Spencer Heath Archive

Item 513

Pencil by Heath on small notepad paper

No date

A given enterprise typical or average:

Gross earnings of the enterprise distributable five ways:

1. Cost of past services, accumulated as capital (interest).
2. Cost of current services (wages and salaries)
3. Cost of public services (location rent)
4. The amount seized by public servants (?) exercising predatory political power (taxes)

5.  Balance, if any, to the owners of the enterprise, as recompense for their administrative services (profit)

Let the total gross receipts distributable as above be 1,000. The distribution may then be set up as follows:

1.	Interest	100
2.	Wages and salaries	400
3.	Ground rent	100
4.	Taxes	300
5.	Profit	100

                                 1000

The above does not list separately such items as insurance, transportation, traveling expenses, etc., because all such costs are paid for services etc. each of which is itself com­pounded of the five items listed above.

The particular allocations in the above list are only for the purpose of illustration. The proportions are extremely variable and no average is known. The item of Taxes (300), however is intended to include all the taxes that are laid on items 1, 2 and 5 (interest, wages and profits) and is believed to be approximately correct, as an average, since the total of all taxation, exclusive of taxes on rent (land value) is considered to be about thirty per cent of all income.

As affecting the proportion that each bears to the whole it is of signal importance to observe that items 1, 2 and 3 are each of them determined prior to distribution of gross income. These items are of a quantity predetermined to a definite rate or amount by the democracy of the open market which expresses the consent and agreement of all the parties concerned and which (significantly) also reflects all the disadvantages that the parties suffer from governmental re­straints and penalizations (taxation) in the exchanges of services that the market endeavors to carry on.

Item number 4 (Taxes), however is not fixed by any con­tract, consent or agreement but by the arbitrary will and power of the public servants (?) acting only within such limits as the population can be made to tolerate and endure without revolt, but always leading to revolution and the toleration of new masters (public servants) after most elec­tions and after each revolution.

Item 5 (Profit) also is to be distinguished from the first three items by the fact that although it is recompense for services — for services of a very high and necessary order and without which there could be no industrial organ­ization or cooperation — it is not fixed by any contract or agreement but is a pure residue remaining after all the items of cost and obligation have been met and taxation submitted to. It represents the value actually created by administrative services, performed by the owner or owners of the business, above the amount of their contractual obligations and the amount seized by public authority.

With this analysis of gross income distribution for any business some thought may be given to the legitimacy of the several items.

As to the first three, interest, wages, and rent, the fact that they are spontaneous and by consent of all parties, both as to their existence and also as to their rate and amount, should make every presumption in their favor. It is true that often it is difficult or impossible to make contracts on any but usurious terms. But the onus is not that men seek to make contracts to exchange their present and future goods and services with each other but that something prevents or restricts the doing of this. The essential to a contract is that there shall be certain goods or services, existing or to be brought into existence, which are called supply, and certain other goods or services, existing or to be brought into existence, that are called demand. Now, the failure or prospective failure of either supply or demand prevents or makes difficult either the forming of contracts or their performance when made. The difficulty or impossi­bility of forming contracts or of performing them when formed arises from failure or impairment of either those goods which constitute supply or of those which constitute demand. So an impairment of contract (prevention of trade) is due to some failure of goods or services to be produced in a primary sense or to be produced to that point where they can be exchanged for other goods or services (it being understood that money and credits are used merely as the accounts and measurements of the two sets of goods being exchanged).

Taking item 1, first services accumulated as capital, when the conduct of business by exchanges is penalized and restricted this inhibits the production of goods by the aid of past labor stored up in capital goods, so the goods that would pay for the use of capital goods are not brought into being. There is little production of the goods that constitute the demand for capital goods. There is said to be a surplus of capital, and interest, both as rate and quan­tity declines. The only corrective is that restrictions on production and exchange be lifted, so that there will be more demand for the use of capital goods. This will enable those who have accumulated instead of consuming the fruits of their best labors to use it or have it used productively by others, and they will draw interest out of the added productivity coming from the use of their saved wealth until such time as they may desire to convert it into consumers’ goods and use it themselves.

In contracts for the exchange of current services for stipulated wages or salaries the rate of work and pay is determined by the operation of the market upon consent of all the parties concerned, or, sometimes, by reference to the market when precise terms of employment have not been set previous to entering upon it. This market is biased by there being usually insufficient demand for laborers owing to many employers having been forced to limit or abandon their business by reason of their profits and properties being seized in taxation and also and for the same reason, there being many disemployed persons who, offering their services, constitute a relative over-supply of laborers in a market of under-demand for them.