Frederic Bastiat, The Interests of Labor and Capital; Land Value

Al­though it is not material, value may pass into material. It is then capable of accumulation, that is to say, of becoming capital. But it is to be noticed that "where value has passed from the sendee to the product, it undergoes in the product all the risks and chances to which it is subject in the service itself." It may rise, or it may sink until it departs altogether, as might have happened to the service.

The tendency, however, of value that has become fixed in a commodity — that is to say in capital — is to sink. " The man who makes a cup today," says Bastiat, "for the purpose of selling it a year hence, confers value on it, and that value is determined by that of the service — not the value which the service possesses at the present moment, but that which it will possess at the end of the year." Owing to constant industrial improvements, the probability is that the cup can be produced cheaper at the end of the year than now. Thus, according to Bastiat, capital, which is only accumulated services, stands at a disadvantage compared with labor, that is, present serv­ices. As society progresses, — and Bastiat thinks of it as always progressing, — capital continues to occupy a more and more disadvantageous position with regard to labor. Labor has no reason to be dissatisfied.

The rent of land, too, is only a return for past services. The original and indestructible powers of the soil are not, as Bicardo would have us believe, the source of rent. No remuneration can be demanded for these, because they are the gift of nature. Land value represents previous services, such as the clearing away of forests, drainage, building of fences, fertilizing the soil, etc. But formerly, on account of the greater imperfection of labor's methods and appliances, it required more labor than would now be necessary to render such services. The landlord receives a return only for the present value of his improvements. Sooner than give him more, people will take up new land and improve that. "This shows how empty," says Bastiat, "are the declama­tions which we hear continually directed against the value of landed property. That value differs from other values in noth­ing— neither in its origin nor its nature, nor in the general law of its slow depreciation, as compared with the labor which it originally cost."

Wage earners have every reason to be satisfied with their lot. Production ever becomes easier and more abundant, and the share they receive is continually augmented. From this "amelioration of the laborer's lot found in wages themselves and in the natural laws by which wages are regulated," Bastiat draws two conclusions and one corollary:

"1st. The laborer tends to rise to the rank of a capitalist and employer.
"2d. Wages tend to rise.

"Corollary — The transition from the state of a paid work­man to that of an employer becomes constantly less desirable and more easy."

According to Bastiat, the postponement of consumption is a service rendered by the capitalist, for which he deserves pay­ment or interest.2 It might be supposed, then, that capitalists would have ground for complaint, but this is not so. Harmony of interests is complete. Capitalists receive a smaller relative share of the produce, but a greater one absolutely, on account of the growth of capital. Bastiat illustrates this by letting the figures 1000, 2000, 3000, and 4000 represent the total production of society at different periods of time. The division between laborer and capitalist, he maintains, would take place in some­what the following manner: —

First Period – 1000 Total Produce – 500 Share Of Capital – 500 Share Of Labor
Second Period – 2000 Total Produce – 800 Share Of Capital – 1200 Share Of Labor
Third Period – 3000 Total Produce – 1050 Share Of Capital – 1950 Share Of Labor
Fourth Period - 4000 Total Produce – 1200 Share Of Capital – 2800 Share Of Labor

The share of the capitalist, it is seen, descends from 50 per cent to 40, 35, and 30 per cent, while that of the laborer rises from 50 per cent to 60, 65, and 70 per cent.

The proof that the relative share of capital decreases, Bastiat finds in the fact that the rate of interest continues to grow lower as society advances. On the other hand, the absolute share of capital must increase, because capitalists would destroy or consume a part of their capital if they could obtain more for a part than for the whole.

It does not appear to occur to Bastiat that the profits of capital may decrease because the aggregate product of labor and capital is less. Let the supposition be made that a given amount of capital and labor produce at one period 1000 and at a later one only 800. Let the share of capital in the first period be 500 and in the second 450. The absolute share of capital would then have decreased, while its share relatively to labor would have increased. This supposition is quite as possible as that made by Bastiat. It might be said that in the beginning of a society, the most productive employments of capital and labor were sought out, and that afterwards capital and labor were obliged to perform work which would formerly have been regarded as unprofitable. Bastiat makes no such supposition as this, nor will he allow the thought of it to enter his mind, because it would interfere with his presupposed harmony and divine order of affairs.

How marked the contrast between Bastiat's general scheme and Ricardo's! The latter believed that prices of raw materials and subsistence rise, and with them rents, this rise being, in a sense, at the expense of the other shares in distribution. But Bastiat, like Carey, maintained that the shares of both labor and capital (including land) increase, there being a more rapid increase in wages.