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The point of view of the undertaker however does not include the whole net income (or Quasi-rent) of

A part of the income of

a

attaches to the

ment.

may

the business for there is another part which business often attaches to his employés. Indeed, in some cases employés, and and for some purposes, nearly the whole income would be lost of a business be regarded as divisible among if they sought other employ- the different persons in the business by bargaining, supplemented by custom and by notions of fairness. Thus the head clerk in a business often has an acquaintance with men and things, the use of which he could sell at a high price to rival firms: but on the other hand it may be of a kind to be of no value save to the business in which he already is; and then his departure would perhaps injure it by several times the value of his salary, while probably he could not get half that salary elsewhere. And when a firm has a speciality of its own, many of its ordinary workmen would lose a great part of their wages by going away, and at the same time injure the firm seriously. The chief clerk may be taken into partnership, and the whole of the employés may be paid partly by a share in the profits of the concern; but whether this is done or not, their earnings are determined, not so much by competition and the direct action of the Law of Substitution, as by a bargain between them and their employers, the terms of which are theoretically arbitrary. In practice however they will probably be governed by a desire to "do what is right," that is, to agree on payments that represent the normal earnings of such ability, industry and special training as the employés severally possess, with something added if the fortunes of the firm are good, and something subtracted if they are bad. Thus there is de facto some sort of profit-and-loss sharing between almost every business and its employés ; and perhaps this is in its very highest form when, without being embodied in a definite contract, the solidarity of interests between those who work together in the

Profit-sharing.

same business is recognized with cordial generosity as the result of true brotherly feeling. But such cases are not very common; and as a rule the relations between employers and employed are raised to a higher plane both economically and morally by the adoption of the system of Profit-sharing; especially when it is regarded as but a step towards the still higher but much more difficult level of true Co-operation.

tions among

tend to make the problem of

minate.

§ 7. If the employers in any trade act together and so do the employed, the solution of the problem of Trades unions wages becomes indeterminate. The trade as a and combinawhole may be regarded as receiving a surplus (or employers Quasi-rent) consisting of the excess of the aggregate price which it can get for such wares as it wages indeterproduces, over what it has to pay to other trades for the raw materials, &c. which it buys; and there is nothing but bargaining to decide the exact shares in which this should go to employers and employed. No lowering of wages will be permanently in the interest of employers, which is unnecessary and drives many skilled workers to other markets, or even to other industries in which they abandon the special income derived from their peculiar skill; and wages must be high enough in an average year to attract young people to the trade. This sets lower limits to wages, and upper limits are set by corresponding necessities as to the supply of capital and business power. But what point between these limits should be taken at any time can be decided only by higgling and bargaining; which are however likely to be tempered somewhat by ethico-prudential considerations, especially if there be a good Court of Conciliation in the trade.

The case is in practice even more complex, because each group of employés is likely to have its own union, and to fight for its own hand. The employers act as buffers: but a strike for higher wages on the part of one group may, in effect, strike the wages of some other group almost as hard as the employers' profits.

CHAPTER XII.

THE INFLUENCE OF PROGRESS ON VALUE.

The field of employment

labour

§ 1. THE field of employment which any place offers for labour and capital depends firstly on its natural resources; secondly, on the power of turning for capital and them to good account, derived from its progress of knowledge and of social and industrial organization; and thirdly, on the access that it has to markets in which it can sell those things of which it has a superfluity. The importance of this last condition is often underrated; but it stands out prominently when we look at the history of new countries.

It is commonly said that wherever there is abundance of good land to be had free of rent, and the climate

rich in new

countries

which have no

is not always is not unhealthy, the real earnings of labour and the interest on capital must both be high. But good access to this is only partially true. The early colonists of the markets of America lived very hardly. wood and meat almost free:

the Old World.

Nature gave them

but they had very

few of the comforts and luxuries of life. And even now there are, especially in South America and Africa, many places to which Nature has been abundantly generous, which are nevertheless shunned by labour and capital, because they have no ready communications with the rest of the world. On the other hand high rewards may be offered to capital and labour by a mining district in the midst of an alkaline desert, when once communications have been opened up with the outer world, or again by a trading centre on a barren sea-coast; though, if limited to their own resources, they could support

but a scanty population, and that in abject poverty. And the splendid markets which the Old World has offered to the products of the New, since the growth of steam-communication, have rendered North America and Australia the richest large fields for the employment of capital and labour that there have ever been.

Old countries

of the future in

country,

sequent influx

But after all the chief cause of the modern prosperity of new countries lies in the markets that the old world offers, not for goods delivered on the spot, offer a market but for promises to deliver goods at a distant for mortgages date. A handful of colonists having assumed comes of a new rights of perpetual property in vast tracts of rich land, are anxious to reap in their own generation its future fruits; and as they cannot do this directly, they do it indirectly, by selling in return for the ready goods of the old world promises to pay much larger quantities of the goods that their own soil will produce in a future and the congeneration. In one form or another they mortgage their new property to the old world at of capital into a very high rate of interest. Englishmen and others, who have accumulated the means of present enjoyment, hasten to barter them for larger promises in the future than they can get at home: a vast stream of capital flows to the new country, and its arrival there raises the rate of wages very high. The new capital filters but slowly towards the outlying districts: it is so scarce there, and so many persons are eager to have it, that it has often commanded for a long time two per cent. a month, from which it has fallen by gradual stages down to six, or perhaps even five per cent., a year.

the latter

For the settlers being full of enterprise, and seeing their way to acquiring private title-deeds to property raises nominal that will shortly be of great value, are eager to wages very become independent undertakers, and if possible employers of others; so wage-earners have to be attracted by

high.

high wages, which are paid in a great measure out of the commodities borrowed from the old world on mortgages, or in other ways. It is, however, difficult to estimate exactly the real rate of wages in outlying parts of new countries. The workers are picked men with a natural bias towards adventure; hardy, resolute, and enterprising; men in the prime of life, who do not know what illness is; and the strain of one kind and another which they go through, is more than the average English, and much more than the average European labourer could sustain. There are no poor among them, because there are none who are weak: if anyone becomes ailing, he is forced to retire to some more thickly-peopled place where there is less to be earned, but where also a quieter and less straining life is possible. Their earnings are very high if reckoned in money; but they have to buy at very high prices, or altogether dispense with, many of the comforts and luxuries which they would have obtained freely, or at low prices, if they had lived in more settled places. It is however true that many of these things are of but little real utility, and can be easily foregone, where no one has them and no one expects them. As population increases, the best situations being already occupied, nature gives generally less return of As time goes on though the raw produce to the marginal effort of the cultiLaw of Di- vators; and this tends a little to lower wages. minishing Return may not But even in agriculture the Law of Increasing be acting very Return is constantly contending with that of Diminishing Return, and many of the lands which were neglected at first, give a generous response to careful cultivation; and meanwhile the development of roads and railroads, and the growth of varied markets and varied industries, render possible innumerable economies in production. Thus the actions of the Laws of Increasing and Diminishing Return appear pretty well balanced, sometimes the one, sometimes the other being the stronger.

strongly,

There is no reason so far why the rate of (Real Efficiency)

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