صور الصفحة
PDF
النشر الإلكتروني

IMPAIRMENT OF THE VALUE OF CAPITAL RELATIVELY TO LABOR.-While the remuneration of labor has enormously increased during recent years, the return to capital has not been in any way proportionate, and is apparently growing smaller and smaller. For this economic phenomenon there can be but one general explanation; and that is, that regarding labor and capital as commodities, or better, as instrumentalities employed in the work of production and distribution, capital has become relatively more abundant than labor, and has accumulated faster than it can be profitably invested; and, in accordance with the law of supply and demand, the compensation for its use-interest or profits-has necessarily declined as compared with the compensation paid for labor.*

One efficient cause of this greater abundance of capital is, that every new invention or discovery produces always as much, and often a much greater amount, of product on a less amount of capital than was previously invested. The result of material progress is, therefore, to supplement the need, or economize the use of capital, and at the same time increase it. For example, a first-class iron freighting screw-steamer cost in Great Britain, in 1872-274, $90 (£18) per ton. In 1887 a better steamer, constructed of steel, fitted with triple compound engines, with largely increased carrying capacity, and consequent earning power, and capable of being worked at much less expense, could have been furnished for $35 (£7) per ton. How rapidly capital has accumulated in recent years under the new conditions of production is indicated by the circumstance that, although most of the great loans which have been negotiated within the last twenty-five

The position has been taken, by some investigators and writers, that the great decline in the value of capital-by reason of an impairment of the ability of its owners, i. e., through loss of dividends on investments and of profits in business, to purchase and consume the products of labor, and a diversion of capital, from lack of remunerative income-yielding investments, into enterprises not needed and so occasioning overproduction-has been a prime and perhaps the main cause of all the economic disturbances in recent years. That such a factor, in common with many others, has been instrumental in occasioning serious disturbances, may not be questioned; but that its influence has not been in any sense primary would seem evident, when it is considered that the reason why capital has increased and cheapened in these latter years is, that mankind, through a larger knowledge and better use of the forces of Nature, has been enabled to produce, and actually has produced, a far greater abundance of almost all material things (or, in other words, a greater abundance of capital) than at any former period of their history. Capital, at the outset, greatly contributed to such a development, or, like the wizard in the Eastern fable, it pronounced the incantation which set the natural forces at work; but the wonderful increase and consequent impairment in the value of capital was an after-result, something not anticipated, and the continued progress of which the owners of capital, like the enchanter, now find themselves powerless to check. The saving in the cost of the freight moved on the railroads of every country, comparing 1887 with 1850, and assuming like quantities to have been transported at the different periods, would represent every year more than the original cost of the railroads and their equipment.

years have been for the replacement of capital unproductively used up, or absolutely destroyed in war or military operations, and notwithstanding the immense amount of capital that has also been destroyed during the same period by the replacement of machinery contingent on new inventions, the vacuum thus created has not only been promptly filled, but the competition for the privilege of furnishing further supplies of capital for similar purposes was never greater.

Again, as capital increases and competition between its owners for its profitable investment becomes more intense, and as modern methods can bring all the unemployed capital of the world within a few hours of the world's great centers for financial supply, the rate of profit, or interest to be obtained by the investor or lender, from this cause, also necessarily tends to shrink toward a minimum. Such a minimum will be reached "when the returns for the use of capital become insufficient to induce individuals to save it, especially in the form of its representative, money, and thus add to the available reserves by which expanding industries can be supported." And to such a minimum the financial world seems to be always moving by the force of laws which no combination of capitalists can resist.*

Those not familiar with financial experiences can hardly realize the great decline within the last few years in the price and profits of capital. Thus, the average rates of interest in the cities of Boston, New York, Philadelphia, Cincinnati, St. Louis, and Chicago, as computed from the record of public transactions, from 1844 to 1858, was 10.5 per cent. In 1871 the London "Economist" estimated that the average rate of interest on a majority of the foreign and colonial stocks and bonds at that time held in Great Britain, amounting to not less than twenty-eight hundred and fifty million dollars, was equal to six or seven per cent as a minimum. Up to 1871 the United States had not been able to sell any portion of its funded debt, bearing 6 per cent gold interest in European markets, on terms as favorable as par in gold, United States five-twenty 68 being quoted on the London market in 1870 as low as 874. The following is a transcript of the prices of various securities as quoted on the London market in 1871: German Confederation obligations, 5 per cents, 87; French national defense 6s, 87; Massachusetts 5s, 91; Georgia 78, 78; Spanish 5 per cents, secured by a mortgage on the celebrated quicksilver-mines of New Almaden, in addition to the faith of the Government, 76 and 77; Italian 6 per cents, secured by a pledge of the state revenues from tobacco, 874; Japanese 9 per cents, 89; Panama Railroad 7 per cent general mortgage, 93; Michigan Central Railroad, first-mortgage sinking-fund, 8 per cent, 85; Pennsylvania Railroad 6 per cent general mortgage (sterling), 91. To-day the Governments of Great Britain and the United States can readily borrow money at 24 per cent; all first-class railroad corporations at 4 per cent; while millions of money have been loaned in recent years on real-estate security in the United States for 4 per cent, and in Great Britain for 3 per cent. In Germany the market rate of discount for a considerable period in 1887 was as low as from 14 to 18 per cent. Not many years ago the customary rate of interest allowed by the savings-banks and trust companies of the United States was 6 per cent; now the former for the most part pay but 4, and the trust companies but 2 to 3 per cent. British consuls in November, 1887, paid to the investor 215 per cent, while of the best (debenture) railroad stocks of Great Britain none now return as much as 4 per cent on their current market prices. The dividends of the Imperial (Reichbank) Bank of Germany in

To those who are the possessors of large properties, a gradually diminishing rate of return for the use of capital makes but little difference so far as personal comforts are concerned; but to the small capitalists the steady reduction in income which has been experienced in recent years means always discomfort, and often misery. A striking illustration of this, derived from actual experience, and contingent on a reduction by the Prussian Government of the interest on its debt to 34 and 3 per cent, is thus given by a recent correspondent (1887) of the London " Economist":

"This reduction," he says, "struck a heavy blow at the existence of what may be called the 'middle classes' in Germany-that is, the great number of people who own a small capital invested in funds, besides carrying on some business or having some other profession. The combined income from both enabled them to live in fair style, making both ends meet by way of carefully regulated expenditure. These classes have formed for over half a century the 'backbone' of Germany. They are now gradually disappearing, making room for great wealth on one side and great poverty on the other."

DECLINE IN LAND-VALUES.-Another interesting and curious feature of the existing economic condition-the direct outcome of the recent radical changes in the methods of production and distribution-has been the decline in the value of land over large areas of the earth's surface. Thus, in the case of Great Britain, while every other item of national wealth has shown an increase -often most extraordinary-since 1840, the estimated value of land in the United Kingdom since that date has heavily decreased.* A similar experience is also reported as respects France,

the four years from 1883 to 1886 inclusive, declined 0.96 per cent, and the average of the private banks of Germany during the same period, 1.60 per cent; all of which clearly indicates that the banking business of Germany is becoming less and less profitable.

* According to Mr. Mulhall, the English statistician, the following table exhibits the changes in the leading items of wealth in Great Britain since 1840:

[blocks in formation]

In 1837 the population of the United Kingdom was 26,000,000; in 1887, it was

37,000,000, an increase during the period of 42 per cent.

Germany,* and Portugal. In the latter country, the owners and cultivators of the soil seem to be in a remarkably unfortunate condition. The Portuguese farmer, despite heavy protective duties, finds himself unable to successfully contend with the increased import of cereals, mainly from the United States. The olive-oil industry, formerly flourishing, is so no longer, through the alleged extensive use of American cotton-seed oil as a substitute; while the demand for Portuguese wines, which for a time was increased by the bad vintages of France, is being impaired, and possibly threatened with destruction, by the continually increasing supply in the French markets of cheaper and more suitable wines for mixing purposes from California, the Cape of Good Hope, and Australia. In addition, the copper-mines of Portugal have suffered severely in recent years from the cheaper supplies of American copper. In the Canary Islands, where the soil is most cheap and fertile, and the vegetation of both the tropic and temperate zones flourishes in great luxuriance, the land question has also become of as much importance and embarrassment as in less favored countries. The former great remunerative industry of these islands was wine, "canary"; but this, by the impairment of the vines, has become of little account. These islands also formerly furnished the world with a large supply of cochineal, for the production of which they have special advantages; but since, through the discovery and use of aniline dyes, cochineal, which was once worth $1.75 (7s.), will now command but 12 cents (sixpence), this industry has become depressed. Curiously, also, a comparatively extensive export of potatoes from these islands to the Spanish West Indies is diminishing through a competitive exportation of the same vegetable from the United States. So that there seems to be nothing left for the land proprietors and cultivators in this locality to do, except to resort to the method, so much in favor at the present time, of taxing each other for their mutual benefit! Over large portions of the West India Islands, great quantities of excellent land, advantageously situated as regards facility of communication with other countries, under exceptionally healthy climatic conditions, and much of which has been formerly under high cultivation, has been absolutely abandoned, or is in the rapid

*One of the largest landholders of Austrian Silesia thus recently expressed himself: "A few years ago my estates admitted of the profitable cultivation of wheat; but the price of wheat, through the competitive supplies of the United States, and in spite of high protective duties at home, has declined to such an extent that the cultivation is no longer profitable. The same is true in respect to the domestic (Austrian) growing of cattle. Latterly, the encouragement of the beet-root sugar production, by the granting of bounties by the state on its exportation, has given an opportunity for labor and proved remunerative; but if the state should abandon the bounty system, which is not improbable, my land, as a source of income, seems likely to become valueless."

VOL. XXXIII.-2

progress of abandonment. In the United States, the decline in the value of land has, in many instances, been also very notable. In the New England States at the present time, agricultural land, not remote from large centers of population, can often be bought for a smaller price than fifty years ago would have been regarded as a fair appraisal, and even less than the cost of the buildings and walls at present upon it. Since the last decennial appraisal of real estate in Ohio (in 1880) "there has been a heavy decline. Farm property is from 25 to 50 per cent cheaper to-day than it then was.' "In the ten cotton States, the value of agricultural land was in 1860 $1,478,000,000; in 1880, $1,019,000,000, a decrease of $459,000,000. It would require an addition of 45 per cent of its value in 1880 to raise it to its value in 1860." Meanwhile, the population of these same States has increased 53 per cent. "In 1860, the value per acre of improved land in Georgia was $6; in 1886, below $3.50; decrease, $2.50. Were the agricultural land divided out among the people, the value per head would have been: in 1860, $150; in 1886, $63; decrease, $87."+

In the foregoing series of papers an attempt has been made to trace out and exhibit in something like regular order the causes and the extent of the industrial and social changes and accompanying disturbances which have especially characterized the last fifteen or twenty-five years of the world's history. The idea adopted at the outset, and an adherence to which has subsequently been kept constantly in view, has been to relate simply but comprehensively what has happened, and thus prepare the way for a solution of the many problems of interest and importance which are the outcome of the situation, rather than attempt the more difficult and to some extent (at present) impossible task of directly formulating and offering satisfactory answers or explanations. At the same time the presentation of whatever in the way of deduction from the record of experience has seemed legitimate and likely to aid in the determination of correct conclusions has not been disregarded, and with a view of further contributing to such results the following additional considerations are finally submitted:

It seems clear that the first and most essential thing for all those who are desirous of determining the extent of the evils which the recent economic disturbances have occasioned, and what course of procedure on the part of society and individuals is likely to prove most remedial of them, is to endeavor to un* “Inaugural Address of Governor Foraker," January, 1837.

Report of a committee of citizens of the ten cotton-growing States ("Sam" Barnett, of Georgia, chairman), “On the Causes of the Depressed Condition of Agriculture, and the Remedies," 1887.

« السابقةمتابعة »