The effect that a series of improvements has on the amount of social capital, if we measure the fund solely on the basis of the cost of the capital goods which embody it, may be represented thus:—The horizontal line measures time and is graduated in years from one to ten. The distance of the point above this base represents the amount of capital as estimated in units of cost, in the possession of the society at the time a particular improvement is made, and would remain unchanged if society were static. The level of the lineABrepresents what, under such a condition, would be the capital of a decade. The curved lineAB´, dipping belowABand then rising above it, expresses the fact that a single important improvement first trenches on the amount of capital in use, and soon makes good the deduction and makes a positive addition. It raises the sum total of capital to the level of the latter part of the lineAB´. The curved lineA´B´´, first falling belowA´B´and then rising above it, expresses the fact that a second improvement, made a year or two after the first one, makes a reduction of the amount of capital as determined by the first improvement, and later adds more thanenough to make good this reduction. A third improvement, at the end of two or three further years, has the effect expressed by the lineA´´B´´´; that is, it first reduces the fund below the level at which at that time it would otherwise have stood,—but by no means to the level at which it stood when the series of improvements began,—and later carries it above the line expressing the highest level it would, without this improvement, have attained. In so far as these three improvements affect the level of the social capital for the ten-year period, it stands at the level indicated by the lineAA´A´´B´´´, and no later improvement, even at the time of its introduction, does more than to make a small reduction of the increment of capital accruing from the products of the earlier improvements. A series of economical changes means a perpetual increase of the social capital as well as a perpetual improvement in the mode of applying labor. The increments of capital due to the earlier changes are far more than is required by the introduction of any later one.
The Impossibility of Reducing Capital by too Rapid Progress.—There is a theoretical question whether this series might be too rapid to permit this result. If the interval were a month instead of several years, and if the amount of capital put into the new appliances were the same that, in the figure, they are represented as requiring, the effect would be to make twelve deductions from the amount of the social capital in the course of a year, which would carry it some distance below its original level,while in this one yearthere would have been no time for the profits to accrue in order to restore and add to thefund. In the next year and the following ones this would follow, and the effect, in the course of ten years, would be to carry the social capital to a still higher level than the one it reaches in consequence of the slower succession of economical changes. Increasing the rapidity of productive inventions only multiplies the additions made to the social capital.
We may summarize the chief facts concerning technical progress as follows:—
(1) Progress may throw particular men out of their present employment, but cannot destroy the social demand for their labor. Somewhere in society there is a place for them.
(2) If improvements were long confined to one subgroup, they might send labor into other subgroups and even into other general groups. Occurring as they do at nearly all parts of the system, they very seldom require an absolute diminution of the amount of labor in a subgroup, and practically never cause such a reduction in a general group.
(3) The gradual introduction of an improvement is important, since it affords time for an increase in the social demand for the product which is thus cheapened and for introducing at many other points improvements which neutralize, in a large degree, the labor-expelling effect of the first improvement.
(4) Technical gains are the largest source of additions to the total amount of the social capital. The constant influx of new capital facilitates the placing of laborers at the points where they are needed.
(5) The fact that elementary utilities which areproduced by agriculture cater to a less elastic demand than do the form utilities which are the product of manufacturing occupations, has caused labor to move slowly from the lowest subgroups of the various series to the upper ones, as the productive power of labor in agriculture has increased.
(6) This movement is so gradual that it can be accomplished almost entirely by devoting to the industries constituting the upper subgroups an enlarged share of new laborers as they enter the field in quest of employment. Young men drift from the farm to the village and the city.
(7) In addition to the upward flow of labor in the series of subgroups there are some lateral movements, or transfers from group to group, to be taken into account. The fact that improvements are widely diffused and that there is a succession of them at each point makes it possible to make these lateral movements of labor in the same way in which the movement within the groups is accomplished; namely, by putting the new men who are entering the field of employment in the places where they are most needed.
(8) These facts do not always prevent particular men from losing the special benefit that skilled handicrafts have insured to them, since a machine, to the running of which they are compelled to betake themselves, may often be as well tended by persons who have never learned such a handicraft.
(9) The loss thus entailed on craftsmen was very large during the original process of supplanting hand labor by machinery, but bids fair to be relatively small hereafter, since fewer men go through long and costly apprenticeships, and since the operator of onemachine can usually learn to operate another with little waste of time.
(10) Such injuries as particular men now suffer from the introduction of economical devices are, as a rule, more than atoned for even to these men by the greater productivity of social labor, as it is applied in new ways, and by the greater abundance of social capital. These gains are the result of improvements made in the earlier periods, and they benefit every one who labors.
(11) The new capital created by productive inventions is an essential cause of the continuing gain of the working class.
(12) While most inventions at first draw capital from the social fund to the point where they are applied, many of them soon liberate capital by cheapening particular appliances of production, and nearly all of them, by means of the profits they insure, ultimately add to the social capital.
The Vital Importance of Continued Improvement.—Intelligent study will make it clear to every one that any assertion that machinery is the enemy of labor is not merely erroneous, it is a contradiction of the most striking and important fact connected with general progress. The gains of labor during the past century, which have been partly due to the occupation of areas of new land, have been largely due to the mechanical inventions and technical discoveries which have put the forces of nature so largely at man's disposal. These forces have worked for all society, indeed, but they have worked largely for the men who labor, whether in the factory, in the shop, on the railroad, or on the farm. Their effects are all-pervasive, since they signify an increase in the productivepower of that final unit of social labor on which wages generally depend. General riches have been and must continue to be generally beneficent. As an isolated man working, Crusoe-like, for himself alone, gains by every technical discovery he can make and by everything he can add to his stock of productive appliances, so society, the great and isolated organism which is the tenant of our planet, reaps a benefit by every improvement it can make, and the forces of distribution see to it that this benefit is carried through and through the system and made to improve the condition of the most humble members. Since the great areas of new land are no longer available as a future resource, the hope of labor during the coming centuries, under any form of industrial organization, whether it be competitive or socialistic, rests on the prospect of continued technical gains,—an unending succession of calls on the exhaustless serving power of nature.
The Effect of Changes in the Relative Amounts of Labor and Capital.—The law of wages, as stated in an early chapter of this work, makes it evident that an increase of population, while the social fund of capital remains the same, would reduce the product of marginal labor and therefore the rate of wages. In every establishment into which more workmen should come, while its capital remained the same in amount, the power of an individual worker to produce goods would be lessened. Moreover, any influx of laborers into the society as a whole would be attended by a diffusion of them among all the groups and subgroups, so that the power of an individual laborer to create any kind of goods would be reduced. This means that labor has lost some of itspower to createcommodity, which is the concrete name for general wealth, and its wages fall accordingly.
An influx of capital without any change in the number of laborers would have the opposite effect. It would add to the productive power of marginal labor. As the new capital should diffuse itself through the producing organism it would enlarge the product of workers everywhere. The wages of labor depend in part on a numerical ratio between units of capital and units of labor, as they coöperate in production; and the change in the ratio which enlarging capital causes improves the condition of the working people. The capital also diffuses itself throughout the system, every subgroup gets a share of it, and labor everywhere responds to this influence and produces more than before. In a change in this ratio—in a gain ofper capitawealth in productive forms—lies one influence which has a great power over human destiny and is one main cause of weal or woe for coming generations. Method as it improves is related in two ways to this critical change in the ratio of capital to population. It is a prominent cause of the increase of capital. What men make by juggling with values and putting taxes on other men adds nothing to the aggregate wealth; but what they make by improved methods of production causes a net addition to it. The improvement in method also directly reënforces the influence of enlarging capital, by infusing productivity into labor and increasing its returns.
The Resultant of the Five Dynamic Changes acting Together.—So long as the increase of capital more than offsets the increase of population, the ultimateresult of all five of the general changes which characterize a dynamic state is to increase the well-being of laborers. The movement of labor from point to point in the system of industrial groups is a necessary means of securing the largest gain for society as a whole and of diffusing the benefit among all members. It is wage earners who are most numerous and most needy, and the greatest benefit which can be credited to any economic influence is that which takes the shape of a rise in wages. Moreover, an upward trend in the rate of pay is of far greater importance than the level of the rate at any one time. A system that should afford high present wages would stand condemned if it precluded all chance of higher ones hereafter; while a system that should begin with a low rate and afford a guaranty that it should grow higher each year to the end of time would have the most important merit which any system could possess. The outlook it would afford for humanity would far outweigh a measure of hardship imposed on the present generation. A present purgatory with dynamic capabilities must in the end excel any earthly paradise which is held fast in a stationary state.
We may represent the resultant of the actual growth of population and of capital by the following figure:—
Measuring time by decades along the horizontal base line and the rate of wages at the beginning of a century by the lineAB, we represent the increase in the pay of labor which would be brought about by an increase of capital not counteracted by any other influence by the dotted lineBC, and the reduction which would be caused by an increase of population by the dotted lineBE. The lineBDdescribes the resultant effect of these two changes acting together, on the supposition that during the latter part of the century the growth of population is somewhat retarded and that the increase of capital is the predominating influence.
We may further represent the change in the rate of wages which is caused by improvements in method and organization by lines rising above the one which expresses the trend of wages as it is affected only by an increase of capital and of population.
AFmeasures time as before andABthe rate of pay at the beginning of the century. The dotted lineBErepresents the rise in wages due to the increase of capital, as it more than counteracts the growth of population. The rise of the lineBDaboveBCrepresents the additional increase in wages which is brought about by improvements of method, and finally, the rise ofBCaboveBDexpresses the further addition to the pay of labor which comes by reason of improved organization. The uppermost lineBCdescribesthe resultant of all the dynamic changes on the supposition that they act in a natural way.
It will be seen thatBCat first rises aboveBDrapidly and later runs nearly parallel with it. This expresses the fact that while gains insured by organization may continue for a long period, the amount of them does not greatly increase after a fairly efficient type of organization has been secured. On the other hand, the fact thatBDrises aboveBEby a wider and wider interval expresses the fact that gains which come from technical improvements may increase for an indefinitely long time.
The Rate of Interest contrasted with the Absolute Amount of it; this Amount Increasing.—The changes which make wages rise cause interest to fall and there would seem to be a partial offset for the general gain; but the chief cause of a decliningrateof interest is an increase of thetotal amountof capital. The size of the income which comes to the capitalists as a class from their entire invested wealth grows larger wherever the amount of the fund increases more rapidly than the rate of interest falls. A million dollars yielding four per cent gives a larger income than a half million yielding five or six. It is a condition such as this which we have described in outline, and it enables the holders of investments to receive a constantly increasing total return, although the percentage yielded by a given amount invested grows continually smaller.
The Conditions of Increasing Future Well-being.—The realization of this resultant of all dynamic forces requires that the rate of growth of population should be subject to a natural check, that the increase of capital should not be unduly retarded, that technicalimprovements should go on, and that the organization which is effected should be of the kind which makes for efficiency but not for monopoly. Competition must be kept alive. In altered ways, indeed, the essential power of it must forever dominate the industrial system, as it will do if the state shall do its duty and not otherwise. A dynamic society requires a dynamic government whose enlarging functions are shaped by economic conditions.
Since the optimistic conclusion reached in the preceding chapter is contingent on an increase of wealth which is not neutralized by an increase of population, it remains to be seen whether the population tends to grow at a rate that gives reason to fear such a neutralizing. Does progress in method and in wealth tend to stimulate that enlarging of the number of working people which, in so far as they are concerned, would bring progress to an end? Is the dynamic movement self-retarding and will it necessarily halt? The answer to this question depends, in part, on the law of population.
The Malthusian Law.—We need first to know whether the growth of population is subject to a law, and if so, whether this law insures the maintenance of the present rate of increase or a retarding of it. The law of population formulated by Malthus at the beginning of the last century is the single extensive and important contribution to economic dynamics made by the early economists. It was based more upon statistics and less ona priorireasoning than were most of the classical doctrines. Even now the statement as made by Malthus requires in form no extensive supplementing, and yet the change which is required is sufficient to reverse completely the original conclusion of the teaching. Malthusianism constitutedthe especially "dismal" element in the early political economy, and yet, as stated by its author, it revealed the possibility of a comfortable future for the working class. One might look with cheerfulness on every threatening influence it described if he could be sure that the so-called "standard of living" on which everything depends would rise. The difficulty lay in the fact that the teaching afforded no evidence that it would thus rise. The common impression of readers was that it was destined to remain stationary and that too at a low level. The workmen of Malthus's time were not accustomed to getting much more than the barest subsistence, and not many economists expected that they would get much more, even though the world generally should make gains.
The Popular Inference from the Malthusian Law.—If we state the conclusion which most people drew from the Malthusian law in its simple and dismal form it is this: Whenever wages rise, population quickly increases, and this increase carries the rate of pay down to its former level. The earnings of labor depend upon the number of laborers; a lessening of the number of workers raises their earnings and an increase depresses them; and therefore, if every rise in pay brings about a quick increase of population, labor can never hold its gains; every rise is the cause of a subsequent fall.
Malthus's Qualification of his Statement.—As we have said, Malthus so qualified his statement that he did not positively assert that this would describe the experience of the future; the fall in pay that should follow the increase of numbers might not always be as great as the original rise, and when alater rise should occur the fall following it might be less than this second rise. In some way workers might insist upon a higher standard of living after each one of their periodical gains.
Why this Qualification is not Sufficient.—The mere fact that the standard of living may conceivably rise does not do much to render the outlook cheerful, unless we can find some good ground for supposing that it will rise and that economic causes will make it do so. We should not depend too much on the slow changes that education may effect, or base our law on anything that presupposes an improvement in human nature. We need to see that in a purely economic way progress makes further progress easier and surer and that the gains of the working class are not self-annihilating but self-perpetuating. We may venture the assertion that such is the fact: that when workers make a gain in their rate of pay they are, as a rule, likely to make a further gain rather than loss. While there must be minor fluctuations of wages, the natural and probable effect of economic law is to make the general rate tend steadily upward, and nothing can stop the rise but perversion of the system. Monopoly may do it, or bad government, or extensive wars, or anarchy growing out of a struggle of classes; but every one of these things, not excepting monopoly, would naturally be temporary, and even in spite of them, the upward trend in the earning power of labor should assert itself. Instead of being hopelessly sunk by a weight that it cannot throw off, the labor of the future bids fair to be buoyed up by an influence that is irrepressible.
Refutations of Malthusianism.—The Malthusian law of population has been so frequently "refuted" asto prove its vitality. It is in the main as firmly impressed in the belief of scientific men as it ever was, and some of the arguments which have been relied upon to overthrow it require only to be stated in order to be discarded. One of these is the claim that the statement of the law is untrue because, during the century in which the American continent, Australia, parts of Africa, and great areas elsewhere were in process of occupation, mankind has not actually pressed on the limits of subsistence. No intelligent view regards that fact as constituting anything but an illustration of the Malthusian law. A vast addition to the available land of the world would, of course, defer the time of land crowding and the disastrous results which were expected from it, but with the steady growth of population the stay of the evil influence would be only temporary.
An Objection based on a Higher Standard of Living.—The second objection is also an illustration rather than a refutation of the Malthusian doctrine; it asserts that the standard of living is now higher than it was, and the population does not increase fast enough to force workers to lower it. Malthus's entire conclusion hung upon anif. The rate of pay conformed to a standard, and if that standard were low, wages would be so; while if it were higher, wages would be higher also.
The Real Issue concerning the Doctrine of Population.—There is a real incompleteness in all such statements. Does the standard of living itself tend to rise with the rise of wages and to remain above its former level? When men make gains can they hold them, or, at any rate, some part of them, or must they fall back to the level at which they started? Andthis amounts to asking whether, after a rise in pay, there is time enough before a fall might otherwise be expected to allow the force of habit to operate, to accustom the men to a better mode of living and forestall the conduct that would bring them down to their old position. The standard of living, of course, will affect wages only by controlling the number of laborers, and the discouragement due to Malthusianism lies in the fact that it seems to say that the number of workers is foreordained to increase so quickly, after a rise in wages, as to bring them to their old level. Whether it does or does not do this is a question of fact, and the answer is a very clear one. The higher standards actually have come from the higher pay, and they have had time to establish themselves. Subsistence wages have given place to wages that provided comforts, and these again to rates that provided greater comforts and modest luxuries; and the progress has continued so long that, if habit has any power whatever, there is afforded even by the Malthusian law itself a guarantee that earnings will not fall to their former level nor nearly to it.
A Radical Change in Theory.—Progress is self-perpetuating. Instead of insuring a retrogression, it causes further progress. The man who has advanced from the position in which he earned a bare subsistence to one in which he earns comforts is, for that very reason, likely to advance farther and to obtain the modest luxuries which appear on a well-paid workman's budget. "To him that hath shall be given," and that by the direct action of economic law. This is a radical departure from the Malthusian conclusion.
Three Possible Conditions for the Wage-earningClass.—Workers are in one of three possible conditions:—
(1) They may have a fixed standard and a very low one. Whenever they get more than this standard requires, they may marry early, rear large families, and see their children sink to their own original condition.
(2) They may have a fixed standard, but a higher one. They may be unwilling to marry early on the least they can possibly live on, but may do so as soon as their pay affords a modicum of comfort.
(3) They may have a progressive standard. There may be something dynamic in their psychology, and it may become a mental necessity for them to live better and better with advancing years, and to place their children in a higher status than they themselves ever obtained.
A Historical Fact.—The manner in which Malthus was actually interpreted was as much due to the condition of workers in his day as to anything which he himself said. It was small comfort to know that, under the law of population, wages might conceivably become higher and remain so because of a higher standard of living, provided the higher standard was never attained. Facts for a long time were discouraging. In due time they changed for the better. The opening of vast areas of new land made its influence felt. It raised the pay of labor faster than the growth of population was able to bring it down. This had the effect of establishing, not only a higher standard, but a rising standard, and as one generation succeeded another it became habituated to a better mode of living than had been possible before. It was the sheer force of the new land supplementedby new capital and new methods of industry that accomplished this. It pushed wages upward, in spite of everything that would in itself have pulled them down.
A Retarded Growth of Population.—If Malthusianism, as most people understood it, were true, population should increase most rapidly during this period of great prosperity, and should do its best to neutralize the effect of new lands, new capital, and new methods. In some places the increase has been abnormally rapid, and in a local way this has had its effect; but if we include in our view the whole of what we have defined as civilized industrial society, the rate of growth has not become more rapid, but has rather become slower during this period. In one prosperous country, namely, France, population has become practically stationary. Even in America, a country formerly of most rapid growth, the increase, apart from immigration, has been much slower than it was during the first half of the nineteenth century. The growth of population, then, may proceed more slowly or come to a halt, even while wealth and earning powers are increasing. If this is so, a further accumulation of capital and further improvements in method will not have to struggle against the effects of more rapidly growing numbers, and their effects will become more marked as the decades pass. There will be a weaker and weaker influence against these forces which fructify labor and they will go on indefinitely, endowing working humanity with more and more productive power and with greater accumulations of positive wealth. Home owning, savings bank deposits, invested capital, and comfortable living may be more and more common amongmen who depend for their income mainly upon the labor of their hands. Is this more than a possibility? Is there an economic law that in any way guarantees it? Can we even say that general wealth will, without much doubt, redound to the permanent well-being of the working class, and that the more there is of this prosperity, the less there is of danger that they will throw it away by any conduct of their own? The answer to these questions is to be found in a third historical fact.
The Birth Rate Small among the Upper Classes in Society.—In most countries it is the well-to-do classes that have small families and the poor that have large ones. It is from the interpretation of this fact that we can derive a most important modification of the Malthusian law. It is the voluntary conduct of different classes which determines whether the birth rate shall be large or small; and the fact is that in the case of the rich it is small, in the case of the poor it is comparatively large, while in the case of a certain middle class, composed of small employers, salaried men, professional men, and a multitude of highly paid workers, it is neither very large nor very small, but moderate. In a general way the birth rate varies inversely as the earning power of the classes in the case, though the amounts of the variations do not correspond to each other with any arithmetical exactness. If one class earns half as much per capita as another, it does not follow that the families belonging to this class will have twice as many children. They do, on the average, have more children. There is, then, at least an encouraging probability that promoting many men from the third class to the middle class would cause them toconform to the habit of the class they joined. This class is at present largely composed of persons who have risen from the lowest of the classes, and any future change by which the third class becomes smaller and the second larger would doubtless retard the average birth rate of the whole society.
Motives for the Conduct of the Different Classes.—History and present fact are again enlightening in that they reveal the chief motive that determines the rapidity of the increase of the population. When children become self-supporting from an early age, the burden resting on the father when he has a comparatively small number of them is as large as it ever will be. If they can earn all they cost when they reach the age of ten, the maintenance of the children will cost as much when the oldest child has reached that age as it will cost at any later time. Even though one were added to the family every year or two, one would graduate from the position of dependence every year or two, and the number constantly on the father's hands for support would probably not exceed five or six, however large the total number might become. The large number of children in families of early New England and the large number of them in French Canadian families at a recent date were due to the fact that land was abundant, expenses were small, and a boy of ten years working on the land could put into the family store as much as his maintenance took out of it. The food problem was not grave in those primitive places and times, and neither were the problems of clothing, housing, and educating. It is in this last item that the key to a change of the condition lay, for the time came when more educating was required, when the burden ofmaintaining children continued longer, and a condition of self-support was reached at no such early date as it had been in rural colonies.
The Effect of Endowing Children with Education and with Property.—When children need to be thoroughly educated, the burden of maintaining a family of course increases. An unduly large family means the lowering of the present standard of living for all and a lowering of the future standard for the children. With most workmen it is not possible either to endow many children with property or to educate them in an elaborate way. The fear, therefore, of losing present comforts for the family as a whole and the fear of losing caste by seeing the family drop, at a later date, into a lower social class, are arguments against large families.
Why Economic Progress perpetuates Itself.—The economic motive which causes progress to perpetuate itself and to bring about more and more progress is the determined resistence to a fall from a social status. The family must not lose caste. It must not sacrifice any of the absolute comforts to which it is accustomed, particularly when so doing entails a degradation. Such is human nature that the unwillingness to give up something to which one is accustomed is a far stronger spur to action than the ambition to get something to which one is not accustomed; and a social rank once attained is not surrendered without a struggle. A tenacious maintenance of status is the motive which figures most prominently in controlling the growth of population and the increase of capital. The rich maintain the status of the family by means of invested wealth, the poor do it by education, and members of the middle class do it by a combination of the two.
Status maintained by Education.—In case of wage earners the need of educating children and the advantages that flow from it overbalance the need of bequeathing to them property; and yet the need of bequeathing property of some kind is a powerful motive also. It is important to enable them to procure the tools of some handicraft, or to secure themselves against dangers from sickness or accident. Moreover, it is not altogether technical education which counts in this way. Culture in itself is a means, not only of direct enjoyment, but of maintaining a social rank. The well-informed person accomplishes directly what a well-to-do person accomplishes indirectly, in that he gets direct pleasures from life which other people cannot get, and he enjoys consideration of others and has influence with them as an uninformed person cannot. The need, therefore, of educating children for the sake of making them good producers and the need of doing it for the purpose of making them good consumers and of enabling them to make the most of what they produce works against too rapid an increase of numbers.
The Effect of Factory Legislation.—These motives are powerfully strengthened when they are reënforced by public opinion and positive law. The ambition of workers to secure laws which will forbid the employment of children under the age of sixteen is, in this view, a reasonable wish and one that if carried out would tend to promote the welfare of future generations. It is doubtless true that this is not the sole motive, and some weight must be accorded to the desire to reduce the amount of available labor, and to protect adults who tend machines from the competition of children who could do it as well or better.There is, however, an undefined feeling in the laborers' minds that when children all work from an early age the wages of the whole family somehow become low, and that it takes all of them to do for the family what the parents might do under a different condition. The Malthusian law shows how, in the long run, this is brought about. The increased strength of the demand for factory laws and compulsory education is a positive proof of the growth of the motives which put a check on population.
Absolute Status and Relative Status both Involved.—The absolute comfort a family may enjoy and its social position are both at stake, and we need not trouble ourselves by asking whether the comparative motive—the need of keeping pace with others in the march of improvement—will cease to act if a whole community advances together. We saw at the outset that this motive acts powerfully on a superior class, which has before its eyes a lower class into whose rank some of its members may possibly drop. The lowest class must always be present, however a community may advance, and a well-to-do worker will always dread falling into it. If it should grow smaller and smaller in number, and if the second of the three classes we are speaking of should grow larger, the dread of falling from the one to the other would not disappear. The relative status—that which appeals to caste feeling and the desire for the consideration of others—would continue to be influential, as well as the desire for positive comforts; and the motive that depends on comparisons might even be at its strongest when the lowest class should so dwindle that few would be left in it except cripples, the aged, or the feeble-minded. An efficient worker would struggleharder to keep his family out of such a class than to keep it out of one which would have upon it only the ordinary stigma of poverty.
Checks more Effective as Wealth Increases.—It is clear that the dominant motives which restrain the growth of population act more powerfully on the well-to-do classes than on the poor. The need of invested wealth, the need of education, the determination to adhere to a social standard of comfort and to avoid losing caste, are stronger in the members of the higher classes than in those of the lower ones, and become more dominant in the community as more and more of its members belong to the upper and the middle classes.
Immediate Causes of a Slow Increase of Population.—The economic motive for a slow growth of population can produce its effect only as it leads to some line of conduct which insures that result. Means must be adopted for attaining the end desired, and when one looks at some of the means which are actually resorted to, he is apt to get the impression that an indispensable economic result is in some danger of being attained by an intolerable moral delinquency. Must the society of the future purchase its comforts at the cost of its character? Clearly not if themustin the case is interpreted literally. A low birth rate may be secured, not at the cost of virtue, but by a self-discipline that is quite in harmony with virtue and is certain to give to it a virile character which it loses when men put little restraint on their impulses. Late marriages for men stand as the legitimate effect of the desire to sustain a high standard of living and to transmit it to descendants; and late marriages forwomen stand first among the normal causes of a retarded growth of population. Moreover, the same moral strength which induces men to defer marriage dictates a considerate and prudent conduct after it, and prevents unduly large families without entailing the moral injury which reckless conduct involves. On the other hand, there may be an indefinite postponement of marriage by classes that lack moral stamina and readily lapse into vice. There are vicious measures, not here to be named in detail, which keep down the number of births or increase the number of deaths, mostly prenatal, though the infanticide of earlier times is not extinct. By strength and also by weakness, by virtue and also by vice, is the economic mandate which limits the rate of growth of population carried out. A limit of growth must be imposed if mankind is to make the most of itself or of the resources of its environment. There is no great doubt that it will be so imposed, and the great issue is between the two ways of doing it; namely, that which brutalizes men and depraves them morally and physically, and that which places them on a high moral level.
Moral Losses attending Civilization.—There is little doubt that vice has made gains which reduce in a disastrous way the otherwise favorable results of increasing wealth. The "hastening ills" that are said to attend accumulating wealth and decaying manhood have come in a disquieting degree and forced us to qualify the happy conclusions to which a study of purely economic tendencies leads. The evil is not confined to the realm of family relations, but pervades politics, "high finance," and a large part of the domain of social pleasures. The richerworld is the more sybaritic—self-indulgent and intolerant of many moral restraints; and if one expects to preserve an unquestioning trust in the future, he must find a way in which the economic gains which he hopes for can be made without a casting away of the moral standards which are indispensable. The greatest possible achievement in this direction would be an abandonment of vicious restraints on population and a general increase of the forethought and the self-command which even now constitute the principal reliance for holding the birth rate within prudent limits.
The Working of Malthusianism in Short Periods as Contrasted with an Opposite Tendency in Long Ones.—There is little doubt that by a long course of technical improvement, increasing capital, and rising wages, the laboring class of the more prosperous countries have become accustomed to a standard of living that is generally well sustained and in most of these countries tends to rise. There is also little uncertainty that a retarded growth of population has contributed somewhat to this result. One of the facts which Malthus observed is consistent with this general tendency. Even though the trend of the line which represents the standard of living be steadily upward, the rise of actual wages may proceed unevenly, by quick forward movements and pauses or halts, as the general state of business is flourishing or depressed. In "booming" times wages rise and in hard times they fall, though the upward movements are greater than the downward ones and the total result is a gain.
Now, such a quick rise in wages is followed by anincrease in the number of marriages and a quick fall is followed by a reduction of the number. The birth rate is somewhat higher in the good times than it is in the bad times. Young men who have a standard of income which they need to attain before taking on themselves the care of wife and children find themselves suddenly in the receipt of such an income and marry accordingly. There is not time for the standard itself materially to change before this quick increase of marriages takes place, and the general result of this uneven advance of the general prosperity may be expressed by the following figure:—
The lineACmeasures time in decades and indicates, by the figures ranging from 1 to 10, the passing of a century.ABrepresents the rate of wages which, on the average, are needed for maintaining the standard of living at the beginning of the century; andCDmeasures the amount that is necessary at the end. The dotted line which crosses and recrosses the lineBDdescribes the actual pay of labor, ranging now above the standard rate and now below it. Whenever wages rise above thestandard, the birth rate is somewhat quickened, and whenever they fall below it, it is retarded; but the increase in the rate does not suffice to bring the pay actually down to its former level. The descent of the dotted line is not equal to the rise, and through the century the earnings of labor fluctuate about a standard which grows continually higher.
The pessimistic conclusion afforded by the Malthusian law in its untenable form requires (1) that the standard of living should be stationary and low, and (2) that wages should fluctuate about this low standard. In this view the facts would be described by the following figure:—
ACmeasures a century, as before, by decades, and the height ofBDaboveBCmeasures the standard of living prevailing through this time. The dotted line crossing and recrossingBDexpresses the fact that wages sometimes rise above the fixed standard and are quickly carried to it and then below it by a rapid increase in the number of the laborers.
Members of the Upper Classes not Secure against the Action of the Malthusian Law if a Great Lower Class is Subject to It.—It is clear that if the workers are to be protected from the depressing effect which follows a too rapid increase of population, the Malthusian law in its drastic form must not operate in the case of the lowest of the three classes, so long as that is a numerous class. A restrainedgrowth in the case of the upper two classes would not suffice to protect them if the lowest class greatly outnumbered them, and if it also showed a rapid increase in number whenever the pay of its members rose. The young workers belonging to this class would find their way in sufficient numbers into the second class to reduce the wages of its members to a level that would approximate the standard of the lowest class. Under proper conditions this does not happen; for the drastic action of the Malthusian law does not take place in the case of the third class as a whole, but only in the case of a small stratum within it.
Countries similarly exposed to Dangers from Other Countries.—Something of this kind is true of a number of countries which are in close communication with each other. If a rise of pay gave a great impetus to growth of population in Europe, and if this carried the pay down to its original level or a lower one, emigration would be quickened; and although the natural growth in America might be slower, the American worker might not be adequately protected. The influx of foreigners might more than offset the slowness of the natural growth of population in America itself. The most important illustration of this principle is afforded by the new connection which America is forming with the Asiatic nations across the Pacific.
Adam Smith and many others have noticed that the growth of capital varies with the intelligence and the foresight of a population. It should therefore increase in rapidity as intelligence increases. A high valuation of the future is a mark of intelligence, and there is no reason why an entirely rational being should value a benefit accruing to himself in the future any less than he does a benefit accruing at once. Perfectly rational estimates of present and future, if there are no influences affecting the choice except these mere differences in time, mean that the two stand at par. It was once supposed that the disposition to save from one's present income varies directly as the rate of interest of the capital which is thus accrued, and in the main this is still regarded as a nearly self-evident proposition. Abstinence imposes a present cost on anybody that practices it. Whosoever saves a dollar misses the gratification which that dollar might bring. He may regard that sacrifice as fixed. It causes him to go without his marginal gratification, whatever that may be. If interest for a year amounts to twenty-five cents, the man has at the end of the year one dollar and twenty-five cents, with which to do whatever he may choose. He may spend it, if he will, and get all the gratification that a dollar anda quarter can bring. If interest stands at five per cent per annum, his abstinence will bring him only one dollar and five cents a year, and that, or whatever he can get by means of it, is a smaller benefit than the one he could get for one dollar and a quarter. If it is barely worth while to go without something now in order to have a dollar and five cents in the future, it is more than worth while to do it in order to have a dollar and a quarter at the same future date. If a man is induced to save only a dollar, for the sake of having a dollar and five cents at the end of the year, why should he not save two dollars, in order to have two dollars and a half at that time? Why should not the amount of his present privation increase, when the surplus of benefit he can gain by it at a future date grows greater? Such is the reasoning, and it seems entirely plausible, if we assume that what the man loses is the gratification he might have by spending his dollar, and that what he gains is the benefit of spending it and its accumulation of interest at the end of the year. The assumption is that the man proposes at a certain future date to spend the principal or the capital which he acquires by saving in the present, together with whatever it may have earned as interest; that he measures the personal benefit which he can get by this spending, and finds the larger benefit better worth a fixed sacrifice in the present than a small one.
The Actual Purpose of Abstinence.—Most capital is saved with no expectation of ever spending the principal. The motive is a perpetual income, which the capital will earn. What the man appraises in his own mind is not the personal benefit he canget by spending a dollar and five cents at the end of the year; it is the benefit that will come from spending five cents at the end of the first year, another five cents at the end of a second, and a more or less similar amount at the end of every year that shall follow. It is a perpetual income, and as the man's life is limited, the greater part of it must accrue to others than himself. The satisfaction which he will get from it near the close of his own life comes altogether from the prospect of passing the principal unimpaired to others and in assuring to them and to their successors the perpetual income which the foundation yields.
Even on this basis it might be supposed that a large perpetual income would offer a greater inducement to save than a small one, and therefore that the amount of saving would be greater when the rate of interest was higher. This would be true if the importance of the perpetual income could be estimated in this simple way by the mere amount of it.
Conditions affecting the Importance of a Future Income.—The importance of a future income may be large because of the prospective helplessness or poverty of the one who expects to enjoy it. A workman may save at a great present cost to himself in order to provide for old age or sickness, in which case the income from the savings, and often the savings themselves, would be the means of averting a great calamity. To make one's self secure against privation in the future is worth more than to add to one's comforts in the present. If a certain minimum amount were needed to avert starvation at the end of a man's life, he shouldsecure that amount at all hazards, however much that may trench on his present comforts. Now, as the amount which he can have at the end of his life depends largely on the rate of interest which his savings will earn, during such time as they may remain in a productive shape, it will take more positive abstinence on his part to keep himself from starvation when the rate of interest is low than it will when the rate is high. If there were no interest at all, he would have to put by from his income his entire old-age fund. If the rate were a hundred per cent per annum, taking a very small part of the fund out of the income of his active years would suffice, since the fund itself would earn the remainder. Is the income which is provided for the future to be treated as a variable amount in addition to some other income, or is it to be regarded as a fixed amount, which is needed for some definite purpose? On the answer to this question depends the entire issue as to whether a low rate of interest or a high one affords the larger incentive for saving.
Future Incomes More or Less Fixed usually Needed.—Recent writers have called attention to the fact that in many cases saving has the providing of a definite future income in view. The owner of a landed estate, who intends to leave it to a son, may try to provide from his rents an endowment which will save from want or from an unhappy approach to want his daughters and his younger sons. He might accomplish this, indeed, without any present saving by putting rent charges or mortgages upon his land, but that would trench on the income which his heir can derive from it. It would reduce the establishment which the heir can maintain andcause him to fall out of the class to which his father has belonged. Rather than do this, the present owner will usually reduce the present standard of living of the entire family and try to make sure that its future standard shall not fall below the one thus established. It seems better to maintain the somewhat lower standard through a series of generations than to make the present mode of living more luxurious at the cost of unclassing one's self and one's heirs at a later date.
This Fact heretofore Underestimated.—To the writers who have cited this familiar fact it appears to require merely a partial amendment of the general proposition that a high rate of interest insures more saving than a low one, and the inference which one naturally draws from this supposed fact is that growing wealth, as is still supposed, reduces the incentive for the accumulation of more wealth. Such an accumulation is an essential part of general progress and is practically necessary for sustaining the rate of wages. Here, then, if this supposition is true, we might see an important influence tending to bring progress to a standstill. Great wealth as the result of progress, a reduced motive for acquiring still further wealth, a retarding of progress—such would be the sequence. Dynamics would thus be, in a very important respect, self-retarding if not self-halting.
Future Standards of Living the Important Element.—The actual fact, as we may venture to affirm, is that the standards of living which need to be maintained in the future are the all-important element in the case. To the laboring man it is necessary to avoid starvation or the workhouse; to thewell-paid artisan it seems necessary to do this and to make for his children a provision which will keep them in the same class with himself. To the capitalist who by successful business has raised himself above the artisan class it seems necessary to keep his children above the rank from which he has lifted the family; and the same principle applies to all the wealthier classes. The tenacity with which a man holds to a station in life outweighs his desire to add to his own present luxuries, and his ambition to keep his children in a certain station far outweighs his desire to add to their present luxuries.
The Importance of Future Standards not affected by the Fact that Men differ in Altruism.—This does not at all raise the question how many people care as much for their children as they do for themselves. That is not the principle at issue.In so far as men do care for their childrenthe end they seek for them is to enable them to avoid what seems like a disaster, rather than to make positive gains in the way of comfortable living. Even in the case of those who have little altruism, such provision as they make for descendants is inspired by the desire to keep them within a certain class more than by any computation of how many comforts or luxuries a surplus income of any amount might give them. Whatever provision for children a selfish or dull person makes is dictated by the same motive that incites him to make provision for his own future, and in both cases it is chiefly the maintenance of a standard that he usually has in mind.
The Principle not invalidated by the Fact that Forethought is often Weak.—All the motives for saving may be unduly weak. The man may carefar less for the future than he should do, and may make an unreasonably small provision for it. Incapacity to estimate the importance of this provision, as well as the degree of selfishness which excludes the exercise of self-denial for the benefit of others, are not the only reasons for this disregard of the future. There is an optimism which is natural; and a religious faith which bids one not to take unduly anxious thought for the morrow may occasionally be carried to the harmful length of justifying a neglect of coming years and their needs. An intelligent trust in Providence, however, incites a man to do his own full duty, and it is the better men who do the most to avert future evils from their families. The principle that we are maintaining applies as completely in the cases of those who make small provision for the future as it does in any others. In the majority of cases whatever they do save is set aside chiefly for the maintenance of some standard of living by those who get the benefit of it; and to maintain any standard whatever, whether high or low, requires a larger fortune when interest is low than it does when interest is high.
Forethought limited in the Length of Time it Covers.—There is little danger that we make any mistake in ascribing to the dread of falling below a standard of living more influence on the accumulation of capital than any other motive exerts. This will be clearer if we look at the actual manner in which present and future are estimated and compared. The fact is not that most people care unduly little for all future benefits as compared with present ones, as it is that they throw off responsibility for all the future beyond a limited period. Theperspective does not reduce the size of remote objects unduly as often as it cuts off the view of them altogether. In looking through coming years a man is subject to a certain economic myopia. One might compare what he sees with what a man sees in a foggy atmosphere, if it were not for the fact that the view of comparatively near objects is clear. It is as though a circle of fog surrounded him and cut off somewhat abruptly the view of everything that was far away. For a short distance the man sees everything with comparative clearness, but the limitless spaces that lie beyond he sees not at all. We have seen that the amount of abstinence he will practice now for the sake of what he or others will gain later varies as he is rational or foolish, unselfish or selfish, and it is also true that the length of his outlook into the future varies in the same way. There are all gradations of far-sightedness among those who create capital; but even comparatively near-sighted ones usually provide for the maintenance of some standard or other during the period that falls within their range of vision, and this requires that they should save more when interest is low than they do when interest is high.
Marginal Capitalists.—In this connection, however, it is to be noted that economic myopia may go to the extreme length of making men nearly indifferent to all future standards. In this case they constitute an exception to the general rule, since whatever they save, if they save at all, is likely to be more when interest is high than when it is low. They are marginal capitalists, who are not influenced by any benefits except immediate ones and only inquire how much an investmentwill, from the day when it is made, add to their own incomes. The higher rate is then the greater lure. Moreover, other capitalists, who are influenced mainly by regard for future standards of living, are somewhat affected by the immediate benefit which marginal savers have exclusively in view. To the extent that they are so, the higher the rate of their immediate returns, the more strongly are they impelled to "abstain" and accumulate. The essential fact is that marginal capitalists are few numerically, and their savings count for little as they enter into the general fund, and that most capitalists, including nearly all who save great amounts, do it chiefly from a desire to maintain themselves and their descendants on an established level of living. In the main the social motives for saving are those we have described.
Enjoyment largely Teleological.—There is a special reason why a rational man, if offered an enjoyment now or later, at his option, is quite likely to take it later. Enjoyment is mainly teleological. It consists in a conscious approach to a desirable end. The knowledge that one's efforts to attain a desired goal are successful and that the good thing is really coming, sheds a light on the present. Indeed, it is anticipation and memory which prolong any enjoyment, and of these anticipation is the more effective. The knowledge that one is at a certain time to sail for a foreign tour confers before the sailing an enjoyment which is often more than a foretaste. It often rivals the pleasure that is consciously taken in the trip itself. A man may be happy for years in the prospect of a business success or a prospect of election to a public office, and many years of hard labor inscientific investigation may be illuminated by the expectation of the ultimate discovery and its consequences. There is a good reason why even an average man, as well as a wise one, will wish to distribute his expenditures over the different periods of his life, and to give a preference to the future whenever that is necessary in order to enable him to hold through his earlier years the comfortable assurance that his later ones are well provided for.