BOOK II.

CH. IV.

Influence

exerted on wages by goodtrade;

an agricultural labourer is not suddenly converted into a cloth-weaver. Such a transition rarely takes place, but if there is a manufactory close at hand, many of the children of the agricultural labourers will be employed in it. There is always connected with an active manufacturing industry much subsidiary work which can be performed by any ordinary labourer. Thus in the Dowlais iron works in South Wales there are no less than 500 horses employed, which of course require a great number of men to superintend them. Such work, consequently, draws off many labourers from agriculture, and thus the higher wages paid to agricultural labourers in the manufacturing districts may be entirely explained by those general laws which regulate all wages: for in this, as in every other case, it is a question between population and capital; the agricultural population of the manufacturing districts being diminished by the frequent employment of the labourers themselves in other work, and by the engagement of their children in the manufactories.

Before concluding this chapter it will be important to explain the influence which is exerted on wages by what is called good or bad trade. In England, where capital is accumulated with such rapidity, the amount of capital invested in any particular industry could be immediately increased beyond almost any assignable limits. Suppose the prospects of the cotton trade were so good, that the Lancashire manufacturers thought they could profitably invest an additional 10,000,000l. in their trade. Many of them would withdraw capital for this purpose from other investments, and there would be no difficulty whatever in making up the whole 10,000,000l. required by obtaining advances from bankers and others on the credit of the individual manufacturers. It would not, however, be possible with equal rapidity to make such an increase in the labour employed in any particular industry. One who is accustomed to other work cannot without considerable practice acquire the skill of a cotton-operative. Many of the processes of cotton-spinning could not probably be by attract- learnt by an adult, for their manipulation requires fingers ing capital trained from childhood. New capital in various forms, to parti- such as larger quantities of raw material, may be at once ployments. brought into any particular industry; but when those who

cular em

have been accustomed to the industry are once fully em-
ployed, an increased supply of labour can then be only
gradually obtained. Hence it appears that the labourers
of each separate trade possess, so far as the supply of
labour is concerned, a monopoly for a limited period.
This will explain the benefit which is observed to result
to any class of labourers when their special trade happens
to be prosperous. Reverting for an illustration to the
manufacture of cotton, let us consider what takes place
when this trade is unusually active, as it was during the
years 1859-60. Throughout this period cotton manu-
facturers realized such large profits, that they were anxious
to spin as much yarn and weave as much cloth as they
possibly could. They therefore had every inducement to
apply to their business the greatest possible amount of
capital that was practicable; so far as depended upon the
supply of capital, the cotton trade might have been at
once indefinitely extended; but new mills and machinery
require time for their erection. It was no use therefore
for a manufacturer to buy more raw material, or employ
more labour than was suited to the mills and machinery
at his command. But every manufacturer during such
times does as much trade as possible; he will therefore
compete for labour; every cotton operative is thus certain
to be fully employed at very high wages, and consequently
the prosperity of any particular branch of trade confers a
great temporary benefit upon the labourers who are
engaged in it. We say temporary benefit, because if the
good trade continued, and wages remained exceptionally
high, an additional supply of labour would at length be
forthcoming. People would be gradually attracted from
other worse-paid employments, because the high wages
would offer them a temptation to learn the trade which is
exceptionally prosperous. Every parent in the district
would have a great inducement to bring his children up
to this trade; and this accession of juvenile labour would
be the chief source from which would be gradually supplied
an additional quantity of labour, sufficient to meet the
increased demands of the trade. If the skill which any
industry requires is particularly great, the labourers of
the trade possess a
more complete monopoly, because
under such circumstances it would be more difficult and

BOOK II.

CH. IV.

The benefit

thus conferred on the labourers is

temporary.

BOOK II.
CH. IV.

take a longer time to import labour from other employments. The labourers fully understand the advantages of a trade monopoly, and they constantly strive to maintain such a monopoly by various restrictions as to the number of apprentices admitted into any trade. In order to effect these purposes, Trades' Unions have been established. It will be better, however, to defer our remarks upon these societies, and the various other means which have been often resorted to, in order to secure higher wages, until the subject of profits has been discussed; for a complete investigation will then have been made into the general laws which regulate the distribution of wealth into the three primary divisions of rent, wages, and profits.

CHAPTER V.

PROFITS.

RENT, wages, and profits, the three portions into which

wealth is distributed, denote the remuneration received by different classes of individuals for the assistance which they render towards the production of wealth. Those who have appropriated land receive a remuneration in the form of rent when they permit others to use the land which has been so appropriated. Those who apply their labour to the production of wealth receive wages as a remuneration for this physical exertion; and profits denote the remuneration which those receive who supply the remaining requisite of production, namely capital. As capital is the result of saving, the owner of capital exercises forbearance when he saves his wealth instead of spending it; profits therefore are the reward of abstinence, in the same manner that wages are the reward of physical exertion. If an individual invests a certain sum in any productive employment, his profits will consist of the entire surplus which remains after the capital has been replaced. Suppose an agriculturist cultivates his farm with a capital of 5,000l.; this capital will be composed of many different elements, such as stock, implements, and a fund from which he is able to advance the wages of his labourers. The profits of the farmer will consist of the surplus which remains, when from the whole produce of the farm sufficient has been deducted to replace the original 5,000l., the value of the capital which the farmer possesses. But in such a case these profits of the farmer will not simply represent a return to his capital, or, in popular language, interest for his money; the farmer has probably given his own time and labour in watching those whom he employs, and in superintending the various operations of his farm: he has

BOOK II.

CH. V.

Profits are

the remuneration

paid to the capitalist,

BOOK II.
CH. V.

and may be divided into three parts.

Reward for saving.

of course to be remunerated for his time and trouble, and therefore part of his profits represents the wages properly due to this labour of superintendence. Again, every business is attended with more or less risk. If a man invests his capital in the funds, he may regard it as perfectly secure, but capital invested in business can never be made equally secure against loss. There may be revulsions in trade, or bad debts; and property invested in any commercial undertaking is subject to depredations of the dishonest, and in some countries to the rapine of internal A capitalist therefore must receive some compensation for the increased risk of loss which is incurred when his capital is invested in trade; a portion of his aggregate profits represents this compensation. The profits therefore which a man obtains from his business are composed of the three following elements.

war.

1st. A reward for saving, or, more properly, a reward for abstinence.

2nd. A compensation for the risk of loss.

3rd. Wages for the labour of superintendence. It is very easy to ascertain the portion of profits which ought in any particular instance to be allotted as the reward of saving. In every commercial country there are investments, the security of which is regarded as perfect. In our own country, for instance, the funds, a freehold mortgage, a stock guaranteed by our own Government, are securities which are regarded as free from risk. The interest which is obtained from capital invested in these securities may be considered as entirely the remuneration for saving. He who so invests his capital cannot receive any remuneration for risk, when there is none, and the investment entails no labour upon him. The interest which is obtained from such securities is termed the current rate of interest; and therefore the first element of which profits are composed may be always estimated in amount by the current rate of interest. If the current rate of interest is four per cent., a capital of 5,000l. would secure a profit of 2001. without the slightest risk or trouble. A person therefore who has 5,000l. invested in his business might consider that 2001. of his annual profits represents interest on capital, or, in other words, is the remuneration which he receives for his abstinence.