much larger proportion of the capital used in production is devoted to the payment of wages than in older countries where a greater part must be expended in machinery and material, and thus, in the new country, though capital is scarcer, and interest is higher, the amount determined to the payment of wages is really larger, and wages are also higher. For instance, of $100,000 devoted in an old country to manufactures, $80,000 would probably be expended for buildings, machinery and the purchase of materials, leaving but $20,000 to be paid out in wages; whereas in a new country, of $30,000 devoted to agriculture, etc., not more than $5,000 would be required for tools, etc., leaving $25,000 to be distributed in wages.
In this way it is explained that the wage fund may be comparatively large where capital is comparatively scarce, and high wages and high interest accompany each other. In what follows I think I shall be able to show that
this explanation is based upon a total misapprehension of the relations of labor to capital — a fundamental error as to the fund from which wages are drawn; but at present it is necessary only to point out that the connection in the fluctuation of wages and interest in the same countries and in the same branches of industry cannot thus be explained. In those alternations known as "good times" and "hard times" a brisk demand for labor and good wages is always accompanied by a brisk demand for capital and stiff rates of interest. While, when laborers cannot find employment and wages droop, there is always an accumulation of capital seeking investment at low rates.[1] The present depression has been no less marked by want of employment and distress among the working classes than by the accumulation of unemployed capital in all the great centers, and by nominal rates of interest
- ↑ Times of commercial panic are marked by high rates of discount, but this is evidently not a high rate of interest, properly so called, but a high rate of insurance against risk.
