Mr. George, however, is not content with disputing these doctrines; he insists on replacing them with others exactly opposite to them in purport, and for which he claims a like universal validity. He propounds a new population theory, and a new wages fund theory of his own. The more population abounds, the more will subsistence superabound, is his comfortable counter-proposition to Malthusianism. "I assert," says he, "that in any given state of civilization a greater number of people can collectively be better provided for than a smaller.... I assert that the new mouths which an increasing population calls into existence, require no more food than the old ones, while the hands they bring with them can in the natural order of things produce more. I assert that, other things being equal, the greater the population, the greater the comfort which an equitable distribution of wealth would give to each individual" (p. 99). In a word, his teaching is that "other things being equal" over-population is a ridiculous impossibility. What may be all concealed under the reservation, "other things being equal," he does not enlighten us, but it avowedly contains at least one presupposition of decisive importance to the question, the presupposition of the unlimited productiveness of the soil. Mr. George denies the law of diminishing return. We shall presently find him, in his doctrine about rent, basing his whole book on the operation of this law. But here in his doctrine about population it suits him to deny it, and he does so on singularly fantastical grounds (p. 93). He denies it on the ground that "matter is eternal, and force must for ever continue to act," as if the indestructibility of matter was the same thing as its infinite productiveness. "As the water that we take from the ocean must again return to the ocean, so the food we take from the reservoirs of nature is, from the moment we take it, on its way back to those reservoirs. What we draw from a limited extent of land may temporarily reduce the productiveness of that land, because the return may be to other land or may be divided between that land and other land, or perhaps all land; but this possibility lessens with increasing area, and ceases when the whole globe is considered. That the earth could maintain a thousand billions of people as easily as a thousand millions is a necessary deduction from the manifest truths that at least, as far as our agency is concerned, matter is eternal and force must for ever continue to act.... And from this it follows that the limit to the population of the globe can only be the limit of space. Now this limitation of space—this danger that the human race may increase beyond the possibility of finding elbow-room—is so far off as to have for us no more practical interest than the recurrence of the glacial period or the final extinguishment of the sun" (p. 94-5). If this passage means anything, it means that the race may go on multiplying as long as it finds room to stand on, and that even when that limit is reached it can only be squeezed to death and not starved. It can in no case apparently be starved. Subsistence cannot possibly run short, for the inherent powers of the soil are not permanently destructible. But he might as well argue that man must be omnipotent because he is immortal. The question is not one of the durability of the productive powers of the earth—it is one of their limited or unlimited productive capacity. Up to a certain point they may yield the same return at the same cost year after year in sæcula sæculorum, but will they yield more? Manifestly not. Every bushel they give after that is got at continuously increasing cost. Now of course wherever population increases so much, compared with the land at its disposal, that this increasing cost must be incurred in order to find them food, the epoch of diminishing return in agriculture has arrived, and the peril of over-population is already present. Happily, as we have said, that time is not yet, but it will come long, long before the human race fails to find elbow-room in this planet.
Mr. George himself admits that in a country of inconsiderable extent, or in a small island, such as Pitcairn's Island, over-population is quite possible before elbow-room is near exhausted—(p. 74)—and in making the admission he virtually surrenders his case. He admits in detail what he denies in gross. For is not the soil of a small island or an inconsiderable country as eternal as the soil of a continent? The only difference is that it is not so extensive, and therefore comes to the epoch of diminishing return sooner. That is all. The reason why he makes an exception of such an island is because its inhabitants "are cut off from communication with the rest of the world, and consequently from the exchanges which are necessary to the improved modes of production resorted to as population becomes dense" (p. 74). But if density of population is such a sure improver of production as Mr. George represents it to be elsewhere, why should it fail here? And if it fail anywhere, how can he argue that it must succeed everywhere? Once he admits, as he does in this passage, that subsistence has a definite limit in the modes of production that happen to be known in any age and country, and that population has a definite limit for such age and country in the amount of subsistence which the known modes of production are capable of extracting from the soil, he really admits all that Malthusians generally contend for, and coming to curse, he has really blessed them altogether. The limit of subsistence which he here recognises—the limit imposed by the state of the arts—is far within the limit which he has just been denying, the natural limit to the inherent fertility of the soil, on which economists base their law of diminishing return. The former point is far sooner reached than the latter. Men will starve because they don't know how to make the best use of nature long before they will starve because nature is used up; and it is exactly that earlier limit on which Malthusians lay stress.
But except for this inconsistent admission in the case of a petty isolated island, Mr. George persistently refuses to recognise any kind of limit to subsistence, either in the productive capacity of the soil or in the state of the arts. He seems to fancy that land will go on yielding larger and larger harvests ad infinitum to accommodate an increasing population, and that even if it failed to do so, new inventions or improved processes of production would be constantly discovered when they were needed, and keep the supply of food always equal to the demand. With these crude assumptions in his head, he arrives very easily at his own peculiar theory, which is, that subsistence tends to increase faster than population, because the growth of population itself affords the means of such economies and organization of labour as multiply immensely the productive capacity of each individual labourer. A hundred labourers, he is fond of arguing, will produce much more than a hundred times the amount that one will, and it is therefore clear folly to think of population as capable of encroaching on subsistence. On the contrary, it seems almost fitter to speak of it as a means of positively economizing subsistence. Mr. George's mistake arises from ignoring the fact that subsistence depends on the productive capacity of land as well as on the productive capacity of labour, and the productive capacity of land is not indefinitely progressive.
Mr. George's new wages fund theory is based on a precisely analogous misconception of the real conditions of the case, and is just as much in the air as his population theory. "Wages," he says, "cannot be diminished by the increase of labourers, but on the contrary, as the efficiency of labour manifestly increases with the number of labourers, the more labourers, other things being equal, the higher wages should be" (p. 62). Just as he has already argued that food can never run short before an advancing population, because the new hands can produce much more than the new mouths can consume, as if the hands span it out of their own finger nails; so he now argues that wages can never decline for want of capital to employ labourers, because the capital that employs them is made by the labourers themselves. They are paid, he declares, not out of the capital of their employers, but out of the product of their own labour. Mr. F. A. Walker, the eminent American economist, had already taught a similar doctrine, but with the reservation that while wages were really paid out of the produce of the labour they remunerated, they were usually advanced out of the employer's capital. But Mr. George throws aside this reservation, and declares boldly that wages are neither paid nor advanced out of capital, and that if any advance is made in the transaction at all, it is the labourer who makes it to the employer, not the employer to the labourer. "In performing his labour, he (the labourer) is advancing in exchange; when he gets his wages, the exchange is completed. During the time he is earning the wages, he is advancing capital to his employer; but at no time, unless wages are paid before work is done, is the employer advancing capital to him" (p. 49).
In this contention Mr. George relies much on the analogy of the "self-employing" labour of primitive society. When men live by gathering eggs, he tells us, the eggs they gather are their wages. No doubt; but in our complicated civilization we don't live by gathering eggs from day to day, but by sowing the seed in spring which is to yield us food only in harvest—by preparing work for the market which may take weeks, months, even years before it is marketable. The energetic Sir John Sinclair is said to have once danced at a ball in the evening dressed in a suit the wool of which was still growing on the sheep's back in the morning; but rapidity like that is naturally foreign to ordinary commerce. The successive operations of clipping, fulling, teasing, spinning, dying, weaving, cutting, sewing, occupy considerable time. So with other things. Houses, ships, railways, are not built in a day, or by a single workman. The product of a single workman's work for a day at any of these things has no value apart from the product of the other workmen's work, nor has the work of them all any value unless the work is, or is to be, completed. The wages paid during the period of construction, therefore, cannot possibly have come out of the work for which they were paid, but must have been advanced otherwise. Who advances them? Clearly not the labourer himself, for he receives them. And yet that is what Mr. George unhesitatingly asserts, and his argument is as courageous as it is ingenious. He does not shrink from applying it to the extremest case you like to suggest—the Great Eastern, the Gothard Tunnel, the Suez Canal; even in these cases the labourers, who spent months and years in doing the work, were paid out of the work itself, out of the Great Eastern, out of the Gothard Tunnel, out of the Suez Canal. "For," says Mr. George, "a work that is incomplete is not valueless, it is not unexchangeable; money may be raised on it by mortgage or otherwise, and as this money is raised on the product of the labourer's work, the wages it is employed to pay are really paid out of that product." But this only shifts the question a little: it does not answer it. Where does this lent money come from? Certainly not from the work it is lent on. Perhaps not, Mr. George will rejoin, again shifting his ground, but it comes from the product of the contemporaneous work of other labourers. "It is not necessary to the production of things that cannot be used as subsistence or cannot be immediately utilized that there should have been a previous production of the wealth required for the maintenance of the labourers while the production is going on. It is only necessary that there should be, somewhere within the circle of exchange, a contemporaneous production of subsistence for the labourers, and a willingness to exchange this subsistence for the thing on which the labour is being bestowed" (p. 51). But this is only passing round the dilemma. For this contemporaneous production has itself the same difficulty to face; it has to sustain its labourers during the time taken to complete their work; and it can only do so, according to Mr. George's explanation, by raising the means through a mortgage on the unfinished work. It borrows to pay its own wages, but is apparently able to lend to pay other people's. Mr. George has a happy method of carrying on the affairs of society by mutual accommodation. Peter is a shoemaker who wants money to buy leather to make shoes and food to maintain him till the shoes are made. Paul is a carpenter who is in a like case, and wants money to buy food and timber. Peter borrows the money he needs from Paul on mortgage, and then Paul in turn borrows what he needs from Peter, on the same terms. Utopia is a pleasanter world than ours, and an IOU probably goes a long way in it; but here on this hard earth Peter would certainly make no shoes nor Paul any chairs, unless he had either himself saved enough to purchase the materials, or found a neighbour who had done so and was ready to make him an advance. Except for this neighbour he could not work at all, and could not therefore "create any wages," and the amount of work he got and wages he earned would manifestly depend greatly on the amount of capital this stranger possessed and was disposed to invest in such an enterprise.
It is true that the wages of labour will be guided in amount by the quantity of the product, but they are not on that account actually paid out of the product. And it is true that the labourer gives value for his wages—certainly he would not otherwise be employed—but that value is not usually marketable until some time, in many cases years, after the wages have been enjoyed, and therefore cannot have been the source whence these wages came. The wages were paid out of the saved results of previous labour—that is, out of capital—and Mr. George has absolutely no conception of the amount of capital that is necessary to carry on the work of industry. He says we live from hand to mouth, and so in a sense we do. Our capital is being constantly consumed and constantly reproduced again, and economists are fond of showing, from the speedy recovery of a civilized state after a devastating war, how short a time it would really take to replace it entirely. But until it is replaced every inhabitant undergoes considerable privations, which simply means that the rate of wages has fallen for want of it. There are some trades, like the baker's, where the product is actually sold before the wages are paid; and there are many, like the whaler's mentioned by Mr. George, where the labourers can afford to wait long terms for part at least of their remuneration (no great sign, by the way, of the minimum of a bare living); but even in these much capital must be set aside before a single hand is engaged. The whalers, for example, must be furnished with a ship to start with, and be provisioned for the voyage; and if these requisites are not forthcoming, they must go without work and wages altogether, or take work at inferior terms in a market glutted by their own arrival in it. Mr. George speaks lightly of the labourers who excavated the Suez Canal advancing value to the company who employed them, and yet before a single pick or spade was stuck into the sand of the Isthmus the company had laid out, in preliminary expenses and machinery, as much as six millions sterling—more than a third of the whole cost of the Canal. They had then to pay other five or six millions in wages before the work fetched a single fee; and yet Mr. George will have us believe that those five or six millions actually came out of the profits, merely because the projectors hoped and believed they might eventually come out of them. Labourers give an equivalent to the capitalists for their wages, but their wages are really paid out of the capital which their employers have saved for the purpose of purchasing that equivalent. I may have bought a cow in the hope of recouping myself by selling her milk, but I did not therefore pay her price out of the milk money—for nobody would have sold her to me if he had to wait for that; I bought her out of money I had previously saved, and from the same source exactly, and no other, do capitalists buy labour.
But, objects Mr. George, that cannot be; wages cannot be paid out of capital, because they are often lowest when, as shown by the low rate of interest, capital is most abundant. But Mr. George here confounds existent capital with employed capital. It is only the capital actually employed that tells on wages; the low rate of interest merely shows that there has been an increase in unemployed capital, and since that is generally a correlative of a diminution of employed capital, it is but natural that low interest should be attended by low wages. Low wages are a consequence of unemployed labour, unemployed labour a consequence of unemployed capital, and unemployed capital a consequence of unfavourable industrial conditions which labour, either with capital or without it, cannot evade or reverse.
So far then of Mr. George's views on population and the wages fund, for which much value, as well as originality, has been claimed. The chapters in which he states them are certainly among the most impressive and characteristic in his book. Nowhere else does he display more strikingly his remarkable acuteness, fertility, and literary power, and nowhere else are these high qualities employed more fruitlessly from sheer want of grasp of the elements of the problems he discusses. These chapters are after all, however, something of a digression from the main business of the book, and they have perhaps detained us too long from Mr. George's own explanation of the supposed growth of poverty.
His explanation is this: "The reason why, in spite of the increase of productive power, wages constantly tend to a minimum which will give but a bare living is that with increase in productive power, rent tends to even greater increase" (p. 199). "Rent swallows up the whole gain, and pauperism accompanies progress" (p. 158). "The magic of property," it seems, has an unsuspected malignancy; but, in the present case, its spell is really exercised only over Mr. George's own vision. For who, with his eyes open, would believe for a moment what Mr. George so gravely asserts, that of the whole gain won by our multiplied productive power, none whatever has gone to the great bankers, and brewers, and cotton spinners, and ironmasters, and corn factors, and shipbuilders, and stockbrokers, and railway contractors; that our Rothschilds, and Brasseys, and Barings, and Bairds, the great plutocrats of the time, the possessors of the largest fortunes in the country, the very men and classes who have been most conspicuously enriched through the material progress of the nation, have all the while been conducting a hard struggle against a fatal tendency in their incomes to sink to a bare living, and had to feed, exactly like the manual labourers, from the crumbs that fall from the landowners' table. The assertion is too violent and preposterous to merit serious refutation. Everybody knows that the greatest part of the wealth of modern society is not concentrated in the hands of the landlords at all, that it has not accrued from rent and that it would not be a farthing the less though private property in land were abolished to-morrow.
But violent and preposterous as Mr. George's conclusion is, it has not been arrived at without the exercise of much perverse ingenuity. Having been brought by his examination of the wages fund and population theories to the conviction that the key to his riddle was not to be discovered in the conditions that regulated production, he concludes that it must, therefore, be sought in the conditions that regulate distribution. His problem is thus one in the distribution of wealth, and it must be explained, if it is to be explained at all, by the laws of distribution. To investigate these laws, therefore, becomes now his object, and the first step he takes is a truly amazing one. At the very outset he throws the most important class of participators in the distribution—the class that appropriates the largest share—out of court altogether, and he proceeds to settle the whole question as if they never got a penny, and as if the entire spoil were divided among their neighbours. People who live on profits, it seems, have no locus standi in a question of distribution, and the case must be considered as if the parties exclusively concerned were the people who live on wages, the people who live on interest, and the people who live on rent. "With profits," he says, "this inquiry has manifestly nothing to do. We want to find what it is that determines the division of their joint produce between land, labour, and capital, and profits is not a term that refers exclusively to any one of these three divisions. Of the three parts into which profits are divided by political economists, namely compensation for risk, wages of superintendence, and returns for the use of capital, the latter falls under the term interest, which includes all the returns for the use of capital and excludes everything else; wages of superintendence falls under the term wages, which includes all returns for human exertions and excludes everything else; and compensation for risk has no place whatever, as risk is eliminated when all the transactions of a community are taken together" (pp. 113-4).