increase in quantity, the absolute shares of both increase. This is a conclusion of great practical importance. As regards relative shares, there can of course be no such harmony. For the relative share of the one can only increase at the expense of the relative share of the other. The workers' chance of increasing their relative share will be favoured by the greater elasticity of demand for work, that of the property owners by the greater elasticity of supply of property. Moreover, as we see from comparing the first and second cases in the preceding section, the greater the relative share of either factor, the greater will be the difficulty of increasing it. For the greater the relative share of either factor, the greater will be the minimum elasticity of demand for that factor, which will ensure that a given increase in its supply shall increase this relative share. On the whole, balancing the preceding considerations against one another and assuming the relative shares of work and property to be about 70% and 30% respectively, it seems likely that the relative share of property will increase, as a result of increases in the amounts of work and property, or in the amount of either alone. In practice we should expect to find the amount of property increasing faster than the amount of work, and probably the relative share of property increasing steadily, but at a steadily diminishing rate. There seems to be considerable ground for regarding this as a normal tendency in capitalistic progress. It seems impossible to say whether the relative share of property is likely to tend to any limit less than 100%, but it can only tend towards 1 Compare Cannan, Economic Outlook, pp. 238–9, and Taussig, Principles, II., p. 205. • In abnormal periods, and especially during and immediately after war on a large scale, this tendency may be modified. A statistical enquiry into the position in this respect in 1914 and in 1919 would be instructive. the latter limit very slowly, since the absolute share of work is likely to go on increasing meanwhile. §6. So far no account has been taken of the effects of new inventions or of changes in consumers' demand. These will be considered in the next two chapters. But before going on to these subjects three subsidiary points may be noticed. First, we have been considering the relative share of property in the total income produced within a given geographical community. But this is not necessarily the same as the relative share of property in the total income of the members of this community, since members of some such communities own property in other communities. Second, the argument of this and the last chapter is based on the assumption that all factors of production are remunerated according to their marginal net products, and probably this assumption is approximately true under the present organisation of industry. Under a Socialistic organisation of industry, however, a public authority might decide to accept a lower rate of remuneration on its property, or even none at all, and thus to reduce the relative share of property in the total income. Similarly a public authority might reduce the relative share of property by fixing wages above the marginal net product of labour. How far such policies would be in the economic interests of the community is too large a question to discuss here, but their success presupposes a willingness on the part of the public authority to raise fresh capital by compulsory levies and not by voluntary subscriptions, in respect of which interest would be payable. That is to say, it presupposes that the elasticity of supply of capital would be almost entirely determined by the public authority. Third, the relative (net) shares of property and work might also be greatly altered by means of taxation. In particular, a capital levy for the reduction of public debt will tend to reduce the relative share of property. For, broadly speaking, the effects of such a levy will be, first, the extinction of a large quantity of property rights and a corresponding quantity of property income, without any corresponding reduction in the amount of land and real capital available for production, and second, a consequent reduction of annual taxation or an increase in annual public expenditure unconnected with the service of the debt, or both. Property owners are practically certain to lose more under the first head than they will gain under the second, while there is reason to anticipate that a capital levy, if wisely planned and administered, will stimulate rather than check production. NOTE STATISTICS BEARING ON THE DIVISION BETWEEN WORKERS AND OWNERS. I cannot discover any satisfactory statistical estimate of the relative shares of work and property in the income of modern communities. Professor Cannan, a considerable time ago, offered to an audience which he suspected of economic pessimism, certain figures, which he admitted to be highly conjectural, because they seemed to him "to suggest at any rate that the pessimists' case is not to be taken as founded on notorious facts." The relative share of property at the time of the publication of Mulhall's Dictionary of Statistics in 1884 was, according to this conjecture, in the United Kingdom 21%, in Australia 22%, in Russia 28%, in France 29%, in the United States 33% and in Greece 54%. The last figure is the only one of these which seems markedly incredible. For this country a later estimate can be obtained, within a large margin of error, from the items in a table given by Professor Bowley, which I have rearranged as follows: 1 Economic Outlook, p. 8o. Division of the Product of Industry, p. 14. The table is headed The Aggregate of the Incomes of Residents in the United Kingdom, 1911. I have omitted Old Age Pensions, 12 millions a year in 1911, from my rearranged grouping, as these are not income either from work or from property, but from civil rights, and, as regards two of Professor Bowley's items, I have assumed that 37 millions, income evading tax or unremitted" from abroad, is all from property, and that 26 millions, "agricultural income, not otherwise included," is half from work and half from property. " Salaries less than £160 Independent workers, small employers, I. Income from Work Million £ Wages 782 84 180 130 15 20 13 1224 farmers, etc., less than £160 Salaries above £160 Occupation of lands (Schedule B) Agricultural income, not otherwise included Total II. Income from Property Ownership of lands and buildings (Schedule A) Government Securities (Schedule C) Evading tax or unremitted Unearned income below £160 Agricultural income, not otherwise included Total III. Income Partly from Work and Partly from Property— Profits from Trades, Professions, etc. (Schedule D) .. 528 The total income from these three groups is 2,078 millions. If all the income under Schedule D were derived from work, the relative share of work would be 84% and of property 16%; if all this doubtful income were derived from property, the relative share of work would be 59% and of property 41%. In fact, it may safely be assumed that at least half this doubtful income, and probably more, is derived from property, so that the relative share of work would be at the most 71% and the relative share of property at the least 29%. |