Common interests of Capital and Labour—Labour directed by Accumulation—Capital enhanced by Labour—Balance of rights and duties—Relation of demand and supply—Money exchanges—Intrinsic and representative value of money.

There is an old proverb, that "When two men ride on one horse, one man must ride behind." Capital and Labour are, as we think, destined to perform a journey together to the end of time. We have shown how they proceed on this journey. We have shown that, although Labour is the parent of all wealth, its struggles for the conversion of the rude supplies of nature into objects of utility are most feeble in their effects till they are assisted by accumulation. Before the joint interests of Labour and Capital were at all understood, they kept separate; when they only began to be understood, as we shall show, they were constantly pulling different ways, instead of giving "a long pull, a strong pull, and a pull altogether;" and even now, when these interests in many respects are still imperfectly understood, they occasionally quarrel about the conditions upon which they will continue to travel in company. In the very outset of the journey, Labour, doubtless, took the lead. In the dim morning of society Labour was up and stirring before Capital was awake. Labour did not then ride; he travelled slowly on foot through very dirty ways. Capital, at length, as slowly followed after, through the same mire, but at an humble distance from his parent. But when Capital grew into strength, he saw that there were quicker and more agreeable modes of travelling for both, than labour had found out. He procured that fleet and untiring horse Exchange; and when he proposed to Labour that they should mount together, he claimed the right, and kept it, for their mutual benefit, of taking the direction of the horse. For this reason, as it appears to us, we are called upon to assign to one of the companions, according to the practice of the old Knights Templars, the privilege of sitting before the other—holding the reins, indeed, but in all respects having a community of interests, and an equality of duties, as well as rights, with his fellow-traveller.

Let us endeavour to advance another step in the illustration of these positions, by going back to the prodigal who had spent all his substance. Let us survey him at the moment when he had made the wise, and in many respects heroic, resolution to pass from the condition of a consumer into that of a producer. The story says, "The first thing that drew his attention was a heap of coals shot out of a cart on the pavement before a house. He offered himself to shovel or wheel them into the place where they were to be laid, and was employed." Here, then, we see that the labour of this man was wholly and imperatively directed by accumulation. It was directed as absolutely by the accumulation of others as the labour of Dampier's Moskito Indian was directed by his own accumulation. The Indian could not labour profitably—he could not obtain fish and goats for his food, instead of seal's flesh—till he had called into action the power which he possessed in his knife and his gun-barrel. The prodigal had no accumulation whatever of his own. He had not even the accumulation of peculiar skill in any mode of labour;—for a continual process of waste enlarges neither the mental nor physical faculties, and generally leaves the wretched being who has to pass into the new condition of a producer as helpless as the weakest child. He had nothing but the lowest power, of labouring without peculiar knowledge or skill. He had, however, an intensity and consistency of purpose which raised this humble power into real strength. He was determined never to go backward—always to go on. He knew, too, his duties as well as his rights; and he saw that he must wholly accommodate his power to the greater power which was in action around him. When he passed into the condition of a producer, he saw that his powers and rights were wholly limited and directed by the principles necessary to advance production; and that his own share of what he assisted in producing must be measured by the laws which enabled him to produce at all. He found himself in a position where his labour was absolutely governed by the system of exchanges. No other system could operate around him, because he was in a civilized country. Had he been thrown upon a desert land without food and shelter, his labour must have been instantly and directly applied to procuring food and shelter. He was equally without food and shelter in a civilized country. But the system of exchanges being in action, he did not apply his labour directly to the production of food and lodging for himself. He added by his labour a new value to a heap of coals; he enabled another man more readily to acquire the means of warmth; and by this service, which he exchanged for "a few pence" and "a small gratuity of meat and drink," he indirectly obtained food and lodging. He conferred an additional value upon a heap of coals; and that additional value was represented by the "few pence" and "a small gratuity of meat and drink." Had the system of exchange been less advanced, that is, had society been less civilized, he would probably have exchanged his labour for some object of utility, by another and a ruder mode. He would have received a portion of the coals as the price of the labour by which he gave an additional value to the whole heap. But mark the inconvenience of such a mode of exchange. His first want was food; his next, shelter: had he earned the coals, he must have carried them about till he had found some other person ready to exchange food and lodging for coals. Such an occurrence might have happened, but it would have been a lucky accident. He could find all persons ready to exchange food and clothes for money—because money was ready again to exchange for other articles of utility which they might require, and which they would more readily obtain by the money than by the food and clothes which our labourer had received for them. During the course of the unprofitable labour of waiting till he had found an exchanger who wanted coals, he might have perished. What then gave him the means of profitable labour, and furnished him with an article which every one was ready to receive in exchange for articles of immediate necessity? Capital in two forms. The heap of coals was capital. The coals represented a very great and various accumulation of former labour that had been employed in giving them value. The coals were altogether valueless till labour had been employed to raise them from the pit, and to convey them to the door of the man who was about to consume them. But with what various helps had this labour worked! Mere manual labour could have done little or nothing with the coals in the pit. Machines had raised them from the pit. Machines had transported them from the pit to the door of the consumer. They would have remained buried in the earth but for large accumulations of knowledge, and large accumulations of pecuniary wealth to set that knowledge in action by exchanging with it. The heap of coals represented all this accumulation; and it more immediately represented the Circulating Capital of consumable articles of utility, which had been paid in the shape of wages, at every stage of the labour exercised in raising the coals from the mine, and conveying them to the spot in which the prodigal found them laid. The coals had almost attained their highest value by a succession of labour; but one labour was still wanting to give them the highest value. They were at their lowest value when they remained unbroken in the coal-pit; they were at their highest value when they were deposited in the cellar of the consumer. For that last labour there was circulating capital ready to be exchanged. The man whose course of production we have been tracing imparted to them this last value, and for this labour he received a "few pence" and a "gratuity of meat and drink." These consumable commodities, and the money which might be exchanged for other consumable commodities, were circulating capital. They supplied his most pressing wants with incomparably more readiness and certainty than if he had been turned loose amongst the unappropriated productions of nature, with unlimited freedom and absolute rights. In the state in which he was actually placed his rights were limited by his duties,—but this balance of rights and duties was the chief instrument in the satisfaction of his wants. Let us examine the principle a little more in detail.

An exchange was to be carried on between the owner of the coals and the man who was willing to shovel them into the owner's cellar. The labourer did not want any distinct portion of the coals, but he wanted some articles of more urgent necessity in exchange for the new value which he was ready to bestow upon the coals. The object of each exchanger was, that labour should be exchanged with capital. That object could not have been accomplished, or it would have been accomplished slowly, imperfectly, and therefore unprofitably, unless there had been interchangeable freedom and security for both exchangers,—for the exchanger of capital, and the exchanger of labour. The first right of the labourer was, that his labour should be free;—the first right of the capitalist was, that his capital should be free. The rights of each were built upon the security of property. Could this security have been violated, it might have happened, either that the labourer should have been compelled to shovel in the coals—or, that the capitalist should have been compelled to employ the labourer to shovel them in. Had the lot of the unfortunate prodigal been cast in such a state of society as would have allowed this violation of the natural rights of the labourer and the capitalist, he would have found little accumulation to give a profitable direction to his labour. He would have found production suspended, or languishing. There would probably have been no heap of coals wanting his labour to give them the last value;—for the engines would have been idle that raised them from the pit, and the men would have been idle that directed the engines. The circulating capital that found wages for the men, and fuel for the engines, would have been idle, because it could not have worked with security. Accumulation, therefore, would have been suspended;—and all profitable labour would, in consequence, have been suspended. It was the unquestionable right of the labourer that his labour should be free; but it was balanced by the right of the capitalist that his accumulation should be secure. Could the labour have seized upon the capital, or the capital upon the labour, production would have been stopped altogether, or in part. The mutual freedom and security of labour and capital compel production to go forward; and labour and capital take their respective stations, and perform their respective duties, altogether with reference to the laws which govern production. These laws are founded upon the natural action of the system of exchange, carrying forward all its operations by the natural action of the great principle of demand and supply. When capital and labour know how to accommodate themselves to the direction of these natural laws, they are in a healthy state with respect to their individual rights, and the rights of industry generally. They are in that state in which each is working to the greatest profit in carrying forward the business of production.

The story of the prodigal goes on to say, "He then looked out for the next thing that might chance to offer; and went with indefatigable industry through a succession of servile employments, in different places, of longer and shorter duration." Here we see the principle of Demand and Supply still in active operation. "He looked out for the next thing that might chance to offer." He was ready with his supply of labour immediately that he saw a demand for it. Doubtless, the "indefatigable industry" with which he was ready with his supply created a demand, and thus he had in some degree a control over the demand. But in most cases the demand went before the supply, and he had thus to watch and wait upon the demand. In many instances demand and supply exercise a joint influence and control, each with regard to the other. Pliny, the Roman naturalist, relates that in the year 454 of the building of Rome (300 years before Christ) a number of barbers came over from Sicily to shave the Romans, who till that time had worn long beards. But the barbers came in consequence of being sent for by a man in authority. The demand here distinctly went before the supply; but the supply, doubtless, acted greatly upon the demand. During a time of wild financial speculation in Paris, created by what is called the Mississippi bubble, a hump-backed man went daily into the street where the stock-jobbers were accustomed to assemble, and earned money by allowing them to sign their contracts upon the natural desk with which he was encumbered. The hump-back was doubtless a shrewd fellow, and saw the difficulty under which the stock-jobbers laboured. He supplied what they appeared to want; and a demand was instantly created for his hump. He was well paid, says the story. That was because the supply was smaller than the demand. If other men with humps had been attracted by the demand, or if persons had come to the street with portable desks more convenient than the hump, the reward of his service would naturally have become less. He must have yielded to the inevitable law by which the amount of circulating capital, as compared with the number of labourers, prescribes the terms upon which capital and labour are united.

By following the direction which capital gave to his industry, the prodigal, whose course we have traced up to the point when he went into the condition of a labourer, became at length a capitalist. "He had gained, after a considerable time, money enough to purchase, in order to sell again, a few cattle, of which he had taken pains to understand the value. He speedily, but cautiously, turned his first gains into second advantages; retained, without a single deviation, his extreme parsimony; and thus advanced by degrees into larger transactions and incipient wealth. The final result was that he more than recovered his lost possessions, and died an inveterate miser, worth 60,000l."

He gained "money," and he "purchased" cattle. In the simple transaction which has been recorded of the first exchange of the prodigal's labour for capital, we find the circumstances which represent every exchange of labour for capital. The prodigal wanted meat and drink, and he gave labour in exchange for meat and drink; the capitalist wanted the produce of labour—he wanted a new value bestowed upon his coals by labour—and he gave meat and drink in exchange for the labour which the prodigal had to give. But the prodigal wanted something beyond the meat and drink which was necessary for the supply of the day. He had other immediate necessities beyond food; and he had determined to accumulate capital. He therefore required "a few pence" in addition to the "meat and drink." The capitalist held that the labour performed had conferred a value upon his property, which would be fairly exchanged for the pence in addition to the food, and he gave, therefore, in exchange, that portion of his capital which was represented by the money and by the food. This blending of one sort of consumable commodity, and of the money which represented any other consumable commodity which the money could be exchanged with, was an accident arising out of the peculiar circumstances in which the prodigal happened to be placed. In ordinary cases he would have received the money alone,—that is, he would have received a larger sum of money to enable him to exchange for meat and drink, instead of receiving them in direct payment. It is clear, therefore, that as the money represented one portion of the consumable commodities which were ready to pay for the labour employed in giving a new value to the coals, it might represent another portion—the meat, for instance, without the drink; or it might represent all the consumable commodities, meat, drink, lodging, clothes, fuel, which that particular labourer might want; and even represent the accumulation which he might extract out of his self-denial as to the amount of meat, drink, lodging, clothes, and fuel which he might require as a consumer; and the farthing saved out of his money-payment might be the nest-egg which was to produce the increase out of which he purchased cattle, and died a rich miser.

We may be excused for calling attention to the fact, which is a very obvious one, that if the labourer, whose story we have told, had received a portion of the coals upon which he had conferred a new value in exchange for the labour which produced that value, he would have been paid in a way very unfavourable for production. It would have required a new labour before the coals could have procured him the meat, and drink, and lodging of which he had an instant want; and he therefore must have received a larger portion of coals to compensate for his new labour, or otherwise his labour must have been worse paid. There would have been unprofitable labour, whose loss must have fallen somewhere,—either upon the capitalist or the labourer in the first instance, but upon both ultimately, because there would have been less production. All the unprofitable labour employed in bringing the exchange of the first labour for capital to maturity would have been so much power withdrawn from the efficiency of the next labour to be performed; and therefore production would have been impeded to the extent of that unprofitable labour. The same thing would have happened if, advancing a step forward in the science of exchange, the labourer had received an entire payment in meat and drink, instead of a portion of the coals, which he could have exchanged for meat and drink. Wanting lodging, he would have had to seek a person who wanted meat and drink in exchange for lodging, before he could have obtained lodging. But he had a few pence,—he had money. He had a commodity to exchange that he might divide and subdivide as long as he pleased, whilst he was carrying on an exchange,—that is, he might obtain as much lodging as he required for an equivalent portion of his money. If he kept his money, it would not injure by keeping as the food would. He might carry it from place to place more easily than he could carry the food. He would have a commodity to exchange, whose value could not be made matter of dispute, as the value of meat and drink would unquestionably have been. This commodity would represent the same value, with little variation, whether he kept it a day, or a week, or a month, or a year; and therefore would be the only commodity whose retention would advance his design of accumulating capital with certainty and steadiness. It is evident that a commodity possessing all these advantages must have some intrinsic qualities which all exchangers would recognise—that it must be a standard of value—at once a commodity possessing real value, and a measure of all other values. This commodity exists in all commercial or exchanging nations in the shape of coined metal. The metal itself possesses a real value, which represents the labour employed in producing it; and, in the shape of coin, represents also a measure of other value, because the value of the coin has been determined by the sanction of some authority which all admit. That authority is most conveniently expressed by a Government, as the representative of the aggregate power of society. The metal itself, unless in the shape of coined money, would not represent a definite value; because the metal might be depreciated in value by the admixture of baser or inferior metals, unless it bore the impress of authority to determine its value. The exchangers of the metal for other articles of utility could not, without great loss of labour, be constantly employed in reducing it to the test of value, even if they had the knowledge requisite for so ascertaining its value. It used to cost 1000l. a year to the Bank of England for the wages of those who weighed the gold coin brought to the Bank; and it has been estimated that 30,000 sovereigns pass over the Bank counter daily. A machine is now used at the Bank, which separates the full-weight sovereigns and the light ones, at the rate of 10,000 an hour. In Greece a piece of gold in the rude times was stamped with the figure of an ox, to indicate that it would exchange for an ox. In modern England, a piece of gold, called a sovereign, represents a certain weight in gold uncoined, and the Government stamp indicates its purity; whilst the perpetual separation of the light sovereigns from those of full-weight affords a security that very few light ones are in general circulation. A sovereign purchases so many pounds weight of an ox, and a whole ox purchases so many sovereigns. The great use of the coined metal is to save labour in exchanging the ox for other commodities. The money purchases the ox, and a portion of the ox again purchases some other commodity, such as a loaf of bread from the baker, who obtains a portion of the ox through the medium of the money, which is a standard of value between the bread and the beef. Our great poetical satirist, Pope, in conducting his invective against the private avarice and political corruption of his day, imagines a state of things in which, money and credit being abolished, ministers would bribe and be bribed in kind. It is a true picture of what would be universal, if the exchanges of men resolved themselves into barter: