IV.8. Results of the Struggle to Produce More Cheaply

We have seen that the struggle set up among producers to take one another’s customers tended to make them produce more at a lower price, without regard to the demand of the commercial world; and we have shown that, if this demand did not grow, the competition that enriched a few individuals caused a certain loss to all the others. It will rightly be objected that a new production creates in its turn a new revenue, and that even if the demand resulting from this revenue comes only after the production, that does not prevent it from absorbing it. True: but the new revenue that results from the producers’ having agreed to work more cheaply must be smaller than the new production. This proposition seems to us self-evident; we shall nevertheless develop it further by examples.

The first effect of competition has been to lower wages and at the same time to increase the number of workers. Suppose a hundred workers in a cloth manufactory, each earning 300 francs a year. Their annual production may be represented by ten thousand ells of cloth; their revenue and their consumption will amount to 30,000 francs. Suppose that ten years later the same manufactory has two hundred workers, whose annual wage is only 200 francs a year. Their production will certainly be double: they will turn out twenty thousand ells of the same cloth; yet their revenue and their consumption will amount to only 40,000 francs. There is therefore no increase in the revenue of the workers proportionate to that of their production. In the same manufactory, a circulating capital of 100,000 francs used to bring the manufacturer 15,000 francs a year, out of which he paid 6 per cent interest to the capitalist, or 6,000 francs, and kept 9,000 for himself. The increase of capitals and the fall in the rate of interest have allowed him to extend his business and to content himself with a smaller profit, because he works on a larger sum. He has put 200,000 francs into his factory; he pays only 4 per cent on it, or 8,000 francs, to the capitalist; he keeps only 8 per cent for himself, and yet believes he has done very good business, for his revenue has risen from 9,000 to 16,000 francs, and the capitalist’s from 6,000 to 8,000. Their production, however, has doubled; but their revenue, and consequently their consumption, has increased only in the ratio of 5 to 8.

Taking further advantage of the abundance of capitals, the manufacturer has added to his manufactory new machines, so far improved as to double his annual product. He has devoted 200,000 francs to them, which he reckons he has placed to great advantage, for he draws from them the same profit as from the first 200,000 francs he put into circulation, that is, 8 per cent for himself and 4 per cent for the capitalist: 24,000 francs in all.

But here the decrease of consumption is above all felt. Ten years ago the product was ten thousand ells of cloth, and the revenue representing consumption was 45,000 francs: 30,000 to the workers, 6,000 to the capitalist and 9,000 to the manufacturer. Today the product will be forty thousand ells of the same cloth, and the total revenue representing consumption will be only 80,000 francs: 40,000 to the workers, 8,000 to the capitalist who lent the circulating capital, 8,000 to the one who lent the fixed capital, and 32,000 to the manufacturer, of which 16,000 is profit on the circulating capital and 16,000 profit on the fixed capital. Production will have quadrupled, and consumption will not even have doubled. The consumption of the workers who made the machines must not be brought into the account. It is covered by the 200,000 francs devoted to the machines, and it belongs to the account of another manufactory, where the same facts may recur.

Now when production quadruples and the revenue it yields only doubles, there must somewhere be an industry whose revenue quadruples while its production only doubles; otherwise there will be a glut in commerce, difficulty in selling and final loss. Each manufacturer counts on the unknown, on the foreigner; he imagines that in some other occupation new revenues are arising, of which he does not try to give himself any account. But all industries are alike, all foreigners come into contact with one another and compare their prices, and the reckoning made at first for a single manufactory soon applies to a whole nation, and finally to the whole market of the known world.

The facts we have just presented are universal. Every manufacturer who has enlarged his manufactory otherwise than in proportion to a need that would have allowed him to keep the same wage for each worker while taking on new ones, and the same interest for each capital while employing a larger sum, will find the same results if he makes up the accounts of his factory. If, instead of thinking only of himself, he makes up those of the branch of industry he carries on in his country, he will again see the same calculation borne out. Commerce may grow; but if its growth depends on the reduction of what used to be paid for each wage and for the interest on each thousand francs, consumption will not keep pace with production, and the general result will not be a greater prosperity. This calculation contradicts at its base one of the axioms most insisted on in political economy: that the freest competition determines the most advantageous course of industry, because each man understands his own interest better than an ignorant and inattentive government could, and the interest of each makes up the interest of all. Both axioms are true, and yet the conclusion is not sound. The interest of each, held in check by all the others, would indeed be the interest of all; but each man, pursuing his own interest at the expense of others as well as in the development of his own means, is not always held in check by forces equal to his own. The stronger then finds it in his interest to take, and the weaker still finds it in his interest not to resist him; for the lesser evil, as much as the greater good, is the aim of man’s policy. Injustice can often triumph in this struggle of all interests against one another; and in that case injustice will almost always be seconded by a public force that will believe itself impartial, and will in fact be so, since, without examining the cause, it will always side with the stronger.

Let us take up the same manufactory again, and we shall see the interest of each, but a forced interest, lead him to a result very decidedly contrary to the interest of the greatest number, and perhaps, in the end, contrary to the interest of all.

From the natural progress of society there results a constant increase of capitals; and from a vice in social organisation, which we shall examine elsewhere, there results a constant increase of the working population, and an offer of hands habitually greater than the demand for labour. It is between these two progressive powers that the manufacturer is placed, with his manufactory in which he employs only 100,000 francs and a hundred workers at 300 francs’ wages. Another capitalist offers him a further 100,000 francs. It is in his interest to take them, since, as we have seen, he will raise his revenue from 9,000 francs to 16,000. It is in the interest of the two capitalists to submit to a reduction of interest, since otherwise half the capital would remain idle, whereas by accepting 4 per cent instead of 6 their combined revenue will rise from 6,000 to 8,000 francs. It is in the interest of the working class to submit to a reduction of wages, whether it has really increased in number, or whether the demand for its labour has been diminished by machines. If it took advantage of being the most numerous to destroy these machines, the public force would drive it back. Each, for his own interest, gives up part of his revenue, until the one for whose profit all the sacrifices seemed to have been made, and who seemed ready to gather their fruits, finds in his turn that when revenues diminish people buy less, and that the production of the manufactory no longer bears any relation to the demand of the market.

From whatever point of view one considers the progress of wealth, one always arrives at the same result. When it is gradual, when it is proportionate to itself, when none of its parts moves at a headlong pace, it spreads universal well-being; but as soon as one of the wheels completes its action sooner than the others, there is suffering. We have seen the suffering that arose from a consumption more rapid than the formation of revenue, and that which resulted from a production greater than consumption; we have just seen the suffering that came from a saving which formed more capitals than the needs of industry could employ; a still greater suffering results from an increase of population greater than the demand for labour. On every side, then, it seems that the action of each individual tends to hurry the working of the machine. Perhaps the duty of government would consist in slowing these movements down in order to regulate them.

Not that there is no room for the development of human activity in the creation of wealth, whenever that activity is exerted in adding to the general fund and not in fighting over it; whenever man struggles with nature and not with another man. Thus the application of the sciences to the arts has not been confined to the invention of machines, which was itself highly useful when more work was demanded than the population could offer. The sciences have also served to discover raw materials, dyeing ingredients, and safer and more economical methods of preservation; they have caused better work to be done more cheaply. They have cared for the health of the workers as well as for the products of their industry; and they have increased not only numerical wealth but also the well-being that results from it for humanity.

In the same way, when nations have only followed the indications of nature, and taken advantage of their benefits of climate, soil, situation and possession of raw materials, they have not put themselves in a forced position; they have not sought an apparent opulence that turns into real misery for the mass of the people. It is again a natural advantage for them that the faculties of the very men of whom they are composed should be superior. Nature, lavish to certain climates, seems to have reserved for those who live in them an industry, an intelligence, a bodily strength and a constancy in work that do not even need to be developed by education. But other qualities, other virtues, seem to contribute still more effectively to the increase of wealth, as to the happiness of society: love of order, thrift, sobriety and justice. These virtues are almost always the work of public institutions. Religion, education, government and the point of honour change the nature of men; and just as they can make good or bad citizens of them, they bring them nearer to or take them further from the end that political economy must set itself.

Intelligent and industrious nations will do more work with the same expenditure of strength; sober and virtuous nations will have more enjoyments with the same revenue; free and orderly nations will have more security with the same capitals. None of the social virtues is lost, provided they are not put up for auction. The most wisely constituted nations will be the happiest, so long as they do not lose sight of the fundamental proportion between demand and labour; but if they once stoop to the wretched manoeuvre of working at cut prices to steal customers from rival peoples, neither intelligence nor sobriety nor liberty will save them from suffering.