THE MONEY PROBLEM

Chapter II.

THE FACTORS OF
PRODUCTION



ALTHOUGH economists treat production and consumption as separate and independent operations, in reality they are merely two steps in one complete process or cycle.  The terms are, in fact, correlative.  We cannot well think of the production of wealth without having in mind the end for which it is produced, viz., consumption.  Similarly, as consumption is impossible without the means, these terms imply each other.  Production is made possible only by consumption, which, as far as humanity is concerned, must necessarily precede production.  As the means of human subsistence do not arise spontaneously, self-created, physical exertion is obligatory, and by the law of equivalence the power must be provided before the work can be accomplished.  Further, continued physical exertion necessitates continued renewal of physical energy.

Everything with which we are familiar that enters into and goes to maintain human life is strictly limited in quantity.  Even the sun, the fountain and source of all earthly life, is limited, and astronomers tell us its heat is being dissipated at an enormously rapid rate ;  but with the uncontrollable forces of nature economics has nothing to do.  It is with the material things which we can control, which lend themselves to human desires and purposes, and whose usefulness we have power to dissipate or preserve, such as the soil, coal, forests, oil, gas, minerals, fish, game, etc., that this science is concerned.  All these things we have power to preserve or waste, and it is the limited amount of such necessaries that makes it essential for humanity to practise economy.  But now, economy, as I shall presently show, does not necessarily involve selfdenial or abstinence.  Far from urging abstinence, economy dictates the use of wealth ;  for whilst the quantity of the productive agents is actually limited, we shall find that consumption does not necessitate destruction or exhaustion of these agents ;  on the contrary, consumption is a necessary part of reproduction, for without it production must cease.

It is useless consumption that economy opposes, that is, consumption without reproduction.  Nature has shown in many of her operations her marvellous recuperative powers.  In the process of evaporation and rain-storm we have a complete system of production and consumption continually going on ;  similarly with animal and plant life.  Plants owe the carbon and hydrogen of which they are largely composed to the carbonic acid and moisture in the air and earth.  Now carbonic acid gas is exhaled by animals through the expenditure of carbon contained in the blood and oxygen from the atmosphere, and this carbon is furnished by the consumption of vegetation.  Here we find a continual process of consumption and production, or rather reproduction, being carried on ;  consumption of vegetation and air, and reproduction of carbon and oxygen in the form of carbonic acid, which is decomposed by the action of the solar rays.

In the formation and combustion of coal and wood we can likewise trace a similar cycle, for the products of combustion emitted to the atmosphere go to form trees and plants which furnish both wood and coal—the latter after possibly many thousands of years’ imprisonment beneath the earth’s surface.  Human life, so far as the consumption of food is concerned, is in all respects similar to the rest of the animal kingdom.  The products of consumption of human beings and animals contain the elements necessary to replenish the soil, to enable it to reproduce the means of subsistence ;1  so that, whilst it is true that the soil is limited, nature discloses a method by which food for the human race may be considered practically limitless.  The same is true as regards clothing.  Clothing consists of vegetable and animal matter, and the fertilizing agents requisite for reproducing such matter is furnished by the animals themselves ;  but observe that consumption is here a necessary part of the process, a necessary step in the process of reproduction.

Consumption therefore, instead of being a luxury to be moderately indulged in, is an essential part of reproduction.  Useful consumption and not abstinence is the motto of economics.  But these processes involve human labor ;  these various forms of matter which serve to produce life-sustaining material have to be brought together, to be transported from place to place.  For this work nature depends upon human agency, and here we can see what part human energy takes in the work of production.  “ If we examine any case of what is called the action of man upon nature,” says John Stuart Mill, “ we shall find that the powers of nature, or in other words the properties of matter, do all the work, when once objects are put in the right position.  This one operation of putting things into fit places for being acted upon by their own internal forces, and by those residing in other natural objects, is all that man does or can do with matter.  He only moves one thing to and from another.  He moves a seed into the ground and the natural forces of vegetation produce in succession a root, a stem, leaves, flowers and fruit.  He moves an axe through a tree and it falls through the natural forces of gravitation, etc. . . . Labor, then, in the physical world, is always and solely employed in putting objects in motion ;  the properties of matter, the laws of nature, do all the rest.”2

To the average person the terms production and consumption are synonymous with creation and annihilation, and the way in which many economists use them serves to confirm this impression.  But in what does the creation of wealth consist ?  Merely the combining, separating, shaping and moving of matter.  We do not create matter in the creation of wealth.  Nor do we create force.  We can neither create nor annihilate a single atom of matter nor a single unit of force.  All we can do is to effect such movement in matter as will cause nature to carry on desirable operations, such as the transformation of one form of energy into another.  One of the grandest triumphs of modern science is demonstration of the fact “that forces, unceasingly metamorphosed, are nowhere increased or decreased.”  If, then, neither force nor matter are consumed, what is meant by consumption ?  Physically speaking, consumption of wealth consists merely in the metamorphosis of force and matter, in altering and effecting new combinations of elements, in changing the forms of things.  Economically speaking, it is the consumption of utility.  In reality it is labor—human exertion—that is consumed.3

As wealth is in reality the product of consumption, consumption should be carried on towards this end.  Practically considered, such consumption is, of course, only attainable to a certain degree.  Were we able to unlock nature's secrets and learn by what mysterious alchemy the plants take the substances—carbonic acid, water and ammonia—to form protoplasm ;  if we knew how to crystallize carbon into the diamond ;  if we could collect all the atoms dissipated in consumption ;  if we could repeat exactly all of nature's processes, practice might be made to conform to theory, and our ideal economic standard might be realized.

Now although in very many instances we have not yet discovered nature’s secrets, science has taught us sufficient to enable us to provide human life incessantly with the commonest necessaries of life,—food, clothing and shelter.  With free access to the soil, with a scientific system of cultivation, with a proper return to the land of all the human and animal products of consumption, with a proper use of natural forces, it is quite possible for the human race to exterminate poverty and starvation.

What, then, are the teachings of nature regarding this subject of production and consumption ?  That wealth produced should be consumed productively, that it should be a necessary step in the process of reproduction.  Like the phoenix, it should give birth to the means for its reappearance, and from the ashes of consumption new wealth should spring.  This is the province of invention and discovery—to show how, from the dry bones, to reproduce life—to reproduce wealth from the products of consumption.  In this way the means of subsistence become practically limitless.  Instead, then, of regarding nature as niggardly, and her resources as limited, we must see that conformity to, and knowledge of her laws furnishes us with never-ending supplies.

We have seen that wealth consumed productively means that its equivalent in labor must be furnished.  Here we find, as shewn in the introduction, economics pointing in the same direction as ethics.  To eat the bread of idleness is as much opposed to a scientific system of economy as it is contrary to morality ;  likewise the duty of finding useful employment, of cultivating industrious habits is as much a socially economic necessity as it is a moral duty. Nature warns society against perpetuating a system that permits a large class to consume wealth without contributing to reproduction.  Prof. Cairnes has not failed to see this.  He says :  “ A formidable obstacle to economic laws is a body of rich non-producers.  It is important on moral, no less than economic grounds, to insist upon this, that no public benefit of any kind arises from the existence of an idle rich class.”

We have already considered several processes in the economy of nature, and hence we may safely consider this as an economic standard to which the laws of distribution should conform.

A perfect economic cycle involves, therefore, two operations, consumption and reproduction.  Starting with a limited quantity of wealth, our aim must be to utilize this wealth in such a way as to not only reproduce it, but if possible increase it, for wealth is capable of enormous increase.  Productive labor always produces a surplus ;  that is, wealth produced by labor is more than sufficient to replenish the energy consumed in production.  Were this not so, human life would have ceased long since, for labor has had to support not only itself, but a vast army of non-producers.




1 “ Thus the matter of life, so far as we know it, breaks up in consequence of that continual death which is the condition of its manifesting vitality, into carbonic acid, water and ammonia, which certainly possess no properties but those of ordinary matter.  And out of these same forms of ordinary matter, and from none which are simpler, the vegetable world builds up all the protoplasm which keeps the animal world a-going.  Plants are the accumulators of the power which animals distribute and disperse.”—PROF. HUXLEY, “ Physical Basis of Life.”

2 “ Principles of Political Economy.”

3 Adam Smith’s assertion that “ Labor is the ultimate price paid for everything ” is in this sense strictly true.  For utilities reappear only at the expenditure of labor.