Page:Progress and poverty - an inquiry into the cause of industrial depressions, and of increase of want with increase of wealth - the remedy (IA progresspovertyi00georiala).pdf/207

Chap. V. capital when it is in excess and giving it out again when there is a deficiency, just as a jeweler may give his wife diamonds to wear when he has a superabundant stock, and put them in his show-case again when his stock becomes reduced. Thus any tendency on the part of interest to rise above the equilibrium with wages must immediately beget not only a tendency to direct labor to the production of capital, but also the application of wealth to the uses of capital; while any tendency of wages to rise above the equilibrium with interest must in like manner beget not only a tendency to turn labor from the production of capital, but also to lessen the proportion of capital by diverting from a productive to a non-productive use some of the articles of wealth of which capital is composed.

To recapitulate: There is a certain relation or ratio between wages and interest, fixed by causes which, if not absolutely permanent, slowly change, at which enough labor will be turned into capital to supply the capital which, in the degree of knowledge, state of the arts, density of population, character of occupations, variety, extent and rapidity of exchanges, will be demanded for production, and this relation or ratio the interaction of labor and capital constantly maintains; hence interest must rise and fall with the rise and fall of wages.

To illustrate: The price of flour is determined by the price of wheat and cost of milling. The cost of milling varies slowly and but little, the difference being, even at long intervals, hardly perceptible; while the price of wheat varies frequently and largely. Hence we correctly say that the price of flour is governed by the price of wheat. Or, to put the proposition in the same form as the preceding: There is a certain relation or ratio between the value of wheat and the value of flour, fixed by the cost of milling, which relation or ratio the interaction between the demand for flour and the supply of wheat constantly maintains; hence the price of flour must rise and fall with the rise and fall of the price of wheat.

Or, as, leaving the connecting link, the price of wheat, to