<h2>CHAPTER 11</h2>
<h3>REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH: RELATION TO ITS SALE AND RENT</h3>
<h4>§ I. REPAIR OF RENT-BEARING AGENTS</h4>
<div class="sidenote">The necessity of repairing nearly all economic agents</div>
<p>1. <i>The continued rent of indirect agents is dependent on the continual
repair of certain parts necessary for their efficiency.</i> All earthly
things wear out or decay. Whenever man's hand is withheld, nature takes
possession of his work, regardless of his purposes. Dust gathers on
unused clothes, and moths burrow in them. Shut up a house, and windows
are shattered, roofs leak, and vermin swarm. To close a factory is to
hasten the time when buildings and machinery will be piled upon the
rubbish heap. The most magnificent and solid works of man have crumbled
under the finger of time. The earth is strewn with ruins of gigantic
engineering works, aqueducts, canals, temples, and monuments, whose
restoration would be no less a task than was their first building.
Everywhere vigilance and repairs are the conditions of continued uses of
wealth. Some works of nature, such as waterfalls, may appear to have a
continued use without repair, but they bear rent only when used with
other things that must be constantly mended. A certain amount of labor
on the banks of the mill-stream, and certain repairs on the dam, the
water-wheel, and the gates are necessary. By a fiction in business
contracts the waterfall may be dealt with apart from those conditions to
its use, and may be rented, as a field is, with the agreement that the
tenant keep up the repairs.</p>
<p><span class="pagenum"><SPAN name="Page_82" id="Page_82">[Pg 82]</SPAN></span></p>
<p>The efficiency of land as mere standing-room usually does not seem to be
dependent on repairs. But here again the land yields rent in connection
with other rent-bearing agents (such as houses and other agents above
ground), which must be repaired. Standing-room on land is not a complete
indirect agent; it is but one of the conditions for carrying on an
industry, and even it often requires repairs to make it usable. Ranging
from these extreme cases of stableness and durability, indirect agents
vary to the extremes of fragility and ephemeralness.</p>
<div class="sidenote">The fertile lands of large regions have lost their
usefulness</div>
<p>2. <i>Most of the qualities that contribute to make land fertile in
agriculture being destructible, the constant repair of tilled land is
necessary to its continued fertility.</i> If any things could be said to be
indestructible, they would be some of the works of nature. In a sense,
all matter is indestructible. Man cannot annihilate it, he can simply
change its condition. But in economic discussion it is the value of
things that is being considered, and from this point of view everything
is in some degree destructible. The effects of bad husbandry are
everywhere apparent, and in many regions fertile fields have been
physically and economically destroyed. In Asia, lands that once
supported millions, perhaps hundreds of millions, of population are now
deserts. Egypt, for a time reduced to a semi-desert condition, has only
in the past century been restored to a certain extent by the use of new
methods and a return to the old ones. Many of the areas that were the
granaries of Rome can now hardly support a sparse, half-starving
population. The lands, or at any rate, the elements that gave them
value, have been destroyed.</p>
<div class="sidenote">Wearing out of some American lands</div>
<p>Even in young America may be seen the effect of a failure to keep land
in repair. As the new rich lands of the West were opened up, the old
lands in the East were allowed to wear out, and many of them were
abandoned. On the new lands in turn the same methods were followed,
using up the first rich store of fertility with no attempt to keep up
the quality of the soil. This may have been the best policy for<span class="pagenum"><SPAN name="Page_83" id="Page_83">[Pg 83]</SPAN></span> the
time; it would not have been economical to employ Old World methods of
intensive husbandry when such rich extensive areas were being opened up.
But the process was one destructive of natural resources. As settlement
moved westward, great forests fell in ashes, and the soil was robbed of
the fertile elements which it had taken centuries for nature to store
up.</p>
<div class="sidenote">Wearing out of the parts the railroad</div>
<p>3. <i>The machinery and appliances used in transportation and
manufacturing are all perishable in varying degrees.</i> Take as an example
the great agency for transportation, the railway. The roadbed, which is
but the natural soil excavated or filled to a better grade, is the most
permanent part; yet every frost weakens, every rain undermines, a
portion of it. Earthquake, landslide, and flood fill up the ditches, or
tear down the embankments. Constant work is needed to keep it fit and
safe for use. Above this is the track, slightly less permanent, more
frequently changed. The ties rot, and even the rails of steel must be at
times replaced. The rolling-stock is still less durable, and the
different parts vary in length of life. It is said that the wheel-tires
are renewed four times, the boiler three times, and the paint seven
times, before a locomotive is entirely worn out. The oil used in the
wheel, which is a necessary part of the running machine, has to be
applied every day.</p>
<div class="sidenote">Depreciation of manufacturing appliances</div>
<p>There is a great difference in the length of life of manufacturing
appliances. The building is fairly durable; yet an average
depreciation-rate of one and one half per cent. a year must be allowed
to offset a reduction in its value of over fifty per cent, in thirty
years. Machinery differs greatly in durability; well-made, substantial
machinery depreciates about five per cent. yearly. The engines and
boilers depreciate more rapidly than the running gear; the loose tools
have to be replaced every second to fourth year; while the materials
consumed in the industry must be repaired and replaced at every
repetition of the process of manufacture. If a factory is to be
maintained in its efficiency in accordance<span class="pagenum"><SPAN name="Page_84" id="Page_84">[Pg 84]</SPAN></span> with the terms of the
renting contract, and is to continue its renting power, everything about
it must be from time to time repaired and replaced.</p>
<div class="sidenote">Neglect of repairs often has evil effects</div>
<p>4. <i>Neglect or postponement of repairs must cause a falling off of the
rent-earning power.</i> The neglect of repairs may have different results
in the factory. The neglect of one kind simply reduces present rental
while not preventing the future restoration of the plant to its full
efficiency. If certain necessary tools wear out and are not replaced,
the factory as a whole will be less efficient. Each part of the entire
outfit being needed in due proportion, the loss in rental will
correspond not merely to the lost efficiency of the missing tools, but
to the crippled efficiency of the remaining appliances. Failure to apply
seed to the land causes the land as a whole to be useless for that
year's crop. In other cases, neglect of repairs increases the expenses
of repairs and cuts off future rental. The adages, "A stitch in time
saves nine," and "An ounce of prevention is worth a pound of cure," must
be acted upon in every industry. The neglect to repair a roof causes
damage to an amount many times the cost of a new roof. Failure to
replace a bolt costing five cents may result in the rack and ruin of a
machine worth many dollars. A handful of earth on a dike may save a
whole country from destruction.</p>
<div class="sidenote">But sometimes is economical</div>
<p>Neglect of repairs may be economical, however, when outer conditions
have first reduced the demand for the agent and consequently the rental.
When the line of travel changes, it does not pay to keep an old hotel up
to the same state of repair as when it had a great patronage. Old
factories sometimes may better be allowed to depreciate while the price
of repairs is invested in more prosperous industries. In a declining
neighborhood the houses fall into decay, the owners seeing that "it
would not pay" to keep them up.</p>
<p><span class="pagenum"><SPAN name="Page_85" id="Page_85">[Pg 85]</SPAN></span></p>
<h4>§ II. DEPRECIATION IN RENT-EARNING POWER OF AGENTS KEPT IN REPAIR</h4>
<div class="sidenote">Repairs can not always prevent ultimate decay of agents</div>
<p>1. <i>Even where repairs are thoroughly kept up and present rent is
undiminished, future rents may be decreasing because of natural decay.</i>
Changes go on in the substance of things which cannot be prevented by
any attention to repairs. The wood in a framework will decay, the metals
crystallize. There is also an unpreventable wear of parts that cannot be
replaced without replacing the whole machine. It is the aim of the
modern manufacturers to make machines like the wonderful one-horse shay,
every part of equal durability. The development in America of the system
of "interchangable parts" has greatly simplified and cheapened repairs,
and has lengthened the working life of machines; nevertheless their lot
is the scrap-heap at last. This general depreciation appears to be
nearly avoided in large factories where there is serial replacement of
the parts, but occasionally some invention or some improvement of
process necessitates an almost completely new equipment. An old man once
said to me: "I have lived in this house forty years: it was well built,
has been repainted regularly, has never been allowed to leak a drop, and
it is as good as it ever was. I see no reason why it could not be kept
to eternity if always kept in repair." But the same could not be said of
the house now. In general, there is finally a termination of the
rent-earning power of wealth, and the whole has to be replaced.</p>
<div class="sidenote">Technical changes destroy the uses of agents</div>
<p>2. <i>A change in inventions and processes may reduce the rent of agents,
independently of their material condition.</i> Rent is dependent on the
indirect relation of things to wants; that relation may be changed if
some other agent is found fitted to serve these wants more directly. Not
only do the materials of houses change, but fashion and engineering
skill change, making the old mansions cheerless and inconvenient,<span class="pagenum"><SPAN name="Page_86" id="Page_86">[Pg 86]</SPAN></span> and
affecting their rent-earning power. At every moment, in a progressive
society, many rent-earning agents are being thrown out of use. The
machinery in flour-mills has been almost completely changed, parts of it
repeatedly, while the roller process has been substituted for the old
millstones. Water-power, because of its uncertainty, has been replaced
in many places by steam-power, and in many places steam-power in turn,
has been rivaled by water-power since the improvements in the generation
and transmission of electricity. A change in the process of making paper
threw out of use much machinery that was only in part saved by its
removal and adaptation to the making of coarser grades of paper. Many
minor inventions in the iron industry, still more the invention of the
Bessemer process, threw out of use great numbers of the old appliances.</p>
<div class="sidenote">Industrial circumstances affect the uses of agents</div>
<p>3. <i>A change in the outer conditions that give occasion to the use of
agents may cause depreciation.</i> The exhaustion of materials on which
machinery is employed may reduce its usefulness. A sawmill located in
the midst of a forest has a high-earning power while the forest lasts,
but when the forest is cut off the mill itself declines in value. Unless
it can be removed to another forest and thus have its earning power
renewed, it will have the value only of scrap-iron; it has become an
indirect agent in the wrong place. Oil-boring machinery where a rich
supply of oil is found has a high rental for a time, but when the
oil-fields give out the machinery falls in value, being worth more or
less than the cost of transporting it according as the next oil-field is
near or far. Changes in fashions, calling for different kinds of
products, cause a depreciation in the value of the old agents. Coarse
salt, evaporated by the sun, was used by our fathers, but the finer
product of the steam process is driving out the product of the old solar
plants. As homespun went out of use, much machinery still in good
physical condition was cast aside. Changes in transportation work
revolutions in industrial methods. Many prosperous small forges on the
country<span class="pagenum"><SPAN name="Page_87" id="Page_87">[Pg 87]</SPAN></span> roads of Pennsylvania became valueless after the building of
the railroads. New forges were built at favored points where materials
and products could be shipped by rail.</p>
<div class="sidenote">Various grades of efficiency in rent-bearers</div>
<p>4. <i>The agents employed in any industry range from the more efficient,
high rent, down to the less efficient, low rent, grades in a more or
less regular series.</i> It follows that as these changes are going on, the
place of agents on the scale of efficiency is constantly shifting. The
various agents represent all grades of efficiency. One depreciates,
possibly is restored later and takes a high place, and again depreciates
until finally it is thrown out of use. One loom embodies the latest
improvements and corresponds to the most fertile field; another can
still be made to yield a little rent; the use of a third results in
certain loss. A great mass of no-rent agents lie just below the margin
of utilization in every industry. Some of these are permanently
abandoned; some will be taken back into use when business conditions
improve. When the iron industry is dull, many forges are out of blast;
but when iron is again in demand, there is a gradual taking up of the
abandoned forges, factories, and machines as they are brought within the
margin of profitable utilization. Many agents not actually earning a
rent, may become rent-earning through a change in business conditions.</p>
<h4>§ III. DESTRUCTION OF NATURAL STORES OF MATERIALS</h4>
<div class="sidenote">Destruction of the American forests</div>
<p>1. <i>A large part of industry is now conducted without regard to the
preservation of the source of income.</i> A striking example of this is the
use, or rather the destruction, of the American forests. In the last
century the demand for lumber grew rapidly both on account of domestic
needs and of the needs of the older countries. Great quantities of wood
have been used and still greater quantities wasted, trees being girdled,
the ground burned over, the timber destroyed in any way that would clear
the soil—timber which to-day would be of far more value than is the
cleared land on which<span class="pagenum"><SPAN name="Page_88" id="Page_88">[Pg 88]</SPAN></span> it stood. Considering present needs and
conditions, the labor seems to have been worse than wasted.</p>
<div class="sidenote">Effects on value of timber</div>
<p>The direct effect of this destruction of the supply has been the
increase in the value of timber. To the settlers much of the timber was
worse than useless; they paid and labored to get rid of it; now the
supplies of lumber must be sought on the very margins of our territory:
Florida, Maine, northern Michigan and Wisconsin, Washington, and Oregon.
The supplies in Washington and Oregon are almost unavailable in the
Eastern states on account of the cost of transportation. Professor
Marsh, thirty years ago, strikingly characterized the policy that has
been pursued: "We are breaking up the foundation timbers and the
wainscoting of the house in which we live in order to boil our mess of
pottage."</p>
<div class="sidenote">Physical effects</div>
<p>The indirect effects of these changes are fully as great as the direct
ones. Forests greatly affect climate, temperature, and soil; they
influence the humidity. They equalize the flow of streams, moderate
floods, and by preventing the washing down of the rich soil, keep the
mountain sides from becoming bare and sterile rocks. So, within the last
two decades, the people in America have begun to think of forestry. Its
purpose is to restore the forests to the condition of permanent
rent-earners, to make the mountains yield not a temporary supply, but a
perpetual crop of timber.</p>
<div class="sidenote">Possible exhaustion of the coal-supply</div>
<p>2. <i>The extraction of coal and other mineral deposits reduces for future
generations a supply already limited.</i> The coal deposits in the earth
have only recently been drawn upon. A small city like Ithaca probably
uses to-day a greater quantity of coal than was used in all Europe two
centuries ago. The large deposits of coal and their early development in
England long gave a great advantage to English industry over that of
other countries. In England, however, has first been felt the fear of
the exhaustion of the coal-supply. Professor Jevons, in 1861, sounded
the note of alarm; he prophesied that because the coal deposits of
America were many times as great as those of England, industrial<span class="pagenum"><SPAN name="Page_89" id="Page_89">[Pg 89]</SPAN></span>
supremacy must inevitably pass to America. Already the supremacy in coal
and iron production has passed to America, and that in textiles soon
will come. In England the accessible supply of coal is limited, deeper
shafts must be sunk, and the coal gotten with greater difficulty and at
greater expense. Coal has risen in price in England within the last few
years, and will continue to rise in the future. The coal deposits of
America are thirty-seven times as great as those of England, but even
these will soon be exhausted. And yet on the part of all except the coal
trust, there appears in America a thoughtless disregard for the future.
Supplies of copper, iron, and lead in favored positions are likewise
limited, and are being rapidly centered in the hands of great companies.
The increasing demand for these products insures a steadily rising
income from their annual use. The value of the mines, being based on the
series of incomes they will yield, may increase while their unused
treasures dwindle in quantity.</p>
<div class="sidenote">Many natural resources are being rapidly exhausted</div>
<p>3. <i>The exhaustion of natural stores of material is due to civilization,
but it threatens to put an end to industrial progress.</i> The savage does
not go deep enough to use up permanently the world in which he lives. He
uses the fruits that he finds, and those fruits are, almost without
exception, renewed the next year. The only mines that were worked out in
ancient times were gold and silver mines, while the mines of useful
metals were touched but lightly. Within the last century the earth's
crust has been exploited with startling rapidity. Scientific knowledge
and mechanical improvement have combined to unlock the storehouses of
the geologic ages. At the ever-increasing rate of their use, many
important materials must be exhausted in the not far distant future.
While it is probable that substitutes will be discovered for many of
them, the outlook in some directions has little promise. To treat
terminable incomes, exhaustible sources of supply, as permanent sources
of income, leads alike to unsound theory and to reckless practice.</p>
<hr class="chap" />
<p><span class="pagenum"><SPAN name="Page_90" id="Page_90">[Pg 90]</SPAN></span></p>
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