◆¹ The conclusion just arrived at is not yet completely stated; for

there are certain further facts to be considered in connection with it

which have indeed already come under our view, but which, in order to

simplify the course of our argument, have been put out of sight in the

two preceding chapters. I shall return to these facts presently; but it

will be well, before doing so, to take the conclusion as it stands in

this simple and broad form, and see, by reference to those principles

which were explained at starting, and in which all classes and parties

agree, what is the broad lesson which it forces on us, underlying all

party differences.

[Sidenote ◆1 If we sum up all that has been said thus far, it may

seem at first sight that it teaches nothing but the

negative lesson, that we should let Ability have its own

way unchecked.]

◆¹ I started with pointing out that, so far as politics are concerned,

the aim of all classes is to maintain their existing incomes; and that

the aim of the most numerous class is not only to maintain, but to

increase them. I pointed out further that the income of the individual

is necessarily limited by the amount of the income of the nation; and

that therefore the increase, or at all events the maintenance, of the

existing income of the nation is implied in all hopes of social and

economic progress, and forms the foundation on which all such hopes

are based. I then examined the causes to which the existing income of

the nation is due; and I showed that very nearly two-thirds of it is

due to the exertions of a small body of men who contribute thus to

the productive powers of the community, not primarily because they

possess Capital, but because they possess Ability, of which Capital is

merely the instrument; that it is owing to the exercise of Ability only

that this larger part of the income has gradually made its appearance

during the past hundred years; and that were the exercise of Ability

interfered with, the increment would at once dwindle, and before long

disappear.

Thus the two chief factors in the production of the national income—in

the production of that wealth which must be produced before it can

be distributed—are not Labour and Capital, which terms, as commonly

used, mean living labourers on the one hand, and dead material on the

other; but they are two distinct bodies of living men—labourers on the

one hand, and on the other men of Ability. The great practical truth,

then, which is to be drawn from the foregoing arguments is this—and it

is to be drawn from them in the interest of all classes alike—that the

action of Ability should never be checked or hampered in such a way as

to diminish its productive efficacy, either by so interfering with its

control of Capital, or by so diminishing its rewards, as to diminish

the vigour with which it exerts itself; but that, on the contrary, all

these social conditions should be jealously maintained and guarded

which tend to stimulate it most, by the nature of the rewards they

offer it, and which secure for it also the most favourable conditions

for its exercise. By such means, and by such means only, is there any

possibility of the national wealth being increased, or even preserved

from disastrous and rapid diminution.

[Sidenote ◆1 But this is very far from being the whole lesson

taught, or indeed the chief part of it.]

◆¹ This, however, is but one half of the case; and, taken by itself,

it may seem to have no connection with the problem which forms the

main subject of this volume, namely, the social hopes and interests,

not of Ability, but of Labour. For, taken by itself, the conclusion

which has just been stated may strike the reader at first sight as

amounting merely to this: that the sum total of the national income

will be largest when the most numerous minority of able men produce the

largest possible incomes,—incomes which they themselves consume; and

that, unless they are allowed to consume them, they will soon cease

to produce them. From the labourer’s point of view, such a conclusion

would indeed be a barren one. It might show him that he could not

better himself by attacking the fortunes of the minority; but it would,

on the other hand, fail to show him that he was much interested in

their maintenance, since, if Ability consumes the whole of the annual

wealth which it adds to the wealth annually produced by Labour, the

total might be diminished by the whole of the added portion, and

Labour itself be no worse off than formerly. But when I said just

now that it was to the interest of all classes alike not to diminish

the rewards which Ability may hope for by exerting itself, this was

said with a special qualification. I did not say that it was to the

interest of the labourers to allow Ability to retain the whole of what

it produced, or to abstain themselves from appropriating a certain

portion of it; but what I did say was that any portion appropriated

thus should not be so large, nor appropriated in such a way, as to make

what remains an object of less desire, or the hope of possessing it

less powerful as a stimulus to producing it. This qualification, as the

reader will see presently, gives to the conclusion in question a very

different meaning from that which at first he may very naturally have

attributed to it.

[Sidenote ◆1 The chief lesson to be learnt is that, whilst Ability

is the chief producer of wealth, Labour may appropriate

a large share of its products.]

◆¹ For the precise point to which I have been leading up, from the

opening page of the present volume to this, is that a considerable

portion of the wealth produced by Ability may be taken from it and

handed over to Labour, without the vigour of Ability being in the

least diminished by the loss; that such being the case, the one great

aim of Labour is to constantly take from Ability a certain part of its

product; and that this is the sole process by which, so far as money

is concerned, Labour has improved its position during the past hundred

years, or by which it can ever hope to improve it further in the future.

[Sidenote ◆1 The question is, How much may it appropriate without

paralysing the Ability which produces it?]

◆¹ The practical question, therefore, for the great mass of the

population resolves itself into this: What is the extent to which

Ability can be mulcted of its products, without diminishing its

efficacy as a productive agent? An able man’s hopes of securing _nine

hundred thousand pounds_ for himself would probably stimulate his

Ability as much as his hopes of securing a _million_. Indeed the fact

that, before he could secure a _million pounds_ for himself, he had to

produce a _hundred thousand_ for other people, might tend to increase

his efforts rather than to relax them. But, on the other hand, if,

before he could secure a _hundred thousand pounds_ for himself, he had

to produce a _million_ for other people, it is doubtful whether either

sum would ever be produced at all. There must therefore be, under any

given set of circumstances, some point somewhere between these two

extremes up to which Labour can appropriate the products of Ability

with permanent advantage to itself, but beyond which it cannot carry

the process, without checking the production of what it desires to

appropriate. But how are we to ascertain where that precise point is?

[Sidenote ◆1 This is a question which can be answered only by

experience; and we have the experience of a century to

guide us.]

◆¹ To this question it is altogether impossible to give any answer

based upon _à priori_ reasoning. The very idea of such a thing is

ridiculous; and to attempt it could, at the best, result in nothing

better than some piece of academic ingenuity, having no practical

meaning for man, woman, or child. But what reasoning will not do,

industrial history will. Industrial history will provide us with an

answer of the most striking kind—general, indeed, in its character;

but not, for that reason, any the less decided, or less full of

instruction. For industrial history, in a way which few people realise,

will show us how, during the past hundred years, Labour has actually

succeeded in accomplishing the feat we are considering; how, without

checking the development and the power of Ability, it has been able to

appropriate year by year a certain share of what Ability produces. When

the reader comes to consider this,—which is the great industrial object

lesson of modern times,—when he sees what the share is which Labour

has appropriated so triumphantly, he will see how the conclusions we

have here arrived at, with regard to the causes of production, afford

a foundation for the hopes and claims of Labour, as broad and solid as

that by which they support the rights of Ability.

Let us turn, then, once more to the fact which I have already so

often dwelt upon, that during the closing years of the last century

the population of Great Britain was about _ten millions_, and the

national income about a _hundred and forty million pounds_. It has been

shown that to reach and maintain that rate of production required the

exertion of an immense amount of Ability, and the use of an immense

Capital which Ability had recently created. But let me repeat what

I have said already: that we will, for the purpose of the present

argument, attribute the production of the whole to average human

Labour. It is obvious that Labour did not produce more, for no more

was produced; and it is also obvious that if, since that time, it

had never been assisted and never controlled by Ability, the same

amount of Labour would produce no more now. We are therefore, let me

repeat, plainly understating the case if we say that British Labour

by itself—in other words, Labour shut out from, and unassisted by the

industrial Ability of the past ninety years—can, at the utmost, produce

annually a _hundred and forty million pounds_ for every _ten millions_

of the population.

[Sidenote ◆1 In 1860 Labour took at least twenty-five per cent

more than it produced itself, out of the products of

Ability; and it now takes about forty-five per cent.]

And now let us turn from what Labour produces to what the labouring

classes[43] have received at different dates within the ninety or

hundred years in question. ◆¹ At the time of which we have just been

speaking, they received about half of what we assume Labour to have

produced. A labouring population of _ten million_ people received

annually about _seventy million pounds_.[44] Two generations later,

the same number of people received in return for their labour about a

_hundred and sixty million pounds_.[45] They were twenty-five per cent

richer than they possibly could have been if, in 1795, they had seized

on all the property in the kingdom and divided it amongst themselves.

In other words, Labour in 1860, instead of receiving, as it did two

generations previously, half of what we assume it to have produced,

received twenty-five per cent more than it produced. If we turn from

the year 1860 to the present time, we find that the gains of Labour

have gone on increasing; and that each _ten millions_ of the labouring

classes to-day receives in return for its labour _two hundred million

pounds_, or over forty per cent more than it produces. And all these

calculations are based, the reader must remember, on the ridiculously

exaggerated assumption which was made for the sake of argument, that

in the days of Watt and Arkwright, Capital, Genius, and Ability had no

share in production; and that all the wealth of the country, till the

beginning of the present century, was due to the spontaneous efforts of

common Labour alone.

[Sidenote ◆1 The gains of Labour are put in a yet more striking

light by comparing the present income of Labour with the

total income of the country fifty years ago.]

◆¹ And now let us look at the matter from a point of view slightly

different, and compare the receipts of Labour not with what we assume

it to have itself produced, but with the total product of the community

at a certain very recent date.

In 1843, when Queen Victoria had been six or seven years on the throne,

the gross income of the nation was in round numbers _five hundred and

fifteen million pounds_. Of this, _two hundred and thirty-five million

pounds_ went to the labouring classes, and the remainder, _two hundred

and eighty million pounds_, to the classes that paid income-tax. Only

fifty years have elapsed since that time, and, according to the best

authorities, the income of the labouring classes now is certainly not

less than _six hundred and sixty million pounds_.[46] That is to say,

it exceeds, by a _hundred and forty-five million pounds_, the entire

income of the nation fifty years ago.

An allowance, however, must be made for the increase in the number of

the labourers. That is of course obvious, and we will at once proceed

to make it. But when it is made, the case is hardly less wonderful.

The labouring classes in 1843 numbered _twenty-six millions_; at the

present time they number _thirty-three millions_.[47] That is to say,

they have increased by _seven million_ persons. Now assuming, as we

have done, that Labour by itself produces as much as _fourteen pounds_

per head of the population, this addition of _seven million_ persons

will account for an addition of _ninety-eight million pounds_ to the

_five hundred and fifteen million pounds_ which was the amount of

the national income fifty years ago. We must therefore, to make our

comparisons accurate, deduct _ninety-eight million pounds_ from the

_hundred and forty-five million pounds_ just mentioned, which will

leave us an addition of _forty-seven million pounds_. We may now say,

without any reservation, that the labouring classes of this country, in

proportion to their number, receive to-day _forty-seven million pounds_

a year more than the entire income of the country at the beginning of

the reign of Queen Victoria.

[Sidenote ◆1 Every labourer anxious for his own welfare should

reflect on these facts.]

◆¹ To any labourer anxious for his own welfare, to any voter or

politician of any kind, who realises that the welfare of the labourers

is the foundation of national stability, and who seeks to discover by

what conditions that welfare can be best secured and promoted, this

fact which I have just stated is one that cannot be considered too

closely, too seriously, or too constantly.

Let the reader reflect on what it means.

[Sidenote ◆1 They show him that the existing system has done, and

is doing for him far more than any Socialist ever

promised.]

Dreams of some possible social revolution, dreams of some division of

property by which most of the riches of the rich should be abstracted

from them and divided amongst the poor—these were not wanting fifty

years ago. ◆¹ But even the most sanguine of the dreamers hardly

ventured to hope that the then riches of the rich could be taken

away from them completely; that a sum equal to the rent of the whole

landed aristocracy, all the interest on Capital, all the profits of

our commerce and manufactures, could be added to what was then the

income of the labouring classes. No forces of revolution were thought

equal to such a change as that. But what have the facts been? What has

happened really? Within fifty years the miracle has taken place, or,

indeed, one greater than that. The same number of labourers and their

families as then formed the whole labouring population of the country

now possess among them every penny of the amount that then formed the

income of the entire nation. They have gained every penny that they

possibly could have gained if every rich man of that period—if duke,

and cotton lord, and railway king, followed by all the host of minor

plutocrats, had been forced to cast all they had into the treasury

of Labour, and give their very last farthing to swell the labourer’s

wages. The labourers have gained this; but that is not all. They have

gained an annual sum of _forty-seven million pounds_ more. And they

have done all this, not only without revolution, but without any

attack on the fundamental principles of property. On the contrary, the

circumstances which have enabled Labour to gain most from the proceeds

of Ability, have been the circumstances which have enabled Ability to

produce most itself.

[Sidenote ◆1 But before proceeding with this argument, there are

two side points to dispose of.]

◆¹ Before, however, we pursue these considerations further, it is

necessary that we should deal with two important points which have

perhaps already suggested themselves to the reader as essential to the

problem before us. They are not new points. They have been discussed in

previous chapters; but the time has now arrived to turn to them once

again.

CHAPTER II

_Of the Ownership of Capital, as distinct from its

Employment by Ability._

[Sidenote ◆1 In the foregoing argument, all mention of Land has

been omitted, for simplicity’s sake.]

[Sidenote ◆2 But rent, especially the rent of the large owners, is

so small a part of the national income that the omission

is of no practical importance.]

The first of the points I have alluded to can be disposed of very

quickly. It relates to Land. In analysing the causes to which our

national income is due, I began with showing that Land produced a

certain definite part of it. ◆¹ For the sake, however, of simplicity,

in the calculation which I went on to make, I ignored Land, and the

fact of its being a productive agent; and treated the whole income as

if produced by Labour, Capital, and Ability. I wish, therefore, now to

point out to the reader that this procedure has had little practical

effect on the calculation in question, and that any error introduced

by it can be easily rectified in a moment. ◆² The entire landed rental

of this country is, as I have already shown, not so much as one

thirteenth of the income; whilst that of the larger landed proprietors

is not so much as one thirty-ninth. Now my sole object in dealing with

the national income at all is to show how far it is susceptible of

redistribution; and it is perfectly certain that no existing political

party would attempt, or even desire, to redistribute the rents of any

class except the large proprietors only. The smaller proprietors,—_nine

hundred and fifty thousand_ in number,—who take between them two-thirds

of the rental, are in little immediate danger of having their rights

attacked. The only rental therefore—namely, that of the larger

proprietors—which can be looked on, even in theory, as the subject of

redistribution, is too insignificant, being less than _thirty million

pounds_, to appreciably affect our calculations when we are dealing

with _thirteen hundred millions_. The theory of Land as an independent

productive agent, and of rent as representing its independent product,

is essential to an understanding of the theory of production generally;

but in this country the actual product of the Land is so small, as

compared with the products of Labour, Capital, and Ability, that for

purposes like the present it is hardly worth considering. Its being

redistributed, or not redistributed, would, as we have seen already,

make to each individual but a difference of three farthings a day.

[Sidenote ◆1 Capital, as distinct from the Ability that uses it,

has been omitted also.]

[Sidenote ◆2 We must now again consider it in connection with the

classes which never themselves employ it, but live on

the interest of it.]

[Sidenote ◆3 What place do these classes hold in the productive

system?]

◆¹ The second point I alluded to must be considered at greater length.

In dealing with Capital and Ability, I first treated them separately. I

then showed that, regarded as a productive agent, Capital _is_ Ability,

and must be treated as identical with it. But it is necessary, now that

we are dealing with distribution, to disunite them for a moment, and

treat them separately once more. ◆² For even though it be admitted that

Ability, working by means of Capital, produces, as it has been shown to

do, nearly two-thirds of the national income, and though it be admitted

further that a large portion of this product should go to those able

men who are actively engaged in producing it,—the men whose Ability

animates and vivifies Capital,—it may yet be urged that a portion of it

which is very large indeed goes, as a fact, to men who do not exert

themselves at all, or who, at any rate, do not exert themselves in

the production of wealth. These men, it will be said, live not on the

products of Ability, but on the interest of Capital which they have

come accidentally to possess; ◆³ and it will be asked on what grounds

Labour is interested in forbearing to touch the possessions of those

who produce nothing? If it has added to its income, as it has done,

during the past hundred years, why should it not now add to it much

more rapidly, by appropriating what goes to this wholly non-productive

class?

To this question there are several answers. One is that a leisured

class—a class whose exertions have no commercial value, or no

value commensurate with the cost of its maintenance—is essential

to the development of culture, of knowledge, of art, and of mental

civilisation generally. But this is an answer which we need not dwell

on here; for, whatever its force, it is foreign to our present purpose.

We will confine ourselves solely to the material interests that are

involved, and consider solely how the plunder of a class living on

the interest of Capital would tend to affect the actual production of

wealth.

It would affect the production of wealth in just the same way as would

a similar treatment of that class on whose active Ability production is

directly dependent; and it would do this for the following reasons.

[Sidenote ◆1 They are the heirs of Ability, and represent, by

their possession of Capital, the main object with which

that Capital was originally created.]

[Sidenote ◆2 For Capital is created and saved in order that it may

yield interest, firstly, to the man who himself created

and saved it;]

◆¹ The greater part of the Capital that has been accumulated in the

modern world is the creation of active Ability, as I have pointed out

already. It has been saved not from the product of Labour, but from

the product which Ability has added to this. It is Ability congealed,

or Ability stored up. And the main motive that has prompted the men

of Ability to create it has not consisted only of the desire of

enjoying the income which they are enabled to produce by its means,

when actually employing it themselves, but the desire also of enjoying

some portion of the income which will be produced by its means if it

is employed by the Ability of others. ◆² In a word, the men who create

and add to our Capital are motived to do so by expectation that the

Capital shall be their own property; that it shall, when they wish

it, yield them a certain income independent of any further exertions

of their own. Were this expectation rendered impossible, were Capital

by any means prevented from yielding interest either to the persons

who made and saved it, or those to whom the makers might bequeath it,

the principal motive for making or saving it would be gone. If a man,

for instance, makes _one thousand pounds_ he can, as matters stand, do

three things with it, any one of which will gratify him. He can spend

it as income, and enjoy the whole of it in that way; he can use it

himself as Capital, and so enjoy the profits; or he can let others use

it as Capital, and so enjoy the interest. But if he were by any means

precluded from receiving interest for it, and desired for any reason

to retire from active business, he could do with his _thousand pounds_

one of two things only—he could spend it as income, in which case it

would be destroyed; or let others use it as Capital, in which case he

himself could derive no benefit whatever from it, and would, in effect,

be giving it or throwing it away. Were the first course pursued, no

Capital would be saved; were the second course obligatory, no Capital

would be created.[48]

[Sidenote ◆1 And secondly, to his family and his immediate heirs.]

[Sidenote ◆2 The bulk of the Capital owned now by those who do not

employ it themselves has come to them from their fathers

or grandfathers who created it;]

[Sidenote ◆3 As the history of the growth of Capital during the

present century shows.]

[Sidenote ◆4 A man’s desire to leave money to his family is shown

by history to be as strong a motive as the desire to

enjoy it himself.]

I have spoken thus far as though in creating Capital a man’s motive

were the hope of enjoying the interest of it himself. ◆¹ But there is

another motive almost equally powerful—in some cases more powerful—and

that is the hope of transferring or transmitting it to his family or to

his children. ◆² Now four-fifths of the Capital of the United Kingdom

has been created within the last eighty years. The total Capital in

1812 amounted to about _two thousand millions_; now it amounts to

almost _ten thousand millions_. Therefore _eight thousand millions_

of the Capital of this country has been created by the Ability of

the parents and of the grandparents of those who now possess it,

supplemented by the Ability of many who now possess it themselves. The

most rapid increase in it took place between 1840 and 1875. ◆³ If we

regard men of fifty as representing the present generation of those

actively engaged in business, we may say that their grandfathers made

_two thousand millions_ of our existing Capital, their parents _four

thousand millions_, and themselves _two thousand millions_. It will

thus be easily realised how those persons who own Capital which they

leave others to employ, and which personally they have had no hand in

making, are for the most part relatives or representatives of the very

persons who made it, and who made it actuated by the hope that their

relations or representatives should succeed to it. ◆⁴ All history shows

us that one of the most important and unalterable factors in human

action is a certain solidarity of interest between men—even selfish

men—and those nearly connected with them; and just as parents are, by

an almost universal instinct, prompted to rear their children, so are

they prompted to bequeath to them—or, at all events, to one of them—the

greater part of their possessions. We might as well try to legislate

against the instincts of maternity, as against the instinct of bequest.

Therefore, that the ownership of much of the Capital of the country

should be separated from the actual employment of it, is a necessary

result of the forces by which it was called into existence; and in

proportion as such a result was made impossible in the future, the

continued operation of these forces would be checked.

[Sidenote ◆1 Further, it is impossible to prevent interest being

both offered and taken for the use of Capital.]

◆¹ But interest depends also on a reason that is yet stronger and more

simple than these. The owner of Capital receives interest for the use

of it, because it is, in the very nature of things, impossible to

prevent its being offered him, and impossible to prevent his taking it.

If a man who possesses _one hundred thousand pounds_, by using it as

Capital makes _ten thousand pounds_ a year, and could, if he had the

use of another _one hundred thousand pounds_, add another _ten thousand

pounds_ to his income, no Government could prevent his making a bargain

with a man who happened to possess the sum required, by which the

latter, in return for lending him that sum, would obtain a part of the

income which the use of it would enable him to produce.

The most practical aspect of the matter, however, yet remains to be

considered. I have spoken of interest as of a thing with whose nature

we are all familiar. But let us pause and ask, What is it? It is merely

a part of the product which active Ability is enabled to produce by

means of its tool, Capital. It is the part given by the man who uses

the tool to the man who owns it. But the tool, or Capital, is, as we

have seen already, itself the product of the Ability of some man in the

past; so that the payment of interest, whether theoretically just or

no, is a question which concerns theoretically two parties only: the

possessor of living Ability, and the possessor of the results of past

Ability. Thus, whatever view we may happen to take about it, Labour,

in so far as theoretical justice goes, has no concern in the matter,

one way or the other. For if interest is robbery, it is Ability that is

robbed, not Labour.

[Sidenote ◆1 And whether interest be just or no, it at all events

represents no injustice to Labour.]

[Sidenote ◆2 For it will modify, though not extinguish, their

desire to appropriate a part of what is paid as

interest.]

◆¹ It is important to take notice of this truth; for a knowledge of

what is theoretically just, though it can never control classes so

far as to prevent their seizing on whatever they can obtain and keep,

exercises none the less a very strong influence on their views as to

how much of the wealth of other classes is obtainable, and also on

the temper in which, and the entire procedure by which, they will

endeavour to obtain it. ◆² For this reason it is impossible to insist

too strongly on the fact that, as a matter of theoretical justice,

Labour, as such, has no claim whatever on any of the interest paid

for the use of Capital; and that if it succeeds in obtaining any part

of this interest, it will be obtaining what has been made by others,

not what has been made by itself. It is not that such arguments as

these will extinguish the desire of Labour to increase its own wages

at the expense of interest, if possible; for might—the might that can

sustain itself, not the brute force of the moment—will always form in

the long run the practical rule of right; but they will disseminate a

dispassionate view of what the limits of possibility are, and on what

these limits depend.

[Sidenote ◆1 History shows us that they have been doing this

already,]

◆¹ And now let us turn to the facts of industrial history, and see

what light they throw on what has just been said. I have pointed out

that if Capital is to be made or used at all, it must necessarily,

for many reasons, be allowed to yield interest to its owners; but the

amount of interest it yields has varied at various times; and, although

to abolish it altogether would be impossible, or, if possible, fatal

to production, it is capable, under certain circumstances, of being

reduced to a minimum, without production being in any degree checked;

and every _pound_ which the man who employs Capital is thus relieved

from paying to the man who owns it constitutes, other things being

equal, a fund which may be appropriated by Labour. To say this is to

make no barren theoretical statement. The fund in question not only

may, under certain circumstances, be appropriated by Labour; but these

circumstances are the natural result of our existing industrial system;

and the fund, as I will now show, has been appropriated by Labour

already, and forms a considerable part of that additional income which

Labour, as we have seen, has secured from the income created by Ability.

[Sidenote ◆1 to an increasing extent.]

[Sidenote ◆2 Interest now forms but a small part of the income of

the nation,]

◆¹ In days preceding the rise of the modern industrial system, the

average rate of interest was as high as ten per cent. As the modern

system developed itself, as Ability more and more was diverted from

war, and concentrated on commerce and industry, and produced by the use

of Capital a larger and more certain product, ◆² the price it paid for

the use of Capital fell, till by the middle of this century it was not

more than five per cent. During the past forty years it has continued

to sink still further, and can hardly be said now to average much more

than three.

[Sidenote ◆1 In spite of appearances to the contrary;]

◆¹ This fact is sufficiently well known to investors; but there are

other facts known equally well which tend to confuse popular thought

on the subject, and which accordingly, in a practical work like this,

it is very necessary to place in their true light. For, in spite of

what has been said of the fall in the rate of interest from ten to six,

and to five, and from five to three per cent, it is notorious that

companies, when successful, often pay to-day dividends of from ten to

twenty per cent, or even more; and founders’ shares in companies are

constantly much sought after, which are merely shares in such profits

as result over and above a return of at least ten per cent on the

capital.

[Sidenote ◆1 As much of what is vulgarly considered interest is

something quite different.]

But the explanation of this apparent contradiction is simple. Large

profits must not be confounded with high interest. ◆¹ Large profits are

a mixture of three things, as was pointed out by Mill, though he did

not name two of them happily. He said that profits consisted of wages

of superintendence, compensation for risk, and interest on Capital. If,

instead of wages of superintendence, we say the product of Ability, and

instead of compensation for risk, we say the reward of sagacity, which

is itself a form of Ability, we shall have an accurate statement of the

case. A large amount of the Capital in the kingdom is managed by the

men who own it; and when they manage it successfully, the returns are

large. Sometimes a man with a Capital of _a hundred thousand pounds_

will make as much as _fifteen thousand pounds_ a year; but that does

not mean that his Capital yields fifteen per cent of interest. Let such

a man be left another _hundred thousand pounds_, which he determines

not to put into his own business, but invests in some security held to

be absolutely safe, and he will find that interest on Capital means not

more than three and a half per cent. If he is determined to get a large

return on his Capital, and if he does this by investing it in some

new and speculative enterprise, this result, unless it be the mere

good luck of a gambler, is mainly the result of his own knowledge and

judgment, as the following facts clearly enough show.

Between the years 1862 and 1885 there were registered in the United

Kingdom about _twenty-five thousand_ joint stock companies, with an

aggregate Capital of about _two thousand nine hundred million pounds_.

Of these companies, by the year 1885, more than _fifteen thousand_

had failed, and less than _ten thousand_ were still existing. During

the following four years the proportion of failures was smaller; but

a return published in 1889 shows that of all the companies formed

during the past twenty-seven years, considerably more than half had

been wound up judicially. Therefore a man who secures a large return

on money invested in a business not under his own control, does so by

an exercise of sagacity not only beneficial to himself, but in a still

higher degree beneficial to the country generally; for he has helped

to direct human exertion into a profitable and useful channel, whereas

those who are less sagacious do but help it to waste itself.[49]

Of large returns on Capital, then, only a part is interest; the larger

part being merely another name for what we have shown to be the actual

creation of Ability—either the Ability with which the Capital has

been employed in directing Labour, or the Ability with which some new

method of directing Labour has been selected. There is accordingly no

contradiction in the two statements that Capital may often bring more

than fifteen per cent to the original investors; and yet that interest

on Capital in the present day is not more than three or three and a

half per cent. Here is the explanation of shares rising in value. A man

who at the starting of a business takes _a hundred one pound shares_

in it, and, when it is well established, gets _twenty pounds_ a year

as a dividend, will be able to sell his shares for something like _six

hundred pounds_; which means that little more than three per cent is

the interest which will be received by the purchaser.

[Sidenote ◆1 Interest, then, has decreased, and the whole sum thus

saved has gone to the labouring classes.]

◆¹ Interest, then, or the sum which those who use Capital pay to

those who own it, having decreased, as we have seen it has done, with

the development of our industrial system, it remains to show the

reader where the sum thus saved has gone. It must have gone to one

or other of two classes of people: to the men of Ability, or to the

labourers. If it had gone to the former,—that is, to the employers of

Labour,—their gains now would be greater, in proportion to the Capital

employed by them, than they were fifty years ago; but if their gains

have not become greater, then the sum in question must obviously have

found its way to the labourers. And that such is the case will be made

sufficiently evident by the fact that Mr. Giffen has demonstrated in

the most conclusive way that, if rent and the interest taken by the

classes that pay income-tax had increased as fast as the sum actually

taken by Labour, the sum assessed to income-tax would be _four hundred

million pounds_ greater than it is, and the sum taken by Labour _four

hundred million pounds_ less.[50] In this case the wealthier classes

would be now taking _one thousand and sixty million pounds_, instead

of the _six hundred million pounds_ which they actually do take;[51]

and the labouring classes, instead of taking, as they do, _six hundred

and sixty million pounds_, or, as Mr. Giffen maintains, more, would be

taking only _two hundred and sixty million pounds_.[52] In fact, as Mr.

Giffen declares, “It would not be far short of the mark to say that the

whole of the great improvement of the last fifty years has gone to the

masses.” And the accuracy of this statement is demonstrated in a very

striking way by the fact that had the whole improvement, according to

the contrary hypothesis, gone not to the labourers, but to the classes

that pay income-tax, the remainder, namely, _two hundred and sixty

million pounds_, would correspond, almost exactly, allowing for the

increase of their numbers, with what the labouring classes received at

the close of the last century.

[Sidenote ◆1 What the social reformer should study is not the

dreams of Socialists, but the forces actually at work,

through which Labour has already gained, and is gaining

so much.]

◆¹ What, then, the social reformer, what the labourer, and the friend

of Labour, ought to study with a view to improving the condition of

the labouring classes, is not the theories and dreams of those who

imagine that the improvement is to be made only by some reorganisation

of society, but the progress, and the causes of the progress, that

these classes have actually been making, not only under existing

institutions, but through them, because of them, by means of them.

CHAPTER III

_Of the Causes owing to which, and the Means by

which Labour participates in the growing

Products of Ability._

Let me repeat in other words what I have just said. The labouring

classes, under the existing condition of things, have acquired more

wealth in a given time than the most sanguine Socialist of fifty

years ago could have promised them; and this increased wealth has

found its way into their pockets owing to causes that are in actual

operation round us. These causes, therefore, should be studied for two

reasons: firstly, in order that we may avoid hindering their operation;

secondly, in order that we may, if possible, accelerate it; and I shall

presently point out, as briefly, but as clearly as I can, what the

general character of these causes is.

[Sidenote ◆1 It is true that there are notorious facts that may

make the superficial or excitable observer doubt the

reality of this great progress of the labouring classes.]

◆¹ But before doing this,—before considering the cause of this

progress,—I must for a moment longer dwell and insist upon the reality

of it; because unhappily there are certain notorious facts which

constantly obtrude themselves on the observation of everybody, and

which tend to make many people deny, or at least doubt it. These facts

are as follows.

[Sidenote ◆1 But when these facts—viz. facts relating to the very

poor—are reduced to their true proportions,]

Speaking in round numbers, there exists in this country to-day a

population consisting of about _seven hundred thousand_ families,

or _three million_ persons, whose means of subsistence are either

insufficient, or barely sufficient, or precarious, and the conditions

of whose life generally are either hard or degrading, or both. A

considerable portion of them may, without any sentimental exaggeration,

be called miserable; and all of them may be called more or less

unfortunate. There is, further, this observation to be made. People who

are in want of the bare necessaries of life can hardly be worse off

absolutely at one period than another; but if, whilst their own poverty

remains the same, the riches of other classes increase, they do, in

a certain sense, become worse off relatively. The common statement,

therefore, that the poor are getting constantly poorer is, in this

relative sense, true of a certain part of the population; and that

part is now nearly equal in numbers to the entire population of the

country at the time of the Norman Conquest. Such being the case, it is

of course obvious that persons who, for purposes of either benevolence

or agitation, are concerned to discover want, misfortune, and misery,

find it easier to do so now than at any former period. London alone

possesses an unfortunate class which is probably as large as the whole

population of Glasgow; and an endless procession of rags and tatters

might be marched into Hyde Park to demonstrate every Sunday. But if

the unfortunate class in London is as large as the whole population of

Glasgow, we must not forget that the population of London is greater

by nearly a _million_ than the population of all Scotland; ◆¹ and the

truth is that, although the unfortunate class has, with the increase

of population, increased in numbers absolutely, yet relatively, for

at least two centuries, it has continued steadily to decrease. In

illustration of this fact, it may be mentioned that, whereas in 1850

there were _nine_ paupers to every _two hundred_ inhabitants, in 1882

there were only _five_; whilst, to turn for a moment to a remoter

period, so as to compare the new industrial system with the old, in

the year 1615, a survey of Sheffield, already a manufacturing centre,

showed that the “begging poor,” who “could not live without the charity

of their neighbours,” actually amounted to one-third of the population,

or _seven hundred and twenty-five_ households out of _two thousand two

hundred and seven_. Further, although, as I observed just now, it is

in a certain sense true to say that, relatively to other classes, the

unfortunate class has been getting poorer, the real tendency of events

is expressed in a much truer way by saying that all other classes have

been getting more and more removed from poverty.

[Sidenote ◆1 We shall find that they have no such significance,

nor disprove in any way the extraordinary progress of

the vast majority.]

[Sidenote ◆2 What then are the causes of this progress?]

◆¹ What the presence, then, and the persistence of this class really

shows us is not that the progress of the labouring classes as a whole

has been less rapid and less remarkable than it has just been said to

be, but that a certain fraction of the population, for some reason or

other, has always remained hitherto outside this general progress; and

the one practical lesson which its existence ought to force on us is

not to doubt the main movement, still less to interfere with it, but to

find some means of drawing these outsiders into it. ◆² This great and

grave problem, however, requires to be treated by itself, and does not

come within the scope of the present volume. Our business is not with

the causes which have shut out one-tenth of the poorer classes from the

growing national wealth, but with those which have so signally operated

in making nine-tenths of them sharers in it.

[Sidenote ◆1 They are of two kinds: spontaneous tendencies, and

the deliberate and concerted actions of men.]

We will accordingly return to these, and consider what they are. ◆¹ We

shall find them to be of two kinds: firstly, those which consist of

the natural actions of men, each pursuing his own individual interest;

and secondly, their concerted actions, which represent some general

principle, and are deliberately undertaken for the advantage not of an

individual but of a class. We will begin with considering the former;

as not only are they the most important, but they also altogether

determine and condition the latter, and the latter, indeed, can do

little more than assist them.

[Sidenote ◆1 We will begin with the spontaneous tendencies—_i.e._

the natural actions of individuals, each pursuing his

own interest.]

[Sidenote ◆2 There are two ways of getting rich: (1) by

abstracting from an existing income, or (2) by adding to

it. The rich class of the modern world have, as a whole,

become rich in the second way.]

◆¹ The natural causes that tend to distribute amongst Labour a large

portion of the wealth produced by Ability will be best understood if we

first consider for a moment the two ways—and the two only ways—in which

a minority can become wealthy. ◆² What these are can be easily realised

thus. Let us imagine a community of eight labouring men, who make each

of them _fifty pounds_ a year, and who represent Labour; and let us

imagine a ninth man,—a man of Ability,—who represents the minority. The

ninth man might, if he were strong enough, rob each of the eight men

of _twenty-five pounds_, compelling them each to live on _twenty-five

pounds_ instead of on _fifty pounds_, and appropriate to himself an

annual _two hundred pounds_. Or he might reach the same result in a

totally different way. He might so direct and assist the Labour of

the eight men, that without any extra effort to themselves they each,

instead of _fifty pounds_ produced _seventy-five pounds_, and if,

under these circumstances, he took _twenty-five pounds_ from each, he

would gain the same sum as before, namely _two hundred pounds_, but,

as I said, in a totally different way. It would represent what he had

added to the original product of the labourers, instead of representing

anything he had taken from it. Now whatever may have been true of rich

classes in former times and under other social conditions, the riches

now enjoyed by the rich class in this country have, with exceptions

which are utterly unimportant, been acquired by the latter of these two

methods, not by the former. They represent an addition to the product

of Labour, not an abstraction from it. This is, of course, clear from

what has been said already; but it is necessary here to specially bear

it in mind.

[Sidenote ◆1 Let us consider the nature of the process,]

[Sidenote ◆2 By first representing Labour and Ability in their

simplest imaginable forms; Ability, or the employing

class, being represented as one man.]

◆¹ Let us then take a community of eight labourers, each producing

commodities worth _fifty pounds_ a year, and each consuming—as he

easily might—the whole of them. These men represent the productive

power of Labour; ◆² and now let us suppose the advent of Ability in

the person of the ninth man, by whose assistance this productive power

is multiplied, and consider more particularly what the ninth man does.

There is one thing which it is quite plain he does not do. He does

not multiply the power of Labour for the sake of merely increasing

the output of those actual products which he finds the labourers

originally producing and consuming, and of appropriating the added

quantity; for the things he would thus acquire would be of no possible

good to him. He would have more boots and trousers than he could wear,

more bread and cheese than he could eat, and spades and implements

which he did not want to use. He would not want them himself, and

the labourers are already supplied with them. They would be no good

to anybody. He does not therefore employ his Ability thus, so as to

increase the output of the products that have been produced hitherto;

but he enables first, we will say, four men, then three, then two, and

lastly one, to produce the same products that were originally produced

by eight; and he thus liberates a continually increasing number, whom

he sets to produce products of new and quite different kinds.

Let us see how he does this. The eight labourers, when he finds

them, make each _fifty pounds_ a year, or _four hundred pounds_ in

the aggregate; and this represents the normal necessaries of their

existence. He, by the assistance which his Ability renders Labour,

enables at last, after many stages of progress, these same necessaries

to be produced by one single man, who, instead of producing, as

formerly, goods worth _fifty pounds_, finds himself, with the

assistance of Ability, producing goods worth _four hundred pounds_.

There is thus an increase of _three hundred and fifty pounds_, and this

increment the man of Ability takes.

Meanwhile, seven men are left idle, and with them the man of Ability

makes the following bargain. Out of the _three hundred and fifty

pounds_ worth of necessaries which he possesses, he offers each of

them _fifty pounds_ worth—the amount which originally they each made

for themselves, on condition that they will make other things for him,

or put their time at his disposal. They accordingly make luxuries for

him, or become his personal servants. For the _three hundred and fifty

pounds_ he pays them in the shape of necessaries, they return him

another _three hundred and fifty pounds_ in the shape of commodities or

of service; and this new wealth constitutes the able man’s income.

[Sidenote ◆1 In this case, there being no competition of

employers, there would be no natural distribution of the

increasing products amongst the labourers.]

Such, reduced to its simplest elements, is the process on which the

riches of the rich in the modern world depend. ◆¹ It will be seen,

however, that in the case we have just supposed, the labourers, by the

process in question, gain absolutely nothing. Each of them originally

made _fifty pounds_ a year. He now receives the same sum in wages. But

the total product has increased by _three hundred and fifty pounds_,

and of this the labourers acquire no share whatever. Nor, supposing

them to be inexperienced in the art of combination, is there any means

by which they could ever do so. And if our imaginary community were a

complete representation of reality, the same would be the case with the

labourers in real life.

[Sidenote ◆1 But let us introduce a second man of Ability

competing with the first, and the process of

distribution of the increased product amongst the

labourers begins at once.]

◆¹ But it must now be pointed out that in one important respect, as a

representation of reality, our community is incomplete. It represents

the main process by which the riches of the rich are produced; but it

offers no parallel to one factor in the real situation, owing to which

the labourers inevitably acquire a share in them. In that community the

rich classes are represented by a single person, who has no conflicting

interests analogous to his own to contend against. But in actual

life, so far as this point is concerned, the condition of the rich is

different altogether. As looked at from without, they are, indeed, a

single body, which may with accuracy be represented as one man; but

as looked at from within, they are a multitude of different bodies,

whose interests, within certain limits, are diametrically opposed to

each other. In order, therefore, to make our illustration complete,

instead of one man of Ability we must imagine two. The first, whose

fortunes we have just followed, and whom, for the sake of distinctness,

we will christen John, has already brought production to the state

that has been just described. He has managed to get seven men out of

eight to produce luxuries for himself,—luxuries, we will say, such

as wine, cigars, and butter,—paying these seven men with the surplus

necessaries which, with his assistance, are produced by the eighth man.

But of these luxuries the seven men keep none; nor can they give any

of them to the eighth man, their fellow. John takes all. But now let

us suppose that a second man of Ability, whom we will christen James,

appears upon the scene, just as anxious as John to direct Labour by

his Ability, and just as capable of making Labour productive. But all

the labourers are at present in the pay of John. James therefore must

set himself to detach them from John’s service; and he accordingly

engages that if they will work for him they shall not only each receive

the necessaries that John gives them, but a share of the other things

that they produce—of the butter, of the cigars, and of the wine—as

well. The moment this occurs, John has to make a similar offer; and

thus the wages of Labour at once begin to rise. When they have been

forced up to a certain point, James and John cease to bid against one

another, and each employs a certain number of labourers, till one or

other of them makes some new discovery which enables the same amount

of some commodity—we will say cigars—as has hitherto been produced by

two men, to be produced by one; and thus a new labourer is set free,

and is available for some new employment. We must assume that James and

John could both employ this man profitably—that is, that they could

set him to produce some new object of desire—let us say strawberries;

and, this being so, there is again a competition for his labour. He

is offered by both employers as much as he has received hitherto, and

as the other labourers receive; and he is offered besides a certain

number of strawberries. Whichever employer ultimately secures his

services, the man has secured some further addition to his income. He

has some share in the increasing wealth of the community; and, as John

and James continue to compete in increasing the production of all other

commodities, some share of each increase will in time go to all the

labourers.

[Sidenote ◆1 And nothing can stop this process except an increase

of population _in excess of the increase_ in the

productive powers of Ability.]

◆¹ One thing only could interfere with this process; and that has

been excluded from our supposed community: namely, an increase in its

numbers. And a mere increase in the numbers would in itself not be

enough. It must be an increase which outstrips the discovery of new

ways in which labour may be employed profitably. Let us suppose that

to our original eight labourers, eight new labourers are added, who

if left to themselves could do just what the first eight could do,

namely, produce annual subsistence for themselves to the value of

_fifty pounds_ each. If, under the management of James or John, the

productivity of these men could be multiplied eight-fold, as was the

case with the first eight, James and John would be soon competing for

their services, and the second eight, like the first eight, would share

in the increased product. But if, owing to all the best land being

occupied, and few improvements having been discovered in the methods of

any new industries, the productivity of the new men could be increased

not eight-fold, but only by one-eighth—that is to say, if what each man

produces by his unaided Labour could be raised by Ability from _fifty

pounds_, not to _four hundred pounds_, but to no more than _fifty-six

pounds ten shillings_,—_fifty-six pounds ten shillings_ would be the

utmost these men would get, even if the Ability of James or John got

no remuneration whatever. Meanwhile, however, the first set of workmen

are, as we have seen, receiving much more than this. They are receiving

each, we will say, _one hundred pounds_. The second set, therefore,

naturally envy them their situations, and endeavour to secure these

for themselves by offering their Labour at a considerably lower price.

They offer it at _ninety pounds_, at _seventy pounds_, or even at

_sixty pounds_; for they would be bettering their present situation by

accepting even this last sum. This being the case, the original eight

labourers have necessarily to offer their Labour at reduced terms also;

and thus the wages of Labour are diminished all round.

Such is the inevitable result under such circumstances, if each

man—employer and employed alike—follows his own interest at the bidding

of common sense. One man is not more selfish than another; indeed, in

a bad sense, nobody is selfish at all; and for the result nobody is

to blame. The average wages of Labour are diminished for this simple

reason, and for no other—that the average product is diminished which

each labourer assists in producing. The community is richer absolutely;

but it is poorer in proportion to its numbers.[53] Let us see how

this works out. The original product of the first eight labourers was

_fifty pounds_ a head, or _four hundred pounds_ in the aggregate. This

was raised by the co-operation of Ability to _four hundred pounds_ a

head, or _three thousand two hundred pounds_ in the aggregate. But the

second set of labourers, whatever Ability may do for them, cannot be

made to produce more than _fifty-six pounds ten shillings_ a head, or

an aggregate of _four hundred and fifty-two pounds_; and thus, whereas

eight labourers produced _three thousand two hundred pounds_, sixteen

labourers produce only _three thousand six hundred and fifty-two

pounds_, and the average product is lowered from _four hundred pounds_

to _two hundred and twenty-eight pounds_.[54]

[Sidenote ◆1 This natural power, however, can be regulated by

deliberate action, political and other, and made more

beneficial to the labourers;]

[Sidenote ◆2 Which action takes two chief forms—legislation, and

combinations amongst the labourers. We will discuss both

in the next chapter.]

Wages naturally decline then, owing to an increase of population, when

relatively to the population wealth declines also; but only then. ◆¹ On

the other hand,—and this is the important point to consider,—so long as

a country, under the existing system of production, continues, like our

own, to grow richer in proportion to the number of labourers, of every

fresh increase in riches the labourers will obtain a share, without any

political action or corporate struggle on their part, merely by means

of a natural and spontaneous process. And we have now seen in a broad

and general way what the character of this process is. It may seem,

however, to many people that a study of it and of its results can teach

no lesson but the lesson of _laisser faire_, which practically means

that the labourers have no interest in politics at all, and that all

social legislation and corporate action of their own is no better than

a waste of trouble, and is very possibly worse. But to think this is

to completely misconceive the matter. Even a study of this process of

natural distribution by itself would be fruitful of suggestions of a

highly practical kind; but if we would understand the actual forces

to which distribution is due, it must, as I have said already, not

be studied by itself, but taken in connection with others by which

its operation has been accelerated. I spoke of these as consisting of

deliberate and concerted actions in contradistinction to individual

and spontaneous actions; ◆² and these, speaking broadly, have been of

two kinds—the one represented by the organisation of Labour in Trade

Unions, the other by certain legislative measures, which, in a vague

and misleading way, are popularly described as “Socialistic.” Let us

proceed to consider these.

CHAPTER IV

_Of Socialism and Trade Unionism—the Extent and

Limitation of their Power in increasing the

Income of Labour._

[Sidenote ◆1 Legislation of the kind just alluded to is commonly

called Socialistic:]

[Sidenote ◆2 But this way of describing it is inaccurate;]

◆¹ I will speak first of the kind of legislation, popularly called

Socialistic, which certain people now regard with so much hope, and

others with corresponding dread; and I shall show that both of these

extreme views rest on a complete misconception of what this so-called

Socialism is. For what is popularly called Socialism in this country,

so far as it has ever been advocated by any political party, or has

been embodied in any measure passed or even proposed in Parliament, ◆²

does not embody what is really the distinctive principle of Socialism.

Socialism, regarded as a reasoned body of doctrine, rests altogether

on a peculiar theory of production, to which already I have made

frequent reference—a theory according to which the faculties of men

are so equal that one man produces as much wealth as another; or, if

any man produces more, he is so entirely indifferent as to whether

he enjoys what he produces or no, that he would go on producing it

just the same, if he knew that the larger part would at once be taken

away from him. Hence Socialists argue that the existing rewards of

Ability are altogether superfluous, and that the existing system of

production, which rests on their supposed necessity, can be completely

revolutionised and made equally efficacious without them.

[Sidenote ◆1 As all the so-called Socialistic legislation in this

country rests on the very system of production which

professed Socialists aim at destroying.]

But whatever may be the opinions of a few dreamers or theorists, or

however in the future these opinions may spread, the fundamental

principle of Socialism, up to the present time, has never been embodied

in any measure or proposal which has been advocated in this country by

any practical party. ◆¹ On the contrary, the proposals and measures

which are most frequently denounced as Socialistic—even one so extreme

as that of free meals for children at Board Schools—all presuppose

the system of production which is existing, and thus rest on the

very foundation which professed Socialists would destroy.[55] They

merely represent so many ways—wise or unwise—of distributing a public

revenue, which consists almost entirely of taxes on an income produced

by the forces of Individualism.

Now, so far as the matter is a mere question of words, we may call such

proposals or measures Socialistic if we like. On grounds of etymology

we should be perfectly right in doing so; but we shall see that in

that case, with exactly the same propriety, we may apply the word to

the institution of Government itself. The Army, the Navy, and more

obviously still the Police Force, are all Socialistic in this sense of

the word; nor can anything be more completely Socialistic than a public

road or a street. In each case a certain something is supported by a

common fund for the use of all; and every one is entitled to an equal

advantage from it, irrespective of his own deserts, or the amount he

has contributed to its support.

[Sidenote ◆1 What is called Socialism in this country is a

necessary part of every State;]

[Sidenote ◆2 And the principle may probably be extended with good

results, if not pushed too far.]

◆¹ If, then, we agree to call those measures Socialistic to which the

word is popularly applied at present, Socialism, instead of being

opposed to Individualism, is its necessary complement, as we may see

at once by considering the necessity of public roads and a police

force; for the first of these shows us that private property would be

inaccessible without the existence of social property; and the second

that it would be insecure without the existence of social servants.

The good or evil, then, that will result from Socialism, as understood

thus, depends altogether on questions of degree and detail. There is

no question as to whether we shall be Socialistic or no. ◆² We must be

Socialistic; and we always have been, though perhaps without knowing

it, as M. Jourdain talked prose. The only question is as to the precise

limits to which the Socialistic principle can be pushed with advantage

to the greatest number.

[Sidenote ◆1 That it can easily be pushed too far is obvious.]

What these limits may be it is impossible to discuss here. Any general

discussion of such a point would be meaningless. Each case or measure

must be discussed on its own merits. But, though it is impossible to

state what the limits are, it is exceedingly easy to show on what

they depend. They depend on two analogous and all-important facts,

one of which I have already explained and dwelt upon, and which

forms, indeed, one of the principal themes of this volume. This is

the fact, that the most powerful of our productive agents, namely

Ability, cannot be robbed, without diminishing its productivity, of

more than a certain proportion of the annual wealth produced by it;

and, as it is from this wealth that most of the Socialistic fund must

be appropriated, Socialistic distribution is limited by the limits of

possible appropriation. The other fact—the counterpart of this—is as

follows. Just as Ability is paralysed by robbing it of more than a

certain portion of its products, Labour may equally be paralysed by

an unwise distribution of them; and thus their continued production

be at last rendered impossible. ◆¹ For instance, quite apart from any

initial difficulty in raising the requisite fund from the wealthier

class of tax-payers, the providing of free meals for children in

Board Schools is open to criticism, on account of the effect which it

might conceivably have upon parents, of diminishing their industry

by diminishing the necessity for its exercise. Whether such would be

the effect really in this particular case, it is beside my purpose

to consider; but few people will doubt that if such a provision were

extended, and if, even for so short a time as a single six months,

free meals were provided for the parents also, half the Labour of

the country would be for the time annihilated. Labour, however, is

as necessary to production as is Ability, even though, under modern

conditions, it does not produce so much; and it is therefore perfectly

evident that there is a limit somewhere, beyond which to relieve the

individual labourer of his responsibilities by paying his expenses out

of a public fund will be, until human nature is entirely changed, to

dry up the sources from which that fund is derived.

[Sidenote ◆1 The sort of natural limit that there is to its

beneficial effects is shown by the history of our Poor

Laws.]

[Sidenote ◆2 Such Socialism, whatever good it may do, can never do

much in the way of raising money wages.]

As I have said already, it is impossible, in any general way, to give

any indication of what this limit is; but the industrial history of

this country supplies a most instructive instance in which it was

notoriously overpassed, and what was meant as a benefit to Labour,

under circumstances of exceptional difficulty, ended by endangering

the prosperity of the whole community. I refer to our Poor Law at the

beginning of this century, the effects of which form one of the most

remarkable object-lessons by which experience has ever illustrated a

special point in economics. ◆¹ That Poor Law, as Professor Marshall

well observes, “arranged that part of the wages [of the labourers]

should be given in the form of poor relief; and that this should be

distributed amongst them in the inverse proportion to their industry,

thrift, and forethought. The traditions and instincts,” he adds, “which

were fostered by that evil experience are even now a great hindrance to

the progress of the working classes.”[56] Now that particular evil on

which Professor Marshall comments,—namely, that the part of the wages

coming through this Socialistic channel were in the inverse proportion

to what had really been produced by the labourer—is inherent in all

Socialistic measures, the principal object of which is to raise or

supplement wages; as is clearly enough confessed by the Socialistic

motto, “To every man according to his needs.” ◆² It may accordingly be

said that, absolutely necessary as the Socialistic principle is, and

much as may be hoped from its extension in many directions, it neither

has been in the past, nor can possibly be in the future, efficacious to

any great extent in increasing the actual income of the labourer.[57]

[Sidenote ◆1 Trade Unionism in this way can do far more. We will

see first how, and then within what limits.]

◆¹ Such being the case, then, let us now turn our attention to another

principle of an entirely different kind, which, so far as regards

this object, is incalculably more important, and which has constantly

operated in the past, and may operate in the future, to increase the

labourer’s income, without any corresponding disadvantages. I mean

that principle of organisation amongst the labourers themselves which

is commonly called Trade Unionism; and which directly or indirectly

represents the principal means by which Labour is attempting,

throughout the civilised world, to accelerate and regulate the natural

distribution of wealth. I will first, in the light of the conclusions

we have already arrived at, point out to the reader what, speaking

generally, is the way in which Trade Unionism strengthens the hands

of Labour; and then consider what is the utmost extent to which the

strength which Labour now derives from it may be developed.

[Sidenote ◆1 The operation of Trade Unionism in raising wages can

be easily seen at a glance by reference to the simple

community which was imagined in the last chapter.]

◆¹ If the reader has not already forgotten our imaginary community,—our

eight labourers with John and James directing them,—our easiest

course will be to turn again to that. We saw that when the labourers

were employed by John only,—John who found them each making _fifty

pounds_ a year, and enabled them by his Ability each to make _four

hundred pounds_—we saw that the whole of this increase, in the natural

course of things, would be kept by John himself, by whose Ability it

was practically created; for it would not be to John’s advantage to

part with any of it, and the labourers, so long as they all acted

separately, would have no means of extracting any of it from him. It

would be useless for one of them at a time to strike for higher wages.

The striker and the employer would meet on wholly unequal terms;

because the striker, whilst the strike lasted, would be sacrificing the

whole of his income, whilst depriving the employer of only an eighth

part of his. But let us alter the supposition. Let us suppose that

the labourers combine together, and that the whole eight strike for

higher wages simultaneously. The situation is now completely changed;

and the loss that the struggle will entail on both parties is equal.

The employer, like the labourer, will for a time lose all his income.

It is true that if the employer has a reserve fund on which he can

support himself whilst production is suspended, and if the labourer has

no such fund, the employer may still be sure of an immediate victory,

should he be resolved at all costs to resist the labourers’ demand.

But, in any case, the cost of resisting it will be appreciable: it is

a loss which the labourers will be able to inflict on him repeatedly;

and he may see that they would be able, by their strikes, to make him

ultimately lose more than he would by assenting to their demands, or,

at all events, making some concessions to them. It is therefore obvious

that the labourers, in such a case, will be able to extract extra wages

in the inverse proportion to the loss which the employer will sustain

if he concedes them, and in direct proportion to the loss which would

threaten him should he refuse to do so.[58]

[Sidenote ◆1 Combination amongst labourers puts them at an

advantage as against competing employers, until their

demands grow so unreasonable as to force the employers

to combine.]

There is, however, much more to be said. With each increase of their

wages which the labourers succeed in gaining, they will be better

equipping themselves for any fresh struggle in the future; for they

will be able to set aside a larger and larger fund on which to support

themselves without working, and thus be in a position to make the

struggle longer, or, in other words, to inflict still greater injury

on the employer. ◆¹ And if such will be the case when there is one

employer only, much more will it be the case when there are two—when

John and James, as we have seen, are forced by the necessities of

competition to grant part of the labourers’ demands, even before they

are formulated. It might thus seem that there is hardly any limit

to the power which a perfected system of Trade Unionism may one day

confer upon the labourers. There are, however, two which we will

consider now, in addition to others at which we will glance presently.

One is the limit with which we are already familiar, and of which in

this connection I shall again speak, namely, the limit of the minimum

reward requisite as a stimulus to Ability. The other is a limit closely

connected with this, which is constituted by the fact that if the

demands of Labour are pushed beyond a certain point against disunited

employers, the employers will combine against Labour, as Labour has

combined against them, and all further concessions will be, at all

costs, unanimously refused.

[Sidenote ◆1 The ultimate tendency of Trade Unionism is to make

any conflict between the employer and employed like a

conflict between two individuals.]

[Sidenote ◆2 The limit to which it can raise wages is fixed by the

minimum reward that suffices to make Ability operative.]

◆¹ Now a situation like this is the ultimate situation which all Trade

Unionism tends to bring about. It tends, by turning the labourers into

a single body on the one hand, and the employers into a single body on

the other, to make the dispute like one between two individuals; and

though for many reasons this result can never be entirely realised,[59]

the limits of the power of Trade Unionism can be best seen by

imagining it. What, then, is the picture we have before us? We have

Labour and Ability in the character of two men confronting each other,

each determined to secure for himself the largest possible portion of

a certain aggregate amount of wealth which they produce together. Now

we will assume, though this is far from being the case, that neither

of them would shrink, for the sake of gaining their object, from

inflicting on the other the utmost injury possible; and we shall see

also, if we make our picture accurate, that Labour is physically the

bigger man of the two. It happens, however, that the very existence

of the wealth for the possession of which they are prepared to fight

is entirely dependent on their peacefully co-operating to produce it;

so that if in the struggle either disabled the other, he would be

destroying the prize which it is the object of his struggle to secure.

Thus the dispute between them, however hostile may be their temper,

must necessarily be of the nature not of a fight, but of a bargain;

and will be settled, like other bargains, by the process of compromise

which Adam Smith calls “the higgling of the market.” ◆² When such a

bargain is struck, there will be a limit on both sides: a maximum limit

to what Ability will consent to give, and a minimum limit to what

Labour will consent to receive. There will be a certain minimum which

Ability must concede in the long run; because if it did not give so

much, it would indirectly lose more: and conversely there is a certain

maximum more than which Labour will never permanently obtain; because

if it did so the stimulus to Ability would be weakened, and the total

product would in consequence be diminished, out of which alone the

increased share which Labour demands can come.

[Sidenote ◆1 Thus the possible power of Trade Unionism in raising

wages is far more limited than it seems.]

[Sidenote ◆2 If we judge hastily by the magnitude of modern Labour

combinations, and the extent to which they can terrorise

the community.]

◆¹ Thus the extent to which Trade Unionism can assist in raising

wages, no matter how wide and how complete its development, is far

more limited than appearances lead many people to suppose. For the

labourers, not only in this country, but all over the world, are

growing yearly more expert in the art of effective combination, and

are increasing their strength by a vast network of alliances; ◆²

and from time to time the whole civilised world is startled at the

powers of resistance and destruction which they show themselves to

have acquired, and which they have called into operation with a view

to enforcing their demands. The gas-strikes and the dock-strikes in

London, and the great railway-strikes, and the strike at Homestead in

America, are cases in point, and are enough to illustrate my meaning.

They impress the imagination with a sense that Labour is becoming

omnipotent. But in all these Labour movements there is one unchanging

feature, which seems never to be realised either by those who take part

in them or by observers, but on which really their entire character

depends, and which makes their actual character entirely different

from what it seems to be. That this feature should have so completely

escaped popular notice is one of the most singular facts in the history

of political blindness, and can be accounted for only by the crude

and imperfect state in which the analysis of the causes of production

has been left hitherto by economists. The feature I allude to is as

follows.

[Sidenote ◆1 The imperfect state of economic science has allowed a

totally false idea to be formed as to the force which

Trade Unionism represents.]

[Sidenote ◆2 The force which it represents is not Labour at all,

but a power of combining in order to abstain from

labour.]

[Sidenote ◆3 And even this power could never be universal, nor

last long; and whilst it lasts it depends on Capital.]

◆¹ These great developments of Trade Unionism which are commonly called

Labour movements do not really, in any accurate sense, represent

Labour at all. ◆² All that they represent in themselves is a power to

abstain from labouring. In other words, the increased command of the

labourers over the machinery of combination, and even their increased

command of the tactics of industrial warfare, represents no increased

command over the smallest of industrial processes, nor puts them in a

better position, without the aid of Ability, to maintain—still less

to increase by the smallest fraction—the production of that wealth in

which they are anxious to share farther. A strike therefore, however

great or however admirably organised, no more represents any part of

the power of Labour than the mutiny organised amongst the crew of

Columbus, with a view to making him give up his enterprise, represented

the power which achieved the discovery of America. And this is not

true of the average labourers only; it is yet more strikingly true of

the superior men who lead them. From the ranks of the labourers, men

are constantly rising whose abilities for organising resistance are

remarkable, and indeed admirable; but it is probably not too much to

say that no leader who has devoted himself to organising the labourers

for resistance has ever been a man capable, to any appreciable degree,

of giving them help by rendering their labour more productive. Those

who have been most successful in urging their fellows to _ask_ for

more, have been quite incompetent to help them to _make_ more. Thus

these so-called Labour leaders, no matter how considerable may be

many of their intellectual and moral qualities, are indeed leaders of

labourers; but they are no more leaders of Labour than a sergeant who

drilled a volunteer corps of art students could be called the leader

of a rising school of painting; and a strike is no more the expression

of the power of Labour than Byron’s swimming across the Hellespont was

an expression of the power of poetry, or than Burns’s poetry was an

expression of the power of ploughing. A strike is merely an expression

of the fact that the labourers, for good or ill, can acquire, under

certain circumstances, the power to cease from labouring, and can use

this as a weapon not of production, but of warfare. ◆³ The utmost that

the power embodied in Trade Unionism could accomplish would be to bring

about a strike that was universal; and although no doubt it might do

this theoretically, it could never do so much as this practically, for

the simple reason that, as I have already pointed out, Labour could

not be entirely suspended for even a single day. Further, the more

general the suspension was, the shorter would be the time for which it

could be maintained; and to mention yet another point to which I have

referred already, it could be maintained only, for no matter how short

a time, by the assistance of the very thing against which strikes are

ostensibly directed, namely Capital; and not even Capital could make

that time long. Nature, who is the arch-taskmaster, and who knows no

mercy, would soon smash like matchwood a Trade Union of all the world,

and force the labourers to go back to their work, even if no such body

as an employing class existed.

All the ideas, then, derived from the recent developments of Trade

Unionism, that Labour, through its means, will acquire any greatly

increasing power of commanding an increasing share of the total income

of the community, rests on a total misconception of the power that

Trade Unionism represents, and a total failure to see the conditions

and things that limit it. It is limited firstly by Nature, who makes

a general strike impossible; secondly by Capital, without which any

strike is impossible; and lastly by the fact that the labourers of the

present day already draw part of their wages from the wealth produced

by Ability; that any further increase they must draw from this source

entirely; and that, being thus dependent on the assistance of Ability

now, Trade Unionism, as we have seen, has not the slightest tendency to

make them any the less dependent on it in the future.

When the reader takes into account all that has just been said, he

will be hardly disposed to quarrel with the following conclusions of

Professor Marshall, who derives them from history quite as much as from

theory, and who expresses himself with regard to Trade Unions thus:

“Their importance,” he says, “is certainly great, and grows rapidly;

but it is apt to be exaggerated: for indeed many of them are little

more than eddies such as have always fluttered over the surface of

progress. And though they are now on a larger and more imposing scale

in this age than before, yet much as ever the main body of the movement

depends on the deep, silent, strong stream of the tendencies of Normal

Distribution and Exchange.”

[Sidenote ◆1 Trade Unionism, in raising wages, can do little more

than accelerate or regulate a rise that would take place

owing to other causes.]

[Sidenote ◆2 But none the less it may be of great benefit to the

labourers, and remove many evils which a general rise in

wages has not removed, and could not remove by itself.]

◆¹ But in the case of Trade Unionism, just as in that of Socialism,

because the extent is limited to which it can raise the labourers’

income, it does not follow that within these limits its action may

not be of great and increasing benefit. ◆² Thus Mill, whose general

view of the subject coincides broadly with that of Professor Marshall,

points out that though a Union will never be able permanently to raise

wages above the point to which in time they would rise naturally, nor

permanently to keep them above a point to which they would naturally

fall, it can hasten the rise, which might otherwise be long delayed,

and retard the fall, which might otherwise be premature; and the gain

to Labour may thus in the long run be enormous. Unions have done this

for Labour in the past; and with improved and extended organisation,

they may be able to do it yet more effectively in the future; and

they have done, and may continue to do many other things besides—to do

them, and to add to their number. It is beyond my purpose to speak of

these things in detail. In the next chapter, I shall briefly indicate

some of them; but the main points on which I am concerned to insist are

simpler; and the next chapter—the last—will be devoted principally to

these.

CHAPTER V

_Of the enormous Encouragement to be derived by

Labour from a true View of the Situation;

and of the Connection between the Interests

of the Labourer and Imperial Politics._

[Sidenote ◆1 Let me again remind the reader of the object of this

book.]

[Sidenote ◆2 It is to show that the labourer’s income depends on

the general forces of production firstly, and secondly

on those of distribution.]

◆¹ The object of this work, as I explained in the opening chapter, is

to point out to the great body of the people—that is to say, to the

multitude of average men and women, whose incomes consist of the wages

of ordinary Labour—the conditions which determine the possibility of

these incomes being increased, and so to enable them to distinguish

the true means from the false, which they may themselves adopt with a

view to obtaining this result. ◆² And in order to show them how their

present incomes may be increased, I have devoted myself to showing

the reader how their present incomes have been obtained. I have done

this by fixing his attention on the fact that their present incomes

obviously depend upon two sets of causes: first, the forces that

produce the aggregate income of the country; and secondly, the forces

that distribute a certain portion of this amongst the labourers. And

these last I have examined from two points of view; first exhibiting

their results, and then indicating their nature. Let me briefly

recapitulate what I have said about both subjects.

[Sidenote ◆1 I have just shown how the normal forces of

distribution are all in favour of the labourer, contrary

to the vulgar view of the matter.]

◆¹ I have shown that, contrary to the opinion which is too commonly

held, and which is sedulously fostered by the ignorance alike of the

agitator and the sentimentalist, the forces of distribution which

are actually at work around us, which have been at work for the past

hundred years, and which are part and parcel of our modern industrial

system, have been and are constantly securing for Labour a share of

every fresh addition to the total income of the nation; and have, for

at all events the past fifty years, made the average income of the

labouring man grow faster than the incomes of any other members of the

community. They have, in fact, been doing the very thing which the

agitator declared could be done only by resisting them; and they have

not only given Labour all that the agitator has promised it, but they

have actually given it more than the wildest agitator ever suggested to

it. I have shown the reader this; and I have shown him also that the

forces in question are primarily the spontaneous forces—“deep, strong,

and silent,” as Professor Marshall calls them—“of normal distribution

and exchange”; how that these have been, and are seconded by the

deliberate action of men: by extended application of what is called the

Socialistic principle, and to a far greater extent by combinations of

the labourers amongst themselves.

[Sidenote ◆1 This should encourage, and not discourage, political

action on behalf of the labourers.]

The practical moral of all this is obvious. As to the normal and

spontaneous forces of distribution, what a study of them inculcates on

the labourer is not any principle of political action, but a general

temper of mind towards the whole existing system. It inculcates general

acquiescence, instead of general revolt. Now temper of mind, being

that from which policies spring, is quite as important as the details

of any of the policies themselves. Still it must be admitted that

were the normal forces of distribution the only forces that had been

at work for the labourer’s benefit, the principal lesson they would

teach him would be the lesson of _laisser aller_. But though these

forces have been the primary, they have not been the only forces; and

the deliberate policies by which men have controlled their operation,

and have applied them, have been equally necessary in producing the

desired results. The normal forces of distribution may be compared

to the waters of the Nile, which would indeed, as the river rises,

naturally fertilise the whole of the adjacent country, but which would

do as much harm as good, and do but half the good they might do, if

it were not for the irrigation works devised by human ingenuity. And

what these works are to the Nile, deliberate measures have been to the

normal forces of distribution. The growing volume of wealth, which is

spreading itself over the fields of Labour, even yet has failed to

reach an unhappy fraction of the community; the tides and currents flow

with intermittent force, which is often destructive, still more often

wasted, rarely husbanded and applied to the best advantage. Had it not

been for the deliberate action of men,—for legislation in favour of the

labourers, and their own combinations amongst themselves,—these evils

which have accompanied their general progress would have been greater.

◆¹ Wise action in the future will undoubtedly make them less; and may,

though it is idle to hope for Utopias in this world, cause the larger

and darker part of them to disappear.

[Sidenote ◆1 Much is to be done beyond the mere raising of the

labourers’ wages; and Trade Unionism and so-called

Socialism vary much.]