriental and especially Persian and Indian masters of colour is acknowledged by Frenchmen themselves to have attained the first rank for certain classes of English fabrics and decorative products. But in other directions France is supreme. Some English manufacturers who hold their own against the world would, it is said, be driven out of the market if they had to depend on English patterns. This is partly due to the fact that Paris having the lead in fashions, as the result of an inherited quick and subtle taste in women's dress, a Parisian design is likely to be in harmony with the coming fashions and to sell better than a design of equal intrinsic worth from elsewhere. (11)

Technical education, then, though it cannot add much directly to the supply of genius in art, any more than it can in science or in business, can yet save much natural artistic genius from running to waste; and it is called on to do this all the more because the training that was given by the older forms of handicraft can never be revived on a large scale. (12)

7. We may then conclude that the wisdom of expending public and private funds on education is not to be measured by its direct fruits alone. It will be profitable as a mere investment, to give the masses of the people much greater opportunities than they can generally avail themselves of. For by this means many, who would have died unknown, are enabled to get the start needed for bringing out their latent abilities. And the economic value of one great industrial genius is sufficient to cover the expenses of the education of a whole town; for one new idea, such as Bessemer's chief invention, adds as much to England's productive power as the labour of a hundred thousand men. Less direct, but not less in importance, is the aid given to production by medical discoveries such as those of Jenner or Pasteur, which increase our health and working power; and again by scientific work such as that of mathematics or biology, even though many generations may pass away before it bears visible fruit in greater material well-being. All that is spent during many years in opening the means of higher education to the masses would be well paid for if it called out one more Newton or Darwin, Shakespeare or Beethoven.

There are few practical problems in which the economist has a more direct interest than those relating to the principles on which the expense of the education of children should be divided between the State and the parents. But we must now consider the conditions that determine the power and the will of the parents to bear their share of the expense, whatever it may be.

Most parents are willing enough to do for their children what their own parents did for them; and perhaps even to go a little beyond it if they find themselves among neighbours who happen to have a rather higher standard. But to do more than this requires, in addition to the moral qualities of unselfishness and a warmth of affection that are perhaps not rare, a certain habit of mind which is as yet not very common. It requires the habit of distinctly realizing the future, of regarding a distant event as of nearly the same importance as if it were close at hand (discounting the future at a low rate of interest); this habit is at once a chief product and a chief cause of civilization, and is seldom fully. developed except among the middle and upper classes of the more cultivated nations.

8. Parents generally bring up their children to occupations in their own grade, and therefore the total supply of labour in any grade in one generation is in a great measure determined by the numbers in that grade in the preceding generation, yet within the grade itself there is greater. mobility. If the advantages of any one occupation in it rise above the average, there is a quick influx of youth from other occupations within the grade. The vertical movement from one grade to another is seldom very rapid or on a very large scale; but, when the advantages of a grade have risen relatively to the difficulty of the work required of it, many small streams of labour, both youthful and adult, will begin to flow towards it; and though none of them may be very large, they will together have a sufficient volume to satisfy before long the increased demand for labour in that grade.

We must defer to a later stage a fuller discussion of the obstacles which the conditions of any place and time oppose to the free mobility of labour, and also of the inducements which they offer to anyone to change his occupation or to bring up his son to an occupation different from his own. But we have seen enough to conclude that, other things being equal, an increase in the earnings that are to be got by labour increases its rate of growth; or, in other words, a rise in its demand price increases the supply of it. If the state of knowledge, and of ethical, social and domestic habits be given; then the vigour of the people as a whole if not their numbers, and both the numbers and vigour of any trade in particular, may be said to have a supply price in this sense, that there is a certain level of the demand price which will keep them stationary; that a higher price would cause them to increase, and that a lower price would cause them to decrease. Thus economic causes play a part in governing the growth of population as a whole as well as the supply of labour in any particular grade. But their influence on the numbers of the population as a whole is largely indirect; and is exerted by way of the ethical, social and domestic habits of life. For these habits are themselves influenced by economic causes deeply, though slowly, and in ways some of which are difficult to trace, and impossible to predict. (13)


1. In this connection it is worth while to notice that the full importance of an epoch-making idea is often not perceived in the generation in which it is made: it starts the thoughts of the world on a new track, but the change of direction is not obvious until the turning-point has been left some way behind. In the same way the mechanical inventions of every age are apt to be underrated relatively to those of earlier times. For a new discovery is seldom fully effective for practical purposes till many minor improvements and subsidiary discoveries have gathered themselves around it: an invention that makes an epoch is very often a generation older than the epoch which it makes. Thus it is that each generation seems to be chiefly occupied in working out the thoughts of the preceding one; while the full importance of its own thoughts is as yet not clearly seen.

2. According to Galton the statement that all great men have had great mothers goes too far: but that shows only that the mother's influence does not outweigh all others; not that it is not greater than any one of them. He says that the mother's influence is most easily traceable among theologians and men of science, because an earnest mother leads her child to feel deeply about great things; and a thoughtful mother does not repress, but encourages that childish curiosity which is the raw material of scientific habits of thought.

3. There are many fine natures among domestic servants. But those who live in very rich houses are apt to get self-indulgent habits, to overestimate the importance of wealth, and generally to put the lower aims of life above the higher, in a way that is not common with independent working people. The company in which the children of some of our best houses spend much of their time, is less ennobling than that of the average cottage. Yet in these very houses, no servant who is not specially qualified, is allowed to take charge of a young retriever or a young horse.

4. The absence of a careful general education for the children of the working classes, has been hardly less detrimental to industrial progress than the narrow range of the old grammar-school education of the middle classes. Till recently indeed it was the only one by which the average schoolmaster could induce his pupils to use their minds in anything higher than the absorption of knowledge. It was therefore rightly called liberal, because it was the best that was to be had. But it failed in its aim of familiarizing the citizen with the great thoughts of antiquity; it was generally forgotten as soon as school-time was over; and it raised an injurious antagonism between business and culture. Now however the advance of knowledge is enabling us to use science and art to supplement the curriculum of the grammar-school, and to give to those who can afford it an education that develops their best faculties, and starts them on the track of thoughts which will most stimulate the higher activities of their minds in after-life. The time spent on learning to spell is almost wasted: if spelling and pronunciation are brought into harmony in the English language as in most others, about a year will be added to the effective school education without any additional cost.

5. As Nasmyth says; if a lad, having dropped two peas at random on a table, can readily put a third pea midway in a line between them, he is on the way to become a good mechanic. Command over eye and hand is gained in the ordinary English games, no less than in the playful work of the Kinder-garten. Drawing has always been on the border line between work and play.

6. One of the weakest points of technical education is that it does not educate the sense of proportion and the desire for simplicity of detail. The English, and to an even greater extent, the Americans, have acquired in actual business the faculty of rejecting intricacies in machinery and processes, which are not worth what they cost, and practical instinct of this kind often enables them to succeed in competition with Continental rivals who are much better educated.

7. A good plan is that of spending the six winter months of several years after leaving school in learning science in College, and the six summer months as articled pupils in large workshops. The present writer introduced this plan about forty years ago at University College, Bristol (now the University of Bristol). But it has practical difficulties which can be overcome only by the cordial and generous co-operation of the heads of large firms with the College authorities. Another excellent plan is that adopted in the school attached to the works of Messrs Mather and Platt at Manchester. "The drawings made in the school are of work actually in progress in the shops. One day the teacher gives the necessary explanations and calculations, and the next day the scholars see, as it were on the anvil, the very thing which has been the subject of his lecture."

8. The employer binds himself to see that the apprentice is thoroughly taught in the workshop all the subdivisions of one great division of his trade, instead of letting him learn only one of these subdivisions, as too often happens now. The apprentice's training would then often be as broad as if he had been taught the whole of the trade as it existed a few generations ago; and it might be supplemented by a theoretical knowledge of all branches of the trade, acquired in a technical school. Something resembling the old apprenticeship system has recently come into vogue for young Englishmen who desire to learn the business of farming under the peculiar conditions of a new country... and there are some signs that the plan may be extended to the business of farming in this country, for which it is in many respects admirably adapted. But there remains a great deal of education suitable to the farmer and to the farm-labourer which can best be given in agricultural colleges and dairy schools.

Meanwhile many great agencies for the technical education of adults are being rapidly developed, such as public exhibitions, trade associations and congresses, and trade journals. Each of them has its own work to do. In agriculture and some other trades the greatest aid to progress is perhaps found in public shows. But those industries, which are more advanced and in the hands of persons of studious habits, owe more to the diffusion of practical and scientific knowledge by trade journals; which, aided by changes in the methods of industry and also in its social conditions, are breaking up trade secrets and helping men of small means in competition with their richer rivals.

9. The heads of almost every progressive firm on the Continent have carefully studied processes and machinery in foreign lands. The English are great travellers; but partly perhaps on account of their ignorance of other languages they seem hardly to set enough store on the technical education that can be gained by the wise use of travel.

10. In fact every designer in a primitive age is governed by precedent: only very daring people depart from it; even they do not depart far, and their innovations are subjected to the test of experience, which, in the long run, is infallible. For though the crudest and most ridiculous fashions in art and in literature will be accepted by the people for a time at the bidding of their social superiors, nothing but true artistic excellence has enabled a ballad or a melody, a style of dress or a pattern of furniture to retain its popularity among a whole nation for many generations together. These innovations, then, which were inconsistent with the true spirit of art were suppressed, and those that were on the right track were retained, and became the starting-point for further progress; and thus traditional instincts played a great part in preserving the purity of the industrial arts in Oriental countries, and to a less extent in medieval Europe.

11. French designers find it best to live in Paris: if they stay for long out of contact with the central movements of fashion they seem to fall behindhand. Most of them have been educated as artists, but have failed of their highest ambition. It is only in exceptional cases, as for instance for the Sèvres china, that those who have succeeded as artists find it worth their while to design. Englishmen can, however, hold their own in designing for Oriental markets, and there is evidence that the English are at least equal to the French in originality; though they are inferior in quickness in seeing how to group forms and colours so as to obtain an effective result. (See the Report on Technical Education, Vol. 1, pp. 256, 261, 324, 325 and Vol. III, pp. 151-2, 202-3, 211 and passim.) It is probable that the profession of the modern designer has not yet risen to the best position which it is capable of holding. For it has been to a disproportionate extent under the influence of one nation; and that nation is one whose works in the highest branches of art have seldom borne to be transplanted. They have indeed often been applauded and imitated at the time by other nations, but they have as yet seldom struck a key-note for the best work of later generations.

12. The painters themselves have put on record in the portrait-galleries the fact that in medieval times, and even later, their art attracted a larger share of the best intellect than it does now; when the ambition of youth is tempted by the excitement of modern business, when its zeal for imperishable achievements finds a field in the discoveries of modern science, and, lastly, when a great deal of excellent talent is insensibly diverted from high aims by the ready pay to be got by hastily writing half-thoughts for periodical literature.

13. Mill was so much impressed by the difficulties that beset a parent in the attempt to bring up his son to an occupation widely different in character from his own, that he said (Principles, II, XIV, 2): — "So complete, indeed, has hitherto been the separation, so strongly marked the line of demarcation, between the different grades of labourers, as to be almost equivalent to an hereditary distinction of caste; each employment being chiefly recruited from the children of those already employed in it, or in employments of the same rank with it in social estimation, or from the children of persons who, if originally of a lower rank, have succeeded in raising themselves by their exertions. The liberal professions are mostly supplied by the sons of either the professional or the idle classes: the more highly skilled manual employments are filled up from the sons of skilled artisans or the class of tradesmen who rank with them: the lower classes of skilled employments are in a similar case; and unskilled labourers, with occasional exceptions, remain from father to son in their pristine condition. Consequently the wages of each class have hitherto been regulated by the increase of its own population, rather than that of the general population of the country." But he goes on, "The changes, however, now so rapidly taking place in usages and ideas are undermining all these distinctions."

His prescience has been vindicated by the progress of change since he wrote. The broad lines of division which he pointed out have been almost obliterated by the rapid action of those causes which, as we saw earlier in the chapter, are reducing the amount of skill and ability required in some occupations and increasing it in others. We cannot any longer regard different occupations as distributed among four great planes; but we may perhaps think of them as resembling a long flight of steps of unequal breadth, some of them being so broad as to act as landing stages. Or even better still we might picture to ourselves two flights of stairs, one representing the "hard-handed industries" and the other "the soft handed industries"; because the vertical division between these two is in fact as broad and as clearly marked as the horizontal division between any two grades.

Mill's classification had lost great part of its value when Cairnes adopted it (Leading Principles, p. 72). A classification more suited to our existing conditions is offered by Giddings (Political Science Quarterly, Vol. II, pp. 69-71). It is open to the objection that it draws broad lines of division where nature has made no broad lines; but it is perhaps as good as any division of industry into four grades can be. His divisions are (i) automatic manual labour, including common labourers and machine tenders; (ii) responsible manual labour, including those who can be entrusted with some responsibility and labour of self-direction; (iii) automatic brain workers, such as book keepers, and (iv) responsible brain workers, including the superintendents and directors.

The conditions and methods of the large and incessant movement of the population upwards and downwards from grade to grade are studied more fully below, VI, IV, V and VII.

The growing demand for boys to run errands, and to do other work that has no educational value, has increased the danger that parents may send their sons into avenues that have no outlook for good employment in later years: and something is being done by public agency, and more by the devotion and energy of men and women in unofficial association, in giving out notes of warning against such "blind alley" occupations, and assisting lads to prepare themselves for skilled work. These efforts may be of great national value. But care must be taken that this guidance and help is as accessible to the higher strains of the working class population when in need of it as to the lower; lest the race should degenerate.

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Chapter 7, The Growth of Wealth


1. In this chapter it is not necessary to distinguish the points of view in which wealth is regarded as the object of consumption and as an agent of production; we are concerned with the growth of wealth simply, and we have no need to emphasize its uses as capital.

The earliest forms of wealth were probably implements for hunting and fishing, and personal ornaments; and, in cold countries, clothing and huts. (1) During this stage the domestication of animals began; but at first they were probably cared for chiefly for their own sake, because they were beautiful, and it was pleasant to have them; they were, like articles of personal ornament, desired because of the immediate gratification to be derived from their possession rather than as a provision against future needs. (2) Gradually the herds of domesticated animals increased; and during the pastoral stage they were at once the pleasure and the pride of their possessors, the outward emblems of social rank, and by far the most important store of wealth accumulated as a provision against future needs.

As numbers thickened and the people settled down to agriculture, cultivated land took the first place in the inventory of wealth; and that part of the value of the land which was due to improvements (among which wells held a conspicuous place) became the chief element of capital, in the narrower sense of the term. Next in importance came houses, domesticated animals, and in some places boats and ships; but the implements of production, whether for use in agriculture or in domestic manufactures, remained for a long time of little value. In some places, however, precious stones and the precious metals in various forms became early a leading object of desire and a recognized means of hoarding wealth; while, to say nothing of the palaces of monarchs, a large part of social wealth in many comparatively rude civilizations took the form of edifices for public purposes, chiefly religious, and of roads and bridges, of canals and irrigation works.

For some thousands of years these remained the chief forms of accumulated wealth. In towns indeed houses and household furniture took the first place, and stocks of the more expensive of raw materials counted for a good deal; but though the inhabitants of the towns had often more wealth per head than those of the country, their total numbers were small; and their aggregate wealth was very much less than that of the country. During all this time the only trade that used very expensive implements was the trade of carrying goods by water: the weaver's looms, the husbandman's ploughs and the blacksmith's anvils were of simple construction and were of little account beside the merchant's ships. But in the eighteenth century England inaugurated the era of expensive implements.

The implements of the English farmer had been rising slowly in value for a long time; but the progress was quickened in the eighteenth century. After a while the use first of water power and then of steam power caused the rapid Substitution of expensive machinery for inexpensive hand tools in one department of production after another. As in earlier times the most expensive implements were ships and in some cases canals for navigation and irrigation, so now they are the means of locomotion in general; — railways. and tramways, canals, docks and ships, telegraph and telephone systems and water-works: even gas-works might almost come under this head, on the ground that a great part of their plant is devoted to distributing the gas. After these come mines and iron and chemical works, ship-building yards, printing-presses, and other large factories full of expensive machinery.

On whichever side we look we find that the progress and diffusion of knowledge are constantly leading to the adoption of new processes and new machinery which economize human effort on condition that some of the effort is spent a good while before the attainment of the ultimate ends to which it is directed. It is not easy to measure this progress exactly, because many modern industries had no counterpart in ancient times. But let us compare the past and present conditions of the four great industries the products of which have not changed their general character: viz. agriculture, the building, the cloth-making, and the carrying trades. In the first two of these hand work still retains an important place: but even in them there is a great development of expensive machinery. Compare for instance the rude implements of an Indian Ryot even of to-day with the equipment of a progressive Lowland farmer; (3) and consider the brick-making, mortar-making, sawing, planing, moulding and slotting machines of a modern builder, his steam cranes and his electric light. And if we turn to the textile trades, or at least to those of them which make the simpler products, we find each operative in early times content with implements the cost of which was equivalent to but a few months of his labour; while in modern times it is estimated that for each man, woman and child employed there is a capital in plant alone of more than £200, or say the equivalent of five years' labour. Again the cost of a steam-ship is perhaps equivalent to the labour for fifteen years or more of those who work her; while a capital of about £1,000,000,000 invested in railways in England and Wales is equivalent to the work for more than twenty years of the 300,000 wage-earners employed on them.

2. As civilization has progressed, man has always been developing new wants, and new and more expensive ways of gratifying them. The rate of progress has sometimes been slow, and occasionally there has even been a great retrograde movement; but now we are moving on at a rapid pace that grows quicker every year; and we cannot guess where it will stop. On every side further openings are sure to offer themselves, all of which will tend to change the character of our social and industrial life, and to enable us to turn to account vast stores of capital in providing new gratifications and new ways of economizing effort by expending it in anticipation of distant wants. There seems to be no good reason for believing that we are anywhere near a stationary state in which there will be no new important wants to be satisfied; in which there will be no more room for profitably investing present effort in providing for the future, and in which the accumulation of wealth will cease to have any reward. The whole history of man shows that his wants expand with the growth of his wealth and knowledge. (4)

And with the growth of openings for the investment of capital there is a constant increase in that surplus of production over the necessaries of life, which gives the power to save. When the arts of production were rude, there was very little surplus, except where a strong ruling race kept the subject masses hard at work on the bare necessaries of life, and where the climate was so mild that those necessaries were small and easily obtained. But every increase in the arts of production, and in the capital accumulated to assist and support labour in future production, increased the surplus out of which more wealth could be accumulated. After a time civilization became possible in temperate and even in cold climates; the increase of material wealth was possible under conditions which did not enervate the worker, and did not therefore destroy the foundations on which it rested. (5) Thus from step to step wealth and knowledge have grown, and with every step the power of saving wealth and extending knowledge has increased.

3. The habit of distinctly realizing the future and providing for it has developed itself slowly and fitfully in the course of man's history. Travellers tell us of tribes who might double their resources and enjoyments without increasing their total labour, if they would only apply a little in advance the means that lie within their power and their knowledge; as, for instance, by fencing in their little plots of vegetables against the intrusion of wild animals.

But even this apathy is perhaps less strange than the wastefulness that is found now among some classes in our own country. Cases are not rare of men who alternate between earning two or three pounds a week and being reduced to the verge of starvation: the utility of a shilling to them when they are in employment is less than that of a penny when they are out of it, and yet they never attempt to make provision for the time of need. (6) At the opposite extreme there are misers, in some of whom the passion for saving borders on insanity; while, even among peasant proprietors and some other classes, we meet not unfrequently with people who carry thrift so far as to stint themselves of necessaries, and to impair their power of future work. Thus they lose every way: they never really enjoy life; while the income. which their stored-up wealth brings them is less than they would have got from the increase of their earning power, if they bad invested in themselves the wealth that they have accumulated in a material form.

In India, and to a less extent in Ireland, we find people who do indeed abstain from immediate enjoyment and save up considerable sums with great self-sacrifice, but spend all their savings in lavish festivities at funerals and marriages. They make intermittent provision for the near future, but scarcely any permanent provision for the distant future: the great engineering works by which their productive resources have been so much increased, have been made chiefly with the capital of the much less self-denying race of Englishmen.

Thus the causes which control the accumulation of wealth differ widely in different countries and different ages. They are not quite the same among any two races, and perhaps not even among any two social classes in the same race. They depend much on social and religious sanctions; and it is remarkable how, when the binding force of custom has been in any degree loosened, differences of personal character will cause neighbours brought up under like conditions to differ from one another more widely and more frequently in their habits of extravagance or thrift than in almost any other respect.

4. The thriftlessness of early times was in a great measure due to the want of security that those who made provision for the future would enjoy it: only those who were already wealthy were strong enough to hold what they had saved; the laborious and self-denying peasant who had heaped up a little store of wealth only to see it taken from him by a stronger hand, was a constant warning to his neighbours to enjoy their pleasure and their rest when they could. The border country between England and Scotland made little progress so long as it was liable to incessant forays; there was very little saving by the French peasants in the eighteenth century when they could escape the plunder of the tax-gatherer only by appearing to be poor, or by Irish cottiers, who, on many estates, even forty years ago, were compelled to follow the same course in order to avoid the landlords' claims of exorbitant rents.

Insecurity of this kind has nearly passed away from the civilized world. But we are still suffering in England from the effects of the Poor-law which ruled at the beginning of last century, and which introduced a new form of insecurity for the working classes. For it arranged that part of their wages should, in effect, be given in the form of poor relief; and that this should be distributed among them in inverse proportion to their industry and thrift and forethought, so that many thought it foolish to make provision for the future. The traditions and instincts which were fostered by that evil experience are even now a great hindrance to the progress of the working classes; and the principle which nominally at least underlies the present Poor-law, that the State should take account only of destitution and not at all of merit, acts in the same direction, though with less force.

Insecurity of this kind also is being diminished: the growth of enlightened views as to the duties of the State and of private persons towards the poor, is tending to make it every day more true that those who have helped themselves and endeavoured to provide for their own future will be cared for by society better than the idle and the thoughtless. But the progress in this direction is still slow, and there remains much to be done yet.

5. The growth of a money-economy and of modern habits of business does indeed hinder the accumulation of wealth by putting new temptations in the way of those who are inclined to live extravagantly. In old times if a man wanted a good house to live in he must build it himself; now he finds plenty of good houses to be hired at a rent. Formerly, if he wanted good beer he must have a good brewhouse, now he can buy it more cheaply and better than he could brew it. Now he can borrow books from a library instead of buying them; and he can even furnish his house before he is ready to pay for his furniture. Thus in many ways the modern systems of buying and selling, and lending and borrowing, together with the growth of new wants, lead to new extravagances, and to a subordination of the interests of the future to those of the present.

But on the other hand, a money-economy increases the variety of the uses between which a person can distribute his future expenditure. A person who in a primitive state of society stores up some things against a future need, may find that after all he does not need those things as much as others which he has not stored up: and there are many future wants against which it is impossible to provide directly by storing up goods. But he who has stored up capital from which he derives a money income can buy what he will to meet his needs as they arise. (7)

Again, modern methods of business have brought with them opportunities for the safe investment of capital in such ways as to yield a revenue to persons who have no good opportunity of engaging in any business, — not even in that of agriculture, where the land will under some conditions act as a trustworthy savings-bank. These new opportunities have induced some people who would not otherwise have attempted it to put by something for their own old age. And, what has had a far greater effect on the growth of wealth, it has rendered it far easier for a man to provide a secure income for his wife and children after his death: for, after all, family affection is the main motive of saving.

6. There are indeed some who find an intense pleasure in seeing their hoards of wealth grow up under their hands, with scarcely any thought for the happiness that may be got from its use by themselves or by others. They are prompted partly by the instincts of the chase, by the desire to outstrip their rivals; by the ambition to have shown ability in getting the wealth, and to acquire power and social position by its possession. And sometimes the force of habit, started when they were really in need of money, has given them, by a sort of reflex action, an artificial and unreasoning pleasure in amassing wealth for its own sake. But were it not for the family affections, many who now work hard and save carefully would not exert themselves to do more than secure a comfortable annuity for their own lives; either by purchase from an insurance company, or by arranging to spend every year, after they had retired from work, part of their capital as well as all their income. In the one case they would leave nothing behind them: in the other only provision for that part of their hoped-for old age, from which they had been cut off by death. That men labour and save chiefly for the sake of their families and not for themselves, is shown by the fact that they seldom spend, after they have retired from work, more than the income that comes in from their savings, preferring to leave their stored-up wealth intact for their families; while in this country alone twenty millions a year are saved in the form of insurance policies and are available only after the death of those who save them.

A man can have no stronger stimulus to energy and enterprise than the hope of rising in life, and leaving his family to start from a higher round of the social ladder than that on which he began. It may even give him an over-mastering passion which reduces to insignificance the desire for ease, and for all ordinary pleasures, and sometimes even destroys in him the finer sensibilities and nobler aspirations. But, as is shown by the marvellous growth of wealth in America during the present generation, it makes him a mighty producer and accumulator of riches; unless indeed he is in too great a hurry to grasp the social position which his wealth will give him: for his ambition may then lead him into as great extravagance as could have been induced by an improvident and self-indulgent temperament.

The greatest savings are made by those who have been brought up on narrow means to stern hard work, who have retained their simple habits, in spite of success in business, and who nourish a contempt for showy expenditure and a desire to be found at their death richer than they had been thought to be. This type of character is frequent in the quieter parts of old but vigorous countries, and it was very common among the middle classes in the rural districts of England for more than a generation after the pressure of the great French war and the heavy taxes that lingered in its wake.

7. Next, as to the sources of accumulation. The power to save depends on an excess of income over necessary expenditure; and this is greatest among the wealthy, In this country most of the larger incomes, but only a few of the smaller, are chiefly derived from capital. And, early in the present century, the commercial classes in England had much more saving habits than either the country gentlemen or the working classes. These causes combined to make English economists of the last generation regard savings as made almost exclusively from the profits of capital.

But even in modern England rent and the earnings of professional men and hired workers are an important source of accumulation: and they have been the chief source of it in all the earlier stages of civilization. (8) Moreover, the middle and especially the professional classes have always denied themselves much in order to invest capital in the education of their children; while a great part of the wages of the working classes is invested in the physical health and strength of their children. The older economists took too little account of the fact that the human faculties are as important a means of production as any other kind of capital; and we may conclude, in opposition to them, that any change in the distribution of wealth which gives more to the wage receivers and less to the capitalists is likely, other things being equal, to hasten the increase of material production, and that it will not perceptibly retard the storing-up of material wealth. Of course other things would not be equal if the change were brought about by violent methods which gave a shock to public security. But a slight and temporary check to the accumulation of material wealth need not necessarily be an evil, even from a purely economic point of view, if, being made quietly and without disturbance, it provided better opportunities for the great mass of the people, increased their efficiency, and developed in them such habits of self-respect as to result in the growth of a much more efficient race of producers in the next generation. For then it might do more in the long-run to promote the growth of even material wealth than great additions to our stock of factories and steam-engines.

A people among whom wealth is well distributed, and who have high ambitions, are likely to accumulate a great deal of public property; and the savings made in this form alone by some well-to-do democracies form no inconsiderable part of the best possessions which our own age has inherited from its predecessors. The growth of the co-operative movement in all its many forms, of building societies, friendly societies, trades-unions, of working men's savings-banks etc., shows that, even so far as the immediate accumulation of material wealth goes, the resources of the country are not, as the older economists assumed, entirely lost when they are spent in paying wages. (9)

8. Having looked at the development of the methods of saving and the accumulation of wealth, we may now return to that analysis of the relations between present and deferred gratifications, which we began from another point of view in our study of Demand. (10)

We there saw that anyone, who has a stock of a commodity which is applicable to several uses, endeavours to distribute it between them all in such a way as to give him the greatest satisfaction. If he thinks he could obtain more satisfaction by transferring some of it from one use to another he will do so. If, therefore, he makes his distribution rightly, he stops in applying it to each several use at such a point that he gets an equal amount of good out of the application that he is only just induced to make of it to each separate use; (in other words, he distributes it between the different uses in such a way that it has the same marginal utility in each).

We saw, further, that the principle remains the same whether all the uses are present, or some are present and others deferred: but that in this latter case some new considerations enter, of which the chief are, firstly, that the deferring of a gratification necessarily introduces some uncertainty as to its ever being enjoyed; and secondly, that, as human nature is constituted, a present gratification is generally, though not always, preferred to a gratification that is expected to be equal to it, and is as certain as anything can be in human life.

A prudent person who thought that he would derive equal gratifications from equal means at all stages of his life, would perhaps endeavour to distribute his means equally over his whole life: and if he thought that there was a danger that his power of earning income at a future date would run short, he would certainly save some of his means for a future date. He would do this not only if he thought that his savings would increase in his hands, but even if he thought they would diminish. He would put by a few fruit and eggs for the winter, because they would then be scarce, though they would not improve by keeping. If he did not see his way to investing his earnings in trade or on loan, so as to derive interest or profits from them, he would follow the example of some of our own forefathers who accumulated small stores of guineas which they carried into the country, when they retired from active life. They reckoned that the extra gratification which they could get by spending a few more guineas while money was coming in fast, would be of less service to them than the comfort which those guineas would buy for them in their old age. The care of the guineas cost them a great deal of trouble; and no doubt they would have been willing to pay some small charge to any one who would have relieved them from the trouble without occasioning them any sort of risk.

We can therefore imagine a state of things in which stored-up wealth could be put to but little good use; in which many persons wanted to make provision for their own future; while but few of those who wanted to borrow goods, were able to offer good security for returning them, or equivalent goods, at a future date. In such a state of things the postponement of, and waiting for enjoyments would be an action that incurred a penalty rather than reaped a reward: by handing over his means to another to be taken care of, a person could only expect to get a sure promise of something less, and not of something more than that which he lent: the rate of interest would be negative. (11)

Such a state of things is conceivable. But it is also conceivable, and almost equally probable, that people may be so anxious to work that they will undergo some penalty as a condition of obtaining leave to work. For, as deferring the consumption of some of his means is a thing which a prudent person would desire on its own account, so doing some work is a desirable object on its own account to a healthy person. Political prisoners, for instance, generally regard it as a favour to be allowed to do a little work. And human nature being what it is, we are justified in speaking of the interest on capital as the reward of the sacrifice involved in the waiting for the enjoyment of material resources, because few people would save much without reward; just as we speak of wages as the reward of labour, because few people would work hard without reward.

The sacrifice of present pleasure for the sake of future, has been called abstinence by economists. But this term has been misunderstood: for the greatest accumulators of wealth are very rich persons, some of whom live in luxury, and certainly do not practise abstinence in that sense of the term in which it is convertible with abstemiousness. What economists meant was that, when a person abstained from consuming anything which he had the power of consuming, with the purpose of increasing his resources in the future, his abstinence from that particular act of consumption increased the accumulation of wealth. Since, however, the term is liable to be misunderstood, we may with advantage avoid its use, and say that the accumulation of wealth is generally the result of a postponement of enjoyment, or of a waiting for it. (12) Or, in other words again, it is dependent on man's prospectiveness; that is, his faculty of realizing the future.

The "demand price" of accumulation, that is, the future pleasure which his surroundings enable a person to obtain by working and waiting for the future, takes many forms: but the substance is always the same. The extra pleasure which a peasant who has built a weatherproof hut derives from its usance, while the snow is drifting into those of his neighbours who have spent less labour on building theirs, is the price earned by his working and waiting. It represents the extra productiveness of efforts wisely spent in providing against distant evils, or for the satisfaction of future wants, as compared with that which would have been derived from an impulsive grasping at immediate satisfactions. Thus it is similar in all fundamental respects to the interest which the retired physician derives from the capital he has lent to a factory or a mine to enable it to improve its machinery; and on account of the numerical definiteness of the form in which it is expressed, we may take that interest to be the type of and to represent the usance of wealth in other forms.

It matters not for our immediate purpose whether the power over the enjoyment for which the person waits, was earned by him directly by labour, which is the original source of nearly all enjoyment; or was acquired by him from others, by exchange or by inheritance, by legitimate trade or by unscrupulous forms of speculation, by spoliation or by fraud: the only points with which we are just now concerned are that the growth of wealth involves in general a deliberate waiting for a pleasure which a person has (rightly or wrongly) the power of commanding in the immediate present, and that his willingness so to wait depends on his habit of vividly realizing the future and providing for it.

9. But let us look more closely at the statement that, as human nature is constituted, an increase in the future pleasure which can be secured by a present given sacrifice will in general increase the amount of present sacrifice that people will make. Suppose, for instance, that villagers have to get timber for building their cottages from the forests; the more distant these are, the smaller will be the return of future comfort got by each day's work in fetching the wood, the less will be their future gain from the wealth accumulated probably by each day's work: and this smallness of the return of future pleasure, to be got at a given present sacrifice, will tend to prevent them from increasing the size of their cottages; and will perhaps diminish on the whole the amount of labour they spend in getting timber. But this rule is not without exception. For, if custom has made them familiar with cottages of only one fashion, the further they are from the woods, and the smaller the usance to be got from the produce of one day's work, the more days' work will they give.

And similarly if a person expects, not to use his wealth himself, but to let it out on interest, the higher the rate of interest the higher his reward for saving. If the rate of interest on sound investments is 4 per cent., and he gives up £100 worth of enjoyment now, he may expect an annuity of £4 worth of enjoyment: but he can expect only £3 worth, if the rate is 3 per cent. And a fall in the rate of interest will generally lower the margin at which a person finds it just not worth while to give up present pleasures for the sake of those future pleasures that are to be secured by saving some of his means. It will therefore generally cause people to consume a little more now, and to make less provision for future enjoyment. But this rule is not without exception.

Sir Josiah Child remarked more than two centuries ago, that in countries in which the rate of interest is high, merchants "when they have gotten great wealth, leave trading" and lend out their money at interest, "the gain thereof being so easy, certain and great; whereas in other countries where interest is at a lower rate, they continue merchants from generation to generation, and enrich themselves and the state." And it is as true now, as it was then, that many men retire from business when they are yet almost in the prime of life, and when their knowledge of men and things might enable them to conduct their business more efficiently than ever. Again, as Sargant has pointed out, if a man has decided to go on working and saving till he has provided a certain income for his old age, or for his family after his death, he will find that he has to save more if the rate of interest is low than if it is high. Suppose, for instance, that he wishes to provide an income of £400 a year on which he may retire from business, or to insure £400 a year for his wife and children after his death: if then then the current rate of interest is 5 per cent., he need only put by £8,000, or insure his life for £8,000; but if it is 4 per cent., he must save £10,000, or insure his life for £10,000.

It is then possible that a continued fall in the rate of interest may be accompanied by a continued increase in the yearly additions to the world's capital. But none the less is it true that a fall in the distant benefits to be got by a given amount of working and waiting for the future does tend on the whole to diminish the provision which people make for the future; or in more modern phrase, that a fall in the rate of interest tends to check the accumulation of wealth. For though with man's growing command over the resources of nature, he may continue to save much even with a low rate of interest; yet while human nature remains as it is every fall in that rate is likely to cause many more people to save less than to save more than they would otherwise have done. (13)

10. The causes which govern the accumulation of wealth and its relation to the rate of interest have so many points of contact with various parts. of economic science, that the study of them cannot easily be brought together in one part of our inquiry. And although in the present Book we are concerned mainly with the side of supply; it has seemed necessary to indicate provisionally here something of the general relations between the demand for and the supply of capital. And we have seen that: —

The accumulation of wealth is governed by a great variety of causes: by custom, by habits of self-control and realizing the future, and above all by the power of family affection. Security is a necessary condition for it, and the progress of knowledge and intelligence furthers it in many ways.

A rise in the rate of interest offered for capital, i.e. in the demand price for saving, tends to increase the volume of saving. For in spite of the fact that a few people who have determined to secure an income of a certain fixed amount for themselves or their family will save less with a high rate of interest than with a low rate, it is a nearly universal rule that a rise in the rate increases the desire to save; and it often increases the power to save, or rather it is often an indication of an increased efficiency of our productive resources: but the older economists went too far in suggesting that a rise of interest (or of profits) at the expense of wages always increased the power of saving: they forgot that from the national point of view the investment of wealth in the child of the working man is as productive as its investment in horses or machinery.

It must however be recollected that the annual investment of wealth is a small part of the already existing stock, and that therefore the stock would not be increased perceptibly in any one year by even a considerable increase in the annual rate of saving.


11. The statistical history of the growth of wealth is singularly poor and misleading. This is partly due to difficulties inherent in any attempt to give a numerical measure of wealth which shall be applicable to different places and times, partly to the absence of systematic attempts to collect the necessary facts. The Government of the United States does indeed ask for returns of every person's property; and though the results thus obtained are not satisfactory, yet they are perhaps the best we have.

Estimates of the wealth of other countries have to be based almost exclusively on estimates of income, which are capitalized at various numbers of years' purchase; this number being chosen with reference (i) to the general rate of interest current at the time, (ii) to the extent to which the income derived from the use of wealth in any particular form is to be credited (a) to the permanent income-yielding power of the wealth itself; and (b) to either the labour spent in applying it, or the using up of the capital itself. This last head is specially important in the case of ironworks which depreciate rapidly, and still more in the case of such mines as are likely to be speedily exhausted; both must be capitalized at only a few years' purchase. On the other hand, the income-yielding power of land is likely to increase; and where that is the case, the income from land has to be capitalized at a great number of years' purchase (which may be regarded as making a negative provision under the head of ii, b).

Land, houses, and live stock are the three forms of wealth which have been in the first rank of importance always and everywhere. But land differs from other things in this, that an increase in its value is often chiefly due to an increase in its scarcity; and is therefore a measure rather of growing wants, than of growing means of meeting wants. Thus the land of the United States in 1880 counted as of about equal value with the land of the United Kingdom, and about half that of France. Its money value was insignificant a hundred years ago; and if the density of population two or three hundred years hence is nearly the same in the United States as in the United Kingdom, the land of the former will then be worth at least twenty times as much as that of the latter.

In the early middle ages the whole value of the land of England was much less than that of the few large-boned but small-sized animals that starved through the winter on it: now, though much of the best land is entered under the heads of houses, railways, etc.; though the live stock is now probably more than ten times as heavy in aggregate weight, and of better quality; and though there is now abundant farming capital of kinds which were then unknown; yet agricultural land is now worth more than three times as much as the farm stock. The few years of the pressure of the great French war nearly doubled the nominal value of the land of England. Since then free trade, improvements in transport, the opening of new countries, and other causes have lowered the nominal value of that part of the land which is devoted to agriculture. And they have made the general purchasing power of money in terms of commodities rise in England relatively to the Continent. Early in the last century 25 fr. would buy more, and especially more of the things needed by the working classes, in France and Germany than £1 would in England. But now the advantage is the other way: and this causes the recent growth of the wealth of France and Germany to appear to be greater relatively to that of England than it really is.

When account is taken of facts of this class, and also of the fact that a fall in the rate of interest increases the number of years' purchase at which any income has to be capitalized, and therefore increases the value of a property which yields a given income; we see that the estimates of national wealth would be very misleading, even if the statistics of income on which they were based were accurate. But still such estimates are not wholly without value.

Sir R. Giffen's Growth of Capital and Mr Chiozza Money's Riches and Poverty contain suggestive discussions on many of the figures in the following table.

Country and Land Houses Farm-Capital Author of £million £million £million Estimate England 1679 (Petty) 144 30 36 1690 (Gregory King) 180 45 25 1812 (Colquhoun) 750 300 143 1885 (Giffen) 1,333 1,700 382 United Kingdom 1812 (Colquhoun) 1,200 400 228 1855 (Edleston) 1,700 550 472 1865 (Giffen) 1,864 1,031 620 1875 — 2,007 1,420 668 1885 — 1,691 2,827 522 1905 (Money) 966 2,827 285 United States 1880 (Census) 2,040 2,000 480 1890 — 1900 — France 1892 (de Foville) 3,000 2,000 400 Italy 1884 (Pantaleoni) 1,160 360

Other Total Wealth

Wealth Wealth per cap.

£million £million £ England 1679 (Petty) 40 250 42 1690 (Gregory King) 70 320 58 1812 (Colquhoun) 653 1,846 180 1885 (Giffen) 3,012 6,427 315 United Kingdom 1812 (Colquhoun) 908 2,736 160 1855 (Edleston) 1,048 3,760 130 1865 (Giffen) 2,598 6,113 200 1875 — 4,453 8,548 260 1885 — 5,897 10,037 270 1905 (Money) 7,326 11,414 265 United States 1880 (Census) 4,208 8,728 175 1890 — 13,200 208 1900 — 18,860 247 France 1892 (de Foville) 4,000 9,400 247 Italy 1884 (Pantaleoni) 1,920 65 But their divergences show the great uncertainty of all such estimates. Mr Money's estimate of the value of land, i.e. agricultural land with farm buildings, is probably too low. Sir R. Giffen estimates the value of public property at £m. 500: and he omits public loans held at home, on the ground that the entries for them would cancel one another, as much being debited under the head of public property as is credited under that of private property. But Mr Money reckons the gross value of public roads, parks, buildings, bridges, sewers, lighting and water works, tramways etc. at £m. 1,650: and, after deducting from this £m. 1,200 for public loans he gets £m. 450 for the net value of public property; and he thus becomes free to count public loans held at home under private property. He estimates the value of foreign stock exchange securities and other foreign property held in the United Kingdom at £m. 1,821. These estimates of wealth are mainly based on estimates of income: and, as regards the statistics of income, attention may be directed to Mr Bowley's instructive analysis in National progress since 1882; and in The Economic Journal for September 1904.

Sir R. Giffen estimates the wealth of the British Empire in 1903 (Statistical Journal, Vol. 66, p. 584) thus:

United Kingdom...... £m. 15,000

Canada......... " 1,350

Australasia......... " 1,100

India......... " 3,000

South Africa...... " 600

Remainder of Empire..." 1,200

A tentative history of changes in the relative wealth of different parts of England has been deduced by Rogers from the assessment of the several counties for the purpose of taxation. Le Vicomte d' Avenel's great work L'Histoire Économique de la Propriété &c. 1200-1800 contains a rich store of materials as to France; and comparative studies of the growth of wealth in France and other nations have been made by Levasseur, Leroy Beaulieu, Neymarck and de Foville.

Mr Crammond, addressing the institute of Bankers in March 1919, estimated the national wealth of the United Kingdom to be £m. 24,000, and the national income to be £m. 3,600. He reckoned the net value of the country's foreign investments to have fallen to £m. 1,600, she having recently sold securities amounting to £m. 1,600; and borrowed another £m. 1,400. On the balance she appeared to be a creditor to the amount of £m. 2,600: but a great part of this amount cannot be reckoned as adequately secured.


1. A short but suggestive study of the growth of wealth in its early forms, and of the arts of life, is given in Tylor's Anthropology.

2. Bagehot (Economic Studies, pp. 163-5), after quoting the evidence which Galton has collected on the keeping of pet animals by savage tribes, points out that we find here a good illustration of the fact that however careless a savage race may be for the future, it cannot avoid making some provision for it. A bow, a fishing-net, which will do its work well in getting food for to-day, must be of service for many days to come: a horse or a canoe that will carry one well to-day, must be a stored-up source of many future enjoyments. The least provident of barbaric despots may raise a massive pile of buildings, because it is the most palpable proof of his present wealth and power.

3. The farm implements for a first class Ryot family, including six or seven adult males, are a few light ploughs and hoes chiefly of wood, of the total value of about 13 rupees (Sir G. Phear, Aryan Village, p. 233) or the equivalent of their work for about a month; while the value of the machinery alone on a well equipped large modern arable farm amounts to £3 an acre (Equipment of the Farm, edited by J. C. Morton) or say a year's work for each person employed. They include steam engines, trench, subsoil and ordinary ploughs, some to be worked by steam and some by horse power; various grubbers, harrows, rollers, clod-crushers, seed and manure drills, horse hoes, rakes, hay-making, mowing and reaping machines, steam or horse threshing, chaff cutting, turnip cutting, hay-pressing machines and a multitude of others. Meanwhile there is an increasing use of silos and covered yards, and constant improvements in the fittings of the dairy and other farm buildings, all of which give great economy of effort in the long run, but require a larger share of it to be spent in preparing the way for the direct work of the farmer in raising agricultural produce.

4. For instance, improvements which have recently been made in some American cities indicate that by a sufficient outlay of capital each house could be supplied with what it does require, and relieved of what it does not, much more effectively than now, so as to enable a large part of the population to live in towns and yet be free from many of the present evils of town life. The first step is to make under all the streets large tunnels, in which many pipes and wires can be laid side by side, and repaired when they get out of order, without any interruption of the general traffic and without great expense. Motive power, and possibly even heat, might then be generated at great distances from the towns (in some cases in coal-mines), and laid on wherever wanted. Soft water and spring water, and perhaps even sea water and ozonized air, might be laid on in separate pipes to nearly every house; while steam-pipes might be used for giving warmth in winter, and compressed air for lowering the heat of summer; or the heat might be supplied by gas of great heating power laid on in special pipes, while light was derived from gas specially suited for the purpose or from electricity; and every house might be in electric communication with the rest of the town. All unwholesome vapours, including those given off by any domestic fires which were still used, might be carried away by strong draughts through long conduits, to be purified by passing through large furnaces and thence away through huge chimneys into the higher air. To carry out such a scheme in the towns of England would require the outlay of a much larger capital than has been absorbed by our railways. This conjecture as to the ultimate course of town improvement may be wide of the truth; but it serves to indicate one of very many ways in which the experience of the past foreshadows broad openings for investing present effort in providing the means of satisfying our wants in the future.

5. Comp. Appendix A.

6. They "discount" future benefits (comp. Book III, ch. v, section 3) at the rate of many thousands per cent per annum.

7. Comp. III, v, section 2.

8. Comp. Principles of Political Economy, by Richard Jones.

9. It must however be admitted that what passes by the name of public property is often only private wealth borrowed on a mortgage of future public revenue. Municipal gas-works for instance are not generally the results of public accumulations. They were built with wealth saved by private persons, and borrowed on public account.

10. Above, III, v.

11. The suggestion that the rate of interest may conceivably become a negative quantity was discussed by Foxwell in a paper on Some Social Aspects of Banking, read before the Bankers' Institute in January, 1886.

12. Karl Marx and his followers have found much amusement in contemplating the accumulations of wealth which result from the abstinence of Baron Rothschild, which they contrast with the extravagance of a labourer who feeds a family of seven on seven shillings a week; and who, living up to his full income, practises no economic abstinence at all. The argument that it is Waiting rather than Abstinence, which is rewarded by Interest and is a factor of production, was given by Macvane in the Harvard Journal of Economics for July, 1887.

13. See also VI, vi. It may however be observed here that the dependence of the growth of capital on the high estimation of "future goods" appears to have been over-estimated by earlier writers; not under-estimated, as is argued by Prof. Böhm-Bawerk.

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Chapter 8, Industrial Organization


1. Writers on social science from the time of Plato downwards have delighted to dwell on the increased efficiency which labour derives from organization. But in this, as in other cases, Adam Smith gave a new and larger significance to an old doctrine by the philosophic thoroughness with which he explained it, and the practical knowledge with which he illustrated it. After insisting on the advantages of the division of labour, and pointing out how they render it possible for increased numbers to live in comfort on a limited territory, he argued that the pressure of population on the means of subsistence tends to weed out those races who through want of organization or for any other cause are unable to turn to the best account the advantages of the place in which they live.

Before Adam Smith's book had yet found many readers, biologists were already beginning to make great advances towards understanding the real nature of the differences in organization which separate the higher from the lower animals; and before two more generations had elapsed, Malthus' historical account of man's struggle for existence started Darwin on that inquiry as to the effects of the struggle for existence in the animal and vegetable world, which issued in his discovery of the selective influence constantly played by it. Since that time biology has more than repaid her debt; and economists have in their turn owed much to the many profound analogies which have been discovered between social and especially industrial organization on the one side and the physical organization of the higher animals on the other. In a few cases indeed the apparent analogies disappeared on closer inquiry: but many of those which seemed at first sight most fanciful, have gradually been supplemented by others, and have at last established their claim to illustrate a fundamental unity of action between the laws of nature in the physical and in the moral world. This central unity is set forth in the general rule, to which there are not very many exceptions, that the development of the organism, whether social or physical, involves an increasing subdivision of functions between its separate parts on the one hand, and on the other a more intimate connection between them. (1) Each part gets to be less and less self-sufficient, to depend for its wellbeing more and more on other parts, so that any disorder in any part of a highly-developed organism will affect other parts also.

This increased subdivision of functions, or "differentiation," as it is called, manifests itself with regard to industry is such forms as the division of labour, and the development of specialized skill, knowledge and machinery: while "integration," that is, a growing intimacy and firmness of the connections between the separate parts of the industrial organism, shows itself in such forms as the increase of security of commercial credit, and of the means and habits of communication by sea and road, by railway and telegraph, by post and printing-press.

The doctrine that those organisms which are the most highly developed, in the sense in which we have just used the phrase, are those which are most likely to survive in the struggle for existence, is itself in process of development. It is not yet completely thought out either in its biological or its economic relations. But we may pass to consider the main bearings in economics of the law that the struggle for existence causes those organisms to multiply which are best fitted to derive benefit from their environment.

The law requires to be interpreted carefully: for the fact that a thing is beneficial to its environment will not by itself secure its survival either in the physical or in the moral world. The law of "survival of the fittest" states that those organisms tend to survive which are best fitted to utilize the environment for their own purposes. Those that utilize the environment most, often turn out to be those that benefit those around them most; but sometimes they are injurious.

Conversely, the struggle for survival may fail to bring into existence organisms that would be highly beneficial: and in the economic world the demand for any industrial arrangement is not certain to call forth a supply, unless it is something more than a mere desire for the arrangement, or a need for it. It must be an efficient demand; that is, it must take effect by offering adequate payment or some other benefit to those who supply it. (2) A mere desire on the part of employees for a share in the management and the profits of the factory in which they work, or the need on the part of clever youths for a good technical education, is not a demand in the sense in which the term is used when it is said that supply naturally and surely follows demand. This seems a hard truth: but some of its harshest features are softened down by the fact that those races, whose members render services to one another without exacting direct recompense are not only the most likely to flourish for the time, but most likely to rear a large number of descendants who inherit their beneficial habits.

2. Even in the vegetable world a species of plants, however vigorous in its growth, which should be neglectful of the interests of its seeds, would soon perish from the earth. The standard of family and race duty is often high in the animal kingdom; and even those predatory animals which we are accustomed to regard as the types of cruelty, which fiercely utilize the environment and do nothing for it in return, must yet be willing as individuals to exert themselves for the benefit of their offspring. And going beyond the narrower interests of the family to those of the race, we find that among so-called social animals, such as bees and ants, those races survive in which the individual is most energetic in performing varied services for the society without the prompting of direct gain to himself.

But when we come to human beings, endowed with reason and speech, the influence of a tribal sense of duty in strengthening the tribe takes a more varied form. It is true that in the ruder stages of human life many of the services rendered by the individual to others are nearly as much due to hereditary habit and unreasoning impulse, as are those of the bees and ants. But deliberate, and therefore moral, self-sacrifice soon makes its appearance; it is fostered by the far-seeing guidance of prophets and priests and legislators, and is inculcated by parable and legend. Gradually the unreasoning sympathy, of which there are germs in the lower animals, extends its area and gets to be deliberately adopted as a basis of action: tribal affection, starting from a level hardly higher than that which prevails in a pack of wolves or a horde of banditti, gradually grows into a notable patriotism; and religious ideals are raised and purified. The races in which these qualities are the most highly developed are sure, other things being equal, to be stronger than others in war and in contests with famine and disease; and ultimately to prevail. Thus the struggle for existence causes in the long run those races of men to survive in which the individual is most willing to sacrifice himself for the benefit of those around him; and which are consequently the best adapted collectively to make use of their environment.

Unfortunately however not all the qualities which enable one race to prevail over another benefit mankind as a whole. It would no doubt be wrong to lay very much stress on the fact that warlike habits have often enabled half-savage races to reduce to submission others who were their superiors in every peaceful virtue; for such conquests have gradually increased the physical vigour of the world, and its capacity for great things, and ultimately perhaps have done more good than harm. But there is no such qualification to the statement that a race does not establish its claim to deserve well of the world by the mere fact that it flourishes in the midst or on the surface of another race. For, though biology and social science alike show that parasites sometimes benefit in unexpected ways the race on which they thrive; yet in many cases they turn the peculiarities of that race to good account for their own purposes without giving any good return. The fact that there is an economic demand for the services of Jewish and Armenian money-dealers in Eastern Europe and Asia, or for Chinese labour in California, is not by itself a proof, nor even a very strong ground for believing, that such arrangements tend to raise the quality of human life as a whole. For, though a race entirely dependent on its own resources can scarcely prosper unless it is fairly endowed with the most important social virtues; yet a race, which has not these virtues and which is not capable of independent greatness, may be able to thrive on its relations with another race. But on the whole, and subject to grave exceptions, those races survive and predominate in which the best qualities are most strongly developed.

3. This influence of heredity shows itself nowhere more markedly than in social organization. For that must necessarily be a slow growth, the product of many generations: it must be based on those customs and aptitudes of the great mass of the people which are incapable of quick change. In early times when religious, ceremonial, political, military and industrial organization were intimately connected, and were indeed but different sides of the same thing, nearly all those nations which were leading the van of the world's progress were found to agree in having adopted a more or less strict system of caste: and this fact by itself proved that the distinction of castes was well suited to its environment, and that on the whole it strengthened the races or nations which adopted it. For since it was a controlling factor of life, the nations which adopted it could not have generally prevailed over others, if the influence exerted by it had not been in the main beneficial. Their pre-eminence proved not that it was free from defects, but that its excellences, relatively to that particular stage of progress, outweighed its defects.

Again we know that an animal or a vegetable species may differ from its competitors by having two qualities, one of which is of great advantage to it; while the other is unimportant, perhaps even slightly injurious, and that the former of these qualities will make the species succeed in spite of its having the latter: the survival of which will then be no proof that it is beneficial. Similarly the struggle for existence has kept alive many qualities and habits in the human race which were in themselves of no advantage, but which are associated by a more or less permanent bond with others that are great sources of strength. Such instances are found in the tendency to an overbearing demeanour and a scorn for patient industry among nations that owe their advance chiefly to military victories; and again in the tendency among commercial nations to think too much of wealth and to use it for the purposes of display. But the most striking instances are found in matters of organization; the excellent adaptation of the system of caste for the special work which it had to do, enabled it to flourish in spite of its great faults, the chief of which were its rigidity, and its sacrifice of the individual to the interests of society, or rather to certain special exigencies of society.

Passing over intermediate stages and coming at once to the modern organization of the Western world, we find it offering a striking contrast, and a no less striking resemblance, to the system of caste. On the one hand, rigidity has been succeeded by plasticity: the methods of industry which were then stereotyped, now change with bewildering quickness; the social relations of classes, and the position of the individual in his class, which were then definitely fixed by traditional rules, are now perfectly variable and change their forms with the changing circumstances of the day. But on the other hand, the sacrifice of the individual to the exigencies of society as regards the production of material wealth seems in some respects to be a case of atavism, a reversion to conditions which prevailed in the far-away times of the rule of caste. For the division of labour between the different ranks of industry and between different individuals in the same rank is so thorough and uncompromising, that the real interests of the producer are sometimes in danger of being sacrificed for the sake of increasing the addition which his work makes to the aggregate production of material wealth.

4. Adam Smith, while insisting on the general advantages of that minute division of labour and of that subtle industrial organization which were being developed with unexampled rapidity in his time, was yet careful to indicate many points in which the system failed, and many incidental evils which it involved. (3) But many of his followers with less philosophic insight, and in some cases with less real knowledge of the world, argued boldly that whatever is, is right. They argued for instance that, if a man had a talent for managing business, he would be surely led to use that talent for the benefit of mankind: that meanwhile a like pursuit of their own interests would lead others to provide for his use such capital as he could turn to best account; and that his own interest would lead him so to arrange those in his employment that everyone should do the highest work of which he was capable, and no other; and that it would lead him to purchase and use all machinery and other aids to production, which could in his hands contribute more than the equivalent of their own cost towards supplying the wants of the world.

This doctrine of natural organization contains more truth of the highest importance to humanity than almost any other which is equally likely to evade the comprehension of those who discuss grave social problems without adequate study: and it had a singular fascination for earnest and thoughtful minds. But its exaggeration worked much harm, especially to those who delighted most in it. For it prevented them from seeing and removing the evil that was intertwined with the good in the changes that were going on around them. It hindered them from inquiring whether many even of the broader features of modern industry might not be transitional, having indeed good work to do in their time, as the caste system had in its time; but being, like it, serviceable chiefly in leading the way towards better arrangements for a happier age. And it did harm by preparing the way for exaggerated reaction against it.

5. Moreover the doctrine took no account of the manner in which organs are strengthened by being used. Herbert Spencer has insisted with much force on the rule that, if any physical or mental exercise gives pleasure and is therefore frequent, those physical or mental organs which are used in it are likely to grow rapidly. Among the lower animals indeed the action of this rule is so intimately interwoven with that of the survival of the fittest, that the distinction between the two need not often be emphasized. For as it might be guessed a priori, and as seems to be proved by observation, the struggle for survival tends to prevent animals from taking much pleasure in the exercise of functions which do not contribute to their well-being.

But man, with his strong individuality, has greater freedom. He delights in the use of his faculties for their own sake; sometimes using them nobly, whether with the abandon of the great Greek burst of life, or under the control of a deliberate and steadfast striving towards important ends; sometimes ignobly, as in the case of a morbid development of the taste for drink. The religious, the moral, the intellectual and the artistic faculties on which the progress of industry depends, are not acquired solely for the sake of the things that may be got by them; but are developed by exercise for the sake of the pleasure and the happiness which they themselves bring: and, in the same way, that greater factor of economic prosperity, the organization of a well-ordered state, is the product of an infinite variety of motives; many of which have no direct connection with the pursuit of national wealth. (4)

No doubt it is true that physical peculiarities acquired by the parents during their life-time are seldom if ever transmitted to their offspring. But no conclusive case seems to have been made out for the assertion that the children of those who have led healthy lives, physically and morally, will not be born with a firmer fibre than they would have been had the same parents grown up under unwholesome influences which had enfeebled the fibre of their minds and their bodies. And it is certain that in the former case the children are likely after birth to be better nourished, and better trained; to acquire more wholesome instincts; and to have more of that regard for others and that self-respect, which are the mainsprings of human progress, than in the latter case. (5)

It is needful then diligently to inquire whether the present industrial organization might not with advantage be so modified as to increase the opportunities, which the lower grades of industry have for using latent mental faculties, for deriving pleasure from their use, and for strengthening them by use; since the argument that if such a change had been beneficial, it would have been already brought about by the struggle for survival, must be rejected as invalid. Man's prerogative extends to a limited but effective control over natural development by forecasting the future and preparing the way for the next step.

Thus progress may be hastened by thought and work; by the application of the principles of Eugenics to the replenishment of the race from its higher rather than its lower strains, and by the appropriate education of the faculties of either sex: but however hastened it must be gradual and relatively slow. It must be slow relatively to man's growing command over technique and the forces of nature; a command which is making ever growing calls for courage and caution, for resource and steadfastness, for penetrating insight and for breadth of view. And it must be very much too slow to keep pace with the rapid inflow of proposals for the prompt reorganization of society on a new basis. In fact our new command over nature, while opening the door to much larger schemes for industrial organization than were physically possible even a short time ago, places greater responsibilities on those who would advocate new developments of social and industrial structure. For though institutions may be changed rapidly; yet if they are to endure they must be appropriate to man: they cannot retain their stability if they change very much faster than he does. Thus progress itself increases the urgency of the warning that in the economic world, Natura non facit saltum. (6)

Progress must be slow; but even from the merely material point of view it is to be remembered that changes, which add only a little to the immediate efficiency of production, may be worth having if they make mankind ready and fit for an organization, which will be more effective in the production of wealth and more equal in its distribution; and that every system, which allows the higher faculties of the lower grades of industry to go to waste, is open to grave suspicion.


1. See a brilliant paper by Häckel on Arbeitsteilung in Menschen- und Tierleben and Schäffle's Bau und Leben des sozialen Körpers.

2. Like all other doctrines of the same class, this requires to be interpreted in the light of the fact that the effective demand of a purchaser depends on his means, as well as on his wants: a small want on the part of a rich man often has more effective force in controlling the business arrangements of the world than a great want on the part of a poor man.

3. See above I, IV, section 6; and below Appendix B, sections 3 and 6.

4. Man with his many motives, as he may set himself deliberately to encourage the growth of one peculiarity, may equally set himself to check the growth of another: the slowness of progress during the Middle Ages was partly due to a deliberate detestation of learning.

5. See Note XI in the Mathematical Appendix. Considerations of this class have little application to the development of mere animals, such as mice; and none at all to that of peas and other vegetables. And therefore the marvellous arithmetical results which have been established, provisionally at all events, in regard to heredity in such cases, have very little bearing on the full problems of inheritance with which students of social science are concerned: and some negative utterances on this subject by eminent Mendelians seem to lack due reserve. Excellent remarks on the subject will be found in Prof Pigou's Wealth and Warfare, Part I, ch. IV.

6. Compare Appendix A, section 16.

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Chapter 9, Industrial Organization, Continued. Division of Labour. The Influence of Machinery


1. The first condition of an efficient organization of industry is that it should keep everyone employed at such work as his abilities and training fit him to do well, and should equip him with the best machinery and other appliances for his work. We shall leave on one side for the present the distribution of work between those who carry out the details of production on the one hand, and those who manage its general arrangement and undertake its risk on the other; and confine ourselves to the division of labour between different classes of operatives, with special reference to the influence of machinery. In the following chapter we shall consider the reciprocal effects of division of labour and localization of industry; in a third chapter we shall inquire how far the advantages of division of labour depend upon the aggregation of large capitals into the hands of single individuals or firms, or, as is commonly said, on production on a large scale; and lastly, we shall examine the growing specialization of the work of business management.

Everyone is familiar with the fact that "practice makes perfect," that it enables an operation, which at first seemed difficult, to be done after a time with comparatively little exertion, and yet much better than before; and physiology in some measure explains this fact. For it gives reasons for believing that the change is due to the gradual growth of new habits of more or less "reflex" or automatic action. Perfectly reflex actions, such as that of breathing during sleep, are performed by the responsibility of the local nerve centres without any reference to the supreme central authority of the thinking power, which is supposed to reside in the cerebrum. But all deliberate movements require the attention of the chief central authority: it receives information from the nerve centres or local authorities and perhaps in some cases direct from the sentient nerves, and sends back detailed and complex instructions to the local authorities, or in some cases direct to the muscular nerves, and so co-ordinates their action as to bring about the required results. (1)

The physiological basis of purely mental work is not yet well understood; but what little we do know of the growth of brain structure seems to indicate that practice in any kind of thinking develops new connections between different parts of the brain. Anyhow we know for a fact that practice will enable a person to solve quickly, and without any considerable exertion, questions which he could have dealt with but very imperfectly a little while before, even by the greatest effort. The mind of the merchant, the lawyer, the physician, and the man of science, becomes gradually equipped with a store of knowledge and a faculty of intuition, which can be obtained in no other way than by the continual application of the best efforts of a powerful thinker for many years together to one more or less narrow class of questions. Of course the mind cannot work hard for many hours a day in one direction: and a hard-worked man will sometimes find recreation in work that does not belong to his business, but would be fatiguing enough to a person who had to do it all day long.

Some social reformers have indeed maintained that those who do the most important brain work might do a fair share of manual work also, without diminishing their power of acquiring knowledge or thinking out hard questions. But experience seems to show that the best relief from overstrain is in occupations taken up to suit the mood of the moment and stopped when the mood is passed, that is, in what popular instinct classes as "relaxation." Any occupation which is so far business-like that a person must sometimes force himself by an effort of the will to go on with it, draws on his nervous force and is not perfect relaxation: and therefore it is not economical from the point of view of the community unless its value is sufficient to outweigh a considerable injury to his main work. (2)

2. It is a difficult and unsettled question how far specialization should be carried in the highest branches of work. In science it seems to be a sound rule that the area of study should be broad during youth, and should gradually be narrowed as years go on. A medical man who has always given his attention exclusively to one class of diseases, may perhaps give less wise advice even in his special subject than another who, having learnt by wider experience to think of those diseases in relation to general health, gradually concentrates his study more and more on them, and accumulates a vast store of special experiences and subtle instincts. But there is no doubt that greatly increased efficiency can be attained through division of labour in those occupations in which there is much demand for mere manual skill.

Adam Smith pointed out that a lad who had made nothing but nails all his life could make them twice as quickly as a first-rate smith who only took to nail-making occasionally. Anyone who has to perform exactly the same set of operations day after day on things of exactly the same shape, gradually learns to move his fingers exactly as they are wanted, by almost automatic action and with greater rapidity than would be possible if every movement had to wait for a deliberate instruction of the will. One familiar instance is seen in the tying of threads by children in a cotton-mill. Again, in a clothing or a boot factory, a person who sews, whether by hand or machinery, just the same seam on a piece of leather or cloth of just the same size, hour after hour, day after day, is able to do it with far less effort and far more quickly than a worker with much greater quickness of eye and hand, and of a much higher order of general skill, who was accustomed to make the whole of a coat or the whole of a boot. (3)

Again, in the wood and the metal industries, if a man has to perform exactly the same operations over and over again on the same piece of material, he gets into the habit of holding it exactly in the way in which it is wanted, and of arranging the tools and other things which he has to handle in such positions that he is able to bring them to work on one another with the least possible loss of time and of force in the movements of his own body. Accustomed to find them always in the same position and to take them in the same order, his hands work in harmony with one another almost automatically: and with increased practice his expenditure of nervous force diminishes even more rapidly than his expenditure of muscular force.

But when the action has thus been reduced to routine it has nearly arrived at the stage at which it can be taken over by machinery. The chief difficulty to be overcome is that of getting the machinery to hold the material firmly in exactly the position in which the machine tool can be brought to bear on it in the right way, and without wasting too much time in taking grip of it. But this can generally be contrived when it is worth while to spend some labour and expense on it; and then the whole operation can often be controlled by a worker who, sitting before a machine, takes with the left hand a piece of wood or metal from a heap and puts it in a socket, while with the right he draws down a lever, or in some other way sets the machine tool at work, and finally with his left hand throws on to another heap the material which has been cut or punched or drilled or planed exactly after a given pattern. It is in these industries especially that we find the reports of modern trades-unions to be full of complaints that unskilled labourers, and even their wives and children, are put to do work which used to require the skill and judgment of a trained mechanic, but which has been reduced to mere routine by the improvement of machinery and the ever-increasing minuteness of the subdivision of labour.

3. We are thus led to a general rule, the action of which is more prominent in some branches of manufacture than others, but which applies to all. It is, that any manufacturing operation that can be reduced to uniformity, so that exactly the same thing has to be done over and over again in the same way, is sure to be taken over sooner or later by machinery. There may be delays and difficulties; but if the work to be done by it is on a sufficient scale, money and inventive power will be spent without stint on the task till it is achieved. (4)

Thus the two movements of the improvement of machinery and the growing subdivision of labour have gone together and are in some measure connected. But the connection is not so close as is generally supposed. It is the largeness of markets, the increased demand for great numbers of things of the same kind, and in some cases of things made with great accuracy, that leads to subdivision of labour; the chief effect of the improvement of machinery is to cheapen and make more accurate the work which would anyhow have been subdivided. For instance, "in organizing the works at Soho, Boulton and Watt found it necessary to carry division of labour to the furthest practicable point. There were no slide-lathes, planing machines or boring tools, such as now render mechanical accuracy of construction almost a matter of certainty. Everything depended on the individual mechanic's accuracy of hand and eye; yet mechanics generally were much less skilled then than they are now. The way in which Boulton and Watt contrived partially to get over the difficulty was to confine their workmen to special classes of work, and make them as expert in them as possible. By continued practice in handling the same tools and fabricating the same articles, they thus acquired great individual proficiency." (5) Thus machinery constantly supplants and renders unnecessary that purely manual skill, the attainment of which was, even up to Adam Smith's time, the chief advantage of division of labour. But this influence is more than countervailed by its tendency to increase the scale of manufactures and to make them more complex; and therefore to increase the opportunities for division of labour of all kinds, and especially in the matter of business management.

4. The powers of machinery to do work that requires too much accuracy to be done by hand are perhaps best seen in some branches of the metal industries in which the system of Interchangeable Parts is being rapidly developed. It is only after long training and with much care and labour that the hand can make one piece of metal accurately to resemble or to fit into another: and after all the accuracy is not perfect. But this is just the work which a well made machine can do most easily and most perfectly. For instance, if sowing and reaping machines had to be made by hand, their first cost would be very high; and when any part of them was broken, it could be replaced only at a great cost by sending the machine back to the manufacturer or by bringing a highly skilled mechanic to the machine. But as it is, the manufacturer keeps in a store many facsimiles of the broken part, which were made by the same machinery, and are therefore interchangeable with it. A farmer in the North-West of America, perhaps a hundred miles away from any good mechanic's shop, can yet use complicated machinery with confidence; since he knows that by telegraphing the number of the machine and the number of any part of it which he has broken, he will get by the next train a new piece which he can himself fit into its place. The importance of this principle of interchangeable parts has been but recently grasped; there are however many signs that it will do more than any other to extend the use of machine-made machinery to every branch of production, including even domestic and agricultural work. (6)

The influences which machinery exerts over the character of modern industry are well illustrated in the manufacture of watches. Some years ago the chief seat of this business was in French Switzerland; where the subdivision of labour was carried far, though a great part of the work was done by a more or less scattered population. There were about fifty distinct branches of trade each of which did one small part of the work. In almost all of them a highly specialized manual skill was required, but very little judgment; the earnings were generally low, because the trade had been established too long for those in it to have anything like a monopoly, and there was no difficulty in bringing up to it any child with ordinary intelligence. But this industry is now yielding ground to the American system of making watches by machinery, which requires very little specialized manual skill. In fact the machinery is becoming every year more and more automatic, and is getting to require less and less assistance from the human hand. But the more delicate the machine's power, the greater is the judgment and carefulness which is called for from those who see after it. Take for instance a beautiful machine which feeds itself with steel wire at one end, and delivers at the other tiny screws of exquisite form; it displaces a great many operatives who had indeed acquired a very high and specialized manual skill, but who lived sedentary lives, straining their eyesight through microscopes, and finding in their work very little scope for any faculty except a mere command over the use of their fingers. But the machine is intricate and costly, and the person who minds it must have an intelligence, and an energetic sense of responsibility, which go a long way towards making a fine character; and which, though more common than they were, are yet sufficiently rare to be able to earn a very high rate of pay. No doubt this is an extreme case; and the greater part of the work done in a watch factory is much simpler. But much of it requires higher faculties than the old system did, and those engaged in it earn on the average higher wages; at the same time it has already brought the price of a trustworthy watch within the range of the poorest classes of the community, and it is showing signs of being able soon to accomplish the very highest class of work. (7)

Those who finish and put together the different parts of a watch must always have highly specialized skill: but most of the machines which are in use in a watch factory are not different in general character from those which are used in any other of the lighter metal trades: in fact many of them are mere modifications of the turning lathes and of the slotting, punching, drilling, planing, shaping, milling machines and a few others, which are familiar to all engineering trades. This is a good illustration of the fact that while there is a constantly increasing subdivision of labour, many of the lines of division between trades which are nominally distinct are becoming narrower and less difficult to be passed. In old times it would have been very small comfort to watch-makers, who happened to be suffering from a diminished demand for their wares, to be told that the gun-making trade was in want of extra hands; but most of the operatives in a watch factory would find machines very similar to those with which they were familiar, if they strayed into a gun-making factory or sewing-machine factory, or a factory for making textile machinery. A watch factory with those who worked in it could be converted without any overwhelming loss into a sewing-machine factory; almost the only condition would be that in the new factory no one should be put to work which required a higher order of general intelligence, than that to which he was already accustomed.

5. The printing trade affords another instance of the way in which an improvement of machinery and an increase in the volume of production causes an elaborate subdivision of labour. Everyone is familiar with the pioneer newspaper editor of newly settled districts of America, who sets up the type of his articles as he composes them; and with the aid of a boy prints off his sheets and distributes them to his scattered neighbours. When however the mystery of printing was new, the printer had to do all this for himself, and in addition to make all his own appliances. (8) These are now provided for him by separate "subsidiary" trades, from whom even the printer in the backwoods can obtain everything that he wants to use. But in spite of the assistance which it thus gets from outside, a large printing establishment has to find room for many different classes of workers within its walls. To say nothing of those who organize and superintend the business, of those who do its office work and keep its stores, of the skilled "readers" who correct any errors that may have crept into the "proofs," of its engineers and repairers of machinery, of those who cast, and who correct and prepare its stereotype plates; of the warehousemen and the boys and girls who assist them, and several other minor classes; there are the two great groups of the compositors who set up the type, and the machinists and pressmen who print impressions from them. Each of these two groups is divided into many smaller groups, especially in the large centres of the printing trade. In London, for instance, a minder who was accustomed to one class of machine, or a compositor who was accustomed to one class of work, if thrown out of employment would not willingly abandon the advantage of his specialized skill, and falling back on his general knowledge of the trade seek work at another kind of machine or in another class of work. (9) These barriers between minute subdivisions of a trade count for a great deal in many descriptions of the modern tendency towards specialization of industry; and to some extent rightly, because though many of them are so slight that a man thrown out of work in one subdivision could pass into one of its neighbours without any great loss of efficiency, yet he does not do so until he has tried for a while to get employment in his old lines; and therefore the barriers are as effective as stronger ones would be so far as the minor fluctuations of trade from week to week are concerned. But they are of an altogether different kind from the deep and broad partitions which divided one group of medieval handicraftsmen from another, and which caused the lifelong suffering of the handloom-weavers when their trade had left them. (10)

In the printing trades, as in the watch trade, we see mechanical and scientific appliances attaining results that would be impossible without them; at the same time that they persistently take over work that used to require manual skill and dexterity, but not much judgment; while they leave for man's hand all those parts which do require the use of judgment, and open up all sorts of new occupations in which there is a great demand for it. Every improvement and cheapening of the printer's appliances increases the demand for the judgment and discretion and literary knowledge of the reader, for the skill and taste of those who know how to set up a good title-page, or how to make ready a sheet on which an engraving is to be printed, so that light and shade will be distributed properly. It increases the demand for the gifted and highly-trained artists who draw or engrave on wood and stone and metal, and for those who know how to give an accurate report in ten lines of the substance of a speech that occupied ten minutes — an intellectual feat the difficulty of which we underrate, because it is so frequently performed. And again, it tends to increase the work of photographers and electrotypers, and stereotypers, of the makers of printer's machinery, and many others who get a higher training and a higher income from their work than did those layers on and takers off, and those folders of newspapers who have found their work taken over by iron fingers and iron arms.

6. We may now pass to consider the effects which machinery has in relieving that excessive muscular strain which a few generations ago was the common lot of more than half the working men even in such a country as England. The most marvellous instances of the power of machinery are seen in large iron-works, and especially in those for making armour plates, where the force to be exerted is so great that man's muscles count for nothing, and where every movement, whether horizontal or vertical, has to be effected by hydraulic or steam force, and man stands by ready to govern the machinery and clear away ashes or perform some such secondary task.

Machinery of this class has increased our command over nature, but it has not directly altered the character of man's work very much; for that which it does he could not have done without it. But in other trades machinery has lightened man's labours. The house carpenters, for instance, make things of the same kind as those used by our forefathers, with much less toil for themselves. They now give themselves chiefly to those parts of the task which are most pleasant and most interesting; while in every country town and almost every village there are found steam mills for sawing, planing and moulding, which relieve them of that grievous fatigue which not very long ago used to make them prematurely old. (11)

New machinery, when just invented, generally requires a great deal of care and attention. But the work of its attendant is always being sifted; that which is uniform and monotonous is gradually taken over by the machine, which thus becomes steadily more and more automatic and self-acting; till at last there is nothing for the hand to do, but to supply the material at certain intervals and to take away the work when finished. There still remains the responsibility for seeing that the machinery is in good order and working smoothly; but even this task is often made light by the introduction of an automatic movement, which brings he machine to a stop the instant anything goes wrong.

Nothing could be more narrow or monotonous than the occupation of a weaver of plain stuffs in the old time. But now one woman will manage four or more looms, each of which does many times as much work in the course of the day as the old hand-loom did; and her work is much less monotonous and calls for much more judgment than his did. So that for every hundred yards of cloth that are woven, the purely monotonous work done by human beings is probably not a twentieth part of what it was. (12)

Facts of this kind are to be found in the recent history of many trades: and they are of great importance when we are considering the way in which the modern organization of industry is tending to narrow the scope of each person's work, and thereby to render it monotonous. For those trades in which the work is most subdivided are those in which the chief muscular strain is most certain to be taken off by machinery; and thus the chief evil of monotonous work is much diminished. As Roscher says, it is monotony of life much more than monotony of work that is to be dreaded: monotony of work is an evil of the first order only when it involves monotony of life. Now when a person's employment requires much physical exertion, he is fit for nothing after his work; and unless his mental faculties are called forth in his work, they have little chance of being developed at all. But the nervous force is not very much exhausted in the ordinary work of a factory, at all events where there is not excessive noise, and where the hours of labour are not too long. The social surroundings of factory life stimulate mental activity in and out of working hours; and many of those factory workers, whose occupations are seemingly the most monotonous, have considerable intelligence and mental resource. (13)

It is true that the American agriculturist is an able man, and that his children rise rapidly in the world. But partly because land is plentiful, and he generally owns the farm that he cultivates, he has better social conditions than the English; he has always had to think for himself, and has long had to use and to repair complex machines. The English agricultural labourer has had many great disadvantages to contend with. Till recently he had little education; and he was in a great measure under a semi-feudal rule, which was not without its advantages, but which repressed enterprise and even in some degree self-respect. These narrowing causes are removed. He is now fairly well educated in youth. He learns to handle various machinery; he is less dependent on the good-will of any particular squire or group of farmers; and, since his work is more various, and educates intelligence more than the lowest grades of town work do, he is tending to rise both absolutely and relatively.

7. We must now proceed to consider what are the conditions under which the economies in production arising from division of labour can best be secured. It is obvious that the efficiency of specialized machinery or specialized skill is but one condition of its economic use; the other is that sufficient work should be found to keep it well employed. As Babbage pointed out, in a large factory "the master manufacturer by dividing the work to be executed into different processes, each requiring different degrees of skill or force, can purchase exactly that precise quantity of both which is necessary for each process; whereas if the whole work were executed by one workman that person must possess sufficient skill to perform the most difficult and sufficient strength to execute the most laborious of the operations into which the work is divided." The economy of production requires not only that each person should be employed constantly in a narrow range of work, but also that, when it is necessary for him to undertake different tasks, each of these tasks should be such as to call forth as much as possible of his skill and ability. Just in the same way the economy of machinery requires that a powerful turning-lathe when specially arranged for one class of work should be kept employed as long as possible on that work; and if there is occasion to employ it on other work, that should be such as to be worthy of the lathe, and not such as could have been done equally well by a much smaller machine.

Here then, so far as the economy of production goes, men and machines stand on much the same footing: but while machinery is a mere implement of production, man's welfare is also its ultimate aim. We have already been occupied with the question whether the human race as a whole gains by carrying to an extreme that specialization of function which causes all the most difficult work to be done by a few people: but we have now to consider it more nearly with special reference to the work of business management. The main drift of the next three chapters is to inquire what are the causes which make different forms of business management the fittest to profit by their environment, and the most likely to prevail over others; but it is well that meanwhile we should have in our minds the question, how far they are severally fitted to benefit their environment.

Many of those economies in the use of specialized skill and machinery which are commonly regarded as within the reach of very large establishments, do not depend on the size of individual factories. Some depend on the aggregate volume of production of the kind in the neighbourhood; while others again, especially those connected with the growth of knowledge and the progress of the arts, depend chiefly on the aggregate volume of production in the whole civilized world. And here we may introduce two technical terms.

We may divide the economies arising from an increase in the scale of production of any kind of goods, into two classes — firstly, those dependent on the general development of the industry; and, secondly, those dependent on the resources of the individual houses of business engaged in it, on their organization and the efficiency of their management. We may call the former external economies, and the latter internal economies. In the present chapter we have been chiefly discussing internal economies; but we now proceed to examine those very important external economies which can often be secured by the concentration of many small businesses of a similar character in particular localities: or, as is commonly said, by the localization of industry.


1. For instance, the first time a man attempts to skate he must give his whole attention to keeping his balance, his cerebrum has to exercise a direct control over every movement, and he has not much mental energy left for other things. But after a good deal of practice the action becomes semi-automatic, the local nerve centres undertake nearly all the work of regulating the muscles, the cerebrum is set free, and the man can carry on an independent train of thought; he can even alter his course to avoid an obstacle in his path, or to recover his balance after it has been disturbed by a slight unevenness, without in any way interrupting the course of his thoughts. It seems that the exercise of nerve force under the immediate direction of the thinking power residing in the cerebrum has gradually built up a set of connections, involving probably distinct physical change, between the nerves and nerve centres concerned; and these new connections may be regarded as a sort of capital of nerve force. There is probably something like an organized bureaucracy of the local nerve centres: the medulla, the spinal axis, and the larger ganglia generally acting the part of provincial authorities, and being able after a time to regulate the district and village authorities without troubling the supreme government. Very likely they send up messages as to what is going on: but if nothing much out of the way has happened, these are very little attended to. When however a new feat has to be accomplished, as for instance learning to skate backwards, the whole thinking force will be called into requisition for the time; and will now be able by aid of the special skating organization of the nerves and nerve centres, which has been built up in ordinary skating, to do what would have been altogether impossible without such aid.

To take a higher instance: when an artist is painting at his best, his cerebrum is fully occupied with his work: his whole mental force is thrown into it, and the strain is too great to be kept up for a long time together. In a few hours of happy inspiration he may give utterance to thoughts that exert a perceptible influence on the character of coming generations. But his power of expression had been earned by numberless hours of plodding work in which he had gradually built up an intimate connection between eye and hand, sufficient to enable him to make good rough sketches of things with which he is tolerably familiar, even while he is engaged in an engrossing conversation and is scarcely conscious that he has a pencil in his hand.

2. J. S. Mill went so far as to maintain that his occupations at the India Office did not interfere with his pursuit of philosophical inquiries. But it seems probable that this diversion of his freshest powers lowered the quality of his best thought more than he was aware; and though it may have diminished but little his remarkable usefulness in his own generation, it probably affected very much his power of doing that kind of work which influences the course of thought in future generations. It was by husbanding every atom of his small physical strength that Darwin was enabled to do so much work of just that kind: and a social reformer who had succeeded in exploiting Darwin' s leisure hours in useful work on behalf of the community, would have done a very bad piece of business for it.

3. The best and most expensive clothes are made by highly skilled and highly paid tailors, each of whom works right through first one garment and then another: while the cheapest and worst clothes are made for starvation wages by unskilled women who take the cloth to their own homes and do every part of the sewing themselves. But clothes of intermediate qualities are made in workshops or factories, in which the division and subdivisions of labour are carried as far as the size of the staff will permit; and this method is rapidly gaining ground at both ends at the expense of the rival method. Lord Lauderdale (Inquiry, p. 282) quotes Xenophon's argument that the best work is done when each confines himself to one simple department, as when one man makes shoes for men, and another for women; or better when one man only sews shoes or garments, another cuts them out: the king's cooking is much better than anybody else's, because he has one cook who only boils, another who only roasts meat; one who only boils fish, another who only fries it: there is not one man to make all sorts of bread but a special man for special qualities.

4. One great inventor is rumoured to have spent £300,000 on experiments relating to textile machinery, and his outlay is said to have been abundantly returned to him. Some of his inventions were of such a kind as can be made only by a man of genius; and however great the need, they must have waited till the right man was found for them. He charged not unreasonably £1000 as royalty for each of his combing machines; and a worsted manufacturer, being full of work, found it worth his while to buy an additional machine, and pay this extra charge for it, only six months before the expiry of the patent. But such cases are exceptional: as a rule, patented machines are not very dear. In some cases the economy of having them all produced at one place by special machinery has been so great that the patentee has found it to his advantage to sell them at a price lower than the old price of the inferior machines which they displaced: for that old price gave him so high a profit, that it was worth his while to lower the price still further in order to induce the use of the machines for new purposes and in new markets. In almost every trade many things are done by hand, though it is well known that they could easily be done by some adaptations of machines that are already in use in that or some other trade, and which are not made only because there would not as yet be enough employment for them to remunerate the trouble and expense of making them.

5. Smiles, Boulton and Watts, pp. 170-1.

6. The system owes its origin in great measure to Sir Joseph Whitworth's standard gauges; but it has been worked out with most enterprise and thoroughness in America. Standardization is most helpful in regard to things which are to be built up with others into complex machines, buildings, bridges, etc.

7. The perfection which the machinery has already attained is shown by the fact that at the Inventions Exhibition held in London in 1885, the representative of an American watch factory took to pieces fifty watches before some English representatives of the older system of manufacture, and after throwing the different parts into different heaps, asked them to select for him one piece from each heap in succession; he then set these pieces up in one of the watch-cases and handed them back a watch in perfect order.

8. "The type-founder was probably the first to secede from the concern; then printers delegated to others the making of presses; afterwards the ink and the rollers found separate and distinct manufacturers; and there arose a class of persons who, though belonging to other trades, made printing appliances a speciality, such as printers' smiths, printers' joiners and printers' engineers" (Mr Southward in the Article on Typography in the Encyclopaedia Britannica).

9. For instance, Mr Southward tells us "a minder may understand only book machines or only news machines; he may know all about" machines that print from flat surfaces or those that print from cylinders; "or of cylinders he may know only one kind. Entirely novel machines create a new class of artisans. There are men perfectly competent to manage a Walter press who are ignorant how to work two-colour or fine book-work machines. In the compositor's department division of labour is carried out to a still minuter degree. An old-fashioned printer would set up indifferently a placard, a title-page, or a book. At the present day we have jobbing hands, book hands, and news hands, the word 'hand' suggesting the factory-like nature of the business. There are jobbing hands who confine themselves to posters. Book hands comprise those who set up the titles and those who set up the body of the work. Of these latter again, while one man composes, another, the 'maker-up,' arranges the pages."

10. Let us follow still further the progress of machinery in supplanting manual labour in some directions and opening out new fields for its employment in others. Let us watch the process by which large editions of a great newspaper are set up and printed off in a few hours. To begin with, a good part of the type-setting is itself often done by a machine; but in any case the types are in the first instance on a plane surface, from which it is impossible to print very rapidly. The next step therefore is to make a papier-maché cast of them, which is bent on to a cylinder, and is then used as the mould from which a new metal plate is cast that fits the cylinders of the printing machine. Fixed on these it rotates alternately against the inking cylinders and the paper. The paper is arranged in a huge roll at the bottom of the machine and unrolls itself automatically, first against the damping cylinders and then against the printing cylinders, the first of which prints it on one side, and the second on the other: thence to the cutting cylinders, which cut it into equal lengths, and thence to the folding apparatus, which folds it ready for sale.

More recently the casting of the type has been brought under the new methods. The compositor plays on a keyboard like that of the type-writer, and the matrix of a corresponding letter goes into line: then after spacing out, molten lead is poured on the line of matrices, and a solid line of type is ready . And in a further development each letter is cast separately from its matrix; the machine reckons up the space taken by the letters, stops when there are enough for a line, divides out the free space equally into the requisite number of small spaces between the words; and finally casts the line. It is claimed that one compositor can work several such machines simultaneously in distant towns by electric currents.

11. The jack-plane, used for making smooth large boards for floors and other purposes, used to cause heart disease, making carpenters as a rule old men by the time they were forty . Adam Smith tells us that "workmen, when they are liberally paid, are very apt to overwork themselves and to ruin their health and constitution in a few years. A carpenter in London, and in some other places, is not supposed to last in his utmost vigour above eight years... Almost every class of artificers is subject to some particular infirmity occasioned by excessive application to their peculiar species of work." Wealth of Nations, Book I, chapter VII.

12. The efficiency of labour in weaving has been increased twelve fold and that in spinning six fold during the last seventy years. In the preceding seventy years the improvements in spinning had already increased the efficiency of labour two-hundred-fold (see Ellison's Cotton Trade of Great Britain, ch. IV and V).

13. Perhaps the textile industries afford the best instance of work that used to be done by hand and is now done by machinery They are especially prominent in England, where they give employment to nearly half a million males and more than half a million females, or more than one in ten of those persons who are earning independent incomes. The strain that is taken off human muscles in dealing even with those soft materials is shown by the fact that for every one of these million operatives there is used about one horse-power of steam, that is, about ten times as much as they would themselves exert if they were all strong men; and the history of these industries will serve to remind us that many of those who perform the more monotonous parts of manufacturing work are as a rule not skilled workers who have come down to it from a higher class of work, but unskilled workers who have risen to it. A great number of those who work in the Lancashire cotton-mills have come there from poverty-stricken districts of Ireland, while others are the descendants of paupers and people of weak physique, who were sent there in large numbers early in the last century from the most miserable conditions of life in the poorest agricultural districts, where the labourers were fed and housed almost worse than the animals whom they tended. Again, when regret is expressed that the cotton factory hands of New England have not the high standard of culture which prevailed among them a century ago, we must remember that the descendants of those factory workers have moved up to higher and more responsible posts, and include many of the ablest and wealthiest of the citizens of America. Those who have taken their places are in the process of being raised; they are chiefly French Canadians and Irish, who though they may learn in their new homes some of the vices of civilization, are yet much better off and have on the whole better opportunities of developing the higher faculties of themselves and their children than they had in their old homes.

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Chapter 10, Industrial Organization Continued. The Concentration of Specialized Industries in Particular Localities


1. In an early stage of civilization every place had to depend on its own resources for most of the heavy wares which it consumed; unless indeed it happened to have special facilities for water carriage. But wants and customs changed slowly: and this made it easy for producers to meet the wants even of consumers with whom they had little communication; and it enabled comparatively poor people to buy a few expensive goods from a distance, in the security that they would add to the pleasure of festivals and holidays during a life-time, or perhaps even during two or three lifetimes. Consequently the lighter and more expensive articles of dress and personal adornment, together with spices and some kinds of metal implements used by all classes, and many other things for the special use of the rich, often came from astonishing distances. Some of these were produced only in a few places, or even only in one place; and they were diffused all over Europe partly by the agency of fairs (1) and professional pedlers, and partly by the producers themselves, who would vary their work by travelling on foot for many thousand miles to sell their goods and see the world. These sturdy travellers took on themselves the risks of their little businesses; they enabled the production of certain classes of goods to be kept on the right track for satisfying the needs of purchasers far away; and they created new wants among consumers, by showing them at fairs or at their own houses new goods from distant lands. An industry concentrated in certain localities is commonly, though perhaps not quite accurately, described as a localized industry. (2)

This elementary localization of industry gradually prepared the way for many of the modern developments of division of labour in the mechanical arts and in the task of business management. Even now we find industries of a primitive fashion localized in retired villages of central Europe, and sending their simple wares even to the busiest haunts of modern industry. In Russia the expansion of a family group into a village has often been the cause of a localized industry; and there are an immense number of villages each of which carries on only one branch of production, or even only a part of one. (3)

2. Many various causes have led to the localization of industries; but the chief causes have been physical conditions; such as the character of the climate and the soil, the existence of mines and quarries in the neighbourhood, or within easy access by land or water. Thus metallic industries have generally been either near mines or in places where fuel was cheap. The iron industries in England first sought those districts in which charcoal was plentiful, and afterwards they went to the neighbourhood of collieries. (4) Staffordshire makes many kinds of pottery, all the materials of which are imported from a long distance; but she has cheap coal and excellent clay for making the heavy "saggars" or boxes in which the pottery is placed while being fired. Straw plaiting has its chief home in Bedfordshire, where straw has just the right proportion of silex to give strength without brittleness; and Buckinghamshire beeches have afforded the material for the Wycombe chairmaking. The Sheffield cutlery trade is due chiefly to the excellent grit of which its grindstones are made.

Another chief cause has been the patronage of a court. The rich folk there assembled make a demand for goods of specially high quality, and this attracts skilled workmen from a distance, and educates those on the spot. When an Eastern potentate changed his residence — and, partly for sanitary reasons, this was constantly done — the deserted town was apt to take refuge in the development of a specialized industry, which had owed its origin to the presence of the court. But very often the rulers deliberately invited artisans from a distance and settled them in a group together. Thus the mechanical faculty of Lancashire is said to be due to the influence of Norman smiths who were settled at Warrington by Hugo de Lupus in William the Conqueror's time. And the greater part of England's manufacturing industry before the era of cotton and steam had its course directed by settlements of Flemish and other artisans; many of which were made under the immediate direction of Plantagenet and Tudor kings. These immigrants taught us how to weave woollen and worsted stuffs, though for a long time we sent our cloths to the Netherlands to be fulled and dyed. They taught us how to cure herrings, how to manufacture silk, how to make lace, glass, and paper, and to provide for many other of our wants. (5)

But how did these immigrants learn their skill? Their ancestors had no doubt profited by the traditional arts of earlier civilizations on the shores of the Mediterranean and in the far East: for nearly all important knowledge has long deep roots stretching downwards to distant times; and so widely spread have been these roots, so ready to send up shoots of vigorous life, that there is perhaps no part of the old world in which there might not long ago have flourished many beautiful and highly skilled industries, if their growth had been favoured by the character of the people, and by their social and political institutions. This accident or that may have determined whether any particular industry flourished in any one town; the industrial character of a whole country even may have been largely influenced by the richness of her soil and her mines, and her facilities for commerce. Such natural advantages may themselves have stimulated free industry and enterprise: but it is the existence of these last, by whatever means they may have been promoted, which has been the supreme condition for the growth of noble forms of the arts of life. In stretching the history of free industry and enterprise we have already incidentally traced the outlines of the causes which have localized the industrial leadership of the world now in this country and now in that. We have seen how physical nature acts on man's energies, how he is stimulated by an invigorating climate, and how he is encouraged to bold ventures by the opening out of rich fields for his work: but we have also seen how the use he makes of these advantages depends on his ideals of life, and how inextricably therefore the religious, political and economic threads of the world's history are interwoven; while together they have been bent this way or that by great political events and the influence of the strong personalities of individuals.

The causes which determine the economic progress of nations belong to the study of international trade and therefore lie outside of our present view. But for the present we must turn aside from these broader movements of the localization of industry, and follow the fortunes of groups of skilled workers who are gathered within the narrow boundaries of a manufacturing town or a thickly peopled industrial district.

3. When an industry has thus chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighbourhood to one another. The mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work is rightly appreciated, inventions and improvements in machinery, in processes and the general organization of the business have their merits promptly discussed: if one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes the source of further new ideas. And presently subsidiary trades grow up in the neighbourhood, supplying it with implements and materials, organizing its traffic, and in many ways conducing to the economy of its material.

Again, the economic use of expensive machinery can sometimes be attained in a very high degree in a district in which there is a large aggregate production of the same kind, even though no individual capital employed in the trade be very large. For subsidiary industries devoting themselves each to one small branch of the process of production, and working it for a great many of their neighbours, are able to keep in constant use machinery of the most highly specialized character, and to make it pay its expenses, though its original cost may have been high, and its rate of depreciation very rapid.

Again, in all but the earliest stages of economic development a localized industry gains a great advantage from the fact that it offers a constant market for skill. Employers are apt to resort to any place where they are likely to find a good choice of workers with the special skill which they require; while men seeking employment naturally go to places where there are many employers who need such skill as theirs and where therefore it is likely to find a good market. The owner of an isolated factory, even if he has access to a plentiful supply of general labour, is often put to great shifts for want of some special skilled labour; and a skilled workman, when thrown out of employment in it, has no easy refuge. Social forces here co-operate with economic: there are often strong friendships between employers and employed: but neither side likes to feel that in case of any disagreeable incident happening between them, they must go on rubbing against one another: both sides like to be able easily to break off old associations should they become irksome. These difficulties are still a great obstacle to the success of any business in which special skill is needed, but which is not in the neighbourhood of others like it: they are however being diminished by the railway, the printing-press and the telegraph.

On the other hand a localized industry has some disadvantages as a market for labour if the work done in it is chiefly of one kind, such for instance as can be done only by strong men. In those iron districts in which there are no textile or other factories to give employment to women and children, wages are high and the cost of labour dear to the employer, while the average money earnings of each family are low. But the remedy for this evil is obvious, and is found in the growth in the same neighbourhood of industries of a supplementary character. Thus textile industries are constantly found congregated in the neighbourhood of mining and engineering industries, in some cases having been attracted by almost imperceptible steps; in others, as for instance at Barrow, having been started deliberately on a large scale in order to give variety of employment in a place where previously there had been but little demand for the work of women and children.

The advantages of variety of employment are combined with those of localized industries in some of our manufacturing towns, and this is a chief cause of their continued growth. But on the other hand the value which the central sites of a large town have for trading purposes, enables them to command much higher ground-rents than the situations are worth for factories, even when account is taKen of this combination of advantages: and there is a similar competition for dwelling space between the employees of the trading houses and the factory workers. The result is that factories now congregate in the outskirts of large towns and in manufacturing districts in their neighbourhood rather than in the towns themselves. (6)

A district which is dependent chiefly on one industry is liable to extreme depression, in case of a falling-off in the demand for its produce, or of a failure in the supply of the raw material which it uses. This evil again is in a great measure avoided by those large towns or large industrial districts in which several distinct industries are strongly developed. If one of them fails for a time, the others are likely to support it indirectly; and they enable local shopkeepers to continue their assistance to workpeople in it.

So far we have discussed localization from the point of view of the economy of production. But there is also the convenience of the customer to be considered. He will go to the nearest shop for a trifling purchase; but for an important purchase he will take the trouble of visiting any part of the town where he knows that there are specially good shops for his purpose. Consequently shops which deal in expensive and choice objects tend to congregate together; and those which supply ordinary domestic needs do not. (7)

4. Every cheapening of the means of communication, every new facility for the free interchange of ideas between distant places alters the action of the forces which tend to localize industries. Speaking generally we must say that a lowering of tariffs, or of freights for the transport of goods, tends to make each locality buy more largely from a distance what it requires; and thus tends to concentrate particular industries in special localities: but on the other hand everything that increases people's readiness to migrate from one place to another tends to bring skilled artisans to ply their crafts near to the consumers who will purchase their wares. These two opposing tendencies are well illustrated by the recent history of the English people.

On the one hand the steady cheapening of freights, the opening of railways from the agricultural districts of America and India to the sea-board, and the adoption by England of a free-trade policy, have led to a great increase in her importation of raw produce. But on the other hand the growing cheapness, rapidity and comfort of foreign travel, are inducing her trained business men and her skilled artisans to pioneer the way for new industries in other lands, and to help them to manufacture for themselves goods which they have been wont to buy from England. English mechanics have taught people in almost every part of the world how to use English machinery, and even how to make similar machinery; and English miners have opened out mines of ore which have diminished the foreign demand for many of England's products.

One of the most striking movements towards the specialization of a country's industries, which history records, is the rapid increase of the non-agricultural population of England in recent times. The exact nature of this change is however liable to be misunderstood; and its interest is so great, both for its own sake, and on account of the illustrations it affords of the general principles which we have been discussing in the preceding chapter and in this, that we may with advantage pause here to consider it a little.

In the first place, the real diminution of England's agricultural industries is not so great as at first sight appears. It is true that in the Middle Ages three-fourths of the people were reckoned as agriculturists; that only one in nine was returned to the last census as engaged in agriculture, and that perhaps not more than one in twelve will be so returned at the next census. But it must be remembered that the so-called agricultural population of the Middle Ages were not exclusively occupied with agriculture; they did for themselves a great part of the work that is now done by brewers and bakers, by spinners and weavers, by bricklayers and carpenters, by dressmakers and tailors and by many other trades. These self-sufficing habits died slowly; but most of them had nearly disappeared by the beginning of the last century; and it is probable that the labour spent on the land at this time was not a much less part of the whole industry of the country than in the Middle Ages: for, in spite of her ceasing to export wool and wheat, there was so great an increase in the produce forced from her soil, that the rapid improvement in the arts of her agriculturists scarcely availed to hold in check the action of the law of diminishing return. But gradually a great deal of labour has been diverted from the fields to making expensive machinery for agricultural purposes. This change did not exert its full influence upon the numbers of those who were reckoned as agriculturists so long as the machinery was drawn by horses: for the work of tending them and supplying them with food was regarded as agricultural. But in recent years a rapid growth of the use of steam power in the fields has coincided with the increased importation of farm produce. The coal-miners who supply these steam-engines with fuel, and the mechanics who make them and manage them in the fields are not reckoned as occupied on the land, though the ultimate aim of their labour is to promote its cultivation. The real diminution then of England's agriculture is not so great as at first sight appears; but there has been a change in its distribution. Many tasks which used once to be performed by agricultural labourers are now done by specialized workers who are classed as in the building, or road-making industries, as carriers and so on. And, partly for this reason the number of people who reside in purely agricultural districts has seldom diminished fast; and has often increased, even though the number of those engaged in agriculture has been diminishing rapidly.

Attention has already been called to the influence which the importation of agricultural produce exerts in altering the relative values of different soils: those falling most in value which depended chiefly on their wheat crops, and which were not naturally fertile, though they were capable of being made to yield fairly good crops by expensive methods of cultivation. Districts in which such soils predominate, have contributed more than their share to the crowds of agricultural labourers who have migrated to the large towns; and thus the geographical distribution of industries within the country has been still further altered. A striking instance of the influence of the new means of transport is seen in those pastoral districts in the remoter parts of the United Kingdom, which send dairy products by special express trains to London and other large towns, meanwhile drawing their own supplies of wheat from the further shores of the Atlantic or even the Pacific Ocean.

But next, the changes of recent years have not, as would at first sight appear probable, increased the proportion of the English people who are occupied in manufactures. The output of England's manufactures is certainly many times as great now as it was at the middle of the last century; but those occupied in manufacture of every kind were as large a percentage of the population in 1851 as in 1901; although those who make the machinery and implements which do a great part of the work of English agriculture, swell the numbers of the manufacturers.

The chief explanation of this result lies in the wonderful increase in recent years of the power of machinery. This has enabled us to produce ever increasing supplies of manufactures of almost every kind both for our own use and for exportation without requiring any considerable increase in the number of people who tend the machines. And therefore we have been able to devote the labour set free from agriculture chiefly to supplying those wants in regard to which the improvements of machinery help us but little: the efficiency of machinery has prevented the industries localized in England from becoming as exclusively mechanical as they otherwise would. Prominent among the occupations which have increased rapidly since 1851 in England at the expense of agriculture are the service of Government, central and local; education of all grades; medical service; musical, theatrical and other entertainments, besides mining, building, dealing and transport by road and railway. In none of these is very much direct help got from new inventions: man's labour is not much more efficient in them now than it was a century ago: and therefore if the wants for which they make provision increase in proportion to our general wealth, it is only to be expected that they should absorb a constantly growing proportion of the industrial population. Domestic servants increased rapidly for some years; and the total amount of work which used to fall to them is now increasing faster than ever. But much of it is now done, often with the aid of machinery, by persons in the employment of clothiers of all kinds, of hotel proprietors, confectioners, and even by various messengers from grocers, fishmongers and others who call for orders, unless they are sent by telephone. These changes have tended to increase the specialization and the localization of industries.

Passing away from this illustration of the action of modern forces on the geographical distribution of industries, we will resume our inquiry as to how far the full economies of division of labour can be obtained by the concentration of large numbers of small businesses of a similar kind in the same locality; and how far they are attainable only by the aggregation of a large part of the business of the country into the hands of a comparatively small number of rich and powerful firms, or, as is commonly said, by production on a large scale; or, in other words, how far the economies of production on a large scale must needs be internal, and how far they can be external. (8)


1. Thus in the records of the Stourbridge Fair held near Cambridge we find an endless variety of light and precious goods from the older seats of civilization in the East and on the Mediterranean; some having been brought in Italian ships, and others having travelled by land as far as the shores of the North Sea.

2. Not very long ago travellers in western Tyrol could find a strange and characteristic relic of this habit in a village called Imst. The villagers had somehow acquired a special art in breeding canaries: and their young men started for a tour to distant parts of Europe each with about fifty small cages hung from a pole over his shoulder, and walked on till they had sold all.

3. There are for instance over 500 villages devoted to various branches of woodwork; one village makes nothing but spokes for the wheels of vehicles, another nothing but the bodies and so on; and indications of a like state of things are found in the histories of oriental civilizations and in the chronicles of medieval Europe. Thus for instance we read (Rogers' Six Centuries of Work and Wages, ch. IV) of a lawyer's handy book written about 1250, which makes note of scarlet at Lincoln; blanket at Bligh; burnet at Beverley; russet at Colchester; linen fabrics at Shaftesbury, Lewes, and Aylsham; cord at Warwick and Bridport; knives at Marstead; needles at Wilton; razors at Leicester; soap at Coventry; horse girths at Doncaster; skins and furs at Chester and Shrewsbury and so on.

The localization of trades in England at the beginning of the eighteenth century is well described by Defoe, Plan of English Commerce, 85-7; English Tradesman, II, 282-3.

4. The later wanderings of the iron industry from Wales, Staffordshire and Shropshire to Scotland and the North of England are well shown in the tables submitted by Sir Lowthian Bell to the recent Commission on the Depression of Trade and Industry. See their Second Report, Part I, p. 320.

5. Fuller says that Flemings started manufactures of cloths and fustians in Norwich, of baizes in Sudbury, of serges in Colchester and Taunton, of cloths in Kent, Gloucestershire, Worcestershire, Westmorland, Yorkshire, Hants, Berks and Sussex, of kerseys in Devonshire and of Levant cottons in Lancashire. Smiles' Huguenots in England and Ireland, p. 109. See also Lecky's History of England in the eighteenth century, ch. II.

6. The movement has been specially conspicuous in the case of the textile manufacturers. Manchester, Leeds and Lyons are still chief centres of the trade in cotton, woollen and silk stuffs, but they do not now themselves produce any great part of the goods to which they owe their chief fame. On the other hand London and Paris retain their positions as the two largest manufacturing towns of the world, Philadelphia coming third. The mutual influences of the localization of industry, the growth of towns and habits of town life, and the development of machinery are well discussed in Hobson's Evolution of Capitalism.

7. Comp. Hobson, l. c. p. 114.

8. The percentage of the population occupied in the textile industries in the United Kingdom fell from 3.13 in 1881 to 2.43 in 1901; partly because much of the work done by them has been rendered so simple by semi-automatic machinery that it can be done fairly well by peoples that are in a relatively backward industrial condition; and partly because the chief textile goods retain nearly the same simple character as they had thirty or even three thousand years ago. On the other hand manufactures of iron and steel (including shipbuilding) have increased so greatly in complexity as well as in volume of output, that the percentage of the population occupied in them rose from 2.39 in 1881 to 3.01 in 1901; although much greater advance has been meanwhile made in the machinery and methods employed in them than in the textile group. The remaining manufacturing industries employed about the same percentage of the people in 1901 as in 1881. In the same time the tonnage of British shipping cleared from British ports increased by one half; and the number of dock labourers doubled, but that of seamen has slightly diminished. These facts are to be explained partly by vast improvements in the construction of ships and all appliances connected with them, and partly by the transference to dock labourers of nearly all tasks connected with handling the cargo some of which were even recently performed by the crew. Another marked change is the increased aggregate occupation of women in manufactures, though that of married women appears to have diminished, and that of children has certainly diminished greatly.

The Summary Tables of the Census of 1911, published in 1915, show so many changes in classification since 1991 that no general view of recent developments can be safely made. But Table 64 of that Report and Prof. D. Caradog Jones' paper read before the Royal Statistical Society in December 1914 show that the developments of 1901-11 differ from their predecessors in detail rather than in general character.

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Chapter 11, Industrial Organization Continued. Production on a Large Scale


1. The advantages of production on a large scale are best shown in manufacture; under which head we may include all businesses engaged in working up material into forms in which it will be adapted for sale in distant markets. The characteristic of manufacturing industries which makes them offer generally the best illustrations of the advantages of production on a large scale, is their power of choosing freely the locality in which they will do their work. They are thus contrasted on the one hand with agriculture and other extractive industries (mining, quarrying, fishing, etc.), the geographical distribution of which is determined by nature; and on the other hand with industries that make or repair things to suit the special needs of individual consumers, from whom they cannot be far removed, at all events without great loss. (1)

The chief advantages of production on a large scale are economy of skill, economy of machinery and economy of materials: but the last of these is rapidly losing importance relatively to the other two. It is true that an isolated workman often throws away a number of small things which would have been collected and turned to good account in a factory; (2) but waste of this kind can scarcely occur in a localized manufacture even if it is in the hands of small men; and there is not very much of it in any branch of industry in modern England, except agriculture and domestic cooking. No doubt many of the most important advances of recent years have been due to the utilizing of what had been a waste product; but this has been generally due to a distinct invention, either chemical or mechanical, the use of which has been indeed promoted by minute subdivision of labour, but has not been directly dependent on it. (3)

Again, it is true that when a hundred sets of furniture, or of clothing, have to be cut out on exactly the same pattern, it is worth while to spend great care on so planning the cutting out of the boards or the cloth, that only a few small pieces are wasted. But this is properly an economy of skill; one planning is made to suffice for many tasks, and therefore can be done well and carefully. We may pass then to the economy of machinery.

2. In spite of the aid which subsidiary industries can give to small manufactures, where many in the same branch of trade are collected in one neighbourhood, (4) they are still placed under a great disadvantage by the growing variety and expensiveness of machinery. For in a large establishment there are often many expensive machines each made specially for one small use. Each of them requires space in a good light, and thus stands for something considerable in the rent and general expenses of the factory; and independently of interest and the expense of keeping it in repair, a heavy allowance must be made for depreciation in consequence of its being probably improved upon before long. (5) A small manufacturer must therefore have many things done by hand or by imperfect machinery, though he knows how to have them done better and cheaper by special machinery, if only he could find constant employment for it.

But next, a small manufacturer may not always be acquainted with the best machinery for his purpose. It is true that if the industry in which he is engaged has been long established on a large scale, his machinery will be well up to the mark, provided he can afford to buy the best in the market. In agriculture and the cotton industries, for instance, improvements in machinery are devised almost exclusively by machine makers; and they are accessible to all, at any rate on the payment of a royalty for patent right. But this is not the case in industries that are as yet in an early stage of development or are rapidly changing their form; such as the chemical industries, the watchmaking industry and some branches of the jute and silk manufactures; and in a host of trades that are constantly springing up to supply some new want or to work up some new material.

In all such trades new machinery and new processes are for the greater part devised by manufacturers for their own use. Each new departure is an experiment which may fail; those which succeed must pay for themselves and for the failure of others; and though a small manufacturer may think he sees his way to an improvement, he must reckon on having to work it out tentatively, at considerable risk and expense and with much interruption to his other work: and even if he should be able to perfect it, he is not likely to be able to make the most of it. For instance, he may have devised a new speciality, which would get a large sale if it could be brought under general notice: but to do this would perhaps cost many thousand pounds; and, if so, he will probably have to turn his back on it. For it is almost impossible for him to discharge, what Roscher calls a characteristic task of the modern manufacturer, that of creating new wants by showing people something which they had never thought of having before; but which they want to have as soon as the notion s suggested to them: in the pottery trade for example the small manufacturer cannot afford even to make experiments with new patterns and designs except in a very tentative way. His chance is better with regard to an improvement in making things for which there is already a good market. But even here he cannot get the full benefit of his invention unless he patents it; and sells the right to use it; or borrows some capital and extends his business; or lastly changes the character of his business and devotes his capital to that particular stage of the manufacture to which his improvement applies. But after all such cases are exceptional: the growth of machinery in variety and expensiveness presses hard on the small manufacturer everywhere. It has already driven him completely out of some trades and is fast driving him out of others. (6)

There are however some trades in which the advantages which a large factory derives from the economy of machinery almost vanish as soon as a moderate size has been reached. For instance in cotton spinning, and calico weaving, a comparatively small factory will hold its own and give constant employment to the best known machines for every process: so that a large factory is only several parallel smaller factories under one roof; and indeed some cotton-spinners, when enlarging their works, think it best to add a weaving department. In such cases the large business gains little or no economy in machinery; and even then it generally saves something in building, particularly as regards chimneys, and in the economy of steam power, and in the management and repairs of engines and machinery. Large soft-goods factories have carpenters' and mechanics' shops, which diminish the cost of repairs, and prevent delays from accidents to the plant. (7)

Akin to these last, there are a great many advantages which a large factory, or indeed a large business of almost any kind, nearly always has over a small one. A large business buys in great quantities and therefore cheaply; it pays low freights and saves on carriage in many ways, particularly if it has a railway siding. It often sells in large quantities, and thus saves itself trouble; and yet at the same time it gets a good price, because it offers conveniences to the customer by having a large stock from which he can select and at once fill up a varied order; while its reputation gives him confidence. It can spend large sums on advertising by commercial travellers and in other ways; its agents give it trustworthy information on trade and personal matters in distant places, and its own goods advertise one another.

The economies of highly organized buying and selling are among the chief causes of the present tendency towards the fusion of many businesses in the same industry or trade into single huge aggregates; and also of trading federations of various kinds, including German cartels and centralized co-operative associations. They have also always promoted the concentration of business risks in the hands of large capitalists who put out the work to be done by smaller men. (8)

3. Next, with regard to the economy of skill. Everything that has been said with regard to the advantages which a large establishment has in being able to afford highly specialized machinery applies equally with regard to highly specialized skill. It can contrive to keep each of its employees constantly engaged in the most difficult work of which he is capable, and yet so to narrow the range of his work that he can attain that facility and excellence which come from long-continued practice. But enough has already been said on the advantage of division of labour: and we may pass to an important though indirect advantage which a manufacturer derives from having a great many men in his employment.

The large manufacturer has a much better chance than a small one has, of getting hold of men with exceptional natural abilities, to do the most difficult part of his work — that on which the reputation of his establishment chiefly depends. This is occasionally important as regards mere handiwork in trades which require much taste and originality, as for instance that of a house decorator, and in those which require exceptionally fine workmanship, as for instance that of a manufacturer of delicate mechanism. (9) But in most businesses its chief importance lies in the facilities which it gives to the employer for the selection of able and tried men, men whom he trusts and who trust him, to be his foremen and heads of departments. We are thus brought to the central problem of the modern organization of industry, viz. that which relates to the advantages and disadvantages of the subdivision of the work of business management.

4. The head of a large business can reserve all his strength for the broadest and most fundamental problems of his trade: he must indeed assure himself that his managers, clerks and foremen are the right men for their work, and are doing their work well; but beyond this he need not trouble himself much about details. He can keep his mind fresh and clear for thinking out the most difficult and vital problems of his business.. for studying the broader movements of the markets, the yet undeveloped results of current events at home and abroad; and for contriving how to improve the organization of the internal and external relations of his business.

For much of this work the small employer has not the time if he has the ability; he cannot take so broad a survey of his trade, or look so far ahead; he must often be content to follow the lead of others. And he must spend much of his time on work that is below him; for if he is to succeed at all, his mind must be in some respects of a high quality, and must have a good deal of originating and organizing force; and yet he must do much routine work.

On the other hand the small employer has advantages of his own. The master's eye is everywhere; there is no shirking by his foremen or workmen, no divided responsibility, no sending half-understood messages backwards and forwards from one department to another. He saves much of the book-keeping, and nearly all of the cumbrous system of checks that are necessary in the business of a large firm; and the gain from this source is of very great importance in trades which use the more valuable metals and other expensive materials.

And though he must always remain at a great disadvantage in getting information and in making experiments, yet in this matter the general course of progress is on his side. For external economies are constantly growing in importance relatively to internal in all matters of trade-knowledge: newspapers, and trade and technical publications of all kinds are perpetually scouting for him and bringing him much of the knowledge he wants-knowledge which a little while ago would have been beyond the reach of anyone who could not afford to have well-paid agents in many distant I places. Again, it is to his interest also that the secrecy of business is on the whole diminishing, and that the most important improvements in method seldom remain secret for long after they have passed from the experimental stage. It is to his advantage that changes in manufacture depend less on mere rules of thumb and more on broad developments of scientific principle; and that many of these are made by students in the pursuit of knowledge for its own sake, and are promptly published in the general interest. Although therefore the small manufacturer can seldom be in the front of the race of progress, he need not be far from it, if he has the time and the ability for availing himself of the modern facilities for obtaining knowledge. But it is true that he must be exceptionally strong if he can do this without neglecting the minor but necessary details of the business.

5. In agriculture and other trades in which a man gains no very great new economies by increasing the scale of his production, it often happens that a business remains of about the same size for many years, if not for many generations. But it is otherwise in trades in which a large business can command very important advantages, which are beyond the reach of a small business. A new man, working his way up in such a trade, has to set his energy and flexibility, his industry and care for small details, against the broader economies of his rivals with their larger capital, their higher specialization of machinery and labour, and their larger trade connection. If then he can double his production, and sell at anything like his old rate, he will have more than doubled his profits. This will raise his credit with bankers and other shrewd lenders; and will enable him to increase his business further, and to attain yet further economies, and yet higher profits: and this again will increase his business and so on. It seems at first that no point is marked out at which he need stop. And it is true that, if, as his business increased, his faculties adapted themselves to his larger sphere, as they had done to his smaller; if he retained his originality, and versatility and power of initiation, his perseverance, his tact and his good luck for very many years together; he might then gather into his hands the whole volume of production in his branch of trade for his district. And if his goods were not very difficult of transport, nor of marketing, he might extend this district very wide, and attain something like a limited monopoly; that is, of a monopoly limited by the consideration that a very high price would bring rival producers into the field.

But long before this end is reached, his progress is likely to be arrested by the decay, if not of his faculties, yet of his liking for energetic work. The rise of his firm may be prolonged if he can hand down his business to a successor almost as energetic as himself. (10) But the continued very rapid growth of his firm requires the presence of two conditions which are seldom combined in the same industry. There are many trades in which an individual producer could secure much increased "internal" economies by a great increase of his output; and there are many in which he could market that output easily; yet there are few in which he could do both. And this is not an accidental, but almost a necessary result.

For in most of those trades in which the economies of production on a large scale are of first-rate importance, marketing is difficult. There are, no doubt, important exceptions. A producer may, for instance, obtain access to the whole of a large market in the case of goods which are so simple and uniform that they can be sold wholesale in vast quantities. But, most goods of this kind are raw produce; and nearly all the rest are plain and common, such as steel rails or calico; and their production can be reduced to routine, for the very reason that they are plain and common. Therefore in the industries which produce them, no firm can hold its own at all unless equipped with expensive appliances of nearly the latest type for its main work; while subordinate operations can be performed by subsidiary industries; and in short there remains no very great difference between the economies available by a large and by a very large firm; and the tendency of large firms to drive out small ones has already gone so far as to exhaust most of the strength of those forces by which it was originally promoted.

But many commodities with regard to which the tendency to increasing return acts strongly are, more or less, specialities: some of them aim at creating a new want, or at meeting an old want in a new way. Some of them are adapted to special tastes, and can never have a very large market; and some have merits that are not easily tested, and must win their way to general favour slowly. In all such cases the sales of each business are limited, more or less according to circumstances, to the particular market which it has slowly and expensively acquired; and though the production itself might be economically increased very fast, the sale could not.

Lastly, the very conditions of an industry which enable a new firm to attain quickly command over new economies of production, render that firm liable to be supplanted quickly by still younger firms with yet newer methods. Especially where the powerful economies of production on a large scale are associated with the use of new appliances and new methods, a firm which has lost the exceptional energy which enabled it to rise, is likely ere long quickly to decay; and the full life of a large firm seldom lasts very long.

6. The advantages which a large business has over a small one are conspicuous in manufacture, because, as we have noticed, it has special facilities for concentrating a great deal of work in a small area. But there is a strong tendency for large establishments to drive out small ones in many other industries. In particular the retail trade is being transformed, the small shopkeeper is losing ground daily.

Let us look at the advantages which a large retail shop or store has in competing with its smaller neighbours. To begin with, it can obviously buy on better terms, it can get its goods carried more cheaply, and can offer a larger variety to meet the taste of customers. Next, it has a great economy of skill: the small shopkeeper, like the small manufacturer, must spend much of his time in routine work that requires no judgment: whereas the head of a large establishment, and even in some cases his chief assistants, spend their whole time in using their judgment. Until lately these advantages have been generally outweighed by the greater facilities which the small shopkeeper has for bringing his goods to the door of his customers; for humouring their several tastes; and for knowing enough of them individually to be able safely to lend them capital, in the form of selling them goods on credit.

But within recent years there have been many changes all telling on the side of large establishments. The habit of buying on credit is passing away; and the personal relations between shopkeeper and customer are becoming more distant. The first change is a great step forwards: the second is on some accounts to be regretted, but not on all; for it is partly due to the fact that the increase of true self-respect among the wealthier classes is making them no longer care for the subservient personal attentions they used to require. Again, the growing value of time makes people less willing than they were to spend several hours in shopping; they now often prefer to spend a few minutes in writing out a long list of orders from a varied and detailed price-list; and this they are enabled to do easily by the growing facilities for ordering and receiving parcels by post and in other ways. And when they do go shopping, tramcars and local trains are often at hand to take them easily and cheaply to the large central shops of a neighbouring town. All these changes render it more difficult than it was for the small shopkeeper to hold his own even in the provision trade, and others in which no great variety of stock is required.

But in many trades the ever-growing variety of commodities, and those rapid changes of fashion which now extend their baneful influence through almost every rank of society, weight the balance even more heavily against the small dealer, for he cannot keep a sufficient stock to offer much variety of choice, and if he tries to follow any movement of fashion closely, a larger proportion of his stock will be left stranded by the receding tide than in the case of a large shopkeeper. Again, in some branches of the clothing and furniture and other trades the increasing cheapness of machine-made goods is leading people to buy ready-made things from a large store instead of having them made to order by some small maker and dealer in their neighbourhood. Again, the large shopkeeper, not content with receiving travellers from the manufacturers, makes tours either himself or by his agent in the most important manufacturing districts at home and abroad; and he thus often dispenses with middlemen between him and the manufacturer. A tailor with moderate capital shows his customers specimens of many hundreds of the newest cloths, and perhaps orders by telegraph the selected cloth to be sent by parcels' post. Again, ladies often buy their materials direct from the manufacturer, and get them made up by dressmakers who have scarcely any capital. Small shopkeepers seem likely always to retain some hold of the minor repairing trades: and they keep their own fairly well in the sale of perishable food, especially to the working classes, partly in consequence of their being able to sell goods on credit and to collect small debts. In many trades however a firm with a large capital prefers having many small shops to one large one. Buying, and whatever production is desirable, is concentrated under a central management; and exceptional demands are met from a central reserve, so that each branch has large resources, without the expense of keeping a large stock. The branch manager has nothing to divert his attention from his customers; and, if an active man, with direct interest in the success of his branch, may prove himself a formidable rival to the small shopkeeper; as has been shown in many trades connected with clothing and food.

7. We may next consider those industries whose geographical position is determined by the nature of their work.

Country carriers and a few cabmen are almost the only survivals of small industry in the carrying trade. Railways and tramways are constantly increasing in size, and the capital required to work them is increasing at an even greater rate. The growing intricacy and variety of commerce is adding to the advantages which a large fleet of ships under one management derives from its power of delivering goods promptly, and without breach of responsibility, in many different ports; and as regards the vessels themselves time is on the side of large ships, especially in the passenger trade. (11) As a consequence the arguments in favour of the State's undertaking business are stronger in some branches of the carrying trade than in any other, except the allied undertakings of carrying away refuse, and bringing in water, gas, etc. (12)

The contest between large and small mines and quarries has not so clearly marked a tendency. The history of the State management of mines is full of very dark shadows; for the business of mining depends too much on the probity of its managers and their energy and judgment in matters of detail as well as of general principle, to be well managed by State officials: and for the same reason the small mine or quarry may fairly be expected, other things being equal, to hold its own against the large one. But in some cases the cost of deep shafts, of machinery and of establishing means of communication, are too great to be borne by any but a very large business.

In agriculture there is not much division of labour, and there is no production on a very large scale; for a so-called "large farm" does not employ a tenth part of the labour which is collected in a factory of moderate dimensions. This is partly due to natural causes, to the changes of the seasons and to the difficulty of concentrating a great deal of labour in any one place; but it is partly also due to causes connected with varieties of land tenure. And it will be best to postpone discussion of all of them till we come to study demand and supply in relation to land in the sixth Book.


1. "Manufacture" is a term which has long lost any connection with its original use: and is now applied to those branches of production where machine and not hand work is most prominent. Roscher made the attempt to bring it back nearer to its old use by applying it to domestic as opposed to factory industries: but it is too late to do this now.

2. See Babbage's instance of the manufacture of horn. Economy of Manufactures, ch. XXII.

3. Instances are the utilization of the waste from cotton, wool, silk and other textile materials; and of the by-products in the metallurgical industries, in the manufacture of soda and gas, and in the American mineral oil and meat packing industries.

4. See the preceding chapter, section 3.

5. The average time which a machine will last before being superseded is in many trades not more than fifteen years, while in some it is ten years or even less. There is often a loss on the use of a machine unless it earns every year twenty per cent. on its cost; and when the operation performed by such a machine costing £500 adds only a hundredth part to the value of the material that passes through it — and this is not an extreme case — there will be a loss on its use unless it can be applied in producing at least £10,000 worth of goods annually.

6. In many businesses only a small percentage of improvements are patented. They consist of many small steps, which it would not be worth while to patent one at a time. Or their chief point lies in noticing that a certain thing ought to be done; and to patent one way of doing it, is only to set other people to work to find out other ways of doing it against which the patent cannot guard. If one patent is taken out, it is often necessary to "block" it, by patenting other methods of arriving at the same result; the patentee does not expect to use them himself, but he wants to prevent others from using them. All this involves worry and loss of time and money: and the large manufacturer prefers to keep his improvement to himself and get what benefit he can by using it. While if the small manufacturer takes out a patent, he is likely to be harassed by infringements: and even though he may win "with costs" the actions in which he tries to defend himself, he is sure to be ruined by them if they are numerous. It is generally in the public interest that an improvement should be published, even though it is at the same time patented. But if it is patented in England and not in other countries, as is often the case, English manufacturers may not use it, even though they were just on the point of finding it out for themselves before it was patented; while foreign manufacturers learn all about it and can use it freely.

7. It is a remarkable fact that cotton and some other textile factories form an exception to the general rule that the capital required per head of the workers is generally greater in a large factory than in a small one. The reason is that in most other businesses the large factory has many things done by expensive machines which are done by hand in a small factory; so that while the wages bill is less in proportion to the output in a large factory than in a small one, the value of the machinery and the factory space occupied by the machinery is much greater. But in the simpler branches of the textile trades, small works have the same machinery as large works have; and since small steam-engines, etc. are proportionately more expensive than large ones, they require a greater fixed capital in proportion to their output than larger factories do; and they are likely to require a floating capital also rather greater in proportion.

8. See below IV, xii, section 3.

9. Thus Boulton writing in 1770 when he had 700 or 800 persons employed as metallic artists and workers in tortoiseshell, stones, glass, and enamel, says: "I have trained up many, and am training up more, plain country lads into good workmen; and wherever I find indications of skill and ability, I encourage them. I have likewise established correspondence with almost every mercantile town in Europe, and am thus regularly supplied with orders for the grosser articles in common demand, by which I am enabled to employ such a number of hands as to provide me with an ample choice of artists for the finer branches of work: and I am thus encouraged to erect and employ a more extensive apparatus than it would be prudent to employ for the production of the finer articles only." Smiles, Life of Boulton, p. 128.

10. Means to this end and their practical limitations are discussed in the latter half of the following chapter.

11. A ship's carrying power varies as the cube of her dimensions, while the resistance offered by the water increases only a little faster than the square of her dimensions; so that a large ship requires less coal in proportion to its tonnage than a small one. It also requires less labour, especially that of navigation: while to passengers it offers greater safety and comfort, more choice of company and better professional attendance. In short, the small ship has no chance of competing with the large ship between ports which large ships can easily enter, and between which the traffic is sufficient to enable them to fill up quickly.

12. It is characteristic of the great economic change of the last hundred years that when the first railway bills were passed, provision was made for allowing private individuals to run their own conveyances on them, just as they do on a highway or a canal; and now we find it difficult to imagine how people could have expected, as they certainly did, that this plan would prove a practicable one.

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Chapter 12, Industrial Organization Continued. Business Management


1. Hitherto we have been considering the work of management chiefly in regard to the operations of a manufacturing or other business employing a good deal of manual labour. But we now have to consider more carefully the variety of the functions which business men discharge; the manner in which they are distributed among the heads of a large business, and again between different classes of business which co-operate in allied branches of production and marketing. And incidentally we have to inquire how it occurs that, though in manufacturing at least nearly every individual business, so long as it is well managed, tends to become stronger the larger it has grown; and though primâ facie we might therefore expect to see large firms driving their smaller rivals completely out of many branches of industry, yet they do not in fact do so.

"Business" is taken here broadly to include all provision for the wants of others which is made in the expectation of payment direct or indirect from those who are to be benefited. It is thus contrasted with the provision for his wants which each one makes for himself, and with those kindly services which are prompted by friendship and family affection.

The primitive handicraftsman managed his whole business for himself; but since his customers were with few exceptions his immediate neighbours, since he required very little capital, since the plan of production was arranged for him by custom, and since he had no labour to superintend outside of his own household, these tasks did not involve any very great mental strain. He was far from enjoying unbroken prosperity; war and scarcity were constantly pressing on him and his neighbours, hindering his work and stopping their demand for his wares. But he was inclined to take good and evil fortune, like sunshine and rain, as things beyond his control: his fingers worked on, but his brain was seldom weary.

Even in modern England we find now and then a village artisan who adheres to primitive methods, and makes things on his own account for sale to his neighbours; managing his own business and undertaking all its risks. But such cases are rare: the most striking instances of an adherence to old-fashioned methods of business are supplied by the learned professions; for a physician or a solicitor manages as a rule his own business and does all its work. This plan is not without its disadvantages: much valuable activity is wasted or turned to but slight account by some professional men of first-rate ability, who have not the special aptitude required for obtaining a business connection; they would be better paid, would lead happier lives, and would do more good service for the world if their work could be arranged for them by some sort of a middleman. But yet on the whole things are probably best as they are: there are sound reasons behind the popular instinct which distrusts the intrusion of the middleman in the supply of those services which require the highest and most delicate mental qualities, and which can have their full value only where there is complete personal confidence.

English solicitors however act, if not as employers or undertakers, yet as agents for hiring that branch of the legal profession which ranks highest, and whose work involves the hardest mental strain. Again, many of the best instructors of youth sell their services, not directly to the consumer, but to the governing body of a college or school, or to a head master, who arranges for their purchase: the employer supplies to the teacher a market for his labour; and is supposed to give to the purchaser, who may not be a good judge himself, some sort of guarantee as to the quality of the teaching supplied.

Again, artists of every kind, however eminent, often find it to their advantage to employ someone else to arrange for them with customers; while those of less established repute are sometimes dependent for their living on capitalist traders, who are not themselves artists, but who understand how to sell artistic work to the best advantage.

2. But in the greater part of the business of the modern world the task of so directing production that a given effort may be most effective in supplying human wants has to be broken up and given into the hands of a specialized body of employers, or to use a more general term, of business men. They "adventure" or "undertake" its risks; they bring together the capital and the labour required for the work; they arrange or "engineer" its general plan, and superintend its minor details. Looking at business men from one point of view we may regard them as a highly skilled industrial grade, from another as middlemen intervening between the manual worker and the consumer.

There are some kinds of business men who undertake great risks, and exercise a large influence over the welfare both of the producers and of the consumers of the wares in which they deal, but who are not to any considerable extent direct employers of labour. The extreme type of these is the dealer on the stock exchange or the produce markets, whose daily purchases and sales are of vast dimensions, and who yet has neither factory nor warehouse, but at most an office with a few clerks in it. The good and the evil effects of the action of speculators such as these are however very complex; and we may give our attention at present to those forms of business in which administration counts for most and the subtler forms of speculation for least. Let us then take some illustrations of the more common types of business, and watch the relations in which the undertaking of risks stands to the rest of the work of the business man.

3. The building trade will serve our purpose well, partly because it adheres in some respects to primitive methods of business. Late in the Middle Ages it was quite common for a private person to build a house for himself without the aid of a master builder; and the habit is not even now altogether extinct. A person who undertakes his own building must hire separately all his workmen, he must watch them and check their demands for payment; he must buy his materials from many quarters, and he must hire, or dispense with the use of, expensive machinery. He probably pays more than the current wages; but here others gain what he loses. There is however great waste in the time he spends in bargaining with the men and testing and directing their work by his imperfect knowledge; and again in the time that he spends in finding out what kinds and quantities he wants of different materials, and where to get them best, and so on. This waste is avoided by that division of labour which assigns to the professional builder the task of superintending details, and to the professional architect the task of drawing plans.

The division of labour is often carried still further when houses are built not at the expense of those who are to live in them, but as a building speculation. When this is done on a large scale, as for instance in opening out a new suburb, the stakes at issue are so large as to offer an attractive field to powerful capitalists with a very high order of general business ability, but perhaps with not much technical knowledge of the building trade. They rely on their own judgment for the decision as to what are likely to be the coming relations of demand and supply for different kinds of houses; but they entrust to others the management of details. They employ architects and surveyors to make plans in accordance with their general directions; and then enter into contracts with professional builders for carrying them out. But they themselves undertake the chief risks of the business, and control its general direction.

4. It is well known that this division of responsibility prevailed in the woollen trade just before the beginning of the era of large factories: the more speculative work and the broader risks of buying and selling being taken over by the undertakers, who were not themselves employers of labour; while the detailed work of superintendence and the narrower risks of carrying out definite contracts were handed over to small masters. (1) This plan is still extensively followed in some branches of the textile trades, especially those in which the difficulty of forecasting the future is very great. Manchester warehousemen give themselves to studying the movements of fashion, the markets for raw materials, the general state of trade, of the money market and of politics, and all other causes that are likely to influence the prices of different kinds of goods during the coming season; and after employing, if necessary, skilled designers to carry out their ideas (just as the building speculator in the previous case employed architects), they give out to manufacturers in different parts of the world contracts for making the goods on which they have determined to risk their capital.

In the clothing trades especially we see a revival of what has been called the "house industry," which prevailed long ago in the textile industries; that is, the system in which large undertakers give out work to be done in cottages and very small workshops to persons who work alone or with the aid of some members of their family, or who perhaps employ two or three hired assistants. (2) In remote villages in almost every county of England agents of large undertakers come round to give out to the cottagers partially prepared materials for goods of all sorts, but especially clothes such as shirts and collars and gloves; and take back with them the finished goods. It is however in the great capital cities of the world, and in other large towns, especially old towns, where there is a great deal of unskilled and unorganized labour, with a somewhat low physique and morale, that the system is most fully developed, especially in the clothing trades, which employ two hundred thousand people in London alone, and in the cheap furniture trades. There is a continual contest between the factory and the domestic system, now one gaining ground and now the other: for instance just at present the growing use of sewing machines worked by steam power is strengthening the position of the factories in the boot trade; while factories and workshops are getting an increased hold of the tailoring trade. On the other hand the hosiery trade is being tempted back to the dwelling-house by recent improvements in hand knitting machines; and it is possible that new methods of distributing power by gas and petroleum and electric engines may exercise a like influence on many other industries. Or there may be a movement towards intermediate plans, similar to those which are largely followed in the Sheffield trades. Many cutlery firms for instance put out grinding and other parts of their work, at piece-work prices, to working men who rent the steam power which they require, either from the firm from whom they take their contract or from someone else: these workmen sometimes employing others to help them, sometimes working alone.

Again, the foreign merchant very often has no ships of his own, but gives his mind to studying the course of trade, and undertakes himself its chief risks; while he gets his carrying done for him by men who require more administrative ability, but need not have the same power of forecasting the subtler movements of trade; though it is true that as purchasers of ships they have great and difficult trade risks of their own. Again, the broader risks of publishing a book are borne by the publisher, perhaps in company with the author; while the printer is the employer of labour and supplies the expensive types and machinery required for the business. And a somewhat similar plan is adopted in many branches of the metal trades, and of those which supply furniture, clothing, etc.

Thus there are many ways in which those who undertake the chief risks of buying and selling may avoid the trouble of housing and superintending those who work for them. They all have their advantages; and when the workers are men of strong character, as at Sheffield, the results are on the whole not unsatisfactory. But unfortunately it is often the weakest class of workers, those with the least resource and the least self-control who drift into work of this kind. The elasticity of the system which recommends it to the undertaker, is really the means of enabling him to exercise, if he chooses, an undesirable pressure on those who do his work.

For while the success of a factory depends in a great measure on its having a set of operatives who adhere steadily to it, the capitalist who gives out work to be done at home has an interest in retaining a great many persons on his books; he is tempted to give each of them a little employment occasionally and play them off one against another; and this he can easily do because they do not know one another, and cannot arrange concerted action.

5. When the profits of business are under discussion they are generally connected in people's minds with the employer of labour: "the employer" is often taken as a term practically coextensive with the receiver of business profits. But the instances which we have just considered are sufficient to illustrate the truth that the superintendence of labour is but one side, and often not the most important side of business work; and that the employer who undertakes the whole risks of his business really performs two entirely distinct services on behalf of the community, and requires a twofold ability.

To return to a class of considerations already noticed (IV, XI, sections 4 and 5), the manufacturer who makes goods not to meet special orders but for the general market, must, in his first role as merchant and organizer of production, have a thorough knowledge of things in his own trade. He must have the power of forecasting the broad movements of production and consumption, of seeing where there is an opportunity for supplying a new commodity that will meet a real want or improving the plan of producing an old commodity. He must be able to judge cautiously and undertake risks boldly; and he must of course understand the materials and machinery used in his trade.

But secondly in this role of employer he must be a natural leader of men. He must have a power of first choosing his assistants rightly and then trusting them fully; of interesting them in the business and of getting them to trust him, so as to bring out whatever enterprise and power of origination there is in them; while he himself exercises a general control over everything, and preserves order and unity in the main plan of the business.

The abilities required to make an ideal employer are so great and so numerous that very few persons can exhibit them all in a very high degree. Their relative importance however varies with the nature of the industry and the size of the business; and while one employer excels in one set of qualities, another excels in another; scarcely any two owe their success to exactly the same combination of advantages. Some men make their way by the use of none but noble qualities, while others owe their prosperity to qualities in which there is very little that is really admirable except sagacity and strength of purpose.

Such then being the general nature of the work of business management, we have next to inquire what opportunities different classes of people have of developing business ability; and, when they have obtained that, what opportunities they have of getting command over the capital required to give it scope. We may thus come a little closer to the problem stated at the beginning of the chapter, and examine the course of development of a business firm during several consecutive generations. And this inquiry may conveniently be combined with some examination of the different forms of business management. Hitherto we have considered almost exclusively that form in which the whole responsibility and control rests in the hands of a single individual. But this form is yielding ground to others in which the supreme authority is distributed among several partners or even a great number of shareholders. Private firms and joint-stock companies, co-operative societies and public corporations are taking a constantly increasing share in the management of business; and one chief reason of this is that they offer an attractive field to people who have good business abilities, but have not inherited any great business opportunities.

6. It is obvious that the son of a man already established in business starts with very great advantages over others. He has from his youth up special facilities for obtaining the knowledge and developing the faculties that are required in the management of his father's business: he learns quietly and almost unconsciously about men and manners in his father's trade and in those from which that trade buys and to which it sells; he gets to know the relative importance and the real significance of the various problems and anxieties which occupy his father's mind: and he acquires a technical knowledge of the processes and the machinery of the trade. (3) Some of what he learns will be applicable only to his father's trade; but the greater part will be serviceable in any trade that is in any way allied with that; while those general faculties of judgment and resource, of enterprise and caution, of firmness and courtesy, which are trained by association with those who control the larger issues of any one trade, will go a long way towards fitting him for managing almost any other trade. Further, the sons of successful business men start with more material capital than almost anyone else except those who by nurture and education are likely to be disinclined for business and unfitted for it: and if they continue their fathers' work, they have also the vantage ground of established trade connections.

It would therefore at first sight seem likely that business men should constitute a sort of caste; dividing out among their sons the chief posts of command, and founding hereditary dynasties, which should rule certain branches of trade for many generations together. But the actual state of things is very different. For when a man has got together a great business, his descendants often fail, in spite of their great advantages, to develop the high abilities and the special turn of mind and temperament required for carrying it on with equal success. He himself was probably brought up by parents of strong earnest character; and was educated by their personal influence and by struggle with difficulties in early life. But his children, at all events if they were born after he became rich, and in any case his grandchildren, are perhaps left a good deal to the care of domestic servants who are not of the same strong fibre as the parents by whose influence he was educated. And while his highest ambition was probably success in business, they are likely to be at least equally anxious for social or academic distinction. (4)

For a time indeed all may go well. His sons find a firmly established trade connection, and what is perhaps even more important, a well-chosen staff of subordinates with a generous interest in the business. By mere assiduity and caution, availing themselves of the traditions of the firm, they may hold together for a long time. But when a full generation has passed, when the old traditions are no longer a safe guide, and when the bonds that held together the old staff have been dissolved, then the business almost invariably falls to pieces unless it is practically handed over to the management of new men who have meanwhile risen to partnership in the firm. But in most cases his descendants arrive at this result by a shorter route. They prefer an abundant income coming to them without effort on their part, to one which though twice as large could be earned only by incessant toil and anxiety; and they sell the business to private persons or a joint-stock company; or they become sleeping partners in it; that is sharing in its risks and in its profits, but not taking part in its management: in either case the active control over their capital falls chiefly into the hands of new men.

7. The oldest and simplest plan for renovating the energies of a business is that of taking into partnership some of its ablest employees. The autocratic owner and manager of a large manufacturing or trading concern finds that, as years go on, he has to delegate more and more responsibility to his chief subordinates; partly because the work to be done is growing heavier, and partly because his own strength is becoming less than it was. He still exercises a supreme control, but much must depend on their energy and probity: so, if his sons are not old enough, or for any other reason are not ready to take part of the burden off his shoulders, he decides to take one of his trusted assistants into partnership: he thus lightens his own labours, at the same time that he secures that the task of his life will be carried on by those whose habits he has moulded, and for whom he has perhaps acquired something like a fatherly affection. (5)

But there are now, and there always have been, private partnerships on more equal terms, two or more people of about equal wealth and ability combining their resources for a large and difficult undertaking. In such cases there is often a distinct partition of the work of management: in manufactures for instance one partner will sometimes give himself almost exclusively to the work of buying raw material and selling the finished product, while the other is responsible for the management of the factory: and in a trading establishment one partner will control the wholesale and the other the retail department. In these and other ways private partnership is capable of adapting itself to a great variety of problems: it is very strong and very elastic; it has played a great part in the past, and it is full of vitality now.

8. But from the end of the Middle Ages to the present time there has been in some classes of trades a movement towards the substitution of public joint-stock companies, the shares of which can be sold to anybody in the open market, for private companies, the shares in which are not transferable without the leave of all concerned. The effect of this change has been to induce people, many of whom having no special knowledge of trade, to give their capital into the hands of others employed by them: and there has thus arisen a new distribution of the various parts of the work of business management.

The ultimate undertakers of the risks incurred by a joint-stock company are the shareholders; but as a rule they do not take much active part in engineering the business and controlling its general policy; and they take no part in superintending its details. After the business has once got out of the hands of its original promoters, the control of it is left chiefly in the hands of Directors; who, if the company is a very large one, probably own but a very small proportion of its shares, while the greater part of them have not much technical knowledge of the work to be done. They are not generally expected to give their whole time to it; but they are supposed to bring wide general knowledge and sound judgment to bear on the broader problems of its policy; and at the same time to make sure that the "Managers" of the company are doing their work thoroughly. (6) To the Managers and their assistants is left a great part of the work of engineering the business, and the whole of the work of superintending it: but they are not required to bring any capital into it; and they are supposed to be promoted from the lower ranks to the higher according to their zeal and ability. Since the joint-stock companies in the United Kingdom do a very great part of the business of all kinds that is done in the country, they offer very large opportunities to men with natural talents for business management, who have not inherited any material capital, or any business connection.

9. Joint-stock companies have great elasticity and can expand themselves without limit when the work to which they have set themselves offers a wide scope; and they are gaining ground in nearly all directions. But they have one great source of weakness in the absence of any adequate knowledge of the business on the part of the shareholders who undertake its chief risks. It is true that the head of a large private firm undertakes the chief risks of the business, while he entrusts many of its details to others; but his position is secured by his power of forming a direct judgment as to whether his subordinates serve his interests faithfully and discreetly. If those to whom he has entrusted the buying or selling of goods for him take commissions from those with whom they deal, he is in a position to discover and punish the fraud. If they show favouritism and promote incompetent relations or friends of their own, or if they themselves become idle and shirk their work, or even if they do not fulfil the promise of exceptional ability which induced him to give them their first lift, he can discover what is going wrong and set it right.

But in all these matters the great body of the shareholders of a joint-stock company are, save in a few exceptional instances, almost powerless; though a few of the larger shareholders often exert themselves to find out what is going on; and are thus able to exercise an effective and wise control over the general management of the business. It is a strong proof of the marvellous growth in recent times of a spirit of honesty and uprightness in commercial matters, that the leading officers of great public companies yield as little as they do to the vast temptations to fraud which lie in their way. If they showed an eagerness to avail themselves of opportunities for wrong-doing at all approaching that of which we read in the commercial history of earlier civilization, their wrong uses of the trusts imposed in them would have been on so great a scale as to prevent the development of this democratic form of business. There is every reason to hope that the progress of trade morality will continue, aided in the future as it has been in the past, by a diminution of trade secrecy and by increased publicity in every form; and thus collective and democratic forms of business management may be able to extend themselves safely in many directions in which they have hitherto failed, and may far exceed the great services they already render in opening a large career to those who have no advantages of birth.

The same may be said of the undertakings of Governments imperial and local: they also may have a great future before them, but up to the present time the tax-payer who undertakes the ultimate risks has not generally succeeded in exercising an efficient control over the businesses, and in securing officers who will do their work with as much energy and enterprise as is shown in private establishments.

The problems of large joint-stock company administration, as well as of Governmental business, involve however many complex issues into which we cannot enter here. They are urgent, because very large businesses have recently increased fast, though perhaps not quite so fast as is commonly supposed. The change has been brought about chiefly by the development of processes and methods in manufacture and mining, in transport and banking, which are beyond the reach of any, and by the increase in the scope but very large capitals; and functions of markets, and in the technical facilities for handling large masses of goods. The democratic element in Governmental enterprise was at first almost wholly vivifying: but experience shows creative ideas and experiments in business technique, and in business organization, to be very rare in Governmental undertakings, and not very common in private enterprises which have drifted towards bureaucratic methods as the result of their great age and large size. A new danger is thus threatened by the narrowing of the field of industry which is open to the vigorous initiative of smaller businesses.

Production on the largest scale of all is to be seen chiefly in the United States, where giant businesses, with some touch of monopoly, are commonly called "trusts." Some of these trusts have grown from a single root. But most of them have been developed by the amalgamation of many independent businesses; and a first step towards this combination was generally an association, or "cartel" to use a German term, of a rather loose kind.

10. The system of cooperation aims at avoiding the evils of these two methods of business management. In that ideal form of co-operative society, for which many still fondly hope, but which as yet has been scantily realized in practice, a part or the whole of those shareholders who undertake the risks of the business are themselves employed by it. The employees, whether they contribute towards the material capital of the business or not, have a share in its profits, and some power of voting at the general meetings at which the broad lines of its policy are laid down, and the officers appointed who are to carry that policy into effect. They are thus the employers and masters of their own managers and foremen; they have fairly good means of judging whether the higher work of engineering the business is conducted honestly and efficiently, and they have the best possible opportunities for detecting any laxity or incompetence in its detailed administration. And lastly they render unnecessary some of the minor work of superintendence that is required in other establishments; for their own pecuniary interests and the pride they take in the success of their own business make each of them averse to any shirking of work either by himself or by his fellow-workmen.

But unfortunately the system has very great difficulties of its own. For human nature being what it is, the employees themselves are not always the best possible masters of their own foremen and managers; jealousies and frettings at reproof are apt to act like sand, that has got mixed with the oil in the bearings of a great and complex machinery. The hardest work of business management is generally that which makes the least outward show; those who work with their hands are apt to underrate the intensity of the strain involved in the highest work of engineering the business, and to grudge its being paid for at anything like as high a rate as it could earn elsewhere. And in fact the managers of a co-operative society seldom have the alertness, the inventiveness and the ready versatility of the ablest of those men who have been selected by the struggle for survival, and who have been trained by the free and unfettered responsibility of private business. Partly for these reasons the co-operative system has seldom been carried out in its entirety. and its partial application has not yet attained a conspicuous success except in retailing commodities consumed by working men. But within the last few years more hopeful signs have appeared of the success of bonâ fide productive associations, or "co-partnerships."

Those working men indeed whose tempers are strongly individualistic, and whose minds are concentrated almost wholly on their own affairs, will perhaps always find their quickest and most congenial path to material success by commencing business as small independent "undertakers," or by working their way upwards in a private firm or a public company. But co-operation has a special charm for those in whose tempers the social element is stronger, and who desire not to separate themselves from their old comrades, but to work among them as their leaders. Its aspirations may in some respects be higher than its practice; but it undoubtedly does rest in great measure on ethical motives. The true co-operator combines a keen business intellect with a spirit full of an earnest faith; and some co-operative societies have been served excellently by men of great genius both mentally and morally — men who for the sake of the co-operative faith that is in them, have worked with great ability and energy, and with perfect uprightness, being all the time content with lower pay than they could have got as business managers on their own account or for a private firm. Men of this stamp are more common among the officers of co-operative societies than in other occupations; and though they are not very common even there, yet it may be hoped that the diffusion of a better knowledge of the true principles of co-operation, and the increase of general education, are every day fitting a larger number of co-operators for the complex problems of business management.

Meanwhile many partial applications of the co-operative principle are being tried under various conditions, each of which presents some new aspect of business management. Thus under the scheme of Profit-Sharing, a private firm while retaining the unfettered management of its business, pays its employees the full market rate of wages, whether by Time or Piece-work, and agrees in addition to divide among them a certain share of any profits that may be made above a fixed minimum; it being hoped that the firm will find a material as well as a moral reward in the diminution of friction, in the increased willingness of its employees to go out of their way to do little things that may be of great benefit comparatively to the firm, and lastly in attracting to itself workers of more than average ability and industry. (7)

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Chapter 13, Conclusion. Correlation of the Tendencies to Increasing and to Diminishing Return


1. At the beginning of this Book we saw how the extra return of raw produce which nature affords to an increased application of capital and labour, other things being equal, tends in the long run to diminish. In the remainder of the Book and especially in the last four chapters we have looked at the other side of the shield, and seen how man's power of productive work increases with the volume of the work that he does. Considering first the causes that govern the supply of labour, we saw how every increase in the physical, mental and moral vigour of a people makes them more likely, other things being equal, to rear to adult age a large number of vigorous children. Turning next to the growth of wealth, we observed how every increase of wealth tends in many ways to make a greater increase more easy than before. And lastly we saw how every increase of wealth and every increase in the numbers and intelligence of the people increased the facilities for a highly developed industrial organization, which in its turn adds much to the collective efficiency of capital and labour.

Looking more closely at the economies arising from an increase in the scale of production of any kind of goods, we found that they fell into two classes — those dependent on the general development of the industry, and those dependent on the resources of the individual houses of business engaged in it and the efficiency of their management; that is, into external and internal economies.

We saw how these latter economies are liable to constant fluctuations so far as any particular house is concerned. An able man, assisted perhaps by some strokes of good fortune, gets a firm footing in the trade, he works hard and lives sparely, his own capital grows fast, and the credit that enables him to borrow more capital grows still faster; he collects around him subordinates of more than ordinary zeal and ability; as his business increases they rise with him, they trust him and he trusts them, each of them devotes himself with energy to just that work for which he is specially fitted, so that no high ability is wasted on easy work, and no difficult work is entrusted to unskilful hands. Corresponding to this steadily increasing economy of skill, the growth of his business brings with it similar economies of specialized machines and plant of all kinds; every improved process is quickly adopted and made the basis of further improvements; success brings credit and credit brings success; credit and success help to retain old customers and to bring new ones; the increase of his trade gives him great advantages in buying; his goods advertise one another, and thus diminish his difficulty in finding a vent for them. The increase in the scale of his business increases rapidly the advantages which he has over his competitors, and lowers the price at which he can afford to sell. This process may go on as long as his energy and enterprise, his inventive and organizing power retain their full strength and freshness, and so long as the risks which are inseparable from business do not cause him exceptional losses; and if it could endure for a hundred years, he and one or two others like him would divide between them the whole of that branch of industry in which he is engaged. The large scale of their production would put great economies within their reach; and provided they competed to their utmost with one another, the public would derive the chief benefit of these economies, and the price of the commodity would fall very low.

But here we may read a lesson from the young trees of the forest as they struggle upwards through the benumbing shade of their older rivals. Many succumb on the way, and a few only survive; those few become stronger with every year, they get a larger share of light and air with every increase of their height, and at last in their turn they tower above their neighbours, and seem as though they would grow on for ever, and for ever become stronger as they grow. But they do not. One tree will last longer in full vigour and attain a greater size than another; but sooner or later age tells on them all. Though the taller ones have a better access to light and air than their rivals, they gradually lose vitality; and one after another they give place to others, which, though of less material strength, have on their side the vigour of youth.

And as with the growth of trees, so was it with the growth of businesses as a general rule before the great recent development of vast joint-stock companies, which often stagnate, but do not readily die. Now that rule is far from universal, but it still holds in many industries and trades. Nature still presses on the private business by limiting the length of the life of its original founders, and by limiting even more narrowly that part of their lives in which their faculties retain full vigour. And so, after a while, the guidance of the business falls into the hands of people with less energy and less creative genius, if not with less active interest in its prosperity. If it is turned into a joint-stock company, it may retain the advantages of division of labour, of specialized skill and machinery: it may even increase them by a further increase of its capital; and under favourable conditions it may secure a permanent and prominent place in the work of production. But it is likely to have lost so much of its elasticity and progressive force, that the advantages are no longer exclusively on its side in its competition with younger and smaller rivals.

When therefore we are considering the broad results which the growth of wealth and population exert on the economies of production, the general character of our conclusions is not very much affected by the facts that many of these economies depend directly on the size of the individual establishments engaged in the production, and that in almost every trade there is a constant rise and fall of large businesses, at any one moment some firms being in the ascending phase and others in the descending. For in times of average prosperity decay in one direction is sure to be more than balanced by growth in another.

Meanwhile an increase in the aggregate scale of production of course increases those economies, which do not directly depend on the size of individual houses of business. The most important of these results from the growth of correlated branches of industry which mutually assist one another, perhaps being concentrated in the same localities, but anyhow availing themselves of the modern facilities for communication offered by steam transport, by the telegraph and by the printing-press. The economies arising from such sources as this, which are accessible to any branch of production, do not depend exclusively upon its own growth: but yet they are sure to grow rapidly and steadily with that growth; and they are sure to dwindle in some, though not in all respects, if it decays.

2. These results will be of great importance when we come to discuss the causes which govern the supply price of a commodity. We shall have to analyse carefully the normal cost of producing a commodity, relatively to a given aggregate volume of production; and for this purpose we shall have to study the expenses of a representative producer for that aggregate volume. On the one hand we shall not want to select some new producer just struggling into business, who works under many disadvantages, and has to be content for a time with little or no profits, but who is satisfied with the fact that he is establishing a connection and taking the first steps towards building up a successful business; nor on the other hand shall we want to take a firm which by exceptionally long-sustained ability and good fortune has got together a vast business, and huge well-ordered workshops that give it a superiority over almost all its rivals. But our representative firm must be one which has had a fairly long life, and fair success, which is managed with normal ability, and which has normal access to the economies, external and internal, which belong to that aggregate volume of production; account being taken of the class of goods produced, the conditions of marketing them and the economic environment generally.

Thus a representative firm is in a sense an average firm. But there are many ways in which the term "average" might be interpreted in connection with a business. And a Representative firm is that particular sort of average firm, at which we need to look in order to see how far the economies, internal and external, of production on a large scale have extended generally in the industry and country in question. We cannot see this by looking at one or two firms taken at random: but we can see it fairly well by selecting, after a broad survey, a firm, whether in private or joint-stock management (or better still, more than one), that represents, to the best of our judgment, this particular average.

The general argument of the present Book shows that an increase in the aggregate volume of production of anything will generally increase the size, and therefore the internal economies possessed by such a representative firm; that it will always increase the external economies to which the firm has access; and thus will enable it to manufacture at a less proportionate cost of labour and sacrifice than before.

In other words, we say broadly that while the part which nature plays in production shows a tendency to diminishing return, the part which man plays shows a tendency to increasing return. The law of increasing return may be worded thus: — An increase of labour and capital leads generally to improved organization, which increases the efficiency of the work of labour and capital.

Therefore in those industries which are not engaged in raising raw produce an increase of labour and capital generally gives a return increased more than in proportion; and further this improved organization tends to diminish or even override any increased resistance which nature may offer to raising increased amounts of raw produce. If the actions of the laws of increasing and diminishing return are balanced we have the law of constant return, and an increased produce is obtained by labour and sacrifice increased just in proportion.

For the two tendencies towards increasing and diminishing return press constantly against one another. In the production of wheat and wool, for instance, the latter tendency has almost exclusive sway in an old country, which cannot import freely. In turning the wheat into flour, or the wool into blankets, an increase in the aggregate volume of production brings some new economies, but not many; for the trades of grinding wheat and making blankets are already on so great a scale that any new economies that they may attain are more likely to be the result of new inventions than of improved organization. In a country however in which the blanket trade is but slightly developed, these latter may be important; and then it may happen that an increase in the aggregate production of blankets diminishes the proportionate difficulty of manufacturing by just as much as it increases that of raising the raw material. In that case the actions of the laws of diminishing and of increasing return would just neutralize one another; and blankets would conform to the law of constant return. But in most of the more delicate branches of manufacturing, where the cost of raw material counts for little, and in most of the modern transport industries the law of increasing return acts almost unopposed. (1)

Increasing Return is a relation between a quantity of effort and sacrifice on the one hand, and a quantity of product on the other. The quantities cannot be taken out exactly, because changing methods of production call for machinery, and for unskilled and skilled labour of new kinds and in new proportions. But, taking a broad view, we may perhaps say vaguely that the output of a certain amount of labour and capital in an industry has increased by perhaps a quarter or a third in the last twenty years. To measure outlay and output in terms of money is a tempting, but a dangerous resource: for a comparison of money outlay with money returns is apt to slide into an estimate of the rate of profit on capital. (2)

3. We may now sum up provisionally the relations of industrial expansion to social wellbeing. A rapid growth of population has often been accompanied by unhealthy and enervating habits of life in overcrowded towns. And sometimes it has started badly, outrunning the material resources of the people, causing them with imperfect appliances to make excessive demands on the soil; and so to call forth the stern action of the law of diminishing return as regards raw produce, without having the power of minimizing its effects. Having thus begun with poverty, an increase in numbers may go on to its too frequent consequences in that weakness of character which unfits a people for developing a highly organized industry.

These are serious perils: but yet it remains true that the collective efficiency of a people with a given average of individual strength and energy may increase more than in proportion to their numbers. If they can for a time escape from the pressure of the law of diminishing return by importing food and other raw produce on easy terms; if their wealth is not consumed in great wars, and increases at least as fast as their numbers; and if they avoid habits of life that would enfeeble them; then every increase in their numbers is likely for the time to be accompanied by a more than proportionate increase in their power of obtaining material goods. For it enables them to secure the many various economies of specialized skill and specialized machinery, of localized industries and production on a large scale: it enables them to have increased facilities of communication of all kinds; while the very closeness of their neighbourhood diminishes the expense of time and effort involved in every sort of traffic between them, and gives them new opportunities of getting social enjoyments and the comforts and luxuries of culture in every form. No doubt deduction must be made for the growing difficulty of finding solitude and quiet and even fresh air: but there is in most cases some balance of good. (3)

Taking account of the fact that an increasing density of population generally brings with it access to new social enjoyments we may give a rather broader scope to this statement and say: — An increase of population accompanied by an equal increase in the material sources of enjoyment and aids to production is likely to lead to a more than proportionate increase in the aggregate income of enjoyment of all kinds; provided firstly, an adequate supply of raw produce can be obtained without great difficulty, and secondly there is no such overcrowding as causes physical and moral vigour to be impaired by the want of fresh air and light and of healthy and joyous recreation for the young.

The accumulated wealth of civilized countries is at present growing faster than the population: and though it may be true that the wealth per head would increase somewhat faster if the population did not increase quite so fast; yet as a matter of fact an increase of population is likely to continue to be accompanied by a more than proportionate increase of the material aids to production: and in England at the present time, with easy access to abundant foreign supplies of raw material, an increase of population is accompanied by a more than proportionate increase of the means of satisfying human wants other than the need for light, fresh air, etc. Much of this increase is however attributable not to the increase of industrial efficiency but to the increase of wealth by which it is accompanied: and therefore it does not necessarily benefit those who have no share in that wealth. And further, England's foreign supplies of raw produce may at any time be checked by changes in the trade regulations of other countries, and may be almost cut off by a great war while the naval and military expenditure which would be necessary to make the country fairly secure against this last risk, would appreciably diminish the benefits that she derives from the action of the law of increasing return.


1. In an article on "The Variation of Productive Forces" in the Quarterly Journal of Economics 1902, Professor Bullock suggests that the term "Economy of Organization" should be substituted for Increasing Return. He shows clearly that the forces which make for Increasing Return are not of the same order as those that make for Diminishing Return: and there are undoubtedly cases in which it is better to emphasize this difference by describing causes rather than results, and contrasting Economy of Organization with the Inelasticity of Nature's response to intensive cultivation.

2. There is no general rule that industries which yield increasing returns show also rising profits. No doubt a vigorous firm, which increases its scale of operations and obtains important (internal) economies which are peculiar to it, will show an increasing return and a rising rate of profit; because its increasing output will not materially affect the price of its produce. But profits tend to be low, as we shall see below (VI, VIII, sections 1, 2), in such industries as plain weaving, because their vast scale has enabled organization in production and marketing to be carried so far as to be almost dominated by routine.

3. The Englishman Mill bursts into unwonted enthusiasm when speaking (Political Economy, Book IV, ch. VI, section 2) of the pleasures of wandering alone in beautiful scenery: and many American writers give fervid descriptions of the growing richness of human life as the backwoodsman finds neighbours settling around him, as the backwoods settlement develops into a village, the village into a town, and the town into a vast city. (See for instance Carey's Principles of Social Science and Henry George's Progress and Poverty.)

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