1 
 
 THE CAUSE AND EFFECT 
 OF MONEY. 
 
 library 
 
 OF The 
 
 LINIVERSIIY nf i p 
 
 BY henry rawie 
 
 Author of 
 
 • VAL UE : The First Cause in Political Economy. 
 
 THE PRINCIPLES OF A NEW POLITICAL ECONOMY. 
 
 “ To find the law by which they are regulated is to understand phenomena. 
 
 “We of the present day have already sufficient insight to know that laws of 
 nature are not things which we can evolve by any speculative method. 
 
 “ On the contrary we have to discover them in the facts and to test them 
 by repeated observations and experiments. 
 
 ‘ ‘ The laws of nature occupy the position of a power with which we are not 
 familiar. Before we can say that our knowledge of any one law is complete 
 we must see that it holds good without exception and make this the test of its 
 correctness. 
 
 “ The law then takes the form of an objective power and for that reason we 
 call it a force. To ascertain laws we have to seek out forces which are the cause 
 of phenomena.” — Hemholtz. 
 
 COPYRIGHT. 
 
 WM. w. HAMPTON, PRINTER, 
 
 26 NORTH PENNSYLVANIA ST., INDIANAPOLIS. 
 
\ 
 
 / 
 
 J 
 
 S CONTENTS. 
 
 ;r 
 
 cJ 
 
 ^ CHAPTER PAGE 
 
 I. The Value of Money 5 
 
 II. The Origin of Money 20 
 
 III. A Measure of Value 29 
 
 (tl IV. The Rate of Interest 42 
 
 •X V. The Circulation of Money . '. 61 
 
 VI. Interference with Circulation 63 
 
 VII. Correction of Circulation 76 
 
THE CAUSE AND EFFECT OF MONEY. 
 
 CHAPTER I. 
 
 THE VALUE OF MONEY. 
 
 In the ordinary transactions of business money goes from 
 hand to hand measuring out to every one a share of the social en- 
 ergy of the community. 
 
 It is not material at this time to inquire into the justness of 
 this distribution, but it is important to understand what money is 
 doing all the time, and what is being measured. 
 
 It is value that money is measuring out, and it is value that is 
 being constantly apportioned, and unless we understand the facts 
 in the case, we will fail to master the principles. 
 
 There are no facts except natural daily occurrences of sun and 
 rain, wind and weather, day and night, that are more familiar than 
 the facts about money. But strange as it may appear there is 
 scarcely a subject about which there is more dispute than about 
 the functions of money. 
 
 It is the familiarity of money that has held hack the truth 
 concerning it, because the most familiar and necessary truths are 
 latest in the order of development. 
 
 A writer on Economic subjects has wisely observed that the 
 progress made in unfolding truth has been in proportion to its re- 
 moteness from human interests. 
 
 We have, in times past, chiefly concerned ourselves with the 
 things that were farthest removed from our immediate welfare 
 and from our life on this earth. 
 
 Thousands of years before men began to observe the familiar 
 things around them they were exhausting their intelligence in 
 fruitless controversies about the personal attributes of God and 
 the properties of the human soul. 
 
 The dawn of modern science was the awakening of men to 
 
6 
 
 truth in familiar things from which the happiness and welfare of 
 the great mass of the people was to be secured. 
 
 But the gains and savings and increase in power resulting 
 from the application of science are almost as nothing when com- 
 pared to the gains we may expect when science is applied to our 
 politics. 
 
 One laborer, however humble his occupation, has an intelligence 
 which readily adapts itself to guide modern machinery and convert 
 natural forces into social products. And the power of these nat- 
 ural forces, which we may direct by our common labor, is beyond 
 our power of calculation. 
 
 When we think of idle and misplaced labor, therefore, we are 
 apt to overlook the fact that in shutting out labor we cut olf, at 
 the same time, the forces which science calls into existence and 
 which are in many cases at least two hundred-fold greater than 
 the force of labor alone. 
 
 In religion, for example, the waste of social force in pulpits, 
 churches and auxiliary expenses is almost incalculable because the 
 work of the church is behind the times and the teaching it seeks 
 to inculcate is too remote from human happiness. 
 
 A far away God who concerns Himself with but a few of the 
 people, who are so fortunate as to get where He resides after they 
 are dead, is entirely too far fetched for this age of intelligence and 
 belongs to a time when the well-being of the common people gave 
 the rulers of men no concern. 
 
 Thus without counting economic forces there are vast relig- 
 ious forces going to waste that should be exerting their power to 
 uplift and comfort mankind. 
 
 Millions of people fail to find, in the churches, any outlet or 
 support for the higher promptings of the soul, and other millions 
 mistake the form and ceremony of the church for the divine es- 
 sence of religion. 
 
 Only within a few years has the religious world began to stir 
 and to realize that is was connected in some way with the economic 
 world, and that God is nearer to us than we are in the habit of be- 
 lieving and somehow our daily life and happiness are in His care. 
 
 It is becoming clearer every day that the unfortunate in the 
 world are the result of our own ignorance and of man’s inhu- 
 manity to man, and the church can no longer afford to abandon 
 
7 
 
 them to an antideluvian Devil and withhold from them the sup- 
 port and fellowship of religion. 
 
 The whole civilized world is a money getting world, to he 
 without money is to he outside the world and beyond the pale of -- 
 civilization, and to possess an abundance of money is to possess all 
 the power that the civilization of the time affords. 
 
 If you were to select the greatest good in the world and were 
 to he guided in that selection by the one thing above all others 
 which people are most anxious to secure, you would select money 
 at once. 
 
 And your belief in the goodness of money would be strength- 
 ened as you beheld the struggle on one side to get plenty of it and 
 the distress and suffering on the other side caused by the want 
 of it. 
 
 But we do not seek money for its own sake but for the power 
 it gives by having other people furnish us with the results of social 
 energy. 
 
 We want money because we want power and the value of 
 money is the quantity of power it contains. 
 
 The value of money is therefore a definite quantity of social 
 energy, and the value of money, differs from the value of every- 
 thing else, as wheat or coal, because such value is free to be ex- 
 changed at any time for an equal value of anything else, while the 
 value of wheat is not free but is contained in the wheat, and before 
 we may exchange wheat for anything else we must first exchange it 
 for the free value of money. 
 
 Money-value being a force, or form of energy, it is subject to 
 the same laws that control other forces and thus money has limits 
 beyond which its power stops although these limits are much wider 
 and more diverse than any other single force, not excepting life 
 itself. 
 
 But money is not always conceded to be a blessing, and is also 
 known as the root of all evil, because we find the nearer we ap- 
 proach the fullness of our desire for money the farther away flies 
 the happiness and the good we dreamed we might buy with it. 
 
 It is the verdict of all people who are most generously wealthy 
 that it is a most difficult undertaking to give away money. 
 
 It is the opinion, indeed, of the men who make charity an es- 
 pecial study, that bounty and alms giving in any form is harmful. 
 
8 
 
 It is certain that money given away to relieve distress can ac- 
 complish nothing beyond the relief of the persons directly con- 
 cerned, and its secondary effects are admitedly bad not only on the 
 giver and receiver but on society at large. 
 
 We should learn from this that another Hand from ours is 
 playing some part in the use we make of money and that the indi- 
 vidual we regard as all important is scarcely of any importance, a 
 step only in the ladder of progress. 
 
 The man whom nature is seeking to introduce into the world 
 and to bring into society is the man of the future, the man of per- 
 fect happiness and of complete intelligence, who shall be an image 
 of God. 
 
 This failure of charity and benevolence to restore a certain 
 degree of harmony in society is caused by a fierce antagonism 
 from Nature v/ho refuses to have her own plans for the diffusion 
 of wealth set aside in favor of some cheap human makeshift. 
 
 Nature refuses to allow any charitable or benevolent compro- 
 mise with her, plan for the circulation of money, and if we desire 
 to secure the benefits of a just and equal distribution of wealth 
 we must learn the laws of its natural distribution and cease to in- 
 terfere with these laws. 
 
 This becomes clear as we begin to realize the laws of value by 
 virtue of which production and distribution takes place and by vir- 
 tue of which the functions of money are regulated and controlled. 
 
 What we should see now quite clearly is that every civilized 
 man is required to first get money before he is permitted to sat- 
 isfy his desires, and we ought to realize that nature has a purpose 
 in putting the value of money between a man and his life in 
 society. 
 
 Surely it is not for nothing that all over the civilized world 
 men are required to get money first and are not permitted to pro- 
 duce and exchange directly. 
 
 This intervention of the value of money discloses to us the 
 plan of Nature and her method of securing the co-operation of 
 men in carrying out that plan. 
 
 Granting that civilization means progress and progress means 
 development toward some end and for some purpose, then we must 
 admit that Nature is required to invent some method by which our 
 labor, and other activities, shall be directed in the way we shall 
 
9 
 
 go in order to progress, because we ourselves never know of what 
 progress consists. 
 
 Thus by placing the value of money between men and the sat- 
 isfaction of their desires, Nature solves her own problem and is 
 able to compel men to work as she directs by holding in her hands 
 the value of money which we must have in order to live. 
 
 An individual who desires a dwelling to be built, according to 
 some plan, is able to secure the required labor and material be- 
 cause he controls 'the value, in the form of money, which other 
 people require who build his house. 
 
 So Nature, in the whole world, holds value in her hands and 
 rewards the worker as she wishes the work done and withholds 
 value where she would discourage development. 
 
 In order to control and direct the activities of men it is a law 
 of Nature that they must secure value first before they are allowed 
 to think about themselves, and in this way the good for all gets in 
 advance^ of the good for any. 
 
 The laws of value determine what kind of activity, and how 
 much of every kind, is to be expended in any direction at any time, 
 except as we may interfere with our own laws by making some 
 property valuable that Nature would have without value. 
 
 It is the circulation of money that brings these laws of value 
 before our eyes and enables us to see the Hand that guides us and 
 apportions social power and enjoyment. 
 
 Getting money should be regarded as a means to some end, 
 although that end may be so far removed from our own times as 
 to be lost in the distance, and be out of reach of our intelligence. 
 
 Having much money may be compared to having an endless 
 supply of meals and clothes on hand, for however essential a need- 
 ful supply may be, an over supply can only become a burden. 
 
 The range of action for money is limited on either side. Be- 
 yond society among savages money is not required and a man may 
 live a life of a low social order with little or no money. 
 
 But passing from savage into civilized life we find the neces- 
 sity for money increasing as the conveniences of civilization mul- 
 tiply, and again we come suddenly to the upper limit. 
 
 After money supplies us with the advantages of a civilized 
 life its functions suddenly cease and the higher life of thought is 
 beyond its control. 
 
10 
 
 We need to learn that the primary purpose of money is not 
 for the selfish satisfaction of our own appetites hut it has an office 
 of its own in the body politic and the satisfaction we get from 
 money must ever be secondary to its higher uses. 
 
 If we desire to secure for ourselves our proper share in the 
 circulation of money we are required by I^ature to understand 
 this greater purpose of money, and only when we adjust our hu- 
 man laws to the natural laws of value may we expect the money 
 we each receive to be a measure of the part we each perform in the 
 greater work of civilization. 
 
 The fond parent looks to a profession, or a trade, for his child 
 to enable it to fill a position in society and to earn the money re- 
 quired. 
 
 There is something in the way, however, which seriously in- 
 terferes with all such plans — professions seem to be over-crowded, 
 and wages are much too low to sustain a decent social position in 
 most of the trades. 
 
 The economic condition of society as a whole is now confront- 
 ing the parent and reacting on him when he seeks to provide a 
 place for his children, and this social condition has to do with that 
 greater use of money which should always have precedence over 
 individual rights in property. 
 
 It is not too much to say that a law of God commands us to 
 understand the money question and it is a crime to educate chil- 
 dren to seek only money and applaud men whose life is a struggle 
 for money for themselves alone. 
 
 It is the height of folly to allow the specter of vested rights 
 to blind our eyes to the individual greed that would hold the mass 
 of mankind in slavish subjection. 
 
 We have been weaving a net of private property that is now 
 fast entangling our feet and preventing all social progress. 
 
 It is well to bear in mind that no question is ever settled until 
 it is settled right, and also to remember that the question of right, 
 in social affairs, is not a question of belief but a scientific question 
 of fact. 
 
 Whatever opinion the reader may hold he must remember 
 that it is not enough to believe that he is right, but it is necessary 
 to know that he is right, and from a standpoint of science he may 
 know this as certainly as any mathematical proposition may be 
 known. 
 
11 
 
 In the money question we are dealing with effect and cause, 
 and the cause becomes a force for the reason that it is invariably 
 followed by its effects and gives us a basis of science. 
 
 The cause of money is the value of it, and this value obeys cer- 
 tain laws which money follows as a needle follows its magnet. 
 
 . Money carries value among the members of society and this 
 value is being maintained or generated every day by the activity of 
 every contributing force in society, and the circulation of money 
 is determined by laws which regulate and control the flow and cir- 
 culation of this value. 
 
 The utmost we may ever accomplish by our laws is to stop 
 all interference with the circulation and generation of value or 
 with the activities upon which the supply of value depends. 
 
 The claim made for this work, in comparison with thous- 
 ands of other writings on the same subject, arises wholly from the 
 new idea and treatment of value in its relation to money. 
 
 The difference between the prevailing theories and the new 
 standpoint is well illustrated as follows: 
 
 W. Stanley J evons in his work, ‘^^Money and the Mechanims of 
 Exchange,^^ says Value expresses ratio in exchange,^^ whatever 
 that may be supposed to mean. Continuing he says — 
 
 ^^We must now direct our attention upon the fact that in 
 every act of exchange a definite quantity of one substance is ex- 
 changed for a definite quantity of another.’^ 
 
 ^^The things bartered may be the most various in character 
 and may be variously measured.^^ 
 
 ^^The quantities to be measured may be expressed in terms 
 of space, time, mass, force, energy, heat or any other physical 
 units.^^ 
 
 “Yet each exchange will consist in giving so many units of 
 one thing for so many units of another, each measured in its ap- 
 propriate way.^^ 
 
 “Every act of exchange thus presents itself to us in the form 
 of a ratio between numbers. The word value is commonly used 
 “For our purpose at least the use of the word value is only an indi- 
 rect method of expressing a ratio of numbers.^^ 
 
 The entire failure of the prevailing theories of money is ex- 
 pressed in the above quotation which will be made plain upon 
 slight examination. 
 
12 
 
 Mr. Jevons uses the illustration that if copper exchanges 
 weight for weight for ten times as much iron then the value of 
 copper is ten times the value of iron. 
 
 Now plainly this is getting the cart before the horse because 
 the word ‘‘if’ is at the wrong place. If the value of copper is ten 
 times the value of iron then it will take ten times as much iron in 
 weight to equal the value of a given weight of copper. 
 
 In plain words we never, as a matter of fact, obtain the value 
 of anything by obtaining a ratio of numbers first, but having the 
 value of any number of articles the ratio, or relation between 
 them, is simple and obvious. 
 
 Having the value of iron and of copper the relation of weight 
 to value solves itself and is simple, and ratio of numbers is the 
 effect of value and is not the cause, as Mr. Jevons attempts to ex- 
 plain. 
 
 In the same work Mr. Jevons uses an illustration which 
 effectively dissipates the idea that value is a ratio of numbers. 
 
 In speaking of the difficulties of barter which is the difficulty 
 of establishing a ratio of numbers he says: “In a state of barter 
 the price current list would he a complicated document for each 
 commodity would have to be quoted in terms of every other com- 
 modity. Between 100 articles there must exist 4950 possible 
 ratios of exchange and these ratios must be carefully adjusted so 
 as to be consistent with each other.” 
 
 ‘^^All such trouble is avoided if one commodity is chosen and 
 its ratio of exchange with each other commodity be quoted.” 
 
 Here is a manifest contradiction because barter is not abol- 
 ished by choosing one commodity as a measure — what is done to 
 abolish complicated ratios is the development of one commodity 
 as a money. 
 
 It is self-evident, in the ease of the 100 articles referred to, 
 that if value could be eliminated each commodity would have 
 4950 prices. 
 
 However the absurdity of this number theory of exchange 
 will become plain when we study the principles of measurement 
 for a moment. 
 
 What is it that actually happens in every exchange in con- 
 trast to what Mr. Jevons assumes to take place. A commodity 
 to be exchanged in his list of 100 must first be exchanged for its 
 
13 
 
 value in money and then this value can be exchanged for its equal 
 value in anything else. 
 
 This is the actual fact and what does this fact signify ? Therc^ 
 can he but one conclusion, namely, that everything exchanged has 
 a common origin, which may he expressed in terms of value. 
 
 Let us now return to where Prof. Jevons says, ^^The quantity 
 to he measured may he expressed in terms of space, time, mass, 
 force, energy, heat or any other physical unit.” 
 
 One thing is now a scientific certainty, namely, that exchange 
 between such various dissimilar factors can never he accomplished 
 except each factor can be reduced to some term which is common 
 to them all. 
 
 What factor is it that is common to everything that is ex- 
 changed anywhere in the civilized world? 
 
 Manifestly it is value, hut value, you may say, fails to convey 
 any idea to the mind. 
 
 But this is only true of value in the abstract as it is true of 
 any force in the abstract, hut in relation to the things exchanged, 
 value conveys a definite idea of social force. 
 
 Manifestly everything exchanged in society can be reduced 
 to common terms of social energy. 
 
 The total activity of any community for any given time re- 
 sults in a definite number of products which have consumed the 
 energy. 
 
 Therefore any product must be reduced to terms of this social 
 energy before it can be compared and exchanged. 
 
 But you may exclaim that this is not one force but is such a 
 complication of forces that the difficulty increases instead of di- 
 minishes. 
 
 Not so, however, because Nature comes to our relief and re- 
 solves all these forces into a single force, which equals them in 
 their social energy, and we have given this force the name of 
 value. 
 
 The value of property of every description in any community 
 is always equal to the social energy of all the forces engaged ir 
 that community. This value rises as social energy rises or falls 
 with the decline of social energy, and each product, or form of 
 property, has consumed a part of this total social energy which 
 its own value should express. 
 
14 
 
 Hence we get a ratio which is in fact a ratio and not a mere 
 collection of words. 
 
 The value of anything is the value of a part in ratio to the 
 whole and this is what a ratio must express — a part to the whole. 
 
 The value of any commodity expresses that part of the total 
 social energy engaged or contained in the commodity, and the 
 commodity expresses its own part of the total product. 
 
 This is so evidently the true explanation of exchange that ex- 
 tended comment must become a mere superfluity of phrases. 
 
 Bearing in mind that value is cause and money a peculiar 
 effect of that cause, it will be clear that a knowledge of the func- 
 tions of money must be based upon a knowledge of the circulation 
 of value. 
 
 The persistence of the need for money has given rise to two 
 theories of its functions that are the opposite of each other — one 
 theory holding that the amount of money in circulation is every- 
 thing and seeks to increase the quantity of money, while the other 
 theory contends that money is non-essential and would abolish 
 its use altogether. 
 
 The writers who would increase the amount of money in cir- 
 culation see one truth clearly, namely, that money has become 
 vitally essential to the activity and welfare of society. 
 
 In arguing therefore, that the activity of society depends 
 upon the circulation of money they are right or wrong, depending 
 on whether they mean that we depend on money in getting our 
 share of the value which money is the means of distributing, o 
 whether they mean that money itself is the cause of this circula- 
 tion of value instead of being but the effect of it. 
 
 What they fail to see is that this great body politic acts like 
 an immense machine which is generating value all the time out of 
 the working forces of society, and the continuance of activity in 
 society requires that this value shall be continuously and equita- 
 bly distributed, and money only acts as a conductor which is 
 charged with value. 
 
 This generation of value by the combination of forces may be 
 fitly compared to a constant supply of electric force at a central 
 station which is being carried out as fast as it is generated along 
 paths and conductors so designed as to carry the proper supply to 
 each part, and these conductors, dividing and becoming smaller 
 
IS 
 
 as they spread oat are designed to deliver valae in such quanti- 
 ties as will secure the work of every kind which society wishes to 
 have done. 
 
 In this illustration money would take the place of copper 
 which carries the electric current, money being charged with value, 
 as a copper conductor is charged with electricity, and money deliv- 
 ers up value instantly at every exchange and takes up a new sup- 
 ply of value at once to deliver at the next exchange. 
 
 It would be as foolish to charge some fault in the generating 
 machinery to the copper conductors as it is to charge some failure 
 in our central society to a scarcity of money. 
 
 Just as a copper wire is a better conductor of electricity than 
 iron by about 6% to 1, so also, is some money a better conductor 
 of value than other money, but there is no doubt that the money 
 of the world is able to conduct all the value with which it is sup- 
 plied vdthout much loss, and the fault is not in money but in some 
 interference with value. 
 
 It is on account of a failure to distinguish cause from effect—- 
 to distinguish value from the medium conducting value, that has 
 led the world into so many disastrous experiments in financial leg- 
 islation. 
 
 It is comparatively easy in these days of paper money for an 
 nation to increase the quantity of its money, but to keep it of 
 the same value is another matter, and the statesman has never 
 appeared who could coin money at will and maintain its value. 
 
 The reason we can not both issue and regulate the value of 
 money, is because Nature herself determines how much value she 
 will permit any given quantity of money to have, and we might 
 legislate forever, on this matter, without changing the value 
 Nature allows money to have. 
 
 The amount of value, in any given community, that may at- 
 tach to money is always a certain ratio of the whole value. 
 
 This is to say that in the City of New York, for example, if 
 the total value of all property is equal to three thousand million 
 dollars then the value of the money in circulation will be a cer- 
 tain per cent, of it, say, for instance, twenty per cent., or six hun- 
 dred million dollars of actual money. 
 
 If the supply of money comes faster than other values then 
 profits fall and drives money away, or if the reverse be true then 
 profits rise to attract more money. 
 
16 
 
 In addition to this flow in volume of money there is a more 
 rapid adjustment from changes in the speed of circulation. 
 
 As changes in business activity call for greater or less 
 amounts of money in short periods of time the want is met by a 
 rise or fall in the speed of circulation. 
 
 This fixity in the value of money has always prevented inter- 
 ference by legislation and has brought all schemes of government 
 finance to grief. 
 
 If we will take the United States as our example we may eas- 
 ily illustrate how this stability in the value of money makes itself 
 felt. 
 
 Suppose we call the value of all property in the United States 
 equal to eighty billion dollars and the value of the money that 
 will circulate as twenty per cent, of this amount, or sixteen hun- 
 dred million dollars. 
 
 Let us suppose that this amount gives us a per capita circu- 
 lation of twenty dollars and it is proposed to increase this to forty 
 dollars, and instead of sixteen hundred millions to have thirty- 
 two hundred million dollars worth of money. 
 
 In this event, if Nature did not interfere, the relation of the 
 value of money to other values would be changed from twenty 
 per cent, of the total to forty per cent., and the value of money 
 would be doubled. 
 
 It is well to remark here that when the advocates of much 
 money talk about its value they refer to the unit of value, the 
 dollar, but we are discussing the value of money as a whole. 
 
 The effect of thus doubling the volume of money would be to 
 cause a rapid rise in prices of all kinds until the true relation be- 
 tween the value of money and all other values was restored to 
 twenty per cent. 
 
 Let us suppose, however, that some scheme is devised whereby 
 this rise in prices is prevented and the value of money is doubled. 
 
 In this event you would find that Nature had another plan to 
 defeat ours, and the whole speed of circulation would fall so low as 
 to require twice the quantity of money to do the work that was 
 done before. 
 
 The reason for this will become clear as we see that money 
 measures out value to the people, and distributes wealth among 
 them, and it is not the quantity of money that is of so much con- 
 cern as it is the quantity of value that is free to be distributed. 
 
17 
 
 A yard stick, given time enough, may measure an indefinite 
 number of yards of cloth by being used over and over again, so 
 money measures value by being used over and over again, and just 
 as a yard stick goes out of business when the cloth has all been 
 measured, so money is forced out of business when value is 
 taken out of circulation to make a few rich instead of being dis- 
 tributed among the many. 
 
 If we had the value in circulation with which to endow all 
 the goods we could produce we would have a market that was prac- 
 tically without a limit. 
 
 Value, as you must see it then, is a force furnished by Nature 
 through the activities of society, and it is the chief function 
 of money to measure out and distribute this force among the mem- 
 bers of society so as to keep up social activities. 
 
 The business, or activity, of any civilized country always de- 
 pends upon the amounts of value received by its members and the 
 use they make of that value. 
 
 Among the great mass of workers in the United States it is 
 very likely that the average for men, women and children will not 
 exceed one dollar per day for every day in the year. 
 
 If then we were to write up the activity of the United States 
 in dollars we would say that if twenty-five million people received 
 and spent on the average of one dollar each per day, that this sum 
 of twenty-five million dollars per day was the limit of our business 
 power. 
 
 If wages were to fall to a standard as low as in China, then 
 the activity would fall in the same way or rather in an increasing- 
 ratio, while if the sums distributed as wages were to double, then 
 the business activity would more than double. 
 
 When this circulation of value among the members of society 
 is interfered with money may be never so plenty but it can find 
 nothing to do, and the unthinking say that a lack of confidence 
 has driven money out of business or else there is not money 
 enough in the country. 
 
 It is a matter of fact, very easy to discover, that this obstruc- 
 tion to the flow of value is outside of any system of finance and 
 no change in quantity or quality of money can put the value into 
 circulation that is now held back and absorbed by property of some 
 kind. 
 
18 
 
 The theory that would abolish money entirely and substi- 
 tute some form of direct exchange of goods, or of labor checks, 
 whereby hours of labor would become a measure of exchange in- 
 stead of the value of money is based upon many false conceptions. 
 
 The advocates of this theory gather their inspiration from 
 the observation that money is not usually desired for itself, but 
 that we are somehow required to get money first before we may 
 really get the things we want. 
 
 Believing that money is purely a human invention, and a 
 creature of law, and it has passed into the control of a few great 
 hanking houses they would cut the Gordian Knot by abolishing 
 money altogether. 
 
 Here we encounter the old difficulty which is found in every 
 economic discussion, namely, that value is set aside and disre- 
 garded. 
 
 These theorists never inquire if by doing away with money 
 they do away with value and if so what other results might follow. 
 
 As we begin to appreciate the work of Nature, in the devel- 
 opment of mone}^ and see how perfect is this measure of social en- 
 ergy, and how well it is adapted to the ends in view, we will turn 
 from seeking to lift up society by changes in its money system to 
 the true cause, and then we will have some hope of doing some- 
 thing permanent for the benefit of the struggling, over-worked 
 masses. 
 
 It must not be presumed that men in society are only a col- 
 lection of semi-savages who are free to seek the gratification of 
 their appetites without restraint from natural law or without any 
 plan to fulfill. 
 
 The desires with which we find ourselves possessed are the de- 
 sires it was planned we must possess, and only such part of the 
 race of savage mankind was able to advance as acquired the new 
 desires that led them upward and forward. ' 
 
 The leading people of the civilized world to-day are the ones 
 who have most closely observed the natural order and acquired 
 appetites needed to carry out the plan Nature has in view by the 
 evolution of society. 
 
 Look, for a moment, at the road the human race has traveled 
 over and left behind it in its journey toward civilization. 
 
 Men started as naked savages with brutal and savage instincts. 
 
19 
 
 without the power to work^ or speak, or think, and they have come 
 into the posession of an intelligence and power that is only com- 
 parable to the intelligence and power of God. 
 
 In thus looking back over this path of the human race, in 
 their hard struggle upward, we are compelled to ask ourselves what 
 Divine Hand has been guiding us to show us the way while other 
 people have remained as animals. 
 
 In the progress of the races of man came a time when they 
 awoke to the consciousness of this Power that was guiding and di- 
 recting them, and at such time Eeligion and the worshiping of 
 God sprang forth with wonderful vitalitj^ 
 
 The religious wars of the world seem quite natural when we 
 think what a new consciousness of this kind must have meant to 
 a passionate, primitive people. 
 
 It must have appeared to each race that to fight for their re- 
 ligion and their God was to fight to maintain a supremacy higher 
 than the race itself. Nor can we wonder that in this conflict of 
 religions the Christian Eeligion survived and became the religion 
 of the dominant races because its God was for love and peace, and 
 an equal God for all mankind. 
 
 A new and higher faith in God must appear as the truths of 
 science make it plain that our destiny is under Divine guidance, 
 and as we appreciate the bountiful provision that is made upon 
 this earth for the happiness of every one, which our ignorance 
 alone prevents us from enjoying. 
 
CHAPTER 11. 
 
 THE ORIGIN OF MONEY. 
 
 It would be a serious mistake at the outset to believe that 
 money has its origin in the human laws which regulate the coinage 
 and value of the money units. 
 
 Long before the dawn of written history the making of money 
 was in active progress in the workshop of Nature, and the pro- 
 cess consumed a long period in the history of social development, 
 and it is not yet complete. 
 
 Legislation has no more power to create the money of a coun- 
 try than it has to create its language, all the law can do is to rec- 
 ognize the money already developed and sustain its uniform value 
 by appropriate coinage laws. 
 
 Money is the language of the body politic and does its talking 
 and counting, it keeps telling us what to do, the easiest way to do 
 it, and informs us what it is worth on being done. 
 
 In considering the origin of money we will fail unless we are 
 willing to recognize a Creative Intelligent Purpose in its develop- 
 ment. 
 
 In trying to solve any mystery of creation wherein manifest 
 intelligence is displayed it is required of us that we discover the 
 purpose of that creation, otherwise we will surely fail in our under- 
 standing, however successfully we may classify, investigate and 
 catalogue a great collection of facts. 
 
 In the prevailing theories of evolution there is an evident 
 failure to master the problems of the higher forms of develop- 
 ment, and in unfolding the laws regulating life and society. 
 
 Development is looked upon as almost a purely mechanical 
 process, and changes are explained upon a basis of mechanical 
 action alone, obeying laws of mechanics and laws of motion that 
 seem to be unrelated to any purpose, or connected to any end to 
 be achieved. 
 
 It was on account of the early investigation of physical phe- 
 nomena that we accepted this tendency to mechanical methods in 
 
21 
 
 the science of evolution, because such methods seemed quite sat- 
 isfactory for purely physical and, therefore, mechanical changes. 
 
 But in following truth the scientist must continually go for- 
 ward and upward, as the world came forward hy development, and 
 he comes to a time, in his search for truth, when life and society 
 furnish problems for which physical and mechanical explanations 
 prove an utter failure. 
 
 Unless scientists are willing to recognize a purpose in life, 
 and a plan in civilization, they must fail to master its problems, 
 or explain its mysteries, because here we find means are every- 
 where adapted to ends. 
 
 A time came to the progressive races of men when their ex- 
 perience with the world brought them in contact with a creative 
 power, and compelled them to recognize God according to the de- 
 gree of their intelligence. 
 
 So must there come a time to scientists, in the investigation 
 of this same world and in seeking an explanation of its mysteries, 
 when they must recognize God according to the degree of their 
 intelligence, and become conscious of a purpose in the progress of 
 mankind. 
 
 With this idea of Intelligent Creative Purpose in mind the 
 explanation of the origin and development of money loses most 
 of its difficulties. 
 
 There are two fundamental ideas upon which the develop- 
 ment of money is based — the first idea deals with the purpose of 
 ISTature in the creation of money, and the other idea deals with 
 the rise of human intelligence by which a consciousness of money 
 is born, so that the human being may become the instrument in 
 carrying out this purpose. 
 
 The first proposition we need to consider deals with the pur- 
 pose money serves in carrying out the plan of civilization. 
 
 The facts in the commercial and industrial world make it 
 perfectly clear that the use of money has accomplished a separa- 
 tion between the civilized man and the means of life. 
 
 A civilized man is required to get money before he may sat- 
 isfy any but the most simple and primitive desires. He produces 
 the things he does not want and is compelled to exchange them 
 for their value in money in order to get the things he wants. 
 
 The savage was a law unto himself, he secured his own food. 
 
22 
 
 supplied his own simple wants, and was quite independent of other 
 savages. 
 
 By the use of money Nature holds the life and activity of 
 men in her hands because she holds value in her hands, and in tak- 
 ing value from one place activity stops at that place, and bestowing 
 value at another place activity follows there. 
 
 Just as we would consider a workman setting about to do his 
 work, and taking account of his forces and materials, so also must 
 we consider Nature in the work of developing money. 
 
 For are we not all but apprentices of the Master Workman, 
 and are not our small plans and works but a miniature of the 
 greater plan and the greater work? 
 
 And have not we all learned our trade in the workshop of the 
 world, and have not we become the people we are because we were 
 compelled to work so as to secure value before we could satisfy our 
 desires? 
 
 Eemember that the industrial organization of society, with 
 railroads, steam and electric power, came into existance without 
 the devising of human beings; but developed because we were com- 
 pelled to pursue value, and then you will begin to realize the ma- 
 jestic proportions of this plan of civilization, which is being 
 worked out under our own eyes according to laws of value. 
 
 In this great work of making money Nature had two great 
 tasks to perform. 
 
 One great task was to so combine all the forces of men and an- 
 imals, and all the natural forces into a new force that could con- 
 tain them and hold them together, this was to develop value. 
 
 The second great task dealt with the material at hand to 
 wield these forces, with Nature^s apprentices, her secondary work- 
 men, with the wild, brutal and unthinking savages. 
 
 As Nature was developing value so as to combine natural 
 forces into social forces it was necessary to develop a consciousness 
 of this value in the human mind. 
 
 In seeking the origin of money, therefore, we go back to the 
 origin of value, to the beginning of society where we find only sav- 
 ages who could not talk, nor work, nor think. 
 
 These savages had a fetv,. animal appetites or desires which 
 were the basis of development in them, and as these desires 
 changed from lower to higher levels the savage changed to higher 
 levels. 
 
23 
 
 In order to change idle, ignorant and brutal savages into the 
 constructors, planners, and builders of society it was necessary 
 that their appetites he worked upon, and that they should discover 
 they could satisfy their savage greed easier by following Nature’s 
 plan than by pursuing a plan of their own. 
 
 Again it was necessary that new appetites in considerable 
 number make their appearance so that the new desires of men 
 would increase Nature’s hold on them, and urge them to work all 
 the harder in order to satisfy more appetites. 
 
 By increasing our desires, and our appetites. Nature increased 
 our hunger, and our incentive to work her way. 
 
 At first, of course, all the savages were outside of this social 
 plan and it was necessary to urge, and coax, and force them in, 
 a little at a time. Nature began with the formation of a tribe, 
 which gradually increased to a nation. 
 
 In the beginning the savages were united by the strength of 
 numbers alone, but they soon developed other advantages and be- 
 gan constructing an environment which gradually withdrew them 
 from savage pursuits and hemmed them into a social body. 
 
 With the growth of society came an environment that spread 
 over the earth like a drag net seeking out savages and forcing civ- 
 ilization upon them, bringing men into closer and closer relation- 
 ship, and compelling them to work more and more fully for the 
 benefit of others while they were working to benefit themselves. 
 
 The first advance in the development of value, and conse- 
 quently in the development of money, was made when separate 
 and isolated savages united to form a tribe. 
 
 The power of the individuals who were thus united by a tribe 
 was greater than the power of the same number of individuals 
 who remained outside. And this difference in power was the first 
 social gain in power, and was therefore the beginning of a new 
 force brought into existance by this union of numbers. 
 
 The tribe was held together by this advantage of increased 
 power because it made each member more forceful, and enabled 
 him to live safer and easier than before. 
 
 The tribal force was at first the joint product of mere num- 
 bers in which each unit contributes as much as another, and in 
 which each enjoyed his part of the joint gain in power. 
 
 In this first appearance the social energy was completely 
 
24 
 
 homogeneous^ one part can not be distinguished from another, and 
 it was the joint property of the tribe, and it made for the import- 
 ance or sovereignty of the tribe, and no single individual could ac- 
 quire any part of it as his own. 
 
 This beginning of social energy, although weak, contains 
 vast possibilities for development, for now the tribal consciousness 
 is born, and the savage becomes conscious of his tribe, and ethics, 
 and government and order have a beginning. 
 
 In the tribe, for the first time, the savage becomes conscious 
 of others, and for the first time he must have some care about his 
 conduct, and consider whether the tribe will approve or condemn 
 his acts. 
 
 In this faint, first beginning of society the units composing it 
 may be said to be all like one another, without a trace of charac- 
 ter, or any personal distinction above the animal. 
 
 But at once this social energy, this cause of development, be- 
 gins to assert itself, the tribe begins slowly to advance, gaining 
 speed with each increase in social power. 
 
 New forces begin immediately to change the savage nature, 
 and some begin an independent advancement backed by the cor- 
 rellated power of their tribe. 
 
 Some of the members of a tribe soon develop capacities higher 
 than mere membership and in this they secured benefits to them- 
 selves besides gaining the approval of the tribe, because such indi- 
 vidual advancement would react to increase the power of the 
 tribe. 
 
 As soon as individual capacity, and primitive character, be- 
 gan to form, the lines of ascent began to mark out their paths, and 
 the gain in social power from the individual back to the tribe, and 
 the return of power from the tribe back to the individual, w^as 
 never ending. 
 
 There was a two-fold development continually at work evolving 
 the state on one hand, and developing the capacity of the individ- 
 ual on the other hand. 
 
 There was a constant action and reaction of social energy, 
 from the state to the individual and back from the individual to 
 the state again. 
 
 The power of the state spreads out to increase the power of 
 every member, and with this help every member began an advance 
 
25 
 
 which increased his own power, and this new power returns to in- 
 crease the whole power of the state which again sends out a new 
 impluse to every member. 
 
 The state is thus designed to increase the benefits of its mem- 
 bers, and its members gaining advantage from its increase of 
 power return a renewed power to the state which goes the same 
 round continuously increasing the social energy. 
 
 Every advance that is made in domesticating flocks and herds, 
 in tilling the soil, in accumulating property, in new discoveries and 
 inventions, in wresting secrets from Nature, and in harnessing her 
 forces should, one and all, increase the power of the body politic 
 as a whole and should return increased benefits to every member 
 by raising wages, by raising the standard of living, and by a gen- 
 eral diffusion of wealth among them. 
 
 If the equal action and reaction of this social energy, or value, 
 from the state to the individual and from the individual to the 
 state, is in any way interfered with then inequality in the distri- 
 bution of wealth begins to manifest itself, and the natural rise in 
 wages stops. 
 
 The principles of taxation enter here, taxes are the instru- 
 ments which, when properly used, will maintain an equilibrum be- 
 tween benefits and burdens. But when taxes are unjustly levied 
 and assessed the returns of some individuals to the the state are 
 out of all proportion to their benefits, and a few retain and accu- 
 mulate, unearned wealth at the expense of many others who are 
 compelled to make up the loss, and return much more than they 
 receive. 
 
 It is the office of money to measure out these benefits so they 
 may he properly apportioned. When we «ay a man has so many 
 dollars' worth of property we tell the proportion of value possessed 
 by him. 
 
 Each member of society should always be in possession of his 
 share of the common and universal gain in value, and he should 
 receive in addition a sum which will balance his service to the 
 state. 
 
 There is a constant supply of value being maintained all the 
 time by the activity of all the social forces, and there is a con- 
 stant necessity for measuring and distributing this value by the 
 use of money. 
 
 In the beginning of the evolution of society the first appear- 
 ance of value could not make itself felt as a distinctive force be- 
 
26 
 
 cause it was common to all people, and because it must in some 
 way be measured before it could be realized. 
 
 Money had its origin in the necessity for distributing the 
 gains of power arising on account of the increasing co-operation 
 among the members of society. 
 
 In the early beginning there was nothing to distribute, and no 
 occasion for measurement, but as soon as individuals were moved, 
 by a consciousness of their tribe, to display ability in many direc- 
 tions, and as soon as property began to develop, a measure of some 
 kind became necessary. 
 
 It was essential that property should be able to move and ex- 
 change among these early people, because such exchange would 
 again augment the power of every individual and the power of 
 the entire body. 
 
 The men most skillful in any one direction would hold the 
 products of such skill in less esteem than other products that were 
 difhcult for them, but easy for another. 
 
 In this way trade made a faint beginning by the exchange of 
 commodities, or barter, the individual giving up what cost him less 
 power in exchange for something that would cost him more power 
 if he produced it himself, thus marking out a line of least resist- 
 ance in production and of greatest attraction in exchange, giving 
 rise to demand and supply. 
 
 This simple form of barter is an exchange of forces, com- 
 monly called utilities, which may be said to reside in the things 
 exchanged, but it was yet a long step before an}^ idea or name at- 
 tached to such utility. 
 
 Gradually one product of more general utility than others, 
 began to be used as a measure, and to take on the functions of 
 money. 
 
 As soon as fifteen or twenty kinds of products were produced 
 barter involved a considerable loss of time and waste because in 
 a trade, quite simple in its terms, days might be consumed in ar- 
 ranging its many details. 
 
 There was a path opened for the development of money by 
 the time and energy that could be saved with its use, and this 
 saving is the source of the value of money independent of the 
 value of any commodity that for the time is used as money. 
 
 Money began its existance in the form of some commodity 
 more desirable than others so that it could circulate by measuring 
 
27 
 
 its own general utility against the less general utility in other 
 things. 
 
 This kind of money had very narrow limits, it was subject 
 to decay and consumption, and its quantity and value was never 
 stable, then again as such a commodity became more and more 
 useful as a money, and saved much time and trouble, the value 
 would rise in such a way as to make any common commodity too 
 valuable, and for this reason the precious metals soon became the 
 money of the world. 
 
 The precious metals had the properties that early made them 
 the natural selection for money, for they could not be consumed, 
 were universally esteemed, and of a value high enough so that 
 the value of money could not easily rise above them and put them 
 out of use. 
 
 It is well to remember, in considering the use of precious met- 
 als as money, that such money, for a long period, was in the form 
 of rings and ornaments of various kinds, and coined money came 
 into existance as a necessity of taxation and sovereignty. 
 
 We need only to recall the most important function of money 
 to understand the order and history of its development. 
 
 Money must be made more desirable than anything else, or 
 the purpose of Nature in the development of money would be de- 
 feated, because if some other thing was more desirable than money 
 it would become the incentive of laber, and Nature might fail to 
 direct labor in the way she wants it to go. 
 
 Barter proceeded then from one commodity, used for a time 
 as money, to another commodity in the order of their desirability, 
 the commodity more generally desirable driving out and displac- 
 ing one less desirable. 
 
 In this advance the commodity used as a measure was looked 
 upon as in itself possessing the utilities of everything for which 
 it could be exchanged, and the idea of utility apart from the ob- 
 ject itself began to form in the mind. 
 
 The idea of value came up from this idea of utility, and the 
 manner of its development is interesting and instructive as we may 
 suppose it to have arisen by a study of the use and functions of 
 money. 
 
 A hungry man will be driven by his hunger to seek food, but 
 the moment he is satisfied he may be expected to wait until he is 
 hungry again before he will exert himself. 
 
28 
 
 But as desires multiplied, and the means to gratify them in- 
 creased on every side, there was born a continual unrest of hunger 
 in a multitude of forms, and at the same time money developed 
 in such a way that is was only by the possession of money that 
 this great variety of appetites could be satisfied, and in this way 
 money took on the objective power of securing the satisfaction of 
 every appetite. 
 
 When the precious metals became the coined money of the 
 world then value may he said to have .acquired an objective ex- 
 istance in the human mind, because then money became purely 
 a power to purchase, and had all the elements of a force. 
 
 The development of money follov^ed in the path which was 
 made by saving time and energy by its use, and as the saving in- 
 creased the value of money increased, and the medium used as 
 money kept continually adjusting itself to this growing fund. 
 
 The development of money is parallel with, and best illus- 
 trated by, the development of thought and speech, because money 
 accomplishes for the body politic the exchange that thought and 
 speech accomplishes for the individual. 
 
 In the beginning of speech a few objects only can be said to 
 have been intelligible to men by names, and such names were an 
 imitation of the objects themselves, as near as sounds could im- 
 itate. The first forms of speech were accompanied by gestures 
 of the hands, face and body thus demonstrating the difficulty of 
 the earliest speech, as was the case with primitive barter. 
 
 It was a long time after men could exchange words and talk 
 intelligently before an alphabet was invented, which is comparable 
 to a coined money. 
 
 By the use of the alphabet names began to impart abstract 
 ideas without requiring a representation by picture, or by sounds 
 of the object. 
 
 So money came up the line of ascent, starting as a consuma- 
 ble commodity. 
 
 It occupied a long time, and required many exchanges and a 
 great amount of dickering among traders, before a crude idea of 
 money, like a crude language, made its appearance among men. 
 
 But like all other forms of development, which are slow and 
 difficult in the beginning, and are afterwards accelerated, money 
 soon became the most perfect measure of value that could be con- 
 ceived. 
 
CHAPTER III. 
 
 A MEASURE OF VALUE. 
 
 The way the value of money acts as a measure of value is not 
 nearly so simple as it may first appear. 
 
 We are in the habit of regarding money as a creature of law 
 rather than a most intricate product of evolution, and it seems as 
 though the government need only to coin a quantity of money, 
 and the holders of this money in some way determine prices and 
 fix values, and that measuring is done by buyer and seller. 
 
 But Nature, by some mysterious process, does the measuring 
 for us, and we find we have little, or no control, over the amounts 
 of money we receive, or the prices we pay. 
 
 We are creatures of a market, more or less determined in ad- 
 vance for us, and we must accept such wages as we can get and pay 
 such prices as have been fixed for us. 
 
 This is equally true for the common laborer and the great 
 financier, and he who finds millions coming his way is as helpless 
 in causing such a flow as the common laborer is helpless in the 
 low wages he is compelled to accept. 
 
 This difference between the men who control millions, and 
 the men who scramble for dollars, is a difference of the market in 
 which they happen to deal. 
 
 In the case of labor value is divided into pennies, and his cal- 
 culations are made on such a basis, while in great financial centers 
 the penny becomes a thousand dollars, and it is relatively as easy 
 to accumulate a thousand dollars at one market as it is to get a 
 dollar at another. 
 
 Between the men who deal with pennies as counters, and the 
 men who deal with thousand dollars as counters, in the same way, 
 are all the intermediate grades. 
 
 We are apt to say without thinking that demand and supply 
 repudiate prices and thus dismiss a great subject without an idea 
 of what is meant by demand or supply. 
 
30 
 
 Demand is not a want or desire^, but a demand is a definite 
 quantity of value put into action by a definite want or desire. 
 
 Twenty-five cents spent for sugar is a demand for sugar, while 
 a group of children looking into a candy store with hungry eyes 
 expresses a strong desire for sugar but no demand. 
 
 Remembering that demand is a definite quantity of value in 
 action we get the controlling side of prices. 
 
 Out of the total value, Nature, in some way that we do not 
 understand — makes a number of divisions of the fund and thi& 
 gives rise to the demands of every kind, and we keep producing 
 the supply, and increasing it, until we get to the lowest margin of 
 profit. 
 
 If wheat is considered as an example, we find that Nature 
 allows the United States to spend about four hundred million dol- 
 lars a year for wheat, and the supply comes up until the profit 
 is at its margin ; the same is true with other sources of supply. 
 
 The action of value in demand and the reaction of the supply, 
 in determining prices, is limited however to what we should call 
 simple values and what is commonly known as commodities. 
 
 If we were to leave the discussion here, as is 'commonly the 
 ease in political economy, we would omit about two-thirds of the 
 prices in the country. 
 
 In addition to prices of goods of every description there is a 
 vast quantity of fixed property the price of which depends upon 
 the rate of profit at which it capitalizes. 
 
 Leaving property in land out of the discussion it is held by 
 economists that the value of all other fixed property, as railways, 
 factories, homes, etc., is determined by the value of the labor and 
 materials of which they are composed, and that, therefore, there 
 is no other regulation of prices but by the demand and supply. 
 
 This is only true to a limited extent, in as much as the prices 
 of such fixed property can not fall below the cost of reproduction, 
 speaking generally. 
 
 As we go up the scale of fixed property, from the simple to 
 the more and more complex, the value of such property will rise 
 relatively higher than its cost of production and be determined 
 by a rate of profit. 
 
 The more stable the property the lower the rate at which it 
 will capitalize and the higher its price, and the greater the dif- 
 ference between its cost of production and its value. 
 
31 
 
 Tlie price of land depends upon the lowest rate of profit which 
 has been fixed outside by the development of other fixed capital, 
 and while much land that is valuable returns no profit because it 
 is not put to its highest use, its price is determined by the profit^ 
 able land of the same class. 
 
 With a given demand each year, this is to say with a given 
 sum to be spent for goods and for investment each year, we may be 
 Tsure it would now divide into three parts, one part going for our 
 living in buying consumable goods, another part in consumers 
 capital, in building houses, factories and the like, and the re- 
 maining part for investment in land and other stable and fixed 
 forms of property. 
 
 Having a fixed sum each year to spend, the amounts going 
 for investments pure and simple limits the amounts that may be 
 used to promote the activity of society and sustain the life of its 
 members. 
 
 As a nation we are limited in our income and expenditures in 
 the same way that individuals are limited, and the expenditures 
 of all individuals in any year limits the nation. 
 
 It will not do to say that next year we may produce three 
 times as much as we produced this year and have, therefore, three 
 times as much to spend, because the chain of activities does not 
 start with production, as is commonly supposed, but ends there. 
 
 What we may produce next year is limited by the amount we 
 may have to spend, and it is not the other way so that we could 
 say that what we will spend next year will depend on what we pro- 
 duce. 
 
 Production is limited by the circulation of value, and unless 
 we adopt some measure to put more value into circulation we are 
 limited one year by the circulation of the year preceding from 
 which there may be a small gain or loss. 
 
 In considering the market from which the activity in produc- 
 tion gets its support it is necessary to consider the entire market, 
 the market for investment and the market for production. 
 
 While we must admit that the investment market does not 
 promote activity, encourage industry, or forward development, but 
 is merely a change in ownership of fixed property, yet its influence 
 on the other market is far reaching and often most disastrous. 
 
 We can see that for some reason the labor market compared 
 
32 
 
 with the investment market is badly crippled, that whereas we 
 could easily produce from two to three times as much goods as 
 we now can market, yet in the investment market we find value 
 for investment accumulates much faster than new property and 
 pushes down the rate of profit and raises prices out of all relation 
 to costs of production. 
 
 While there is no outlet in this investment market for the ac- 
 cumulation of surplue value, except in lower rates of profit and 
 higher prices for land and other property, the same value could 
 find an unlimited outlet if it could increase wages and add its force 
 to the market for commodities. 
 
 What we need to discover is the cause of this paradox of 
 value, this accumulation every year for investment on one side 
 while great masses of people are chained to a life of drudgery for 
 the need of this self same value on the other side. 
 
 There is some interference with Nature^s apportionment and 
 measurement of value, hack behind the market, that must be the 
 cause of this disproportion of value going to labor on one side, and 
 piling up for useless investment on the other side. 
 
 Manifestly it can not he natural that such great sums of idle 
 value should be constantly seeking investment only to force up 
 prices of land and securities of every kind while millions of fam- 
 ilies are forced to live way below the standard of our civilization 
 because this very value does not come to them. 
 
 Both the idle capital and the idle and underpaid labor are 
 alike a menace to our civilization, and have come from causes 
 which no men have sought to impose on their fellows, and which 
 110 class would knowingly sustain. 
 
 This inequality in the entire distribution of wealth, and in 
 the daily distribution which follows a similar proportion, is the 
 cause of widespread discontent, and of many theories to remedy 
 the evil. 
 
 It is generally held that the measurement of benefits is to 
 blame, and while one class of reformers lay the cause to a monop- 
 oly of money, the Socialists go much deeper and would take hold 
 of property itself to restore equality. 
 
 Socialists may be said to regard unequal distribution as be- 
 ing a natural product of evolution coupled with human greed for 
 private property, and that the situation requires heroic measures 
 for relief. 
 
83 
 
 They would take the apportionment of benefits into their 
 own hands, doin^y away with all forms of investment by making 
 fixed property the property of the State. 
 
 The chief question to consider from the Socialist standpoint 
 is whether our unequal condition is a result of evolution and can 
 be remedied by human beings taking to themselves the task of 
 controlling development. 
 
 We need to ask whether Nature does not show capacity to 
 manage society better than human beings can manage it, and to 
 ask if the whole trouble has not arisen because we have attempted 
 to regulate and control where we should have kept our hands off? 
 
 We need to look at evolution from the right side and from 
 the only logical side, and when we do we must credit evolution 
 with the benefits we have secured, and we must charge the fail- 
 ures, that have scattered ruins of civilization along the history of 
 the human race, to the ignorance of man and to his want of sym- 
 pathy for his fellow-man. 
 
 The government that endures and rises above the ruins of 
 human governments is the government of Almighty God, with its 
 laws of unfailing justness and equality. 
 
 It is not enough that our sympathy for suffering humanity is 
 the mainspring of our actions and we are moved by good inten- 
 tions, for the poet has wisely observed that ^^Hell is paved with 
 good intentions.^’ 
 
 A useful rule to remember in discussing remedies for social 
 ills is that we will never learn the wrong we suffer until we learn 
 the right, and we will never be permitted to compromise with the 
 wrong because we have not discovered the right. 
 
 Although there is a great deal of truth in Socialism, yet suc- 
 cess requires the whole truth, and their plan to substitute human 
 intelligence to measure and apportion social benefits in place of 
 Divine Intelligence is open to serious objection. 
 
 It seems to the writer that Socialists fail utterly to compre- 
 hend the marvelous adjustment of forces that bring about the 
 natural regulation of values, and the wonderful complexity of 
 measurement required to maintain an equilibrium in society. 
 
 To regulate production Socialists see but two simple elements 
 — labor and materials — and they conceive that all forces can be 
 reduced to terms of labor and all substances to terms of materials 
 measured by labor. 
 
34 
 
 This scheme denies at first hand, and as a primary proposi- 
 tion, that natural law regulates production, and assumes that 
 inequality in the distribution of the wealth arises from human 
 greed instead of human ignorance. 
 
 But the problem of measurement in the distribution of 
 wealth, we will easily discover, is not nearly so simple as the good 
 intention of Socialism would have us believe. 
 
 Not only is it necessary to measure out social energy every 
 day according to the progress of that day, or to the failure of that 
 day, hut, what is vastly more important, the present daily appor- 
 tionments are made with due regard to a plan of civilization cen- 
 turies of the future ahead of us, and what human being may he 
 so hold as to say that he could regulate production with due 
 regard to the future destiny of the human race f 
 
 The problem of economic measurement is not a simple ques- 
 tion of labor as the only force, and products of labor as the only 
 material. 
 
 The evolution of society is brought about by the co-operation 
 of all physical, all vital, all chemical forces and all substances, 
 including, and taking into account, their manifold and inestimable 
 qualities. 
 
 Nature has accomplished a pooling of every imaginable force 
 and item of substance in society by the development of value, 
 and controls progress by the laws she compels value to follow. 
 
 Consider how production changes by recalling to mind that 
 the factor}^ system began almost in the middle of the 19th cen- 
 tury, and did not result from human greed or foresight, nor come 
 because of human legislation, but was a result of laws of value 
 world-wide in their scope. 
 
 A pair of shoes — how simple it seems in the market, and yet 
 how difficult to unravel the forces that to-day engage in the pro- 
 duction of a pair of shoes, and what changes have come when we 
 remember that some of our grandfathers were their own cattle 
 raisers, tanners and shoemakers all in one. 
 
 How intricate is the measuring that needs now to be done to 
 apportion and distribute the value of a pair of shoes when a large 
 part of society is engaged indirectly in producing them. 
 
 The raw material for a shoe factory comes from farms and 
 mills scattered all over the world, and these farms and mills keep 
 other farms and mills employed. 
 
35 
 
 A shoe factory is^, itself^ an important part of the life and in* 
 diTstry of some town or city. 
 
 The city government where the factory is located contributes 
 a part in the making of shoes, the schools of the city and country 
 help to make shoes by keeping up the standard of intelligence. 
 
 Physicians, dentists, lawyers, etc., engage in shoe making 
 when they save life or time for the inhabitants of the town where 
 the factory is located. 
 
 Outside the factory town is the county and state, and the effi- 
 ciency in shoemaking is influenced by them. 
 
 Beyond the state is the country at large, and beyond the 
 country is the civilized world, in some way indirectly connected 
 with shoemaking. 
 
 Along with the labor and capital that is directly engaged in 
 shoemaking, and which we all see clearly must be paid out of the 
 market price of shoes, is the other world of labor and capital indi- 
 rectly engaged in the same industry, but only touching it at many 
 points, and all this secondary labor and capital must also be paid 
 out of the market price of shoes as much as they contribute to the 
 product. 
 
 The circulation of money, which pays wages of every descrip- 
 tion, which pays taxes and incomes of all kinds, gets the value 
 from the retail market for goods. 
 
 Society at large releases certain amounts of value for every 
 industrial channel, and the products coming to the market have 
 their measure taken by money and have their prices fixed in con- 
 formity to the whole amount of value which is released for that 
 purpose. 
 
 The importance of a proper market price has never been ap- 
 preciated by economic writers, who always conclude, off-hand, that 
 a low competitive price is the best price for all concerned. 
 
 When we remember that the retail market price must carry 
 with it the value that pays for everything, for wages of every de- 
 scription, for profits, for all capital, for all incomes and taxes, we 
 begin to discover the reason a general fall in prices produces a 
 panic and such wide disaster. 
 
 The monopoly price is assumed to be unjust because it is rela- 
 tively higher than other competitive prices, which are taken un- 
 justly, and without reason, for a standard of comparison. 
 
36 
 
 The monopoly price, on the contrary, is the natural price, 
 and is the price Nature would establish, and does establish, 
 wherever she is not interfered with, and the highness of the mo- 
 nopoly price, fixed by relative competition, is its chief virtue be- 
 cause it carries with it the wages for teachers, doctors, lawyers 
 and government employes of all kinds, and all other payments for 
 services. 
 
 At present this monopoly price does not obtain for goods ex- 
 cept they are controlled by great combinations of capital, but 
 nearly all income-bearing property, which greatly exceeds the 
 value of all goods, sells always at its monopoly price. 
 
 Nature has produced, and has always on hand, a quantity of 
 value sufficient with which to allow every commodity in our mar- 
 ket to sell at its true monopoly price, but on account of human 
 institutions diverting this value from its true channels it piles up 
 in every market to compete, and for useless investment. 
 
 Just as a trust, by controlling the market, can take advantage 
 of this monopoly price and keep the gain instead of distributing it 
 in higher wages, so also other strong property, notably property 
 in land, takes up and absorbs the value that should go into trade. 
 
 We can see when shoes are sold at the store, and taken away 
 to be consumed, the value of them begins to be redistributed and 
 the last element in production, the merchant, is the first to be 
 paid, and after him in succession all other contributors are paid 
 until we reach the beginning of the production, which is paid last. 
 
 It may seem, to the reader, that distribution does not occur 
 in this order, owing to the advance payments the merchants are 
 required to make to secure a stock of goods in the first instance, 
 and to replenish the stock as the sales deplete it. 
 
 But the capital invested by merchants in stocks of goods is 
 in the nature of a loan to society upon which interest charges are 
 added and collected from the consumers. 
 
 This again is an illustration of the backward conduction of 
 value; of the chain of proceeding from cause to effect, the value 
 of goods is held at the center and only attaches to goods as they 
 come into the market, and, therefore, can only be redistributed 
 after they are sold. 
 
 The explanation of the market price by political economists 
 is almost the opposite of an explanation of the facts, they hold 
 
37 
 
 tliat the price of any good in the market is a result of additions 
 which commence with the first work done and the first material 
 used and is added to with every change, or handling, until the 
 market is reached, when the sum of all the lower costs are united 
 to make the market price. 
 
 This is now generally admitted to he an error because it fails 
 utterly to agree with the facts, and because if it was true there 
 could be no such declines in prices as result in panics. 
 
 The market price is made by society in some mysterious way, 
 and is a result of a chain of evolution which has established a 
 path for value. 
 
 From the market price all the costs and profits are sub- 
 tracted, and all the elements entering into production are paid, 
 the last element being paid first and the first element being paid 
 last. 
 
 Hence it follows that production comes to a sudden stop 
 when a fall in prices is passed down the line to where it has its 
 beginning and an attempt is made to take away the profits of the 
 employing capital or reduce the wages of labor below the standard 
 of living. 
 
 This mystery of prices being measured out for us at the cen- 
 ters of social activity, and being determined by some kind of a 
 clearing between every social force, is one of the secrets of Nature 
 that we may never have explained. 
 
 The laborer in a country village in Kansas, when he buys a 
 pair of shoes, may be paying a part of the salary of the President 
 of the Argentine Republic. 
 
 But by what process of apportionment such services can be 
 added to the price of a pair of shoes, and by what paths such 
 minute fractions of value can return to their source, may never 
 be explained to us. 
 
 Although we may never unravel the intricate mystery of 
 ])rices, owing to the complexity of evolution, yet a study of devel- 
 opment may help us to form an idea of the general plan by which 
 value flows in large streams before it sub-divides and balances into 
 })rices. 
 
 We may learn something by a study of the backward conduc- 
 tion of value, by discovering the reason that the latest elements 
 entering into the production, or exchange of goods, are paid in 
 advance of the primary elements. 
 
The first steps of progress are always the most difficult to 
 take, and each succeeding step becomes easier until a habit is- 
 formed, and doing work in a particular manner becomes a second 
 nature to us. 
 
 In the production of shoes we must admit that the first pair 
 was by far the most difficult and costly, consumed large quantities 
 of energy, wasted much material and occupied considerable time. 
 
 We may imagine, for the purpose of illustration, that the 
 making of the first pair of shoes required the maker to wait until 
 the cattle for the hide was ready for the killing, and then to pre- 
 pare and tan the hide and wait on the tanning, to make his own 
 tools, and after a long time, and much toil and waste of mate- 
 rial, shoes of a very inferior quality make their appearance. 
 
 While this is not the true history of the first pair of shoes, 
 strictly speaking, it is near enough the truth to demonstrate the 
 lines of progress. 
 
 In this illustration the lines of advancement and improve- 
 ment are clearly defined and shoemaking would expand as an in- 
 dustry by saving in three directions; the first would be a saving of 
 labor, the second a saving in time, and the third a saving in mate- 
 rial, and progress of the whole would continually be helped by a 
 better product, by better shoes. 
 
 What is saved in each instance is a gain in power, leaving that 
 power free to make more shoes without any increase in expend- 
 iture. 
 
 Therefore, as a result, the shoe industry would welcome any 
 help from any other lines of development that would save labor, 
 or time, or material in making shoes, because such help would be 
 able to pay themselves out of their own savings, and leave some- 
 thing over for the benefit of shoemaking in general. 
 
 For this reason evolution in every industry brings new forces 
 into it that help it along, and these forces must be paid out of 
 what they save, and are, therefore, paid first, or paid before the 
 earlier processes. 
 
 Some forms of property quite foreign to all methods of pro- 
 duction, and entirely removed from the labor and cajntal engaged 
 in producing goods, are strong enough to pick up much of this 
 saving without in any way contributing to it, and when this is 
 done there is a shortage in the supply of value, more goods are 
 
39 
 
 produced than can be sold, and there is not enough value to pass 
 back so as to pay labor the necessary wages and pay the necessary 
 jDrotits .to capital. The value of land and the value of franchises 
 are notable examples of property of this kind that absorb the sav- 
 ings made by inventions and improvements. 
 
 To reduce our problem, of the evolution of industry, to more 
 scientific terms, we may say that in order to make a beginning in 
 any line of development we will have a definite quantity of force 
 with which to work and this force expends itself in overcoming 
 the difficulties, or the resistances, in the way, and in doing so con- 
 sume a definite amount of time. 
 
 In the line of ascent in every industry there will be gains 
 made by an increase in the force available, and by diminishing the 
 resistances, and by saving in time. 
 
 We may imagine a trade in shoemaking having been started, 
 and such a trade is really the making of a path along which the 
 forces of society expend themselves with less and less resistance 
 to overcome, and as this one trade develops and helps along other 
 trades it is itself helped by them. 
 
 The principle we are trying to demonstrate is that in the de- 
 velopment of industries, and in the development of new desires at 
 the same time, paths are being made along which social forces 
 expend themselves, and the measurements of social forces are in 
 some way accomplished by these paths. 
 
 We might illustrate this idea by the nervous system of our 
 bodies, and by the manner in which the paths for nerve force 
 branch out and sub-divide, an impulse of force from the center 
 carries force along its paths, each of which is proportioned to 
 carry the amount of force required for a particular work of the 
 body. 
 
 The lines and branches of every industry lead to points 
 wherever that industry may receive and give support to any other. 
 
 During development the social energy will push out its paths 
 along the lines of least resistance, but in obedience all the time to 
 the general plan for the evolution of society. 
 
 There is in progress all the time an orderly development 
 which implies a constant increase or growth of social energy, and 
 a constant pushing of this social energy along lines of develop- 
 ment in obedience to natural law. 
 
40 
 
 The valuation of every product by the central society becomes 
 a necessity of complex development because it is only at industrial 
 centers that a balance of forces can be maintained^, and only at 
 such points that the exact proportion could possibly be made. 
 
 All manner of industries from the most simple farming to 
 the most complicated manufacturing are connected together by 
 paths of force, and are ever'receiving and giving a variable assist- 
 ance to each other. 
 
 The amount of social energy, in the form of value, going out 
 along its paths is subject to considerable variation which would 
 necessitate the constant equalization of forces, and constant meas- 
 urement by money, which is shown by changing prices. 
 
 The price of any commodity, as, for instance, five dollars for 
 a pair of shoes, is not a measured amount of shoe labor and shoe 
 material, as it is commonly supposed. 
 
 Five dollars’ worth of shoes is to say that the social power of 
 a pair of five-dollar shoes is equal to five dollars in value, and this 
 is determined by a pooling of all kinds of energy by society and 
 then an apportioning the proper share to the pair of shoes. 
 
 The labor, and other activities, by which shoes are produced 
 form a part of the whole social energy, and this shoemaking en- 
 ergy must come to the center where it will be adjusted with every 
 other productive energy and be equalized, and then an amount of 
 value, equal to this adjusted and equalized power, will attach to 
 the product and from the product will flow back to pay labor and 
 capital. 
 
 This is the law of value by which demand arises, and the rea- 
 son more value does not flow back to labor in every industry is be- 
 cause there is a robber between the valuation of society and the 
 valuation of the product that is strong enough to take everything 
 that labor and capital can be forced by competition to give up. 
 
 All manner of activity in society may be said to be comiected 
 by paths to some central directing Intelligence; this activity is 
 then reduced to its equivalent value, and then this value is redis- 
 tributed along these paths, going back always in the same ratio 
 that the activity sent its force to the central station, provided it 
 is not interfered with. 
 
 We say, then, that for any given time, the activity of any so- 
 ciety consists of a definite amount of social forces, resulting in a 
 
41 
 
 definite quantity of social products, but before any product may 
 know where it belongs, in the social scale, these definite social 
 forces are combined into an equivalent and definite sum of value, 
 and this value should attach to each product in the ratio of its 
 social importance. 
 
 This value divides first into great streams, the whole of the 
 force producing goods receiving first a whole amount of value 
 equivalent to such force, and then this stream sub-divides into 
 grand divisions for each department, and each of these divisions 
 sub-divide into innumerable branches, which fix the great varieties 
 of prices of goods of every kind. 
 
 In considering this perfect automatic action of natural law 
 regulating prices, and controlling the order of development, the 
 reader must not conceive the idea that human intelligence plays 
 no part in the social plan and is only a higher developed form of 
 labor. 
 
 Intelligence is doubtless one of the ends in view for which all 
 this evolution is proceeding, and, inasmuch as happiness is the 
 mainspring of our actions, and as the field for happiness con- 
 stantly extends and the quality of happiness becomes more ex- 
 quisite, a more perfect intelligence develops as a means to direct 
 and control us in our pursuit of happiness. 
 
 But at the same time, in giving to the intelligence of human 
 beings a high place in I^ature, we must not lose sight of its finite 
 limits, and must not forget that we depend after all upon infinite 
 intelligence to enable human intelligence to become self-con- 
 scious. 
 
 We never know, from within ourselves, of what intelligence 
 really consists, and during the history of mankind, and during our 
 passing existence, much false coin passes current for good and 
 true intelligence. 
 
 It is probably safe to say that we develop mental capacities 
 in great variet^q but only such capacity as is in harmony with 
 Divine Intelligence remains in the world to become a basis of 
 higher intelligence in man. 
 
 The true intelligence in the world may be said to be the resi- 
 due that remains after mental developments have passed through 
 the melting pots of hard experience and have become refined and 
 harmonize with that higher and infinite intelligence at whose sug- 
 gestion human intelligence starts in life. 
 
CHAPTER IV. 
 
 THE RATE OF INTEREST. 
 
 This much-discussed subject is not nearly so difiicult and 
 complex as modern writers of political economy would have us 
 believe. 
 
 Interest must be studied from the standpoint of the facts, 
 and the theories that fail to explain any of the facts, or explain all 
 of them, must be abandoned. 
 
 To attempt to discover the origin of interest by leaving 
 money out of the discussion, as the Austrian Economists are at- 
 tempting to do, is more difficult than to play Hamlet with Hamlet 
 cut out of the play. 
 
 The common idea of interest, that it is paid for the use of 
 money, is the correct idea, and is the result of meffis experience in 
 business. 
 
 The reader must be able to distinguish interest from profits, 
 interest is paid for the use of money and profits are paid for the 
 use of capital. 
 
 Economists attempt to lump all such payments as being made 
 for capital, and to call all such payments interest. 
 
 Money is not capital, but it is a distinct evolution much older 
 than capital, and has its own peculiar functions to perform which 
 are distinct from the functions of capital. 
 
 The payment of interest depends upon the laws of the distri- 
 bution of wealth, and has its origin in the backward conduction of 
 value. 
 
 Money must be advanced to capital and labor to secure co-op- 
 eration and to gain advantages in production, because the value 
 of products is never fixed until after they come into the market, 
 and products are never paid for until after they are sold, and the 
 labor and capital directly engaged in producing them is paid last. 
 
 On this account money lends to labor and capital a most 
 valuable assistance, and takes its pay out of the saving it estab- 
 lishes by its use. 
 
43 
 
 There are two sides to the interest problem equally impor- 
 tant. One depends upon the nature and functions of money, and 
 the other upon the backward circulation of value which calls 
 money into use and by which the benefits of civilization are dis- 
 tributed. 
 
 Money is a labor-saving and time-saving device, the use of 
 which causes an increase in social energy and an increase in value, 
 and this increase in value gives rise to profits out of which interest 
 is paid. 
 
 The interest paid for the use of money comes out of the in- 
 creasing volume of value which appears first in the market and in- 
 creases prices and profits. 
 
 Lending money, after all has been said, is only a higher form 
 of exchange, and the banker and money lender is, under normal 
 conditions, only a more universal merchant and manufacturer 
 than the men directly engaged, because in lending money they be- 
 come silent and conditional partners in every business to which 
 their money gives assistance. 
 
 As society develops, as commodities increase in quantity and 
 variety, and as inventions and improvements increase the social 
 energy, there is a corresponding increase in the total amount of 
 value which becomes profits first before it is redistributed, and 
 money is paid its interest out of this profit. 
 
 From the redistribution of these profits, by building houses, 
 factories, railroads, etc., a new source of energy is developed, and 
 a new series of profits must he paid to capital on account of the 
 assistance given by these improvements to society. 
 
 As all these sources of gain develop there comes into exist- 
 ence corresponding quantities of new value^ and as the costs of 
 production are constantly lowered large margins of profits make 
 their appearance. 
 
 This increase in the quantity of value greatly increases the 
 volume of business and increase the use and necessity for money. 
 
 The lending of money is based upon the development of so- 
 ciety by the redistribution of profits, and interest is a payment 
 made out of profits for the use of the value of money by which 
 profits are secured. 
 
 It is a mistake to assume that the sums paid for interest are 
 paid out of the earnings of labor or capital, and are an interfer- 
 
44 
 
 ence with production, and are a cause of the unequal distribution 
 of wealth. 
 
 Just the contrary is true, and interest is paid on account of 
 the assistance given to labor and capital by money, and because it 
 promotes a wider distribution of wealth. 
 
 On account of the superior stability of the value of money 
 the rate of interest is much lower than rates of profit, leaving a 
 margin to borrowers and enabling them to promote development 
 and encourage a wuder diffusion of wealth by the use they make 
 of money. 
 
 We are confronted with vast accumulations of idle capital 
 that can not be put to use and are constantly competing and inter- 
 fering with natural rates of profit by driving them down to the 
 interest rate for mone}^, but money is not responsible for this con- 
 dition. 
 
 The competition of idle capital has a tendency to lower all 
 profits to the low level of interest for money, notwithstanding the 
 stability in value of money and the hazard in business, and, as a 
 result, there is a large percentage of failures in every line of en- 
 deavor on account of insufficient profit. 
 
 According to the law of profits the rate should vary with the 
 quantity of value engaged and with the risk involved. 
 
 Speaking for society as a whole the general rate will decline 
 with the general increase in wealth and with the increase in the 
 stability in government. 
 
 The natural rate of profit for different lines of products 
 should vary considerably, and the highest rate should be with per- 
 ishable commodities, and the lowest rate with fixed business prop- 
 erty in the center of a city. 
 
 Such commodities as fruits and vegetables, the time of which 
 is short owing to their liability to decay, should carry the widest 
 margins of profit because the price is subject to the widest fluctua- 
 tions. 
 
 As we go up the scale to where there is an increase in sta- 
 bility of products and in the quantity consumed, there should be 
 a corresponding decline in the profit. 
 
 Passing from commodities to factories we will find the high- 
 est profit naturally with such plants whose product is subject to 
 sudden changes in fashions or changes from new development. 
 
45 
 
 The value of money must be more stable than the value of the 
 best property because it must always be interchangeable with the 
 best property without loss^ and^ therefore, the rate of interest 
 should be lower than the rate of profit for the safest capital. 
 
 To sustain the rate of interest below the lowest rates of prof- 
 its the amount loaned on any property is always considerably less 
 than its value, thus guarding the value of money against fluctua- 
 tions, and the time of the loan is limited so as to be able to renew 
 this security of money before changes in value occur. 
 
 The qualities required by Nature in the medium we use as 
 money are quite simple, and are determined by the laws which 
 regulate the circulation of value. 
 
 Money must possess the power of taking up a value of its own 
 independent of the value of the substance out of which money 
 may be coined. 
 
 Money must give up this value in every exchange to the com- 
 modity to which the value belongs, and must immediately take up 
 the same measure of value again from the general supply. 
 
 Money must measure value as it attaches to commodities and 
 property, and must at all times measure changes in value by 
 changes in prices, and for this reason the value of money must be 
 more certain and secure than the value of any other property. 
 
 Equal relations in society, upon which all economic equality 
 depends, are based upon this relation of value in different kinds of 
 products, and upon the value they contain being always in its true 
 relation to the whole value. 
 
 That money may perform its various functions, without loss 
 to any class in society, it is essential that every dollar shall have 
 identically the same value, and every multiple of dollars shall 
 have a value of exact multiplication of the unit. 
 
 A thousand dollars must be a thousand times as valuable as 
 one dollar, and a penny must always, and ever be, the one-hun- 
 dredth part in value of a dollar. 
 
 Money must not possess any power of increase, or change; 
 it must not, like a commodity, be subject to fluctuations and ever 
 be worth more or less than it costs. 
 
 The changes in value in other things must be the motive for 
 the circulation of money and, therefore, money, itself, must not be 
 subject to such changes. 
 
46 
 
 Money must have a basis for its value because it must be ex- 
 changeable at any time for simple property, such as commodities, 
 and for income-bearing property. 
 
 This necessity for a stable value in mone}^, superior to the 
 value of commodities, that are subject to sudden changes and to 
 fixed property that changes only during long periods of time, has 
 given rise to what is known, all over the world, as a gold basis. 
 
 Gold developed as the chief money metal on account of the 
 stability of its value, which was a result of its limited quantity 
 coupled with its qualities as a metal that made its possession 
 tilmost universally desirable among people of wealth. 
 
 In order to appreciate the position of money the reader must 
 have a clear conception of its value, and gold money offers the best 
 obtainable illustration. 
 
 Gold may be said to have a double existence; one life de- 
 pends upon its use as money, and the other upon its use as gold. 
 
 From an economic standpoint gold can not be both money 
 and gold at the same time because value determines its economic 
 standing. 
 
 When gold is coined into money it ceases to be gold; that is 
 to say, it loses all its gold characteristics and acquires all the 
 characteristics of money, and a paper dollar and a gold dollar, of 
 equal value, become identical. 
 
 For this reason, whenever the money value falls below the 
 gold value, then gold goes out of circulation and into the arts, 
 and the reverse happens when money value is higher than gold 
 value then gold flows to such points. 
 
 With the increase in wealth of the world the quantity of gold 
 became utterly inadequate to supply the world with money, and 
 the value of gold could not rise above its commodity value, while 
 the money value of the world greatly increased beyond the value 
 of all the gold. 
 
 Under these conditions paper money came into existence to 
 supply and make up the deficiency of gold, and in order to make 
 a stable value for this paper money it was given a gold basis; that 
 is to say, it was made redeemable in gold. 
 
 The amount of money that will circulate in any country 
 without causing fluctuations, and changes in prices, is determined 
 by laws of value and is always a certain ratio of the whole amount 
 of value. 
 
47 
 
 When a country depends upon the value of gold for the unit 
 of value of its money, and can not get enough gold with which to 
 fill out its allotted circulation, it may issue paper money to the 
 point of saturation of its money value without a dollar of such 
 money ever having to he redeemed in gold, because this paper 
 money, in such case, would take up the exact amount of value 
 that gold would have taken up had enough gold been obtainable. 
 
 But the moment the paper money exceeds such quantity — 
 that is, the moment the paper money passes the point of satura- 
 tion — it is plain that the money value instead of being divided 
 into units, of which gold is the measure, is divided into more units 
 of which paper money is the measure, and they, consequently, 
 have a value lower than gold. 
 
 Then it follows that gold, being cheaper in one country 
 measured by a paper unit, than in another country measured by 
 a gold unit, will flow to its dearest and best market. 
 
 This necessitates the redemption of paper by gold so that the 
 paper money can not pass the point of saturation and divide the 
 money units into units of less value than the gold basis. 
 
 The question now presenting itself for solution is the reason 
 for this exceptional stability in the value of gold that leads all 
 nations of the civilized world to adopt it as a standard of monetary 
 value. 
 
 This question will he easily answered and easily understood 
 if the reader will bear in mind the two great classes of property 
 in every community, namely, goods of every description and prop* 
 erty hearing an income. 
 
 Money must have a value so stable that it is not effected by 
 changes in prices of commodities which are subject to wide fluc- 
 tuations, and its value must he more stable, also, than income 
 property, which is slow to change in price. 
 
 The producer of wheat, when he sells his product for its value 
 in money, must know that he can buy income-bearing property 
 for this money on the same basis of value, and the property owner, 
 when he sells his property must know, also, that he can buy com- 
 modities on the same basis as he sells. 
 
 If the quantity of money could increase arbitrarily, then the 
 money prices of commodities would rise out of all proportion to 
 income property, because they would advance under an inflation 
 of currency while fixed property remained stationary, thus giving 
 undue advantage for the time to sellers of commodities. 
 
4S 
 
 The reason gold became the standard measnre of the civiKzed 
 ^mrld was becanse a balance was always kept between the valne of 
 gold, the value of commodities, and the value of income property. 
 
 This stability in the value of gold was a result of national 
 debts, and of the constant borrowing by the governments of the 
 world who thus became buyers of gold in large quantities, for 
 which they paid with bonds, giving a bond bearing a definite rate 
 of interest for a fixed weight of gold. 
 
 In this way gold became possessed of the property of being 
 convertible, at the option of the owner, for the very best and most 
 stable form of income bearing property in existance, and this fixed 
 its status for all income property, for being readily received for 
 the best property it was necessarily in greater demand for prop- 
 erty not quite as good. 
 
 Hence, it follows that a gold basis, for monetary value, is 
 misleading because behind the gold is a basis of value higher, wider 
 and deeper than gold; the basis for the value of all income prop- 
 erty — namely, the power of commanding a fixed and definite rate 
 of interest or profit. 
 
 Since all governments have been compelled to buy gold at a 
 fixed rate of interest, which rate of interest depended upon the 
 credit or stability of the government, it follows that the value of 
 gold developed an international and world wide stability. 
 
 There are, however, several important considerations pointing 
 to the rapid displacement of gold as a money metal not far in the 
 future. 
 
 The first of these is the increasing use, and stability in value, 
 of paper currency which fills the natural requirements of money 
 better than gold because the value of paper will depend solely upon 
 the free money value of society and will not be complicated by a 
 commodity value. 
 
 The second consideration is the need in the arts for gold, 
 which makes the use of gold money an expense that is being op- 
 posed at all times, by the laws of the conservation of value. 
 
 This expensiveness of gold, on account of its commodity 
 value, and the loss by wear, confines gold to be used almost wholly 
 as a reserve by banks and government treasuries. 
 
 The third consideration is the steady and certain increase in 
 the output of gold from the mines, which will soon saturate the 
 demand for gold as a reserve, because all requirements for reserves 
 will soon be filled by this increased production. 
 
49 
 
 This saturation of gold reserves will force gold into circula- 
 tion in competition with paper, and will do away with the redemp- 
 tion of paper by gold, and in this competition gold will be defeated 
 and will return to pile up in banks and treasury vaults just as sil- 
 ver did in its day. 
 
 But more important than the foregoing considerations will he 
 the development and extension of international trade by which 
 war will he abolished and the stability of government will be se- 
 cured. 
 
 This increase in trade will make a new market for securities 
 of all governments which will be used in the settlement of balances 
 in place of gold. 
 
 Then will follow, as a logical conclusion, the redemption of 
 the paper money of every country by the bonds of that country, 
 and then the value of paper will become international and will be 
 based upon a bond bearing a fixed rate of interest. 
 
 Furthermore the value of paper can be made more stable than 
 gold has ever been, and at the same time such a currency can be 
 made as elastic in quantity as the demands of business may re- 
 quire. 
 
 Gold basis money depends upon the erratic demands of gov- 
 ernments for loans, which demands are subject to wide fluctu- 
 ations, and which must effect the money of the entire civilized 
 world. 
 
 A paper money may be made redeemable in government 
 bonds, at the will and option of the holders of currency, and in this 
 way there will never be a departure between the simple values of 
 commodities and the compound values of income bearing prop- 
 erty. 
 
 The elasticity of a paper money may be made practically per- 
 fect by the issue of currency bonds bearing a rate of interest 
 slightly lower than the loaning rate for money, so that the de- 
 mands for currency in business would not be interferred with by 
 the demands for currency bonds. 
 
 Any government could issue its paper, which is made inter- 
 convertible with a currency bond, until the surplus of money 
 caused a demand for bonds and then the issue of currency would 
 cease and currency bonds would be issued and the money coming 
 in for exchange of bonds would be destroyed. 
 
50 
 
 These currency bonds going out would at once become the 
 currency barometer and would indicate the need of society for cur- 
 rency because as a demand for money arose the bonds would come 
 back for redemption in currency to go into circulation, thus keep- 
 ing up the supply of money to the point where the quantity of 
 money equalled and took up the value provided by Nature for that 
 purpose. 
 
CHAPTER V. 
 
 THE CIRCULATION OF MONEY. 
 
 In studying the circulation of money we study, at the same 
 time, the distribution of wealth, and we find our subject so com- 
 plicated by unequal wealth that we may have some difficulty in 
 separating the principles of circulation from the interferences. 
 
 We are about to attempt the diagnosis of a body that is racked 
 with pain and weakened with disease without having a healthy 
 body with which to make comparison. 
 
 The body politic, in all its history, has never known what we 
 may call a period of healthy development, because with the be^ 
 ginning of the increase in wealth there began at the same time an 
 unequal and unjust distribution of that wealth. 
 
 We must depend upon our knowledge of science and upon our 
 ability to follow natural law through the mazes of development, 
 in order to discover the proper distribution of wealth and to dis- 
 cover the cause of interference with such distribution. 
 
 It seems as though the best plan would be to ignore, for the 
 time, the facts of unequal distribution and seek out the laws of 
 natural distribution, and then return to our subject and follow 
 the processes by which the equal distribution is changed to concen- 
 tration. 
 
 If we can demonstrate that the application of correct prin- 
 ciples in our politics will be followed by a correction in the dis- 
 tribution of wealth we may consider we have proven our case. 
 
 Certain fundamental ideas must not be lost to our sight if 
 we expect to follow the path of circulation and understand the dis- 
 tribution of wealth. 
 
 The most important of these is — Value, because it is the most 
 fundamental. 
 
 We must remember all the time that we are dealing with laws 
 of value and with the movement or circulation of value, and that 
 money and goods only follow where value leads them. 
 
 We must remember that there is a limit in the quantity of 
 
52 
 
 value which is not fixed by the quantity of goods, hut which fixes 
 the quantity of goods. 
 
 We must remember that the quantity of value is governed 
 by the quantity of forces co-operating in society, and rises as these 
 forces rise, and falls as these forces fall. 
 
 We must not lose sight of the fact that labor and capital pro- 
 ducing goods do not produce the value of such goods, and the value 
 of products is a result of social adjustments and measurements in 
 which all the co-operating forces are balanced against all the pro- 
 ducts according to the needs of society at large and not according 
 to the needs of individuals. 
 
 It is society at large that tells a laborer what kind of product 
 to make by the value it places on the product, and drives labor 
 away from useless employments by denying value to his products. 
 
 When the bicycle came into the market its value bore no re- 
 lation to its cost of production because society saw fit to encourage 
 a rapid increase of bicycles by a valuation that allowed an abnor- 
 mal profit. 
 
 With a clear idea of value the next step in importance is a 
 clear idea of the backward conduction of value, and of its circula- 
 tion. 
 
 According to this idea distribution of wealth does not rise 
 with labor and capital and proceed to the other members of so- 
 ciety but rises with society and goes back to labor and capital last 
 instead of first. 
 
 Value appears first as a social force and attaches to goods af- 
 ter they are produced and appear in the market, and when the 
 goods are sold then the distribution of this value takes place, no 
 other conclusion can be made to agree with the facts. 
 
 It has been assumed, and accepted without question, that la- 
 bor was first in production and value was one of the products of 
 labor, but the self-evident truth is that value is first and labor is 
 one of the products of value. Value directs labor in the way it 
 shall go and prevents it being wasted in useless effort. 
 
 In discussing the circulation of money we must necessarily 
 deal with a society so far advanced as to have developed money, 
 but as we have examined the origin of value and of money we need 
 experience no difficulty on that account. 
 
 Money circulates because the activities of society result in the 
 appearance of value a part of which attaches to money, and the re- 
 mainder attaches to property. 
 
53 
 
 Speaking generally there are two great divisions of value cor- 
 responding to two great classes of products — circulating value and 
 fixed value. 
 
 We may say that the active social forces should he balanced 
 by an equivalent active or circulating value, and the potential so- 
 cial forces could be balanced by an equivalent fixed or potential 
 value. 
 
 It may be well to attempt to draw a line between the active 
 and potential social forces although such a line can not be made 
 distinct. 
 
 Of the active forces intelligent labor is chief and next are the 
 active forces of growth and reproduction in animal and vegetable 
 life, and to these we may add the active mechanical, chemical and 
 physical forces. 
 
 Of potential forces the chief is the properties of materials, 
 and the persistance of such natural forces as gravity, the heat and 
 the light of the sun, and the organization of structures of all kinds 
 to assist the active forces. 
 
 It is a law of compound evolution that these potential forces, 
 which give rise to the value of fixed property, must facilitate the 
 active forces, which give rise to circulating value, before any value 
 will attach to such fixed property. 
 
 The rate of income of fixed property will measure and deter- 
 mine the quantity of value it may contain because such income 
 measures the benefit received by the active forces from such prop- 
 erty. 
 
 To make this matter more clear we may say that all the active 
 forces of society give rise to a sum of circulating value out of 
 which all wages and profits and incomes are paid, and the incomes 
 of fixed property should equal the benefit received from such prop- 
 erty by the circulating value. 
 
 A dwelling house has a definite value which we may call po- 
 tential, and the amount of this value will depend upon the income 
 it can command, and the income in turn will depend upon the 
 help the dwelling will give to the active forces of society. 
 
 Although value thus divides into two great classes of primary 
 and secondary according to laws of simple and compound evo- 
 lution the reader must not get the idea that social forces do not 
 act in concert and divide also. 
 
54 
 
 All forces contributing in any way to the progress of the body 
 politic act together as one single force — just as life unifies the com- 
 plex forces of our bodies — and value is the name we have given 
 this force in its united and single power. 
 
 And although value is redistributed as rapidly as it appears 
 and attaches to property and products of industry there is not, 
 therefore, any sparate action of such forces. 
 
 It has been a great mistake in political economy to suppose 
 that social activity was a result of a multitude of independent la- 
 bor forces that acted in concert by accident only, and because of 
 human legislation. 
 
 This division of value into primary and secondary, or into cir- 
 culating and fixed, is important not only in understanding the dis- 
 tribution of wealth, but, also, in discovering the causes of unequal 
 distribution. 
 
 The proper distribution of wealth depends upon the natural 
 proportion being always maintained between simple and compound 
 development. 
 
 If for any reason the increases in value that come with new 
 development, and appear in the centers of distribution, fail to be 
 redistributed as an increase in wages and an increased circulation 
 of money, the industrial forces are thrown out of balance. 
 
 As a preliminary to the circulation of money there must exist 
 a certain industrial activity in the community under consideration. 
 
 This activity will be balanced by an amount of value which is 
 equal to it, and this value must be considered as a unit before it 
 is measured out for purposes of circulation. 
 
 Simultaneous’with this activity, and this appearance of value, 
 will be the appearance of products to which this value will be meas- 
 ured out as they come into the market. 
 
 The next step is the valuation of these products by society 
 and then money begins to circulate and carry back the payments 
 to labor and capital. 
 
 As has been explained the value of money is required by na- 
 ture to be more stable than values of any other kind, because this 
 money value is the nearest approach we have to the force itself. 
 
 It is important to understand and appreciate this truth if the 
 reader would understand the commanding power of money in every 
 financial disturbance. 
 
55 
 
 When the normal circulation of value is interferred with and 
 the total amount of value suddenly falls as in a panic, then goods 
 and property of all kinds must he scaled or measured down to a 
 lower price and a lower basis of value, money does not change 
 at such times while other things may be changing rapidly. 
 
 In order that the entire amount of property may be measured 
 down to a lower amount of total value it is necessary that great 
 quantities of property may be rapidly exchanged for their value in 
 money so as to establish the new price, hence, there arises, for a 
 short time, an enormous demand for the use of money and the rate 
 of interest may increase fifty or a hundred-fold. 
 
 If we could imagine such a suspension of activity as would 
 practically cut off the income of property and wages of all kinds 
 there would be a corresponding decline in values, hut money would 
 hold to its value until the value of all else had vanished. 
 
 This fact will give us a useful rule to remember in the concen- 
 tration, or in the distribution of wealth, namely, where a country 
 is suffering a relapse in its progress, by panics or chronic hard 
 times, the owners of money possess an enormous advantage over 
 the owners of property because, at such times, the value of prop- 
 erty declines while the value of money remains stationary, profits 
 are destroyed and the high interest for the use of money becomes 
 a heavy burden. 
 
 But, on the contrary, when development proceeds according 
 to the natural order then the producers and owners of property 
 have an advantage over the owners of money because, at such 
 times, other values are increasing while the value of money re- 
 mains stationary, and profits are greatly in excess of the rate of 
 interest thus diffusing and distributing wealth. 
 
 Circulation begins by money paying out the value of society 
 in buying commodities for sale and distributing them to con- 
 sumers. 
 
 This circulation of money for commodities will continue as 
 long as there is value to pay out for that purpose, and when the 
 supply of value runs out then circulation may continue for a time 
 on borrowed value until the market is glutted with goods. 
 
 As commodities are sold to retail buyers, and taken from the 
 market to be consumed, their value is released and set free to be 
 again taken up by money and again imparted to new supplies com- 
 ing into the market. 
 
5 ^ 
 
 As a commodity becomes more or less fixed in its development 
 there will be definite channels of value more or less fixed which 
 will limit production to definite quantities of goods and the market 
 must wait for one supply to be consumed before another supply 
 can find room. 
 
 The amount of value appearing in the market which fixes the 
 retail price of goods does not bear any definite relation to the value 
 of labor or capital producing such goods, but is usually and nat- 
 urally much higher until development reaches its completion. 
 
 The reason for this is not at all obscure because in the early 
 beginning of industry labor can not command higher wages than 
 is determined by its own unaided efforts, and, as a result, wages 
 start on a basis of labor force alone, and the allied forces helping 
 labor give rise to increases in the total value which become profits 
 to buyers and sellers in the market and to employers of labor. 
 
 It follows, therefore, that the value of sfoods in thn market 
 should carry a wide margin of profit, and this in its turn should, 
 by reinvestment, increase the demand for labor and raise wages. 
 
 It may appear at first sight that the laws of nature favor the 
 unequal distribution of wealth by allowing new floods of value 
 to increase the wealth of the mere owners of money and accumula- 
 tors of property who find their possessions increase in value with- 
 out appreciable effort on their part. 
 
 To a limited extent it is true that during stages of rapid de- 
 velopment Nature does favor the originator, and developer and 
 builder with floods of value, but it is for the purpose of conserving 
 value and of bringing about economy in the use and disposition of 
 her forces. 
 
 Some plan had to be devised to induce men to construct so- 
 ciety, to build homes, to build cities, to make improvements in 
 transportation, and to apply labor saving and time saving devices, 
 and it was the flow of profits that secured these results. 
 
 There is an extreme beauty and simplicity in the plans of Na- 
 ture, and their wonderful effectiveness so satisfies the mind, and so 
 convinces the judgment, that we feel sure no other plan is possible, 
 and so all men and all minds, must at last agree and unite with Na- 
 ture in her plan and thus we will secure perfect co-operation and 
 harmony in society. 
 
 But Nature does not allow unequal distribution to continue 
 
57 
 
 for any length of time, and only allows it so as to secure a better 
 distribution a little later. 
 
 We must remember that structures of every kind, and pro- 
 ducts of all kinds, have a relatively short life, and although some 
 men may naturally secure much wealth during active development, 
 while wages remain low, the natural decay of all property tends 
 ever to return it again to the common fund and wages should in- 
 crease continually from the redistribution of this fund. 
 
 And although this profit, which is the basis of the wealth of 
 merchants and employers, comes to them at times in floods of value 
 it only comes because they increase the facility of labor in some 
 way, either in saving of time, or material or force. 
 
 But by looking a little deeper we will find how wonderful is 
 the plan that guides these same profits, and we will find that 
 Nature does not suffer them to go to capitalists blindly but, to use 
 a slang expression, she has a string tied to them by which they 
 are pulled back to become higher wages for labor. 
 
 When you have discovered the truth that the conduction, or 
 circulation, of value is backwards you have made a great step in 
 understanding the distribution of wealth, and when you follow 
 these profits backwards you will find a law of redistribution by 
 which these increases in value must increase the standard in living 
 or civilization will be destroyed. 
 
 Thus while Nature is distributing profits most generously 
 with one hand, to all her workmen who aid in the organization of 
 society, the other hand is held back and is heavy in its punishment 
 for the society, that interferes with the redistribution of these 
 profits. 
 
 It should now be clear that value appears first as a social fund 
 and attaches to money and property, and the gains in this fund 
 increase the values of property, leaving wide margins of profits, 
 and these profits allow accumulations of wealth to merchants and 
 employers of labor who become capitalists in this way. 
 
 But there is a simple law of the redistribution of these in- 
 creases in value that requires that all products must be bought and 
 all incomes must be paid out of the wages received by laborers. 
 
 Here we come to what may seem to be a paradox. How is it 
 possible for labor to buy back at retail a product for which two dol- 
 lars is demanded when the total wages paid in producing the pro- 
 duct were but one dollar? 
 
58 
 
 The same labor producing a product and getting less in wages 
 than is the market price, can not buy back all its products, but we 
 must remember there are other laborers to be provided for who 
 must be paid out of the value distributed by this product. 
 
 If one-tenth only of labor was engaged in producing the whole 
 of our commodities, and the other nine-tenths were otherwise em- 
 ployed, the value of such commodities on the market must be high 
 enough to pay all wages. 
 
 This is to say that the volume of value circulating for any 
 definite time, say for one year, in the goods market, is the sum, and 
 the only sum, at our disposal with which to pay wages and buy 
 back the goods. 
 
 This value is furnished by society and as it has become the 
 property of a small part of the people it is used to make advance 
 payments by loans to labor, and wages are paid out of these ad- 
 vance payments and with these wages all goods of whatever de- 
 scription must be bought and all incomes and taxes must be paid. 
 
 • We can see these facts in our daily experience and see how 
 the market for goods carries with it the value that pays the rail- 
 roads the freight, the rents of the landlords, profits of the mer- 
 chants, etc., and how in this way millions of laborers, not directly 
 engaged in production, are provided with the value from which 
 they receive their wages. 
 
 In this circulation of value — beginning with money paid out* 
 in the market for goods, and this money carrying value back along 
 the entire wage line — the secondary redistribution is more impor- 
 tant than the primary distribution, because primary production 
 may continue for a time after secondary distribution fails and the 
 market will then be glutted with unsalable goods. 
 
 . When the volume of value is low it will limit the volume and 
 the price of goods of every description and this will interfere with 
 wages all along the line of development. 
 
 Hence, it follows when increases in value, arising from an im- 
 provement in production or from any increase in social energy by 
 government, by education, or invention, are held back and are not 
 redistributed in new wages or in increases of wages, the whole cir- 
 cle of social activity is interferred with because primary activities 
 are always dependent upon secondary redistribution, and second- 
 ary activities are always dependent upon primary distribution. 
 
69 
 
 This is to say that wages of labor of one kind are always de- 
 pendent upon wages of labor of another kind and all other pay- 
 ments depend upon wages, and no class is self-supporting. 
 
 The much vaunted independence of the farmer is a myth for 
 he depends for his market upon the wages paid in manufacturing 
 and trading. 
 
 These floods of new value which appear first as profits, and 
 make capitalists out of the thrifty and enterprising members of a 
 community, carry with them a correction for what would speedily 
 become an unequal distribution of wealth. 
 
 The reader must not imagine that enormous profits pile up at 
 all times for every capitalist without ever encountering a loss and 
 he must not imagine that these profits would be permitted to be 
 withdrawn from circulation by Nature. 
 
 Profits are highest where the risks are greatest, and where the 
 value involved is least; hence, there is practically an unlimited 
 field for participation in such profits. 
 
 But the losses here are also greatest, and our experience with 
 losses soon lead us to respect the natural law and to seek safer in- 
 vestments at lower profits. 
 
 The greatest quantity of profits, or new value, appears regu- 
 larly in the goods market and come periodically with the market- 
 ing and consumption of goods. 
 
 The merchant who is seeking a profit and has secured his 
 share of it begins immediately to encourage an increase in wages 
 by increasing his purchases. 
 
 This brings about a speedy correction of profits and a wider 
 distribution because the former gain becomes a new demand for 
 labor, and an increase in quantity of goods is followed by a lower 
 price and lower profits and an increased purchasing power of 
 wages. 
 
 What may appear at first sight as a drain upon wages in this 
 harvesting of profits will upon close examination develop into an 
 increase in the wage fund unless otherwise prevented. 
 
 Remember that the law of redistribution requires that pro- 
 ducts must be bought back by wages in order to keep up the cir- 
 culation of value, and it is the plan of Nature to constantly in- 
 crease wages in order to increase social activity. 
 
 Suppose a merchant gains from profits in one year the sum 
 
60 
 
 of ten thousand dollars, this gain must then he spent either to 
 buy an increased quantity of goods or to construct a building giv- 
 ing him an income. 
 
 In thus spending the ten thousand dollars this sum gets back 
 into the wage fund and we may suppose it was never in that fund 
 before, and it must therefore employ new labor or else increase the 
 wages of labor already employed. 
 
 There is, then, an increase in the circulation of money of ten 
 thousand dollars which has passed out of the hands of the mer- 
 chant and has become wages in the hands of the laborers. 
 
 This money becoming new wages of laborers who will employ 
 in turn other labor as soon as it is spent, and these laborers now 
 take the place of the merchant as employers by becoming buyers 
 of commodities. 
 
 Thus it follows that when gains in business are spent for new 
 development they continue in circulation as an increase in the 
 wage fund, and after the merchant has spent his thousands of dol- 
 lars we may allow him to drop out, and although he makes no 
 profit in succeeding years the former profit-should continue in cir- 
 culation and would do so unless it is interfered with. 
 
 This continual circulation of value from wages to profits and 
 from profits back to increased wages is only comparable to the 
 plant and the seed; as the plant grows to maturity it produces the 
 seed by which the plant is reproduced and brings forth the seed 
 again, and once started this process continues as long as conditions 
 are favorable. 
 
 This continual redistribution of the increases in value should 
 go on until all labor is fully employed at the highest wages society 
 at large can afford to pay, and until all the means of production 
 are fully utilized. 
 
 Every new laborer put to work should add more by his activity 
 to the total value than he can get in a return as wages be- 
 cause a part must go to the general benefit, and every extension 
 of development to new lands, and streams, and mines, and every 
 invention and improvement in morals, in education, or in art can 
 but serve to add to the total of social energy, and increase the total 
 fund of value and should continually increase wages and diminish 
 rates of profit. 
 
 But to return to the merchant, who in spending his gains by 
 
61 
 
 building a structure costing ten thousand dollars receives an in- 
 •come from it, you may ask how about this wealth, does it not come 
 unearned to the merchant from labor in general? 
 
 We have demonstrated that the value taken from society by 
 the merchant — ^namely — ten thousand dollars in profits — is re- 
 turned to circulation again as an "increase in wages as it is spent 
 in building and the mystery to he solved is connected with the 
 value of the structure which gives the merchant an income. 
 
 This structure will have a value greater or less than ten thous- 
 and dollars, and its value has no connection in particular with the 
 money spent for it. 
 
 In order to he valuable this building owned by the merchant 
 must in itself combine an organization of forces and of properties 
 of materials so as to be worth as much to society at large as the 
 value it contains. 
 
 To make our subject more clear let us suppose the merchant 
 gave away his ten thousand dollars so that he received no ben- 
 efit himself but it went into circulation just the same as if a 
 building had been constructed. 
 
 It is clear that although you might applaud him as a benefac- 
 tor yet in the last case he would have done an inujry to society by 
 his charity and society would have lost the benefit it should have 
 received from an intelligent investment in a needful building. 
 
 In considering whether wealth could not accumulate with in- 
 justice in this manner there are just two considerations which 
 demonstrate conclusiyely that it can not. 
 
 The first of these is the natural decay in property of this 
 kind during which its value is released to go into circulation again 
 for new construction at a much higher rate of wages and a much 
 lower rate of profit. 
 
 When development is not interferred with profits are highest 
 and wages are lowest during the early stages of construction, and 
 the continual return of increases in value to circulation would and 
 should continually increase wages, therefore, as these structures 
 began to pass away the development of the country should have 
 proceeded to a point where a higher rate of wages enabled labor to 
 get an increase in gain for itself and should make all accumula- 
 tions of wealth easier for the laborer and slower for the capitalist. 
 
 The second consideration is the natural limit of property of 
 
62 
 
 this description by which the value of this class of property is held 
 down to its true proportion to other values. 
 
 When fixed property is behind circulating property in devel- 
 opment its price rises above its cost of construction and there is 
 the same inducement to extend such enterprises and increase the 
 number of buildings as there is to increase the output of commod- 
 ities on account of the profit to be gained. 
 
 It is plain that there is a natural limit to social energy 
 brought about by the limit in the number of laborers and by their 
 natural inclination to work no more than is agreeable, and by the 
 limit in the extent of the forces and materials at their command. 
 
 This limit in social energy fixes the limitation in the quantity 
 of value and makes necessary the maintenance at all times of a bal- 
 ance between the values of property of every description and the 
 products to which this value attaches. 
 
 Fixed property requires care and labor to be maintained and 
 it is a law of value that such property is not allowed to take more 
 value away in the shape of income than it returns by the help it 
 gives to the active forces in society. 
 
 Then it follows that we might increase the quantity of such 
 property until its care and maintainance became a burden instead 
 of a help to society. 
 
 The moment fixed property gets in advance of the entire de- 
 velopment there will come a shrinkage in the value of all such 
 property and this shrinkage soon allows the poorest and least fitted 
 to decay and pass away so that the value of others is again restored 
 by the value released from abandoned property. 
 
 In this way the rate of profit finds its true level and the var- 
 ious quantities of value devoted to various lines of development 
 are kept in balance, and thus a balance is maintained in the forces 
 of development, and in the circulation of value, and in the distri- 
 bution of wealth. 
 
CHAPTER VI. 
 
 INTERFERENCE WITH CIRCULATION. 
 
 In looking at the circulation of money, as we see it when 
 we look at the facts, we get a vivid picture of the action of value 
 moving vast columns of supplies and moving vast armies of labor 
 in every conceivable direction. 
 
 Without an appreciation of the fact that all these supplies 
 move as value directs them to move, and all this labor is exerted 
 as value determines it shall be exerted, we could form no idea of 
 social order. 
 
 ■ Without a knowledge of the laws of value, which direct the 
 activities of men, we would regard society as a scramble to get to 
 a table to eat and drink and crowd down and trample upon others, 
 in our haste for fear there is not enough for all. 
 
 But when we come to appreciate the order and harmony of 
 social arrangements, and when we see how bountiful is the provis- 
 ion made for all of us, and how generous is the feast spread for 
 us, we then begin to realize that even the weakest of mankind 
 should earn a social position of comfort and simple luxury. 
 
 In looking for the cause of the unjust and unequal distribu- 
 tion of wealth, we must look for a cause that is great enough to 
 produce the effects. 
 
 It is absurd to talk about the robbery of labor by capitalists 
 and middlemen, and to infer that the source of low wages in some 
 loss of profits from the present earnings of labor. 
 
 Such claims and assertions fail utterly to account for the 
 facts and amount to nothing, can be of no help to any solution of 
 the problem, and can not lead to any discovery, because, even if we 
 admit that profit is a robbery of labor, the cause is utterly inad- 
 equate to explain the effects. 
 
 Countless millions of dollars have been withheld from labor 
 and kept out of circulation in the past and thousands of millions 
 are held back from labor every year, this is the fact to he ex- 
 plained, and such an explanation as that labor is robbed through 
 
64 
 
 profits fails utterly because if labor could keep all tfie profits, even 
 then, wages would be far below the natural standard of living. 
 
 The utter inability of all prevailing theories to furnish any 
 adequate explanation of the cause of unequal distribution of 
 wealth springs from false ideas of the source of wealth,, and from, 
 falses ideas concerning the methods of accumulation and increase 
 in wealth. 
 
 Value is the source of wealth because wealth only arises on 
 account of the value of things, and wealth is the source of labor 
 because labor is exerted in order to secure wealth. 
 
 The false idea, that wealth consists of things rather than of 
 the value of theni, is responsible for much confusion of thought 
 on this subject. 
 
 On account of this idea reformers seek to change the owner- 
 ship of things instead of the much more simple plan of changing 
 the flow of value. 
 
 If we will only look at the facts, that are on all sides of us, we 
 must see that men get wealthy by manipulating values, by causing 
 property to rise in value when they sell, and decline in value when 
 they buy, as in stock manipulations. 
 
 Or to speak more accurately, since fluctuations in value are 
 largely beyond human control, the men who become wealthy do 
 so by changes in the value of property which are constantly in 
 their favor. 
 
 The wealth of capitalists does not consist in tangible and ma- 
 terial forms of real property, but in some form of legal instrument 
 by which they are able to control the value of property. 
 
 Thousands of millions of wealth is in the form of mortgages, 
 bonds and stocks by which the owners are relieved of all the cares 
 of ownership, but which enables them to enjoy all the benefits of 
 wealth. 
 
 Although the Political Economist failed to acquire any defin- 
 ite idea of value from modern development, the capitalists of the 
 world learned to have a very lively appreciation of value, and ac- 
 quired a deep knowledge of how to manipulate it and have it flow 
 to them. 
 
 In the recent development of great wealth, and its rapid con- 
 centration to a tew owners, there has come into existance, a know- 
 ledge of value as the essential core and essence of wealth. 
 
65 
 
 Modern development has given rise to a separation of value 
 from the things to which it attaches. 
 
 This development consists in the multiplication of corpora- 
 tions and in the increase in the quantity of bonds, mortgages, 
 stocks and bank deposits, all of which are a species of money, be- 
 ing the money of compound value — that is to say, they have an ex- 
 changeable value based on fixed property that makes them almost 
 as secure as money itself. 
 
 In order to obtain a security for the value of bonds, mort- 
 gages, and stocks of the first class, the value of the property 
 pledged to pay them must be considerably greater than the value 
 of the securities. 
 
 In this way the fluctuations in value do not reach these cap- 
 italists, and they can not suffer a loss until the owners of the re- 
 mainder of the property are wiped out by a decline in its value, 
 then they can buy it in, wait for a favorable rise in value and sell 
 an interest large enough to protect themselves from a similar loss 
 in the future. 
 
 It is important to note this fact, and to note the growing ten- 
 dency of wealth in this direction; because for this reason wealth 
 is much more unequally distributed than it may appear. 
 
 In times of panic, and during declines in the total value of 
 all property, this class of capitalists find their share of wealth re- 
 mains steadfast while the wealth of the great middle class is melt- 
 ing away in falling prices. 
 
 At such times, therefore, practically all of the wealth of the 
 country belongs to the small but enormously wealthy class, and at 
 such times large sections of the middle class, who own mortgaged 
 property, drop out and fall in with the poor and dependent classes. 
 
 With a proper conception of value this movement of property 
 and this separation of value from property is explained. 
 
 The essence of wealth is value, which is hut crystalized social 
 energy, and as a result the control of value carries with it the con- 
 trol of wealth, and the control of all social forces. 
 
 Another false idea associated with wealth is the idea that its 
 accumulation is a slow process of saving and self denial. 
 
 According to this idea the wealth of the country is a result of 
 long saving in the past, and of a long sacrifice of pleasure, whereas 
 wealth grows by leaps and bounds as new forces are put into action. 
 
66 
 
 It is remarkable that an opinion so contrary to the plainest 
 of facts could have had a respectable standing among a thinking 
 people. 
 
 The activity of societ}^, from which wealth springs, is a result 
 of spending, and saving throttles the action of social forces and of 
 the production of wealth, speaking generally. 
 
 When we remember that wealth springs from value and not 
 from labor, and remember that the circulation and distribution of 
 wealth is backward from society to its members and not forward 
 from labor to society, we may easily discover the sources of the ac- 
 cumulation of wealth, and the causes that interfere with its dis- 
 tribution. 
 
 As already explained value is social energy, and it develops in 
 the heart of society from where it is distributed to every organ and 
 to all the tissues, and the quantity of value increases as social en- 
 ergy increases, as more men and more machines are put to work. 
 
 The paradox in society to be explained — the riddle of the 
 Sphinx; is this accumulation of surplus value in enormous quan- 
 tities in the hands of a few owners for investment and the loss 
 from circulation of the countless millions of value which the 
 masses require in order to live an orderly and virtuous life. 
 
 We must demonstrate that this enormous accumulation of 
 value has no outlet, and can only be invested and reinvested and 
 thus make room for itself by an increase in the value of the most 
 desirable property, and demonstrate that trade and industry suf- 
 fers because this same value is prevented from flowing in its nat- 
 ural channels to circulate and distribute wealth among the masses. 
 
 If the reader will keep in mind the natural law of distribution 
 this demonstration will be comparatively simple, because we have 
 but to point out how the increase in value is held back and pre- 
 vented from going to increase wages, and, therefore, piles up as 
 useless capital. 
 
 The natural law of distribution of wealth, as was explained in 
 the last chapter, is based upon the appearance of value at centers 
 of trade before any value attaches to the products of labor, and 
 upon the fact that value is a social product and is not an individ- 
 ual product. 
 
 This appearance of value in centers of activity coming in 
 quantities that equal the quantity of social energy, and the appear- 
 ance, at the same time, of products give us to understand that all 
 this value should in some manner attach to these products. 
 
67 
 
 If the consumption of goods is to balance the production of 
 goods, if demand and supply are to he in perfect accord, then the 
 value which accumulates in the market must all attach to products 
 so that labor can buy back its own production, otherwise the mar- 
 ket will fill with unsalable commodities, prices will fall, current 
 wages can not be paid, and a panic must follow. 
 
 The reader must not understand that this total value must 
 all attach to commodities but it must attach, also, to materials 
 used in all kinds of construction, and when these advance in value 
 then all buildings already built advance thus keeping the market 
 in perfect equilibrium, and taking up the surplus value. 
 
 Labor and capital are paid with value delivered to them by the 
 circulation of money, and they can not be paid, in our civilization, 
 in any other way. 
 
 The value with which to pay labor and capital, which is also 
 the amount due them from society, can only be determined after 
 goods come to the market, and after the value comes to the same 
 place; and distribution can only be made after the goods are sold 
 and the value is released and returns to labor and capital in the 
 form of wages and profits. 
 
 If it was otherwise and labor and capital engaged in produc- 
 tion could fix the amount of value they were to receive, and fix the 
 value of goods before they came to market, then any kind of a pro- 
 duct, whether it was suitable or not, or whether it promoted so- 
 ciety or not, could have a standing equal to any other product, and 
 would thus destroy all order and all proportion in development. 
 
 The next point to consider, after we consider the backward 
 circulation of value, is the manner in which the increases of value 
 should be distributed. 
 
 For the purpose of illustration we will call the total value in 
 the United States as being worth ninety billion dollars. 
 
 This total value is a social force that just balances the forces 
 at work that build and maintain this body politic, and each of such 
 forces at work in society contributes its proportional part to the 
 total value. 
 
 While we can not estimate, with any degree of accuracy, what 
 any particular combination of forces may contribute to the total 
 value, yet it will assist our understanding to approximate some of 
 the contributions to the total. 
 
68 
 
 We will say, for example, that the invention and application 
 of the sewing machine resulted in an increase of total value of five 
 hundred million dollars, and the continued use of that invention 
 sustains such a sum of value at all times. 
 
 That any interference, which would put half of this inven- 
 tion out of use would cut this value one-half, and any increase in 
 activity that would double the sewing machine power would double 
 this value. 
 
 We may suppose that the operation of our steam railroads add 
 and sustain twenty billion dollars of the total value of ninety 
 billions, and when they are crippled for want of business there will 
 be a corresponding decline in this value. 
 
 In this way the total value is made up, and by this activity it 
 rises or falls in quantity. 
 
 The law of redistribution requires that this total value shall 
 divide and be apportioned among all the contributing forces in the 
 exact ratio in which they contribute. 
 
 As each of these combinations of forces give rise to a sum of 
 value in proportion to the energy they expend for society, so should 
 value return to them and be a measure, and an indication, of the 
 part they play in the grand drama of civilization. 
 
 As we examine into the divisions of this total value, so as to 
 uncover what factor in society is getting so much more value than 
 it contributes, so as to furnish us the cause for the lack of value 
 in all other branches, we come upon a remarkable discovery. 
 
 In examining the various items of value that make up the 
 total we discover that the value of lands, lots and mines absorbs 
 almost one-half of the total, being at least forty billions out of a 
 total of ninety billions of dollars. 
 
 When we begin to inquire what sort of activity landowners 
 contribute to the progress and success of society, that they should 
 be permitted to absorb almost one-half of all the benefits of civil- 
 ization, and deprive the vast majority of people of a chance to live 
 a decent life, we are astounded to discover that they contribute 
 nothing. 
 
 And when we probe a little deeper into this question of land 
 value, we are more than ever amazed to find that not only does 
 landowning contribute nothing to the progress of the human race 
 but that the value of land measures the actual damage done to 
 society, by them in preventing the advancement of humanity. 
 
69 
 
 Think a moment of this tremendous truth — that in the value 
 of land we discover a damage to human progress that is measured 
 by forty thousand million dollars worth of social energy turned 
 away from development. 
 
 If this is the fact surely we are now at the heels of a cause that 
 is great enough to account for all the evil effects we see around us, 
 for the idleness and misplaced labor, for the intemperance, vice 
 and crime which follow, and for the degradation of low wages that 
 compels most families to live the life of animals. 
 
 That the value of land is a measure of damage to the progress 
 of the human race is not difficult to prove because the interference 
 with progress is so general that the cause must be almost self- 
 evident. 
 
 To establish this proof we ask the reader to consider the enor- 
 mous loss inflicted on the great mass of people who have failed to 
 receive their share of modern development. 
 
 We must find this loss, and it can only be said to have been 
 found when we have uncovered a sum great enough to account for 
 the loss, and the proof is conclusive when we find that such sum is 
 taken out of circulation to become a value of land without giving 
 society any benefit in return. 
 
 Land value presents two aspects, and the difficulty in seeing 
 the damage done by it arises wholly on account of this condition. 
 
 Property in land, like other fixed property, has a fixed value 
 and an annual income upon which its fixed value depends. 
 
 Many economists admit that this annual income is a sheer 
 robbery of society, but they are unable to see that the much 
 greater sum, the fixed value of land and not the annual income, is 
 the measure of damage. 
 
 The proof of damage will fall — not upon the income received 
 by landowners — but upon the absolute value of land which the an- 
 nual income enables landowners to withdraw from circulation. 
 
 This is a very important difference because the annual in- 
 come does not exceed one and one-half billion of dollars based upon 
 a fixed value of forty billion of dollars. 
 
 This brings us at once to the center and core of the dispute 
 in the unequal distribution of wealth, and opens up the problem 
 in its full significance. 
 
 In Feudal times as soon as a peaceful commerce developed 
 
70 
 
 upon the principal rivers of Europe, the Feudal Barons, who 
 claimed to own as much of these streams as was included in their 
 estates, fastened chains across the rivers so as to halt this com- 
 merce at their castles and compel it to pay tribute for the use of 
 the rivers. 
 
 The Barons drunk demanded and received more tax than 
 the Barons sober and the effect of this system of taxation is fa- 
 miliar to all readers of history. 
 
 The commerce that was in progress of development on these 
 streams, and the dependent industries that were building towns 
 and cities to supjdy this trade, was stopped short in its career, and 
 as the trade was destroyed the industry of the people was destroyed 
 also. 
 
 In this illustration the damage done by the Feudal Barons is 
 not to be measured by the tribute levied upon the commerce of the 
 rivers, but by the value of the trade and industry destroyed. 
 
 On one of the corners of State Street in the City of Chicago 
 is an old five story building worth not to exceed sixty thousand dol- 
 lars; the merchant who uses this location and building pays the 
 owner a rent of sixty-five thousand dollars per year. The owner 
 of this property need not go to the trouble and expense of inter- 
 fering with the rushing traffic of this street to collect his tribute 
 from its trade because the merchant can afford to give the public 
 better facilities, a larger selection, and a lower price at this loca- 
 tion than at another where the traffic is not nearly so great. 
 
 In this illustration the owner of the building and the location 
 is a capitalist because he furnishes a building, and a landowner be- 
 cause he controls the location. 
 
 The sixty-five thousand dollars of rent per year includes two 
 items, one is the profit to capital for the use of the building and 
 the other is profit to landowner for the use of the location. 
 
 Suppose we allow the capitalist a profit on his capital of 
 twenty per cent, per year which will produce twelve thousand dol- 
 lars a year for the use of the building worth sixty thousand dollars. 
 
 To subtract twelve thousand dollars from sixty-five thousand 
 dollars rent leaves a profit to the landowner of fifty-three thous- 
 and dollars a year for the location. 
 
 This income of fifty-three thousand dollars a year will sustain 
 a fixed land value of not less than a million dollars, for the same 
 reason that the twelve thousand dollars a year sustains a building 
 value of sixty thousand dollars. 
 
71 
 
 This brings ns now to the heart of the question and we have to 
 demonstrate that the damage to society, by this system of feudal- 
 ism, is to be measured by the million dollars of land value, and not 
 by the fifty-three thousand dollars of annual income. 
 
 We will first examine the source of the annual income which 
 is paid for the use of this 'exceptional location. 
 
 Here we discover that it would he quite difficult, if not impos- 
 sible to prove any damage to society because of this payment. 
 
 The source of this fifty-three thousand dollars is in time saved 
 by the use of this location over any other location in Chicago. 
 
 Although the land owner may have no claim on this saving of 
 time yet the occupying merchant does furnish the facilities by 
 which the public saves time enough to counterbalance the rent, 
 and the merchant may be considered to be an agent of the land- 
 owner according to the terms of theiy contract. . 
 
 This favorable location is an effect of building the City of 
 Chicago around the center of trade, and the annual rents result 
 from a gain to the public on account of being able to trade to 
 greater advantage at these favorable points. 
 
 Thus if the landowner did not himself receive this sum of 
 fifty-three thousand dollars per year it v/ould swell the profits of 
 the merchant, because prices are determined by world wide consid- 
 erations, and the public does not suffer on account of this rent. 
 
 When, on the other hand, we come to examine the source of 
 the million dollars of land value, which the owner may receive at 
 any time from the sale of this property, we come upon an entirely 
 new and original proposition. 
 
 The source of this million dollars of value is the industry and 
 activity of society to which the landowner is not required to con- 
 tribute one cent for the million dollars he may take away. 
 
 It follows as certainly as two and two are four that this sum 
 of one million dollars in value, and the forty thousand other mil- 
 lion dollars of like value, is taken out of circulation without any 
 return to society. 
 
 In order to see this problem more clearly we must remember 
 that this location, now worth a million dollars, has increased in 
 value from nothing to a million dollars without any change in the 
 property itself, differing in this particular from the value of all 
 other property. 
 
72 
 
 This increase in land value came to these fortunate individ- 
 uals as a result of the growth and wealth of Chicago which was a 
 result of a great concentration of social energy within a compara- 
 tively small space. 
 
 The cause of the development of the City of Chicago was the 
 meeting at that point of many lines of trade, the economy of 
 forces and the saving in time over the same forces expended at any 
 similar place within a radius of many miles. 
 
 This saving and economy, in the expenditure of social energy, 
 gave rise to large profits to capital and higher wages to labor at 
 Chicago than at other places. 
 
 Thus labor and capital were attracted to that location on ac- 
 count of its advantages in the circulation of value and proceeded 
 to build the city. 
 
 The owners of the land upon which Chicago is built held the 
 power in their hands to drive away all this labor and capital by de- 
 manding such a price for their land, as to force wages and profits 
 below the general level. 
 
 In the beginning of the development of Chicago such power 
 was not realized by the landowners, and as but little value was in 
 existance at that place land was almost worthless. 
 
 There was thus nothing in the way of a start being made in 
 building this city and to encourage labor and capital to concentrate 
 at that point. 
 
 But as labor and capital began to build, and manufacture, and 
 develop trade, there was a great increase in the quantity of value 
 in circulation. 
 
 Centers were soon established where profits were greater than 
 the average and the competition for these locations began to bid 
 up the value of land, and bring a new form of investment into the 
 market. 
 
 As the total value increased the power of landowners increased 
 in greater ratio and they demanded, and received, a constantly in- 
 creasing share of the wealth of the community. 
 
 This demand for increasing prices of land withdrew increasing 
 sums from circulation, and it was only as long as increase in popu- 
 lation and increase in production, kept pace with these demands 
 that the growth of the city was not interrupted by panics. 
 
 But these demands soon outrun the power of satisfying them, 
 and as land value would advance investment would leave other 
 
73 
 
 channels and buy land^, and a boom in realestate would result which 
 would be followed by a panic, because the value withdrawn from 
 circulation left business without the means of life. 
 
 The panic and low prices destroyed all legitimate profits in 
 trading and manufacturing, and brought all industry to a stand- 
 still, and as all incomes failed, including the incomes of landown- 
 ers, a great shrinkage in all values followed. 
 
 In the hard times and low prices, following a boom in real 
 estate, land w^as forced to a lower price, and as industry started up 
 again the value thus set free could attach to goods and was suffi- 
 cient to allow living wages and profits and a new season of prosper- 
 ity followed but with production on a lower margin than before. 
 
 In the settlement and adjustment of prices, which follows a 
 panic, the land wmuld retain as much of the value it had taken as 
 labor and capital could be compelled to give up, and this reduced 
 the profits of capital and wages of labor to the lowest standard of 
 living. 
 
 For this reason the wages of common labor, being subject to 
 the hardest competition, could never advance with the increase 
 in wealth of society and rise to the higher standard of living pro- 
 vided by a newer civilization. 
 
 The natural law of the distribution of wealth requires that 
 all the increases of value, arising from increasing powers, must be 
 distributed and paid out in wages in order to supply value to 
 the market with which to buy back the products, and thus relieve 
 the market of goods. 
 
 The value of land is an interference with this law, and takes 
 up this value as fast as it develops, and prevents this increase of 
 the wage fund. 
 
 The new powers of production soon fill the market with goods 
 for which no buyers are to be had, because the value with which 
 to buy has never been distributed to them. 
 
 The method by which land value increases at the expense of 
 wages is made clear by the law of the circulation of value. 
 
 The quantity of value always depends upon the quantity of 
 social energy, being expended at the time, in carrying on the work 
 of society. 
 
 This value appears in the market before products appear and 
 attaches to money ; and money measures out the value to products 
 
74 
 
 as fast as they appear, but when part of this value is diverted and 
 absorbed then money can only measure out the value provided for 
 commodities, and prices fall and goods fail to find buyers. 
 
 The quantity of value in the market, coming there as a re- 
 sult of production, always exceeds the cost of production, leaving 
 a wide margin for profit to employers of labor and merchants. 
 
 The entire problem of distribution hinges upon the invest- 
 ment of these profits, and when they are used to increase land 
 value the redistribution fails, and wealth concentrates. 
 
 The investment of profits should always be made in new lines 
 of development, or to increase old enterprises, and when this is 
 done the power of consumption in the market is always ahead of 
 the power of production by the amount of the profit. 
 
 New enterprises called into existance by the investment of 
 profits, and the increase in old established lines, brings new social 
 energy into play and again increases the value available in the 
 market. 
 
 The time comes rapidly, in such cases, when wages must be- 
 gin to advance to take up this surplus value, and expand the mar- 
 ket to the widest extent, thus making an outlet for products equal 
 at least to our powers of production. 
 
 The interference with this circulation of value arises the 
 moment some property offers an investment for profits that will 
 not employ labor, or increase development, or bring new enter- 
 prises into play. 
 
 Property in land offered the most desirable form of invest- 
 ment to be found in the market, and this property caused a con- 
 tinual interference which was only checked by repeated panics. 
 
 The annual rent for property in land was the most secure 
 basis of income in the market, and on account of such security 
 every dollar of such rent would put twenty dollars of investment 
 value into land before a dollar income from capital would call 
 out ten dollars for investment in new structures. 
 
 Land does thus capitalize on a much lower basis of profit and 
 absorbs value much faster than the capital employed in produc- 
 tion or trade. 
 
 The value of land must be regarded as a value held out of 
 circulation, and regarded as being the efficient cause of all the 
 evils that attend our unequal and unjust distribution of wealth. 
 
75 
 
 This value is a permanent and persistant interference with 
 the progress of societ}^, doing evil, not only by the vast sums it 
 takes away from mankind, but doing a double damage by prevent- 
 ing the progress that would result from the use of this enormous 
 value in development. 
 
 It may he worth our time to inquire into another form of un- 
 earned value, namely, what is known as water in the valuation of 
 other forms of property, meaning a value greatly in excess of the 
 cost of reproduction. 
 
 Without doubt the profits in many enterprises that pay div- 
 idends upon issuses of watered securities supplies a fund similar 
 to value in land, and holds such value out of circulation, provided, 
 that if such values were set free land would not pick them up and 
 add them to its own. 
 
 But when we examine this question closely we will find that 
 these issues of water securities are hut an effect of the competi- 
 tion with land value, and of the low rate of profit and of the sur- 
 plus of capital brought into existance by it. 
 
 The value of land being held out from its natural channels 
 attempts to get into circulation by competition. 
 
 As this value is loaned out it increases the output of factor- 
 ies by increasing their number, and increases the number of mer- 
 chants, thus dividing profits into low rates. 
 
 Wages not having been allowed to advance to their natural 
 level, on account of this loss of value, furnish the explanation of 
 the large earnings of railways, and other monopolies, by which 
 they support their great issues of securities. 
 
 If land value was removed, as an interference, the immediate 
 increase in wages and the consequent decline in quantity of cap- 
 ital would at once correct the evil of overcapitalization. 
 
CHAPTER VII. 
 
 CORRECTION OF CIRCULATION. 
 
 The remedy for the unequal distribution of wealth must be 
 found in a change in the currents of value for the reason that 
 value is the cause of the wealth which is distributed by the flow of 
 this force. 
 
 The value taken out of circulation, to become a value of land, 
 must be restored to trade and industry. 
 
 The problem of correcting the circulation of value is a very 
 simple one and consists only of taking the annual profits, received 
 for the use of locations of all kinds, for public purposes by a new 
 system of taxation. 
 
 This system is well and most favorably known as the Single 
 Tax, but its effects upon the distribution of wealth are not well 
 known or even appreciated. 
 
 As a method of taxation the Single Tax has been so ably and 
 effectually presented by Mr. Henry George as to silence all opposi- 
 tion. 
 
 It is universally admitted among students that the single tax 
 should supercede our present system on account of its merits as a 
 tax measure alone, if it had no greater virtue. 
 
 But we expect to demonstrate that the effect of this system 
 will change the current of at least forty billion dollars’ worth of 
 value, in the United States alone, and solve all of our great indus- 
 trial problems. 
 
 In the days before railroads were built when communication 
 was had with ox teams, and springless wagons on wooden axles, 
 it would indeed have been difficult to point out the advantages of 
 modern methods, although we easily appreciate them now. 
 
 At such times it would have been a hard task to prove to trav- 
 elers that a much less expenditure of force on a steel track could 
 carry ten times the load, a greater distance in an hour, than was 
 being done in a day. 
 
 We meet such a problem in trying to explain the benefits of a 
 
77 
 
 just and equitable distribution of wealth to a public who are strug- 
 gling along hub deep in the mud^, walking half the time, helping 
 to push the load, swearing and cursing the team, the road, the 
 driver, God and the Devil. 
 
 The distribution of wealth is admittedly so bad that no illus- 
 tration can add to our knowledge of it, but roads were admittedly 
 bad a long time before people roused themselves to better condi- 
 tions. 
 
 Every one is willing to admit that roads are abominable and 
 growing worse, that they interfere with the happiness and wealth 
 and progress of the community, but when they contemplate the 
 cost of a change the heart fails and they submit until conditions 
 become intolerable. 
 
 Just as opposition has been encountered in improvements for 
 the general benefit in times past because of the expense, and the 
 fear of property-owners that they may have it to pay, so may we 
 expect opposition now. 
 
 But as improved methods of taxation in cities has dispelled 
 opposition by placing the burden of cost upon the property bene- 
 fited, so may we expect opposition to fade away as the effects of 
 the single tax and its general benefits are appreciated. 
 
 When a new railroad is planned to connect scattered com- 
 munities with some important commercial center the investment 
 is calculated on a basis of existing conditions, and upon the exist- 
 ing traffic to be moved. 
 
 The secondary effects of railroad construction, however, have 
 greatly exceeded the estimated and primary effects. 
 
 Not only was the market increased beyond all expectation, 
 and the tributary territory relieved of its congestion of products, 
 but a new circulation of wealth came into existence, the benefits of 
 which were far reaching. 
 
 The effect of an important railroad is to open up new lines of 
 industry in every direction, causing new towns to be built and 
 old ones to take on new life and grow into cities. 
 
 Factories are added to factories and stores of new merchan- 
 dise to stores, and all trade expands beyond the fondest expecta- 
 tion. 
 
 The problem confronting society, which is made plain by the 
 congestion of wealth among a few people in great centers of trade 
 and the impoverishment of the great masses of mankind, is not 
 unlike the problem presented to railroad builders. 
 
78 
 
 When we consider, therefore, the congestion of value to be re- 
 distributed as a primary proposition, we must also take into ac- 
 count the secondary effects which will greatly exceed the expected 
 benefits. 
 
 We may only be able to explain how the idle and surplus value 
 seeking investment may be restored to its natural channels, and 
 thereby cause a wonderful revival of industry and a great increase 
 in wages. 
 
 But the much greater results which will follow this primary 
 adjustment, by a higher life, a better religion and morality, by a 
 new faith and a higher conception of God, may not be as clear to 
 the student. 
 
 Our problem reduces itself to a single primary proposition 
 and this is about the disposition of the present value of land after 
 the profits of ownership have been taken away. 
 
 It is admitted on all sides that if the annual income now re- 
 ceived by landlords for the use of favorable locations is taken by 
 the government for taxes then the fixed value of land will dis- 
 appear. 
 
 The reason of this is very simple and is found in the fact that 
 to deprive income property of its revenue is to destroy its value 
 or drive it away. 
 
 The proposition we seek to establish is that the value of land 
 is a part of the general value of society and does not depend upon 
 any inherent quality of land or location or mineral, but does de- 
 pend upon the activity of the forces of industry. 
 
 The result, then, from this standpoint, granting that in- 
 dustry would not be checked by this system of taxation, must be 
 that the total quantity of value could remain unchanged and the 
 present value of land must seek its natural channels of circula- 
 tion. 
 
 The complete demonstration of this problem is found in the 
 laws of value already considered. 
 
 But for fear the reader may believe the subject-matter is 
 beyond his grasp, and he is unable to conceive of value acting as an 
 objective power, there is yet another method by which he may be 
 convinced of the truth. 
 
 Nature has a plan, in all of her laws, to convince the under- 
 standing against the will, and against settled beliefs, by the fact 
 
79 
 
 that when the mind once entertains a great truth it is driven to 
 accept it because any contrary opinion is beyond power of con- 
 ception. 
 
 In the case under consideration, when the truth is once 
 plainly stated the mind will perceive that anything to the con- 
 trary becomes impossible. 
 
 Let us examine this proposition, then, from the standpoint of 
 an axiom and see if we can imagine any other result than the one 
 claimed. 
 
 It is admitted that the forty billion dollars of value will leave 
 property in land, and now we ask where will it go ? What will 
 become of it ? 
 
 Are we to be told and expected to believe that the first result 
 of the single tax will be to reduce the value of all property in the 
 United States from a total of ninety billion dollars' worth to a 
 total of fifty billion, and it will entail a loss of so much wealth to 
 a single class of the country? 
 
 It will not answer to say that land is not wealth and should 
 have no value because we are not speaking of land, but of the 
 value of land, and the present value of land is wealth, all argument 
 to the contrary failing to change the self-evident fact. 
 
 This, clearly reduces any other proposition opposed to the one 
 here submitted to an utter absurdity and to leave no room for com- 
 ment or argument. 
 
 Then we are compelled to admit that when we take away the 
 annual income that now supports the value of land we set this 
 value free and do not destroy it. 
 
 We now come to the important question of what becomes of 
 this free value driven from property in land? Where does it go 
 and how does it get there? 
 
 Again, we will find that the laws of Nature leave no room for 
 more than one opinion on this subject, and we will be forced to ad- 
 mit that this value set free must attach to the remaining property 
 and increase its price according to the same laws of distribution 
 by which the present value of such property has been apportioned. 
 
 Consider again how simple is this great truth and how surely 
 the mind must refuse to entertain any contrary opinion. 
 
 We have in our problem a total quantity of value estimated 
 for the United States as ninety billion dollars^ worth and we admit 
 this value is independent of the property to which it now attaches. 
 
80 
 
 We admit, also, that the activity of social forces, upon which 
 this value depends, will not be impaired by the proposed change in 
 methods of taxation, and, hence, it follows the total value will not 
 decline. 
 
 Having, therefore, a constant sum of value, which we will not 
 diminish in changing the currents of distribution, and, also, a 
 supply of property to which this value now attaches, we decide to 
 withdraw one class of property containing value to the amount of 
 forty billion dollars from the present market. 
 
 We have thus decreased the supply of property almost one- 
 half without in any way impairing the demand, and we may be 
 sure what now constitutes a demand for land will then become a 
 demand for other property and in this manner transfer the pres- 
 ent value of land to other property. 
 
 We now come to consider the method by which this change 
 occurs and we encounter the mystery of measurement by society 
 at large. 
 
 Consider the egg market as an illustration. We have in this 
 example a variable supply operating against a fixed value just as 
 we have in our problem of land value. 
 
 During the months when eggs come into the market in large 
 quantities the value being limited, results in a fall in price, and as 
 the season closes and the supply begins to diminish the same value 
 covers a smaller supply at an increasing price. 
 
 In this illustration we have a definite quantity of value that 
 keeps our market supplied with eggs, and when the supply is low 
 this value divides up according to this supply resulting in a high 
 price and gives encouragement to increase the supply, and the 
 price falls as the supply grows. 
 
 This is true of every price in the market and therefore the • 
 same law applies to the value of land which, being set free, will 
 increase every other fund, and give us more value in every line, 
 and the value that was taken from the market will again be re- 
 stored to the market. 
 
 We may claim, with the assurance of having the truth on our 
 side, that each particular item in our social economy, such as 
 eggs, meat and clothes, etc., etc., will each receive their share of 
 this land value when it has been restored to the general fund of 
 society. 
 
81 
 
 The interference of property in land by which it was able to 
 acquire its present value did not bear as heavily on some classes of 
 property as upon others better able to resist competition. 
 
 The classes of property least able to resist a loss to property 
 in land will gain most when this value is restored to the market. 
 
 In the redistribution of this land value the first general effect 
 will be an evening up of all values to the general level provided by 
 natural laws ,and when this is accomplished the value that may re- 
 main will go to every class of property according to the proportion 
 that each sustains in the entire fund. 
 
 This natural level to which all value now below it must first 
 be raised is the level of monopoly, and present monopoly prices 
 will not advance until after every other competitive price has 
 come up to the monopoly level. 
 
 The products of common labor will therefore make the great- 
 est gain because common labor acted as a buffer against which 
 competition expended its greatest force, and other labor did not 
 suffer loss until common labor suffered all it could bear. 
 
 We are now at the point from which we may go back to the 
 law of distribution and trace this forty billions of value according 
 to this law. 
 
 It was demonstrated that the activity of social forces, divid- 
 ing into thousands of occupations, gave rise to a sum of value 
 which is in the control of society, and which apnears first in the 
 market as the retail price of goods and goes hack to compensate 
 the social forces producing the goods. 
 
 The activity of these social forces gave rise, also, to a certain 
 quantity of products which were sent to the market in a constant 
 stream to find their value. 
 
 It is the chief function of money to take up value from the 
 general fund of society and measure it out to this stream of com- 
 modities as the laws of evolution prescribe. 
 
 Money acts as a measure that takes up its measure of value, 
 no more and no less, and when full of value pours it out to any- 
 thing for which it may be exchanged. In this manner the value 
 free to circulate is distributed to goods as they come to market, 
 and from this start the same value is distributed to pay profits and 
 wages. The point now to consider is that the wages of labor and 
 the cost of production is less than the value of the product in the 
 
82 
 
 market. The reason for this condition is found in the fact that 
 wages are based on common labor and only advance as co-opera- 
 tion replaces individual efforts^ and as new methods and machin- 
 ery are put to use. Labor is paid only what it may earn working 
 independently, because some such workmen are outside and ever 
 ready to take the places of other workmen, and, therefore, wages 
 do not rise in proportion to their gain in power from the use of 
 tools and machinery. Wages originally, before employers came 
 into the market and when each man was an individual worker, 
 were only sufficient to support a simple life. Wages could only 
 advance as productive power increased and then only by the cor- 
 responding increase in value returning to labor. So long as some 
 workmen were not taken into new development their competition 
 lield wages down and the gains in productive power became the 
 l)rofits of employers and traders. 
 
 The advance in wages, therefore, must come from profits, 
 because as the power of labor increased the effect was to increase 
 the total and general value, and since this value could but in- 
 crease the prices of products its effect was to enlarge profits. It 
 is a law of distribution that before wages may rise generally these 
 profits must be so general and in such quantity, and be so distrib- 
 uted and used for new development, as to call all labor into the 
 market and do away with the competition of the unemployed. 
 
 Hence, so long as there is a margin of labor at cheap employ- 
 ments, competing for value in order to live, profits refuse to dis- 
 tribute themselves in higher wages and remain to augment the 
 wealth of employers and merchants. 
 
 It is clear that although five workmen who co-operate will 
 produce a greater result than five workmen at the same task work- 
 ing independently, it does not follow that they will necessarily be 
 paid more wages for the greater product. 
 
 This extra payment of wages depends upon the redistribution 
 of profits, and when we remember how the value of land is a grave- 
 yard for profits, we find why wages advance with such difficulty 
 above the lowest levels at which a man will work in order to live. 
 
 Land value is made up of profits that should have been redis- 
 tributed from the beginning of improvements in production. 
 
 In order to realize what the effect will be from the redistribu- 
 tion of such an enormous sum of profits, now, and in bulk, by a 
 
83 
 
 new system of taxation, we must consider what the result would 
 have been, at this time, had these profits been regularly distributed 
 instead of becoming a value of land. To do this we must attempt 
 to distribute this value now by the same channels it would have 
 been distributed and to estimate the increase of results. 
 
 We know that the value we have in circulation goes out to buy 
 material and build all manner of structures and thus keep labor 
 and machinery employed. AVe need, then, to estimate how much 
 greater would have been the development, how much higher the 
 wages and how much happier and better the people had the pres- 
 ent value of land been free to circulate as other value now circu- 
 lates. AA^e may be reasonably sure that, in such an event, we would 
 have had at least double the number and value of improvements 
 and not less than three times as much paid out in wages as now. 
 
 AA^e have already demonstrated that the mind can only admit 
 of one conclusion as a result of driving value away from land by 
 taxation and the property remaining must rapidly gain all the 
 value land loses, except money, which can only fill up its measure 
 from the general fund. 
 
 The first effect of the single tax, speaking generally, would 
 be to at least double the value of all buildings, of all stocks of 
 goods, and of all manner of supplies in the country. The question 
 will now arise as to how it will be possible to dispose of stocks of 
 goods and property at such a great increase in price to a public 
 who can not buy the present stocks at present prices. To answer 
 this question there is, as usual, two points to consider. The first 
 is that there has been no increase in price where the whole market 
 is considered, but that land has been cheapened by what other 
 things have gained in price. 
 
 But there remains the important point that commodities in 
 general will be very much higher while apparently the purchasing- 
 power of the mass of the people remains practically the same. 
 
 The increase in value we are considering must be measured 
 out to goods by the use of money, and goods will not jump to the 
 new price in an instant. The path of circulation for the distribu- 
 tion of the present value of land is as follows : AVhen this value is 
 set free it will become a part of the general fund of society first, 
 and from there it will next increase the value of structures of 
 every description, and this increase will be immediately communi- 
 cated to materials used in construction and then other commod- 
 
84 
 
 ities will gain the new price from which wages must get the addi- 
 tional value. Blit we find that it would not he possible to sell 
 goods at a higher price than the one now prevailing without a mar- 
 ket for consumption strong enough in value to buy the goods. We 
 can not get away from the fact that higher priced goods can not be 
 sold without a previous increase in wages so as to buy the goods, 
 and we know that wages can not advance except they do so from 
 the value distributed by higher priced commodities. Here, indeed, 
 is a dilemma — a problem without an apparent solution, and we 
 seem to have run our argument against a stone wall, and to expect 
 the reader to believe that merchants will buy goods at a high price 
 only to sell them at a certain loss. The only solution to this per- 
 plexing problem seems to he that the value with which to increase 
 the purchasing power of the market so as to admit higher priced 
 goods is loaned or advanced from some source ahead of production 
 or simultaneously with it. We know from experience with panics 
 that there is a simultaneous adjustment of higher prices and 
 greater purchasing power by which prosperity returns into the 
 market. 
 
 The prosperous times, following a panic, come in this order: 
 There is first an advance in prices of leading commodities, coming 
 in impulses a little at a time, from the value set free by the de- 
 cline in value of land during the close of hard times. This advance 
 in prices leads merchants and others to give buying orders in ad- 
 vance of the consuming power of the market. The merchants 
 have gained a profit from this advance in prices on the stocks of 
 goods on hand, and they do not increase their liabilities by giv- 
 ing orders to this amount. From these advance orders follows an 
 increase in production all along the line of higher priced goods, 
 which calls out labor, puts mills and factories in operation, and 
 supplies the required value to buy the goods. The wage fund is, 
 therefore, increased by these orders for goods, and if every mer- 
 chant orders new goods only to the extent of the profit he has 
 gained from the increase in price on the goods he has on hand 
 we may 'say that the total increase in value of goods has thus been 
 advanced to make a new market for them at higher prices. Sec- 
 ondary occupations then become increasingly active and the con- 
 struction of houses and factories and buildings of every descrip- 
 tion takes place and this again increases the wage fund and the 
 consuming power of the market. 
 
85 
 
 This advance of value, from merchant to manufacturer and 
 from him to labor, is not a pure loan from capitalists, hut is in 
 reality an advance from society to one cla^s who gain an increase 
 in price of goods, and this class loans this value to the next, who 
 then advance wages to labor before goods are sold. 
 
 In the case under consideration we have a fund of forty billion 
 dollars^ worth of value to advance from society to various classes 
 of property-owners with which to create a new market in propor- 
 tion to the new prices made necessary by this new circulation of 
 value. We have now to understand that as soon as the investment 
 feature of property in land is driven from the market the entire 
 investing power of surplus value must be expended in the pur- 
 chase of things that cause a demand for labor in some form. This 
 expenditure must grow in volume by the continual redistribution 
 of profits which will continually increase this demand. 
 
 As we have repeatedly shown, the present value of land has 
 been built up from retained profits and has cost nothing, having 
 gone to land-owners as a bonus from society. When this value 
 seeks to return to its natural channels it must travel back in the 
 way it came, according to the law of redistribution. Had this 
 value never been held out of circulation it would have been redis- 
 tributed to labor as other profits were redistributed, first by in- 
 vestment in secondary development, in new buildings and new 
 construction of every kind, and this activity would call labor from 
 primary production and would have increased the demand for 
 primary products at the same time. This is to say that profits as 
 they accumulate are expended for construction when the supply of 
 goods begins to encroach on demand and to force down the price. 
 The surplus value then goes into construction and new develop- 
 ment and takes labor away from the production of commodities, 
 thus cutting down the power of production in such lines and in- 
 creases the power of consumption at the same time, and restores 
 the market to an equilbrium. 
 
 These secondary workmen engaged in building and construc- 
 tion will call out new classes of workers in higher lines of develop- 
 ment, as in the arts, in music, the drama and in professional serv- 
 ices of all kinds. 
 
 The general fund of value should go out in greater and 
 greater proportion to pay wages as more and more men are called 
 from lower to higher ranks, and the demand for common labor 
 
86 
 
 should rise in increasing ratio because the number of such laborers 
 should be continually reduced while the demand for their services 
 should continually increase. 
 
 The wages of common labor^ which are now the basis of wages 
 for all labor, would have reached a much higher standard if this 
 process of redistribution had not been stopped by the rise in the 
 value of land. In following the redistribution of this forty bil- 
 lion dollars’ worth of land value, we must trace it along the lines 
 it must have taken had it followed its natural paths. 
 
 The first effect of the release of this value by the single tax 
 will be to add this sum to the general fund as a free value ready to 
 ])e distributed and advanced to pay higher wages to labor and 
 higher prices for goods and materials. The circulation of this 
 value will begin with secondary development because when it was 
 taken from the market it stopped secondary development. The 
 first symptoms of this increase of value in circulation will be felt 
 by a great advance in the value of buildings of all kinds. This ad- 
 vance in value will become a profit to builders, who will then ad- 
 vance value to material men and from these men the new value 
 will flow to manufacturers and laborers. As an example, we will 
 illustrate with a dwelling costing $1,500.00 to build upon a loca- 
 tion costing $1,500.00, a total of $3,000.00, and returning an an- 
 nual rent of $300.00, upon which the total value is based. The loss 
 of $1,500.00 of land value would leave this property worth only 
 $1,500.00 instead of $3,000.00, provided there was no gain in value 
 from the general fund. But since the annual rent is not changed, 
 the value of this property will not change, and, as a result, either 
 land will refuse to surrender its value or else the buildings will 
 gain the $1,500.00 of additional value. 
 
 A similar location can now be had by builders by the pay- 
 ment of taxes in advance, which is without cost, and since labor 
 and material have as yet not advanced in price a building costing 
 but $1,500.00 has a prospective market at $3,000.00, offering the 
 builder $1,500.00 in profit. 
 
 The immediate effect of such a prospect of gain would be to 
 start a wonderful activity in construction from every community 
 all over the country and to send out advance orders for material 
 of every description greatly in excess of any supply on hand and 
 any present p^'wer to meet the demand. These advance orders 
 
87 
 
 could not possibly be met by existing powers of production and a 
 long line of materials would at once begin a remarkable rise in 
 prices. This would stimulate every line in the trades allied to con- 
 struction and would call upon all other lines for supplies and 
 communicate higher prices for products of every description. We 
 would then discover that with a normal demand we speedily reach 
 the limit of the labor market, and reach a point where the anxiety 
 of employers to secure profits impell them to bid up wages to the 
 highest price the profit will permit. 
 
 By way of illustration, yet us assume that the increase in 
 value of improvements calls out fifteen billions of our total of 
 forty billions as a start, and of this sum all but three billions gets 
 into circulation by the demand for material and other supplies of 
 products. We have shown that when profits once get into the 
 hands of labor as wages they are added to the circulation as a per- 
 manent increase in that fund, going from hand to hand as a new 
 demand for goods. 
 
 The only method by which this fund can be diminished will 
 be by a decline in the value of labor products. If society could 
 not keep up the supply of value, and had but the fifteen billions to 
 spare, the prosperity in the market would be followed by a decline 
 in prices during which property would take out its own share of 
 the fifteen billions and products would take their share. But we 
 have an additional supply of value of twenty-five billions to feed 
 into the market as fast as the first impulse is distributed and hence 
 as fast as wages require twelve billions to go into circulation 
 twelve billions of the twenty-five are paid out to sustain the mar- 
 ket value of buildings. In this way the entire fund gets into its 
 many channels of distribution and allows wages to rise to the nat- 
 ural limit and take up all the value they sustain by their industry. 
 
 That this is the path of circulation becomes more evident as 
 we recall the method by which the value of labor is fixed by society. 
 We have been in the habit of believing that the value of labor de- 
 termined the price of products and that the value of buildings wa: 
 fixed by the value of the labor and material used in construction. 
 
 But this is decidedly false, and the truth is just the opposite. 
 Wages are determined by the value society places upon the prod- 
 uct and if this value is taken up by property in land wages must 
 remain stationary or decline to the lowest limit as prices decline, 
 and they may advance only from an advance in value of products. 
 
88 
 
 3112 062 
 
 70094 
 
 Another point of importance is found in the law by which the 
 market depends upon the consuming power of wages to buy back 
 the products. According to this law, the market will compel 
 profits to return to labor or clog the wheels of circulation and 
 wages must rise to take up all profits save such a sum as is re- 
 quired to carry forward development. 
 
 It is worth while to note that unless the value of land returns 
 to increase the value of improvements, of commodities and of 
 wages, the single tax will fail because it will not effect property in 
 land. The advocates of the single tax claim that this system of 
 taxation alone, without considering what may become of land 
 value, will bring down the value of land, but this is a serious mis- 
 take. They argue that where land is now improved to its full 
 capacity the tax taken off of the improvement will offset the in- 
 crease in tax on the location. 
 
 We come, then, to the question and ask, “Why will the value 
 of land decline in such cases 
 
 Any improver who sought land that was forced upon the 
 market by higher taxes could afford to pay the value of that land 
 provided the improvements cost no more than they now cost. Or, 
 conversely, take the new Stock Exchange Building in Chicago as 
 an example of a location, fully improved, as it is by a modern office 
 building. The present value of this location is about two million 
 dollars, or more, and the value of the improvement, let us assume, 
 cost one million dollars. Under a single tax the income would not 
 be changed by an increase in taxes nor would the rents be dimin- 
 ished unless business declined or other buildings as well located 
 were built at once, and similar locations are not to be found in 
 Chicago. 
 
 How is the single tax to prevent the owner receiving three 
 million dollars for this property ? And if the building can be re- 
 produced for one million dollars, the two million dollars will re- 
 main as a land or location value. 
 
 Anderson, Ind., Dec. 11, 1900.