Essentials of Economic Theory Part 11

_The Geographical Boundaries of Society not Fixed._--The boundaries of this central area are not fixed. As relations between the center and the part of the outer zone which is nearest to it become more and more intimate, the adjacent region takes on the character of the center. It is, in an economic way, a.s.similated to it; and in this way the center may be regarded as annexing to itself belt after belt of the environing world. Ultimately it will doubtless annex the whole of it; and for this reason, even though we confine our studies to the center, we shall establish a system of economic laws which will apply, in the end, to all the world. This indeed is not the only way in which the economic life of the outer area comes into the economist's purview, for he can study it for itself. This zone has its peculiar life, which is a distant reflection of the life of the center. It is a type of economic activity in which all the primary forces work, but in which friction abounds and adjustments are made with extreme slowness.

For the present, what interests us is the life of the center itself, and in studying this we take account of the influence of the environment. The effects of these influences are first seen in changes in the rate at which the five general dynamic movements go on within the center. The grand resultant is more rapid progress within the center.

_What is involved in a Full Study of the Relative Density of Populations._--A full treatment of the subject of the comparative density of population in different places would include an extended study of the kinds of industry which find their natural homes in densely peopled countries and of those which flourish in spa.r.s.ely peopled ones, and a much more detailed tracing than it is possible here to undertake of those changes in the character of industries everywhere which result from a leveling out of differences in population. Clearly, if all America were to become as crowded with inhabitants as are Holland and Belgium we should develop industries of a different type from those that we now have, and the change would be in the direction of producing relatively more form utilities and relatively less of the elementary utilities. Labor and capital would move from the subgroups which in our table we have called _A_, _B_, and _C_ toward _A'''_, _B'''_, and _C'''_. We should spend more of our energy in making finished goods and less in getting raw materials. I shall note in a very general way the changes in social industry caused by increase of population without looking forward to that remote time when the density of population shall be equalized.

_Why an Approximately Static Adjustment of Industries within the Central Area permits Unequal Density of Population in Different Parts of It._--We exclude from view the ultimate static adjustment of the whole world, and content ourselves with an approximate adjustment within society as we have defined it. Even within this limit there are inequalities in the density of population which it would require a very long time to remove, and a perfectly static state cannot be reached till they are leveled out. The selection of industries in Texas and in Belgium cannot be, in the ultimate sense, natural till population in these two regions is so adjusted that there is no longer an economic motive for migrating from the one to the other. If, in order to determine what an absolutely static condition for the central society would be, we were to apply the rule of imagining all new dynamic influences precluded and of allowing time enough to elapse to bring about a normal apportionment of population within that limited area, we should encounter a measure of the same difficulty which confronted us when we proposed to attain a similar static state for the entire world, though the trouble would be less serious in degree.

In waiting long enough for population to distribute itself naturally, we cut off influences that, within that period, will affect production and distribution far more than the change in population will affect them. In so far as Texas or any newly occupied region is concerned, the changes thus precluded are those which would have tended to reverse the effect of the redistribution of population.

Migrations from Belgium to Texas, if extensive and long continued, would reduce the productive power of labor in Texas; while the dynamic changes which will actually go on within any such period will increase the productive power of that labor, and it is not certain whether the one or the other influence will predominate. For the United States as a whole it is probable that progress in the useful arts will more than offset the influx of new laborers and give to wages a rising trend.

If, however, we establish the natural standard of wages by cutting off such progress and letting the influx of labor continue, the test would give a standard lower than the present one,--a false, as well as a discouraging result. The resultant of all the changes we are about to study will probably give to the future pay of labor in America a rising trend.

_How Industries adapt themselves to Unequal Density of Population._--In view of this fact it is necessary to recognize a proximate rather than an ultimate static state as that toward which the adjustments now going on are immediately tending. We will treat the unequal density of population within our economic society as something which will last, not forever, but so long that it will not be removed or appreciably affected within the period required for the other adjustments that we are studying. Given a population that is dense in Belgium and spa.r.s.e in Texas, and compet.i.tion will cause the industries to take on the types which they would have and retain if that difference in density were destined to be permanent. The type toward which the economic life of both regions is tending is thus a proximate rather than an ultimate one. Each region will, in the near future, be of the type toward which influences which do not involve an equalization of population are impelling it. We get the true direction of the change that is going on in the earning power of labor and in the shape of the industrial organism in both regions by recognizing the fact that the differences in the density of their populations will continue through the period which we are considering.

[Ill.u.s.tration]

If the line _BC_ represents the productive power of a unit of labor in a region which is spa.r.s.ely peopled, and the line _B'C'_ represents the productive power of a unit of labor in a densely peopled region, we may a.s.sume that _AC_ and _A'C'_, which are equal to each other, represent the product of a unit in either locality when, general progress being precluded, the difference in the density of population should have been leveled out. Move people at once and in a wholesale manner till there is nothing to be gained by further moving them,--let pressure of population on the land be fully equalized,--and you may be supposed to create a condition of uniform productive power for laborers of a given grade in the entire region. The horizontal line _AA'_, which is everywhere the same distance above the line _CC'_, represents the universal level of the productivity of labor in such a theoretical condition. The line _BB'_ represents the actual and different levels of the natural earnings of labor in the different regions. a.s.suming that all other static adjustments are made, but that the equalization of population has not taken place, labor will earn the amount _BC_ in one place and the amount _B'C'_ in another.

Somewhere it will earn an amount represented by the vertical line descending from _D_ and somewhere that expressed by the line descending from _F_, while there will be places where the earnings of labor are measured by the line descending from _E_, which is the amount that labor would everywhere create and get if the population could be quickly made normal in all regions. The standard of wages for the whole of the great region, largely European and American, which const.i.tutes the economic center of the world, shows varying levels in different countries and parts of countries, and the actual rates in every place fluctuate about this proximately normal standard for that place, the standard rate in one locality being higher than that of another.

The line _A'B'_ exceeds in length the line _AB_, and this expresses the fact that equalizing the pressure of population on the land in different regions adds more to the productivity of labor in the region now crowded than it deducts from that of labor in regions now spa.r.s.ely peopled. The overcrowding does greater and greater harm the further it is carried, and therefore taking away a surplus of people from a region which has suffered greatly from overcrowding affords a relief which more than offsets what is lost in other places by a moderate increase of population. Moreover, the fact has to be recognized that at present there are ten square miles of spa.r.s.e population for one that is very densely peopled, and reducing all to an equality would add only slightly to the number of inhabitants of the regions that now contain few of them.[1]

[1] Exceptional local conditions may make an influx of population for a time a cause of greater productivity rather than of less. The general and permanent effects are otherwise, and it is on these that the present argument rests.

[Ill.u.s.tration]

If the line _BB'_ represents the unequal level of _natural_ wages in different localities, on the a.s.sumption that populations remain unequal, the undulating curve _DD'_ which crosses and recrosses the line _BB'_ represents actual local rates fluctuating about the standard ones.

_How a Static Adjustment for the World is a Dynamic Influence within a Limited Part of It._--Commodities are, by traffic, crossing the social boundary in both directions, and with the goods there go and come influences that affect the economic life of the central society.

Methods and modes of organizing business are taught by each region to the other, though most of the teaching is done by the people of the center and most of the learning by those of the environment. All this affects the center and falls within our study. It has dynamic effects within the center, though it is only a part of a static adjustment for the world as a whole. If the grand bank of Newfoundland were to subside to the level of the middle of the Atlantic, there would be a great rush of water toward the place that the banks now occupy, but this would be only what is required in bringing the general level of the sea to an equilibrium. It would be essentially a static phenomenon, but for the region of the banks it would be dynamic in the highest degree. A rush of population from China to America would be a change tending to establish an equilibrium of population in the world, but it would be a startling bit of dynamics for America. Teaching the Chinese all the mechanical arts that we know would be creating an equilibrium of another sort, in which methods would be similar in the two countries; but for China itself this acquiring of practical arts would be dynamics acting on a vast scale. What is a static adjustment for the world is a dynamic change for parts of the world, and all such changes that can occur within the area of economic society proper and within the period we can wisely include in our study we need to take into account. Changes in population, wealth, method, and organization must be studied, however they may originate.

CHAPTER XV

PERPETUAL CHANGE OF THE SOCIAL STRUCTURE

_Perpetual Change of the Social Structure._--We confine ourselves to that economic society _par excellence_ which we have called the industrial center of the world. In this region economic influences are forever changing the very structure of the society itself. They move labor from place to place in the system and they transfer capital to and fro in the same way. If we think of our table of groups and subgroups as representing the whole of this great industrial world, we must think of labor and capital as in a perpetual flow from subgroup to subgroup, making some industries larger and others smaller by reason of every such movement. The great force of labor and the fund of capital are like restless seas whose currents carry the water composing them now hither and now yon as the direction and force of the moving influences change.

_Movements of Labor within the Group System caused by Increasing Population._--If the population were to increase while the amount of capital and the mode of using it remained the same, the effect would be a downward movement of both labor and capital in the series of subgroups by which we represent industrial society. Labor and capital would tend to desert the subgroups _A'''_, _B'''_, and _C'''_ in our table and to move to _A_, _B_, and _C_:--

_A'''_ _B'''_ _C'''_ _A''_ _B''_ _C''_ _A'_ _B'_ _C'_ _A_ _B_ _C_

_Causes of Downward Flow of Labor in the Group System._--A larger population means, of course, not merely an increase in the amount of labor performed, but also an increase in the number of consumers. It means more mouths to feed and more bodies to clothe. It entails also, according to principles that we have already studied, a lower earning power and a lower rate of pay for labor. This means that simple food, cheap clothing, inexpensive houses, furnishings, etc., const.i.tute a larger element in the consumers' wealth of society than they have heretofore done. Society uses fewer luxuries and more necessaries, and the necessaries of life are products in which raw materials predominate and costly form utilities are wanting. This makes a heavier draft upon the land than does the production of highly wrought articles of the same value.

Luxurious articles are fashioned with a great amount of artisan's or artist's labor and a relatively small amount of the labor of cultivators and miners. The subgroups _A_, _B_, and _C_ are the ones that furnish the rawest materials, and it is they, therefore, that receive the largest portions of the new labor that enters the field.

_How Economic Friction works to the Disadvantage of Immigrants._--Unless capital grows more rapidly than population, there is a certain friction to be overcome in obtaining places for new laborers. If they come largely as immigrants, they are crowded at the points of disembarkation and are then scattered over a large territory. They may have to gain employment by offering to _entrepreneurs_ some inducement to take them. If capital has not increased, and the _entrepreneurs_ are in no special need of new men, they will take them only at a rate of pay which is low enough to afford of itself a slight margin of profit. If the capital has already grown larger and the new men are needed, the situation favors them, and their pay is likely to be as high as it was before, or higher.

_The Effect of Increasing Capital._--The growth of capital has an opposite effect. It means a lower rate of interest, though it means more interest in the aggregate, since it insures a larger fund on which the interest is received. The rate does not decline as rapidly as the amount of the fund increases, and this insures a larger gross income from the fund; and it also insures larger individual incomes for many persons. There is, then, a large number of people who are in a position to make their consumption more luxurious, and this causes an upward movement of labor and capital in the group system. More workers will be needed in the subgroups _A'''_, _B'''_, and _C'''_, where raw materials receive the finishing touches, and also in the other subgroups above the lowest tier. It is to these subgroups that a large portion of the new capital itself will come, and the labor will come with it. Larger incomes, more luxury, more labor spent in elaborating goods as compared with that required for procuring crude materials,--such is the order.

_Effect of an Increase of Both Labor and Capital._--It is clear that a certain increase of capital might practically neutralize the increase of population, in so far as the movements thus far considered are concerned, and a greater increase of capital would reverse the original downward movement caused by the increase of labor and result in a permanent upward movement toward the subgroups _A'''_, _B'''_, and _C'''_. In this case the men occupy themselves more and more in making the higher form utilities. They make finer clothing, costlier furniture, etc., and the new production requires proportionately less raw material than did the old. This is the supposition which corresponds to the actual facts. Capital is increasing faster than labor, and consumption is growing relatively more luxurious; dwellings, furnishings, equipage, clothing, and food are improving in quality more than they are increasing in quant.i.ty. Goods of high cost are predominating more and more, and the subgroups that produce them are getting larger shares of both labor and capital. Population drifts locally toward centers of manufacturing and commerce. It moves toward cities and villages in order to get into the subgroups which have there their princ.i.p.al abodes. The growth of cities is the visible sign of an upward movement of labor in the subgroup series.

_A Change in the Relative Size of General Groups._--If all the steady movements of labor and capital were stated, it would appear that a relative increase in the amount of labor, as compared with the amount of capital, would enlarge the three general groups, _AA'''_, _BB'''_, and _CC'''_, and reduce the comparative size of the general group _HH'''_, which maintains the fund of capital by making good the waste of active instruments. Gain in capital estimated per capita would cause relatively more of the labor and more of the fund of capital to betake itself to the group _HH'''_. The movement toward the upper subgroups which is actually going on is attended by a drift toward this general group. An increase of luxurious consumption and an enlargement of the permanent stock of capital goods go together.

_Regularity and Slowness of Movements caused by Changes in the Amounts of Labor and Capital._--The important fact about the movements thus far traced is that they are steady and slow. They do not often call for taking out of one part of the system mature men who have been trained to work there. They are movements of _labor_ which do not, in the main, involve any considerable moving of _laborers_ from group to group. The sons of the men in the subgroup A do not all succeed to their fathers' occupations, but many of them enter _A'_, _A''_, and _A'''_, so that labor moves from the lowest subgroup to higher ones.

Such a transfer of labor entails few hardships for any one, and in general it is to be said that all the movements of labor and capital which are occasioned by quant.i.tative changes in the supply of these agents are of this comparatively painless and frictionless kind. About changes caused by new methods of production there is a different story to tell. The transformation of the world does not go on without some disquieting results, however inspiring is the remote outlook which they afford. The irregularity of the general movement, the fact that it goes by forward impulses followed by partial halts, is a further serious fact. Hard times present their grave problems, and we need to know whether it is necessary that dynamics--the natural and forward movement of the industrial system--should produce them. This problem is for later consideration.

_Movements caused by Changes in the Processes of Production._--Mechanical inventions are typical movers of labor and capital--constant disturbers of what would otherwise be a comparatively tranquil state. Dynamos for generating electricity and devices for conducting it to great distances from its sources have done much to rearrange the society of a score of years ago, as economical steam engines had done at an earlier date. Every device that "saves labor" calls for a _rearrangement of labor_ in the system of organized industry.

In a perfectly static condition there would be, as we have seen, a standard shape for all society, which means a normal apportionment of labor and capital among the producing groups and subgroups and also among the local divisions of the general area. The elements would subside to a state of equilibrium and become motionless, as water finds its level and becomes still in a sheltered pool. The body of fluid takes its standard shape and retains it, so long as no disturbing force appears. Now, society would have such a standard shape and would require, in the absence of dynamic changes, a relatively short time in order to conform more or less closely to it, if it were not for the unnatural apportionment of population in different parts of the area that the society inhabits and the obstacles which wholesale migrations encounter. For the solution of problems of the present and the near future we must accept as a standard the quasi-static adjustment of the population and the consequent quasi-static selection of industries in the different local divisions of the broad area--the arrangement that we have described as locating an excess of manufacturing in the more densely peopled areas and an excess of agriculture in the more spa.r.s.ely settled ones. With this qualification it may be said that there is a standard apportionment of labor and capital among the producing groups, and that these agents gravitate powerfully and even rapidly toward it. If there were a certain amount of labor and capital at _A_, a certain amount at _B_, and so throughout the system, this standard shape would be attained, and the elements would not move, except as a very slow movement would be caused by changes in the comparative density of population of different regions.[1] This standard shape would long remain nearly fixed if it were not for the appearance of the dynamic influences which are so active within the area we are studying.

[1] It is obvious that capital as well as population is distributed with uneven density over the territory occupied by society; but the movement of capital is less obstructed than that of a great body of people, and moreover it is chiefly the fact that the people are not dispersed over the area in a natural way which creates the chief obstacle to the moving of capital. It goes easily when it accompanies a migration of laborers.

_Alternations in the Direction of Movements caused by Improved Methods._--In a dynamic state this standard shape itself--the approximately static one--is forever changing. At one time, for example, conditions exist which call for a certain amount of labor at _A_, another amount at _B_, etc. A little later these respective quant.i.ties at _A_, _B_, etc., are no longer the natural or standard quant.i.ties; for something has occurred that calls for less labor at _A_, more at _B_, etc. If _A_ represents wheat farming, the amount of labor that it required when grain was gathered with sickles is more than is necessary when it is gathered with self-binding reapers, always provided that there has been no increase in population, which would require an increase in the food supply. The society therefore will not be in what has now become its standard shape till men have been moved from the wheat-raising subgroup to others.

If the invention of the reaper were not followed by any others and if no other disturbing changes took place, labor would move from the one group, distribute itself among others, and bring the system to a new equilibrium; but it has not time to do this. It begins to move in the way that the new condition occasioned by the introduction of the reaping machine impels it to move; but before the transfer is at all complete there is a new invention somewhere else in the system that starts a movement in some other direction. Before the labor from _A_ is duly distributed in _B_, _C_, etc., there is an invention in _B_ which starts some of it toward other points.

_Why Movements are Perpetual as well as Changeful._--Such improvements are perpetual, and the dynamic society is not for an instant at rest.

If the disturbing causes would cease, the elements of the social body would find their abiding place; and the important fact is that at any one instant there is such a resting place for each laborer and each bit of capital in the whole system. As we have seen, the men and the productive funds would go to these points but for the fact that before they have time to reach them new disturbances occur that call them in new directions. Again and again the same thing occurs, and there is no opportunity for placing labor and capital at exactly the points to which recent changes call them before still further improvements begin to call them elsewhere.

_Why Technical Changes are more disturbing than a General Influx or Efflux of Population._--When the moving of labor is gradual, it is effected, not so much by transferring particular men from one occupation to another, as by diverting the young men who are about entering the field of employment to the places where labor is most needed. When the son of a shoemaker, instead of learning his father's trade, becomes a carpenter, no _laborer_ has abandoned an accustomed occupation and betaken himself to another; but _labor_ has gone from the shoemaking trade to that of carpentering. A man often stays where he is to the end of his life, although during that life labor has moved freely out of his occupation to others. If we represent the facts by a diagram, they will stand thus:--

A B C D

50 40 70 100 Natural and actual apportionment of labor in 1850.

45 35>-->90 90 Natural apportionment after change of ----------^ ^---- method in 1850.

47 38 80 95 Apportionment in 1855 when the movement initiated in 1850 is partially completed.

52 41<---65 102="" natural="" apportionment="" in="" 1855,="" with="" ^----------="" ----^="" movements="" then="">

_A_, _B_, _C_, and _D_ represent different occupations or subgroups in the table we have before used. At one date a static adjustment called for fifty units of labor at _A_, forty at _B_, seventy at _C_, and one hundred at _D_. A half decade later, after improvements had taken place at _A_, _B_, and _D_, static forces, if they were allowed to have their full effect, would leave only forty-five men at _A_, and thirty-five at _B_, but they would place ninety at _C_ and at _D_.

The first movements that would tend to bring this about are in the direction indicated by the dotted lines. The transfers are made, not by forcing men from _A_, _B_, and _D_ to _C_, but chiefly by diverting to _C_ young laborers who would otherwise have gone to _A_, _B_, and _D_ to replace men who are leaving in these groups.

Now, before the transfers are completed something happens that calls for a different movement. Let us say that only three units of labor have as yet gone from _A_ to _C_ instead of five, leaving forty-seven at _A_; only two have gone from _B_, leaving thirty-eight; and only five have gone from _D_, leaving ninety-five at that point. Eighty would then be at _C_, and the static adjustment would not have been perfectly attained. It is at this point that a new change of conditions occurs, which calls for fifty-two units at _A_, forty-one at _B_, sixty-five at _C_, and a hundred and two at _D_. _C_ now contributes something to _A_ and _B_, but it gives more to _D_; and the fluctuations go on forever. Particular men may, more often than otherwise, stay in their places, since the incoming stream of new labor, by going where it is needed, may suffice to make the adjustments, in so far as they are gradually made; but labor, in the sense of the quantum of energy embodied in a succession of generations of men, is never at rest. It is a veritable Wandering Jew for restlessness and in a perpetual quest of places where it can remain.

Moreover, there are to be taken into account changes so sudden that they thrust particular workers from one group to another.

_A Perpetual Effort to conform to a Standard Shape which is itself Changing._--We think, then, of society as striving toward an endless series of ideal shapes, never reaching any one of them and never holding for any length of time any one actual shape. One movement is not completed before another begins, and at no one time is the labor apportioned among the groups exactly in the proportions that static law calls for. Men are vitally interested to know what they have to hope for or to fear from this perpetual necessity that some labor should move from point to point.

_Questions concerning the Effects of these Transformations._--These changes of shape involve costs as well as benefits. The gains are permanent and the costs are transient, but are not for that reason unimportant. They may fall on persons who do not get the full measure of the offsetting gains. What we wish to know about any economic change is how it will affect humanity, and especially working humanity. Will it make laboring men better off or worse off? If it benefits them in the end, will it impose on them an immediate hardship? Will it even make certain ones pay heavily for a gain that is shared by all cla.s.ses? Are there some who are thus the especial martyrs of progress, suffering for the general good?

_Natural Transformations of Society increase its Productive Power._--There is no doubt that the changes of shape through which the social organism is going cause it to grow in strength and efficiency.

More and more power to produce is coming, as we have seen, in consequence of these trans.m.u.tations. They always involve shifting _labor_ about within the organization and often involve shifting laborers, taking some of them out of the subgroups in which they are now working and putting them into others, something that cannot be done without cost.

_Immediate Effects of Labor Saving._--Inventing a machine that can do the work of twenty men will cause some of the twenty to be discharged.

They feel the burden of finding new places, and if they are skilled workmen and their trade is no longer worth practicing, they lose all the advantage they have enjoyed from special skill in their occupations. Do they themselves get any adequate offset for this, or does society as a whole divide the benefit in such a way that those who pay nearly the whole cost get only their minute part of the gain?

Is there unfair dealing inherent in progress in the economic arts, and must we justify the movement only on the ground of utility, though knowing that a moralist would condemn it? These are some of the general questions that are to be decided by a study of this phase of economic dynamics. We need to know both what the movement will in the end do for humanity and what it will at once do for particular workmen.[2] In addition to ascertaining what the ultimate results of the movement will be, we need to trace, with as much accuracy as is possible, the effects of the disturbances that are involved in generally beneficent changes.