III. Trade
The Distribution of Wealth, as well as its Production, is effected through Trade. As in the Productive Process from the very beginning of Labor specialization up to the point of delivery to ultimate consumers, so in the process of Distribution, Trade is the continuous and the culminating agency. It determines the kind of Wealth and the quantity that each factor in Production shall receive.
We have seen that Labor as a whole, a social unit, produces Wealth from Land and that this activity and this result are governed by natural Economic law—by natural relations of Economic effect to Economic cause. We have seen also that a correlative natural law, a correlative connection of effect to cause, constantly allocates one portion of the total Product to the Labor factor and another portion to the Land factor. We may readily see, moreover, that those two primary allocations subdivide into almost infinitesimal and extremely confusing secondary categories, comprising every variety of Labor, every variety of Land, every variety of Wealth, every variety of Economic desire. It is to satisfy those desires out of that continuous flow of Wealth that the infinitude of processes indicated in the next preceding Lesson enter into the comprehensive Productive Process which includes delivery to ultimate consumers, and that an infinitude of corresponding processes enter into Distribution.
Many of those processes overlap, playing now a part in Production and now in Distribution. Some of them are natural, some are customary, some are legalistic. But all are subject to the cooperation or to the obstruction of natural law as manifestly as is the navigation of a sailing vessel on the ocean. In so far as the customary or the legalistic do not conform to natural Economic law, natural penalizations inevitably result; in so far as they do conform to natural Economic law, the results are socially as well as individually beneficial. As with gravitation in the physical universe, so with its correspondent force in the Economic domain.
Not only, then, are the minute details of Labor specialization merged in Productive wholes and delivered in their completeness to ultimate consumers by means of Trade, as we learned in the next preceding Lesson, but, also by means of Trade, the two great divisions of Wealth (Wages and Rent) are assigned respectively to Labor interests and to Land interests in proportions determined by comparisons of Value.
Individual deliveries, in contrast with Distribution into the two basic categories, Wages and Rent, consist in the delivery of Wealth to individuals in proportion to the effective demands of each. Their demands are limitless, for when satisfied with quantity they naturally demand quality. But there is a limit to all effective demands. The limitation on the one hand is the producer’s ability to produce, and on the other the consumer’s ability to obtain in Trade. Ability to produce depends in high degree at any time upon the general productive knowledge of the time. Ability to obtain depends upon the Economic power in Trade of the individual seeking to gratify his wants. If he is isolated from all the rest of mankind, he is outside the Economic circle and can obtain only what he himself directly produces. If he is one of an absolutely free community, he can obtain what others are willing to give him in Trade for the service he renders directly or indirectly to them. If Production be arbitrarily obstructed, whether by impediments to Natural Resources or to Trade, his ability to obtain Wealth is not so much according to what he produces or to the service of any other kind that he renders, but according to his command over the sources of Production and the channels of Trade whereby he may levy tribute or escape it.
As human services naturally tend to exchange at par for equally desirable human services, so do different forms of Wealth, each product of human service, tend to exchange at par for equally desirable forms of Wealth; and as Wealth in the Rent category and Wealth in the Wages category are alike service-products of Labor applied to Land, exchanges of every kind of Wealth tend to be effected on the basis of equality in the expenditure of Labor for their Production.
Let it now be carefully observed and faithfully remembered in this connection, that however various the kind and the amount of Wealth that individuals receive, each variety is but a subdivision of Wealth as a whole, and is therefore either Wages or Rent, those being the two primary divisions of Wealth in Distribution. A “captain of industry” may get a large share of Wealth for his service while a skilled laborer gets a small share for his; but each will take his share from Wages, not from Rent. On the other hand, the owner of a rich mining opportunity may get a large share of Wealth and the owner of a small area of farming land or a village building-lot may get a small share; but each will in that respect get Rent, not Wages. To the extent, however, that the “captain of industry” derives any part of his income from Natural-Resource privileges, that part is Rent; and to the extent that the mine owner or the farm owner or the village lot owner derives any part of his from his service, that part is Wages.
Thus the factor in Production technically termed Land is represented in Distribution by the Wealth element technically termed Rent; whereas the factor in Production technically termed Labor is represented in Distribution by the Wealth element technically termed Wages.