A History of Economic Doctrines / from the time of the physiocrats to the present day

by Charles Gide; Charles Rist

Hence his exposition of the twofold aspect of distribution. Economically exchange attributes to each of the factors land, capital, and labour a portion of the produce corresponding to the value of their respective services as estimated in the market. Socially it often means taking away from the real producers—from the workers—a part of the goods which their toil has created. This portion Rodbertus refers to under the simple name “rent,” which includes both the revenue of capitalists and the income of landlords.

No economist ever put the twofold aspect of the problem in a clearer light. Laying hold of the eternal opposition between the respective standpoints, he emphasises the difficulties which they present to so many minds. Justice would relate distribution to merit, but society is indifferent provided its own needs are satisfied. Society simply takes account of the market value of these products and services without ever showing the least concern for their origin or the efforts which they may originally have involved—the weary day of the industrious labourer and the effortless lounge of the lazy capitalist being similarly rewarded. Rodbertus’s great merit was to separate this truth from the other issues so frequently confused with it in the writings of the earlier economists and to bring it clearly before the notice of his fellow economists.

Rodbertus’s criticism did not end there, although the demonstration which we have just given of the distinction between the social and the purely economic point of approach to distribution constitutes its essential merit. We must not omit the practical conclusions which he draws from it.

What concerned Rodbertus most—at least, so we imagine from the standpoint which he adopted—was not the particular way in which the rate of wages or interest, high or low rents, are determined, but the proportion of the revenue that goes to the workers and non-workers respectively. The former question is a purely economic one of quite secondary importance compared with this other social problem. Believing that he had already shown the possibility of the workers being robbed, the problem now was to determine whether this spoliation was likely to continue. Does economic progress give any ground for hoping that rent or unearned income will gradually disappear? Bastiat and Carey had replied in the affirmative. The proportion that goes to capital, so they affirmed, is gradually becoming less, to the great advantage of the labourer. Ricardo, faced with the same dilemma, had come to the conclusion that with the inevitable increase in the cost of producing food the landowner’s share must be constantly growing. Say had asked himself the same question in the earliest edition of his treatise, but had found no reply. Rodbertus adopts none of their solutions, but independently arrives at the conclusion that the worker’s share gradually dwindles, to the advantage of the other participants.[912]

Theorist as he was, a simple deduction was all that was needed to convince him of the truth of this view. The rate of wages, we have already seen, is determined by the interaction of demand and supply in the labour market. The market price of labour, however, like that of any other product, is always gravitating towards a normal value—this normal value being none other than Ricardo’s necessary wage. “The share of the product that falls to the lot of the producer both in an individual instance and as a general rule is not measured by the amount which he himself has produced, but by that quantity which is sufficient for the upkeep of his strength and the upbringing of his children.”[913] This celebrated “brazen law” became the pivot of Lassalle’s propaganda, although it was never definitely recognised by Marx.

Granting the existence of such a law, and admitting also that the amount produced by labour is always increasing, so that the mass of commodities produced always keeps growing, a very simple arithmetical calculation suffices to show that the total quantity obtained by the workers always remains the same, representing a diminished fraction of the growing totality.

A similar demonstration affords a clue to the prevalence of crises. The entrepreneur keeps adding to the mass of commodities produced until he touches the full capacity of social demand.[914] But while production grows and expands the worker’s share dwindles, and thus his demand for some products remains permanently below production level. The structure is giving way under the very feet of the unsuspecting producer.[915] This theory of crises is simply a re-echo of Sismondi,[916] and gives an explanation of a chronic evil rather than of a crisis pure and simple. Its scientific value is just about equal to Sismondi’s other theory concerning proportional distribution.

This theory upon which Rodbertus laid such emphasis had already been outlined in his Forderungen, and a fuller development is given in his Soziale Briefe, where he expressly states it to be the fundamental point of his whole system, all else being mere scaffolding. His one ambition all his life long was to be able to give a statistical proof of it, but its importance is not nearly as great as he imagined it to be.

In the first place, doubt as to the validity of the “brazen” or “iron law of wages”—upon which the theory is based—is entertained not merely by economists, but also by socialists. And even if it were true, Rodbertus’s proof would still be inconclusive, for the workers’ share of the total product depends not upon one fact alone, but upon two—the rate of wages and the number of workers. Rodbertus’s error and Bastiat’s are very similar. Bastiat had tried to determine the capitalists’ share of the total product by taking account of one fact only, namely, the rate of interest, whereas he ought to have taken the amount of existing capital into consideration as well.