• The Genesis of Wealth

    Epigraphs to Book II

    Definitions are the basis of systematic reasoning.

    -- Aristotle

    The mixture of those things by speech which are by nature divided is the mother of all error.

    -- Hooker

    Bacon made us sensible of the emptiness of the Aristotelian philosophy; Smith, in like manner, caused us to perceive the fallaciousness of all the previous systems of political economy; but the latter no more raised the superstructure of this science, than the former created logic.... We are, however, not yet in possession of an established text-book on the science of political economy, in which the fruits of an enlarged and accurate observation are referred to general principles that can be admitted by every reflecting mind; a work in which these results are so complete and well arranged as to afford to each other mutual support, and that many everywhere and at all times be studied with advantage.

    -- J.B. Say, 1803

    We may cite as examples of such inchoate but yet incomplete discoveries the great Wealth of Nations by Adam Smith -- a work which still stands out, and will ever stand out, as that of a pioneer, and the only book on political economy which displays its genius to every kind of intelligent reader. But among the specialists and the schools, this work of genius which swayed all Europe in its day, is laid upon the shelf as an antiquated affair, superseded by the smaller and duller men who have pulled his system to pieces and are offering us the fragments as a science most of whose first principles are still under dispute.

    -- Professor (Greek) J.P. Mahaffy, "The Present Position of Egyptology," "Nineteenth Century," August, 1894.

    Putting this book online was underwritten by The Robert Schalkenbach Foundation, publisher of Henry George's works.

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    Henry George
    The Science of Political Economy
    Book II, The Nature of Wealth

    Chapter XVI
    The Genesis of Wealth

    Showing How Wealth Originates and What It Essentially Is

    Reason of this inquiry -- Wealth proceeds from exertion prompted by desire, but all exertion does not result in wealth -- Simple examples of action, and of action resulting in wealth -- "Riding and tying" -- Sub-divisions of effort resulting in increments of wealth -- Wealth essentially a stored and transferable service -- Of transferable service -- The action of reason as natural, though not as certain and quick as that of instinct -- Wealth is service impressed on matter -- Must be objective and have tangible form

    It is so all-important that we should know precisely and certainly just what the chief factor of political economy, wealth, is, so that we may hereafter be in no doubt whatever about it but may confidently reason from our knowledge of its nature, that I propose to reinforce all that has been said by showing just how wealth originates and what in essence it actually is.


    Wealth is a result of human exertion. But all human exertion does not result in wealth. Not merely is there failure and misadventure in the application of effort to the production of wealth, but the production of wealth is not the only purpose of human effort.


    All human actions proceed from desire and have their aim and end in the satisfaction of desire. But if we consider those actions of men which aim at material satisfactions, we see that there is a distinction as to the way in which satisfaction is sought. In some the satisfaction sought is direct and immediate. In others it is indirect and delayed.


    To put myself in imagination in the position of my most remote ancestor: I am moved by the desire we call hunger or appetite, or it is aroused in me by the sight of a tree laden with fruit. I pluck and eat the fruit, and am satisfied. Or I feel the desire called thirst, and stooping down to a spring, I drink, and am again satisfied. Action and satisfaction are in such cases confined to the same person, and the connection between them is direct and immediate.


    Or, my wife is with me. She feels the same desires; but is not tall enough to pluck the fruit and cannot as well climb a tree or so readily stoop to the spring. So, impelled by that primordial impulse that ordains that the desire of the man shall be to the woman no less than the desire of the woman to the man, I pluck fruit that she may eat, and hollowing my hands give her to drink. In this case the action is on the part of one person; the satisfaction proceeding from the action is obtained by another.* This transfer of the direct result of action we speak of as a service rendered and received. But the connection between action and satisfaction is still direct and immediate, the causal relation between the two having no intermediate link.


    These two examples are types of the ways in which many of our actions attain satisfaction. These are the ways in which in nearly all cases the animals satisfy their desires. If we except the storing and hiving animals, and the almost accidental cases in which a predatory animal kills a victim too large to be consumed at once, there is nothing in their actions which goes beyond the direct and immediate satisfaction of desire. The cow that has browsed all day or the bird that has brought worms to her young has done nothing towards the satisfaction of desire that will recur to-morrow.


    In such cases there is no suggestion of anything we would call wealth. And in a world where all human desires were satisfied in this direct and immediate way there would be no wealth, no matter how great the activities of man or how abundant the spontaneous offerings of nature for the satisfaction of his desires.


    But man is a reasoning being, who looks beyond the immediate prompting of desire, and who adapts means to ends. An animal would merely eat of the fruit or drink of the spring to the full satisfaction of present desire. But the man bethinking himself of the recurrence of desire might, after satisfying his immediate desire, carry off with him some of the fruit to insure a like satisfaction on the morrow, or with a still longer prevision plant its kernel with a view to satisfaction in future years. Or with a view to the future satisfaction of thirst, he might enlarge the spring or scoop out a vessel in which to carry water, or dig a channel or construct a pipe. In such cases action would be spent not in the direct and immediate satisfaction of desire, but in the doing of what might indirectly and in the future aid in satisfying desire.


    In these cases is something which did not exist in the previous cases, and which, save among the storing animals, has nothing analogous to it in animal life.** This something is wealth. It consists of natural substances or products, so changed in place, form or combination by the exertion of human labor as better to fit them for the satisfaction of human desires.


    The essential character of wealth is that of the embodiment or storage in material form of action aiming at the satisfaction of desire, so that this action obtains a certain permanence -- a capability of remaining for a time as at a stopping -- place, whence it may be taken, either to yield satisfaction to desire, or to be carried forward towards the satisfaction of desire requiring yet more effort.


    Where two men wishing to travel over a determined road have between them but one horse, they frequently "ride and tie." That is, John rides forward for a certain space, leaving Jim to follow on foot. He then ties the horse, pushing forward himself on foot. When Jim comes up, he unties the horse, and in his turn rides forward for some distance past John, and then tying the horse again for John to take, pushes forward. And so on to the journey's end. In this tying of the horse, so that he may be taken and ridden forward again, is something analogous to the way in which effort towards the satisfaction of desire is fixed or tied up in wealth, from which it may be taken for the gratification of desire, or for the purpose of being carried forward by additional effort to a point where it may serve to gratify desires requiring larger effort.


    Thus, for the satisfaction of desire by the eating of bread, effort must first be expended to grow the grain; then to harvest it; then to grind it into flour; then to bake the flour into bread. At each of these stages (and they may be sub-divided) there is an increment of wealth: that is to say, some part of the effort required to reach the point of yielding the final satisfaction has been accomplished, and is tied or stored in concrete form, so that what has been gained towards the final result may be utilized in the remaining stages of the process. Grain is an article of wealth expressing the effort necessary in growing and harvesting, in such form that it may be from thence carried forward to the satisfaction of desire, either by feeding it to domestic animals, converting it into starch or alcohol, etc., or by turning it into flour and making bread. Flour again is an article of wealth embodying the effort necessary to the production of grain and the further effort required in grinding; and bread an article of wealth embodying that and the additional effort required in baking, in a form in which consumption (in this case eating) will give the satisfaction to desire of which bread is capable.


    The idea of wealth cannot be reduced to that of satisfaction, since, even when the intent and the result of the effort is the satisfaction of a desire on the part of the expender of the effort, there is necessarily an intermediate step, in which the expended effort pauses or is stored up for an interval in concrete form, and whence it may be released not merely to satisfy the desire of the expender of the effort, but that of another as well. If I pluck fruit today for the satisfaction of tomorrow's appetite, the satisfaction I then obtain when eating it would not be to me then the direct result of an effort, but would yield me satisfaction as the result of a service -- a service of which I myself would be the direct beneficiary, but still no less truly a service than it would be in the case of my wife were she the recipient of the satisfaction obtained by eating it.


    Thus if we wish to bring the idea of wealth into a larger generalization, the term of widest inclusiveness that we could select would be a word which would express the idea of service without limitation as to mode. The essential idea of wealth is really that of service embodied in material form, and all our enjoying of wealth, or exchanging of wealth, or giving of wealth, or obtaining of wealth, is really at bottom the enjoying or exchanging or giving or obtaining of service, a word which involves the possibility of distinction in person between the exertor of effort and the recipient of the final satisfaction, which is its aim.


    Service of some sort is essential to life, as it may well be doubted if even in what the microscope may show us of the lowest rounds of life's ladder there is anything that comes into life and maintains life self-contained and self-sufficing.


    But the first and simplest form of service, that in which the recipient gets directly the satisfaction brought about by the action (and to which for the sake of distinction the term service should be reserved), though it is capable of being given, received and exchanged, is so capable only within very narrow limits, since the action is spent in such direct service and is over and done, whereas in action resulting in wealth the action is not spent, but is stored or tied in intermediate and material form, to be spent in gratification when required. In direct service the power of human action to satisfy human desire is like the exertion of the power of electricity in the lightning-flash or the spark of the Leyden jar. But in indirect service, through the medium of wealth, the action remains unused for a time in readily exchangeable form, whence it may be called forth for use, as the power of electricity remains in transportable and exchangeable form in the storage battery. So narrow indeed are the limits to the exchange of direct service for direct service that though this sometimes takes place even in our highest civilization, it is clear that were it the only mode in which the action of one person could be used in procuring satisfaction to another, nothing like what we call civilization could exist, nor indeed do I think that human life, in any stage in which we know it, could continue.


    I may black your boots with the understanding that you shall in return shave my face, or gratify you by telling a story on condition that you shall gratify me by singing a song, and the possibilities of such exchange may be somewhat widened by the understanding that though I black your boots or tell you the story today, you may give me the shave or sing the song at a future time, and do this either for me or for any one whom I may present to receive in my place the promised service. But manifestly the exchange of services that may take place in that way is as nothing compared with the exchange that becomes possible when service is embodied in concrete form in wealth and may be passed from hand to hand and used at will in the satisfaction of desire.


    By this transmutation of labor into wealth the exchange even of such services as cannot be transmuted into wealth, since they must be rendered directly to the person, is much facilitated. I desire, for instance, such service from another as the carrying of a bag or message, or the conveyance of myself and luggage from one place to another by cab, or stage, or train. There is no equivalent service on my part desired by those for whose services I wish, nor if there was could I stop to render it; but by the intervention of wealth the satisfaction of desire on both sides becomes possible, and the exchange is completed there and then; those from whom I obtain the service receiving from me some article of wealth or representative of wealth which they can in turn exchange either for wealth or for direct services from others. It is thus, and only thus, that the great body of exchanges of direct services that take place in civilization becomes possible. Indeed, without wealth it is difficult to see how men could avail themselves of one another's powers to a much greater extent than do the animals; for that some animals exchange services, whoever has watched monkeys reciprocally ridding each other of fleas must have realized. Wealth is produced by man and consequently there could be no wealth in the world until after man came, just as bees must have preceded the honey which they make. But though man has no wealth-making instinct as the bees have a honey-making instinct, yet reason supplies its place, and man produces wealth just as naturally and certainly as the bees make honey -- so naturally and so certainly that save in unnatural and temporary conditions, men destitute of all forms of wealth have never been found.


    The essential idea of wealth being that of exertion impressed on matter, or the power of rendering service stored in concrete form, to talk of immaterial wealth as some professed economists now talk, is as much a contradiction in terms as it would be to talk of square circles or triangular squares. Nothing can be really an object of wealth that is not tangible to the senses. Nor in the strict sense of the term, can wealth include any natural substance, or form, or power, unmodified by man's exertion, nor any human power or capacity of exertion. To talk of natural wealth, or to talk of human skill, knowledge or energy as included in wealth is also a contradiction in terms.

    * There is of course on my part both a desire and a satisfaction -- a desire that her desires may be satisfied and a satisfaction when they are satisfied. But these are secondary, the primary end and aim of my action being the satisfaction of her desires.

    ** Book 1, Chapter 2, paragraphs 9-12

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