Copyright
Thomas Nixon Carver.

Principles of political economy online

. (page 16 of 48)
Online LibraryThomas Nixon CarverPrinciples of political economy → online text (page 16 of 48)
Font size
QR-code for this ebook


to increase the production of agricultural machinery. That would
add very little to the total producing power of the nation. If
something could be added to the transportation facilities, that
would add considerably to the productive power of the nation.
Under a well-organized industrial system the readjustment
takes place automatically. Farm implements become cheap.
Farmers do not care to buy any more, and the manufacturers
are discouraged from production. Railroad-building, however,
is stimulated by the high earnings of the existing railroads,
and the productive energy of the community is diverted from
the manufacture of agricultural implements to the building of
railroads and the manufacture of railroad equipment.

If we reverse the supposition, of course we get the opposite
results, but the same principles will be at work. If we should
find an overabundance of railroad facilities and a scarcity of
agricultural implements, then it would be to the interest of the
country to have more agricultural implements. If the existing
transportation facilities could easily carry all that the farms pro-
duce, and more too, little would be added to the national
product by building more railroads, and much could be added by
manufacturing more farm equipment and increasing the growth
of crops. The low earnings of railroads and the increased
demand for farm machinery would tend to divert the productive



1 86 PRINCIPLES OF POLITICAL ECONOMY

power of the nation from railroad-building to the manufacture
of farm implements and the use of them on the farms.

This principle is of universal application, and thousands of
illustrations could be multiplied if it were necessary. If we
apply it to the railroads themselves, we find it working in the
utmost detail. When a railway system does not have rolling
stock enough to utilize its tracks, its capital is badly balanced,
and naturally the thing to do is to get more rolling stock and
more freight, in order to utilize the trackage advantageously.
In other cases the road may find itself with more rolling
stock and more business than can be done effectively on its
existing trackage. It must then begin adding to its trackage
rather than to its rolling stock, in order to restore the balance.

The fundamental problem of scientific management. The
fundamental problem of all management, whether it be the
management of a diet kitchen, a farmer's feeding lot, a farm
as a whole, a factory, a railroad, or a nation, is the problem of
balancing the factors of production. The problem of managing
the nation is commonly called the problem of statesmanship,
and the fundamental problem of all statesmanship is that of
balancing the factors of national life. To have so much produc-
tive power as to tempt barbarians from the outside to invade
and rob, and so little military defense as to be unable to repel
barbaric invasions, is to invite national disaster. On the other
hand, to maintain so large a fighting machine as to interfere
seriously with the work of production is also bad statesmanship,
because it preserves a bad balance of the factors of national
life and prosperity. To encourage immigration and the multi-
plication of numbers beyond the point necessary to utilize the
land effectively also produces an unbalanced situation. To dis-
courage immigration or the multiplication of numbers to such an
extent as to leave the land inadequately utilized is equally bad.

A balanced population. The greatest danger of all, however,
and the one which, apparently, is least appreciated by some of
our statesmen, is that of producing a badly balanced population.



BALANCING OF FACTORS OF PRODUCTION 187

At the beginning of this chapter the question of the balancing
of the hodcarriers and the brick and stone masons was men-
tioned. This may be taken as typical of the necessity of
balancing skilled labor and unskilled labor. To have more
unskilled labor than can be used effectively with the limited
supply of skilled labor is quite as bad as to have more people
than can be supported on the land, or fewer people than are
necessary to Utilize the land. To have more manual labor
than will effectively combine with mental labor, to have more
mental laborers who are capable of doing only routine work
than will combine effectively with those mental laborers who
possess originality, inventiveness, and the power of leadership
is also to produce a bad balance.

Probably the most important of all problems of statesman-
ship, and at the same time one of the most difficult, is that
of balancing up the population so that no particular class of
labor is either oversupplied or undersupplied with respect to
any other class. One method of preserving the balance is by
education and vocational guidance. Training men for the
occupations where men are needed, as evidenced by the high
wages and salaries paid, is one of the quickest and most effec-
tive ways of preserving the balance. Whenever any occupation
is so undermanned as to make it difficult to find workers,
wages or salaries will tend to rise. This increase in remunera-
tion is then a standing invitation to young men to prepare
themselves for that work, and a properly conducted education
system is a standing opportunity to young people to prepare
themselves to accept the invitation.

Differential rates of multiplication. A wholesome moral life
would also be a powerful agency working in the same direction.
Those who have demonstrated that they are needed by the fact
that they can fill good positions for which there is a demand,
and for which high wages and salaries are offered, are the
ones who ought to reproduce their kind most abundantly.
Unfortunately, in most modern communities, they are the very



1 88 PRINCIPLES OF POLITICAL ECONOMY

people who multiply least rapidly. On the other hand, those
who have demonstrated that they are more or less superfluous
because they can do only a kind of work which is oversup-
plied, and who therefore find difficulty in getting work at all,
and can earn only low wages when they do get it, ought,
from the standpoint of a balanced population, to multiply least
rapidly. Unfortunately they are frequently the very people
who multiply most rapidly. This differential rate of multiplica-
tion helps to perpetuate a badly balanced population in spite
of all the efforts of all the schools toward an occupational
redistribution of population and a restoration of the balance.

Geographical redistribution of population. That more land
is better for a growing population than less land is the theory
on which a great deal of the history of the world has been
constructed. The migrations of peoples in search of more
land is one of the large aspects of human history. There could
be no possible object in seeking more land, instead of remain-
ing content with the land in the possession of the people, were
it not for the fact of diminishing returns. Therefore a very
discriminating writer 1 has stated the opinion that the law of
decreasing returns is the fundamental fact of human history.
The effort of a growing population to acquire more land is,
from the standpoint of the present chapter, merely an effort to
restore the balance between factors of production. In any given
state of civilization too dense a population, that is, too much
labor and too little land, works to the disadvantage of the
people. When they begin to perceive that they would be better
off if they had more land, nothing except the strong military
guard or a Chinese wall will prevent emigration.

Migration of capital. But capital follows the same law as
population. In a community where the land and labor are not
properly balanced up with an adequate supply of capital, the
perception of a need for more capital, that is, tools and

1 Edward Van Dyke Robinson, " War and Economics," Political Science
Quarterly, Vol. XV, pp. 581-622.



BALANCING OF FACTORS OF PRODUCTION 189

equipment, is likely to be pretty clear and definite. This leads to
the offer of high rates of interest as an inducement to capital
to migrate from other communities where it is abundant in order
to supply those communities where it is scarce. The possibility
of using each and every unit of capital advantageously is what
enables borrowers to pay the high rate of interest. The scar-
city of capital relatively to other factors is what creates the
opportunity for advantageous use of capital. The formula,
" More capital, more product ; less capital, less product," is appre-
ciated with peculiar vividness. This appreciation leads to active
bidding for capital, and this to the offer of high rates of
interest. The fortunate individual who can gain possession
of an additional fund of capital, being able to increase his
product considerably, finds it economical to pay a high rate of
interest for it. If he owns his own capital, whereas his com-
petitors in production lack capital, he will have a great advan-
tage over them and will therefore secure a large income.
According to our analysis in the chapter on The Source of
Interest, this additional income which he gets from the use
of his own capital is interest as truly as the income which he
gets from lending his capital to someone else.



SECTION B
THE PRODUCTIVE INDUSTRIES

The chief methods by which the productive forces are made to work for

our advantage



191




192



CHAPTER XVI
THE EXTRACTIVE INDUSTRIES

Ways of acquiring wealth. In the diagram on the preced-
ing page the ways of acquiring wealth are divided into two
main classes, the uneconomical and the economical. From the
social or national point of view it is uneconomical to have
men acquiring wealth by methods which do not add to the
total wealth or well-being of the society or the nation. When
one man gains something by plundering, swindling, counter-
feiting, or monopolizing, someone else loses a like amount, and
nothing is added to the total. In fact, if these harmful methods
become general, it is likely to discourage honest industry and
actually diminish the total production of wealth. Even the
neutral methods may become harmful if they result in wasted
lives ; that is, if they enable men and women who would other-
wise be productive and useful to live in idleness and luxury.
The smaller the proportion of the people who live by means of
the uneconomical methods, the more prosperous the nation is
likely to become.

By the economical ways of acquiring wealth are meant all
those ways by which an individual contributes to the wealth of
the whole community as much as he gets. He may make his
contribution by laboring either to produce commodities or to
render direct service to some of his fellow men. In either case,
where he gives honest service for honest pay he is enriching
someone else in proportion as he is himself enriched. A nation
in which this rule prevails universally, where everyone is con-
tributing to the well-being of someone else in exact proportion
as he himself prospers, has at least one of the conditions of
general prosperity. If each one is capable and well trained,

193



194 PRINCIPLES OF POLITICAL ECONOMY

so that he can give efficient service, that is, if he contributes
largely to the prosperity and well-being of someone else, then
everyone is prosperous, which is the same as saying that the
nation as a whole is prosperous.

Economical ways of getting wealth. The economical ways
of getting a living are subdivided into three classes : first, the
primary industries ; second, the secondary industries ; and,
third, professional and personal service. The primary industries
are those which produce commodities directly from their original
and natural source, which take material as nature provides
it and appropriate it to some human use or change it from a
form which is nonusable to a form which is either usable or
one stage nearer to usableness. For example, the elements
which produce plant growth are not, in their natural state,
available for human use. The farming industry converts these
elements into something which is either usable, as in the case
of fruits and vegetables, or at least one stage on . its way toward
usableness, as in the case of grain or live stock. The mining
industry brings the crude ore, which is not usable, into a condi-
tion where it is either usable or at least one stage nearer usability.
The secondary industries are those which take the products
of the primary industries which are in need of further modifi-
cation and carry them through the remaining stages on their
way to final usability. The iron ore, for example, must be
worked over many times before it becomes an automobile or
the blade of a pocketknife. The coal must sometimes be
transported long distances before it can warm our houses. The
farmer's grain, besides being transported long distances from
places where there is a surplus to other places where there is
a shortage, must also be stored from threshing time until it is
needed by the consumers ; and it must be ground into flour
and baked into bread or manufactured into some other form
of food before it is ready for use.

Personal and professional services include all lines of work
which do not directly produce salable commodities. Lawyers,



THE EXTRACTIVE INDUSTRIES 195

doctors, preachers, teachers, actors, barbers, and even policemen
and congressmen, besides multitudes of others, are performing
professional and personal services. Their labor has sometimes
been called unproductive labor, merely on the ground that it does
not produce vendible commodities. Though the writers who
apply that term to them do not mean to cast any reflection upon
them, always being careful to state that unproductive does not
mean useless, nevertheless it seems better to avoid the use of a
term which is so easily misunderstood. The important distinc-
tion is not that between productive and unproductive labor, but
between the economical and uneconomical ways of acquiring
wealth. Even though the labor of the policeman does not directly
produce a commodity, as the labor of a shoemaker does, for
example, nevertheless the shoemaker and every other honest
worker is helped to work better by the law and order which
a good police system helps support. They are also helped by
the physician, the teacher, and others who labor in the field of
direct professional service. There is an ancient story of some
musicians who formed a part of a captured army. They
requested that they be set free by their captors, on the ground
that they had not taken part in the fighting. The captors
replied, " By your music you inspired others to fight ; therefore
you must be treated as though you were yourselves fighters."
By a similar line of reasoning it could be said that if musicians
inspire others to work, they are themselves workers and are
contributing their part toward the national prosperity.

The primary industries. The primary industries are them-
selves subdivided into two classes, the extractive and the ge-
netic. Extractive industries are those which merely appropriate
natural objects, without any attempt to replace what is taken or
to keep up and increase the supply. The genetic industries,
which might almost be called creative, are those primary indus-
tries which make a conscious effort to replace that which is
taken, and to increase the supply. Thus, hunting wild animals
and grazing domesticated animals on free ranges are extractive,



196 PRINCIPLES OF POLITICAL ECONOMY

whereas tillage and stock breeding are genetic. Lumbering or
cutting timber in a natural forest is extractive, whereas forestry,
the scientific growing of timber, is genetic. Fishing in unstocked
waters is extractive, whereas fish culture is genetic. Mining is
extractive. There does not seem to be any genetic industry
which bears the same relation to it as fish culture bears to
fishing, or forestry to lumbering.

Hunting. Of all industries hunting is the most primitive.
It was sometimes combined with fishing as a means of sub-
sistence. It usually included the search for edible fruits, nuts,
and vegetables, as well as the killing of animals ; and it some-
times even degenerated into a man hunt ; that is, the hunting,
killing, and robbing of men. Where animals constituted the
most abundant source of food, primitive men quite naturally
hunted animals. Where fruits, nuts, and edible roots were
abundant, it was not uncommon for the search for these foods
to become the chief occupation. The hunting of animals led
naturally to domestication and herding, and the search for
fruits and herbs led quite as naturally to horticulture as the next
stage in industrial development. Our own primitive ancestors
seem to have been hunters, and later herdsmen, before they took
up agriculture. The North American Indians lived mainly by
hunting animals, though they had taken to the cultivation, of
crops on a small scale. They seem not to have domesticated
any animal except the dog, before the coming of the white
man. This direct passage from hunting to tillage, without an
intermediate stage of herding, is considered somewhat excep-
tional. The ancient Peruvians had domesticated the llama and
the alpaca. The ancient Mexicans had become horticulturists
apparently without having been herdsmen at all ; their primi-
tive hunting seems to have consisted mainly in searching for
fruits and herbs rather than for animals.

Hunting, which includes trapping, has played an important
part, and still plays an appreciable part, in our national economy.
The abundance of game on our western frontiers, when we had



THE EXTRACTIVE INDUSTRIES 197

a frontier, was an important source of food for the advance
army of settlers. The emigrants who crossed the great plains
in the early settlement of the Pacific coast also benefited to a
certain extent from the herds of buffalo, deer, elk, and antelope
which at one time abounded. More important, however, was the
regular business of trapping fur-bearing animals and of trading
with the Indians for the skins and furs which they collected.
A great deal of the history of our frontier, beginning with the
first settlements on the Atlantic coast and continuing across
the continent, has been a history of the fur trade. Relatively
to her size and her other industries, the fur trade has been even
more important in Canada than in the United States. Great
companies such as the Hudson Bay Company and the North-
west Company of Merchants of Canada were organized, which,
especially during the eighteenth and early nineteenth century,
swayed the destinies of that country and parts of our own
Northwest. They maintained numerous trading posts and em-
ployed thousands of men, who explored every nook and corner
of the territory over which they operated. Similar though
smaller companies were formed within the United States, to
trade with our own Indians. Many of our Western pioneers,
guides, and scouts, of whom Kit Carson was the most famous,
began their careers as hunters and trappers for these various
companies. The story of their adventures adds a romantic
element to the early history of our Far West, but they were
making their living by gathering furs to supply the demands
of commerce.

After the building of the transcontinental railroads across
the great Western plains a rich harvest of buffalo skins was
reaped for a few brief years. The lamentable result was that
the buffaloes, or bison, as they are more properly named, which
had roamed in countless numbers over those plains, were
almost exterminated in the two decades from 1870 to 1890.
It is doubtful if such a slaughter of noble animals ever took
place before in the history of the world.



198 PRINCIPLES OF POLITICAL ECONOMY

As the country has become settled, fur-bearing animals, as well
as other wild animals whose skins form articles of commerce,
have tended to grow scarcer, though no such wholesale destruc-
tion has overtaken any of the others (except the beaver) as that
which overtook the buffalo. Most of them are small enough to
find cover and sustenance for small numbers in the woods and
fields of settled communities. Therefore hunting and trapping
still supply a small fraction of our national income. The most
valuable of all our inland fur-bearing animals, the beaver, has
almost disappeared, along with the buffalo ; but minks, musk-
rats, raccoons, opossums, skunks, foxes, and coyotes are still
found in small numbers. The subarctic regions of Northern
Canada and Alaska still yield considerable harvests of furs, while
the seals which congregate in the Bering Sea, if adequately
protected, may prove a valuable national asset.

Fishing. While hunting, as a source of national wealth, tends
to decline in importance as the country develops, fishing seems
to increase. One reason for the decline of hunting is the sim-
ple fact that land becomes too valuable for other purposes to
be allowed to remain in its wild state as a refuge or feeding
ground for wild animals. When it is turned to other purposes,
most of them must of necessity disappear. The same is appar-
ently true of many inland streams which once furnished small
quantities of fish. But the larger lakes, and especially the oceans,
furnish an almost inexhaustible supply of excellent food. As
population and the demand for food increase, the harvest of
the sea assumes a more and more important part in our national
economy. According to the last estimate of the Federal Census
there were in the United States, including Alaska, 7347 vessels
engaged in the fishing industry; 166,343 persons were em-
ployed, and the total value of the product was $75,029,973.
The total value of the fisheries of the world is estimated at
something over $480,0x30,000.

We have as yet scarcely begun to realize the possibilities of
this harvest of the sea. Practically every fish which lives in



THE EXTRACTIVE INDUSTRIES 199

these northern waters is good for food if properly prepared.
Every decade we are discovering that some variety which has
formerly been rejected is quite as good as any that we have
hitherto prized. Thus far we have chosen only a few of the
many varieties with which the sea abounds.

Pasturage. It would be impossible to estimate how much
the civilized races of the north temperate zone owe to such
domestic animals as the horse, the ass, the cow, the sheep,
the goat, and the pig. All these animals have, at one time or
another, furnished food for man. The horse, the ox, and
the ass have furnished that which has played almost as im-
portant a part as food in man's conquest of nature, namely,
power. Before steam and electricity had been harnessed,
or water power developed, these animals were almost the
only sources of power besides human muscles. The skins
of all were and are still utilized, there being no very good
substitute for leather even to this day. The cow and the
goat have furnished, and still furnish, milk, one of our most
important articles of diet. The wool of the sheep is even now,
next to cotton, the most important material for the manufacture
of clothing.

In their native state all these animals except the pig lived
almost exclusively upon grass, either green or dried in the
form of hay, and they still depend mainly upon it. Even the
pig, with his omnivorous appetite and his accommodating
stomach, will thrive on grass as his chief article of diet, though
he needs some more concentrated food in addition if he is to
make his best growth. Grass and grazing have therefore played
a very important part in the economic life of that branch of the
human race from which we are derived. Our ancestors were
already herdsmen before they emerged from prehistoric dark-
ness. All the animals now under domestication, and all the
fowls except the turkey, were domesticated so long ago that
we have no record as to where or when it occurred. It may
give us a new respect for those prehistoric ancestors of ours



200 PRINCIPLES OF POLITICAL ECONOMY

when we reflect that we have never succeeded in thoroughly
domesticating any animal since we have had a history, though
we may soon succeed with the zebra. There has never been
a period, of which we have any record, from the earliest
times to the present, when our branch of the human race
did not depend for its subsistence largely upon the grazing
animals. During the greater part of our historic life our
domestic animals grazed on wild or native grasses. Feeding
them upon cultivated grasses and grains will be discussed under
Agriculture.

Grazing on our western frontier. From the earliest settle-
ments in the territory now occupied by the United States,



Online LibraryThomas Nixon CarverPrinciples of political economy → online text (page 16 of 48)