The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-01-28
THE LAW OF PROFITS.
IAr. Rawie Thinks 1t Must BE Consid.
cred I'm Treating of Finance.

To the Editor of the Indianapolis Journal:
permanent solution of the financial
question requires that it be done in con-
formity to the law of profits. The tre-
mendous fall in the value of property of
many kinds was preceded by a decline in
profits. Values bear relation to profits of
about 20 to 1 on the average-that is to say,
average values in this country on
per cent basis. A decline of Prifits of one
point means a decline of values OF twenty
points. The relation, therefore, of profits
to values depending upon them is the all
important relation, and the cause of de-
cline in profits is the all-important cause.
The Rcardian theory makes profits the
leavings of wages, meaning that fall in
price must first cut into profits, and that
wages can suffer only when profits fail be-
low. the average. When profits are too low
production ceases. That theory gives the
fact of the relation that profits bear to
wages there is little room for doubt. but
it does not rise to the dignity of law.
Ricardo does not take causes into account
and explain in a satisfactory way the neces-
sary variation of profits. Some industries,
in order to maintain themselves require a
Values which require a high rate of profit
do not decline as rapidly nor as far as they
do where rates of profit are lower When
values and profits as five to one, on
a. twenty per cent. basis, profits must lose
four points before values VIII decline as
at per cent. basis. We know that rates
of profit vary with the quantity and stability
values are great in quantity and have great
stability. Higher rates are required where
values are small and unstable. To draw
tons to tse a fe apped ae
rated wages, profits and rents from
wealth; next capital was separated from
al1tn and n x,f1 od into 6val
cuating capital Instead of this division of
value. clearing the ground it merely CLASH
fled the facts and left fundamental princi-
pies as remote as ever. Let us try and clear
the ground of some of this surplus VERDI
age and see if we cannot lay hold of funda-
mentals and keep to them Let us consider
value in the relation of it's development 1t
is self-evident that values which are vari-
able in quantity and unstable are values of
primary production. This includes not only
agricultural products of simple societies.
complex societies as well. Each class of
products bears similar relation in the So
ciety in which they are produced-that is
some other values which they sus-
tain Primary value is, then, the first in
Weud ncede ali that Rearao includes and id
wages, in profits, in rents and in circulate
ing capital; 1t is a fact, beyond question,
we'll to society as to physics. We know
that the secondary develops or evolves
from the primary, that the compound is
is next, therefore, ir. order of develop
ment. Secondary values are distinguished
simple. Secondary values are those of
greater quantity, greater stability and
greater complexity than primary values.
The law of development IS this: AS prinl-
airy values increase In quantity secondary
values develop; as primary values continue
in quantity secondary values will develop
in stability. We now come to the law Of
profits naturally and without beating about
the bush. Profits vary the quantity
n siryrf n iy,,sr,
ishing as quantity. and stability of value
profits lis. therefore. the relation of
primary values to secondary values. The
rate of profit is the speed with which pri-
mary values become secondary values. The
most stable values have the lowest rate of
Profit and require the longest time to con-
dense value. What has all this to do with
the money question? you may ask. 1t has
much to do with ii. The finance question
is a question of money and securities, and
ties bear the same relation to each other
that primary and secondary values bear
Money is to primary va lues what securities
are to secondary values. Money holds pri-
mary value in transit from value in one
thing to a value in another. Securities
hold, or contain, secondary values in the
depend upon the quantity and stability of
secondary value for which it may be ex-
changed, or into which it may be converted
The most stable values are those that bear
the lowest rate of profit Government bonds
of a low rate of interest are the ideal secllr-
ity, and a full legal tender convertible into
them would give us the ideal currency A
discussion of gold would require too much
space, but the greatest danger that con-
fronts the financial world is a gold crisis
that will follow as sure as ni.ht follows
day. Gold will some day, not far Gfstant
follow the lead of silver. and in spite of ali
our laws VIII lose most of its value without
giving us warning. HENRY RAWIE
Anderson Ind, Jan. &c.