by Thomas G. Shearman
The Land and Labor Library
at the office of The Standard, 25 Ann Street, New York October 22, 1887
printed in The Standard, October 8, 15 and 22, 1887
Mr. Edward Atkinson is a gentleman of whom I have no disposition to speak in any other terms than those of respect and esteem. He has done a vast amount of useful work; he is sincerely desirous of promoting the welfare of mankind; he has done much for the dissemination of sound ideas on economic questions, and he is always sincere and earnest. His weakness is mostly in a too strong conviction of his own infallibility, in the full persuasion that he knows just what needs to be done, how it is to be done and when it must be done, and a consequent peremptory method of disposing of everybody as something very like a fool who does not agree with him upon all these details. Thus, he has been for many years in favor of free trade, and in former years he strenuously insisted upon the vital importance of reform in that direction. He has not recanted his opinions; but he has become more interested in other questions, and now he has very little patience with, and indeed, something very like contempt for, men who hold his opinions as to free trade and think that issue more important than the new questions which have recently attracted Mr. Atkinson's mind.
In May last Mr. Atkinson addressed the Boston labor lyceum, ostensibly on the subject of the proposed eight hour law, but really on the question, "How are the profits divided?" His address, as revised, has but just come into my hands, and it raises some issues which need further consideration and a broader view. In reviewing its conclusions, it may be as well to accept its statement of facts and statistics without dispute, for it is so evident that Mr. Atkinson has overlooked important elements of the problem, upon his own showing, that it is not worth while to enter into controversy as to the facts or figures.
Mr. Atkinson claims that in $1,100,000 worth of cotton sheeting there is not more than $145,000 profit to capitalists, while $15,000 go in taxes and $940,000 to labor. He makes no allowance whatever for rent, except perhaps for the rent of the ground upon which the mill stands. He assumes that 1,400 bales of cotton can be grown upon land which pays no rent and costs nothing to the cotton grower. Of course he makes no allowance for rent in the cost of supplies, machinery, repairs, freight, etc. In one place he says that rent does enter into the cost; in another he says that if the landlord is taxed upon his rent he will add the tax to the rent, and so it will enter into the cost; and finally he says that rent amounts to a trifle less than 1% of sales, anyway. Now the truth is that before this $1,100,000 worth of cotton sheeting can get into the hands of the people there must be paid out of the proceeds rent, or the interest on the cost of the land, which is the same thing, on the land where the cotton is grown, on which the supplies are manufactured, on which the railroad is laid, on which the repairs are done, on which the sheeting mill is situated, on which the great stores where the sheetings are sold stand, and, finally, on which the residences of the 3,400 persons said to be engaged in producing these goods also stand. All this is plainly stated in Mr. Atkinson's "Distribution of Products." We will leave Mr. Atkinson to reckon the amount of these items, simply remarking that upon his own estimates the single item of the rent of the stores in which the goods are sold would add $100,000 to their cost, and that, making the most moderate allowance for the rent of the other land used in this work of production, it is obvious that rent alone would far exceed the whole sum Mr. Atkinson has allowed to go to compensation for capital.
In the next place, Mr. Atkinson has fallen, for the moment, into the old idea, long ago exploded by Adam Smith, but still current among unthinking people, that what is spent by the rich in their personal luxuries is as truly employed for the general good as that which is spent in productive enterprise. He seeks to reduce the $145,000 appropriated by capital by showing that much of this is spent in employing labor. He might just as well include the whole of it, because even the money which he charges to waste, as spent on champagne, etc., is all paid out for labor of some kind. The true rule is that nothing should be charged to labor except that which is expended usefully and so as to promote reproduction. A lord who employs a hundred servants to wait upon his idle and useless person, not only wastes the money which he pays to them, but also wastes their time and skill in occupations which neither help him nor them to serve mankind any better than they would have done before. Every dollar thus spent is devoted to waste, not to useful labor.
All this Mr. Atkinson knows quite well, and he will probably be indignant at the suggestion that he has forgotten it, even for a moment. But he certainly did forget it; not only when speaking to the workingmen of Boston, but also when revising his address afterward.
Upon many points it is easy to agree with Mr. Atkinson. We certainly agree
- that capital is exceedingly useful to labor;
- that the margin of profit upon the use of real capital is growing smaller and smaller; that it is not now excessive, and is likely still to diminish;
- that the condition of the laborer has improved and is slowly improving;
- that a mere arbitrary reduction of working time to eight hours a day, if unattended with a corresponding increase of production in each hour, would do harm to the mass of workers themselves;
- that there is an enormous and needless amount of waste in the food and fuel of all people, and pre-eminently among Americans;
- that education of a new and more practical kind is indispensable to the development of a higher prosperity among hand workers, and, for that matter, among all men, and so about other matters, not necessary to mention here.
It is necessary to repeat that, if all which is meant by such an assertion is that nine-tenths of the national income is spent in the employment of labor, including the labor expended upon the luxuries and extravagances of the rich, it is a statement not worth making or refuting. Precisely the same thing might have been said of the south in the time of slavery, or of the income of the czar of Russia today. Slaveholders spent substantially all of the gold which they wrung out of their slaves in the field in the support of other slaves to attend upon their personal wants in the house or on the road. Robbers spend all their gains in payment for labor used in providing them with food, clothing, shelter, etc. Nothing of importance can be had without labor, and, therefore, all gains and income — no matter how acquired — must be spent in the employment of labor. The real test is, is it useful labor? That is what we all mean, or should mean, when talking about labor. If we do not mean that, our talk is idle and absurd. If it is a sufficient justification for any mode of gaining wealth or for any plan of its distribution, that, when gained, it is expended in employing other people to do something for us, we may as well all turn thieves, for thieves have to spend just as much upon this kind of labor as the most honest man alive.
Having got rid of all this nonsense, which is quite pardonable in poor, uneducated men, but almost inexcusable in so wise and studious a gentleman as Mr. Atkinson, let us see what portion of the general income really falls to capital and land, as distinguished from labor. For this purpose we have the statistics of the income tax in Great Britain and Germany, and the census estimates of income in the United States, as well as a very doubtful estimate of the national wealth.
Writing in the midst of the Alps, with no books and no figures at hand, my estimate, based on recollection, must be subject to correction in detail; but it cannot be very far wrong. The value of all property in the United States was estimated at $43,000,000,000, of which at least $30,000,000,000 were productive of income. The average income from investments in 1880 could not have been less than 6%. This would amount to $2,100,000,000. The income of capital and land could not, therefore, have been less than this sum for that year. But the most extravagant estimate of the total national earnings during the same year does not exceed $10,000,000,000. Taxes amounted to over $700,000,000. If nothing else were to be deducted there would be only seven-tenths instead of nine-tenths left for the income of the laborers. But this is only a beginning. From the $7,000,000,000 which appear to remain must be deducted again the income of the higher class of workers — those who work with the brain rather than the hand, and whose skill commands vastly superior compensation. Mr. Atkinson has himself estimated the number of these in 1880 at 1,100,000. He has also shown that the average compensation of railroad officers and clerks exceeded $1,000 per annum. He has shown that the average compensation of 400,000 ordinary railroad hands, who are a picked and superior class of workmen, did not exceed $450, while the average wages of the 4,000,000 farm laborers did not exceed $200, and the 3,000,000 mechanical workmen earned less than $350. Thus there remained 16,200,000 persons who alone belonged to the class properly called manual laborers. It is impossible that their income could have exceeded for the whole year $6,000,000,000. In fact, it could not have approached that sum. But suppose it did. Out of this sum was taken more than seven-eighths of the taxes, it being undisputed that they paid taxes in proportion to their living expenses, not their income. This amounts to over $600,000,000.
What, then, is the result of this tabulation of Mr. Atkinson's own figures, taken from his own book of pamphlets, as these are? Simply this, that, even including the great mass of farmers nominally owning their own farms in the laboring class, that class, constituting sixteen-seventeenths of the whole people, or 94% of all, collected, free of taxes, only 54% of the total national income.
But we have not done with this matter yet. Out of this 54% must be deducted all the interest on the cost of land in the hands of these laborers. These earnings include all that the land owners among them received as compensation for the use of their land. From these earnings had to be paid all rent and mortgage interest which those of them paid who did not own the land on which they lived. I have no figures to quote from Mr. Atkinson on this point, and will not incur the risk of a debate on false issues by making estimates; but no one in his senses will dispute that the most moderate allowance for these purposes must immensely exceed the amount which would be needed to reduce the share of the laborer to less than 50% of the annual product. It is impossible to doubt that the American laborer, instead of receiving, as Mr. Atkinson, deceived by the cunning tactics of John Roach, has been led to believe, 90% of the combined product of land, capital and labor receives less than 50%.
Is there anything else to confirm this view? Everything. The census shows that wages, in manufacturing and mechanical industries, amount to less than half the net production. Of course, it would be a gross mistake to assume that the manufacturers pocketed the difference. It is an equal mistake to suppose that the immediate employers of laborers generally make on the average such enormous profits on the work done for them. But somebody gets it, or it is utterly lost. Whatever may be the fact as to this, the only point which interests the laborer is to know that he does not get it, and to know the reason why.
What do we find in Great Britain? The profits of manufacturers and merchants are smaller there than in the United States, and have always been so.
If Mr. Atkinson's apparent theory, that the laborer gets all that his employer does not retain, is correct, then the condition of the British laborer ought to be vastly superior to that of the American; for the British employer has been content for 50 years with half the American rate of profit. If the American workman has had 90% of his production, the British workman must have had 95%. Yet what do the income returns of Great Britain show? They demonstrate that the "working classes'' have received, on the average, only about one-third of the national earnings, and do not even now receive two-fifths. Much the same thing appears by the income returns of Germany; and it is confirmed by all that can be learned in any other country.
In his last computation, Mr. Atkinson ignores rent and federal taxes. There lies the mistake which makes all his calculations worthless. Instead of the taxes upon the production of $1,100,000 of sheetings being $15,000, as he says, the taxes levied upon the 3,400 workmen said to be employed in it must amount to over $100,000. The increase of prices, resulting directly from this taxation can rarely be less than $50,000, and has often been $100,000 a year. Some of this goes to capitalists but far more goes to waste. No matter where it goes, the workman loses it. Can the rent of these workmen be less than another $100,000? They must live like dogs if it is.
The statistics furnished by Mr, Atkinson, although worthless for the purpose of proving the conclusion which he seeks to draw from them, are valuable as a basis for further inquiry. He has rendered good service in all his publications by collecting figures and facts, the bearing of which he does not always appreciate, but which are eminently suggestive to those who will take pains to give them the proper sitting and application. And when he becomes a little less dogmatic, and looks deeper into the facts which he has so laboriously and skillfully collected, he will begin to see that the real "irrepressible conflict" is not between capital and labor, but between both of these, on one side, and untaxed rent, on the other.
Switzerland, Sept 13, 1887.