Chapter LIV: Section CXCVI: (a.)

UNDERTAKER'S PROFIT.--HAVING THE "LEAD."

The undertaker's profit is that branch of the national income in which the greater number of new fortunes are made. If a landowner has a large income, he generally considers himself obliged to make a correspondingly large outlay, one in keeping with his position; and workmen who are not undertakers themselves seldom have the means to make large savings. Besides, undertakers stand between the purchasers of their products and the lessors of the productive forces used by them in the peculiarly favorable situation which I may describe by the expression: having, as they say in card-playing, "the lead."[196a-1] When, in the struggle for prices, one party occupies a position which enables him to observe every change of circumstance much sooner than his opponent, the latter may always suffer from the effects of erroneous prices. If, for instance, the productiveness of business increases, even without any personal merit of the individual undertakers themselves, it will always be some time before the decline in the price of commodities and the rise in the rate of interest take place, as a result of the increased competition of undertakers, consequent upon the extraordinary rate of the undertaker's profit. It is difficult, and even impossible in most instances for the proprietors of the productive forces which they have rented out, to immediately estimate accurately the profit made by undertakers. On the other hand, the least enhancement of the price of the forces of production is immediately felt by the undertakers, and causes them to raise their prices. They just as quickly observe a decline of the prices of the commodities, and know how to make others bear it by lowering wages and the rate of interest.[196a-2] It should not be forgotten that the persons most expert, far-seeing, active and expeditious in things economic, belong to the undertaking class.[196a-3] [196a-4]

[Footnote 196a-1: The same principle is effective in
intermediate commerce, and in the intervention of bankers
between government and state creditors.]

[Footnote 196a-2: This is much less the case in rents, for
the reason that contracts here are made for a much longer
term. Hence, here the farmer has as much to fear as to hope
from a change of circumstances. Hence, too, we meet with a
farmer who has grown rich much more seldom than with a
manufacturer or a merchant.]

[Footnote 196a-3: If an undertaker can cede his higher
reward to another and guaranty its continuance, the
circumstances which enable him to do this assume the nature
of fixed capital; for instance, the trade or _clientèle_
secured by custom or privilege. If the undertaker has not
the power to dispose of it in this way, the increased profit
either disappears with his retirement from the business or
falls to the owner of the capital employed, and still more
to the land owner. Thus, for instance, how frequently it has
happened that a store, which has been largely resorted to by
the public, drawn thither by the business tact of the
lessee, has afterwards been rented by the owner at a higher
rent! (_Hermann_, loc. cit. 210.)]

[Footnote 196a-4: _Lassalle's_ socialistic attacks on
Political Economy have been directed mainly against the
undertaker's profit or reward. Compare the work
"Bastiat-Schulze von Delitzsch, der ökonom. Julian oder
Kapital und Arbeit," 1863. By means of state credit, he
would have this branch of income turned over to common
labor. _Dühring_ also, Kapital und Arbeit 90, declaims not
so much against capital as against "the absolutism of
undertakers." _Schäffle_ D. Vierteljahrsschrift Nr. 106, II,
223, objects to this, that undertakers give value in
exchange to unfinished products, a great service rendered
even to the laboring class, who otherwise would have to
resign the advantages of the division of labor.

The undertaker's profit is precisely the part of the great
politico-economical tree from which further growth chiefly
takes place. To artificially arrest it, therefore, would be
to hasten the stationary state, and thus make general and
greater the pressure on workmen and capitalists, which it is
sought to remove locally. Hence _Roesler_, Grundsätze, 507
ff., very appropriately calls the undertaker's profit the
premium paid by society to those who most effectually combat
the "law of rent." The importance of a good undertaker may
be clearly seen when a joint stock manufacturing company
pays a dividend of from 20 to 30 per cent., while one close
by, of the same kind, produces no profit whatever. But, at
the same time, the socialistic hatred of this branch of
income may be easily accounted for, in a time full of
stock-jobbing, which last never produces except a
pseudo-undertaker's profit.]