It is impossible to deny that the considerations brought to notice in
the preceding chapter make out a frightful case either against the
existing order of society, or against the position of man himself in
this world. How much of the evils should be referred to the one, and
how much to the other, is the principal theoretic question which has
to be resolved. But the strongest case is susceptible of exaggeration;
and it will have been evident to many readers, even from the passages
I have quoted, that such exaggeration is not wanting in the
representations of the ablest and most candid Socialists. Though much
of their allegations is unanswerable, not a little is the result of
errors in political economy; by which, let me say once for all, I do
not mean the rejection of any practical rules of policy which have
been laid down by political economists, I mean ignorance of economic
facts, and of the causes by which the economic phenomena of society
as it is, are actually determined.
In the first place it is unhappily true that the wages of ordinary
labor, in all the countries of Europe, are wretchedly insufficient to
supply the physical and moral necessities of the population in any
tolerable measure. But, when it is further alleged that even this
insufficient remuneration has a tendency to diminish; that there is,
in the words of M. Louis Blanc, _une baisse continue des salaires_;
the assertion is in opposition to all accurate information, and to
many notorious facts. It has yet to be proved that there is any
country in the civilized world where the ordinary wages of labor,
estimated either in money or in articles of consumption, are
declining; while in many they are, on the whole, on the increase; and
an increase which is becoming, not slower, but more rapid. There are,
occasionally, branches of industry which are being gradually
superseded by something else, and, in those, until production
accommodates itself to demand, wages are depressed; which is an evil,
but a temporary one, and would admit of great alleviation even in the
present system of social economy. A diminution thus produced of the
reward of labor in some particular employment is the effect and the
evidence of increased remuneration, or of a new source of
remuneration, in some other; the total and the average remuneration
being undiminished, or even increased. To make out an appearance of
diminution in the rate of wages in any leading branch of industry, it
is always found necessary to compare some month or year of special and
temporary depression at the present time, with the average rate, or
even some exceptionally high rate, at an earlier time. The
vicissitudes are no doubt a great evil, but they were as frequent and
as severe in former periods of economical history as now. The greater
scale of the transactions, and the greater number of persons involved
in each fluctuation, may make the fluctuation appear greater, but
though a larger population affords more sufferers, the evil does not
weigh heavier on each of them individually. There is much evidence of
improvement, and none, that is at all trustworthy, of deterioration,
in the mode of living of the laboring population of the countries of
Europe; when there is any appearance to the contrary it is local or
partial, and can always be traced either to the pressure of some
temporary calamity, or to some bad law or unwise act of government
which admits of being corrected, while the permanent causes all
operate in the direction of improvement.
M. Louis Blanc, therefore, while showing himself much more enlightened
than the older school of levellers and democrats, inasmuch as he
recognizes the connection between low wages and the over-rapid
increase of population, appears to have fallen into the same error
which was at first committed by Malthus and his followers, that of
supposing that because population has a greater power of increase than
subsistence, its pressure upon subsistence must be always growing more
severe. The difference is that the early Malthusians thought this an
irrepressible tendency, while M. Louis Blanc thinks that it can be
repressed, but only under a system of Communism. It is a great point
gained for truth when it comes to be seen that the tendency to
over-population is a fact which Communism, as well as the existing
order of society, would have to deal with. And it is much to be
rejoiced at that this necessity is admitted by the most considerable
chiefs of all existing schools of Socialism. Owen and Fourier, no less
than M. Louis Blanc, admitted it, and claimed for their respective
systems a pre-eminent power of dealing with this difficulty. However
this may be, experience shows that in the existing state of society
the pressure of population on subsistence, which is the principal
cause of low wages, though a great, is not an increasing evil; on the
contrary, the progress of all that is called civilization has a
tendency to diminish it, partly by the more rapid increase of the
means of employing and maintaining labor, partly by the increased
facilities opened to labor for transporting itself to new countries
and unoccupied fields of employment, and partly by a general
improvement in the intelligence and prudence of the population. This
progress, no doubt, is slow; but it is much that such progress should
take place at all, while we are still only in the first stage of that
public movement for the education of the whole people, which when more
advanced must add greatly to the force of all the two causes of
improvement specified above. It is, of course, open to discussion what
form of society has the greatest power of dealing successfully with
the pressure of population on subsistence, and on this question there
is much to be said for Socialism; what was long thought to be its
weakest point will, perhaps, prove to be one of its strongest. But it
has no just claim to be considered as the sole means of preventing the
general and growing degradation of the mass of mankind through the
peculiar tendency of poverty to produce over-population. Society as at
present constituted is not descending into that abyss, but gradually,
though slowly, rising out of it, and this improvement is likely to be
progressive if bad laws do not interfere with it.
Next, it must be observed that Socialists generally, and even the most
enlightened of them, have a very imperfect and one-sided notion of the
operation of competition. They see half its effects, and overlook the
other half; they regard it as an agency for grinding down every one's
remuneration--for obliging every one to accept less wages for his
labor, or a less price for his commodities, which would be true only
if every one had to dispose of his labor or his commodities to some
great monopolist, and the competition were all on one side. They
forget that competition is a cause of high prices and values as well
as of low; that the buyers of labor and of commodities compete with
one another as well as the sellers; and that if it is competition
which keeps the prices of labor and commodities as low as they are, it
is competition which prevents them from falling still lower. In truth,
when competition is perfectly free on both sides, its tendency is not
specially either to raise or to lower the price of articles, but to
equalize it; to level inequalities of remuneration, and to reduce all
to a general average, a result which, in so far as realized (no doubt
very imperfectly), is, on Socialistic principles, desirable. But if,
disregarding for the time that part of the effects of competition
which consists in keeping up prices, we fix our attention on its
effect in keeping them down, and contemplate this effect in reference
solely to the interest of the laboring classes, it would seem that if
competition keeps down wages, and so gives a motive to the laboring
classes to withdraw the labor market from the full influence of
competition, if they can, it must on the other hand have credit for
keeping down the prices of the articles on which wages are expended,
to the great advantage of those who depend on wages. To meet this
consideration Socialists, as we said in our quotation from M. Louis
Blanc, are reduced to affirm that the low prices of commodities
produced by competition are delusive and lead in the end to higher
prices than before, because when the richest competitor has got rid of
all his rivals, he commands the market and can demand any price he
pleases. Now, the commonest experience shows that this state of
things, under really free competition, is wholly imaginary. The
richest competitor neither does nor can get rid of all his rivals, and
establish himself in exclusive possession of the market; and it is not
the fact that any important branch of industry or commerce formerly
divided among many has become, or shows any tendency to become, the
monopoly of a few.
The kind of policy described is sometimes possible where, as in the
case of railways, the only competition possible is between two or
three great companies, the operations being on too vast a scale to be
within the reach of individual capitalists; and this is one of the
reasons why businesses which require to be carried on by great
joint-stock enterprises cannot be trusted to competition, but, when
not reserved by the State to itself, ought to be carried on under
conditions prescribed, and, from time to time, varied by the State,
for the purpose of insuring to the public a cheaper supply of its
wants than would be afforded by private interest in the absence of
sufficient competition. But in the ordinary branches of industry no
one rich competitor has it in his power to drive out all the smaller
ones. Some businesses show a tendency to pass out of the hands of many
small producers or dealers into a smaller number of larger ones; but
the cases in which this happens are those in which the possession of a
larger capital permits the adoption of more powerful machinery, more
efficient by more expensive processes, or a better organized and more
economical mode of carrying on business, and thus enables the large
dealer legitimately and permanently to supply the commodity cheaper
than can be done on the small scale; to the great advantage of the
consumers, and therefore of the laboring classes, and diminishing,
_pro tanto_, that waste of the resources of the community so much
complained of by Socialists, the unnecessary multiplication of mere
distributors, and of the various other classes whom Fourier calls the
parasites of industry. When this change is effected, the larger
capitalists, either individual or joint stock, among which the
business is divided, are seldom, if ever, in any considerable branch
of commerce, so few as that competition shall not continue to act
between them; so that the saving in cost, which enabled them to
undersell the small dealers, continues afterwards, as at first, to be
passed on, in lower prices, to their customers. The operation,
therefore, of competition in keeping down the prices of commodities,
including those on which wages are expended, is not illusive but real,
and, we may add, is a growing, not a declining, fact.
But there are other respects, equally important, in which the charges
brought by Socialists against competition do not admit of so complete
an answer. Competition is the best security for cheapness, but by no
means a security for quality. In former times, when producers and
consumers were less numerous, it was a security for both. The market
was not large enough nor the means of publicity sufficient to enable a
dealer to make a fortune by continually attracting new customers: his
success depended on his retaining those that he had; and when a dealer
furnished good articles, or when he did not, the fact was soon known
to those whom it concerned, and he acquired a character for honest or
dishonest dealing of more importance to him than the gain that would
be made by cheating casual purchasers. But on the great scale of
modern transactions, with the great multiplication of competition and
the immense increase in the quantity of business competed for, dealers
are so little dependent on permanent customers that character is much
less essential to them, while there is also far less certainty of
their obtaining the character they deserve. The low prices which a
tradesman advertises are known, to a thousand for one who has
discovered for himself or learned from others, that the bad quality of
the goods is more than an equivalent for their cheapness; while at the
same time the much greater fortunes now made by some dealers excite
the cupidity of all, and the greed of rapid gain substitutes itself
for the modest desire to make a living by their business. In this
manner, as wealth increases and greater prizes seem to be within
reach, more and more of a gambling spirit is introduced into
commerce; and where this prevails not only are the simplest maxims of
prudence disregarded, but all, even the most perilous, forms of
pecuniary improbity receive a terrible stimulus. This is the meaning
of what is called the intensity of modern competition. It is further
to be mentioned that when this intensity has reached a certain height,
and when a portion of the producers of an article or the dealers in it
have resorted to any of the modes of fraud, such as adulteration,
giving short measure, &c., of the increase of which there is now so
much complaint, the temptation is immense on these to adopt the
fraudulent practises, who would not have originated them; for the
public are aware of the low prices fallaciously produced by the
frauds, but do not find out at first, if ever, that the article is not
worth the lower price, and they will not go on paying a higher price
for a better article, and the honest dealer is placed at a terrible
disadvantage. Thus the frauds, begun by a few, become customs of the
trade, and the morality of the trading classes is more and more
deteriorated.
On this point, therefore, Socialists have really made out the
existence not only of a great evil, but of one which grows and tends
to grow with the growth of population and wealth. It must be said,
however, that society has never yet used the means which are already
in its power of grappling with this evil. The laws against commercial
frauds are very defective, and their execution still more so. Laws of
this description have no chance of being really enforced unless it is
the special duty of some one to enforce them. They are specially in
need of a public prosecutor. It is still to be discovered how far it
is possible to repress by means of the criminal law a class of
misdeeds which are now seldom brought before the tribunals, and to
which, when brought, the judicial administration of this country is
most unduly lenient. The most important class, however, of these
frauds, to the mass of the people, those which affect the price or
quality of articles of daily consumption, can be in a great measure
overcome by the institution of co-operative stores. By this plan any
body of consumers who form themselves into an association for the
purpose, are enabled to pass over the retail dealers and obtain their
articles direct from the wholesale merchants, or, what is better (now
that wholesale co-operative agencies have been established), from the
producers, thus freeing themselves from the heavy tax now paid to the
distributing classes and at the same time eliminate the usual
perpetrators of adulterations and other frauds. Distribution thus
becomes a work performed by agents selected and paid by those who have
no interest in anything but the cheapness and goodness of the article;
and the distributors are capable of being thus reduced to the numbers
which the quantity of work to be done really requires. The
difficulties of the plan consist in the skill and trustworthiness
required in the managers, and the imperfect nature of the control
which can be exercised over them by the body at large. The great
success and rapid growth of the system prove, however, that these
difficulties are, in some tolerable degree, overcome. At all events,
if the beneficial tendency of the competition of retailers in
promoting cheapness is fore-gone, and has to be replaced by other
securities, the mischievous tendency of the same competition in
deteriorating quality is at any rate got rid of; and the prosperity of
the co-operative stores shows that this benefit is obtained not only
without detriment to cheapness, but with great advantage to it, since
the profits of the concerns enable them to return to the consumers a
large percentage on the price of every article supplied to them. So
far, therefore, as this class of evils is concerned, an effectual
remedy is already in operation, which, though suggested by and partly
grounded on socialistic principles, is consistent with the existing
constitution of property.
With regard to those greater and more conspicuous economical frauds,
or malpractices equivalent to frauds, of which so many deplorable
cases have become notorious--committed by merchants and bankers
between themselves or between them and those who have trusted them
with money, such a remedy as above described is not available, and the
only resources which the present constitution of society affords
against them are a sterner reprobation by opinion, and a more
efficient repression by the law. Neither of these remedies has had any
approach to an effectual trial. It is on the occurrence of
insolvencies that these dishonest practices usually come to light; the
perpetrators take their place, not in the class of malefactors, but in
that of insolvent debtors; and the laws of this and other countries
were formerly so savage against simple insolvency, that by one of
those reactions to which the opinions of mankind are liable,
insolvents came to be regarded mainly as objects of compassion, and it
seemed to be thought that the hand both of law and of public opinion
could hardly press too lightly upon them. By an error in a contrary
direction to the ordinary one of our law, which in the punishment of
offences in general wholly neglects the question of reparation to the
sufferer, our bankruptcy laws have for some time treated the recovery
for creditors of what is left of their property as almost the sole
object, scarcely any importance being attached to the punishment of
the bankrupt for any misconduct which does not directly interfere with
that primary purpose. For three or four years past there has been a
slight counter-reaction, and more than one bankruptcy act has been
passed, somewhat less indulgent to the bankrupt; but the primary
object regarded has still been the pecuniary interest of the
creditors, and criminality in the bankrupt himself, with the exception
of a small number of well-marked offences, gets off almost with
impunity. It may be confidently affirmed, therefore, that, at least in
this country, society has not exerted the power it possesses of making
mercantile dishonesty dangerous to the perpetrator. On the contrary,
it is a gambling trick in which all the advantage is on the side of
the trickster: if the trick succeeds it makes his fortune, or
preserves it; if it fails, he is at most reduced to poverty, which was
perhaps already impending when he determined to run the chance, and
he is classed by those who have not looked closely into the matter,
and even by many who have, not among the infamous but among the
unfortunate. Until a more moral and rational mode of dealing with
culpable insolvency has been tried and failed, commercial dishonesty
cannot be ranked among evils the prevalence of which is inseparable
from commercial competition.
Another point on which there is much misapprehension on the part of
Socialists, as well as of Trades Unionists and other partisans of
Labor against Capital, relates to the proportions in which the produce
of the country is really shared and the amount of what is actually
diverted from those who produce it, to enrich other persons. I forbear
for the present to speak of the land, which is a subject apart. But
with respect to capital employed in business, there is in the popular
notions a great deal of illusion. When, for instance, a capitalist
invests L20,000 in his business, and draws from it an income of
(suppose) L2,000 a year, the common impression is as if he was the
beneficial owner both of the L20,000 and of the L2,000, while the
laborers own nothing but their wages. The truth, however, is, that he
only obtains the L2,000 on condition of applying no part of the
L20,000 to his own use. He has the legal control over it, and might
squander it if he chose, but if he did he would not have the L2,000 a
year also. As long as he derives an income from his capital he has not
the option of withholding it from the use of others. As much of his
invested capital as consists of buildings, machinery, and other
instruments of production, are applied to production and are not
applicable to the support or enjoyment of any one. What is so
applicable (including what is laid out in keeping up or renewing the
buildings and instruments) is paid away to laborers, forming their
remuneration and their share in the division of the produce. For all
personal purposes they have the capital and he has but the profits,
which it only yields to him on condition that the capital itself is
employed in satisfying not his own wants, but those of laborers. The
proportion which the profits of capital usually bear to capital itself
(or rather to the circulating portion of it) is the ratio which the
capitalist's share of the produce bears to the aggregate share of the
laborers. Even of his own share a small part only belongs to him as
the owner of capital. The portion of the produce which falls to
capital merely as capital is measured by the interest of money, since
that is all that the owner of capital obtains when he contributes
nothing to production except the capital itself. Now the interest of
capital in the public funds, which are considered to be the best
security, is at the present prices (which have not varied much for
many years) about three and one-third per cent. Even in this
investment there is some little risk--risk of repudiation, risk of
being obliged to sell out at a low price in some commercial crisis.
Estimating these risks at 1/3 per cent., the remaining 3 per cent. may
be considered as the remuneration of capital, apart from insurance
against loss. On the security of a mortgage 4 per cent. is generally
obtained, but in this transaction there are considerably greater
risks--the uncertainty of titles to land under our bad system of law;
the chance of having to realize the security at a great cost in law
charges; and liability to delay in the receipt of the interest even
when the principal is safe. When mere money independently of exertion
yields a larger income, as it sometimes does, for example, by shares
in railway or other companies, the surplus is hardly ever an
equivalent for the risk of losing the whole, or part, of the capital
by mismanagement, as in the case of the Brighton Railway, the dividend
of which, after having been 6 per cent. per annum, sunk to from
nothing to 1-1/2 per cent., and shares which had been bought at 120
could not be sold for more than about 43. When money is lent at the
high rates of interest one occasionally hears of, rates only given by
spend-thrifts and needy persons, it is because the risk of loss is so
great that few who possess money can be induced to lend to them at
all. So little reason is there for the outcry against "usury" as one
of the grievous burthens of the working-classes. Of the profits,
therefore, which a manufacturer or other person in business obtains
from his capital no more than about 3 per cent. can be set down to the
capital itself. If he were able and willing to give up the whole of
this to his laborers, who already share among them the whole of his
capital as it is annually reproduced from year to year, the addition
to their weekly wages would be inconsiderable. Of what he obtains
beyond 3 per cent. a great part is insurance against the manifold
losses he is exposed to, and cannot safely be applied to his own use,
but requires to be kept in reserve to cover those losses when they
occur. The remainder is properly the remuneration of his skill and
industry--the wages of his labor of superintendence. No doubt if he is
very successful in business these wages of his are extremely liberal,
and quite out of proportion to what the same skill and industry would
command if offered for hire. But, on the other hand, he runs a worse
risk than that of being out of employment; that of doing the work
without earning anything by it, of having the labor and anxiety
without the wages. I do not say that the drawbacks balance the
privileges, or that he derives no advantage from the position which
makes him a capitalist and employer of labor, instead of a skilled
superintendent letting out his services to others; but the amount of
his advantage must not be estimated by the great prizes alone. If we
subtract from the gains of some the losses of others, and deduct from
the balance a fair compensation for the anxiety, skill, and labor of
both, grounded on the market price of skilled superintendence, what
remains will be, no doubt, considerable, but yet, when compared to the
entire capital of the country, annually reproduced and dispensed in
wages, it is very much smaller than it appears to the popular
imagination; and were the whole of it added to the share of the
laborers it would make a less addition to that share than would be
made by any important invention in machinery, or by the suppression of
unnecessary distributors and other "parasites of industry." To
complete the estimate, however, of the portion of the produce of
industry which goes to remunerate capital we must not stop at the
interest earned out of the produce by the capital actually employed in
producing it, but must include that which is paid to the former owners
of capital which has been unproductively spent and no longer exists,
and is paid, of course, out of the produce of other capital. Of this
nature is the interest of national debts, which is the cost a nation
is burthened with for past difficulties and dangers, or for past folly
or profligacy of its rulers, more or less shared by the nation itself.
To this must be added the interest on the debts of landowners and
other unproductive consumers; except so far as the money borrowed may
have been spent in remunerative improvement of the productive powers
of the land. As for landed property itself--the appropriation of the
rent of land by private individuals--I reserve, as I have said, this
question for discussion hereafter; for the tenure of land might be
varied in any manner considered desirable, all the land might be
declared the property of the State, without interfering with the right
of property in anything which is the product of human labor and
abstinence.
It seemed desirable to begin the discussion of the Socialist question
by these remarks in abatement of Socialist exaggerations, in order
that the true issues between Socialism and the existing state of
society might be correctly conceived. The present system is not, as
many Socialists believe, hurrying us into a state of general indigence
and slavery from which only Socialism can save us. The evils and
injustices suffered under the present system are great, but they are
not increasing; on the contrary, the general tendency is towards their
slow diminution. Moreover the inequalities in the distribution of the
produce between capital and labor, however they may shock the feeling
of natural justice, would not by their mere equalisation afford by any
means so large a fund for raising the lower levels of remuneration as
Socialists, and many besides Socialists, are apt to suppose. There is
not any one abuse or injustice now prevailing in society by merely
abolishing which the human race would pass out of suffering into
happiness. What is incumbent on us is a calm comparison between two
different systems of society, with a view of determining which of them
affords the greatest resources for overcoming the inevitable
difficulties of life. And if we find the answer to this question more
difficult, and more dependent upon intellectual and moral conditions,
than is usually thought, it is satisfactory to reflect that there is
time before us for the question to work itself out on an experimental
scale, by actual trial. I believe we shall find that no other test is
possible of the practicability or beneficial operation of Socialist
arrangements; but that the intellectual and moral grounds of Socialism
deserve the most attentive study, as affording in many cases the
guiding principles of the improvements necessary to give the present
economic system of society its best chance.