Front Page Titles (by Subject) LESSON II. Capital and Labor - The A B C of Finance
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LESSON II. Capital and Labor - Simon Newcomb, The A B C of Finance 
The ABC of Finance: or, the Money and Labor Questions Familiarly Explained to Common People in Short and Easy Lessons (New York: Harper and Bros. 1877).
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Capital and Labor.
We frequently hear of the oppression of labor by capital, and of antagonism between these two agencies. In order to judge how much foundation there is for this notion, let us inquire what capital really is. It seems as if a large portion of the labor party look upon it as some kind of instrumentality wielded by the rich for the purpose of injuring or oppressing the poor. Really, however, capital consists simply of the accumulated wealth of the past—houses, machinery, railroads, engines, mills, and everything which in any way produces the things that we want. It is one of the most important parts of the social machine described in my last lesson. I might say, indeed, that it is the whole material part of that machine. The ships which bring flannel shirts across the ocean for you to wear in winter; the factories in which those shirts were made; the railways which transport them to your city; the warehouses in which they are stored until you are ready to buy them; the roof which covers your head, and all the machinery designed for the transportation and preservation of the food you eat, are capital. To complain of these when one is suffering for the comforts of life is as if a naked and hungry man should complain that food and clothing were his enemies. Diminish or injure this capital, and the power of everybody, the laborer included, to get clothes to wear, food to eat, and shelter from the weather, will be diminished.
Let us now go a step further. Food, clothing, and shelter are the three great wants for which we all labor. To supply these wants in the best manner, both the labor and capital of others are necessary. For instance, taking all the people of the country together, they need, we may suppose, some three millions of houses to live in. These houses must be kept in repair; and, as population increases, a hundred thousand new ones must be built every year to accommodate our increasing numbers. The more labor which is put into buildings and repairs, the more perfectly will everybody, laborers included, be sheltered. So, if the house-carpenters all strike, or in any way prevent house building and repairing from going on, there will be fewer and poorer houses to shelter the population, and some one must go with less perfect shelter than he would otherwise enjoy. Perhaps you will think that in this case the loss would fall principally upon the rich, and that it would be the rich who would have to live in smaller or worse houses, rather than the poor. But the fact is directly the contrary. The rich man is able to have just such a house as he wants, and will have it without regard to the wages of carpenters; so that whatever suffering may result from the houses not being built, or enlarged, or repaired, has to be undergone by the laboring and the poorer classes, and not by the rich.
The same thing holds true of every article of food and shelter of which the laboring classes are so much in need. Let us take some examples. In the recent riot in Pittsburgh, an immense quantity of coal oil was destroyed by the rioters. The means of lighting the houses of our country were diminished by the quantity of oil thus destroyed. There is less oil in the market, and, in consequence of the destruction, a somewhat higher price must be paid for every gallon that is left. On whom do you think the loss will fall? On the rich? Not at all. They do not burn coal oil, and if they did, they would have their houses well lighted, no matter if they do have to pay a few cents a gallon more. It is the people with whom one cent a gallon is an important item who must economize in using the oil, and strain their eyes for want of good light; so that they are the real class who must suffer by the burning of the oil.
During the reign of the Paris Commune the Communists burned three or four houses belonging to M. Thiers, a man of great wealth. Did they damage his shelter? Not in the least. No matter how many houses he owned, he could only live in one. The people whose shelter was diminished by this destruction were not M. Thiers or his family, but the tenants who had to rent houses from him. If there were ten houses less in Paris, it was inevitable that the people must have lived in fewer houses than before.
In the Pittsburgh riot of which I have spoken, several hundred thousand bushels of wheat were burned. Somebody's supply of bread must be diminished by that movement. Whose will it be? That of the rich? Not in the slightest. They will have their full supply, no matter what it costs. Those who will suffer will be the poor, who will have to give higher prices in consequence of the destruction of the wheat. If the farm laborers should strike for higher wages, and thus diminish the supply and raise the price of grain, the result would be the same. It would be their fellow-laborers of the whole country who would have to pay the cost.
I hope you will now be able to see that all accumulated capital is for the advantage of the laborer or the non-capitalist, as well as the rich. If the capitalist expends his money in building a factory, that factory is making clothing for the poor as well as for the rich; probably more for the poor than for the rich, because the former will derive the greatest advantages from the cheapening of clothing thus produced. If he builds a railroad with it, that railroad will be employed in bringing hides from Texas to make shoes for the laborer's feet, or corn from Illinois for him to consume. The capitalist may or may not derive any benefit from it; but it is certain that the laborer will derive a benefit. If the capitalist builds a row of houses, the only use he can make of them is to get somebody to live in them. The amount of shelter that is available for laborers is thus increased, and they have just as much advantage of the houses while they live in them as if they owned them themselves; that is to say, as far as shelter is concerned, the house you live in is equally useful to you whether you own it or some one else owns it. But you say, perhaps, "The owner takes a tax from me in the shape of rent for living in it." This is true, and in the market this rent is the equivalent of the shelter; but it would not be the equivalent of the shelter if there were no capital to build houses at all. For every house which is burned down, and every house which is not built, the rent of the remaining ones is higher, while for every new house added the rent comes lower. However rents may vary, it is certain that if the number of houses is diminished from any cause whatever, there must be more people in one house, and thus more discomfort.
Again, what does the capitalist do with the money which you pay him for rent? Some part of it he may expend for his own exclusive benefit; but, as the world goes, the chances are that he puts the larger part of it into improvements which in some way benefit his fellow-men, laborers included. Some part of it goes to keep the very house in which you live in repair; another part, perhaps, to build new houses; another part to extend railroads, and so on. In all these ways, it is expended so as to increase the supply of food, clothing, and shelter available for the support of the laborer. Thus, all combinations among laborers to diminish or interfere with the development of capital amount to nothing but combinations to do the whole laboring class of the country, themselves included, as much harm as they can by interfering with the operation of the social system described in the first lesson.
We may now see that in spite of the antagonisms which from time to time arise between the employer and the employed, capital and labor are each indispensable to the other. How indispensable labor is to capital every one sees without argument, but many do not seem to see the other side of the truth. But this must be plain if you will reflect for a moment that every laborer or employé in the country is, under our present laws, perfectly at liberty to get along without the capitalist if he is able and willing to do so. If an engineer or fireman is dissatisfied with his wages, he is not compelled to remain and be oppressed; on the contrary, the whole world is before him where to choose. If a bricklayer or carpenter is not satisfied with what his employer pays him for his work, no law compels him to remain working for wages so low: he is free to build on his own account, and to combine with men in other trades to any extent to build houses for themselves. If the laborers of the country would combine in ever so feeble an effort to get along without the help of the capitalist, collecting all necessary capital for themselves, and working on their own account, they would at least show a laudable disposition to be independent. The very fact that they have never attempted this, and that during strikes they have remained idle, thus causing more suffering to themselves than to their employers, shows that the latter are really necessary to them.
One way in which the employer or capitalist is necessary to the laborer is this: when the two classes combine in any enterprise, say the building of a house, the former takes all the risk. Whether the house sells well or not, the men who build it get their wages, and thus are enabled to live, whereas it depends altogether on how the house sells whether the capitalist makes or loses. Thus, the men very wisely trade off their chances of large profit, which they might have if they built for themselves, for the sake of being certain of the means of living.
The best solution for these difficulties which so often arise between the two classes in question is to be found in some system of co-operation, whereby the laborer, besides having regular, but low wages, as a certainty, shall be allowed a share of the profits, if there are any. This plan has several times been tried, and always, I think, with success. If labor-unions generally would move for it, instead of waging a suicidal war by entirely refusing to work for weeks or months at a time, they would do more for their own well-being than by any other plan they have yet tried, and would show better than they ever have shown that they understood their own interests.