Page:Progress and Poverty.pdf/39

 the ordinary bank rate of interest, was twenty-four per cent. per annum. Now that common wages are $2 or $2.50 a day, the ordinary bank rate is from ten to twelve per cent.

Now, this broad, general fact, that wages are higher in new countries, where capital is relatively scarce, than in old countries, where capital is relatively abundant, is too glaring to be ignored. And although very lightly touched upon, it is noticed by the expounders of the current political economy. The manner in which it is noticed proves what I say, that it is utterly inconsistent with the accepted theory of wages. For in explaining it such writers as Mill, Fawcett, and Price virtually give up the theory of wages upon which, in the same treatises, they formally insist. Though they declare that wages are fixed by the ratio between capital and laborers, they explain the higher wages and interest of new countries by the greater relative production of wealth. I shall hereafter show that this is not the fact, but that, on the contrary, the production of wealth is relatively larger in old and densely populated countries than in new and sparsely populated countries. But at present I merely wish to point out the inconsistency. For to say that the higher wages of new countries are due to greater proportionate production, is clearly to make the ratio with production, and not the ratio with capital, the determinator of wages.

Though this inconsistency does not seem to have been perceived by the class of writers to whom I refer, it has been noticed by one of the most logical of the expounders of the current political economy. Professor Cairnes endeavors in a very ingenious way to reconcile the fact with the theory, by assuming that in new countries,