The effect of a temporary rise of wages upon profits may be illustrated as follows: —

A manufacturer of kerseymeres is able to produce an article for one dollar per yard, for which he can get one dollar and twenty cents in the usual state of trade. A sudden rise of wages advances the cost to one dollar and ten cents. The result, under ordinary circumstances, will be that the manufacturer will not be able to obtain at once an advance equal to the enhanced cost. He will be fortunate if he can get one dollar and twenty-five cents for his goods, leaving him but fifteen cents profit. But, if the rise in wages holds on until the market has been cleared of the stock of goods on hand, the price will then be easily brought up to one dollar and thirty or one dollar and thirty-five cents.

But a rise of wages, especially if occasioned by an expansion of the currency, is sure to be followed by a corresponding decline when contraction takes place. The manufacturer will then gain the advantage he lost by the rise of wages. His goods will not fall at once as much as the fall in wages. This is the practical experience of business men; and they can safely calculate to gain as much on the one hand as they lost on the other. Wages, we have previously shown on page 258, fall faster than commodities. It is from the operation of this law that the entrepreneur gains in the Ml as much, ordinarily, as he lost in the rise of wages.

Dividends

A large share of the income received by owners of capital, at the present day, comes in the form of dividends on stock, held in corporations and joint-stock companies, formed for almost every conceivable purpose. The introduction of railroads has caused immense investments, the income from which is received in dividends. How are these to be classed? They cannot be regarded as synonymous with interest, or rent: they must be considered as profits. They are received for the profits of business done by proxy. The capitalist may not have the slightest agency in the affairs of the company from which he gets an income; still he is a partner, though a limited and silent one, and receives his share of the profits or loss.

It may be objected, that bank dividends must surely be classed with interest, since they are made up wholly of interest received for the loan of capital. This is not strictly correct. No inconsiderable share of profit to the banks of the United States is derived from the premiums charged for exchange. American banks are exchange-brokers. Besides, nearly one-half of all the income of mixed-currency banks is derived from the manufacture of currency, not the loaning of money or capital. Although the dividends of banks, of this kind, approach nearer to interest than those of ordinary business corporations, still they are most properly classed with profits.

Through associations, capital is largely connected with the industrial operations of the country, and shares directly in their prosperity or adversity. This result is in so far a favorable one, as it unites the interest of capital with the industry of the country.