§ 6. Thus far, we have, through this discussion, proceeded on the supposition that competition is free, so far as regards human interference; being limited only by natural causes, or by the unintended effect of general social circumstances. But law or custom may interfere to limit competition. If apprentice laws, or the regulations of corporate bodies, make the access to a particular employment slow, costly, or difficult, the wages of that employment may be kept much above their natural proportion to the wages of common labor. They might be so kept without any assignable limit, were it not that wages which exceed the usual rate require corresponding prices, and that there is a limit to the price at which even a restricted number of producers can dispose of all they produce. In most civilized countries, the restrictions of this kind which once existed have been either abolished or very much relaxed, and will, no doubt, soon disappear entirely. In some trades, however, and to some extent, the combinations of workmen produce a similar effect. Those combinations always fail to uphold wages at an artificial rate, unless they also limit the number of competitors. But they do occasionally succeed in accomplishing this. In several trades the workmen have been able to make it almost impracticable for strangers to obtain admission either as journeymen or as apprentices, except in limited numbers, and under such restrictions as they choose to impose. It was given in evidence to the Hand-loom Weavers Commission, that this is one of the hardships which aggravate the grievous condition of that depressed class. Their own employment is overstocked and almost ruined; but there are many other trades which it would not be difficult for them to learn: to this, however, the combinations of workmen in those other trades are said to interpose an obstacle hitherto insurmountable.

Notwithstanding, however, the cruel manner in which the exclusive principle of these combinations operates in a case of this peculiar nature, the question, whether they are on the whole more useful or mischievous, requires to be decided on an enlarged consideration of consequences, among which such a fact as this is not one of the most important items. Putting aside the atrocities sometimes committed by workmen in the way of personal outrage or intimidation, which cannot be too rigidly repressed; if the present state of the general habits of the people were to remain forever unimproved, these partial

combinations, in so far as they do succeed in keeping up the wages of any trade by limiting its numbers, might be looked upon as simply intrenching round a particular spot against the inroads of over-population, and making the wages of the class depend upon their own rate of increase, instead of depending on that of a more reckless and improvident class than themselves. What at first sight seems the injustice of excluding the more numerous body from sharing the gains of a comparatively few, disappears when we consider that by being admitted, they would not be made better off, for more than a short time; the only permanent effect which their admission would produce, would be to lower the others to their own level. To what extent the force of this consideration is annulled when a tendency commences towards diminished over-crowding in the laboring classes generally, and what grounds of a different nature there may be for regarding the existence of trade combinations as rather to be desired than deprecated, will be considered in a subsequent chapter of this work, with the subject of Combination Laws.

§ 7. To conclude this subject, I must repeat an observation' already made, that there are kinds of labor of which the wages are fixed by custom, and not by competition. Such are the fees or charges of professional persons: of physicians, surgeons, barristers, and even attorneys. These, as a general rule, do not vary, and though competition operates upon those classes as much as upon any others, it is by dividing the business, not, in general, by diminishing the rate at which it is paid. The cause of this, perhaps, has been the prevalence of an opinion that such persons are more trustworthy if paid highly in proportion to the work they perform; insomuch that if a lawyer or a physician offered his services at less than the ordinary rate, instead of gaining more practice, he would probably lose that which he already had. For analogous reasons it is usual to pay greatly beyond the market price of their labor, all persons in whom the employer wishes to place peculiar trust, or from whom he requires something besides their mere services. For example, most persons who can afford it, pay to their domestic servants higher wages than would purchase in the market the labor of persons fully as competent to the work required. They do this, not merely from ostentation, but also from more reasonable motives; either because they desire that

those they employ should serve them cheerfully, and be anxious to remain in their service; or because they do not like to drive a hard bargain with people whom they are in constant intercourse with; or because they dislike to have near their persons, and continually in their sight, people with the appearance and habits which are the usual accompaniments of a mean remuneration. Similar feelings operate in the minds of persons in business, with respect to their clerks and other employees. Liberality, generosity, and the credit of the employer, are motives which, to whatever extent they operate, preclude taking the utmost advantage of competition: and doubtless such motives might, and even now do, operate on employers of labor in all the great departments of industry; and most desirable is it that they should. But they can never raise the average wages of labor beyond the ratio of population to capital. By giving more to each person employed, they limit the power of giving employment to numbers; and however excellent their moral effect, they do little good economically, unless the pauperism of those who are shut out, leads indirectly to a readjustment by means of an increased restraint on population.

Chapter XV.-Of Profits

§ 1. Having treated of the laborer's share of the produce, we next proceed to the share of the capitalist; the profits of capital or stock; the gains of the person who advances the expenses of production-who, from funds in his possession, pays the wages of the laborers, or supports them during the work; who supplies the requisite buildings, materials, and tools or machinery; and to whom, by the usual terms of the contract, the produce belongs, to be disposed of at his pleasure. After indemnifying him for his outlay, there commonly remains a surplus, which is his profit; the net income from his capital: the amount which he can afford to expend in necessaries or pleasures, or from which by further saving he can add to his wealth.

As the wages of the laborer are the remuneration of labor, so the profits of the capitalist are properly, according to Mr. Senior's well-chosen expression, the remuneration of abstinence. They are what he gains by forbearing to consume his capital for his own uses, and allowing it to be consumed by productive laborers for their uses. For this forbearance he re

quires a recompense. Very often in personal enjoyment he would be a gainer by squandering his capital, the capital amounting to more than the sum of the profits which it will yield during the years he can expect to live. But while he retains it undiminished, he has always the power of consuming it if he wishes or needs; he can bestow it upon others at his death; and in the meantime he derives from it an income, which he can without impoverishment apply to the satisfaction of his own wants or inclinations.

Of the gains, however, which the possession of a capital enables a person to make, a part only is properly an equivalent for the use of the capital itself; namely, as much as a solvent. person would be willing to pay for the loan of it. This, which as everybody knows is called interest, is all that a person is enabled to get by merely abstaining from the immediate consumption of his capital, and allowing it to be used for productive purposes by others. The remuneration which is obtained in any country for mere abstinence, is measured by the current rate of interest on the best security; such security as precludes any appreciable chance of losing the principal. What a person expects to gain, who superintends the employment of his own capital, is always more, and generally much more, than this. The rate of profit greatly exceeds the rate of interest. The surplus is partly compensation for risk. By lending his capital, on unexceptionable security, he runs little or no risk. But if he embarks in business on his own account, he always exposes his capital to some, and in many cases to very great, danger of partial or total loss. For this danger he must be compensated, otherwise he will not incur it. He must likewise be remunerated for the devotion of his time and labor. Thei control of the operations of industry usually belongs to the person who supplies the whole or the greatest part of the funds by which they are carried on, and who, according to the ordinary arrangement, is either alone interested, or is the person most interested (at least directly), in the result. To exercise. this control with efficiency, if the concern is large and complicated, requires great assiduity, and often, no ordinary skill. This assiduity and skill must be remunerated.

The gross profits from capital, the gains returned to those who supply the funds for production, must suffice for these three purposes. They must afford a sufficient equivalent for

abstinence, indemnity for risk, and remuneration for the labor and skill required for superintendence. These different compensations may be either paid to the same, or to different persons. The capital, or some part of it, may be borrowed: may belong to someone who does not undertake the risks or the trouble of business. In that case, the lender, or owner, is the person who practices the abstinence; and is remunerated for it by the interest paid to him, while the difference between the interest and the gross profit remunerates the exertions and risks of the undertaker.* Sometimes, again, the capital, or a part of it, is supplied by what is called a sleeping partner; who shares the risks of the employment, but not the trouble, and who, in consideration of those risks, receives not a mere interest, but a stipulated share of the gross profits. Sometimes the capital is supplied and the risk incurred by one person, and the business carried on exclusively in his name, while the trouble of management is made over to another, who is engaged for that purpose at a fixed salary. Management, however, by hired servants, who have no interest in the result but that of preserving their salaries, is proverbially inefficient, unless they act under the inspecting eye, if not the controlling hand, of the person chiefly interested: and prudence almost always recommends giving to a manager not thus controlled, a remuneration partly dependent on the profits; which virtually reduces the case to that of a sleeping partner. Or finally, the same person may own the capital, and conduct the business; adding, if he will and can, to the management of his own capital, that of as much more as the owners may be willing to trust him with. But under any and all of these arrangements, the same three things require their remuneration, and must obtain it from the gross profit: abstinence, risk, exertion. And the three parts into which profit may be considered as resolving itself, may be described respectively as interest, insurance, and wages of superintendence.

§ 2. The lowest rate of profit which can permanently exist, is that which is barely adequate, at the given place and time, to afford an equivalent for the abstinence, risk, and exertion implied in the employment of capital. From the gross profit, has first to be deducted as much as will form a fund sufficient on

It is to be regretted that this word, in this sense, is not familiar to an English ear. French political economists

enjoy a great advantage in being able to speak currently of les profits de l'entrepreneur.