Principles of Political Economy

In 1855 the charge per ton per mile was 3.27 cents, as compared with 0.89 in 1883. Tons moved 1 m. in 1883 by 9,286,216,628 railroads of N.Y. At rate of 1855, would cost $303,659,283 Actual cost in 1883 83,464,919 Saving to the State $220,194,364 The explanation of this reduced cost is given by Mr. Edward Atkinson(135) as (1) the competition of water-ways, (2) the competition of one railway with another, and (3) the competition of other countries, which forces our railways to try to lay our staple products down in foreign markets at a price which will warrant continued shipment. Besides these reasons, much ought also (4) to be assigned to the progress of inventions and the reduced cost of steel and all appliances necessary to the railways. The large importance of the railways shows itself in an influence on general business prosperity, and as a place for large investments of a rapidly growing capital. The building of railways, however, has been going on, at some times with greater speed than at others. Instead of 33,908 miles of railways at the close of our war, we have now (1884) over 120,000 miles. How the additional mileage has been built year by year, with two distinct eras of increased building—one from 1869 to 1873, and another from 1879 to 1884—may be seen by the shorter lines of the subjoined chart, No. VI. That speculation has been excited at different times by the opening up of our Western country, there can be no doubt. And if a comparison be made with Chart No. XVII (Book IV, Chap. III), which gives the total grain-crops of the United States, it will be seen that since 1879, although our population has increased from 12-½ per cent to 14 per cent, our grain-crops only 5 per cent, yet our railway mileage has increased 40 per cent. The extent to which the United States has carried railway-building, as compared with European countries, although we have a very much greater area, is distinctly shown by Chart No. VII. This application of one form of improvement to oppose the law of diminishing returns in the United States has produced extraordinary results, especially when we consider that we are probably not yet using all our best lands, or, in other words, that we have not yet felt the law of diminishing returns in some large districts. Chart VI. _Miles of Railroad in Operation on the 1st January in each Year, and the Miles added in the Year Ensuing._ Year. Miles of Railroad. Miles added. 1865 33,908 1,177 1866 35,085 1,716 1867 36,801 2,449 1868 39,250 2,979 1869 42,229 4,615 1870 46,844 6,070 1871 52,914 7,379 1872 60,293 5,878 1873 66,171 4,107 1874 70,278 2,105 1875 72,383 1,713 1876 74,096 2,712 1877 76,808 2,281 1878 79,089 2,687 1879 81,776 4,721 1880 86,497 7,048 1881 93,545 9,789 1882 103,334 11,591 1883 114,925 6,618 Railways and canals are virtually a diminution of the cost of production of all things sent to market by them; and literally so of all those the appliances and aids for producing which they serve to transmit. By their means land can be cultivated, which would not otherwise have remunerated the cultivators without a rise of price. Improvements in navigation have, with respect to food or materials brought from beyond sea, a corresponding effect. § 4. —In Manufactures. From similar considerations, it appears that many purely mechanical improvements, which have, apparently, at least, no peculiar connection with agriculture, nevertheless enable a given amount of food to be obtained with a smaller expenditure of labor. A great improvement in the process of smelting iron would tend to cheapen agricultural implements, diminish the cost of railroads, of wagons and carts, ships, and perhaps buildings, and many other things to which iron is not at present applied, because it is too costly; and would thence diminish the cost of production of food. The same effect would follow from an improvement in those processes of what may be termed manufacture, to which the material of food is subjected after it is separated from the ground. The first application of wind or water power to grind corn tended to cheapen bread as much as a very important discovery in agriculture would have done; and any great improvement in the construction of corn-mills would have, in proportion, a similar influence. Those manufacturing improvements which can not be made instrumental to facilitate, in any of its stages, the actual production of food, and therefore do not help to counteract or retard the diminution of the proportional return to labor from the soil, have, however, another effect, which is practically equivalent. What they do not prevent, they yet, in some degree, compensate for.(136) Chart VII. _Ratio of Miles of Railroad to the Areas of States and Countries—United States and Europe. The relative proportion is 1 Mile Railroad to 4 Square Miles of Area._ No. Name. Rank in Size. Relative. 1 Massachusetts 67 98 2 Belgium 62 96 3 England and 29 88 Wales 4 New Jersey 62 81 5 Connecticut 68 80 6 Rhode Island 71 65 7 Ohio 44 60 8 Illinois 32 59 9 Pennsylvania 40 55 10 Delaware 69 53 11 Indiana 50 52 12 New Hampshire 65 45 13 Switzerland 59 44 14 New York 39 41 15 Iowa 33 39 16 German Empire 4 38 17 Scotland 52 37 18 Maryland 63 36 19 Vermont 64 35 20 Ireland 51 29 21 Michigan 31 28 22 France 5 27 23 Denmark 60 26 24 Netherlands 57 25 25 Missouri 26 24 26 Wisconsin 34 23 27 Austrian 3 21 Empire 28 Virginia 45 19 29 Italy 13 18 30 Georgia 30 17 31 Kansas 22 16 32 Kentucky 46 15 33 South 49 14 Carolina 34 Tennessee 42 14 35 Minnesota 21 13 36 Alabama 36 13 37 West Virginia 55 12 38 Roumania 41 12 39 North 37 12 Carolina 40 Maine 48 12 41 Nebraska 23 10 42 Mississippi 38 9 43 Spain 6 9 44 Portugal 47 9 45 Sweden 7 9 46 Arkansas 35 8 47 Louisiana 43 8 48 Colorado 16 8 49 California 8 7 50 Turkey 27 7 51 Texas 2 7 52 Utah 20 6 53 Florida 28 6 54 Dakota 7 6 55 Russia in 1 5 Europe 56 Nevada 15 5 57 Norway 11 5 58 Oregon 18 4 59 Bulgaria 54 4 60 New Mexico 12 3 61 Wyoming 17 2 62 Indian 25 2 Territory 63 Washington 24 1 64 Arizona 14 1 65 Idaho 19 1 66 Greece 58 0 67 Montana 10 0 68 Bosnia and 53 0 Herzegovina 69 Servia 56 0 70 Eastern 61 0 Roumelia 71 Montenegro 70 0 72 Andorra 72 0 (The United States have substantially one mile of railway to each 540 inhabitants. Europe has one mile to each 3,000 inhabitants, if Russia be included; about one mile to each 2,540, exclusive of Russia.) The materials of manufactures being all drawn from the land, and many of them from agriculture, which supplies in particular the entire material of clothing, the general law of production from the land, the law of diminishing return, must in the last resort be applicable to manufacturing as well as to agricultural history. As population increases, and the power of the land to yield increased produce is strained harder and harder, any additional supply of material, as well as of food, must be obtained by a more than proportionally increasing expenditure of labor. But the cost of the material forming generally a very small portion of the entire cost of the manufacture, the agricultural labor concerned in the production of manufactured goods is but a small fraction of the whole labor worked up in the commodity. Mr. Babbage(137) gives an interesting illustration of this principle. Bar-iron of the value of £1 became worth, when manufactured into— £ Slit-iron, for nails 1.10 Natural steel 1.42 Horseshoes 2.55 Gun-barrels, ordinary 9.10 Wood-saws 14.28 Scissors, best 446.94 Penknife-blades 657.14 Sword-handles, polished steel 972.82 It can not, however, be said of such manufactures as coarse cotton cloth, wherein the increased cost of raw cotton causes an immediate effect upon the price of the cloth, that the cost of the materials forms but a small portion of the cost of the manufacture.(138) All the labor [not engaged in preparing materials] tends constantly and strongly toward diminution, as the amount of production increases. Manufactures are vastly more susceptible than agriculture of mechanical improvements and contrivances for saving labor. In manufactures, accordingly, the causes tending to increase the productiveness of industry preponderate greatly over the one cause which tends to diminish it; and the increase of production, called forth by the progress of society, takes place, not at an increasing, but at a continually diminishing proportional cost. This fact has manifested itself in the progressive fall of the prices and values of almost every kind of manufactured goods during two centuries past; a fall accelerated by the mechanical inventions of the last seventy or eighty years, and susceptible of being prolonged and extended beyond any limit which it would be safe to specify. The benefit might even extend to the poorest class. The increased cheapness of clothing and lodging might make up to them for the augmented cost of their food. There is, thus, no possible improvement in the arts of production which does not in one or another mode exercise an antagonistic influence to the law of diminishing return to agricultural labor. Nor is it only industrial improvements which have this effect. Improvements in government, and almost every kind of moral and social advancement, operate in the same manner. We may say the same of improvements in education. The intelligence of the workman is a most important element in the productiveness of labor. The carefulness, economy, and general trustworthiness of laborers are as important as their intelligence. Friendly relations and a community of interest and feeling between laborers and employers are eminently so. In the rich and idle classes, increased mental energy, more solid instruction, and stronger feelings of conscience, public spirit, or philanthropy, would qualify them to originate and promote the most valuable improvements, both in the economical resources of their country and in its institutions and customs. § 5. Law Holds True of Mining. We must observe that what we have said of agriculture is true, with little variation, of the other occupations which it represents; of all the arts which extract materials from the globe. Mining industry, for example, usually yields an increase of produce at a more than proportional increase of expense. It does worse, for even its customary annual produce requires to be extracted by a greater and greater expenditure of labor and capital. As a mine does not reproduce the coal or ore taken from it, not only are all mines at last exhausted, but even when they as yet show no signs of exhaustion they must be worked at a continually increasing cost; shafts must be sunk deeper, galleries driven farther, greater power applied to keep them clear of water; the produce must be lifted from a greater depth, or conveyed a greater distance. The law of diminishing return applies therefore to mining in a still more unqualified sense than to agriculture; but the antagonizing agency, that of improvements in production, also applies in a still greater degree. Mining operations are more susceptible of mechanical improvements than agricultural: the first great application of the steam-engine was to mining; and there are unlimited possibilities of improvement in the chemical processes by which the metals are extracted. There is another contingency, of no unfrequent occurrence, which avails to counterbalance the progress of all existing mines toward exhaustion: this is, the discovery of new ones, equal or superior in richness. Professor Jevons has applied this economic law to the industrial situation of England.(139) While explaining that the supply of cheap coal is the basis of English manufacturing prosperity, yet he insists that, if the demand for coal is constantly increasing, the point must inevitably be reached in the future when the increased supply can be obtained only at a higher cost. When coal costs England as much as it does any other nation, then her exclusive industrial advantage will cease to exist. In the United States the outlying iron deposits of Lake Superior, Lake Champlain, and Pennsylvania, so geologists tell us, will find competition arising from the new grades of greater productiveness in the richer deposits of States like Alabama. In that case we shall be going from poorer to better grades of iron-mines, but after the change is made a series of different grades of productiveness will be established as before. To resume: all natural agents which are limited in quantity are not only limited in their ultimate productive power, but, long before that power is stretched to the utmost, they yield to any additional demands on progressively harder terms. This law may, however, be suspended, or temporarily controlled, by whatever adds to the general power of mankind over nature, and especially by any extension of their knowledge, and their consequent command, of the properties and powers of natural agents. Chapter X. Consequences Of The Foregoing Laws. § 1. Remedies for Weakness of the Principle of Accumulation. From the preceding exposition it appears that the limit to the increase of production is twofold: from deficiency of capital, or of land. Production comes to a pause, either because the effective desire of accumulation is not sufficient to give rise to any further increase of capital, or because, however disposed the possessors of surplus income may be to save a portion of it, the limited land at the disposal of the community does not permit additional capital to be employed with such a return as would be an equivalent to them for their abstinence. In countries where the principle of accumulation is as weak as it is in the various nations of Asia, the desideratum economically considered is an increase of industry, and of the effective desire of accumulation. The means are, first, a better government: more complete security of property; moderate taxes, and freedom from arbitrary exaction under the name of taxes; a more permanent and more advantageous tenure of land, securing to the cultivator as far as possible the undivided benefits of the industry, skill, and economy he may exert. Secondly, improvement of the public intelligence. Thirdly, the introduction of foreign arts, which raise the returns derivable from additional capital to a rate corresponding to the low strength of the desire of accumulation. An excellent example of what might be done by this process is to be seen under our very eyes in the present development of Mexico, to which American capital and enterprise have been so prominently drawn of late. All these proposed remedies, if put into use in Mexico, would undoubtedly result in a striking increase of wealth. § 2. Even where the Desire to Accumulate is Strong, Population must be Kept within the Limits of Population from Land. But there are other countries, and England [and the United States are] at the head of them, in which neither the spirit of industry nor the effective desire of accumulation need any encouragement. In these countries there would never be any deficiency of capital, if its increase were never checked or brought to a stand by too great a diminution of its returns. It is the tendency of the returns to a progressive diminution which causes the increase of production to be often attended with a deterioration in the condition of the producers; and this tendency, which would in time put an end to increase of production altogether, is a result of the necessary and inherent conditions of production from the land.