The Daily News. FRIDAY, DECEMBER 2, 1921. AN ECONOMIC FALLACY.

Taranaki Daily News, 2 December 1921, Page 4

The Daily News. FRIDAY, DECEMBER 2, 1921. AN ECONOMIC FALLACY.

At a recent Workers’ shivoo at New Plymouth, held in honor of the waterside delegates who have been having sueh a strenuous time curing the past week of two ill solving the great problems before the count:--. the h.pe was expressed that the time would soon come when the workers would ‘ ‘ finally achieve working class emancipation, and own what they produced.” We ventured the opinion the other day that if some of them received all they earned they would be worse off than they are to-day. This remark, it must be clearly understood, applies only to a section, for the great bulk of working men, particularly in times like the present, give of their best and earn their money. But the section we allude to are those who make the most noise and do the least work, those who are protected by unionism and the preference given by the Arbitration Court awards. If it were possible to introduce a scheme of payment by results they would earn precious little. The idea is prevalent in the minds of many of the Labor extremists that the only section who are entitled to reward in industry and business are the manual workers. It is an entire fallacy. In a recent issue of the monthly circular of . the National City Bank of New York this phase of the economic problem is lucidly dealt with. The writer shows that the distribution of current production takes place according to natural economic laws. The production and distribution of wealth are not unchangeable; they are changing continually, but in accordance with economic law. In Russia an attempt has been made to increase the distribution of wealth Without regard to economic law, or the facts of human nature, with the result that industry has been paralysed, production has come almost to a standstill, and the nation has been reduced to beggary. The fallacies that are responsible for the tragedy in Russia permeate all of the theories which propose to improve the condition of the masses by a mere redistribution of the present industrial product. The fundamental fallacy in all of them is that, of laying the emphasis upon distribution instead of upon production. Another error is in enormously exaggerating what might be done for the masses by seizing the incomes of the rich. In the first place the masses now get so large a share of all that is produced that if it was possible for them to get all the rest it would make no great change in their condition; and in the second place every attempt to seize the rest by arbitrary methods causes it to disappear, as it has in Russia. The fallacy is, in thinking that the leaders and managers of industry and business are not worth as much as they get, whereas every experiment in getting along without them shows that they are worth a great deal more than they get. Everything goes to pieces without them. This does not, of course, mean that the individuals now holding positions of leadership and management are all indispensable. If they should all pass away, others would be found to take their places, but there must be leadership and recognr tion of ability and reward for ini tiative and service, or society goes to pieces. Even the labor organizations find it necessary to have leaders, and pay them salaries much in excess of the average earnings of the members. Professor David Friday, who teaches political economy in the University of Michigan, has made a study of corporate incomes in the United States during the war period, when profits are supposed to have been larger than ever before. He found that 1917 was the year of largest profits, and that the combined earnings or proceeds of the manufacturing, mining, railroad, and public utility industries m that year were divided as follows: Dollars. Per cent. Wases & salaries 11.100,000,000 54.3 Taxes K 2,360,000,000 11.0 Interest 1 1'50.000.000 0.8 Dividends .. . 3,070,000,000 15.1 Surplus 2,731.000.000 13.4 Total .... 20,4il 000,000 100. I The total paid in interest and | dividends was 20.8 per cent, of j the values created. That is what Sffent dis compensation to the peo-

pie who provided the capital employed in these industries. It did not all go to rich people. The interest payments went for borrowed money, and many of the securities of these corporations are own ed by savings banks, insurance companies,, employees and small investors. The “surplus” is not pefsonal income, but a part of the earnings retained in the business It may never be drawn out; it may be lost, but while it exists as surplus it is being used to enlarge the business, increase the product, and afford employment to more labor. As long as it is so employed it is a common fund, rendering service to the employees and the public as well as to the owners. The figures for “surplus” increased while prices were rising and diminished when prices began to fall.