IF we keep to our division of the economic instruments of Production into the powers of Nature and the powers of Man respectively, and if we assign their products to Rent, Profits, and Wages, and then consider how these products tend to distribute themselves among the individual landlords, capitalists, and wage-earners respectively, the most casual inspection will show that they everywhere tend to inequality, and not as the orthodox economists contend to equality; as indeed the unequal fortunes of individual men in every class of a community where freedom of contract prevails, gives proof. Rent, of course, is with them an admitted exception to their general doctrine of the tendency of economic things to equality; the incomes received from land being palpably as unequal as are the respective degrees of fertility of its different units of soil, their distance from central markets, the facilities for transport of the product, the size of holdings, their intensive cultivation, and the extent to which the large holdings will permit of the application of labour-saving machinery with its reduction of working costs, and so on. But it is precisely the same with Profits as with Rent, as will be apparent on a moment's consideration.

For Profits depend not on a different but on precisely the same class of considerations, namely on the difference between rival manufacturers of the same class of goods in respect to the relative powers of their instruments of production to reduce costs; - as, for example, on the superiority of the machinery used by one manufacturer over another (especially when it is protected by patents), the access to central markets through the facility of transport which relative advantages of situation give them, their proximity to the sources of raw material, the differential advantages in the matter of cheap motor-power, and above all the saving in costs of all kinds which huge capitals concentrated in single hands in favoured localities make possible - capitals which in themselves form monopolies as strongly entrenched almost as natural ones. To these may be added the cumulative effects of the 'goodwil' which comes from the reputation of old-established firms, of trade-marks, etc., as well as the effects on the imaginations of men of advertising on the great scale, and so on. Each and all of these factors, it is obvious, must make steadily for inequality of profits, and must operate as effectually between nation and nation as between the different individuals or trades in the same nation.

And the question we have now to ask is; - what are the special considerations which have made the orthodox economists believe that Profits tend to equality, when they so obviously if left alone tend steadily and cumulatively to inequality. They are mainly, I think reducible to four: -

1. The neglect of the principle of Combination, which as we have seen is as much an element in freedom of contract and laissez-faire as is the principle of Competition.

2. The illusion of keeping their eye on the dead products of industry, instead of on the instruments of production from which they proceed, and on the actual game which is being played by the capitalists themselves who own these instruments.

3. The neglect of what we may here call the incidence of Power, or, in other words, of the political or other forces in connection with which the wheel of wealth functions, and which in one form or another always make themselves felt in the distribution of wealth.

4. The old illusion of the divided stick, which is the symbol, as we have seen, lying at the base of all the doctrines of the orthodox schools.

To begin, then, with farmers' profits. These undoubtedly tend to equality, but that is because the landlords stand by with their shears ready to crop off all excess over the accepted standard as rent, and so force profits to an unnatural appearance of equality by what is in its essence as much a tax as any income tax can be; as indeed would be manifest at once if we imagine the landlords' rents removed, when the profits per unit of land occupied (which is the essence of the problem) would be found to be as unequal as the qualities of the soil, or the hills and dales of the landscape.

But it is the profits from manufactures and other industries with which we are mainly concerned, for it is these on which the landlords are supposed to keep their eye when determining how much profit they will allow the farmers before applying their shears in shaving off any excess as rent. Now what the orthodox economists contend in discussing the tendency of profits to an equality in agriculture and manufactures respectively is, that were the landlords to cut down the farmers' profits below this rate, capital would leave the land, to be invested in manufactures. On the other hand, were the landlords disposed to allow the farmers more than the rate current in manufactures, capital would compete for land and be driven away from manufactures until the rates in both were reduced to an equality again. This is the theory, and we will return to its implications later on in this chapter. In the meantime if we examine the considerations which have made the orthodox economists believe that the profits of different manufactures naturally tend to equality, in spite of the fact that the instruments of production from which these profits proceed are of all degrees of inequality in power, - and therefore in the scale of costs at which they can turn out their products, - we shall find that they all conspire in their various ways to produce an illusion of equality.

The first is that all articles or commodities of the same quality and kind fetch an equal price in the great wholesale markets of the world, whether made by hand or by machinery, whether carried overland in carts or by railroads, canals, or ocean steamers, whether grown on old and exhausted or on rich and virgin soils. This may seem a small matter in itself and scarcely worth mentioning, but taken with other impressions pointing the same way it has its effect notwithstanding. The second is the tendency to imagine that because the interest on capital in the abstract, or in other words on floating capital, or money, tends to a general level of equality in any particular nation, that therefore the profits of capital in the concrete, that is to say of money invested in this or that productive industrial undertaking, must tend to equality also. But is it not the accepted doctrine of the orthodox economy that profits are made up of the 'wages of superintendence' and of 'risks' as well as of interest? And if so, and if wages of superintendence are as unequal as are the different abilities and responsibilities of men in the same line of work; and if risks are as unequal as are the different undertakings in which men hazard their capital; how can profits tend to equality? On the contrary they must be as unequal as one field is unequal to another in fertility, or one mine to another in yield on an equal outlay of costs.