relevant to the discovery, training, equipment and success of 'natural ability', set up a series of almost impenetrable barriers to the free flow of natural ability throughout the industrial system, and give rise to an elaborate hierarchy of restricted employments where the rates of remuneration represent, not any inherent services of ability, but the degree of the restriction in relation to the importance of the work.All such advantages of opportunity are reflected in rates of payment for 'ability' which carry elements of 'surplus.' Though some portion of the higher remuneration paid to successful professional workers may be regarded as interest upon the capital-outlay of their education and training, there is no reason to hold that the extra payment is adjusted to the costs of this outlay.Still less can any such argument avail in the case of high business profits.Though ability and expensive training may be favouring conditions to such financial success, restricted competition must be accounted the principal direct determinant of all such extra payments.
§14.There remains one final demurrer to our doctrine of the unproductive 'surplus'.If you take into consideration, it is urged, all the unsuccessful as well as the successful businesses, you will find that the average return for capital and for business ability is low enough, not in fact more than represents a bare 'costs' economy.Similarly with the high incomes earned by the few successful men in the professions and in other walks of life.
Set the failures fairly against the successes and there is no net 'surplus'
to take account of.
But this contention is one more abuse of the method of averages.To the charge that one man is overpaid, it is no answer that another is underpaid.
To the statement that surplus emerges in the payment for some orders of capital or ability it is no answer to say that other capital and ability does not even get its true 'costs' or subsistence wages.The force of this rebuttal is still further strengthened when it is realised to what extent the success of those who succeed is directly responsible for the failure of those who fail.For the economic strength of those whose superior advantages have secured for them a position of control will necessarily operate to make the competition of outsiders difficult and their failure probable.
Indeed, a portion of the gains which combination yields will often be consciously applied to kill the competition of outsiders, or to restrict their trade to the less profitable or the more precarious forms of enterprise.But even where this business policy is not adopted, the very fact that strong firms and 'combines' control many markets, must, by limiting the area of free competition, intensify the competition within that area and so cause the failures to be numerous.
The contention, that the excessive profits of successful firms are balanced and in some way cancelled by the losses of those that fail, is also contradicted by the psychology of the case.If it could be shown that the chance of winning these high gains was in fact a necessary inducement to the winners to stake their capital and business capacity in an inherently risky line of enterprise, there might be some force in this plea.But to the men who achieve these successes business is not a simple game of hazard in which they have merely the same chance as the others.Success is commonly achieved by force, strategy and the possession of known advantages, and is used to strengthen these advantages and so to increase continuously the 'pull' by which they accumulate their gains and ruin their would-be competitors.Although tight forms of monopoly are very rare, loose or partial restrictions upon competition are very numerous and often very profitable.
All these extra gains, issuing from various forms of natural or contrived scarcity in all sorts of industries, are rightly classed as unproductive surplus.Many of them are as constant and as certain as the economic rents of land, arise in the same way from a limitation of some productive factor, and are 'unearned' income in the same sense of that term.Other of these gains are more fluctuating, proceeding from less stable forms of privilege or combination, but while they exist they equally belong to unproductive 'surplus.'8§15.The distinction between that portion of the social income which goes as necessary payments to support and evoke the energies of body and mind of wealth-producers, i.e., costs of production, and that which goes as unproductive 'surplus' to those who, possessing some necessary instrument of production that is relatively scarce, can exact a scarcity price, is fundamental in a valuation of industry.For this surplus not only represents sheer economic waste, regarded from the social standpoint, but it can be shown to be directly responsible, as an efficient cause, for most of those particular maladies in our current processes of production and consumption which impede the economic and the human progress of the nation.
