dearest markets open to them. Resultant opposition of interest
between the buyer of labor and the seller of it. The Class War. Its
atrocities. Slaves better cared for than “free” vendors of their
own labor. Exposures by Karl Marx. Restraints imposed by factory
legislation. Opposition by employers. Their apprehension not
justified by the effect of the Acts. Opposition of the proletariat.
Its parental interest in child labor. The parish apprentices. Prices
in the labor market. The value of labor falls to zero. The theory of
Capitalism. The Manchester school. Failure of the Capitalist system to
make good its guarantees. The reserve army of unemployed. The Statute
of Elizabeth. The workhouse. Child sweating practically compulsory on
parents. 187
48
WOMEN IN THE LABOR MARKET
Men’s wages are family wages, women’s wages individual wages. The
effect is to make the proletarian married woman the slave of a slave,
and to establish conventions that the man is the breadwinner; that
the woman’s work in the home being apparently gratuitous, is not work
at all; and that women, when they are directly paid for their work,
should be paid less than men. Protection of women in the propertied
class by marriage settlements, and in the middle class by the Married
Women’s Property Acts. The sweating of daughters living partly on
their father’s wages enables one trade to sweat another, and produces
a class of women who work for less than subsistence wages without
starving. Their competition brings down the wages of all women of
their class below subsistence level, with the result that women who
have neither husband nor father to make up the shortage must make
it up by prostitution or suffer the extremity of excessive toil
and insufficient food. The wages of sin often much higher than the
wages of virtue. The affiliation laws and the advantages of having
illegitimate children. The Song of the Shirt and the Mind The Paint
Girl. Male prostitution: dancing partners, barristers, clerks,
journalists, parliamentary careerists, doctors, etc. Difference in
quality between the physical prostitution forced on the woman and the
mental prostitution forced on the man. 196
49
TRADE UNION CAPITALISM
Resistance of the proletariat to the capitalists. Combination the
first condition of effective resistance. Combination difficult
or impossible as between segregated workers (domestic servants
and agricultural laborers) and workers differing greatly in class
(actors). Easy as between factory operatives, miners, and railway
workers. The weapon of the combinations is the strike: that of
the employers’ counter-combinations the lock-out. The warfare at
its worst. Rattening. The Manchester and Sheffield outrages. “Ca’
canny”, and “restricting output”. The cost of this warfare to the
community. Capitalism cannot check it because Trade Unionism is only
the application of the Capitalist principle to labor as well as to
land and capital. Resistance of the employers. Attempt to suppress
the Unions as criminal conspiracies. Refusal to employ unionists.
Combinations of employers into employers’ federations. Victimization.
The disablement of labor by machinery obliges the Unions to insist on
piecework wages instead of time wages. Machine minding by girls’ and
women’s Unions. Failure of the proletariat to secure any considerable
share of the increase in the national output produced by machinery. 204
50
DIVIDE AND GOVERN
The impermanence of the concessions wrested by the Unions from the
employers by strikes makes it necessary for the proletariat to have
them established as laws (Factory Acts, etc.): hence the appearance
in Parliament of Labor members, and finally of an Independent Labor
Party. The Factory Acts, beginning with the protection of children
and women, acted as a protection for the men also. In factories,
when the women and children stop the engine stops; and when the
engine stops the men must stop. How these concessions were wrung
from Parliament through a split in the Capitalist ranks whilst Labor
was in a negligible minority there. The manufacturers in 1832 break
the monopoly of Parliament by the landlords. The Factory Acts as the
revenge of the landlords. These two Capitalist parties compete for
popular support by bribing the proletariat with votes. Final complete
enfranchisement of the proletariat. Meanwhile Socialism, having
sprung into existence under middle class leadership, had undertaken
the political education of the proletariat. Romantic illusions of
the middle class about the industrial proletariat. Failure of the
Socialist societies to supplant Trade Unionism. Success of the Fabian
Society as a middle class body permeating all existing political
organizations. Establishment of the Labor Party in Parliament as a
political federation of Socialist societies and Trade Unions. Its
history up to 1927. On the Trade Union side the tendency is not to
Socialism but to Capitalism controlled by Labor, with the middle
and propertied classes reduced to subjection in the interest of the
proletariat. As the proletariat has the advantage of numbers this
arrangement would profit the majority; but it would be so unpalatable
to the propertied and learned classes that they may conceivably be
driven to clamor for Socialism to save them from it. 213
51
DOMESTIC CAPITAL
The conversion of capital into machines, vehicles, and other aids
to labor. The delusion that this operation can be reversed, and
the machines and vehicles converted into spare ready money. Why
this impossible operation seems to practical business men to be not
only possible but an everyday occurrence. The real nature of the
transactions which delude them. As these transactions can be effected
only by a few people at a time, an attempt to force them on the
whole Capitalist class simultaneously by a tax on capital must fail.
The income of the capitalist is real: her capital, once invested, is
imaginary, as it has been consumed in the act of converting it into
aids to labor. Death Duties, nominally taxes on capital, are not
really so, and are as objectionable in practice as they are unsound in
theory. Insanity of estimates of the wealth of the country in terms of
capital values. 225
52
THE MONEY MARKET
The Money Market is not a market for the sale and purchase of spare
money, but for its hire. Difference between hiring and borrowing.
Payment for the hire of spare money is called in business interest,
and in old-fashioned economic treatises “the reward of abstinence”.
In the case of spare cash in the money market the obligation of the
owner to the hirer is as great as that of the hirer to the owner,
since capital not hired perishes by natural decay. Negative interest.
The real business of the money market is to sell incomes for lump sums
of spare ready money. Enormous rates of interest paid by the poor.
The Bank Rate. Lending to companies. Limited liability. Varieties of
shares and debentures. Jobbers and brokers. The connection of Stock
Exchange transactions with industry is mostly only nominal. Warnings.
Bogus companies. Genuine companies which are smoked out. “Coming in on
the third reconstruction.” Perils of enterprise, of public spirit, of
conscience, and of imaginative foresight. 231
53
SPECULATION
Risk of becoming a gambler’s wife. Selling and buying imaginary
shares for phantom prices. How this is possible. Settling day on the
Stock Exchange. Fluctuations. Bulls, bears, and stags. Contango and
Backwardation. Cornering the bears. The losses risked are only net,
not gross. Cover. Bucket shops. Unreality of the transactions. An
extraordinary daily waste of human energy, audacity, and cunning. 239
54
BANKING
Spare money for business purposes is mostly hired from bankers.
Overdrafts. Discounted bills of exchange. The Bank Rate. How the
bankers get the spare money they deal in. Customers must not draw
their balances simultaneously. The word credit. Credit is not capital:
it is a purely abstract opinion formed by a bank manager as to the
ability of a customer to repay an advance of goods. Credit, like
invested capital, is a phantom category. Its confusion with real
capital is a dangerous delusion of the practical business man.
“Bubbles” founded on this delusion. The Bank Rate depends on the
supply and demand of spare subsistence available. Effective demand.
Proposals to tax invested capital and credit. A hypothetical example.
243
55
MONEY
Money as a tool for buying and selling. As a measure of value. As
material available for other purposes and therefore valuable apart
from its use as money. The latter a guarantee against the dishonesty
of governments. Debasing the currency. Paper money. Inflation.
Post-war examples. Deflation. Stability the main desideratum. How
to maintain this. Fluctuations in the value of money indicated by
a general rise or fall of prices. Cheques and clearing houses as
economisers of currency. Communism dispenses with pocket money. The
Bank of England as the bankers’ bank. An intrinsically valuable
coinage the safest and most stable. 251
56
NATIONALIZATION OF BANKING
The nationalization of minting is necessary because only a Government
can establish a legal tender currency. Cheques and the like,
circulating as private currency, are not legal tender money but only
private and insecure title deeds to such money; but legal tender money
is a Government title deed to goods. Cheques and bills of exchange
are senseless unless expressed in terms of money. The nationalization
of the manufacture of money is a matter of course. The case for
nationalization of banking, though less obvious, is equally strong.
Profiteering in spare money. Municipal banks. There is no mystery
about banking; and those who now conduct it are as available for
public as for private employment. 264
57
COMPENSATION FOR NATIONALIZATION
The fate of the shareholder when the banks are nationalized. Purchase
of their shares no expense to the nation if the cost be levied on
the whole body of capitalists. The apparent compensation is really
distributed confiscation. The process a well established and familiar
one. Candidates who advocate expropriation without compensation do
not know their business and should not be voted for. Alternative of
Government entering competitively into industries and beating private
enterprises out of them. Objections. Wastefulness of competition.
A competing State enterprise would have to allow competition with
itself, which is often inadmissible in the case of ubiquitous
services. The private competitor is indifferent to the ruin of a
defeated rival; but the State must avoid this. 268
58
PRELIMINARIES TO NATIONALIZATION
Nationalization, though theoretically sound, and its expense a bogey,
is practically an arduous undertaking, involving the organization of a
central department with local services throughout the country. It is
possible only in stable and highly organized States. Revolutions and
proclamations cannot by themselves nationalize anything. Governments
may plunder and wreck State industries to avoid imposing unpopular
direct taxes. 274
59
CONFISCATION WITHOUT COMPENSATION
There is always a clamor by indignant idealists for direct retributive
confiscation without compensation. Its possibilities. Taxation of
capital as a means of forcing defaulters to surrender their title
deeds and share certificates to the Government is plausible and not
physically impossible. 276
60
REVOLT OF THE PARASITIC PROLETARIAT
The expropriation of the rich is objected to on the ground that the
rich give employment. The sense in which this is true. The parasitic
proletariat. Bond Street and Bournemouth. All transfers of purchasing
power from the rich to the Government depress the parasitic trades and
their employees. A sudden wholesale transfer would produce an epidemic
of bankruptcy and unemployment. Governments must immediately expend
the incomes they confiscate. 277
61
SAFETY VALVES
Doles. Throwing the confiscated money into nationalized banks. Raising
wages in confiscated industries. War. Would these act quickly enough?
An uninterrupted circulation of money is as necessary to a nation
as an uninterrupted circulation of blood to an animal. Any general
and simultaneous confiscation of income would produce congestion in
London. Grants-in-aid to municipalities an important safety valve.
Public works. Roads, forests, water power, reclamation of land
from the sea, garden cities. Examination of these activities shews
that none of them would act quickly enough. They would provoke a
violent reaction which would give a serious set-back to Socialism.
Nationalizations must be effected one at a time, and be compensated.
279
62
WHY CONFISCATION HAS SUCCEEDED HITHERTO
Direct confiscation of income without compensation is already in
vigorous operation. Income tax, super tax, and estate duties. The
Chancellor of the Exchequer and his budget. Gladstone’s attitude
towards income tax. General agreement of Capitalist parties that
all other means of raising money shall be exhausted before levying
taxes on income. Contrary assumption of the proletarian Labor
Party that the Capitalists should pay first, not last. This issue
underlies all the Budget debates. Estate duties (“death duties”),
though unsound economically, and often cruel and unfair in operation,
succeed in carrying Socialistic confiscation further in England under
Conservative Governments than some avowedly Socialistic ones have
been able to carry it abroad. The success of the operation is due to
the fact that the sums confiscated, though charged as percentages
on capital values, can be paid out of income directly or indirectly
(by insuring or borrowing), and are immediately thrown back into
circulation by Government expenditure. Thus income can be safely
confiscated if immediately redistributed; but the basic rule remains
that the Government must not confiscate more than it can spend
productively. This is the Socialist canon of taxation. 284
63
HOW THE WAR WAS PAID FOR
War must be paid for on the nail: armies cannot be fed nor slaughtered
by promissory notes. Men are obtained by conscription, and money
partly by direct taxation and inflation, but mainly by borrowing from
the capitalists in spite of the protests of the Labor Party against
the exemption of capital from conscription. The quaint result is
that in order to pay the capitalists the interest on their loans,
the Chancellor of the Exchequer has to tax them so heavily that,
as a class, they are losing by the transaction. Robbing Peter, who
did not lend, to pay Paul, who did. As the property owners who hold
War Loan Stock gain at the expense of those who do not, a unanimous
Capitalist protest is impossible. An illustration. But the Labor
contention that it would pay the propertied class as a whole to cancel
the National Debt is none the less sound. Financing war by “funded”
loans. As capital invested in war is utterly and destructively
consumed it does not, like industrial capital, leave the nation better
equipped for subsequent production. The War Loan, though registered
in the books of the Bank of England as existing capital, is nothing
but debt. The country is therefore impoverished to meet interest
charges on 7000 millions of non-existent capital. There are reasons
for not repudiating this debt directly; but as the war produced an
enormous consumption of capital and yet left the world with less
income to distribute than before, a veiled repudiation of at least
part of the debt is inevitable. Our method of repudiation is to
redistribute income as between the holders of War Loan and the other
capitalists. But as the huge borrowing and confiscation of capital
that was feasible when the Government had war employment ready for an
unlimited number of proletarians leaves them destitute now that the
Government has demobilized them without providing peace employment,
the capitalists have now to pay doles in addition to finding the money
to pay themselves their own interest. 289
64
NATIONAL DEBT REDEMPTION LEVIES
Though taxation of capital is nonsensical, all proposals in that form
are not necessarily impracticable. A Capitalist Government could,
without requiring ready money or disturbing the Stock Exchange or the
Bank Rate, cancel the domestic part of the National Debt to relieve
private industry from taxation by veiling the repudiation as a levy
on capital values and accepting loan and share scrip at face value
in payment. Illustration. The objection to such a procedure is that
levies, as distinguished from established annual taxes, are raids on
private property. As such, they upset the sense of security which
is essential to social stability, and are extremely demoralizing to
Governments when once they are accepted as legitimate precedents.
A raiding Chancellor of the Exchequer would be a very undesirable
one. The regular routine of taxation of income and compensated
nationalizations is available and preferable. 294
65
THE CONSTRUCTIVE PROBLEM SOLVED
Recapitulation. The difficulty of applying the constructive program
of Socialism lies not in the practical but in the metaphysical part
of the business: the will to equality. When the Government finally
acquires a virtually complete control of the national income it will
have the power to distribute it unequally; and this possibility
may enlist, and has to a certain extent already enlisted, the most
determined opponents of Socialism on the side of its constructive
political machinery. Thus Socialism ignorantly pursued may lead to
State Capitalism instead of to State Socialism, the same road leading
to both until the final distributive stage is reached. The solution of
the constructive problem of Socialism does not allay the terrors of
the alarmists who understand neither problem nor solution, and connect
nothing with the word Socialism except red ruin and the breaking up
of laws. Some examination of the effect of Socialism on institutions
other than economic must therefore be appended. 297
66
SHAM SOCIALISM
The War, by shewing how a Government can confiscate the incomes
of one set of citizens and hand them over to another set with or
without the intention of equalizing distribution or nationalizing
industries or services, shewed also how any predominant class,
trade, or clique which can nobble our Cabinet Ministers can use the
power of the State for selfish ends by measures disguised as reforms
or political necessities. All retrogressions and blunders, like
all genuine reforms, are lucrative to somebody, and so never lack
plausible advocates. Illustrative cases of exploitation of the rates
and taxes and of private benevolence by Capitalism and Trade Unionism.
Public parks, endowed schools, garden cities, and subsidies. The
Government subsidy to the coal owners in 1925 not Socialistic nor
even Capitalistic, but simply unbusinesslike. Poplarism. Mischief
done by subsidies and doles. Subsidies plus Poplarism burn the candle
at both ends. The danger of conscious and deliberate exploitation of
the coercive and confiscatory powers of the Government by private
or sectional interests is greatly increased by the modern American
practice of employing first-rate brains as such in industrial
enterprise. The American Trade Unions are following this example.
Surprising results. What its adoption by English Trade Unions will
mean. Socialists will still have to insist on equalization of income
to prevent Capitalist big business and the aristocracy of Trade
Unionism controlling Collectivist Governments for their private ends.
299
67
CAPITALISM IN PERPETUAL MOTION
Nothing stays put. Literal Conservatism impossible. Human society
is like a glacier, apparently stationary, always in motion, always
changing. To understand the changes that are happening, and the
others that are coming, it is necessary to understand the changes
that have gone before. Examples of every phase in economic evolution
still survive and can be studied from life. Without such study we are
liable to be misguided and corrupted or exasperated. Those adventures
of Capitalism in pursuit of profits which took the form of thrilling
exploits by extraordinary individuals with no sordid aims are narrated
as the splendid history of our race. On the other hand, the more
shameful episodes in that pursuit may be imputed to the greed of
capitalists instead of to the ferocity and bigotry of their agents.
Both views may be discounted as special pleadings. A capitalist may
accidentally be a genius just as she may be a fool or a criminal. But
a capitalist as such is only a person with spare money and a legal
right to withhold it from the hungry. No special ability or quality of
any sort beyond ordinary prudence and selfishness is involved in the
capitalist’s function: the solicitor and stockbroker, the banker and
employer, will carry the capital to the proletarians and see that when
consuming it they replace it with interest. The most intelligent woman
can do no better than invest her money, which does far more good when
invested than when spent in charity. But the employers and financiers
who exploit her capital are pressed by the exhaustion of home markets
and old industries to finance adventurous and experimental geniuses
who explore and invent and conquer. They cannot concern themselves
with the effect of these enterprises on the world or even on the
nation provided they bring back money to the shareholders. Capital, to
save itself from rotting, has to be ruthless in its ceaseless search
for investment; and mere Conservatism is of no avail against this iron
necessity. Its chartered companies. It adds India, Borneo, Rhodesia to
the white Englishman’s burden of its naval and military defence. It
may yet shift our capital from Middlesex to Asia or West Africa. Our
helplessness in such an event. No need to pack up yet; but we must get
rid of static conceptions of civilization and geography. 308
68
THE RUNAWAY CAR OF CAPITALISM
Controlled motion is a good thing; but the motion of Capital is
uncontrollable and dangerous. As the future of civilization depends
on Governments gaining control of the forces that are running away
with Capitalism an understanding of them is necessary. Very few people
do understand them. The Government does not: neither do the voters.
The difference between Governments and governed. The Governments
know the need for government and want to govern. The governed have
no such knowledge: they resent government and desire freedom. This
resentment, which is the central weakness of Democracy, was not
of great importance when the people had no votes, as under Queen
Elizabeth and Cromwell. But when great extensions of government and
taxation came to be required to control and supplant Capitalism,
bourgeois Democracy produced an increase of electoral resistance to
government; and proletarian Democracy has continued the bourgeois
tradition. The resultant paralysis of Parliament has produced a demand
for dictatorships; and Europe has begun to clamor for political
disciplinarians. Between our inability to govern well and our
unwillingness to be governed at all, we furnish examples of the abuses
of power and the horrors of liberty without ascertaining the limits of
either. 314
69
THE NATURAL LIMIT TO LIBERTY