Common Ground-U.S.A. presents:
"PROGRESS AND POVERTY"
The Riddle:During the 19th century the U.S. witnessed a huge increase in wealth-producing power. People naturally expected labor-saving inventions to lessen toil and improve working conditions for all; that the enormous increase in wealth producing power would wipe out poverty forever.
Instead, however, squalor, misery, vice and crime increased and are still increasing everywhere as our villages, towns and cities grow and as new technologies bring advantages to improve methods of production and exchange.
The association of poverty with progress is the great enigma of our times. It is the source of our industrial, social and political difficulties. Our statesmen, philanthropists, and educators grapple with it in vain. This riddle, if not answered, will eventually topple our entire civilization. To solve the riddle, we must research the immutable laws governing the science of economics.
Land, Labor, Capital:
Land, labor, and capital are the three factors of production. The term land as used herein, is intended to include all natural resources, such as the earth and all its locations, minerals, oil and waterfalls as untouched by human hands; the term labor, all human exertion whether by brain or brawn or both; the term capital, all wealth (such as tools, machinery, investments and goods in process of exchange) used to produce more wealth. The return to each factor is distributed as follows: landowners get the part called rent, laborers (whether by brain or by brawn, or both) the part called wages, and capital the part called interest. These terms mutually exclude each other. Any person may derive income from any one, two or all three of these sources; but to understand how the returns to each are exchanged we must keep them separate.
David Ricardo (1772-1823), an English economist, discovered that the rent, or the cost of land, is determined by the excess of its produce over that which the same application of labor can secure from the least productive land in use. This is proven by the fact that locations in active manufacturing and commercial areas are much more valuable than land (locations) in remote areas.
The increase of rent (the return to the location owner) in the U.S. explains why wages and interest do not increase with the increase in productive power. Wealth, which must be produced by humans, is divided into two parts by the rent line which is fixed by the return which labor and capital can obtain from the natural resources free to them without the payment of rent. From that part of the produce below this rent line wages and interest must be paid. All production above the rent line goes to the owners of land. Thus, where the value of land is low, there may be low production of wealth, and yet a high rate of wages and interest. Where the value of land is high, there may be enormous production of wealth, but with a low rate of wages and interest.
The increase of rent explains why wages and interest do not increase. The cause which enriches the landowner is the cause which tends to impoverish the laborer and capitalist (investor). Hence, the rate of wages and interest is everywhere fixed, not so much by the productivity of labor as by the value of land. Wherever the value of land is relatively low, wages and interest are relatively high. Wherever the value of land is relatively high, wages and interest are relatively low. Hence the increase of productive power does not result in increased wages, but rather results in increases in the value of land. Rent (which goes to the non-producing landowners) swallows up the whole gain, and poverty accompanies progress.
Human beings in the most abject, most helpless and hopeless condition, are in the great cities of the U.S. There you will find the ownership of a small location is worth a fortune, while actual wealth producers gel only part of what they produce (landowners getting the rest) and willing workers can find no jobs and no land on which to apply their labor.