3. Having now seen fully the varied action of Supply and Demand upon the Value of personal services in their three kinds, we come at length to the most important general point in this chapter, namely, that in the second class of Services, those purchased in connection with the use of Capital, Wages are all the time enlarging relatively to Profits. We have seen clearly already, that Cost of Labor and Cost of Capital are the only onerous elements in the cost of Commodities; because, while Natural Agents are all the time assisting and assisting more and more effectively in such production, they work without weariness or decay and without fee or reward. The reward of laborers is Wages, and the reward of capitalists is Profits; and we are now to demonstrate, that the part of their joint products falling to laborers as wages is all the while increasing as compared with the remaining part falling to capitalists as profits. This truth is of the deepest significance, and of the most cheering character; because men are more important in the universe than things; and because the number of men who sell their services as laborers is vastly greater than the number of men who sell their services as capitalists.

It is another indisputable and exhilarating truth for the masses of mankind, that the Value of each item or article of those products created by the joint action of laborers and capitalists is ever becoming less and less as measured by any relatively fixed standard as Money; so that, while wages as thus measured becomes a larger and larger aggregate as compared with the aggregate of profits, and is shared of course by a much larger number of people, those commodities looked at as a collection of items for which the wages of these many is usually expended for their own comforts, are becoming all the time cheaper and cheaper to everybody, owing to the ever-enlarging and wholly gratuitous action of natural forces.

For the sake of simplicity in the argument on this great point, we will first look at what the facts are through recent illustrations gathered by other parties for a wholly different purpose, and then give in detail the economical grounds for these patent and universal facts. Take for example, from Poor's Railroad Manual for 1889 a table showing in a graphic way the steady reduction in freight charges per ton per mile from 1865 to 1888 of seven representative Eastern trunk railroad lines, namely, the Pennsylvania, Fort Wayne and Chicago, New York Central, Michigan Central, Lake Shore, Boston and Albany, and Lake Erie and Western; and of six leading Western roads, namely, the Illinois Central, St. Paul, Burlington and Quincy, Chicago and Northwestern, Rock Island, and Chicago and Alton. The following are the figures:—

Rate Charges per Ton per Mile (in Cents).

Year.Eastern.Western.Year.Eastern.Western.
18652.9003.6421877.9711.664
18662.5033.4591878.8981.476
18672.3053.1751879.7641.279
18682.1323.1511880.8691.389
18691.8603.0261881.7631.405
18701.5932.4231882.7561.364
18711.4782.5091883.8291.310
18721.5042.3241884.7401.220
18731.4762.1881885.6361.158
18741.3322.1601886.7111.111
18751.1611.9791887.7181.014
1876.9851.8771888.609.934

This reduction of rates in the case of the group of Eastern roads has amounted to 79 per centum, and in the Western group to 73 per centum, in the twenty-four years. Not less remarkable than the extent of this decline in freight charges per mile is its uniformity. Both groups show a wonderful steadiness in the progress of rate reductions. Starting at quite different points as to territorial development, they have yet travelled at a nearly equal pace in the same direction. This shows the operation of causes at once steady and universal. Statistics can never of themselves yield us causes; but they guide the way to them; at any rate, they prevent any radical misinterpretation of them. The great and overshadowing cause here of the cheaper freights per ton, as everywhere else of cheaper rates at the junction of efforts by capitalists and laborers, is of course the perpetual and augmenting and ever-gratuitous assistance of natural forces at every point.

While the rates of freight per ton have decreased more than three-quarters in less than one-quarter of a century in the case of these 13 railroads on the whole average, the entire cost of the operation of these roads in this interval of time has not been diminished to any appreciable extent, as also stated by the same Manual. The main item in all the operation-expenses of railroads is the wages paid to the laborers of all grades; and the laborers are quite as well paid now on these 13 roads as they were in 1865, proper allowances being made for the changed and changing standards in the national Money. If, on a broad view, railroad employees of all grades have lost nothing as such in their wages in this interval; and the general public, including these laborers and also the capitalists concerned, have greatly gained, how can we account for the immensely lessened freight-charges while the whole operation-expenses continue substantially as before?

There is only one rational account to be given of this. And it is trustworthy. All known facts jump with it, and nothing substantial can be urged against it. The gains to the masses including the capitalists and the laborers have come out of the capitalists as such. This is apparent as well as real. Cost of Labor and Cost of Capital is the whole cost. If the whole cost of moving one ton of freight from Boston to Chicago is ¾ less than it was ¼ of a century ago, the cost of the labor being the same at the two points of time, then the conclusion is inevitable, that the cost of the capital at the second point is less than it was at the first point. With this conclusion all facts agree. All the laborers connected with a railroad from highest to lowest must be paid at any rate, or else the trains will certainly cease to move, whether the stockholders receive any dividend or not on their capital invested. The original stock—the capital that built the roads—of many if not of most the railroads in the country, has been annihilated, a new indebtedness in another form called bonds having taken the place of it. Even the nominal dividends of dividend-paying roads have declined in the interval from 10 or 8 to 5 or 4 per centum in the general, that is, 50 per centum. It is perfectly evident on every hand, that there is something in the nature and progress of things, that makes for wages as contrasted with profits: wages hold on and relatively enlarge, profits decline or go out altogether.

Fortunately we are not left to generalities here, however plain and certain these may be. One of the 13 railroads specified above, the Illinois Central, made a remarkable exhibit in its own annual Report of 1887, showing the cost of its locomotive service for each year of the thirty years preceding. This cost per mile run had fallen from 26.52 cents in 1857 to 13.93 cents in 1886. This reduction had been effected wholly on the Capital side of the account, by inventions and improvements of all sorts in the machinery of locomotion; while the wages of the engineers and firemen had risen in the period from 4.51 cents to 5.52 cents per mile run. The cost of the labor had risen both relatively and absolutely while the cost of the capital had declined both absolutely and relatively. In 1857 the engineers and firemen had received as wages 17% of the entire cost of the locomotive service, but in 1886 they had received 39% of that total cost. The table is as follows: —

I. C. R. R. CO.