indefinitely. But that is very far from being the case. Νο expenditure upon the product can force up its price indefinitely. The value of the product is regulated by the great general Law of Demand and Supply; and, consequently, as no Capitalist can continue to produce for any length of time unless he receives the ordinary rate of profit, he cannot afford to give more as wages than will allow him to obtain that profit. Hence, if he cannot reduce wages he must cease to produce. Thus in all cases where Wages are expended as Capital, there is a natural limit which they can by no possibility exceed-however much they may fall below it.

19. Many writers seem to think that there is some definite fund set apart for the maintenance of Labourers, which they call the "Labour fund," or the "Wages fund," which they suppose regulates wages.

Thus, as we have already quoted from Senior, who says that the proximate cause which decides the rate of wages "is the extent of THE Fund [What fund?] for the maintenance of labourers compared with the number of labourers to be maintained."

So Jones, who confines Wealth to material objects only, says Wages depend on the amount of Wealth, devoted to maintaining Labourers.

"The amount of Wealth devoted to the maintenance of labour constitutes the labour fund of the world, and the amount so devoted in any country constitutes the Labour fund of that country."

"The third division of the labour fund consists of what is properly called Capital, that is, of the stored up results of past labour, used with a view to profit.”

So Mill says that unfortunately there is no mode of expressing by one familiar term the aggregate of what may be called the "Wages fund" of a country.

Here we have distinctly affirmed that Wages depend upon the aggregate funds employed in hiring labourers.

Since, therefore, the rate of wages which results from competition distributes the whole wages fund among the whole labouring population."2

1 Lectures on Political Economy, pp. 114, 414, 415, 420.

2 Mill. Principles, B. II., ch. 12.

But what is this Wages fund?

"Now all these writers affirm that the "Wages fund" consists of Capital, which they say is the accumulation of the savings of the past. They maintain that it is only increased Capital that can lead to the increased employment of labour, and that increased Capital can only arise from the increased savings of the past.

20. But is this the fact? Is the "Wages fund" confined to material money, the fruits of past savings? Are wages paid in nothing but specie? No one who has the slightest knowledge of practical business can fail to perceive that such an idea is utterly erroneous. Every practical man knows that an enormous mass of Wages is paid in CREDIT.

We will take the example of Scotland, because the system of Credit has been brought to a greater state of development and perfection in that country than in any other; though it is nothing but a practical exemplification of the Theory of Credit which was brought to perfection by the Roman Lawyers 1,300 years ago.

Suppose, as has been the case there, there are large tracts of unreclaimed but improvable land; suppose also there are abundance of people, who perhaps manage to exist on some scanty sustenance but have no work to occupy their time. There being no money to employ these people they stand idle, and the land lies waste.

Suppose, as has often been the case, a wealthy merchant buys this property, and brings down with him 10,000 sovereigns. He sets the people to work, they reclaim the land and sow it; in due time the harvest is reaped, and in course of time the £10,000 is restored to the proprietor with a profit; and the reclaimed land yields an annual rent for ever. Now these 10,000 sovereigns are undoubtedly the result of past labour, they have been used as Capital, and have formed part of the wages fund.

But suppose, again, exactly the same state of matters; fertile reclaimable land; idle people waiting to be employed; but no rich merchant with his box of sovereigns.

A Bank, however, seeing this state of matters, and also that there are trustworthy and industrious farmers and proprietors, opens a branch in the district and sends down a box with 10,000 £1 notes.

It advances these notes to the proprietors and farmers; they hire the labourers, and pay their wages in these £1 notes; the

labourers buy their food and clothes with these £1 notes, which are universally received throughout the country, exactly as if they were sovereigns.

In short, these £1 notes produce exactly the same effects as if they were so many sovereigns. The land is reclaimed and sown, and produces exactly the same revenue as if it had been reclaimed by means of money. The proprietors and farmers repay the bank its advances gradually, and in course of time the debt is extinguished, and it yields an annual rent for ever. But equally in both cases the land has been changed from a dreary desert into smiling corn fields.

Now Wages have been paid in these £1 notes; and therefore they have been part of the "Wages fund." Have they not been "Capital" as much as so much money? The Bank has gained the same profit by advancing them as if they were actual money; the proprietors and farmers have gained the same profits by reclaiming the land by their use as if they were money. They have, then, produced the same effects to the whole community as if they had been money. They were therefore "Capital" in exactly the same sense as money is "Capital." But were they theresult of saving?

Similarly all public works in Scotland are formed in precisely the same way; lands, railways, docks, roads, harbours, &c. Whenever the construction of one of these great works is determined on the projectors go to a Bank, and, on receiving proper security, it creates a Cash Credit in their favour, and issues the requisite number of £1 notes-pure Credit-and the work is constructed by means of these notes exactly as if they were so many sovereigns. They have been part of the "Wages fund," and have been "Capital" exactly as if they had been sovereigns: that is, they have been used to produce a profit just like money. What becomes, then, of the doctrine that the "Wages fund" consists exclusively of the accumulation of past labour? or that "Capital" is restricted to the savings of past labour? What becomes of Mill's fundamental proposition that-Industry is limited by Capital? Unless Credit be admitted to be Capital, the proposition is wholly untrue.

Hence we see that not only the accumulation of past profits is brought into the "Wages fund," but also the anticipation of future profits. As we have over and over again set forth-Every

future Profit has a PRESENT VALUE-and that Present Value may be brought into the "Wages fund" and made "Capital" of, exactly in the same way as the accumulation of the past.

But exactly the same process goes on in every branch of industry, manufacturing and commercial. The anticipated proceeds of the future are capitalised and brought into the "Wages fund," and conduce to production exactly in the same way as so much money.

And this doctrine we shall find fully admitted by Mill. "Wealth," he says, "is anything which has purchasing power -"Credit," again he says, "is purchasing power." Therefore, by his own admission, Credit is Wealth. Again, he says that "Bank Notes, Bills of Exchange, and Cheques circulate as money, and perform ALL the functions of it." Now these documents are simply the Rights to future payment, and are Credit. And as Mill admits they perform ALL the functions of money, they, of course, equally with money, may be used as Capital, and form part of the "Wages fund." Thus we see amply admitted by Mill the doctrine we have so often inculcated that-Every future payment has a PRESENT VALUE-which may be bought and sold exactly like money, and perform all the functions of money, and is therefore Wealth in itself.

21. The complete fallacy of the doctrine that the "Wages fund" is limited to existing specie has also been observed by Mr. Longe1"The theory that the wages of labourers is limited by the amount of capital which their employers have at their disposal prior to the sale, and independent of the price of their goods, is very favourable to the doctrine somewhat in vogue among master manufacturers, that the labourer has no right to look to the market price of the goods which he makes, or assists in making, as a measure of the sum which his employers would be able to pay in wages. Of late years, however, the workmen in most of these trades have become too powerful and too intelligent to be hoodwinked in this way, and employers have found it necessary to impress on their workmen that it is not their means, but the purchasers' demand, which limits the amount which they can afford to pay as wages. In the late dispute in the iron trade, when the employers taught an unruly and high paid class of 1 A refutation of the Wages Fund Theory of Modern Political Economy, p. 49.

workmen the wholesome lesson that employers can combine as well as labourers, the more intelligent workmen discussed the question on the proper ground, viz., with reference to the purchasers' demand for the finished goods, and their power of supplying themselves elsewhere, if the English supply was too dear; and it being the general opinion that the works could not be kept going unless the price of iron was reduced, the whole body of ironworkers, with the exception of the North Staffordshire men, agreed to submit to the proposed reduction of wages."

22. The most grotesque statement of the "Wages fund" doctrine that we have seen is the following" I think you are all sufficiently acquainted with the elementary principles of Political Economy to know that the circulating capital of a country is its wages fund. Hence, if we desire to calculate the average money wages received by each labourer we have simply to divide the amount of this capital with the number of the labouring population. It is therefore evident that the average money wages cannot be increased, unless either the circulating capital is augmented or the number of the labouring population is diminished."

Now let us ask what is Circulating Capital? This writer excludes Credit from the title of capital; so that, according to him, only specie can be circulating Capital. But how much specie is there in the nation? No one can tell. But all specie is not used as Capital, as is admitted by all Economists; it is only Capital when used for the purpose of profit. And the same piece of money may be used as Revenue in one Exchange and as Capital in the next. So for our numerator we have an unknown part of an unknown quantity. In the next place, what is the labouring population? Of this we have no definition, and no approximate number given. So that to determine the average money wages of the labouring population we have to take the unknown part of an unknown quantity, to be divided by an unknown quantity!

Let us, however, make a venture at random, and see the result. It is often alleged that the quantity of money in the country is about £80,000,000. Let us suppose that fifty millions of this is used as Capital. Again, let us suppose that the labouring 1 Fawcett. Economic position of the British Labourer, p. 119.