V. An Illustration of the Productive Process
By means of the primary and the subsidiary categories described and illustrated in this Lesson, all the tangled data of the Productive Process in Economics may be readily unraveled. Consider for further illustration the Productive phenomena involved in so simple a specimen of Wealth (Artificial Objects) as a needle in the hands of a house-wife engaged in mending family clothing.
She bought the needle at a retail store along with many other needles gathered together in a bunch—a “paper of needles.”
How did that “paper of needles” get into the stock of the retail store? It came with other commodities from a wholesale store. How? By a railway train, on the complicated structure and management of which, as well as upon the roadbed, the track and the station houses, a great variety of Labor had been expended.
Where and how did the wholesale store get that needle? Directly or indirectly, and by similar complicated methods of transportation, from a needle factory.
How did the needle factory get it? Its workers made it. How? By means of machinery, Artificial Products—Wealth used as Capital for the production of further Wealth.
Of what did those workers make the needle? Steel. Where did the steel come from? From transformations of iron in a steel mill. The iron? From iron ore. The ore? From natural deposits in the earth.
By what magic was all that brought about? By an infinite variety and complexity of specialized Labor, which, applied to a variety of special kinds of Land (Natural Resources)—in country, town and city,—produced all the Wealth (Artificial Objects) necessary for the production of more Wealth, namely the Capital; and this consisted of implements and structures made from and upon Land by Labor; of implements and structures for the production of those implements and structures, also made from and upon Land by Labor; of transportation facilities of many kinds similarly made and operated. Also buildings for stores as well as factories—all in a confusion of industrial specialties that can be unraveled only by generalizing the details in accordance with natural law as disclosed by the Basic Facts.
Let that unraveling be done and still we may be bothered by collateral problems to which those details give rise—banking, for instance, and book-keeping all along the productive lines.
To follow in detail the ramifications of the Production of that needle from the first effort of Labor to which it owes its existence, to its delivery at the retail store in a “paper of needles” to the house-wife in whose deft hands we find it, would drive even a magician mad. But all confusion is banished if we classify the multitudinous details according to their natural characteristics respectively, as Labor, Land and Wealth.
And as of the details of that needle’s production, so of all Economic details, from least to greatest, from simplest to most complex, throughout the labyrinthine intricacies of the Productive Process in Economics. To study separately all the Economic constituents of even the simplest civilized habitation and their respective relations to it, Economically, one would need training in many different kinds of specialties, from forestry to decoration. Yet systematic Economic thinking assigns every Economic detail to three categories which can be studied without risk of confusion. It need hardly be again explained that those three categories are Labor, Land and Wealth. Every constituent of such a habitation, no matter how minute, is assignable for primary Economic study to one or another of those Basic Facts—to Land for the site, and for all the rest, from architectural designing to decorative completion, to composites of Land and Labor.
Likewise of every other human contrivance for human satisfactions. In multitudinous detail it is an inexplicable mystery except to an all comprehensive body of experts, and even to them if they ignore the Basic Facts. Yet every complexity disappears when the details are assigned to their appropriate natural categories of Man as the sole producer, Natural Resources as the sole basis and source of production, and Artificial Objects as the product; or, reverting to technical Economic terms, when the confused details are appropriately assigned to Labor as the Productive power, to Land as the basis and source of Production, and to Wealth as the Product.
All Economic details, from least to greatest, from simplest to most complex, from most familiar to most mysterious, throughout the labyrinthine intricacies of the Productive Process in Economics, are like the details in the Economic history of the house-wife’s needle of our illustration. What the points of the compass are to navigation, or the four fundamental divisions of arithmetic to mathematics, such are the three Basic Facts to the Productive Process in Economics.
SIXTH LESSON
DISTRIBUTION
At the outset in this Lesson let the difference between Distribution of Wealth and delivery of Wealth be again emphasized.
Delivery is part of the Productive Process to which the next preceding Lesson was devoted. No Wealth is finally produced until, finished for ultimate consumption, it has been produced to ultimate consumers by final delivery.
Quite another thing is Distribution in the technical Economic sense. In this sense Distribution is the apportionment of Labor-produced Wealth in appropriate categories with reference to the Economic relationship of Labor to Land—of Man to Natural Resources.
A better term than Distribution, since this term has been so much abused by giving to it the sense of delivery by transportation (a mere phase of Production), would probably be Division. But Distribution of Wealth has too long served as the technical term for the Economic division or sharing of Wealth, to be discarded offhand.
Although the Distribution of Wealth in appropriate shares, with reference to the Economic relationship of Labor to Land, affects the sharing of Wealth by individuals, it does not completely dictate either the proportions or the magnitude of individual shares. These may be determined not only by natural Economic law but also by purchase, by common usage, by conventional inheritance statutes, by highway robbery, by forgery, by burglary, by petty theft, by “confidence” tricks, by lucky speculation or gambling games, by beggary, by “crooked business,” by generous gifts, by legal distortions, by taxation, by a thousand and one other influences, legitimate or illegitimate, outside the jurisdiction of natural Economic law. Radically different are those fundamental Economic apportionments in Distribution with reference to the natural relations of Labor to Land.
Fundamentally, Economic Distribution is a twofold apportionment of the Wealth produced by Labor from and upon Land, whereby one portion is naturally allocated to Labor as its producer and the other to Land-ownership as the controller of Natural Resources and sites.
Presumably, then, as Production of Wealth has two Basic factors—in technical terms Labor and Land, in other terms Man and Natural Resources—so Distribution of Wealth has two basic apportionments, one corresponding to the Labor or Man factor in Production, the other to the Land or Natural Resource factor—Wages for Labor, Rent for permission to use Land.
That there can be neither Wages for Labor nor Rent for Land unless Wealth has been produced, is a manifest law of nature. The nonexistent being naturally indivisible, Production of Wealth must precede Distribution of Wealth. Inasmuch, then, as Labor produces all Wealth and without Labor no Wealth is or can be produced, some Wealth must naturally be distributed or allocated to Labor as Wages before any can be distributed or allocated to Land-ownership as Rent.
Consequently, the Wages allocation of Wealth demands consideration first.