§ 3. —Nor in the law of Profits.

Wages and rent being thus regulated by the same principles when paid in money, as they would be if apportioned in kind, it follows that Profits are so likewise. For the surplus, after replacing wages and paying rent, constitutes Profits.

We found, in the last chapter of the Second Book, that the advances of the capitalist, when analyzed to their ultimate elements, consist either in the purchase or maintenance of labor, or in the profits of former capitalists; and that, therefore, profits in the last resort depend upon the Cost of Labor, falling as that rises, and rising as it falls. Let us endeavor to trace more minutely the operation of this law.

There are two modes in which the Cost of Labor, which is correctly represented (money being supposed invariable as well as efficiency) by the money wages of the laborer, may be increased. The laborer may obtain greater comforts; wages in kind—real wages—may rise. Or the progress of population may force down cultivation to inferior soils and more costly processes; thus raising the cost of production, the value, and the price, of the chief articles of the laborer's consumption. On either of these suppositions the rate of profit will fall.

If the laborer obtains more abundant commodities only by reason of their greater cheapness, if he obtains a greater quantity, but not on the whole a greater cost, real wages will be increased, but not money wages, and there will be [pg 470] nothing to affect the rate of profit. But, if he obtains a greater quantity of commodities of which the cost of production is not lowered, he obtains a greater cost; his money wages are higher. The expense of these increased money wages falls wholly on the capitalist. There are no conceivable means by which he can shake it off. It may be said—it used formerly to be said—that he will get rid of it by raising his price. But this opinion we have already, and more than once, fully refuted.294

The doctrine, indeed, that a rise of wages causes an equivalent rise of prices, is, as we formerly observed, self-contradictory: for, if it did so, it would not be a rise of wages; the laborer would get no more of any commodity than he had before, let his money wages rise ever so much; a rise of real wages would be an impossibility. This being equally contrary to reason and to fact, it is evident that a rise of money wages does not raise prices; that high wages are not a cause of high prices. A rise of general wages falls on profits. There is no possible alternative.

Having disposed of the case in which the increase of money wages, and of the Cost of Labor, arises from the laborer's obtaining more ample wages in kind, let us now suppose it to arise from the increased cost of production of the things which he consumes, owing to an increase of population unaccompanied by an equivalent increase of agricultural skill. The augmented supply required by the population would not be obtained, unless the price of food rose sufficiently to remunerate the farmer for the increased cost of production. The farmer, however, in this case sustains a twofold disadvantage. He has to carry on his cultivation under less favorable conditions of productiveness than before. For this, as it is a disadvantage belonging to him only as a farmer, and not shared by other employers, he will, on the general principles of value, be compensated by a rise of the price of his commodity; indeed, until this rise has taken [pg 471] place, he will not bring to market the required increase of produce. But this very rise of price involves him in another necessity, for which he is not compensated. He must pay higher money wages to his laborers [if they retain the same quantity of real wages]. This necessity, being common to him with all other capitalists, forms no ground for a rise of price. The price will rise, until it has placed him in as good a situation, in respect of profits, as other employers of labor; it will rise so as to indemnify him for the increased labor which he must now employ in order to produce a given quantity of food; but the increased wages of that labor are a burden common to all, and for which no one can be indemnified. It will be paid wholly from profits.

Thus we see that increased wages, when common to all descriptions of productive laborers, and when really representing a greater Cost of Labor, are always and necessarily at the expense of profits. And by reversing the cases, we should find in like manner that diminished wages, when representing a really diminished Cost of Labor, are equivalent to a rise of profits. But the opposition of pecuniary interest thus indicated between the class of capitalists and that of laborers is to a great extent only apparent. Real wages are a very different thing from the Cost of Labor, and are generally highest at the times and places where, from the easy terms on which the land yields all the produce as yet required from it, the value and price of food being low, the cost of labor to the employer, notwithstanding its ample remuneration, is comparatively cheap, and the rate of profit consequently high, as at present in the United States. We thus obtain a full confirmation of our original theorem that Profits depend on the Cost of Labor: or, to express the meaning with still greater accuracy, the rate of profit and the cost of labor vary inversely as one another, and are joint effects of the same agencies or causes.

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