THE FACTORS OF PRODUCTION.
Although economists treat production and consumption as separate and independent operations, in reality they are merely two steps in one complete process or cycle. The terms are, in fact, correlative. We cannot well think of the production of wealth without having in mind the end for which it is produced, viz., consumption. Similarly, as consumption is impossible without the means, these terms imply each other. Production is made possible only by consumption, which, as far as humanity is concerned, must necessarily precede production. As the means of human subsistence do not arise spontaneously, self-created, physical exertion is obligatory, and by the law of equivalence the power must be provided before the work can be accomplished. Further, continued physical exertion necessitates continued renewal of physical energy.
Everything with which we are familiar that enters into and goes to maintain human life is strictly limited in quantity. Even the sun, the fountain and source of all earthly life, is limited, and astronomers tell us its heat is being dissipated at an enormously rapid rate; but with the uncontrollable forces of nature, economics has nothing to do. No human power can check the sun's dissipation, so far as we know. It is with the material things which we can control, which lend themselves to human desires and purposes, and whose usefulness we have power to dissipate or preserve, that this science is concerned, such as the soil, coal, forests, oil, gas, minerals, fish, game, etc. All these things we have power to preserve or waste, and it is the limited amount of such necessaries that makes it essential for humanity to practice economy. We economise in the use of those things which we are liable to run out of, and it is to perpetuate life that economy is practised; but now, economy, as I shall presently show, is not necessarily self-denial or abstinence in the sense the term is commonly used.
Nothing exhibits to so great a degree the falseness of orthodox political economy as the prevalent idea that the limited quantity of natural agents involves abstinence from consumption. Far from urging abstinence, economy dictates the use of wealth; for whilst the quantity of the productive agents is actually limited, such as the soil, we shall find that consumption does not necessitate destruction or exhaustion of these agents; on the contrary, consumption is a necessary part of reproduction, for without consumption production must cease.
It is useless, not useful consumption that economy opposes, that is, consumption without reproduction. Nature has shown us in many of her operations her marvellous recuperative powers. In the process of evaporation and rainstorm we have a complete system of production and consumption continually going on; similarly with animal and plant life. Plants owe the carbon and hydrogen of which they are largely composed to the carbonic acid and moisture in the air and earth. Now carbonic acid gas, as is well known, is exhaled by animals through the expenditure of carbon contained in the blood and oxygen from the atmosphere, and this carbon is furnished by the consumption of vegetation. Here we find a continual process of consumption and production, or rather reproduction, being carried on; consumption of vegetation and air, and reproduction of carbon and oxygen in the form of carbonic acid, which is decomposed by the action of the solar rays.
In the formation and combustion of coal and wood we can likewise trace a similar cycle, for the products of combustion emitted to the atmosphere go to form trees and plants which furnish both wood and coal — the latter after possibly many thousands of years' imprisonment beneath the earth's surface. Now the knowledge of these laws and operations of nature, the science of economics, teaches us to utilize and imitate. Human life, so far as the consumption of food is concerned, is in all respects similar to the rest of the animal kingdom. The products of consumption of human beings and animals contain the elements necessary to replenish the soil, to enable it to reproduce the means of subsistence; (“Thus the matter of life, so far as we know it, breaks up in consequence of that continual death which is the condition of its manifesting vitality, into carbonic acid, water and ammonia, which certainly possess no properties but those of ordinary matter. And out of these same forms of ordinary matter, and from none which are simpler, the vegetable world builds up all the protoplasm which keeps the animal world a-going. Plants are the accumulators of the power which animals distribute and disperse.” —Prof. Thomas Huxley, Physical Basis of Life) so that, whilst it is true that the soil is limited, nature discloses a method by which food for the human race may be considered practically limitless.
Note that such a notion would be immediately attacked by modern so-called “ecologists” (yes the eco in front of their designation is the same as for economists) who are in fact by their training and consequent bigotry BLIND to any ideas that the “carrying capacity” of this earth might in fact be many times higher than at present. If you don't happen to think so consider what it says here. It will hence become apparent that all notions of “scarcity” are manifestly relative and are INTENTIONALLY MANIPLATED for the selfish interests of the few in political control.
The same is true as regards clothing. Clothing consists of vegetable and animal matter, and the fertilizing agents requisite for reproducing such matter is furnished by the animals themselves; but observe that consumption is here a necessary part of the process, a necessary step in the process of reproduction.
Consumption therefore, instead of being a luxury to be moderately indulged in, is an essential part of reproduction. Useful consumption and not abstinence is the motto of a scientific system of economics. But these processes involve human labour; these various forms of matter which serve to produce life-sustaining material have to be brought together, to be transported from place to place. This work nature depends upon human agency for, and here we can see what part human energy takes in the work of production.
"If we examine any case of what is called the action of man upon nature" says John Stuart Mill, "we shall find that the powers of nature, or in other words the properties of matter, do all the work, when once objects are put in the right position. This one operation of putting things into fit places for being acted upon by their own internal forces, and by those residing in other natural objects, is all that man does or can do with matter. He only moves one thing to and from another. He moves a seed into the ground and the natural forces of vegetation produce in succession a root, a stem, leaves, flowers and fruit. He moves an axe through a tree and it falls through the natural forces of gravitation, etc. . . . Labour, then, in the physical world, is always and solely employed in putting objects in motion; the properties of matter, the laws of nature, do all the rest.” (Principles of Political Economy) Obvious, but necessarily true.
To the average person the terms production and consumption are synonymous with creation and annihilation, and the way in which economists use them serves to confirm this impression. Thus the creation and destruction of wealth is an every-day expression. But in what does the creation of wealth, or what we term production, consist? Merely the combining, separating, shaping and moving of matter. We do not create matter in the creation of wealth. During the past century's growth of wealth, enormous as it has been, there has not been added to the universe a single particle of matter. Nor do we create force. We can neither create nor annihilate a single atom of matter nor a single unit of force. All we can do is to effect such movement in matter as will cause nature to carry on desirable operations, such as the transformation of one form of energy into another.
One of the grandest triumphs of modern science is demonstration of the fact "that forces, unceasingly metamorphosed, are nowhere increased or decreased.” If, then, neither force nor matter are consumed, what is meant by consumption? Physically speaking, consumption of wealth consists merely in the metamorphosis of force and matter, in altering and effecting new combinations of elements, in changing the forms of things. Economically speaking, it is the consumption of utility. In reality it is labour — human exertion — that is consumed. (Adam Smith's assertion that "Labour is the ultimate price paid for everything” is in this sense strictly true. For utilities reappear only at the expenditure of labour.)
Strictly speaking, we cannot consider wealth consumed unproductively as economic consumption. Such consumption is wasteful. As wealth is in reality the product of consumption, all consumption should be carried on in this direction. Practically considered, such consumption is, of course, only attainable to a certain degree. Were we able to unlock nature's secrets and learn by what mysterious alchemy the plants take the substances — carbonic acid, water and ammonia — to form protoplasm; if we knew how to crystallize carbon into the diamond; if we could collect all the atoms dissipated in consumption; if we could repeat exactly all of nature's processes, practice might be made to conform to theory, and our ideal economic standard might be realized. Provided always, however, that men were willing to furnish labour sufficient to effect these transformations.
And herein lies one of the most important truths of economics, viz., that wealth consumed without an equivalent being returned by the consumer in the shape of labour — such wealth is wasted; consumed unproductively.
Nature warns society against perpetuating a system that permits a large class to consume wealth without contributing to reproduction. Such a system is contrary to economy. Prof. Cairnes has not failed to see this. He says "A formidable obstacle to economic laws is a body of rich non-producers. It is important on moral, no less than economic grounds, to insist upon this, that no public benefit of any kind arises from the existence of an idle rich class." (Notwithstanding this admission, he holds tenaciously to the system that produces and maintains this class. “By all means,” he says, “they must have their rent and interest as it is written in the bond.”)
Now although in very many instances we have not yet discovered nature's secrets, science has taught us sufficient to enable us to provide human life incessantly with the commonest necessaries of life, — food, clothing and shelter. With free access to the soil, with a scientific and intelligent system of cultivation, with a proper return to the land of all the human and animal products of consumption, with a scientific use of natural forces, it is quite possible for the human race to exterminate poverty and starvation. As far as the prime essentials for support are concerned, science has already solved the problem, and it is only necessary to bring about those conditions under which wealth is properly distributed in order to arrive at this desirable consummation, for with every life comes the means for its own support, when guided by scientific principles.
This sounds all well and good, but it is a potential idealism, one we've dealt with many times before in human history. What was the tip off? It all began here: “With free access to the soil” Such a thing is quite impossible without someone, either a state or some other authority using FORCE with which to attempt to accomplish this. Secondly, this all well seeming sentence presumes quite a lot on behalf of the average likely farmer in terms of his or her knowledge of what to do after any “free access to the soil” may be accomplished. And there is a third complaint before Kitson gets too far into it: it has to do with how value from soil, any field used for cultivation of whatever crops or grazing purposes, is determined based on the differential qualities of soil and what it takes to clear, maintain and irrigate it. These factors were certainly used going back over many centuries to determine the actual remunerative scales demanded by various labourers for various crops or other intended productive uses. What would be the value of the superintendent of such farming or grazing operations and who or what would be willing to pay him or her for their services? These are matters that cannot so easily be swept aside.
What, then, are the teachings of nature regarding this subject of production and consumption? That wealth produced should be consumed productively, or rather, it should be a necessary step in the process of reproduction. In other words, it should, like the phoenix, give birth to the means for its re-appearance, and from the ashes of consumption, new wealth should spring. Re-incarnation should govern the material as well as the spiritual world. and that too is assuming quite a lot This is the province of invention and discovery — to show how, from the dry bones, to reproduce life — to reproduce wealth from the products of consumption. In this way the means of subsistence become practically limitless.
Instead, then, of regarding nature as niggardly, and her resources as limited, we must see that conformity to, and knowledge of her laws furnishes us with never-ending supplies.
This assumes quite a lot too; it would demand some kind of universal education in these things which may in fact be a better education than is afforded most today. But what is Kitson, and others before him, ignoring? A little something I'll call natural talent. Not everyone is equally gifted to turn their labour toward farming or husbanding herd animals, dairying, etc. In fact agriculture demands its own divisions of labour as does any other human pursuit. We said at the outset that we intend on being just as hard on Kitson as we ever were on Rand or on anyone else.
We have seen that wealth consumed productively means its equivalent in labour must be furnished. Here we find, as shown in the first chapter, economics pointing in the same direction as ethics. To eat the bread of idleness is as much opposed to a scientific system of economy as it is contrary to morality; likewise the duty of finding useful employment, of cultivating industrious habits is as much a socially economic necessity as it is a moral duty.
We most definitely have grounds for an idealism here. Natural talent is distributed unequally, therefore, despite what Proudhon or anyone else might think, ABSOLUTE HUMAN EQUALITY IS A FICTION, never to be realized. Yes, I did shout! People, many of whom who talk about equality are just plain stupid, need to be shouted at until or perhaps they decide to think before mouthing such stupid ideas! Ignoring this fact, makes a mess of everything else. We state again that this model Kitson is attempting to set up can only go so far, like a problem in limits in elementary Calculus; one gets as close as one pleases without actually getting there. Anything more, as we shall soon realize, is just more idealism parading itself as “science.”
Now, as we have seen, nature furnishes us with an ideal economic system, one in which consumption and reproduction succeed each other in constant, never-failing cycles. Such a system entails no wastefulness and no loss. We have already considered several such processes in the economy of nature, and hence we may safely consider this as an economic standard to which the laws of distribution should conform. When it is said that there is no waste in a perfect economic system, we mean no waste of utility. All life, under the best of economic conditions, is kept up with an expenditure of solar energy, — an expenditure which as before mentioned astronomers tell us is not being renewed. We don't really know about the sun, so let's stop pretending that we do.
A perfect economic cycle involves, therefore, two operations, consumption and reproduction. Starting with a limited quantity of wealth, the aim of economics is to utilize this wealth in such way as to not only reproduce it, but if possible increase it, for wealth is capable of enormous increase. One of the grandest truths economics has taught us in the pasty is, that productive labour always produces a surplus; that is, that the wealth produced by labour is more than sufficient to replenish or refund the energy consumed in production.
Again, just because it may be true that productive labour always produces a surplus, nevertheless that surplus is often not that easy to precisely quantify, or quantify at all. In such instances the price arrived at may always of necessity be a compromise and of course under free market principles, another ideal that cannot be presently realized, nor is ever likely to be realized, any quantification remains quite arbitrary.
Were this the general productivity of labour able to produce a surplus not so, human life would have ceased long since, for labour has had to supportnot only itself, but a vast army of non-producers. It always has been so and what's more it will always be so and there is absolutely nothing any idealist may devise to change this aspect that will not instantly fall under the lash of criticism as innately inhuman, for despite many attempts to try and FORCE it upon humanity, men are not bees!
Let us now compare the system of production and distribution which orthodox economy recognizes, with our ideal standard.
We shall find it, perhaps, most convenient to do this by means of the following figures: Here, as shown, labour and land are the sole factors in production, and their produce is distributed, or rather returned to the same two factors, which insures the means for reproduction. The land receives it in the shape of manure, fertilizing agents, seeds, plants and whatever is necessary to replenish the soil and maintain as far as possible those natural agents which participate in production. The balance of wealth goes entirely to the other factor, labour.
It will be noticed that the term capital does not appear in this system. Capital, as economists inform us, is wealth devoted to the production of more wealth; hence, since in o ur ideal system all wealth is used reproductively, by returning it to the two factors that made it, all wealth is in this sense capital. Capital does not figure as an original factor in production, because it is, itself, a product of those factors. In its proper use and consumption it becomes a factor, however, in reproduction, but only so when used and consumed by the two original factors, proving that use and consumption, and not abstinence, is the true principle of economy. In such a cycle there is no loss. It is, economically speaking, perfect. … and the basis for an idealism! Under normal circumstances, were there not perhaps more to be gained from this exercise, I would have willingly chucked this book right … into the trash … right here and now, just as I once chucked Ayn Rand. However that may be, we shall continue.
A representation of the present unscientific, uneconomic system of distribution may be shown as follows: The illustration is missing.
Orthodox economics recognizes three factors in production; Labour, land and capital, and their produce, wealth, is distributed not solely among these, but among other factors which social laws and customs have hitherto regarded as necessary participators in every economic system of distribution. This subject I have already discussed in the previous chapter. Examination of the illustration shows, however, the result of this unscientific system. By distributing wealth as rent and interest, a large proportion of produce is constantly dissipated; consumed without any equivalent being returned. All that is not devoted to maintaining the three factors, all that does not go to improve labour, land and capital, is wastefully employed, is utilized unproductively, and no true science of economics can possibly countenance such a system, for it tends to the dissipation instead of the conservation of wealth.
That may be, but neither Kitson, nor Marx, nor endless planning by those endlessly concocting, as our French colleagues ruefully have it, “big useless plans,” will FORCE something like the productive capacities of humanity into a neat framework, nor do we need it to arrive at a better monetary system; machine. Perhaps by any standards, economics is not a true “science” as Kitson aptly criticizes it, but under this chapter and its contents, it is not likely ever to be one. At its best then, economics can only be a descriptive discipline, like history or anthropology, rather than a predictive one. This may all by itself render the subject of economics as a legitimate “science” either an impertinence or a waste of time.
Our present system actually taxes itself for its own existence. Thus capital demands interest for allowing itself to perform its natural function in the process of reproduction; likewise rent is demanded when land performs its natural function in production, and these burdens are thrown upon the other original factor, labour. Hence labour is actually punished for performing its duties, for maintaining life and producing happiness. Economy is thus made a hardship and treated as a crime. Orthodox economy is like a wheel whose rotation cannot be effected without putting on the brake ! or like that proverbial class of individuals who, by giving them rope enough, hang themselves! Again, if economics is descriptive rather than predictive, then the record shows that there has usually been sufficient FORCE available, paid in any possible way to acquire it, to maintain the powerful against the otherwise productive class of labourers. The present system has been maintained by FORCE. Bastiat said that law was FORCE, so he would of course agree with this assessment.
Further, the figure shows us the unscientific generalizations of orthodox economy. The two original factors of production are, considered in their totality, of infinite value, for, being the source of all wealth, they are the source of capital which is a part of wealth and of definite value.
To classify labour and land with wealth is to generalize falsely. It reduces them to the level of their products. It assumes that things which are inreality unlike, are alike. It leads to false results.
Again, this system of distribution leads to results opposed to those which it is the professed aim of the science to achieve, viz., the well-being of society. By distributing wealth as rent, interest and wages, society is at once divided into two classes: of producers and non-producers, whose interests are antagonistic. Instead of society remaining a unit in production and distribution, where all are self-supporting, one part of society feeds off the other part. They become parasites, vermin, whose very existence is unsocial and a menace to society. Nothing is more discouraging than to find political economy, dignified with the name of science, recognizing and supporting a system that leads individuals to regard the miseries of society as stepping stones to their own success; that makes them consider human disasters as blessings from which they can reap rich harvests.
So where exactly has Kitson gone wrong? Here's an instance: he claims that the professed aim of science is the well being of society. We doubt this has ever been so, nor do we concede the requirement that it be so. Such because, very simply put, again, neither Kitson nor anyone else would be able to precisely quantify what the well being of society would look like and furthermore, as that may be to one group of people cannot be inferred to apply to every and all groups of people. We could certainly add here that neither can it be said with any certainty that any art is or ever should be in the service of the well-being of society. Neither can this be said of the pursuits of either history or anthropology. An honest evaluation of Kitson as opposed to Riegel reveals, for those able to see it, just another attempt at idealism, whereas Riegel's suggestions, and those of this blog need not concern any of the weighty matters Kitson seems evidently bent on pursuing. There are parasites on society, but they are those who utilize usury or price speculation as vehicles, rather than any and all who happen to live off the excess productivity of the labouring classes and they certaily are not the poor or those who cannot find a “job” in the present order. And not all “capital” per se can be said to be parasitic.
Finally, we can see how inevitable is the conflict between labour and capital; how, by our false system of distribution, antagonism is natural — like the similar poles of magnets. This analogy is terribly misapplied. In giving to capital, through restrictions and privileges, by force of law, a position above its creator, labour, we are upsetting the natural order and condition of things and attempting the impossible Nay sir! It as been and is possible and has been so for thousands of years. Best the Kitsons of this or any other age study history before claiming to make into a “science” the basis for yet another ideology.; for capital — as an independent institution, apart from labour and land — has arisen only by an inequitable system of distribution in the past by robbery of the two original factors. It is the thief who, having stolen all a man's necessaries, insults him by offering to lend him some of them on condition that he returns them with a profit. It is in vain that statesmen and economists seek to unite what in the very nature of things are repellent.
Why, pray tell didn't Kitson back off such profound considerations and merely look at money itself? Had he done so, he would have easily seen that the fundamental flaw in usury is that it demands back that which was never created. It does so in the form of money which is usually intended to be yet another commodity, at first represented by gold and silver and later as the accumulation of all credit. Such observations are simple and obvious and do not require us to get into emotional entanglements.
Capital can only be at one with labour by becoming its subordinate in practice, as it is by nature; by taking its natural part in the cycle of consumption and reproduction; by being employed by labour instead of usurping the position of employer.
Study of these diagrams no, there are none also shows us the cause of what is known as "over-production." It results entirely from inequitable distribution. By returning all wealth to its creators, "over-production" becomes an impossibility. It is by giving wealth to non-producers that the cycle is broken.
I shall require no diagrams to prove this idea entirely false, because there is something else to consider; the public demand for the production. Let's say there are six people involved in a cheese making operation. Let's say that production of cheese = P and that under remuneration C = (P/6) - K is what each of the labourers get, C, minus the cost of whatever it takes to make cheese, K. As demand increases, K must increase and up to the point where public demand says “no more cheese,” everything can operate smoothly. Nature is also competitive and therefore there may sooner or later arise other production factors to challenge the natural right of the cheese producers to make more cheese. It may suit 4 out of 6 of the producers to settle for their lives as cheese makers or to do something else and there is no natural law or scientific principle available to assist Kitson or anyone else in predicting what may happen to cheese production. In fact consumption of many commonplace objects is always subject to unscientifically quantifiable whims of society and so shall it ever be. The actual question is, do we need anything Kitson has bothered himself with to seek a better solution to the present monetary order? The answer must frankly be NO!
These periods of disturbance, of stagnation in industry, are entirely the result of an immoral system of distribution, of divergence from the path of morality unless you are of the Ayn Rand type who tries to remake the rules of morality and ethics to suit their own selfishness, and can only be remedied by abandonment of the system and the establishment of one more in conformity to our ideal system.
There it is, my friends! Another idealism ready to take the stage … even 120 too late. I'm so sorry, Mr. Kitson, but you've barked up the wrong trees, involved yourself in matters you cannot fully comprehend and needlessly complicated matters. One aspect of human existence that apparently Kitson does not fully comprehend at all is FREEDOM! That should stand in good stead to any and all idealists, who are among the most oppressive, dictatorial and misunderstanding of those who will not or cannot fit their “systems.” Bastiat understood that law was FORCE and therefore understood that such matters handled by law should be of very limited scope. Perhaps Kitson would have thought up something better had he read Bastiat. Inevitably, unless other matters are dealt with better, Kitson's intellectual capital is rapidly falling in value.
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