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A HISTORY OF ECONOMIC DOCTRINES




                              A HISTORY OF
                           ECONOMIC DOCTRINES
                    FROM THE TIME OF THE PHYSIOCRATS
                           TO THE PRESENT DAY

                             BY CHARLES GIDE
                  PROFESSOR OF SOCIAL ECONOMICS IN THE
                   FACULTY OF LAW UNIVERSITY OF PARIS

                                   AND

                              CHARLES RIST
                  PROFESSOR OF POLITICAL ECONOMY IN THE
                   FACULTY OF LAW IN THE UNIVERSITY OF
                               MONTPELLIER

             AUTHORISED TRANSLATION FROM THE SECOND REVISED
                      AND AUGMENTED EDITION OF 1913

                     UNDER THE DIRECTION OF THE LATE
                         PROFESSOR WILLIAM SMART

                                   BY
                            R. RICHARDS B.A.
                  LECTURER IN THE UNIVERSITY COLLEGE OF
                               NORTH WALES

                         D. C. HEATH AND COMPANY
                         BOSTON NEW YORK CHICAGO
                   DALLAS ATLANTA LONDON SAN FRANCISCO

                          _All rights reserved_

          _Printed in Great Britain at THE BALLANTYNE PRESS by
                   SPOTTISWOODE, BALLANTYNE & CO. LTD.
                       Colchester, London & Eton_




PREFATORY NOTE


Gide’s _Principles of Political Economy_, of which there are several
translations, is probably better known to English students than any
similar work of foreign origin on the subject, and many readers of that
book will welcome an opportunity of perusing this volume which Professor
Gide has produced in collaboration with Professor Rist.

The remarkable dearth of literature of this kind in English may be
pleaded in further extenuation of the attempt to present the work in
an English garb, and readers of the Preface will be able to contrast
the position in this country with the very different condition of
things prevailing across the Channel. The contrast might even be
carried a stage farther, and it would be interesting to speculate upon
the historical causes which have made Germany supreme in the field of
economic research and history, which influenced France in her choice of
the history of theory, and which decreed that England should on the whole
remain faithful to the tradition of the “pure doctrine.” Can it be that
something like a “territorial division of labour” applies in matters
intellectual as well as economic?

Be that as it may, we can hardly pretend to be satisfied with the
position of our country in this matter of doctrinal history. Of the nine
names mentioned in the Preface, only two are English, namely, Ashley
and Ingram; and it is no disparagement to Ashley’s illuminating study
of mediæval England to say that the main interest of his work is not
doctrinal, and that Cunningham’s name might with equal appropriateness
have been included in the list.

Omitting both Ashley and Cunningham, whose labours have been largely
confined to the realm of economic history, we are thus left with Ingram’s
short but learned work as the sole contribution of English scholarship to
the history of economic thought.

English readers may possibly be puzzled by the omission of any
references, except a stray quotation or two, to Cannan’s _History of
the Theories of Production and Distribution_. But the microscopic care
with which the earlier theories are examined and elucidated in that work
have resulted in its being regarded as a most valuable contribution to
economic theory itself, and under the circumstances the absence of any
reference to it in the Preface is not altogether surprising.

Our apparent indifference to the development which theory has undergone
in the course of the last 150 years is all the more difficult to explain
when we recall the fact that England has always been the classic home
of theory, both orthodox and socialist, and our backwardness in this
respect contrasts very unfavourably with the progress made in the kindred
study of economic history during the last twenty-five years under the
inspiration of writers like Ashley, Cunningham, Maitland, Round, and
Seebohm.

Most critics are by this time agreed that Ingram’s work, lucid and
learned though it is, is somewhat marred by being written too exclusively
from the standpoint of a Positivist philosopher who thought he saw in
the rapid rise of the Historical school an indisputable proof of the
soundness of the Comtean principles and a presage of their ultimate
triumph.

Complete impartiality in the writing of history, even were it attainable,
may not be altogether desirable, and the present authors have hastened
to disclaim any such qualification. Notwithstanding this, some of their
readers will possibly feel that certain French schools, both ancient
and modern, have been dealt with at disproportionate length, and that
scarcely enough attention has been paid to certain English and American
writers. But it will surely do us little harm occasionally “to see
ourselves as others see us.”

The chief interest of the present volume will probably be found to
consist in the attempt made to give us something like a true perspective
of certain modern theories by connecting them with their historical
antecedents; and we can imagine its later pages being scanned with a
great deal of justifiable curiosity. After all, the verdict of history
upon the achievements of Smith, the measure of his indebtedness to his
immediate predecessors, and the extent to which the “car of economic
progress” was accelerated or retarded in its movements at the hands of
Ricardo and his contemporaries is fairly well established by this time.
On one point only do the present writers seem to challenge that verdict,
namely, in their designation of Ricardo and Malthus as Pessimists.

It is otherwise with the more modern writers, however. Their work has not
the distinctness of that of the earlier writers, partly because we are
not sufficiently removed from it as yet, and partly because some of it
is obscured by the haze of party strife. But it may help us to a better
understanding of their relative positions to learn, for example, that
the Historical school, which set out on its career of conquest with a
considerable flourish of trumpets, has not yet succeeded in giving us a
new science of Political Economy; that the Marxian doctrine is already
antiquated, in the opinion of certain members of that school; that the
Socialism of the Fabian Society is merely a recrudescence of Ricardian
economics, and that Anarchism is nothing but a violent form of Liberalism.

       *       *       *       *       *

I cannot hope to have succeeded in retaining in this translation the
freshness and vivacity of the original. But I have endeavoured to make
the rendering as accurate as possible; and with this object in view
considerable trouble has been taken to verify the quotations.

As the title-page implies, the work was originally begun at the
suggestion of the late Professor Smart of Glasgow, and to-day more than
ever I am conscious of what I owe to his kindly criticism and genial
encouragement.

The passage of the book through the press has been watched with assiduous
care by Mr. C. C. Wood, who is also responsible for the Index at the end
of the volume. I can scarcely express the measure of my indebtedness to
him. To my friends Mr. W. H. Porter, M.A., and Mr. J. G. Williams, M.A.,
both of Bangor, I am also indebted for reading some of the proofs.

                                                              R. RICHARDS




PREFACE


In the economic curricula of French universities much greater stress
is laid upon the history of economic theory than is the case anywhere
else. Attached to the Faculty of Law in each of these universities is a
separate chair specially devoted to this subject; at the examination for
the doctor’s degree a special paper is set in the history of theory, and
if necessary further proof of competence is demanded from the student
before his final admission to the degree. At the Sorbonne, where there
is only one chair in economics, that chair is exclusively devoted to the
history of doctrines, and the same is true of the chair recently founded
at the École des Hautes Études.

Such prominence given to the history of theory must seem excessive,
especially when it is remembered that in economic history, as distinct
from the history of economics, there is not a single chair in the whole
of France. Those who believe that the French people are somewhat prone
to ideology will not fail to see in this fact a somewhat unfortunate
manifestation of that tendency. Elsewhere the positions are reversed,
the premier place being given to the study of facts rather than ideas.
Extreme partisans of the historical method, especially the advocates of
historical materialism, regard doctrines and systems as nothing better
than a pale reflection of facts. It is a part of their belief that facts
are the only things that matter, and that the history of the evolution of
property or the rise of the wage system may prove quite as instructive as
the history of the controversies concerning the nature of the right of
property or the wages-fund theory.

Such views as we have just expressed, however, are not altogether devoid
of exaggeration, though of a kind directly opposite to that which we
would naturally impute to them. The influence exerted by the economic
environment, whence even the most abstract economist gets material for
reflection and the exercise of his logical acumen, is indisputable. The
problems which the theorist has to solve are suggested by the rise of
certain phenomena which at one moment cut a very prominent figure and at
another disappear altogether. Such problems must vary in different places
and at different times. The peculiar economic condition in which England
found herself at the beginning of the nineteenth century had a great
deal to do in directing Ricardo’s thought to the study of the problems
of rent and note issue. But for the advent of machinery, with the
subsequent increase in industrial activity and the parallel growth of a
proletarian class, followed by the recurrence of economic crises, we may
be certain that neither the doctrine of Sismondi nor that of Karl Marx
would ever have seen the light of day. It is equally safe to assume that
the attention which economists have recently bestowed upon the theory of
monopoly is not altogether unconnected with the contemporary development
of the trust movement.

But, while recognising all this, it is important that we should
remember that facts alone are not sufficient to explain the origin of
any doctrines, even those of social politics, and still less those
of a purely scientific character. Ideas even are not independent of
time and place. Similar conditions in the same epoch of history have
not infrequently given rise to heterogeneous and even antagonistic
theories—J. B. Say’s and Sismondi’s, for example, Bastiat’s and
Proudhon’s, Schulze-Delitzsch’s and Marx’s, Francis Walker’s and those
of Henry George. With what combination of historical circumstances are
we to connect Cournot’s foundation of the Mathematical school in France,
or how are we to account for the simultaneous discovery in three or four
countries of the theory of final utility?

Although anxious not to seem to make any extravagant claims for the
superiority of the history of theory, we are not ashamed of repeating
our regrets for the comparative neglect of economic history, and we are
equally confident in claiming for our subject the right to be regarded
as a distinct branch of the science.[1] We shall accordingly omit all
reference to the history of economic facts and institutions except in so
far as such reference seems indispensable to an understanding of either
the appearance or disappearance of such and such a doctrine or to the
better appreciation of the special prominence which a theory may have
held at one moment, although it is quite unintelligible to us to-day.
Sometimes even the facts are connected with the doctrines, not as causes,
but as results, for, notwithstanding the scepticism of Cournot, who was
wont to declare that the influence exerted by economists upon the course
of events was about equal to the influence exerted by grammarians upon
the development of language, it is impossible not to see a connection
between the commercial treaties of 1860, say, and the teachings of the
Manchester school, or between labour legislation and the doctrine of
State Socialism.

To write a history of economic doctrines which should not exceed the
limits of a single volume was to attempt an almost impossible task, and
the authors cannot pretend that they have accomplished such a difficult
feat. Even a very summary exposition of such doctrines as could not
possibly be neglected involved the omission of others of hardly less
importance.

But in the first place it was possible to pass over the pioneers by
taking the latter part of the eighteenth century as the starting-point.
There is no doubt that the beginnings of economic science lie in a
remoter past, but the great currents of economic thought known as the
“schools” only began with the appearance of those two typical doctrines,
individualism and socialism, in the earlier half of the nineteenth
century.[2] Moreover, the omission is easily made good, for it so happens
that the earlier periods are those most fully dealt with in such works as
have already appeared on the subject. For the period of antiquity we have
the writings of Espinas[3] and Souchon; the mediæval and post-mediæval
periods, right up to the eighteenth century, are treated of in the works
of Dubois and Rambaud; while, in addition to these, we have the writings
of Ashley, Ingram, Hector Denis, Brants, and Cossa, to mention only a
few. Modern theories, as contrasted with those of the earlier periods,
have received comparatively little attention.

Not only have we been obliged to confine our attention to certain
periods, but we have also had to restrict ourselves to certain countries.
We would claim the indulgence of those of our readers who feel that
French doctrines have been considered at disproportionate length,
reminding them that we had French students chiefly in view when writing.
Each author is at liberty to do the same for his own particular country,
and it is better so, for readers generally desire to learn more about
those things of which they already know something. But, despite the
prominence given to France, England and Germany were bound to receive
considerable attention, although in the case of the latter country we
had to make considerable omissions. With regard to the other countries,
which we were too often obliged to pass by in silence or to mention
only very casually in connection with some theory or other, we are most
anxious not to appear indifferent to the eminent services rendered
by them, and especially Italy and the United States, to the cause of
economic science, both in the past and in the present.

But, notwithstanding such restrictions, the field was still too wide, and
we were obliged to focus attention on the minimum number of names and
ideas, with a view to placing them in a better light. Our ambition has
been, not to write as full or detailed a history as we possibly could,
but merely to draw a series of pictures portraying the more prominent
features of some of the more distinct epochs in the history of economic
doctrines.

Such choice must necessarily be somewhat arbitrary, for it is not always
an easy matter to fix upon the best representative of each doctrine.
Especially is this the case in a science like economics, where the
writers, unknown to one another, not infrequently repeat the same ideas,
and it becomes a matter of some difficulty to decide the claim to
priority. But although it may be difficult to hit upon the exact moment
at which a certain idea first made its appearance, it is comparatively
easy to determine when such an idea attracted general attention or took
its place in the hierarchy of accepted or scarcely disputed truths. This
has been our criterion. With regard to those whose names do not figure
in our list, although quite worthy of a place in the front rank, we
cannot believe that they will suffer much through this temporary eclipse,
especially in view of the partiality of the age for the pioneers. That
we are not unduly optimistic in this matter may be inferred from the
numerous attempts recently made to discover the _poetæ minores_ of the
science, and to make amends for the scant justice done them by the more
biased historians of the past.

Not only was selection necessary in the case of authors, but a similar
procedure had to be applied to the doctrines. It must be realised,
however, that a selection of this character does not warrant the
conclusion that the doctrines dealt with are in any way superior to
those which are not included, either from the standpoint of moral value,
of social utility, or of abstract truth, for we are not of the number
who think with J. B. Say that the history of error can serve no useful
purpose.[4] We would rather associate ourselves with Condillac when he
remarks: “It is essential that everyone who wishes to make some progress
in the search for truth should know something of the mistakes committed
by people like himself who thought they were extending the boundaries
of knowledge.” The study of error would be thoroughly well justified
even though the result were simply a healthy determination to avoid it
in future. It would be even more so if Herbert Spencer’s version of the
saying of Shakespeare, that there is no species of error without some
germ of truth in it, should prove correct. One cannot, moreover, be said
to possess a knowledge of any doctrine or to understand it until one
knows something of its history, and of the pitfalls that lay in the path
of those who first formulated it. A truth received as if it has fallen
from the sky, without any knowledge of the efforts whereby it has been
acquired, is like an ingot of gold got without toil—of little profit.

Moreover, it is to be remembered that this book is intended primarily for
students, and that it may be useful to show them in what respects certain
doctrines are open to criticism, either from the point of view of logic
or of observation. We have attempted to confine such criticism within the
strictest limits, partly because we did not wish the volume to become
too bulky, and partly because we felt that what is important for our
readers are not our own opinions, but the opinions of the masters of the
science with which we deal. Wherever possible these have been given the
opportunity of speaking for themselves, and for this reason we have not
been afraid to multiply quotations.

A special effort has been made to bring into prominence such
doctrines—whether true or false—as have contributed to the formation of
ideas generally accepted at the present time, or such as are connected
with these in the line of direct descent. In other words, the book is an
attempt to give an answer to the following questions: Who is responsible
for formulating those principles that constitute the framework—whether
provisionary or definitive it is not for us to determine—of economics
as at present taught? At what period were these principles first
enunciated, and what were the circumstances which accounted for their
enunciation just at that period? Thus we have thought it not altogether
out of place to pay some attention to those ideas which, although only
on the borderland of economics, have exercised considerable influence
either upon theory itself, upon legislation, or upon economic thought in
general. We refer to such movements as Christian Socialism, Solidarism,
and Anarchism. Had we considered it advisable to retain the official
title by which this kind of work is generally known, we should have had
to describe it as _A History of the Origin and Evolution of Contemporary
Economic Doctrines_.

The plan of a history of this kind was a matter that called for some
amount of deliberation. It was felt that, being a history, fairly close
correspondence with the chronological order was required, which meant
either taking a note of every individual doctrine, or breaking up the
work into as many distinct histories as there are separate schools. The
former procedure would necessitate giving a review of a great number
of doctrines in a single chapter, which could only have the effect
of leaving a very confused impression upon the reader’s mind. The
alternative proposal is open to the objection that, instead of giving
us a general outline, it merely treats us to a series of monographs,
which prevents our realising the nature of that fundamental unity that
in all periods of history binds every doctrine together, similar and
dissimilar alike. We have attempted to avoid the inconveniences and to
gain something of the advantages offered by these alternative methods
by grouping the doctrines into families according to their descent,
and presenting them in their chronological order. This does not mean
that we have classified them according to the date of their earliest
appearance; it simply means that we have taken account of such doctrines
as have reached a certain degree of maturity. There is always some
culminating-point in the history of every doctrine, and in deciding
to devote a separate chapter to some special doctrine we have always
had such a climacteric in mind. Nor have we scrupled to abandon the
chronological order when the exigencies of the exposition seemed to
demand it.

The first epoch comprises the end of the eighteenth and the beginning of
the nineteenth centuries. It deals mainly with the founders of Classical
political economy, with the Physiocrats, Smith and Say, and with Malthus
and Ricardo, the two writers whose gloomy forebodings were to cloud the
glory of the “natural order.”

The second epoch covers the first half of the nineteenth century. The
“adversaries” include all those writers who either challenged or in
some way disputed the principles which had been laid down by their
predecessors. To these writers five chapters are devoted, dealing
respectively with Sismondi, Saint-Simon, the Associative Socialists,
List, and Proudhon.

A third epoch deals with the middle of the nineteenth century and the
triumph of the Liberal school, which had hitherto withstood every attack,
though not without making some concessions. It so happened that the
fundamental doctrines of this school were definitely formulated about
the same time, though in a very different fashion, of course, in the
_Principles_ of Stuart Mill in England and the _Harmonies_ of Bastiat in
France.

The second half of the nineteenth century constitutes a fourth period.
Those who dissented from the Liberalism of the previous epoch are
responsible for the schisms that began to manifest themselves in four
different directions at this time. The Historical school advocates the
employment of the inductive method, and the State Socialists press the
claims of a new social policy. Marxism is an attack upon the scientific
basis of the science, and Christian Socialism a challenge to its ethical
implications.

A fifth epoch comprises the end of the nineteenth century and the
beginning of the twentieth. The heading “Recent Doctrines” includes
several theories that are already well known to us, but which seem
transfigured—or disfigured, as some would prefer to put it—in their new
surroundings. The Hedonistic doctrine and the theory of rent represent a
kind of revision of the Classical theories. Solidarism is an attempt to
bridge the gap that exists between individualism and socialism, whilst
Anarchism can only be described as a kind of impassioned Liberalism.

This order of succession must not be taken to imply that each antecedent
doctrine has either been eliminated by some subsequent doctrine or else
incorporated in it. The rise of the Historical school in the middle of
the nineteenth century, for example, happened to be contemporaneous with
the triumph of the Liberal school and the revival of Optimism. In a
similar fashion the new Liberalism of the Austrian school was coincident
with the advent of State intervention and the rise of Collectivism.

We cannot, however, help noticing a certain rhythmical sequence in this
evolutionary process. Thus we find the Classical doctrine, as it is
called, outlined in the earliest draft of the science, but disappearing
under the stress of more or less socialistic doctrines, to reappear
in a new guise later on. There is no necessity for regarding this as
a mere ebb and flow such as distinguishes the fortunes of political
parties under a parliamentary _régime_. Such alternation in the history
of a doctrine has its explanation not so much in the character of the
doctrine itself as in the favour of public opinion, which varies with the
fickleness of the winds of heaven.

But doctrines and systems have a vitality of their own which is
altogether independent of the vagaries of fashion. It were better to
regard their history, like all histories of ideas, as a kind of struggle
for existence. At one moment conflicting doctrines seem to dwell in
harmony side by side, content to divide the empire of knowledge between
them. Another moment witnesses them rushing at each other with tumultuous
energy. It may happen that in the course of the struggle some of the
doctrines are worsted and disappear altogether. But more often than not
their conflicting interests are reconciled and the enmity is lost in the
unity of a higher synthesis. And so it may happen that a doctrine which
everybody thought was quite dead may rise with greater vigour than ever.

The bibliography of the subject is colossal. In addition to the general
histories, which are already plentiful, the chapters devoted to the
subject in every treatise on political economy, and the numerous
articles which have appeared in various reviews, there is scarcely an
author, however obscure, who is not the subject of a biography. To have
attempted to enumerate all these works would merely have meant increasing
the bulk of the book without being able to pretend that our list was
exhaustive. It is scarcely necessary to add that this meant that we had
to confine ourselves to the work done by the “heroes” of this volume.
Their commentators and critics only came in for our attention when
we had to borrow either an expression or an idea directly from them
or when we felt it necessary that the reader should fill up the gaps
left by our exposition. This accounts for the number of names which
had to be relegated to the foot-notes. But such deliberate excision
must not prevent our recognising at the outset the debt that we owe to
the many writers who have traversed the ground before us. They have
facilitated our task and have a perfect right to regard themselves as our
collaborators. We feel certain that they will find that their labours
have not been ignored or forgotten.

Although this book, so far as the general task of preparation and
revision is concerned, must be regarded as the result of a collective
effort on the part of the two authors whose names are subjoined, the
actual work of composition was undertaken by each writer separately. The
Contents will sufficiently indicate the nature of this division of labour.

The authors refuse to believe that collaboration in the production of
a scientific history of ideas need imply absolute agreement on every
question that comes up for consideration. Especially is this the case
with the doctrines of political and social economy outlined herein;
each of the authors has retained the fullest right of independent
judgment on all these matters. Consequently any undue reserve or any
extravagant enthusiasm shown for some of these doctrines must be taken
as an expression of the personal predilection of the signatory of the
particular article.

                                                             CHARLES GIDE
                                                             CHARLES RIST




CONTENTS


                                                                      PAGE

                          BOOK I: THE FOUNDERS

  CHAPTER I: THE PHYSIOCRATS (M. GIDE)                                   1


                                    I

    I. THE NATURAL ORDER                                                 5

   II. THE NET PRODUCT                                                  12

  III. THE CIRCULATION OF WEALTH                                        18


                                   II

    I. TRADE                                                            27

   II. THE FUNCTIONS OF THE STATE                                       33

  III. TAXATION                                                         38

   IV. RÉSUMÉ OF THE PHYSIOCRATIC DOCTRINE. CRITICS AND DISSENTERS      45


  CHAPTER II: ADAM SMITH (M. RIST)                                      50

    I. DIVISION OF LABOUR                                               56

   II. THE “NATURALISM” AND “OPTIMISM” OF SMITH                         68

  III. ECONOMIC LIBERTY AND INTERNATIONAL TRADE                         93

   IV. THE INFLUENCE OF SMITH’S THOUGHT AND ITS DIFFUSION. J. B. SAY   102


  CHAPTER III: THE PESSIMISTS (M. GIDE)                                118

    I. MALTHUS                                                         120

       THE LAW OF POPULATION                                           121

   II. RICARDO                                                         138

       1. THE LAW OF RENT                                              141

       2. OF WAGES AND PROFITS                                         157

       3. THE BALANCE OF TRADE THEORY AND THE QUANTITY THEORY
            OF MONEY                                                   163

       4. PAPER MONEY, ITS ISSUE AND REGULATION                        165


                        BOOK II: THE ANTAGONISTS


  CHAPTER I: SISMONDI AND THE ORIGINS OF THE CRITICAL SCHOOL
    (M. RIST)                                                          170

    I. THE AIM AND METHOD OF POLITICAL ECONOMY                         173

   II. SISMONDI’S CRITICISM OF OVER-PRODUCTION AND COMPETITION         178

  III. THE DIVORCE OF LAND FROM LABOUR AS THE CAUSE OR PAUPERISM
         AND OF CRISES                                                 186

   IV. SISMONDI’S REFORM PROJECTS. HIS INFLUENCE UPON THE HISTORY
        OF DOCTRINES                                                   192


  CHAPTER II: SAINT-SIMON, THE SAINT-SIMONIANS, AND THE BEGINNINGS
    OF COLLECTIVISM (M. RIST)                                          198

    I. SAINT-SIMON AND INDUSTRIALISM                                   202

   II. THE SAINT-SIMONIANS AND THEIR CRITICISM OF PRIVATE PROPERTY     211

  III. THE IMPORTANCE OF SAINT-SIMONISM IN THE HISTORY OF DOCTRINES    225


  CHAPTER III: THE ASSOCIATIVE SOCIALISTS                              231

    I. ROBERT OWEN (M. GIDE)                                           235

       1. THE CREATION OF THE MILIEU                                   237

       2. THE ABOLITION OF PROFIT                                      239

   II. CHARLES FOURIER (M. GIDE)                                       245

       1. THE PHALANSTÈRE                                              246

       2. INTEGRAL CO-OPERATION                                        248

       3. BACK TO THE LAND                                             251

       4. ATTRACTIVE LABOUR                                            252

  III. LOUIS BLANC (M. RIST)                                           255


  CHAPTER IV: FRIEDRICH LIST AND THE NATIONAL SYSTEM OF POLITICAL
    ECONOMY (M. RIST)                                                  264

    I. LIST’S IDEAS IN RELATION TO THE ECONOMIC CONDITIONS IN GERMANY  266

   II. SOURCES OF LIST’S INSPIRATION. HIS INFLUENCE UPON SUBSEQUENT
         PROTECTIONIST DOCTRINES                                       277

  III. LIST’S REAL ORIGINALITY                                         287


  CHAPTER V: PROUDHON AND THE SOCIALISM OF 1848 (M. RIST)              290

    I. CRITICISM OF PRIVATE PROPERTY AND SOCIALISM                     291

   II. THE REVOLUTION OF 1848 AND THE DISCREDIT OF SOCIALISM           300

  III. THE EXCHANGE BANK THEORY                                        307

   IV. PROUDHON’S INFLUENCE AFTER 1848                                 320


                          BOOK III: LIBERALISM


  CHAPTER I: THE OPTIMISTS (M. GIDE)                                   322

    I. THE THEORY OF SERVICE-VALUE                                     332

   II. THE LAW OF FREE UTILITY AND RENT                                335

  III. THE RELATION OF PROFITS TO WAGES                                340

   IV. THE SUBORDINATION OF PRODUCER TO CONSUMER                       342

    V. THE LAW OF SOLIDARITY                                           344


  CHAPTER II: THE APOGEE AND DECLINE OF THE CLASSICAL SCHOOL. JOHN
    STUART MILL (M. GIDE)                                              348

    I. THE FUNDAMENTAL LAWS                                            354

   II. MILL’S INDIVIDUALIST-SOCIALIST PROGRAMME                        366

  III. MILL’S SUCCESSORS                                               374


                         BOOK IV: THE DISSENTERS


  CHAPTER I: THE HISTORICAL SCHOOL AND THE CONFLICT OF METHODS
    (M. RIST)                                                          370

    I. THE ORIGIN AND DEVELOPMENT OF THE HISTORICAL SCHOOL             381

   II. THE CRITICAL IDEAS OF THE HISTORICAL SCHOOL                     388

  III. THE POSITIVE IDEAS OF THE HISTORICAL SCHOOL                     398


  CHAPTER II: STATE SOCIALISM (M. RIST)                                407

    I. THE ECONOMISTS’ CRITICISM OF LAISSEZ-FAIRE                      410

   II. THE SOCIALISTIC ORIGIN OF STATE SOCIALISM. RODBERTUS AND
         LASSALLE                                                      414

       1. RODBERTUS                                                    415

       2. LASSALLE                                                     432

  III. STATE SOCIALISM—PROPERLY SO CALLED                              436


  CHAPTER III: MARXISM (M. GIDE)                                       449

    I. KARL MARX                                                       449

       1. SURPLUS LABOUR AND SURPLUS VALUE                             450

       2. THE LAW OF CONCENTRATION OR APPROPRIATION                    459

   II. THE MARXIAN SCHOOL                                              465

  III. THE MARXIAN CRISIS AND THE NEO-MARXIANS                         473

       1. THE NEO-MARXIAN REFORMISTS                                   473

       2. THE NEO-MARXIAN SYNDICALISTS                                 479


  CHAPTER IV: DOCTRINES THAT OWE THEIR INSPIRATION TO CHRISTIANITY
    (M. GIDE)                                                          483

    I. LE PLAY’S SCHOOL                                                486

   II. SOCIAL CATHOLICISM                                              495

  III. SOCIAL PROTESTANTISM                                            503

   IV. THE MYSTICS                                                     510


                        BOOK V: RECENT DOCTRINES


  CHAPTER I: THE HEDONISTS (M. GIDE)                                   517

    I. THE PSEUDO-RENAISSANCE OF THE CLASSICAL SCHOOL                  517

   II. THE PSYCHOLOGICAL SCHOOL                                        521

  III. THE MATHEMATICAL SCHOOL                                         528

   IV. CRITICISM OF THE HEDONISTIC DOCTRINES                           537


  CHAPTER II: THE THEORY OF RENT AND ITS APPLICATIONS (M. RIST)        545

    I. THE THEORETICAL EXTENSION OF THE CONCEPT RENT                   545

   II. UNEARNED INCREMENT AND THE PROPOSAL TO CONFISCATE RENT BY
         MEANS OF TAXATION                                             558

  III. SYSTEMS OF LAND NATIONALISATION                                 570

   IV. SOCIALIST EXTENSIONS OF THE DOCTRINE OF RENT                    579


  CHAPTER III: THE SOLIDARISTS (M. GIDE)                               587

    I. THE CAUSES OF THE DEVELOPMENT OF SOLIDARISM                     587

   II. THE SOLIDARIST THESIS                                           593

  III. THE PRACTICAL APPLICATION OF SOLIDARIST DOCTRINES               601

   IV. CRITICISM                                                       607


  CHAPTER IV: THE ANARCHISTS (M. RIST)                                 614

    I. STIRNER’S PHILOSOPHICAL ANARCHISM AND THE CULT OF THE
         INDIVIDUAL                                                    616

   II. SOCIAL AND POLITICAL ANARCHISM AND THE CRITICISM OF AUTHORITY   619

  III. MUTUAL AID AND THE ANARCHIST CONCEPTION OF SOCIETY              629

   IV. REVOLUTION                                                      637


  CONCLUSION (MM. GIDE AND RIST)                                       643


  INDEX                                                                649




BOOK I: THE FOUNDERS




CHAPTER I: THE PHYSIOCRATS


Political Economy as the name of a special science is the invention
of one Antoine de Montchrétien, who first employed the term about the
beginning of the seventeenth century. Not until the middle of the
eighteenth century, however, does the connotation of the word in any
way approach to modern usage. A perusal of the article on Political
Economy which appeared in the _Grande Encyclopédie_ of 1755 will help
us to appreciate the difference. That article was contributed by no
less a person than Jean Jacques Rousseau, but its medley of politics
and economics seems utterly strange to us. Nowadays it is customary to
regard the adjective “political” as unnecessary, and an attempt is made
to dispense with it by employing the terms “economic science” or “social
economics,” but this article clearly proves that it was not always devoid
of significance. It also reveals the interesting fact that the science
has always been chiefly concerned with the business side of the State,
especially with the material welfare of the citizens—“with the fowl in
the pot,” as Henry IV put it. Even Smith never succeeded in getting
quite beyond this point of view, for he declares that “the object of the
political economy of every nation is to increase the riches and the power
of that country.”[5]

But the counsels given and the recipes offered for attaining the desired
end were as diverse as they were uncertain. One school, known as the
Mercantilist, believed that a State, like an individual, must secure the
maximum of silver and gold before it could become wealthy. Happy indeed
was a country like Spain that had discovered a Peru, or Holland, which,
in default of mines, could procure gold from the foreigner in exchange
for its spices. Foreign trade really seemed a quite inexhaustible mine.
Other writers, who were socialists in fact though not in name—for that
term is of later invention—thought that happiness could only be found in
a more equal distribution of wealth, in the abolition or limitation of
the rights of private property, or in the creation of a new society on
the basis of a new social contract—in short, in the foundation of the
Utopian commonwealth.

It was at this juncture that Quesnay appeared. Quesnay was a doctor
by profession, who now, when on the verge of old age, had turned his
attention to the study of “rural economy”—the problem of the land and
the means of subsistence.[6] Boldly declaring that the solution of the
problem had always lain ready to hand, needing neither inventing nor
discovering, he further maintained that all social relations into which
men enter, far from being haphazard, are, on the contrary, admirably
regulated and controlled. To those who took the trouble to think, the
laws governing human associations seemed almost self-evident, and the
difficulties they involved no greater than the difficulties presented by
the laws of geometry. So admirable were these laws in every respect that
once they were thoroughly known they were certain to command allegiance.
Dupont de Nemours cannot be said to have exaggerated when, in referring
to this doctrine, he spoke of it as “very novel indeed.”[7]

It is not too much to say that this marks the beginning of a new
science—the science of Political Economy. The age of forerunners is
past. Quesnay and his disciples must be considered the real founders
of the science. It is true that their direct descendants, the French
economists, very inconsiderately allowed the title to pass to Adam Smith,
but foreign economists have again restored it to France, to remain in
all probability definitely hers. But, as is the case with most sciences,
there is not very much to mark the date of its birth or to determine
the stock from which it sprang; all that we can confidently say is
that the Physiocrats were certainly the first to grasp the conception
of a unified science of society. In other words, they were the first
to realise that all social facts are linked together in the bonds of
inevitable laws, which individuals and Governments would obey if they
were once made known to them. It may, of course, be pointed out that such
a providential conception of economic laws has little in common with
the ordinary naturalistic or deterministic standpoint of the science,
and that several of the generalisations are simply the product of their
own imaginations. It must also be admitted that Smith had far greater
powers of observation, as well as a superior gift of lucid exposition,
and altogether made a more notable contribution to the science. Still,
it was the Physiocrats who constructed the way along which Smith and the
writers of the hundred years which follow have all marched. Moreover,
we know that but for the death of Quesnay in 1774—two years before the
publication of the _Wealth of Nations_—Smith would have dedicated his
masterpiece to him.

The Physiocrats must also be credited with the foundation of the earliest
“school” of economists in the fullest sense of the term. The entrance of
this small group of men into the arena of history is a most touching and
significant spectacle. So complete was the unanimity of doctrine among
them that their very names and even their personal characteristics are
for ever enshrouded by the anonymity of a collective name.[8]

Their publications follow each other pretty closely for a period of
twenty years, from 1756 to 1778.[9]

Turgot was the only literary person among them, but like his _confrères_
he was devoid of wit, though the age was noted for its humorists. On
the whole they were a sad and solemn sect, and their curious habit of
insisting upon logical consistency—as if they were the sole depositaries
of eternal truth—must often have been very tiresome. They soon fell an
easy prey to the caustic sarcasm of Voltaire.[10] But despite all this
they enjoyed a great reputation among their more eminent contemporaries.
Statesmen, ambassadors, and a whole galaxy of royal personages, including
the Margrave of Baden, who attempted to apply their doctrines in his
own realm, the Grand Duke Leopold of Tuscany, the Emperor Joseph II of
Austria, Catherine, the famous Empress of Russia, Stanislaus, King of
Poland, and Gustavus III of Sweden, were numbered among their auditors.
Lastly, and most unexpectedly of all, they were well received by the
Court ladies at Versailles. In a word, Physiocracy became the rage.
All this may seem strange to us, but there are several considerations
which may well be kept in view. The society of the period, _raffiné_ and
licentious as it was, took the same delight in the “rural economy” of the
Physiocrats as it did in the pastorals of Trianon or Watteau. Perhaps
it gleaned some comfort from the thought of an unchangeable “natural
order,” just when the political and social edifice was giving way beneath
its feet. It may be that its curiosity was roused by that terse saying
which Quesnay wrote at the head of the _Tableau economique_: “Pauvres
paysans, pauvre royaume! Pauvre royaume, pauvre roi!” or that it felt in
those words the sough of a new breeze, not very threatening as yet, but a
forerunner of the coming storm.

An examination of the doctrine, or the essential principles as they
called them, must precede a consideration of the system or the proposed
application of those principles.


I


I: THE NATURAL ORDER

The essence of the Physiocratic system lay in their conception of the
“natural order.” _L’Ordre naturel et essential des Societés politiques_
is the title of Mercier de la Rivière’s book, and Dupont de Nemours
defined Physiocracy as “the science of the natural order.”

What are we to understand by these terms?

It is hardly necessary to say that the term “natural order” is meant
to emphasise the contrast between it and the artificial social order
voluntarily created upon the basis of a social contract.[11] But a purely
negative definition is open to many different interpretations.

In the first place, this “natural order” may be conceived as a state
of nature in opposition to a civilised state regarded as an artificial
creation. To discover what such a “natural order” really was like man
must have recourse to his origins.

Quotations from the Physiocrats in support of this view might easily be
cited.[12] This interpretation has the further distinction of being in
accord with the spirit of the age. The worship of the “noble savage”
was a feature of the end of the eighteenth century. It pervades the
literature of the period, and the cult which began with the tales of
Voltaire, Diderot, and Marmontel reappears in the anarchist writers of
to-day. As an interpretation of the Physiocratic position, however, it
must be unhesitatingly rejected, for no one bore less resemblance to a
savage than a Physiocrat. They all of them lived highly respectable lives
as magistrates, _intendants_, priests, and royal physicians, and were
completely captivated by ideas of orderliness, authority, sovereignty,
and property—none of them conceptions compatible with a savage state.
“Property, security, and liberty constitutes the whole of the social
order.”[13] They never acquiesced in the view that mankind suffered loss
in passing from the state of nature into the social state; neither did
they hold to Rousseau’s belief that there was greater freedom in the
natural state, although its dangers were such that men were willing to
sacrifice something in order to be rid of them, but that nevertheless in
entering upon the new state something had been lost which could never
be recovered.[14] All this was a mere illusion in the opinion of the
Physiocrats. Nothing was lost, everything was to be gained, by passing
from a state of nature into the civilised state.

In the second place, the term “natural order” might be taken to mean
that human societies are subject to natural laws such as govern the
physical world or exercise sway over animal or organic life. From this
standpoint the Physiocrats must be regarded as the forerunners of the
organic sociologists. Such interpretation seems highly probable because
Dr. Quesnay through his study of “animal economy” (the title of one of
his works) and the circulation of the blood was already familiar with
these ideas. Social and animal economy, both, might well have appeared
to him in much the same light as branches of physiology. From physiology
to Physiocracy was not a very great step. At any rate, the Physiocrats
succeeded in giving prominence to the idea of the interdependence of all
social classes and of their final dependence upon nature. And this we
might almost say was a change tantamount to a transformation from a moral
to a natural science.[15]

Even this explanation seems to us insufficient. Dupont, in the words
which we have quoted in the footnote below, seems to imply that the laws
of the beehive and the ant-hill are imposed by common consent and for
mutual benefit. Animal society, so it seemed to him, was founded upon
social contract. But such a conception of “law” is very far removed
from the one usually adopted by the natural sciences, by physicians and
biologists, say. And, as a matter of fact, the Physiocrats were anything
but determinists. They neither believed that the “natural order” imposed
itself like gravitation nor imagined that it could ever be realised in
human society as it is in the hive or the ant-hill. They saw that the
latter were well-ordered communities, while human society at its present
stage is disordered, because man is free whereas the animal is not.

What are we to make of this “natural order” then? The “natural order,” so
the Physiocrats maintained, is the order which God has ordained for the
happiness of mankind. It is the providential order.[16] To understand it
is our first duty—to bring our lives into conformity with it is our next.

But can a knowledge of the “order” ever be acquired by men? To this they
reply that the distinctive mark of this “order” is its obviousness. This
word occurs on almost every page they wrote.[17] Still, the self-evident
must in some way be apprehended. The most brilliant light can be seen
only by the eye. By what organ can this be sensed? By instinct, by
conscience, or by reason? Will a divine voice by means of a supernatural
revelation show us the way of truth, or will it be Nature’s hand that
shall lead us in the blessed path? The Physiocrats seem to have ignored
this question, for every one of them indifferently gives his own answer,
regardless of the fact that it may contradict another’s. Mercier de
la Rivière recalls the saying of St. John concerning the “Light which
lighteth every man that cometh into the world.” This may be taken to be
an internal light set by God in the heart of every man to enable him to
choose his path. Quesnay, so Dupont affirms, “must have seen that man had
only to examine himself to find within him an inarticulate conception
of these laws. In other words, introspection clearly shows that men are
unwittingly guided by an “inherent” knowledge of Physiocracy.”[18] But,
after all, it seems that this intuitive perception is insufficient to
reveal the full glory of the order. For Quesnay declared that a knowledge
of its laws must be enforced upon men, and this afforded a _raison
d’être_ for an educational system which was to be under the direct
control of the Government.

To sum up, we may say that the “natural order” was that order which
seemed obviously the best, not to any individual whomsoever, but to
rational, cultured, liberal-minded men like the Physiocrats. It was not
the product of the observation of external facts; it was the revelation
of a principle within. And this is one reason why the Physiocrats showed
such respect for property and authority. It seemed to them that these
formed the very basis of the “natural order.”

It was just because the “natural order” was “supernatural,” and so raised
above the contingencies of everyday life, that it seemed to them to be
endowed with all the grandeur of the geometrical order, with its double
attributes of universality and immutability. It remained the same for
all times, and for all men. Its fiat was “unique, eternal, invariable,
and universal.” Divine in its origin, it was universal in its scope, and
its praises were sung in litanies that might rival the _Ave Maria_.[19]
Speaking of its universality, Turgot writes as follows: “Whoever is
unable to overlook the accidental separation of political states one
from another, or to forget their diverse institutions, will never treat
a question of political economy satisfactorily.”[20] Referring to its
immutability, he adds: “It is not enough to know what is or what has
been; we must also know what ought to be. The rights of man are not
founded upon history: they are rooted in his nature.”

It looked as if this dogmatic optimism would dominate the whole Classical
school, especially the French writers, and that natural law would usurp
the functions of Providence. To-day it is everywhere discredited, but
when it first loomed above the horizon its splendour dazzled all eyes.
Hence the many laudatory remarks, which to us seem hyperbolical, if
not actually ridiculous.[21] But it was no small thing to found a new
science, to set up a new aim and a fresh ideal, to lay down the framework
which others were to fill in.

It was the practical results, however, that revealed the full powers of
the “natural order.” It so happened that the mass of regulations which
constituted the old _régime_ fell to the ground before its onslaughts
almost immediately, and it all came about in this fashion.

Knowledge of the “natural order” was not sufficient. Daily life must also
conform to the knowledge. Nothing could be easier than this, for “if the
order really were the most advantageous”[22] every man could be trusted
to find out for himself the best way of attaining it without coercion of
any kind.[23]

This psychological balance which every individual was supposed to carry
within himself, and which, as the basis of the Neo-Classical school, is
known as the Hedonistic principle, is admirably described by Quesnay.[24]
“To secure the greatest amount of pleasure with the least possible
outlay should be the aim of all economic effort.” And this was what the
“order” aimed at. “When every one does this the natural order, instead
of being endangered, will be all the better assured.” It is of the very
essence of that order that the particular interest of the individual can
never be separated from the common interest of all, but this happens
only under a free system. “The movements of society are spontaneous and
not artificial, and the desire for joy which manifests itself in all its
activities unwittingly drives it towards the realisation of the ideal
type of State.”[25] This is _laissez-faire_ pure and simple.[26]

These famous formulæ have been so often repeated and criticised since
that they appear somewhat trite to-day. But it is certain that they were
not so at the time. It is easy to laugh at their social philosophy, to
mock at its _naïveté_ and simplicity, and to show that such supposed
harmony of interests between men does not exist, that the interests of
individuals do not always coincide with those of the community, and
that the private citizen is not always the best judge even of his own
interests. It was perhaps necessary that the science should be born of
such extreme optimism. No science can be constructed without some amount
of faith in a pre-established order.

Moreover, _laissez-faire_ does not of necessity mean that nothing will
be done. It is not a doctrine of passivity or fatalism. There will be
ample scope for individual effort, for it simply means leaving an open
field and securing fair play for everyone, free from all fear lest his
own interests should injure other people’s or in any way prejudice
those of the State. It is true that there will not be much work for
the Government, but the task of that body will by no means be a light
one, especially if it intends carrying out the Physiocratic programme.
This included upholding the rights of private property and individual
liberty by removing all artificial barriers, and punishing all those who
threatened the existence of any of these rights; while, most important
of all, there was the duty of giving instruction in the laws of the
“natural order.”


II: THE NET PRODUCT

Every social fact had a place within the “natural order” of the
Physiocrats. Such a wide generalisation would have entitled them to
be regarded as the founders of sociology rather than of economics.
But there was included one purely economic phenomenon which attracted
their attention at an early stage, and so completely captivated their
imaginations as to lead them on a false quest. This was the predominant
position which land occupied as an agent of production—the most erroneous
and at the same time the most characteristic doctrine in the whole
Physiocratic system.

Every productive undertaking of necessity involves certain outgoings—a
certain loss. In other words, some amount of wealth is destroyed in the
production of new wealth—an amount that ought to be subtracted from the
amount of new wealth produced. This difference, measuring as it does the
excess of the one over the other, constitutes the net increase of wealth,
known since the time of the Physiocrats as the “net product.”

The Physiocrats believed that this “net product” was confined to one
class of production only, namely, agriculture. Here alone, so it seemed
to them, the wealth produced was greater than the wealth consumed.
Barring accidents, the labourer reaped more than he consumed, even if
we included in his consumption his maintenance throughout a whole year,
and not merely during the seasons of harvest and tilth. It was because
agricultural production had this unique and marvellous power of yielding
a “net product” that economy was possible and civilisation a fact.[27] It
was not true of any other class of production, either of commerce or of
transport, where it was very evident that man’s labour produced nothing,
but merely replaced or transferred the products already produced.
Neither was it true of manufacture, where the artisan simply combined or
otherwise modified the raw material.[28]

It is true that such transfer or accretion of matter may increase the
value of the product, but only in proportion to the amount of wealth
which had to be consumed in order to produce it; because the price of
manual labour is always equal to the cost of the necessaries consumed by
the worker. All that we have in this case, however, is a collection of
superimposed values with some raw material thrown into the bargain. But,
as Mercier de la Rivière put it, “addition is not multiplication.”[29]

Consequently, industry was voted sterile. This implied no contempt
for industry and commerce. “Far from being useless, these are the
arts that supply the luxuries as well as the necessaries of life, and
upon these mankind is dependent both for its preservation and for its
well-being.”[30] They are unproductive in the sense that they produce no
“extra” wealth.

It may be pointed out, on the other hand, that the “gains,” both in
industry and commerce, are far in excess of those of agriculture. All
this was immaterial to the Physiocrats, for “they were gained, not
produced.”[31] Such gains simply represented wealth transferred from
the agricultural to the industrial classes.[32] The agricultural classes
furnished the artisans not only with raw material, but also with the
necessaries of life. The artisans were simply the domestic servants, or,
to use Turgot’s phrase, the hirelings of the agriculturists.[33] Strictly
speaking, the latter could keep the whole net product to themselves, but
finding it more convenient they entrust the making of their clothes, the
erection of their houses, and the production of their implements to the
artisans, giving them a portion of the net product as remuneration.[34]
It is possible, of course, that, like many servants in fine houses, the
latter manage to make a very good living at their masters’ expense.

The “sterile classes” in Physiocratic parlance simply signifies those who
draw their incomes second-hand. The Physiocrats had the good sense to
try to give an explanation of this unfortunate term, which threatened to
discredit their system altogether, and which it seemed unfair to apply
to a whole class that had done more than any other towards enriching the
nation.

It is a debatable point whether the Physiocrats attributed this virtue of
furnishing a net product solely to agriculture or whether they intended
it to apply to extractive industries, such as mining and fishing. They
seem to apply it in a general way to mines, but the references are rare
and not infrequently contradictory. We can understand their hesitating,
for, on the one hand, mines undoubtedly give us new wealth in the form
of raw materials, just as the land or sea does; on the other hand, the
fruits of the earth and the treasures of the deep are not so easily
exhausted as mines. Turgot put it excellently when he said, “The land
produces fruit annually, but a mine produces no fruit. The mine itself
is the garnered fruit,” and he concludes that mines, like industrial
undertakings, give no net product, that if any one had any claim to that
product it would be the owner of the soil, but that in any case the
surplus would be almost insignificant.[35]

This essential difference which the Physiocrats sought to establish
between agricultural and industrial production was at bottom theological.
The fruits of the earth are given by God, while the products of the
arts are wrought by man, who is powerless to create.[36] The reply is
obvious. God would still be creator if He decreed to give us our clothes
instead of our daily bread. And, although man cannot create matter, but
simply transform it, it is important to remember that the cultivation of
the soil, like the fashioning of iron or wood, is merely a process of
transformation. They failed to grasp the truth which Lavoisier was to
demonstrate so clearly, namely, that in nature nothing is ever created
and nothing lost. A grain of corn sown in a field obtains the materials
for the ear from the soil and atmosphere, transmuting them to suit its
own purpose, just as the baker, out of that same corn, combined with
water, salt, and yeast, will make bread.

But they were sufficiently clear-sighted to see that all natural
products, including even corn, were influenced by the varying condition
of the markets, and that if prices fell very low the net product
disappeared altogether. In view of such facts can it still be said
that the earth produces real value or that its produce differs in any
essential respects from the products of industry?

The Physiocrats possibly thought that the _bon prix_—_i.e._ the price
which yielded a surplus over and above cost of production—was a normal
effect of the “natural order.” Whenever the price fell to the level of
the cost of production it was a sure sign that the “order” had been
destroyed. Under these circumstances there was nothing remarkable in the
disappearance of the net product. This is doubtless the significance
of Quesnay’s enigmatic saying: “Abundance and cheapness are not
wealth, scarcity and dearness are misery, abundance and dearness are
opulence.”[37]

But if the _bon prix_ simply measures the difference between the value of
the product and its cost of production, then it is not more common in
agriculture than in other modes of production. Nor does it extend over a
longer period in the one case than in the other, provided competition be
operative in both cases; on the contrary, it will become manifest in the
one case as easily as in the other, especially if there be any scarcity.
It remains to be seen then whether monopoly values are more prevalent in
agricultural production than in industrial. In a very general way, seeing
that there is only a limited quantity of land, we may answer in the
affirmative, and admit a certain degree of validity in the Physiocratic
theory. But the establishment of protective rights and the occurrence
of agricultural crises clearly prove that competition also has some
influence upon the amount of that revenue.

The net product was just an illusion. The essence of production is not
the creation of matter, but simply the accretion of value. But it is
not difficult to appreciate the nature of the illusion if we recall the
circumstances, and try to visualise the kind of society with which the
Physiocrats were acquainted. One section of the community, consisting
solely of nobility and clergy, lived upon the rents which the land
yielded. Their luxurious lives would have been impossible if the earth
did not yield something over and above the amount consumed by the
peasant. It is curious that the Physiocrats, while they regarded the
artisans as nothing better than servants who depended for their very
existence upon the agriculturists, failed to recognise the equally
complete dependence of the worthless proprietor upon his tenants.
If there had existed instead a class of business men living in ease
and luxury, and drawing their dividends, it is quite possible that
the Physiocrats would have concluded that there was a net product in
industrial enterprise.

So deeply rooted was this idea of nature, or God operating through
nature, as the only source of value that we find traces of it even
in Adam Smith. Not until we come to Ricardo do we have a definite
contradiction of it. With Ricardo, rent, the income derived from land,
instead of being regarded as a blessing of nature—the _Alma Parens_—which
was bound to grow as the “natural order” extended its sway, is simply
looked upon as the inevitable result of the limited extent and growing
sterility of the land. No longer is it a free gift of God to men, but a
pre-imposed tax which the consumer has to pay the proprietor. No longer
is it the net product; henceforth it is known as rent.

As to the epithet “sterile,” which was applied to every kind of work
other than agriculture, we shall find that it has been superseded, and
that the attribute “productive” has been successively applied to every
class of work—first to industry, then to commerce, and finally to the
liberal professions. Even if it were true that industrial undertakings
only yield the equivalent of the value consumed, that is not enough to
justify the epithet “sterile,” unless, as Adam Smith wittily remarks, we
are by analogy to consider every marriage sterile which does not result
in the birth of more than two children. To invoke the distinction between
addition and multiplication is useless, because arithmetic teaches us
that multiplication is simply an abridged method of adding.

It seems very curious that that kind of wealth which appeared to the
Physiocrats to be the most legitimate and the most superior kind should
be just the one that owed nothing to labour, and which later on, under
the name of rent, seems the most difficult to justify.

But we must not conclude that the Physiocratic theory of the net product
possessed no scientific value.

It was a challenge to the economic doctrines of the time, especially
Mercantilism. The Mercantilists thought that the only way to increase
wealth was to exploit neighbours and colonists, but they failed to see
that commerce and agriculture afforded equally satisfactory methods. Nor
must we forget the Physiocrats’ influence upon practical politics. Sully,
the French minister, betrays evidence of their influence when he remarks
that the only two sources of national wealth are land and labour. Let us
also remember that, despite some glaring mistakes, agriculture has never
lost the pre-eminence which they gave it, and that the recent revival of
agricultural Protection is directly traceable to their influence. They
were always staunch Free Traders themselves, but we can hardly blame
them for not being sufficiently sanguine to expect such whole-hearted
acceptance of their views as to anticipate some of the more curious
developments of their doctrines. It is almost certain that if they were
living to-day they would not be found supporting the Protectionist
movement. At least this is the opinion of M. Oncken, the economist, who
has made the most thorough study of their ideas.[38]

Although the Physiocratic distinction between agriculture and industry
was largely imaginary, it is nevertheless true that agriculture does
possess certain special features, such as the power of engendering the
forces of life, whether vegetable or animal. This mysterious force,
which under the term “nature” was only very dimly understood by the
Physiocrats, and still is too often confused with the physico-chemical
forces, does really possess some characteristics which help us to
differentiate between agriculture and industry. At some moments
agriculture seems inferior because its returns are limited by the
exigencies of time and place; but more often superior because agriculture
alone can produce the necessaries of life. This is no insignificant fact;
but we are trenching on the difficult problems connected with the name of
Malthus.


III: THE CIRCULATION OF WEALTH

The Physiocrats were the first to attempt a synthesis of distribution.
They were anxious to know—and it was surely a praiseworthy ambition—how
wealth passed from one class in society to another, why it always
followed the same routes, whose meanderings they were successful in
unravelling, and how this continual circulation, as Turgot said,
“constituted the very life of the body politic, just as the circulation
of the blood did of the physical.”

A scholar like Quesnay, the author of the work on animal economy[39]
and a diligent student of Harvey’s new discovery, was precisely the
man to carry the biological idea over into the realm of sociology. He
made use of the idea in his _Tableau économique_, which is simply a
graphic representation of the way in which the circulation of wealth
takes place. The appearance of this table caused an enthusiasm among
his contemporaries that is almost incredible,[40] although Professor
Hector Denis declares that he is almost ready to share in Mirabeau’s
admiration.[41]

We know by this time that this circulation is much more complicated than
the Physiocrats believed, but it is still worth while to give an outline
of their conception.[42]

Quesnay distinguishes three social classes:

1. A productive class consisting entirely of agriculturists—perhaps also
of fishermen and miners.

2. A proprietary class, including not only landed proprietors, but also
any who have the slightest title to sovereignty of any kind—a survival
of feudalism, where the two ideas of sovereignty and property are always
linked together.

3. A sterile class, consisting of merchants and manufacturers, together
with domestic servants and members of the liberal professions.

The first class, being the only productive class, must supply all that
flow of wealth whose course we are now to follow. Let us suppose,
then—the figures are Quesnay’s and seem sufficiently near the facts—that
the value of the total wealth produced equals 5 milliard francs. Of this
5 milliards 2 milliards are necessary for the upkeep of the members of
this class and its oxen during harvest and sowing. This portion does
not circulate. It simply remains where it was produced. The produce
representing the remaining 3 milliards is sold. But agricultural
products alone do not suffice for the upkeep of Class 1. Manufactured
goods, clothes, and boots also are required, and these are got from the
industrial classes, for which a milliard francs is given.

There remain just 2 milliards, which go to the landowners and the
Government in rents and taxes. By and by we shall see how they attempted
to justify this apparent parasitism.

Let us pass on to consider the propertied class. It manages to live upon
the 2 milliards which it receives by way of rents, and it lives well. Its
food it must obtain from the agricultural class (unless, of course, the
rents are paid in kind), and for this it possibly pays a milliard francs.
It also requires manufactured goods, which it must get from the sterile
class, and for which it pays another milliard francs. This completes
their account.

As to the sterile class, it produces nothing, and so, unlike the
preceding class, it can only get its necessaries second-hand from the
productive class. These may be got in two ways: a milliard from the
agricultural class in payment for manufactured goods and another milliard
from the landed proprietors. The latter milliard being one of the two
which the landed proprietors got from the agriculturists, has in this way
described the complete circle.

The 2 milliards obtained as salaries by the sterile class are employed
in buying the necessaries of life and the raw material of industry.
And since it is only the productive class that can procure these
necessaries and raw materials, this 2 milliards passes into the
hands of the agriculturists. The 2 milliards, in short, return to
their starting-point. Adding the milliard already paid by the landed
proprietors to the 2 milliards’ worth of products unsold, the total of 5
milliards is replaced in the hands of the productive class, and so the
process goes on indefinitely.[43]

This _résumé_ gives but a very imperfect idea of the vast complexities
and difficulties involved in tracing the growth of revenues—an evolution
which the Physiocrats followed with the enthusiasm of children. They
imagined that it was all very real.[44] The rediscovery of their
millions intoxicated them, but, like many of the mathematical economists
of to-day, they forgot that at the end of their calculations they only
had what they had assumed at the beginning. It is very evident that the
table proves nothing as to the essential point in their system, namely,
whether there really exist a productive and a sterile class.[45]

The most interesting thing in the Physiocratic scheme of distribution is
not the particular demonstration which they gave of it, but the emphasis
which they laid upon the fact of the circulation of wealth taking place
in accordance with certain laws, and the way in which the revenue of each
class was determined by this circulation.

The singular position which the proprietors hold in this tripartite
division of society is one of the most curious features of the system.

Anyone examining the table in a non-Physiocratic fashion, but simply
viewing it in the modern spirit, must at once feel surprised and
disappointed to find that the class which enjoys two-fifths of the
national revenue does nothing in return for it. We should not have
been surprised if such glaring parasitism had given to the work of the
Physiocrats a distinctly socialistic tone. But they were quite impervious
to all such ideas. They never appreciated the weakness of the landowners’
position, and they always treated them with the greatest reverence. The
epithet “sterile” is applied, not to them, but to manufacturers and
artisans! Property is the foundation-stone of the “natural order.” The
proprietors have been entrusted with the task of supplying the staff of
life, and are endued with a kind of priestly sacredness. It is from their
hands that all of us receive the elements of nutrition. It is a “divine”
institution—the word is there.[46] Such idolatry needs some explanation.

One might have expected—even from their own point of view—that the
premier position would have been given to the class which they termed
productive, _i.e._ to the cultivators of the soil, who were mostly
farmers and _métayers_. The land was not of their making, it is true.
They had simply received it from the proprietors. This latter class takes
precedence because God has willed that it should be the first dispenser
of all wealth.[47]

There is no need to insist on this strange aberration which led them
to look for the creator of the land and its products, not amid the
cultivators of the soil, but among the idlers.[48] Such was the logical
conclusion of their argument. We must also remember that the Physiocrats
failed to realise the inherent dignity of all true labour simply because
it was not the creator of wealth. This applied both to the agricultural
labourer and the industrial worker, and though the former alone was
considered productive it was because he was working in co-operation with
nature. It was nature that produced the wealth and not the worker.

Something must also be attributed to their environment. Knowing only
feudal society, with its economic and political activities governed and
directed by idle proprietors, they suffered from an illusion as to the
necessity for landed property similar to that which led Aristotle to
defend the institution of slavery.[49]

Although they failed to foresee the criticisms that would be
levelled against the institution of private property, they were very
assiduous—especially the Abbé Baudeau—in seeking an explanation of its
origin and a justification of its existence. The reasons which they
advanced are more worthy of quotation than almost any argument that has
since been employed by conservative economists.

The most solid argument, in their opinion—at least the one that was
most frequently used—is that these proprietors are either the men who
cleared and drained the land or else their rightful descendants. They
have incurred or they are incurring expenditure in clearing the land,
enclosing it and building upon it—what the Physiocrats call the _avances
foncières_.[50] They never get their revenues through some one else
as the manufacturers do, and they are anything but parasites. Their
portion is _optimo jure_, in virtue of a right prior and superior even to
that of the cultivators, for although the cultivators help to make the
product, the proprietors help to make the land. The three social classes
of the Physiocratic scheme may be likened to three persons who get their
water from the same well. It is drawn from the well by members of the
productive class in bucketfuls, which are passed on to the proprietors,
but the latter class gives nothing in return for it, for the well is of
their making. At a respectable distance comes the sterile class, obliged
to buy water in exchange for its labour.[51]

The Physiocrats failed to notice the contradiction involved in this. If
the revenue which the proprietor draws represents the remuneration for
his outlay and the return for his expenditure it is no longer a gift of
nature, and the net product vanishes, for, by definition, it represented
what was left of the gross product after paying all initial expenses—the
excess over cost of production. If we accept this explanation of the
facts there is no longer any surplus to dispose of. It is as capitalists
pure and simple and not as the representatives of God that proprietors
obtain their rents.

Must we really believe that although these outlays afford some
explanation of the existence of private property they supply no means of
measuring or of limiting its extent? Is there no connection between these
outlays and the revenues which landed proprietors draw?

Or must we distinguish between the two portions of the revenue—the one,
indispensable, representing the reimbursement of the original outlay, and
in every respect comparable to the revenue of the farmer, and the other,
being a true surplus, constituting the net product? How can they justify
the appropriation of the latter?

There is another argument held in reserve, namely, that based upon social
utility. They point out that the cultivation of land would cease and the
one source of all wealth would become barren if the pioneer were not
allowed to reap the fruits of his labour.

The new argument is a contradiction of the old. In the former case land
was appropriated because it had been cultivated. In the present case land
must be appropriated before it can be cultivated. In the former labour
is treated as the efficient cause, in the latter as the final cause of
production.

Finally, the Physiocrats believed that landed proprietorship was
simply the direct outcome of “personal property,” or of the right of
every man to provide for his own sustenance. This right includes the
right of personal estate, which in turn involves the right of landed
property. These three kinds of property are so closely connected that
in reality they form one unit, and no one of the three can be detached
without involving the destruction of the other two.[52] They were full
of veneration for property of every description—not merely for landed
property. “The safety of private property is the real basis of the
economic order of society,” says Quesnay.[53] Mercier de la Rivière
writes: “Property may be regarded as a tree of which social institutions
are branches growing out of the trunk.”[54] We shall encounter this cult
of property even during the terrible days of the French Revolution and
the Reign of Terror. When all respect for human life was quite lost there
still remained this respect for property.

The defence of private property was already well-nigh complete.[55] But
if they were strong in their defence of the institution they did not
fail to impose upon it some onerous duties—which counterbalanced its
eminent dignity. Of course, every proprietor should always be guided by
reason and be mannerly in his behaviour, and he should never allow mere
authority to become the rule of life.[56] Their duties are as follows:

1. They must continue without fail to bring lands into cultivation,
_i.e._ they must continue the _avances foncières_.[57]

2. They must dispose of the wealth which the nation has produced in such
a way as to further the general interest; this is their task as the
stewards of society.[58]

3. They must aim during their leisure at giving to society all those
gratuitous services which they can render, and which society so sorely
needs.

4. They must bear the whole burden of taxation.

5. Above all they must protect their tenants, the agriculturists, and be
very careful not to demand more than the net product. The Physiocrats
never go the length of advising them to give to their tenants a portion
of the net product, but they impress upon them the importance of
giving them the equivalent of their annual expenditure and of dealing
liberally with them. It does not seem much, but it must have been
something in those days. “I say it boldly,” writes Baudeau, “cursed be
every proprietor, every sovereign and emperor that puts all the burden
upon the peasant, and the land, which gives all of us our sustenance.
Show them that the lot of the worthy individuals who employ their own
funds or who depend upon those of others is to none of us a matter of
complete indifference, that whoever hurts or degrades, attacks or robs
them is the cruellest enemy of society, and that he who ennobles them,
furthers their well-being, comfort, or leisure increases their output
of wealth, which after all is the one source of income for every class
in society.”[59] Such generous words, which were none too common at the
time, release the Physiocrats from the taunt of showing too great a
favour to the proprietors. In return for such privileges as they gave
them they demanded an amount of social service far beyond anything that
was customary at the time.


II

So far we have considered only the Physiocratic theory. But the
Physiocratic influence can be much more clearly traced if we turn to
applied economics and examine their treatment of such questions as the
regulation of industry, the functions of the State, and the problems of
taxation.[60]


I: TRADE

All exchange, the Physiocrats thought, was unproductive, for by
definition it implies a transfer of equal values. If each party only
receives the exact equivalent of what it gives there is no wealth
produced. It may happen, however, that the parties to the exchange are
of unequal strength, and the one may grow rich at the expense of the
other.[61] In giving a bottle of wine in exchange for a loaf of bread
there is a double displacement of wealth, which evidently affords a
fuller satisfaction of wants in both cases, but there is no wealth
created, for the objects so exchanged are of equal value. To-day the
reasoning would be quite different. The present-day economist would
argue as follows: “If I exchange my wine for your bread, that is a proof
that my hunger is greater than my thirst, but that you are more thirsty
than hungry. Consequently the wine has increased in utility in passing
from my hands into yours, and the bread, likewise, in passing from your
hands into mine, and this double increase of utility constitutes a real
increase of wealth.” Such reasoning would have appeared absurd to the
Physiocrats, who conceived of wealth as something material, and they
could never have understood how the creation of a purely subjective
attribute like utility could ever be considered productive.

We have already had occasion to remark that industry and commerce were
considered unproductive. This was a most significant fact, so far as
commerce was concerned, because all the theories that held the field
under Mercantilism, notably the doctrine that foreign commerce afforded
the only possible means of increasing a country’s wealth, immediately
assumed a dwindling importance. For the Mercantilists the prototype of
the State was a rich merchant of Amsterdam. For the Physiocrats it was
John Bull.

And foreign trade, like domestic, produced no real wealth: the only
result was a possible gain, and one man’s gain is another man’s loss.
“Every commercial nation flatters itself upon its growing wealth as
the outcome of foreign trade. This is a truly astonishing phenomenon,
for they all believe that they are growing rich and gaining from one
another. It must be admitted that this gain, as they call it, is a most
remarkable thing, for they all gain and none loses.”[62] A country must,
of course, obtain from foreigners the goods which it cannot itself
produce in exchange for those it cannot itself consume. Foreign trade
is quite indispensable, but Mercier de la Rivière thinks that it is a
necessary evil[63] (he underlines the word). Quesnay contents himself
with referring to it merely as a _pis aller_.[64] He thought that the
only really useful exchange is one in which agricultural products pass
directly from producers to consumers, for without this the products would
be useless and would simply perish in the producer’s hands. But that
kind of exchange which consists in buying products in order to resell
them—trafficking, or a commercial transaction, as we call it—is sheer
waste, for the wealth instead of growing larger becomes less, because a
portion of it is absorbed by the traffickers themselves.[65] We meet with
the same idea in Carey. Mercier de la Rivière ingeniously compares such
traders to mirrors, arranged in such a way that they reflect a number
of things at the same time, all in different positions. “Like mirrors,
too, the traders seem to multiply commodities, but they only deceive the
superficial.”[66]

That may be; but, admitting a contempt for commerce, what conclusions
do they draw from it? Shall they prohibit it, or regulate it, or shall
they just let it take its own course? Any one of these conclusions would
follow from their premises. If commerce be as useless as they tried to
make out, the first solution would be the best. But it was the third that
they were inclined to adopt, and we must see why.

It seems quite evident that the Physiocrats would have condemned both the
Mercantile and the Colbertian systems. Both of these aimed at securing
a favourable balance of trade—an aim which the Physiocrats considered
illusory, if not actually immoral. But if they thought all trade was
useless it is not easy to understand their enthusiasm for Free Trade.
Those economists who nowadays favour Free Trade support it in the belief
that it is of immense benefit to every country wherein it is practised,
and that the more it is developed the richer will the exchanging
countries become. But such was not the Physiocratic doctrine. It is a
noteworthy fact that they are to be regarded as the founders of Free
Trade, not because of any desire to favour trade as such, but because
their attitude towards it was one of disdainful _laissez-faire_. They
were not, perhaps, altogether free from the belief that _laissez-faire_
would lead to the disappearance of commerce altogether. They were Free
Traders primarily because they desired the freedom of domestic trade,
and we must not lose sight of those extraordinary regulations which
completely fettered its movements at this time.[67]

The “natural order” also implied that each one would be free to buy or
sell wherever he chose, within or without the country. It recognised
no frontiers,[68] for only through “liberty” could the “good price” be
secured. The “good price” meant the highest price and not the lowest,
dearth and not cheapness. “Free competition with foreign merchants
can alone secure the best possible price, and only the highest price
will enable us to increase our stock of wealth and to maintain our
population by agriculture.”[69] This is the language of agriculturists
rather than of Free Traders. It is the natural result of thinking about
agricultural problems, and especially about the question of raising corn;
and since Free Trade at this time gave rise to no fears on the score of
importation, free exchange meant free exportation. Oncken points out that
the commercial _régime_ which the Physiocrats advocated was identical
with that in operation in England about this time, where in case of
over-abundance exportation was encouraged in order to keep up the price,
and in case of dearth importation was permitted in order to ensure a
steady supply and to prevent the price rising too much.[70]

In a word, Free Trade meant for the Physiocrats the total abolition of
all those measures which found so much favour with the Mercantilists, and
which aimed at preventing exportation to places outside the country and
checking the growth of free intercourse within it.[71] Narrow as their
conception of Free Trade at first was, it was not long in growing out
of the straitened circumstances which gave it birth, and it developed
gradually into the Free Trade doctrine as we know it, which Walras
expressed as follows: “Free competition secures for every one the maximum
final utility, or, what comes to the same thing, gives the maximum
satisfaction.” We no longer admit that international trade is a mere _pis
aller_. But all the arguments which have been used in its defence on the
Free Trade side were first formulated by the Physiocrats. We shall refer
to a few of them.

The fallacy lurking behind the “balance of trade” theory is exposed with
great neatness by Mercier de la Rivière. “I will drown the clamour of all
your blind and stupid policies. Suppose that I gave you all the money
which circulates among the nations with whom you trade. Imagine it all in
your possession. What would you do with it?” He goes on to show how not a
single foreign country will any longer be able to buy, and consequently
all exportation will cease. The result of this excessive dearness will
be that buying from foreign countries will be resorted to, and this will
result in the exportation of metallic currency, which will soon readjust
matters.[72]

The contention that import duties are paid by the foreigner is also
refuted. Nothing will be sold by the foreigner at a lower price than that
which other nations would be willing to give him. An import duty on such
goods will increase the real price, which the foreigner will demand, and
this import duty will be paid by those who buy the goods.[73]

There is also a refutation of the policy known as reciprocity. “A nation
levies an import duty upon the goods of another nation, but it forgets
that in trying to injure the selling nation it is really checking the
possible consumption of its own goods. This indirect effect, of course,
is inevitable, but can nothing be done to remedy this by means of
reprisals? England levies a heavy duty on French wines, thereby reducing
its debit account with France very considerably, but more French wine
will not be bought if a tax is also placed upon the goods which England
exports to France. Do you think that the prejudice which England has
taken against France can be remedied in this way?”

We have multiplied instances, for during the whole of the hundred years
which have since elapsed has anyone deduced better arguments?

These theories immediately received legal sanction in the edicts of 1763
and 1766 establishing free trade in corn, first within the country and
then without, but some very serious restrictions were still retained.
Unfortunately Nature proved very ungrateful to her friends. For four or
five years she ran riot with a series of bad harvests, for which, as
we may well imagine, the Physiocratic _régime_ and its inspirers were
held responsible. Despite the protests of the Physiocrats, this liberal
act was repealed in 1770. It was re-established by Turgot in 1774, and
again repealed by Necker in 1777—a variety of fortune that betokens a
fickleness of public opinion.

This new piece of legislation, and, indeed, the whole Physiocratic
theory, was subjected to severe criticism by an abbot of the name of
Galiani. Galiani was a Neapolitan monsignor residing at the French court.
At the age of twenty-four he had written a remarkable work in Italian
dealing with money, and in 1770, written in splendid French, appeared his
_Dialogues sur le Commerce des Blés_. It was an immediate success, and it
won the unqualified approval of Voltaire, who was possibly attracted more
by the style than by the profundity of thought. Galiani was not exactly
opposed to _laissez-faire_. “Liberty,” he wrote, “stands in no need of
defence so long as it is at all possible. Whenever we can we ought to be
on the side of liberty.”[74] But he is opposed to general systems and
against complete self-surrender into the hands of Nature. “Nature,” says
he, “is too vast to be concerned about our petty trifles.”[75] He shares
the realistic or historical views of the writers of to-day, and thinks
that before applying the principles of political economy some account
should be taken of time, place, and circumstances. “The state of which
the Physiocrats speak—what is it? Where is it to be found.”[76]

Along with Galiani we must mention the great financier Necker, who in a
bulky volume entitled _La Législation et le Commerce des Grains_ (1775)
advocates opportunistic views almost identical in character with those of
Galiani, and who, as Minister of State (1776-81 and 1788-90), put an end
to free trade in corn.

In monetary matters, especially on the question of interest, the
Physiocrats were willing to recognize an exception to their principle
of non-intervention. Mirabeau thought that whenever a real increase of
wealth resulted from the use of capital, as in agriculture, the payment
of interest was only just. It was simply a sign or symbol of the net
product. But in trade matters he thought it best to limit if not to
prohibit it altogether. It often proved very harmful, and frequently was
nothing better than a tax levied by order of “the corrosive landowners.”
Quesnay could not justify it except in those cases where it yielded a
net product, but he was content simply to suggest a limitation of it.
The Physiocrats are at least logical. If capital sunk in industrial and
commercial undertakings yields no income it is evident that the interest
must be taken from the borrower’s pocket, and they condemned it just as
they condemned taxing the industrial and commercial classes.

Turgot[77] is the only one of them who frankly justifies taking interest.
The reason that he gives is not the usual Physiocratic argument, but
rather that the owner of capital may either invest it in the land or
undertake some other productive work—capital being the indispensable
basis of all enterprise[78]—and that, consequently, the capital will
never be given to anyone who will offer less than what might have been
made out of it did the owner himself employ it. This argument implies
that every undertaking is essentially a productive one, and indeed one
of the traits which distinguishes Turgot from the other Physiocrats is
the fact that he did not think that industry and commerce were entirely
unproductive.


II: THE FUNCTIONS OF THE STATE

Seeing that the Physiocrats believed that human society was pervaded by
the principle of “natural order,” which required no adventitious aid
from any written law, and since Nature’s voice, without any artificial
restraint, was sufficient guide for mankind, it might have been expected
that the trend of Physiocracy would have been toward the negation of all
legislation, of all authority—in a word, toward the subversion of the
State.

It is certain that the Physiocrats wished to reduce legislative activity
to a minimum, and they expressed the belief—which has often been repeated
since by every advocate of _laissez-faire_—that the most useful work
any legislative body can do is to abolish useless laws.[79] If any new
laws are required they ought simply to be copies of the unwritten laws
of Nature. Neither men nor Governments can make laws, for they have
not the necessary ability. Every law should be an expression of that
Divine wisdom which rules the universe. Hence the true title of lawgiver,
not law-maker.[80] It is in this connexion that we meet with those
anecdotes—some of more than doubtful authenticity it is true—that have
gathered round their names. Of these the best known is that which tells
of Mercier de la Rivière’s visit to St. Petersburg, and his laconic reply
to Catherine the Great. He had been invited there to advise the Empress
about a new constitution for the country. After dilating upon the great
difficulties of the undertaking and the responsibilities it involved, he
gave it as his opinion that the best way of achieving her object was just
to let things take their course. Whereupon the Empress promptly wished
him good-bye.

But it would be a great mistake to think of the Physiocrats as
anarchists. What they wanted to see was the minimum of legislation with
a maximum of authority. The two things are by no means incompatible. The
liberal policy of limitation and control would have found scant favour
with them. Their ideal was neither democratic self-government, as we have
it in the Greek republics, nor a parliamentary _régime_ such as we find
in England. Both were detested.[81]

On the other hand, great respect was shown for the social hierarchy, and
they were strong in their condemnation of every doctrine that aimed at
attacking either the throne or the nobility. What they desired was to
have sovereign authority in the guise of a hereditary monarchy. In short,
what they really wanted—and they were not frightened by the name—was
despotism.[82]

“The sovereign authority should be one, and supreme above all individual
or private enterprise. The object of sovereignty is to secure obedience,
to defend every just right, on the one hand, and to secure personal
security on the other. A government that is based upon the idea of a
balance of power is useless.”[83]

This should help us to realise the distance separating the Physiocrats
from the Montesquieuian idea of the distribution of the sovereign
authority, and from the other idea of local or regional control. There
is no mention of representation as a corollary of taxation. This form of
guarantee, which marks the beginnings of parliamentary government, could
have no real significance for the Physiocrats. Taxation was just a right
inherent in the conception of proprietary sovereignty, a territorial
revenue, which was in no way dependent upon the people’s will.

It seems strange that such should be the opinion of a future President of
the Constituent Assembly. How can we explain this apparent contradiction
and such love of despotism among the apostles of _laissez-faire_?

Despotism, in the eyes of the Physiocrats, had a peculiar significance
of its own. It was the work of freedom, not of bondage. It did not
signify the rule of the benevolent despot, prepared to make men happy,
even against their own will. It was just the sovereignty of the “natural
order”[84]—nothing more. Every reasonable person felt himself bound to
obey it, and realised that only through such obedience could the truth be
possibly known.

It is quite different from the despotism of the ancient maxim, _Sicut
principi placuit legis habet vigorem_.[85] They would never have
subscribed to the doctrine that the king’s word is law, but they were
equally energetic in rejecting the claim of the popular will.[86] They
are as far from modern democracy as they are from monarchical absolutism.

This despotism was incarnate in the person of the sovereign or king. But
he is simply an organ for the transmission of those higher laws which are
given to him. They would compare him with the leader of an orchestra,
his sceptre being the baton that keeps time. The conductor’s despotism
is greater than the Tsar’s, for every musician has to obey the movement
of the hand, and that immediately. But this is not tyranny, and whoever
strikes a false note in a spirit of revenge is not simply a revolter, but
also an idiot.

Sovereignty appealed to the Physiocrats in the guise of hereditary
monarchy, because of its associations with property under the feudal
_régime_, and since hereditary rights were connected with landed property
so must royalty be. The sovereign who best represents the Physiocratic
ideal is perhaps the Emperor of China.[87] As the Son of Heaven he
represents the “natural order,” which is also the “divine order.” As an
agricultural monarch he solemnly puts his hand to the plough once a year.
His people really govern themselves; that is, he rules them according to
custom and the practice of sacred rites.[88]

In practice there will be nothing of great importance for the despot to
do. “As kings and governors you will find how easy it is to exercise
your sacred functions, which simply consist in not interfering with the
good that is already being done, and in punishing those few persons who
occasionally attack private property.”[89] In short, the preservation
of the “natural order” and the defending of its basis—private
property—against the attacks of the ignorant and the sacrilegious is the
first and most important duty of the sovereign. “No order of any kind is
possible in society unless the right of possession is guaranteed to the
members of that society by the force of a sovereign authority.”[90]

Instruction is the second duty upon which the Physiocrats lay special
stress. “Universal education,” says Baudeau, “is the first and only
social tie.” Quesnay is specially anxious for instruction on the “natural
order,” and the means of becoming acquainted with it. Further, the only
guarantee against personal despotism lies in well-diffused instruction
and an educated public opinion. If public opinion, as Quesnay said, is to
lead, it should be enlightened.

Public works are also mentioned. A wise landlord has good roads on his
property, for good roads and canals improve it. These represent a species
of _avances foncières_, similar to those undertaken by proprietors.

This is by no means all.[91] There are a number of duties recognised as
belonging to the State, of which every economist of the Liberal school up
to Bastiat and M. de Molinari approves.

We will add one other trait. Like the Liberal school, the Physiocrats
were whole-hearted “internationalists.” In this respect they differ from
their prototypes, the Chinese. They believed that all class distinctions
and all international barriers ought to be removed in the interest of
political development, as well as in that of scientific study.[92] The
peace advocates of to-day would do well to make the acquaintance of their
illustrious predecessors.


III: TAXATION

The bulk of the Physiocratic system is taken up with the exposition of
a theory of taxation, which really forms one of the most characteristic
portions of their work. Though inextricably bound up with the theory
of the net product and with the conception of landed proprietorship,
curiously enough, it has survived the rest of their doctrine, and quite
recently has been given a new lease of life.

In the table showing the distribution of the national income three
participators only are mentioned—the landed proprietor, the farmer, and
the artisan. But there is also a fourth—the Physiocratic sovereign, who
is none other than the State itself, and who thoroughly deserves a share.
This benevolent despot, whose duties we have just mentioned, cannot be
very exacting, for, having little to do, his demands must be moderate.
In addition to his double mission of maintaining security and giving
instruction, he must also contribute towards increasing the productivity
of the land by establishing public works, making roads, etc.[93] Money is
required for all this, and the Physiocrats argued that taxes ought to be
paid liberally,[94] and not grudgingly, as is too often the case under a
parliamentary _régime_. Where is this money to come from?

The reply is obvious if we have grasped their system. The only available
fund is the net product, which is the only new wealth that is really
dispensable—the rest is necessarily absorbed in the repayment of the
advances made for the upkeep of the agricultural and industrial classes.
Were taxation to absorb a proportion of the revenues that are devoted to
production it would gradually drain away the source of all wealth. So
long as it only takes the surplus—the true net product, which is a mere
tributary of the main stream—no harm will be done to future production.

All this is quite clear. But if taxation is to absorb the net product
the question arises as to who is to pay it. It is equally evident that
it can only be taken from those who already possess it, namely, from the
landed proprietors, who must bear the whole burden of taxation. Just now
we were amazed at the privileges which the Physiocrats so light-heartedly
granted them: this is the ransom, and it is no light one. The next
problem is how to assess this tax.

The Physiocrats were extremely loth to rob the gentry of their incomes,
and a number of pages in their writings are devoted to a justification
of their claims upon them. Not only were they willing to leave them
everything that was necessary to compensate them for the outlay of
capital and labour, but also all that might be required to make the
property thoroughly valuable and the position of the landowner a most
enviable one.[95] The preference shown for the landowner is just the
result of the social importance attributed to him by the Physiocrats.
“If some other class were preferable,” says Dupont de Nemours, “people
would turn their attention to that.” They would no longer spend their
capital in clearing or improving the land. But if the possession of
land be so desirable, is there not some danger lest everybody should
become a landlord and neglect the other walks of life? The Physiocrats
thought not, for, since Nature has set a limit to the amount of land in
existence, there must also be a limit to the number of landowners.

A third of the net product, or, if we accept Baudeau’s figures,
six-twentieths, _i.e._ 30 per cent., was to be paid in taxes. Taking
the net product at 2 milliard francs, which is the figure given in the
_Explication du Tableau économique_, this gives us exactly 600 million
francs as the amount of the tax.[96]

The proprietors, who were then for the most part free from taxation, felt
that this was a very considerable contribution, and that the Physiocrats
demanded a heavy price for the high honour which they had conferred
upon them. Even to-day a tax of 30 per cent. on the gross revenue of
landlords would cause some consternation. The Physiocrats anticipated
this objection, and in reply brought forward an argument which shows that
they possessed exceptionally keen economic insight. They argued that none
would feel the burden, seeing that no one was really paying it. Land
would now be bought at 70 per cent. of its former value, so that the 30
per cent. nominally paid by the proprietor was in reality not paid by
him at all.[97] Land let at £10,000 would be valued at £200,000. But
with a tax of £3000 it is really only yielding £7000, and its value will
be £140,000. The buyer who pays this price, despite the fact that he
has paid a tax of £3000, will enjoy all the revenue to which he has any
claim, for he can only lay claim to what he has paid for, and he did not
pay for that portion of the revenue which is affected by the tax. It is
exactly as if he had only bought seven-tenths of the land, the remaining
three-tenths being the State’s. And if at some later time this tax should
be abolished, it would merely mean making him a present of £3000 a
year—the equivalent of a lump sum of £60,000.[98]

The reasoning was excellent for those buying land after the tax had
been levied. It had, however, a much wider import than the Physiocrats
thought, for it might be applied not merely to taxes on land, but also
to taxes on capital. But this gave little consolation to those who were
to have the honour of inaugurating the new _régime_, and the first task
evidently was to convert them.[99]

The sovereign’s position in the main is like that of the landed
proprietors, which is in agreement with the Physiocratic conception of
sovereignty. The landed proprietors and the king in reality form one
class of fellow landowners, with the same rights, the same duties, and
the same revenues. Hence the sovereign’s interests are completely bound
up with those of his country.[100]

The Physiocrats attached the greatest practical importance to their
fiscal system, and were thoroughly convinced that the misery of the
people was due to the unequal distribution of the burden of taxation.
They thought that this was the true source of injustice—in short,
that this was the social problem. To-day we ascribe misery to unequal
distribution of wealth rather than to any particular fiscal system, and
consequently the Physiocratic view seems to us somewhat extreme. Still,
it was perhaps not so difficult to justify, in view of the frightful
conditions of fiscal organisation under the old _régime_.

The objections which a single tax, levied only on the landed interest,
was bound to provoke were not unforeseen by the Physiocrats, nor did they
neglect to answer them.

To the objection that it was unjust to place the burden of taxation
upon the shoulders of a single class of the nation,[101] instead of
distributing it equally among all classes, the Physiocrats replied that
the statesman’s ideal was not equal taxation, but the complete abolition
of all taxation. This could only be achieved by taxing the “net product.”

Suppose that we agree that the taxes should be paid by some other class.
The question then is to determine what class of the community should be
chosen.

Shall we say that the farmer must pay them? But after deducting the “net
product” what remains for the farmer is just the bare equivalent of his
original outlay. Consequently, if we take 600 millions from the farmers
by way of taxation there will be so much less capital for the land,
resulting in a smaller gross product the following year,[102] unless they
agitate for a reduction of 600 millions in their rents. If they succeed
this will leave the proprietors in the position of having paid over
the 600 millions to the State. But we must also reckon the losses and
friction incurred in every deviation from the “natural order.” Suppose
we decide that the sterile classes should pay the taxes. This class is
_ex hypothesi_ sterile—that is, it produces the exact equivalent of what
it consumes. To take 600 millions from this class is tantamount to a
reduction of its consumption by 600 millions, or an equivalent limitation
of its purchases of raw material. The result would be a diminished
product in the future, unless the industrial classes succeeded in
increasing prices by an equivalent amount. Even in that case the landed
proprietors will have to bear the brunt of it: firstly, they will have
to reduce their own consumption, and secondly, their tenants’, whose
efficiency will thereby be impaired.[103]

This process of reasoning seems to imply that the revenues of the
agricultural and industrial classes are not squeezable because they
represent the indispensable minimum necessary for the expenses of
production. This seems to be an anticipation of the notorious “iron
law.” Turgot’s formula incisively stating this law, but containing no
attempt at a justification, is known to most people.[104] Long before
his day, however, it had been stated by Quesnay in terms no less
pronounced, though perhaps not so well known. “It is useless to urge
that wage-earners can pay the tax so levied upon them, by restricting
consumption and depriving themselves of luxuries without thereby causing
the burden to fall upon the classes who pay the wages. The rate of
wages, and consequently the amount of comfort and luxury which wages
can purchase, are fixed at the irreducible minimum by the action of the
competition which prevails among them.” This is quite a characteristic
trait.[105] The author of the “natural order,” without any hesitation,
admits that the direct outcome of the establishment of that order would
be to reduce the life of the wage-earners to a level of bare subsistence.

It is also remarkable that in their study of the industrial classes wages
should have claimed the exclusive attention of the Physiocrats. Profits
even then were by no means unsqueezable, but curiously enough they failed
to realise this. Voltaire’s rich banker would have proved embarrassing
here. They would have had some difficulty in showing how a reduction of
his extravagance could possibly have endangered production. But they
might have replied that since he had so little difficulty in squeezing
the 400,000 _livres_ out of his fellow-citizens he would not experience
much more trouble in getting another 400,000 out of them and paying them
over to the State.

Another objection consists in the insufficiency of a single tax to meet
all the needs of the State. “In some States it is said that a third, a
half, or even three-fourths of the clear net revenue from all sources
of production is insufficient to meet the demands of the Treasury, and
consequently other forms of taxation are necessary.”[106]

In reply to this the Physiocrats would point out that the mere
application of their fiscal system would result in such an increase in
the net product that the yield from the tax would progressively grow. We
must also take account of the economies resulting from the simplicity of
the tax, and the almost complete absence of expenses of collection. But
the most interesting point of all is that they thought the State should
adapt its needs to meet its revenue, and not _vice versa_. The great
advantage of the Physiocratic _impôt_, however, was that it was regulated
by a natural norm, which gave the amount of the net product. Without
this, taxation becomes arbitrary.[107] At bottom the system affords a
barrier against the autocracy of the sovereign—a barrier that is much
more effective than a parliamentary vote.

One of the disciples of Quesnay put the theory to the test of practice.
The Margrave of Baden had the advantage of being a prince, and he
proceeded to experiment on his own subjects. The system was tried in
three communes of his principality, but, like most social experiments,
failed. In two of the communes it was abandoned at the end of four years.
In a third, despite its evil effects, it was prolonged until 1802.
The increase in the land tax caused a veritable slump in the value of
property just when the remission of taxes upon consumption was resulting
in the rapid multiplication of wineshops and beerhouses.[108] It is
unnecessary to add that the failure of the experiment did nothing to
weaken the faith of the Margrave or his fellow Physiocrats. An experiment
on so small a scale could not possibly be accepted as decisive. This is
the usual retort of innovators when social experiments prove failures,
but we must recognise the element of truth contained in their reply.

But if we wish to see the real results of the Physiocratic system we must
look beyond the private experiments of a prince. Elsewhere the effects
were much more far-reaching.

The fiscal aspect of the French Revolution owed its guiding inspiration
to their ideas. Out of a budget of 500 million francs the Constituent
Assembly decreed that about half of it—that is, 240 millions—should be
got out of a tax levied upon land, equal to a tax of 2400 million francs
nowadays; and the greatest part of it was to be raised by direct taxation.

Distrust of indirect taxation, and of all taxes on commodities, is also a
consequence of the Physiocratic system—a distrust that is bound to grow
as society becomes more democratic. Most of the arguments in favour of
direct taxation are to be found in the Physiocratic writings. But the
chief one employed nowadays—namely, that indirect taxes often bear no
proportion to the amount of the revenue, but weigh heaviest upon those
who have least, is not among them. This concern about proportionality,
which is merely another word for justice, was quite foreign to their
thoughts.[109]

At a later stage of this work it will be our duty to call attention
to the enthusiasm aroused by this old theory of an _impôt unique_ as
advocated in the works of an eminent American economist,[110] who renders
homage to the Physiocrats for inspiring him with ideals altogether
opposed to those of the landed proprietors. And a similar movement under
the very same name—the single-tax system—is still vigorous in the United
States.


IV: _RÉSUMÉ_ OF THE PHYSIOCRATIC DOCTRINE. CRITICS AND DISSENTERS

A brief _résumé_ of the contributions made to economic science by the
Physiocrats will help us to realise their great importance.

From the theoretical point of view we have:

1. The idea that every social phenomenon is subject to law, and that the
object of scientific study is to discover such laws.

2. The idea that personal interest if left to itself will discover what
is most advantageous for it, and that what is best for the individual is
also best for everybody. But this liberal doctrine had many advocates
before the Physiocrats.

3. The conception of free competition, resulting in the establishment of
the _bon prix_, which is the most advantageous price for both parties,
and implies the extinction of all usurious profit.

4. An imperfect but yet searching analysis of production, and of the
various divisions of capital. An excellent classification of incomes and
of the laws of their distribution.

5. A collection of arguments which have long since become classic in
favour of landed property.

From a practical point of view we have:

1. The freedom of labour.

2. Free trade within a country, and an impassionate appeal for the
freedom of foreign trade.

3. Limitation of the functions of the State.

4. A first-class demonstration of the superiority of direct taxation over
indirect.

It is unjust to reproach the Physiocrats, as is sometimes done, with
giving us nothing but social metaphysics. A little over-systemisation may
prove useful in the early stages of a science. Its very faults have some
usefulness. We must admit, however, that although their conception of the
“natural order” supplied the foundation, or at least the scaffolding, for
political economy, it became so intertwined with a kind of optimism that
it nullified the work of the Liberal school, especially in France.[111]

But the greatest gap in the Physiocratic doctrine is the total absence of
any reference to value, and their grossly material, almost terrestrial,
conception of production. They seldom mention value, and what little they
do say is often confused and commonplace. Herein lies the source of their
mistakes concerning the unproductive character of exchange and industry,
which are all the more remarkable in view of the able discussions of this
very question by a number of their contemporaries. Among these may be
mentioned Cantillon,[112] who resembles them in some respects and whose
essay on commerce was published in 1755; the Abbé Galiani, who dealt with
the question in his _Della Moneta_ (1750); and the Abbé Morellet, who
discussed the same topic in his _Prospectus d’un Nouveau Dictionnaire du
Commerce_ (1769). More important than any of them, perhaps, is Condillac,
whose work _Du Commerce et du Gouvernement_ was unfortunately not
published until 1776; but by that time the Physiocratic system had been
completed, and their pre-eminence well established.

Turgot, though one of their number, is an exception. He was never a
thoroughgoing Physiocrat, and his ideas concerning value are much
more scientific.[113] He defines it as “an expression of the varying
esteem which man attaches to the different objects of his desire.” This
definition gives prominence to the subjective character of value, and the
phrases “varying esteem” and “desire” give it greater precision.[114] It
is true that he also added that besides this relative attribute value
always implied “some real intrinsic quality of the object.” He has
frequently been reproached for this, but all that he meant to say was
that our desire always implies a certain correctness of judgment, which
is indisputable unless every judgment is entirely illusory. But Turgot
would never have admitted that.

It is possible that Turgot inspired Condillac, and that he himself
owed his inspiration to Galiani, whose book, which appeared twenty
years earlier, he frequently quotes. This work contains a very acute
psychological analysis of value, showing how it depends upon scarcity on
the one hand and utility on the other.

Besides a difference in his general standpoint, there are other
considerations which distinguish Turgot from the members of the
Physiocratic school, and it would have been juster to him as well as more
correct to have devoted a whole chapter to him.[115] Generally speaking,
his views are much more modern and more closely akin to Smith’s. In view
of the exigencies of space we must be content to draw attention to the
principal doctrines upon which he differs from the Physiocrats.

1. The fundamental opposition between the productivity of agriculture
and the sterility of industry, if not altogether abandoned, is at least
reduced in importance.

2. Landed property is no longer an institution of divine origin. Even the
appeal to the “ground expenses” is dropped. As an institution it rests
merely upon the fact of occupation and public utility.

3. Movable property, on the other hand, holds a prominent place. The
function of capital is more carefully analysed and the legitimacy of
interest definitely proved.

But we must turn to Condillac’s book if we want to see how the
Physiocratic doctrine should be completed and expurgated of its errors.
Condillac was already well known as a philosopher when, in his sixtieth
year, he published this new work in 1776. This admirable book, entitled
_Le Commerce et le Gouvernement considérés relativement l’un à l’autre_,
contains an outline of most modern problems. The title gives no adequate
indication of the character of the work, and possibly accounts for the
oblivion into which the book has fallen.

It is a genuine economic treatise, and not a medley of economic and
political suggestions concerning social science, with an admixture
of ethics and jurisprudence. Value is regarded as the foundation of
the science, and the Physiocrats are thus out-classed from the very
first.[116] Value itself is considered to be based upon utility, which
is stripped of its popular meaning, and given a scientific connotation
which it has never lost. It no longer implies an intrinsic, physical
property of matter, but connotes a degree of correspondence between a
commodity and a given human want. “Value is not an attribute of matter,
but represents our sense of its usefulness, and this utility is relative
to our need. It grows or diminishes according as our need expands or
contracts.” This is the foundation of the psychological theory of
value.[117]

But this is not all—though a great deal. He clearly realises that utility
is not the only determinant of value; that quantity, _i.e._ scarcity
or abundance, also exercises an important influence. With admirable
judgment he seizes upon the connection between them, and shows how the
two statements are united in one, for quantity only influences value
according as its action upon utility intensifies or weakens demand.
“But since the value of things is based upon need it is natural that a
more keenly felt need should endow things with greater value, while a
less urgent need endows them with less. Value increases with scarcity
and diminishes with plenty. In case of plenty it may even disappear; a
superabundant good will be valueless if one has no use for it.”[118]
This could not be put more clearly to-day. Here we have the germ of the
theories of Jevons and the Austrian school, though it took a long time to
develop.

We might naturally expect a superior treatment of exchange following upon
this new theory of value. If value is simply the satisfaction of want,
exchange creates two values when it satisfies two needs at the same time.
The characteristic of exchange is that each of the two parties yields
what it has in superabundance in return for what it needs. But what is
given up is superabundant, is useless, and consequently valueless; what
is demanded has greater utility, and consequently greater value. Two
men come to market each with a useless thing, and each returns with a
useful one.[119] Consequently the Physiocratic saying that exchange means
no gain to anyone, or at least that the gain of one only compensates
for the loss of the others, is seen to be radically false. The
Physiocrats—notably Trosne—attempted a reply, but, for reasons already
given, they never succeeded in realising the subjective character of
value.

This same theory should have carried Condillac a stage further, and
helped in the rectification of the Physiocratic error concerning
production. If value is simply utility and utility itself is just the
correspondence between things and our demand for them, what is the agency
that produces this harmony between things and desires? It is very seldom
that nature succeeds in establishing it. “Nature is frequently fertile in
things we have no desire for and lavish of what is useless”—a profound
remark that ought to have cooled the Physiocrats’ love of the _Alma
Parens_. “Matter is transformed and made useful by dint of human labour.
Production means giving new form to matter.”[120] If this be true, then
there is no difference between agricultural and industrial production,
for they both transform what already exists.[121]

Moreover, the theory proves very clearly that if artisans and proprietors
are dependent upon the agriculturists—as, indeed, they are—the latter in
their turn are nothing but artisans. “If someone asks whether agriculture
ought to be preferred to manufacture or manufacture to agriculture, we
must reply that we have no preferences, and that the best use should be
made of both.”[122]

Lastly, his definition of wages, short as it is, is of immense
significance. “Wages represent the share of the product which is due to
the workers as co-partners.”[123] Wages only “represent” the share that
is due to the workers. In other words, the wage-earner, either through
want of will or of power, cannot exercise his rightful claim to his own
work, and simply surrenders the claim in return for a money price. This
constitutes his salary, which is regulated, like every other price, by
competition between buyers and sellers. Condillac makes no reference to
an iron law of wages, but regards them as determined by the forces of
demand and supply. He does, however, hint at the implicit alliance which
exists between capital and labour.[124]

From a practical standpoint also, especially in his defence of free
labour and his condemnation of corporations, Condillac is more
categorical than the Physiocrats. “All these iniquitous privileges,”
he writes, “have no claim to a place in the order beyond the fact
that they are already established.” He is as persistent as Turgot in
his justification of the taking of interest and in his demand for the
determination of the rate by competition. This very elegant argument
is employed to show its similarity to exchange: Exchange implies
compensation for overcoming the drawbacks of distance, whether of place
or of time.[125] Exchange generally refers to place, interest to time,
and this is really the foundation of the modern theory.




CHAPTER II: ADAM SMITH


Notwithstanding the originality and vigour displayed by the Physiocrats,
they can only be regarded as the heralds of the new science. Adam
Smith,[126] it is now unanimously agreed, is its true founder. The
appearance of his great work on the _Wealth of Nations_ in 1776
instantly eclipsed the tentative efforts of his predecessors. To-day the
Physiocratic doctrines scarcely do more than arouse historical curiosity,
while Smith’s work has been the guide for successive generations of
economists and the starting-point of all their speculation. Even at the
present day, despite many changes in the fundamental principles of the
science, no economist can afford to neglect the old Scotch author without
unduly narrowing his scientific horizon.

Several reasons account for the commanding position held by this book—a
position which no subsequent treatise has ever successfully rivalled.

First is its supreme literary charm. It is above all an interesting book,
bristling with facts and palpitating with life. The burning questions
of the hour, such as the problems presented by the colonial _régime_,
the trading companies, the mercantile system, the monetary question, and
taxation, supply the author with congenial themes for his treatment.
His discussion of these questions is marked by such mastery of detail
and such balance of judgment that he convinces without effort. His facts
are intermixed with reasoning, his illustrations with argument. He is
instructive as well as persuasive. Withal there is no trace of pedantry,
no monotonous reiteration in the work, and the reader is not burdened
with the presence of a cumbersome logical apparatus. All is elegantly
simple. Neither is there the slightest suggestion of the cynic. Rather
a passion of genuinely human sympathy, occasionally bordering upon
eloquence, breathes through the pages. Thanks to rare qualities such as
these we can still feel something of the original freshness of this old
book.

In addition to this, Smith has been successful in borrowing from his
predecessors all their more important ideas and welding them into a
more general system. He superseded them because he rendered their work
useless. A true social and economic philosophy was substituted for
their fragmentary studies, and an entirely new value given to their
contributions. Taken out of their isolation, they help to illustrate his
general theory, becoming themselves illuminated in the process.

Like most great writers, Smith knows how to borrow without impairing
his originality. Over a hundred authors are quoted in his book, but
he does not always acknowledge them. The names of some of the writers
who exercised such influence over him, and opened up the path which he
afterwards followed, deserve more than a passing reference.

The first place among these belongs, perhaps, to Hutcheson, Smith’s
predecessor in the chair of Moral Philosophy at Glasgow. The divisions
of the subject are almost identical with those given by Hutcheson, and
many of Smith’s best known theories can be traced in the _System of Moral
Philosophy_ published by Hutcheson in 1755, but which we know was written
long before. Hutcheson laid great stress upon the supreme importance of
division of labour, and his views on such questions as the origin and
variations in the value of money and the possibility of corn or labour
affording a more stable standard of value closely resemble those of the
_Wealth of Nations_.

David Hume is a near second. Smith refers to him as “by far the most
illustrious philosopher and historian of the present age,”[127] and
from 1752 onward they were the closest of friends. Hume was already the
author of some essays on economic questions, the most important among
them dealing with money, foreign trade, the rate of interest, etc. These,
along with several other writings, were published in the _Political
Discourses_ in 1752. Hume’s examination of these problems displays his
original penetrative thought, and there is evident the profundity and
lucidity of treatment characteristic of all his writings. The absurdity
of the Mercantile policy and of interfering with the natural tendency
of money to adapt itself to the needs of each community, the sophistry
of the balance of trade theory, and the impious consequences resulting
from commercial jealousy among nations are exposed with admirable force
in these essays. No doubt the essays left a great impression upon Smith.
He quoted them in his lectures at Glasgow, and Hume consulted him before
bringing out a second edition. It is true that Smith eventually became
the stauncher Liberal of the two. Hume, in his essay on the _Balance of
Trade_, recognized the legitimacy of certain protective rights which
Smith wished removed altogether. Still it was to Hume that Smith owed his
conversion to the Liberal faith.

On this matter of commercial liberty there was already, towards the
end of the seventeenth and the beginning of the eighteenth centuries,
a small but a growing band of Mercantilists who had begun to protest
against the irksomeness of the Customs regulations. They were, of course,
still largely imbued with mercantile prejudice, but they are rightly
classed as “Liberals.” Just as in France Boisguillebert had foreshadowed
the Physiocrats, so in England Child, Petty, Tucker, Dudley North, and
Gregory King had been preparing the way for a more liberal policy in
foreign trade.[128]

In addition to Hutcheson and Hume one other writer must be mentioned in
this connection, namely, Bernard de Mandeville. He was not an economist
at all, but a doctor with considerable philosophical interests. In 1704
he had published a small poem, which, along with a number of additions,
was republished in 1714 under the title of _The Fable of the Bees; or,
Private Vices Public Benefits_. The fundamental idea of the book, which
caused quite a sensation at the time, and which was seized by order of
the Government, is that civilisation—understanding by that term not only
wealth, but also the arts and sciences—is the outcome, not of the virtues
of mankind, but of what Mandeville calls its vices; in other words, that
the desire for well-being, comfort, luxury, and all the pleasures of life
arises from our natural wants. The book was a sort of apology for the
natural man and a criticism of the virtuous.

Smith criticised Mandeville in his _Theory of Moral Sentiments_,[129]
and reproached him particularly for referring to tastes and desires as
vices though in themselves they were nowise blameworthy. But despite his
criticism Mandeville’s idea bore fruit in Smith’s mind. Smith in his turn
was to reiterate the belief that it was personal interest (in his opinion
no vice, but an inferior virtue) that unwittingly led society in the
paths of well-being and prosperity. A nation’s wealth for Smith as well
as for Mandeville is the result, if not of a vice, at least of a natural
instinct which is not itself virtuous, but which is bestowed upon us by
Providence for the realisation of ends that lie beyond our farthest ken.

Such are the principal writers in whose works we may find an outline of
some of the more important ideas which Smith was to incorporate in a true
system.

Mere systematisation, however, would not have given the _Wealth of
Nations_ its unique position. Prior to Smith’s time attempts had been
made by Quesnay and the Physiocrats to outline the scope of the science
and to link its various portions together by means of a few general
principles. Although he was not the first to produce a connected
scientific treatise out of this material, he had a much greater measure
of success than any of his predecessors.

Smith owed much to the Physiocrats, but he had little personal
acquaintance with them beyond that afforded by his brief stay in Paris
in 1765. Slight as the intimacy was, however, there is no doubt about
the influence they had upon him. It is also very improbable that he had
read all their works: Turgot’s _Réflexions_, for example, written in
1766, but only published in 1769-70, was probably not known to him. But
frequent personal converse with both Turgot and Quesnay had helped him
in acquiring precise first-hand knowledge of their views. We can easily
guess which ideas would attract him most.

On one point at least he had no need to be enlightened, for in the matter
of economic liberalism he had long been known as a doughty champion. But
the ardent faith of the Physiocrats must have strengthened his own belief
very considerably.

On the other hand, it appears that he borrowed from the Physiocrats the
important idea concerning the distribution of the annual revenue between
the various classes in the nation. In his lectures at Glasgow he scarcely
mentions anything except production, but in the _Wealth of Nations_ an
important place is given to distribution. The difference can hardly be
explained except upon the hypothesis of Smith’s growing acquaintance with
the _Tableau économique_ and the theory of the “net product.”

But admitting that he borrowed what was most characteristic and most
suggestive in their teaching, his treatment of its many complicated
aspects is altogether superior to theirs. The Physiocrats were so
impressed by the importance of agriculture that they utterly failed to
see the problem in its true perspective. They scanned the field through
a crevice, and their vision was consequently narrow and limited. Smith,
on the other hand, took the whole field of economic activity as his
province, and surveyed the ground from an eminence where the view was
clearest and most extensive.

The economic world he regarded as a vast workshop created by division
of labour, one universal psychological principle—the desire of everyone
to better his lot—supplying unity to its diverse phenomena. Political
economy was at last to be based, not on the interests of a particular
class, whether manufacturing or agricultural, but upon a consideration
of the general interest of the whole community. Such are the directing
principles that inspire the whole work, the guiding lines amidst what
had hitherto seemed a mere chaos of economic facts. Contemporaries
never counted upon the difficulties which the new science was bound to
encounter, so great was their enthusiasm at having a fixed standpoint
from which for the first time the complex interests of agriculture,
industry, and commerce might be impartially surveyed. With Smith the
study emerged from the “system” stage and became a science.

Our examination of Smith’s views will be grouped around three points:

(I) Division of labour.

(II) The “natural” organisation of the economic world under the influence
of personal interest.

(III) Liberalism.


I: DIVISION OF LABOUR

It was Quesnay who had propounded the theory that agriculture was the
source of all wealth, both the State’s and the individual’s.[130] Adam
Smith seized upon the phrase and sought to disprove it in his opening
sentence by giving to wealth its true origin in the general activity of
society. “The annual labour of every nation is the fund which originally
supplies it with all the necessaries and conveniences of life which it
annually consumes, and which consist always either in the immediate
produce of that labour or in what is purchased with that produce from
other nations.”

Labour is the true source of wealth. When Smith propounded this
celebrated theory, which has given rise to so many misunderstandings
since, it was not intended that it should minimise the importance
of natural forces or depreciate the part which capital plays in
production.[131] No one, except perhaps J. B. Say, has been more
persistent in emphasising the importance of capital, and to the land, as
we shall presently see, he attributed a special degree of productivity.
But from the very outset Smith was anxious to emphasise the distinction
between his doctrine and that of the Physiocrats. So he definitely
affirms that it is human activity and not natural forces which produces
the mass of commodities consumed every year. Without the former’s
directing energy the latter would for ever remain useless and fruitless.

He is not slow to draw inferences from this doctrine. Work, employed in
the widest sense, and not nature, is the parent of wealth—not the work
of a single class like the agriculturists, but the work of all classes.
Hence all work has a claim to be regarded as productive. The nation’s
annual income owes something to everyone who toils. It is the result
of their collaboration, of their “co-operation” as he calls it. There
is no longer any need for the distinction between the sterile and the
productive classes, for only the idle are sterile.

A nation is just a vast workshop, where the labour of each, however
diverse in character, adds to the wealth of all. The passage in which
Adam Smith expresses this idea is well known, but no apology is needed
for quoting it once again.[132] “What a variety of labour too is
necessary in order to produce the tools of the meanest of those workmen!
To say nothing of such complicated machines as the ship of the sailor,
the mill of the fuller, or even the loom of the weaver, let us consider
only what a variety of labour is requisite in order to form that very
simple machine, the shears with which the shepherd clips the wool. The
miner, the builder of the furnace for smelting the ore, the feller
of the timber, the burner of the charcoal to be made use of in the
smelting-house, the brick-maker, the brick-layer, the workmen who attend
the furnace, the mill-wright, the forger, the smith, must all of them
join their different arts in order to produce them. Were we to examine,
in the same manner, all the different parts of his dress and household
furniture, the coarse linen shirt which he wears next his skin, the shoes
which cover his feet, the bed which he lies on, and all the different
parts which compose it, the kitchen-grate at which he prepares his
victuals, the coals which he makes use of for that purpose, dug from the
bowels of the earth, and brought to him perhaps by a long sea and a long
land carriage, all the other utensils of his kitchen, all the furniture
of his table, the knives and forks, the earthen or pewter plates upon
which he serves up and divides his victuals, the different hands employed
in preparing his bread and his beer, the glass window which lets in
the heat and the light, and keeps out the wind and the rain, with all
the knowledge and art requisite for preparing that beautiful and happy
invention, without which these northern parts of the world could scarce
have afforded a very comfortable habitation, together with the tools
of all the different workmen employed in producing those different
conveniencies; if we examine, I say, all these things, and consider what
a variety of labour is employed about each of them, we shall be sensible
that without the assistance and co-operation of many thousands, the
very meanest person in a civilized country could not be provided, even
according to, what we very falsely imagine, the easy and simple manner in
which he is commonly accommodated.”

Division of labour is simply the spontaneous realisation of a particular
form of this social co-operation. Smith’s peculiar merit lies in placing
this fact in its true position as the basis of his whole work. The book
opens upon this note, whose economic and social importance has been so
frequently emphasised since that it sounds almost commonplace to-day.

This division of labour effects an easy and natural combination of
economic efforts for the creation of the national dividend. Whereas
animals confine themselves to the direct satisfaction of their individual
needs,[133] men produce commodities to exchange them for others more
immediately desired. Hence there results for the community an enormous
increase of wealth; and division of labour, by establishing the
co-operation of all for the satisfaction of the desires of each, becomes
the true source of progress and of well-being.

In order to illustrate the growth in total production as the outcome of
division of labour, Smith gives an example of its effects in a particular
industry. “The effects of the division of labour, in the general business
of society, will be more easily understood by considering in what manner
it operates in some particular manufactures.” It is in this connection
that he introduces his celebrated description of the manufacture of
pins. “A workman not educated to this business (which the division of
labour has rendered a distinct trade), nor acquainted with the use of the
machinery employed in it (to the invention of which the same division
of labour has probably given occasion), could scarce, perhaps, with his
utmost industry, make one pin in a day, and certainly could not make
twenty. But in the way in which this business is now carried on, not
only the whole work is a peculiar trade, but it is divided into a number
of branches, of which the greater part are likewise peculiar trades.
One man draws out the wire, another straights it, a third cuts it, a
fourth points it, a fifth grinds it at the top for receiving the head;
to make the head requires two or three distinct operations; to put it
on, is a peculiar business, to whiten the pins is another; it is even a
trade by itself to put them into the paper; and the important business
of making a pin is, in this manner, divided into about eighteen distinct
operations, which, in some manufactories, are all performed by distinct
hands, though in others the same man will sometimes perform two or three
of them. I have seen a small manufactory of this kind where ten men only
were employed, and where some of them consequently performed two or three
distinct operations. But though they were very poor, and therefore but
indifferently accommodated with the necessary machinery, they could, when
they exerted themselves, make among them about twelve pounds of pins in a
day.”[134]

Such is the picture of man as we find him in society. Division of labour
and exchange have resulted in augmenting production a hundredfold, and
thus increasing his well-being, whereas left to himself he could scarcely
supply his most urgent needs.

In a subsequent analysis Smith ascribes the gain resulting from division
of labour to three principal causes: (1) The greater dexterity acquired
by each workman when confined to one particular task; (2) the economy of
time achieved in avoiding constant change of occupation; (3) the number
of inventions and improvements which suggest themselves to men absorbed
in one kind of work.

Criticism has been levelled at Smith for his omission to mention the
disadvantages of division of labour which might possibly counterbalance
its many advantages. The omission is the result of his method of
treating the whole question, and it is not of much real importance.
The disadvantages, moreover, were not altogether lost sight of, and it
would be difficult to find a more eloquent plea for some counteracting
influence than that which Smith puts forward in the fifth book of the
_Wealth of Nations_. “In the progress of the division of labour,” he
remarks, “the employment of the far greater part of those who live by
labour, that is, of the great body of the people, comes to be confined
to a few very simple operations; frequently to one or two.” But “the man
whose whole life is spent in performing a few simple operations, of which
the effects too are, perhaps, always the same, or very nearly the same,
has no occasion to exert his understanding, or to exercise his invention
in finding out expedients for removing difficulties which never occur.
He naturally loses, therefore, the habit of such exertion, and generally
becomes as stupid and ignorant as it is possible for a human creature to
become.”[135]

This passage seems in contradiction with the ideas expressed above.
At one moment constant application to one particular kind of work is
regarded as the mother of invention, at another the unremitting task
is branded as a fertile cause of stupefaction. The contradiction is,
however, more apparent than real. An occupation at first stimulating to
the imagination may, if constantly pursued, result in mental torpor.
Smith’s conclusions are at any rate interesting. In order to remove the
inconveniences resulting from over-specialisation he emphasises the need
for bringing within reach of the people, even of imposing upon them, a
system of education consisting of the three R’s[136]—such education to
be supplied through institutions partly supported by the State. We can
imagine the shock which such heterodoxy must have given to the prophets
of _laissez-faire_. Fortunately it was not the only one they had to bear.

Smith next proceeds to indicate the limits of this division of labour. Of
such limits he mentions two: (1) In the first place it must be limited by
the extent of the market. “When the market is very small, no person can
have any encouragement to dedicate himself entirely to one employment,
for want of the power to exchange all that surplus part of the produce
of his own labour, which is over and above his own consumption, for such
parts of the produce of other men’s labour as he has occasion for.”[137]
This is why foreign trade, including trade with the colonies, by
extending the market for some products is favourable to further division
of labour and a further increase of wealth. (2) The other consideration
which, according to Smith, limits division of labour is the quantity
of capital available.[138] The significance of this observation is not
quite so obvious as that of the former one. Here it seems to us that a
conclusion drawn from one particular trade has been applied to industry
as a whole. It may be true of a private manufacturer that he will be
able to push technical division of labour further than any of his rivals
provided he has more capital than they; but taking society as a whole
it is clear that the existence of division of labour enables the same
product to be produced with less capital than is necessary for the single
producer.[139]

Such is an outline of Adam Smith’s theory of division of labour—a theory
so familiar to everyone to-day that we are often unable to realise its
importance and to appreciate its originality, and this despite the fact
that certain sociologists like Durkheim have hailed it as supplying the
basis of a new ethic. Juxtaposed with the Physiocratic theory, it is not
very difficult to realise its superiority.

To the Physiocrats the economic world was a hierarchy of classes. The
agriculturist in some mysterious way bore the “whole weary weight of
this unintelligible world” upon his own shoulders, giving to the other
classes a modicum of that sustenance which he had wrested from the soil.
Hence the fundamental importance of the agricultural classes and the
necessity for making the whole economic system subordinate to them. Adam
Smith, on the other hand, attempted to get a view of production as a
whole. He regarded it as the result of a series of joint undertakings
engineered by the various sections of society and linked together by the
tie of exchange. The progress of each section is bound up with that of
every other. To none of these classes is entrusted the task of keeping
all the others alive; all are equally indispensable. The artisan who
spares the labourer the task of building his house or of making his shoes
contributes to the accumulation of agricultural products just as much as
the ploughman who frees the artisan from turning the furrow or sowing
the seed. The progress of national wealth cannot be measured in terms of
a single net product; it must be estimated by the increase in the whole
mass of commodities placed at the disposal of consumers.

One very evident practical conclusion follows; namely, that taxation
should fall, not upon one class, as the Physiocrats wished, but upon all
classes alike. As against the _impôt unique_, Smith advocates multiple
taxation which shall strike every source of revenue equally, labour and
capital as well as land; and the fundamental rule which he lays down is
as follows: “The subjects of every State ought to contribute towards
the support of the Government, as nearly as possible, in proportion to
their respective abilities; that is, in proportion to the revenue which
they respectively enjoy under the protection of the State.”[140] This
is his famous maxim of equality so frequently quoted in every financial
discussion.[141]

It is very curious that Smith should have failed to make the best
possible use of this theory. Its full significance was lost upon him.
The theory of division of labour alone was sufficient to dispose of the
whole Physiocratic system. Nevertheless, in the last chapter of Book IV
we find him still valiantly struggling to disprove the conclusions of
the Physiocrats, by the aid of arguments not always very convincing.
Forgetting his principle of division of labour, he even adopts a part
of their thesis and finds himself entangled by the invalid distinctions
which they had drawn between productive and unproductive workers. He
simply gives another definition and describes as unproductive all works
which “perish in the very instant of their performance, and seldom leave
any trace or value behind them for which an equal quantity of service
could afterwards be procured.”[142] All these services, which comprise
the labours of domestic servants, of administrators and magistrates,
of soldiers and priests, of counsellors, doctors, artists, authors,
musicians, etc., Say classed together as “immaterial products.” By
restricting the term “productive” to material objects only, Smith gave
rise to a very useless controversy on the nature of productive and
unproductive works—a controversy that was first taken up by Say and
revived by Mill, but which to-day seems to be decided against Smith,
thanks to a more exact interpretation of his own doctrines. It is,
indeed, quite clear that all these services constitute a part of the
annual revenue of the nation, and that “production” in a general sense
would be diminished if some persons did not exclusively devote themselves
to the performance of such tasks.

After criticising the Physiocratic distinction drawn between the
wage-earning classes and the productive, Smith immediately admits that
the labour of artisans and traders is not as productive as that of
farmers and agricultural labourers, for the latter not only return the
capital employed by them together with profits, but they also furnish the
proprietor with rent.[143]

Whence this hesitation on the part of Smith? Where did he come by the
idea of the special and superior productivity of agriculture? An attempt
to account for it may prove interesting, and it will help us to give
Smith his true place in a history of economic doctrines.

Notwithstanding his recantation, Smith was never quite rid of
Physiocratic influence. Writing of the Physiocratic system, he described
it as perhaps “the nearest approximation to the truth that has yet been
published.”[144] So indelible was the impression which the Physiocrats
left upon him that both they and their doctrines, even when the latter
are directly opposed to his own, are always spoken of with the greatest
respect. The most important evidence of their power over him is the
thesis just mentioned which he attempted to defend, namely, that between
agriculture and other industries lies an essential distinction, because
in industry and commerce the forces of nature are never brought into
play, whereas in agriculture they always collaborate with man. “No
equal quantity of productive labour employed in manufactures can ever
occasion so great a reproduction. In them nature does nothing; man does
all; and the reproduction must always be in proportion to the strength
of the agents that occasion it.”[145] We almost think we are dreaming
when we read such things in the work of a great economist. Water, wind,
electricity, and steam, are they not natural forces, and do they not
co-operate with man in his task of production?

Considerations such as these were allowed to pass quite unheeded, and
Smith persisted in his error because he believed that this new doctrine
furnished him with an explanation of rent, that strange enigma which
had puzzled English economists for so long. How was it that while other
branches of production gave a return only sufficient to remunerate
the capital and labour employed, agriculture, in addition to these
two revenues, yielded a supplementary income known as rent? It was
because “in agriculture nature labours along with man: and though her
labour costs no expence, its produce has its value as well as that
of the most expensive workman.” Thus “rent may be considered as the
produce of those powers of nature, the use of which the landlord lends
to the farmer.”[146] Had Smith arrived at a true theory of rent this
recourse to the natural powers of the soil to furnish an explanation
of the proprietor’s revenue would have been quite unnecessary, and in
all probability he would not have so easily accepted the idea of the
special productivity of the soil. But this false conception of nature
has persisted in economic theory, and in it Smith thought he saw an
additional reason for adhering to those errors which the Physiocrats had
first induced him to commit.[147]

Apart from his personal attachment to the Physiocrats we must also
remember that Smith more than shared their predilection for agriculture.

Nothing can be more incorrect, though it is frequently done, than to
regard Smith as the prophet of industrialism and to contrast him with
the Physiocrats, the champions of agriculture. When the _Wealth of
Nations_ appeared in 1776 the economic transformation known to history
as the Industrial Revolution, which consisted in the rapid substitution
of machine production for the old domestic _régime_, had as yet
scarcely begun. Hargreaves and Arkwright had doubtless some inventions
to their credit. The one had produced the spinning jenny in 1765, and
the other had perfected the water frame in 1767, improvements that had
given considerable impetus to the cotton trade. James Watt,[148] who
was known to Smith, took out a patent for a steam-engine in 1769. But
these inventions were as yet quite novel, and required time before they
could modify the industrial system. The more important among them,
Crompton’s “mule”[149] and Cartwright’s weaving machine, were as yet of
the future. These dates are significant; they prove conclusively that
the Industrial Revolution had scarcely begun when Smith’s great work
appeared. Moreover, several of the more important themes treated of in
the _Wealth of Nations_ may be discovered in the course of lectures which
Smith delivered at Glasgow about 1759, so that it is quite impossible
to establish anything like an exact connection between the Industrial
Revolution which was just beginning and the ideas embodied in the _Wealth
of Nations_. One cannot even say that Smith was particularly enamoured
of the manufacturing _régime_—apart from the mechanical advance which
it implied. For, as Marx says,[150] the characteristic trait of English
economic life, despite the undisputed advance that industry was making
at that time, was commercial rather than industrial.[151] Especially was
this true of Glasgow, where Smith made most of his observations. Glasgow
then was an essentially commercial town, principally engaged in the
importation of American tobacco.[152]

Far from constituting a prophetic manifesto of the new age, Smith’s
work reveals even to the most superficial reader a thorough abhorrence
of traders and manufacturers. All his sarcasm is reserved for them, all
his criticism levelled at them. While the interest of landed proprietors
and workers appears to him always to accord with a country’s general
interest, that of traders and manufacturers “is never exactly the same
with that of the public,” the manufacturers having “generally an interest
to deceive and even to oppress the public, and who accordingly have, upon
many occasions, both deceived and oppressed it.”[153]

Again, when it comes to choosing between capitalists and workmen the
issue is not long in doubt. It is quite clear from more than one
passage that Smith’s sympathy was wholly with the workers. Several
paragraphs could be cited in proof of this. Suffice it to recall the
very sympathetic way in which he speaks of the high wages of workmen
and contrast it with his discussion of profits. “Is this improvement in
the circumstances of the lower ranks of the people to be regarded as
an advantage or as an inconveniency to the society? The answer seems
at first sight abundantly plain. Servants, labourers and workmen of
different kinds, make up the far greater part of every great political
society. But what improves the circumstances of the greater part can
never be regarded as an inconveniency to the whole. No society can
surely be flourishing and happy, of which the far greater part of the
members are poor and miserable. It is but equity, besides, that they
who feed, cloath, and lodge the whole body of the people, should have
such a share of the produce of their own labour as to be themselves
tolerably well fed, cloathed, and lodged.”[154] The tune changes when
he comes to speak of profits. He is of opinion that high profits raise
the price of commodities much more than high wages, and he dismisses the
consideration of the problem with this ironical remark: “Our merchants
and master-manufacturers complain much of the bad effects of high wages
in raising the price, and thereby lessening the sale of their goods
both at home and abroad. They say nothing concerning the bad effects of
high profits. They are silent with regard to the pernicious effects of
their own gains. They complain only of those of other people.”[155] The
contrast is significant. It is still more deeply marked in that phrase
which one is surprised not to see more frequently quoted by the champions
of labour legislation. “Whenever the legislature attempts to regulate the
differences between masters and their workmen, its counsellors are always
the masters. When the regulation, therefore, is in favour of the workmen,
it is always just and equitable; but it is sometimes otherwise when in
favour of the masters.”[156]

This is not the tone of most of his contemporaries. Nor do we meet with
this note in the writings of the appointed champions of the industrial
system—the MacCullochs, the Ures, and the Babbages of the next fifty
years. His words ring with that generous pity which proved a source of
inspiration to Lord Shaftesbury and Michael Sadler in their efforts to
secure the passing of the Factory Act of 1833.

Smith cannot, accordingly, be regarded as the herald of dawning
industrialism. He clung to agriculture with all the tenacity of his
nature, and no opportunity of showing his preference was ever missed.
The difficulties of agriculture are quite beyond those of any other
craft. “After what are called the fine arts, and the liberal professions,
however, there is perhaps no trade which requires so great a variety
of knowledge and experience.”[157] Not only is it more difficult, but
it is also more useful. Between agriculture, manufacture, and commerce
he draws a long comparison (to which we shall have to make reference
again) purporting to show that of all employments agriculture is the
most profitable field of investment, and the one most in accord with the
general interest. For the more progressive nations “the natural course
of things” would seem to suggest the investment of capital firstly in
agriculture, in the second place in industry, and finally in foreign
trade. The whole of Book III is an endeavour to show how the policy of
European nations had for many centuries been hostile to agriculture and
how the natural order had been inverted in the interests of merchants
and artisans. Agriculture had always been the victim. In his theory
of taxation he shows how a portion of the taxes on profits and wages
ultimately falls upon property. In his discussion of duties on imported
corn—those duties which aroused the indignation of Ricardo against the
landlords—he reveals the same partiality. And he even goes the length
of saying that it is not because of their personal interest, but owing
solely to a badly conceived imitation of the doings of merchants and
manufacturers, that “the country gentlemen and farmers of Great Britain
so far forgot the generosity which is natural to their station, as to
demand the exclusive privilege of supplying their countrymen with corn
and butchers’-meat.”[158]

Smith’s preference for agriculture and agriculturists need not be further
insisted upon. Despite his own theory of division of labour, he still
cherished a secret regard for the Physiocratic prejudice. He never
subjected agriculture to the indignity of equal treatment along with
other forms of economic activity. In his work at least it still retains
its ancient pre-eminence.


II: THE “NATURALISM” AND “OPTIMISM” OF SMITH

In addition to the conception of the economic world as a great natural
community created by division of labour, we can distinguish in Smith’s
work two other fundamental ideas, around which his more characteristic
theories group themselves. First is the idea of the spontaneous origin of
economic institutions, and secondly their beneficent character—or, more
briefly, Smith’s naturalism and optimism.

The two ideas, though frequently intermingled and sometimes even confused
in Smith’s work, must be carefully distinguished by the historian of
economic thought.

Spontaneity and beneficence were intimately connected for Smith. In
the eighteenth century anything natural or spontaneous was immediately
voted good, and the terms “natural,” “just,” and “advantageous” were
often used as synonymous. Smith did not escape the confusion of ideas.
Having shown the natural origin of economic institutions, he imagined
that at the same time he had demonstrated their useful and beneficent
character.[159] The confusion is no longer permissible. To give a
scientific demonstration of the origin of social institutions and to
gauge their value from the point of view of the general interest are
two equally legitimate but very different intellectual pursuits. We may
agree with Smith that our economic organisations, both in their origin
and functions, participate of the spontaneity of natural organisms,
but we may at the same time reserve judgment as to their real worth.
Pessimism no less than optimism may be engendered by contemplation of the
spontaneous character of economic institutions. While this conception
of the spontaneity of economic institutions seems to us just and
fruitful, the demonstration given of their beneficent character appears
insufficient and doubtful. The former conception is a commonplace with
all the greatest economists; the latter is rejected by the majority of
them.

These two ideas which have played such an important part in the history
of economic doctrines must be separately examined.

The conception of spontaneity is the one to which Smith refers most
frequently. _Il mondo va da se._ Here at any rate he and the Physiocrats
were entirely at one. There is no need for organisation, no call for the
intervention of any general will, however far-seeing or reasonable, and
no necessity for any preliminary understanding between men. Such are the
reflections that the study of the economic world suggests ever anew to
our author. The present aspect of the economic world is the result of the
spontaneous action of millions of individuals, each of whom follows his
own sweet will, taking no heed of others, but never doubting the ultimate
result. The noble outlines of the economic world as we know it have been
traced, not by following a plan issuing complete from the brain of an
organiser and deliberately carried out by an intelligent society, but by
the accumulation of numberless deeds designed by a crowd of individuals
in obedience to an instinctive force wholly unconscious of the work which
it was encompassing.

This idea of the spontaneous constitution of the economic world is in
some aspects analogous to the conception of an “economic law” of a
later period. Both ideas suggest the presence of something superior to
individual wills, and imposed upon them even despite their resistance.
The differences are equally marked, however, the scope of the former
being far greater than that of the latter. The words “natural law,”
in the first place, suggest regularity and repetition—the constant
recurrence of the same phenomena under similar conditions. This is not
the aspect that particularly struck Smith. He insists less upon the
constancy of economic phenomena and more on their spontaneity, their
instinctive and natural character. Say’s delight was to compare the
economic and the physical worlds. Smith loves to regard the economic
world as a living organism which creates for itself its own indispensable
organs. Nowhere is the term “economic law” employed, but his delineation
of the chief economic institutions and the account of their functions
always results in the same conclusion.

First of all take division of labour, which we have just studied, and
which more than any other institution contributes to the increase of
wealth.

This marvellous institution is “not originally the effect of any human
wisdom, which foresees and intends that general opulence to which it
gives occasion.” “It is the necessary, though very slow and gradual,
consequence of a certain propensity in human nature which has in view no
such extensive utility; the propensity to truck, barter, and exchange one
thing for another.”[160] This tendency itself is the outcome of personal
interest. “Man has almost constant occasion for the help of his brethren,
and it is in vain for him to expect it from their benevolence only. He
will be more likely to prevail if he can interest their self-love in his
favour, and show them that it is for their advantage to do for him what
he requires of them. Whoever offers to another a bargain of any kind,
proposes to do this: Give me that which I want, and you shall have this
which you want, is the meaning of every such offer; and it is in this
manner that we obtain from one another the far greater part of those
good offices which we stand in need of. It is not from the benevolence
of the butcher, the brewer, or the baker that we expect our dinner,
but from their regard to their own interest. We address ourselves, not
to their humanity, but to their self-love, and never talk to them of
our own necessities, but of their advantages.”[161] This gives rise to
exchange, and with exchange comes division of labour. “And thus the
certainty of being able to exchange all that surplus part of the produce
of his own labour, which is over and above his own consumption, for such
parts of the produce of other men’s labour as he may have occasion for,
encourages every man to apply himself to a particular occupation, and
to cultivate and bring to perfection whatever talent or genius he may
possess for that particular species of business.” Division of labour is
the outcome of a tendency common to all men, the tendency to barter; and
this tendency itself is spontaneously developed under the influence of
personal interest, which acts simultaneously for the benefit of each and
all.

Next comes money, and nothing has so facilitated exchange or so greatly
increased wealth. Every economic treatise since Smith’s has demonstrated
its advantages in terms almost identical with his. But how did money
first come to be employed? It was not by the act of a public body, nor
was it the outcome of a nation’s reflective judgment. It is simply the
result of the operation of a collective instinct. Some men who were
keener than others saw the inconveniences of the truck system. And “in
order to avoid the inconveniency of such situations, every prudent man in
every period of society, after the first establishment of the division
of labour, must naturally have endeavoured to manage his affairs in such
a manner, as to have at all times by him, besides the peculiar produce
of his own industry, a certain quantity of some one commodity or other,
such as he imagined few people would be likely to refuse in exchange
for the produce of their industry.”[162] Money is thus the product
of the simultaneous though not concerted action of a great number of
people, each obeying his personal inclination. The intervention of the
public authority is much later, and its object is merely to guarantee by
means of a design the weight and purity of such coins as are already in
circulation.

Take another well-known phenomenon—capital.[163] With the exception of
division of labour and the invention of money, Smith thought there was no
phenomenon of greater importance and no more essential fount of national
wealth than capital. The larger the store of capital, the greater
the number of productive workers, makers of tools and machinery—the
essentials of increased productivity—the further will division of labour
extend. To increase a nation’s capital is to expand its industry and
to further its well-being.[164] In some passages the growth of wealth
appears not merely as the chief but as the only method of augmenting
a nation’s wealth. “The industry of the society can augment only in
proportion as its capital augments, and its capital can augment only in
proportion to what can be gradually saved out of its revenue.”[165] In
short, capital limits industry,[166] a phrase that was destined to become
classic, and one that was repeated by every economist down to Mill.
Capital is the true source of economic life. Let capital increase and
industry will expand in every direction; diminish it and a bar is set to
all improvement. Capital fertilises the earth, whereas the labour of man
simply leaves it a weary waste.

Criticism has been freely levelled at this extravagant importance
which capital is made to assume. It is certainly somewhat curious that
labour should now be treated as altogether subordinate to capital,
whereas earlier in the volume labour alone was regarded as the great
wealth-producing agent. But we are not here concerned with the revival
of these threadbare controversies.[167] We merely wish to note that Smith
finds in this accumulation of capital a new illustration of spontaneity.
The saving of capital is not the result of any foresight on the part of
society, but is solely due to the simultaneous and concurrent actions
of thousands of individuals. These individuals, urged on by a desire to
better their situation, are spontaneously urged to save their earnings
and to employ those savings productively.

“The principle which prompts to save, is the desire of bettering our
condition, a desire which, though generally calm and dispassionate, comes
with us from the womb, and never leaves us till we go into the grave.…
An augmentation of fortune is the means by which the greater part of men
propose and wish to better their condition. It is the means the most
vulgar and the most obvious; and the most likely way of augmenting their
fortune, is to save and accumulate some part of what they acquire.” This
desire is so powerful that even the greatest follies perpetrated by
Governments have never succeeded in annulling its beneficial effects.
“The uniform, constant, and uninterrupted effort of every man to better
his condition, the principle from which public and national as well as
private opulence is originally derived, is frequently powerful enough
to maintain the natural progress of things toward improvement, in spite
both of the extravagance of government, and of the greatest errors of
administration. Like the unknown principle of animal life, it frequently
restores health and vigour to the constitution, in spite, not only of the
disease, but of the absurd prescriptions of the doctor.”[168]

But the idea of the spontaneity of economic institutions finds its most
interesting illustration in the theory of demand and supply, upon which
we must dwell a little.

In a society based upon division of labour, where everyone produces for
a market without any previous arrangement with his fellow producers and
without any external direction, the great difficulty lies in adapting
the amount of goods supplied to the amount demanded. How, as a matter
of fact, are these producers to know at any particular moment what they
ought to produce and in what quantities? Moreover, who is to direct
and who can restrain them? It is true that Smith was careful to point
out that they are not concerned with the satisfaction of all needs, of
whatever kind they may be. Their duty lies towards what he calls the
“effectual,” not the “absolute,” demand. By effectual demand we are to
understand the demand of those who are capable of offering not merely
something in exchange for the products which they desire, but of offering
at least enough to cover the expenses of raising those products.[169]
Society founded upon division of labour and exchange implies that nothing
can be gratuitous and every loss involves a sacrifice on the part of
some person or other.[170] But if production is carried on in this
haphazard fashion how are we to avoid an occasional over-production or an
accidental under-supply?

Before we can understand this we must acquaint ourselves with Adam
Smith’s theory of prices.

In the preceding chapter we had occasion to note how Condillac in 1776
put forward a theory of value which was altogether superior to the
Physiocrats’. Smith’s book, also published in 1776, betrays not the least
sign of Condillac’s influence, and the new theory never comes up for
discussion. The very success of the _Wealth of Nations_ had eclipsed the
fame of the French philosopher, and Smith’s theory, though quite inferior
to Condillac’s, held the field for so many years simply because it won
the allegiance of the English economists, whose influence was paramount
throughout the first half of the nineteenth century. Its popularity only
waned with the publication of the works of Walras, Jevons, and Menger.
Its historic interest is further enhanced by the fact that it had the
singular good fortune to win the approval both of the socialists and the
Liberal economists. It is the fate of writers like Smith, remarkable
for wealth of ideas rather than for logical presentation, to impel
minds along different and sometimes even opposite paths. Unfortunately
the theory of value is not the only one that presents a somewhat hazy
outline. We cannot here enter into the details of the theory, but must
content ourselves with a mere sketch of it. Even this, however, will
immediately enable us to understand its insufficiency, and appreciate the
twofold influence which it exercised upon subsequent doctrines.

Smith opens his treatment by emphasising the fundamental distinction
which exists between “value in use” and “value in exchange.”[171] By
value in use he means almost[172] exactly what we understand by utility,
or what other writers call subjective value, desirability, or ophelimity.

Present-day economists when treating of prices—the exchange value
of things—chiefly rely upon this conception of “value in use.” The
explanation of the “ratio of exchange” of commodities is based upon a
previous analysis of their utility for those who exchange them. Smith
proceeds in a different fashion. “Value in use” is mentioned, but only
for the purpose of contrasting it with value in exchange. It is then
dismissed without further consideration. The two notions seem to have
no point of contact. Value in exchange was the only one that was of any
interest to Smith; hence there was all the more reason for denying its
derivative character.[173]

Thus from the very first the only avenue that might have led to a
satisfactory solution of this problem of prices was closed. One could
easily have predicted that this was bound to land Smith in difficulty; as
a matter of fact he is doubly involved.[174] Two different but equally
erroneous solutions have been successively adopted by him, but he has
never actually decided between them. The socialists and economists who
are to follow will be engaged in the same task, and the cleavage between
them will be marked by their adoption of one or other of these two
theories.

Smith was led to the study of prices because he wished to know something
of the constant oscillation which is such a feature of their history. The
actual or market price is unstable because of the unstable connection
between demand and supply,[175] or, as he puts it, “It is adjusted,
however, not by any accurate measure, but by the higgling and bargaining
of the market, according to that sort of rough equality which, though not
exact, is sufficient for carrying on the business of common life.”[176]
It seemed impossible that their perpetual fluctuation should represent
the true value of the commodity. Its real value could not vary from
this moment to the next or from one place to another. Underneath the
constantly oscillating market price may be discerned another price,
referred to by Smith as the real or sometimes as the natural price.
The discovery of a more stable and a more constant element beneath the
continual fluctuations of price movements still constitutes the great
problem of pure economics.[177]

Smith’s first theory makes the true value of any commodity depend
upon the amount of labour or effort it has taken to produce. “Labour,
therefore, is the real measure of the exchangeable value of all
commodities.” “The real price of every thing, what every thing really
costs to the man who wants to acquire it, is the toil and trouble
of acquiring it.”[178] Labour—that is, the effort expended upon the
production of a commodity—is both the origin and the measure of its
exchange value. The theory that labour or effort is the cause of value
(if value can be said to have a cause) was first formulated by the father
of political economy himself. It is curious to think that it was this
same theory that was used with such good effect by Karl Marx in his
attack upon capitalism.

This first attempt to find a firmer foundation for exchange value than
that afforded by the shifting sands of demand and supply was scarcely
made before Smith became aware of some difficulties in the path. For
example, how was this work and the value dependent upon it to be
measured? “There may be more labour in an hour’s hard work than in two
hours’ easy business; or in an hour’s application to a trade which
it cost ten years’ labour to learn, than in a month’s industry at an
ordinary and obvious employment. But it is not easy to find any accurate
measure either of hardship or ingenuity.”[179] A second objection arises
when the theory is applied to civilized society. Work by itself cannot
produce anything; something must be contributed by both land and capital.
But neither of these is a free good, and they must cost something to
those who employ them. Accordingly primitive societies[180] are the only
ones where “the quantity of labour commonly employed in acquiring or
producing any commodity is the only circumstance determining its value.”
We must nowadays take some account of land and capital. So that labour
is not the only source of value, nor is it its sole measure.

Another hypothesis becomes necessary forthwith. This time cost of
production is hit upon as the likely regulator of value. Hitherto the
“real” price has signified the price that is based upon labour. Now the
“natural” price is defined as the price of goods valued at their cost
of production. The change of name is not of any great significance.
What Smith was in search of on both occasions was that true value which
always kept in hiding behind the fluctuations of market prices. It is the
same problem, but with a new solution. Just now we were informed that
if a commodity sold at a price representing the labour which it cost to
produce, that price would also represent its real cost. With no less
assurance we are now told that a commodity sold at cost of production
“is then sold precisely for what it is worth, or for what it really
costs the person who brings it to market.”[181] The true value of goods
corresponds to their cost of production. By this we are to understand a
sum sufficient to pay at normal rates the wages of labour, the interest
of capital, and the rent of land, all of which have collaborated in the
production of the particular commodity.

Smith, having discarded labour, finds a new determinant of value in
cost of production, and if socialists rallied to his first hypothesis
the great majority of economists right up to Jevons have clung to his
second. As for Smith himself, he never had the courage to choose between
them. They remain juxtaposed in the _Wealth of Nations_ because he
never made up his mind which to adopt. As a result his work is full of
contradictions which it would be futile to try to reconcile. For example,
land and capital in one place are regarded as sources of new values,
adding to and increasing the value which labour creates, and producing
normally an element of profit and rent, which, together with the wages of
labour, makes up the cost of production. In another connection they are
treated as deductions made by capitalists and landlords from the value
created by labour alone.[182] Some writers accordingly argue that Smith
must have been a socialist. On the whole the cost of production theory
prevailed, and the natural price of commodities is taken to mean that
price which coincides with their cost of production. As to market price,
he makes the remark that it is higher or lower than the natural price
according as the quantity offered diminishes or increases as compared
with the quantity demanded.

Such is Smith’s theory of prices. The element of truth which it contains,
namely, that the prices of goods tend to coincide with their cost of
production (the remark is not originally Smith’s at all), must not blind
us to its many faults. It is open to at least two very serious objections.

An attempt is made to explain the price of goods by referring to the
price of the services (wages, interest, and rent) which make up the
cost of production. When the cost of those services comes up for
consideration it is assumed that their cost is dependent upon the price
of the goods. Wages, for example, are determined by the selling price
of the commodities which labour has produced. Escape from the vicious
circle is only possible by availing ourselves of the modern theory
of economic equilibrium. That theory shows us how prices generally,
whether of goods or of services, are interdependent; all being determined
simultaneously—like the unknown in an algebraical formula—just when the
exchange is taking place. But this theory of economic equilibrium was, of
course, unknown to Smith.

Cost of production being the regulator of price, it is very important
that an analysis of cost of production and a study of the causes which
determine the rates of wages, profit, and rent should be made. One might
have expected that this study would have cleared away any obscurity
that still clung to the theory of prices. But this analysis is one of
the least satisfactory portions of Smith’s work. We have already had
occasion to note the unsatisfactory character of his theory of rent. That
of profits—which Smith fails to distinguish from interest—is equally
useless;[183] and his theory of wages is hopelessly inconsistent. He
hesitates between the subsistence theory of wages and the other theory
which makes them depend upon the relations between demand and supply,
without ever making a final choice.

We cannot agree with Say in considering Smith’s theory of distribution
one of his best claims to fame. His treatment of this problem, which
afterwards became the kernel of Ricardian economics, is altogether
inferior to his handling of production. We also know that this is the
least original part of his work. It was simply added as a kind of
afterthought, the original intention being to deal only with production.
This becomes evident if we compare the _Wealth of Nations_ with the
Glasgow course of 1763, the whole of which is devoted to production.
The addition of a theory of distribution to the original skeleton was
probably due to the Physiocrats, with whom in the meantime he had become
acquainted; and the hesitations and uncertainties which mar this part of
the work merely go to prove that Smith had not thought it out as clearly
as the other sections.

The subject cannot be pursued here. We can only point to the inference
which Smith draws from his theory of value, and how it is made to support
the contention that demand adapts itself spontaneously to the conditions
of supply. This is how Smith explains the continual oscillation of
prices: “When the quantity brought to market exceeds the effectual
demand, it cannot be all sold to those who are willing to pay the whole
value of the rent, wages and profit, which must be paid in order to
bring it thither. Some part must be sold to those who are willing to
pay less, and the low price which they give for it must reduce the price
of the whole. The market price will sink more or less below the natural
price according as the greatness of the excess increases more or less the
competition of the sellers, or according as it happens to be more or less
important to them to get immediately rid of the commodity.” The reverse
will happen when demand exceeds supply. “When the quantity brought to
market is just sufficient to supply the effectual demand and no more, the
market price naturally comes to be either exactly, or as nearly as can
be judged of, the same with the natural price. The whole quantity upon
hand can be disposed of for this price, and cannot be disposed of for
more. The competition of the different dealers obliges them all to accept
of this price, but does not oblige them to accept of less.” Thus “the
quantity of every commodity brought to market naturally suits itself to
the effectual demand.”[184]

And this very remarkable result is simply the outcome of personal
interest. “If at any time it exceeds the effectual demand, some of the
component parts of its price must be paid below their natural rate. If it
is rent, the interest of the landlords will immediately prompt them to
withdraw a part of their land; and if it is wages or profit, the interest
of the labourers in the one case, and of their employers in the other,
will prompt them to withdraw a part of their labour or stock from this
employment. The quantity brought to market will soon be no more than
sufficient to supply the effectual demand. All the different parts of its
price will rise to their natural rate, and the whole price to the natural
price.”

And so, in the majority of cases at least, this natural and spontaneous
mechanism secures a constant balancing of the quantities of goods
produced and the quantities effectively demanded. The circumstances under
which such a result does not follow are really quite exceptional—although
Smith does not deny that sometimes they do exist. Whenever such
conditions obtain—that is, when the market price remains for a
considerable length of time above the natural price—we find that it is
always due to the capitalists’ action in concealing the high rate of
profits which they draw, or in retaining possession of some patent or
natural monopoly, such as wine of a special quality. It occasionally
happens also as the result of an artificial monopoly.[185] But these are
mere exceptions, their rare occurrence confirming the fundamental rule
concerning the spontaneous adaptation of the quantity offered to the
quantity demanded, thanks to this oscillation of the market price about
the natural.

This theory of adaptation, we know, is one of the most important in the
whole of political economy. Since Smith wrote it has been reproduced by
almost every economist, and without any very substantial alteration. It
remains even to this day the basis of our theory of production.

It is interesting to note the manner in which Smith makes use of his
theory to illustrate his thesis. We shall refer to two cases which are
intrinsically important as well as affording admirable illustrations of
that spontaneity upon which Smith laid such stress.

The first concerns population. Population, like commodities, may be
superabundant or it may be insufficient. What regulates its numbers? “The
number of people,” Smith replies, “depends upon the demand of society,
and this is how it works. Among the proletariat, generally speaking,
children are plentiful enough. It is only when wages are very low that
poverty and misery cause the death of many of them; but when wages are
fairly high several of them manage to reach maturity.” “It deserves to be
remarked, too,” he continues, “that it necessarily does this as nearly as
possible in the proportion which the demand for labour requires. If this
demand is continually increasing, the reward of labour must necessarily
encourage in such a manner the marriage and multiplication of labourers
as may enable them to supply that continually increasing demand by a
continually increasing population. If the reward should at any time
be less than what was requisite for this purpose, the deficiency of
hands would soon raise it; and if it should at any time be more, their
excessive multiplication would soon lower it to this necessary rate. The
market would be so much under-stocked with labour in the one case, and
so much over-stocked in the other, as would soon force back its price
to that proper rate which the circumstances of the society required.
It is in this manner that the demand for men, like that for any other
commodity, necessarily regulates the production of men; quickens it when
it goes on too slowly, and stops it when it advances too fast.”[186]

The second case relates to the demand for money and its supply. We have
already seen how the problem of its origin is solved. Alongside of that
problem is now placed another, namely, how is the quantity in circulation
regulated to meet the requirements of exchange? Smith’s first task was
to expose the popular fallacy concerning this topic.[187] According
to one school of thinkers, money was wealth _par excellence_, and it
was all the more important that he should get rid of this view seeing
that it constituted the very foundation of the Mercantile theory, the
overthrow of which was the immediate object in publishing the _Wealth of
Nations_. The Mercantilists contended that a country should export more
than it imports, receiving the balance in money. If it can be proved that
this balance is useless because money is a mere commodity possessing
no greater and no less utility than any other, then the Mercantilist
foundation is completely destroyed. Smith thought that money was less
indispensable than some other goods, seeing that we are anxious to pass
it on as often as we can. The disdain with which Smith regarded money
was the result of a reaction against Mercantilism, and it led some of
his followers to over-emphasise his point of view and to misconceive
the special character of monetary phenomena. A nation’s true wealth
“consists,” Smith tells us, “not in its gold and silver only, but in
its lands, houses, and consumable goods of all different kinds.”[188]
“It is the annual produce of the land and labour of the society.”[189]
Hence in evaluating a country’s net revenue we must omit money because
it is not consumed. It only serves as an instrument for the circulation
of wealth and for the measurement of value. It is the “great wheel of
circulation.”[190] In virtue of this title, although Smith himself
classed money along with circulating capital, he remarks that it might be
likened to the fixed capital of an industry, to machinery or workshops.
The greater the economy in the use of fixed capital, provided there is
no diminution in production, the better, for the larger will be the
net product. This is equally true of money—a necessary but a very
costly instrument of social production. “Every saving in the expence of
collecting and supporting that part of the circulating capital which
consists in money is an improvement of exactly the same kind”[191] as
that which reduces the fixed capital of industry.[192]

This is why bank-notes—the circulation of which diminishes the quantity
of money needed—have proved such a precious invention. What they do is to
set free a certain quantity of gold and silver which may be sent abroad
to pay for machinery and other instruments of production, and which will
in turn increase the true revenue of the country. Smith’s parable in
which he illustrates these advantages, has long since become classic:
“The gold and silver money which circulates in any country may very
properly be compared to a highway, which, while it circulates and carries
to market all the grass and corn of the country, produces itself not a
single pile of either. The judicious operations of banking, by providing,
if I may be allowed so violent a metaphor, a sort of waggon-way through
the air; enable the country to convert, as it were, a great part of its
highways into good pastures and cornfields, and thereby to increase very
considerably the annual produce of its land and labour.”[193]

The conclusion is that every policy—the Mercantilist, for example—which
aims at increasing the quantity of money within the country, whether
by direct or indirect methods, is absurd, for money, far from being
indispensable, is really an encumbrance.

It is not only absurd, but also useless. Have we not seen already that
money is a mere commodity designed to facilitate circulation and that
the demand for it is entirely determined by that object? But the supply
of any commodity usually adapts itself spontaneously to the demand for
it. No one concerns himself with supplying the nation with wine or
with crockery. Why trouble about money?[194] If the quantity of goods
diminishes, exchange slackens and a part of the money becomes useless.
But “the interest of whoever possesses it requires that it should
be employed.”[195] Accordingly “it will, in spite of all laws and
prohibitions, be sent abroad, and employed in purchasing consumable goods
which may be of some use at home.”

On the other hand, as the prosperity of a nation grows it necessarily
attracts the precious metals because a multiplication of exchanges leads
to a growing demand for money. These exportations and importations will
depend, as Hume[196] had already shown, upon the relative cheapness or
dearness of money. What is true of metallic money is also true of a
special kind of money known as bank-notes. Smith has given us a vivid
description of the functions of banks, and especially of the fortunes of
the most famous bank of this period, the Bank of Amsterdam. This afforded
him another opportunity of demonstrating how the quantity of notes
offered spontaneously adapts itself to the quantity demanded. If banks
issue more notes than the circulation warrants prices will rise. Buying
from foreign countries will be resorted to and the notes will be returned
to the banks to be exchanged for gold and silver—the only international
money. The banks clearly have no interest in issuing too many notes,
because it involves a greater metallic reserve as the result of the more
frequent demands for payment which they will have to face. Of course,
“every particular banking company has not always understood or attended
to its own particular interest, and the circulation has frequently been
over-stocked with paper money.”[197] But this does not affect the main
principle, and we have one further proof of the spontaneous activity of
the economic mechanism.

We have now reviewed some of Smith’s principal themes, and we have
seen how every phenomenon impresses him in the same fashion. Had space
permitted we might have cited other examples all pointing to the same
conclusion.[198] This conception of spontaneity and wise beneficence is
by no means the product of mere _a priori_ thinking. It was no abstract
theory that needed the backing of a rigid demonstration. It was a belief
gradually borne in upon him in the course of his review of the economic
field. This is characteristic of all his thought, and with every new
vista we are reminded of it. The conclusion is hinted at again and
again, and the impression left upon the reader’s mind is that no other
conclusion could ever be possible. Smith thought of the economic order
as an organism—the creation of a thousand human wills unconscious of the
end whither they are tending, but all of them obedient to the impulse of
one instinctive, powerful force. This force, the root of all economic
activity, its constancy and uniformity triumphant over every artificial
obstacle and giving unity to the whole system, what is it?

We have already encountered it on more than one occasion. It is personal
interest, or, as Smith prefers to call it, “the natural effort of every
individual to better his own condition.”[199] Hidden deep in the heart
of every individual lies this essential spring of human life and social
progress.

Doubtless it is not the only one. Smith is never exclusive. He knew
that there were other passions[200] besides self-interest, and he is
not afraid of naming them, as when he attributes an economic revolution
which had such beneficial effects as the emancipation of the rural
classes to “the most childish vanity of proprietors.”[201] Neither did
he omit to point out that personal interest is not equally strong in the
breast of every one, and that there is the greatest diversity in human
motives. All this he had forgotten, according to some of his critics,
while others charge him with the creation of the _homo œconomicus_, a
poor representation of reality and a mere automaton exclusively guided by
material interests. Someone has remarked that if you add to this figure
a tinge of patriotism you have a faithful picture of the Englishman and
Scotsman of his day. Had he been acquainted with Germans or Frenchmen,
with their less sordid attachment to material gain, he might have judged
differently. It may be that our reading of him is incorrect. He seems
to have taken care to note that his remarks do not apply to _all_, but
only to the generality of men. He continually recalls the fact that he
is speaking of men of common understanding,[202] or of those gifted
with common prudence.[203] He knew well enough that the principles of
common prudence do not always govern the conduct of _every_ individual,
but he was of opinion that they always influenced that of the majority
of every class and order.[204] His reasoning is applicable to men _en
masse_, and not to individuals in particular. Moreover, he does not deny
that man may be unacquainted with or may even entirely ignore his own
interest. We have just quoted a passage wherein he remarks that bankers
who temporarily issue too many notes are at that moment ignorant of their
own interests.

These reservations notwithstanding, and full account being taken of all
the exceptions to the principle as laid down by Smith, it is still true
to say that as a general thesis he considers “the natural effort of every
individual to better his own condition”—that is, personal interest—as
the fundamental psychological motive in political economy. Any reference
to the case of business men who are really actuated by a desire to take
general welfare as their guide in matters of conduct is treated with a
measure of scepticism which it is difficult not to share. “I have never
known much good done by those who affected to trade for the public good.
It is an affectation, indeed, not very common among merchants, and
very few words need be employed in dissuading them from it.”[205] Not
that sentiment does not play a part, and a very important part, in the
philosophy of Smith; but sentiment, or sympathy, as he calls it, has
the domain of morality for its own, while interest dominates that of
economics. All his thinking led him to a firm belief in a spontaneous
economic order founded and guided by self-interest.

Comparison with the Physiocratic doctrine concerning the natural and
essential order of societies is illuminating. To the Physiocrats the
“natural order” implied a system—an ideal. It required a genius to
discover it, and only an enlightened despotism could realise it. For
Smith the “spontaneous order” was a fact. It was not a thing to be
brought into being. It already existed. It was doubtless held in check
by a hundred imperfections, including, among others, the stupidity of
human legislation.[206] But it was triumphant over them all. Beneath
the artificial constitution of society lay the natural constitution
which completely dominated it. This natural constitution, which for the
Physiocrats was nothing more than an ideal, Smith discovered in actual
operation, and he was able to describe its _modus operandi_. Political
economy, which with Quesnay was nothing better than a system of rules and
regulations, became in Smith’s hands a natural science based upon the
observation and analysis of existing facts. In a passage written in his
usual lucid style Smith shows the superiority of his system over that of
the Physiocrats. “Some speculative physicians seem to have imagined that
the health of the human body could be preserved only by a certain precise
regimen of diet and exercise, of which every, the smallest, violation
necessarily occasioned some degree of disease or disorder proportioned to
the degree of the violation.… Mr. Quesnai, who was himself a physician,
and a very speculative physician, seems to have entertained a notion of
the same kind concerning the political body, and to have imagined that it
would thrive and prosper only under a certain precise regimen, the exact
regimen of perfect liberty and perfect justice. He seems not to have
considered that in the political body, the natural effort which every
man is continually making to better his own condition, is a principle
of preservation capable of preventing and correcting, in many respects,
the bad effects of a political œconomy in some degree both partial and
oppressive. Such a political œconomy, though it no doubt retards more or
less, is not always capable of stopping altogether the natural progress
of a nation towards wealth and prosperity, and still less of making it
go backwards. If a nation could not prosper without the enjoyment of
perfect liberty and perfect justice, there is not in the world a nation
which could ever have prospered. In the political body, however, the
wisdom of nature has fortunately made ample provision for remedying many
of the bad effects of the folly and injustice of man; in the same manner
as it has done in the natural body, for remedying those of his sloth and
intemperance.”[207]

This passage leads us to his second thesis, namely, the excellence of
these economic institutions. As we have already remarked, these two
ideas of spontaneity and excellence, though confused by Smith, ought to
be treated apart. His naturalism and optimism are inseparable, and both
of them find expression in the same paragraph. The passage just quoted
affords a proof of this. Personal interest not only creates and maintains
the economic organism, but at the same time ensures a nation’s progress
towards wealth and prosperity. The institutions are not only natural,
but are also beneficial. They interest him not merely as objects of
scientific curiosity, but also as the instruments of public weal. Herein
lies their chief attraction for him, for political economy to him was
more of a practical art than a science.[208]

But this is hardly emphatic enough. Natural economic institutions are not
merely good: they are providential. Divine Providence has endowed man
with a desire to better his condition, whence arises the “natural” social
organism: so that man, following where this desire leads, is really
accomplishing the beneficent designs of God Himself. By pursuing his own
interest, man “is in this as in many other cases” (he is writing now of
the employment of capital) “led by an invisible hand to promote an end
which was no part of his intention.”[209] The Physiocrats could hardly
have improved upon that.

We can scarcely share in his optimism to-day. But it has played too
prominent a _rôle_ in the history of ideas not to detain us for a moment.
We must examine the arguments upon which it is based and endeavour to
grasp their import.

Let us note, in the first place, that every example hitherto deduced with
a view to proving the spontaneity of economic institutions at the same
time furnishes a demonstration of the beneficial effects of personal
interest. Owing to a coincidence by no means fortuitous every institution
mentioned by Smith as owing its existence to the prevalence of action of
this kind is at the same time favourable to economic progress. Division
of labour, the invention of money, and the accumulation of capital are so
many natural social facts that also increase wealth. The adaptation of
demand and supply, the distribution of money according to the need for
a circulating medium, the growth of population according to the demand
for it, are so many spontaneous phenomena which ensure the efficient
working of economic society. A perusal of Smith’s work leaves us with the
impression that these spontaneous institutions must also be the best.

The general proof of this thesis is scattered throughout the whole book.
But there was one point especially upon which Smith was very anxious
to show complete accord between public and private interest. This was
in connection with the investment of capital. In his opinion capital
spontaneously seeks, and as spontaneously finds, the most favourable
field for investment—most favourable, that is to say, to the interest
of society in general. This proof at first sight seems to apply only to
one special fact, but it really has a more general import. We know the
great stress which Smith laid upon capital. Division of labour depends
upon it, and so does the abundance or scarcity of produce. It determines
the quantity of work and fixes the limit of population. To show that the
investment of capital conforms to the general interest is to show that
all production is organised in the manner most favourable to national
prosperity.

Smith distinguishes between four methods of investing capital: in
agriculture, in industry, in the wholesale and in the retail trades.
Wholesale industry is further divided into three classes: domestic trade;
foreign trade, furnishing the nation with foreign products; and the
carrying trade which transports those goods from one country to another.
Smith maintained that the order in which these various forms of activity
were mentioned was also the order of their utility, agriculture being the
most advantageous, industry the second best, etc.

He also proposes two criteria for testing this hierarchy: (1) the
quantity of productive labour put into operation by means of the capital
employed by each; (2) the amount of exchange value annually added to the
revenue by each of these employments. As we pass from agriculture to the
other branches, the quantity of productive labour brought into operation
and the amount of exchange value obtained gradually decreases, and with
this decrease goes a diminishing utility for the country. Smith thought
that a nation ought to employ its capital in the way he had suggested.
It ought to give the preference to agriculture, and engage in the other
branches only as the accumulation of capital permitted.

But this is precisely what the capitalists would do were they entirely
free. Every one of them, in fact, is interested in keeping his capital
as near home as possible, with a view to better supervision. Only as
a last resource does he venture to engage in foreign commerce. Again,
even among the industries carried on in his own country every capitalist
will preferably choose that which will result in the production of the
greatest exchange value, seeing that his profit varies with the amount
of this exchange value. His investments will accordingly be made in
the order mentioned, an order which roughly corresponds to the greater
or lesser quantity of exchange values produced by each industry. And
finally, when contemplating investment in foreign trade he will for the
same reason follow the order specified above—the order of greatest
general utility. Thus the double desire of keeping one’s capital within
one’s reach and of finding for it the most lucrative field of investment
leads every capitalist to employ his capital in the fashion which is most
advantageous for the nation. Such is the argument, whatever its value.

Even if we adopted his criteria it is obvious that his classification is
altogether too arbitrary. How, for example, can we justify the statement
that an industrial enterprise or the carrying trade employs less capital
than agriculture? The exact contrary would be nearer the truth, and
agriculture ought to be given a much more modest position. Moreover, the
conception of such a hierarchy does not accord very well with the theory
of division of labour, which seeks to put the various forms of human
activity more nearly on an equality.

As a matter of fact we cannot even accept a criterion which takes the
amount of exchange values furnished by an industry as the test of its
social utility. This increase in the quantity of exchange values simply
proves that the demand for the goods concerned is stronger than the
demand for some others. When capital flows into certain industries
it only points to the spontaneous satisfaction of social demand. But
social demand and social utility are not necessarily the same. Demand
is the outcome of human desires, and its intensity depends upon the
revenue drawn by the individual. But we can neither regard these desires
in themselves or the system of distribution that makes such desires
“effective” as sufficient tests of social utility. And to say that
production follows demand is to prove nothing at all. Smith himself
seems to have realised this; hence his other criterion—the quantity of
productive labour employed by capital. According to this test those
industries that employ the least amount of machinery and the greatest
amount of hand labour are the most useful—quite an untenable view.

A demonstration of a somewhat similar character has been attempted by the
Hedonistic school. They have shown how free competition always tends to
direct production into such channels as will result in maximum utility,
or, in other words, that it affords the best method of satisfying the
actual demands of the market. But they have been very careful to note
that social utility and ophelimity are two very different expressions
that must never be confused, and that they have failed to find any
scientific test of social utility.

Smith’s argument is unsatisfactory, and its foundation untrustworthy.
We do not forget that his optimism is based not so much upon this
specious demonstration as upon the great number of observations which
he had occasion to make in the course of his work. This idea of a
harmony between private interest and the general well-being of society
was not put forward as a rigidly demonstrable _a priori_ theory,
open to no exceptions. It was rather a general view of the whole
position—the conclusion drawn from repeated observations, the _résumé_
of a detailed inquiry which had covered every corner of the economic
field. A particular process of reasoning may have helped to confirm this
conclusion, but the reasoning itself was largely based upon experience,
the universal experience of history. It was the study of this experience
that led to the discovery of a “vital” principle of health and progress
in the “body social.” Smith would have been the first to oppose the
incorporation of his belief in any dogma. He was content to say that
“most frequently” and in a “majority of cases” general interest _was_
satisfied by the spontaneous action of private interest. He was also the
first to point out instances—in the case of merchants and manufacturers,
for example—where the particular and the general interest came into
conflict. We might cite many characteristic passages in which he takes
pains to qualify his optimism.

Absolute his optimism was not, neither was it universal. In fact, it
would not be difficult to prove that it was never intended to apply to
anything other than production. Nowhere does the great Scotch economist
pretend that the present distribution of wealth is the justest possible—a
trait that distinguishes him from the optimists of Bastiat’s school. His
optimism deserted him when he reached that portion of his subject. On the
contrary, he showed that landed proprietors as well as capitalists “love
to reap where they have not sown,” that inequalities in social position
give masters an advantage in bargaining with their men.[210] In more than
one passage he speaks of interest and rent as deductions from the produce
of labour.[211] Smith, indeed, might well be regarded as a forerunner of
socialism. There is no difficulty in believing, so far as the experience
of old countries goes, that “rent and profit eat up wages and the two
superior orders of people oppress the inferior one.”[212]

It is especially important that we should make a note of the opinions
of those people who think that Smith intended his optimism to extend
to distribution as well as to production. As a matter of fact he was
too level-headed to entertain any such idea. Even Say himself in the
last edition of his _Treatise_ expresses some doubts as to the equity of
the present system of distribution.[213] Smith was not really concerned
with the question at all. It is only at a much later date, when the
socialists had demonstrated the importance of the problem, that we hear
of this belief in the beneficence of economic institutions. It really
represents a reaction against the socialistic teaching and an attempt at
a justification of the present methods of distribution.

We must beware of confusing Smith’s optimism with that of modern
Hedonism, or of identifying it with Bastiat’s answer to the socialists.
It lacks the scientific precision of the one and has none of the
apologetic tone of the other. It is little more than a reflection
prompted by the too naïve confidence of the eighteenth century in the
bounty of “nature,” and an expression of profound conviction rather than
the conclusion of a logical argument.


III: ECONOMIC LIBERTY AND INTERNATIONAL TRADE

The practical conclusion to which naturalism leads and to which Smith’s
optimism points is economic liberty. So naturally does it proceed from
what we have just said that the reader finds himself quite prepared for
Smith’s celebrated phrases: “All systems either of preference or of
restraint, therefore, being thus completely taken away, the obvious and
simple system of natural liberty establishes itself of its own accord.
Every man, as long as he does not violate the laws of justice, is left
perfectly free to pursue his own interest his own way, and to bring both
his industry and capital into competition with those of any other man,
or order of men.” As to the Government, or “sovereign,” as Smith calls
him, “he is completely discharged from a duty, in the attempting to
perform which he must always be exposed to innumerable delusions, and
for the proper performance of which no human wisdom or knowledge could
ever be sufficient; the duty of superintending the industry of private
people, and of directing it towards the employments most suitable to the
interests of the society.”

Smith, following the Physiocrats, but in a more comprehensive and
scientific fashion, finds himself driven to the same conclusion, namely,
the wisdom of non-intervention by the State in matters economic.[214]

But here, as elsewhere in his work, the sense of the positive and the
concrete, so remarkable in Smith, prevents his being content with a
general demonstration. He is not satisfied with proving the inefficiency
of intervention as compared with the efficiency of those institutions
which are spontaneously created by society itself, but he attempts
to show that the State, by its very nature, is unfitted for economic
functions. His arguments have been the arsenal from which the opponents
of State intervention have been supplied with ammunition ever since.

Let us briefly recall them.

“No two characters seem more inconsistent than those of trader and
sovereign.”[215] Governments are “always, and without any exception, the
greatest spendthrifts in the society.”[216] The reasons for this are
numerous. In the first place, they employ money which has been gained by
others, and one is always more prodigal of the wealth of others than of
one’s own. Moreover, the Government is too far removed from the centres
of particular industries to give them that minute attention which they
deserve if they are going to prosper. “The attention of the sovereign
can be at best but a very general and vague consideration of what is
likely to contribute to the better cultivation of the greater part of
his dominions. The attention of the landlord is a particular and minute
consideration of what is likely to be the most advantageous application
of every inch of ground upon his estate.”[217]

This necessity for a thorough cultivation of the soil and for the best
employment of capital, for direct and careful superintendence, is an idea
to which he continually reverts. He regrets, among other things, that
the growth of public debts causes a portion of the land and the national
capital to pass into the hands of fund-holders, who are doubtless
interested in the good administration of a country, but “are not
interested in the good condition of any particular portion of land, or in
the good management of any particular portion of capital stock.”[218]

Lastly, the State is an inefficient administrator because its agents
are negligent and thriftless, not being directly interested in
administration, but paid out of public funds. Should the administration
of the land pass into the hands of the State he exclaims that not a
fourth of the present produce would ever be raised, because of “the
negligent, expensive, and oppressive management of his factors and
agents.”[219] On the contrary, he proposes that the remainder of the
common land should be distributed among individuals. On this point
European Governments have followed his advice somewhat too closely.[220]
For the same reason—the necessity for stimulating personal interest
wherever possible—he commends, instead of a fixed salary for public
officers, payment by those who benefit by their services, such payment in
every case to be in strict proportion to the zeal and activity displayed.
This was to apply, for example, to judges and professors.[221]

State administration is accordingly a _pis aller_, and intervention
ought to be strictly limited to those cases in which individual action
is impossible. Smith recognises three functions only which the State
can perform, namely the administration of justice, defence, “and,
thirdly, the duty of erecting and maintaining certain public works and
certain public institutions, which it can never be for the interest of
any individual, or small number of individuals, to erect and maintain;
because the profit could never repay the expence to any individual or
small number of individuals, though it may frequently do much more than
repay it to a great society.”[222]

We must beware, however, lest we exaggerate this point. Although Smith,
in the majority of cases, preferred individual action, we must not
conclude from this that he had unlimited confidence in individuals.
Smith’s individualism was of a particular kind. It was not a mere blind
preference for every private enterprise, for he knew that industry
frequently falls a prey to the spirit of monopoly. “People of the same
trade seldom meet together, even for merriment and diversion, but
the conversation ends in a conspiracy against the public, or in some
contrivance to raise prices.”[223] In order that a private enterprise
may be useful for the community two conditions are necessary. The
_entrepreneur_ must be: (1) actuated by personal interest; (2) his
actions must by means of competition be kept within the limits of
justice. Should either of these two conditions be wanting, the public
would run the risk of losing as much by private as they would by State
enterprise.

Thus Smith throughout remains very hostile to certain collective
enterprises of a private nature, such as joint-stock companies,[224]
because of the absence of personal interest. The only exceptions which he
would tolerate are banks, insurance companies, and companies formed for
the construction or maintenance of canals or for supplying great towns
with water, for the management of such undertakings can easily be reduced
to a kind of routine, “or to such a uniformity of method as admits of
little or no variation.”[225]

His opposition to every kind of monopoly granted either to an individual
or to a company is even more pronounced. A whole chapter is devoted to an
attack upon the great trading companies of the seventeenth and eighteenth
centuries, which were created with a view to the development of colonial
trade, and of which the East India Company was the most famous.

One other observation remains to be made. Non-intervention for Smith was
a general principle, and not an absolute rule. He was no doctrinaire,
and he never forgot that to every rule there are some exceptions. An
interesting list could be made, giving all the cases in which, according
to Smith, the legitimacy of State intervention was indisputable—legal
limitation of interest,[226] State administration of the post-office,
compulsory elementary education, State examinations as a condition of
entry into the liberal professions or to any post of confidence whatever,
bank-notes of a minimum value of £5, etc.[227] In a characteristic
phrase he gave expression to his feeling on the question of restricting
the liberty of banks. “Such regulations may, no doubt, be considered as
in some respects a violation of natural liberty. But those exertions
of the natural liberty of a few individuals, which might endanger the
security of the whole of society, are, and ought to be, restrained by
the laws of all governments; of the most free, as well as of the most
despotical.”[228] Despite these reservations it is still very evident
that the whole of Smith’s work is a plea for the economic freedom of the
individual. It is an eloquent appeal against the Mercantilist policy and
a violent attack upon every economic system inspired by it.

On this point there is absolute agreement between the work done by Smith
in England and that carried on at the same time by the Physiocrats in
France. Both in foreign and domestic trade producers, merchants, and
workmen were hemmed in by a network of restrictions either inherited
from the traditions of the Middle Ages or imposed by powerful party
interests and upheld by false economic theories. The corporations still
existed in the towns; although their regulations could not be applied to
industries born after the passing of Elizabeth’s famous law concerning
apprenticeship. The Colbertian system, with its mob of officials
entrusted with the task of superintending the processes of production,
of examining the weight, the length, and the quality of the material
employed, was still a grievance with the woollen manufacturers.[229] The
fixing of the duration of apprenticeship at seven years, the limitation
of the number of apprentices in the principal industries, the obstacles
put in the way of the mobility of labour by the Poor Law and by the
series of statutes passed since the reign of Elizabeth, fettered the
movement of labour and the useful employment of capital. Smith opposed
these measures with the whole of his energy. England, unlike France, had
fortunately escaped internal restrictions upon trade, but the restraints
placed upon foreign trade still kept England and Ireland commercially
separated. These checks upon foreign trade proved as irksome in England
as they did everywhere else. Manufactured goods from foreign countries
were heavily taxed or were prohibited entrance altogether. Certain
natural products, _e.g._ French wine, were similarly handicapped; the
importation of a number of commodities necessary for national industry
was banned; a narrow and oppressive policy regarded the colonies as
the natural purveyors of raw materials for the mother-country and
the willing buyers of its manufactured goods. Against all this mass
of regulations, destined, it was thought, to secure the supremacy of
England among other commercial nations, Smith directed his most spirited
onslaughts. The fourth book of the _Wealth of Nations_ is an eloquent
and vigorous attack upon Mercantilism, admirable alike for the precision
and the extent of its learning. It was this section of his work that
interested his contemporaries most. For us it would have been the least
interesting but for its theory of international trade and its criticism
of Protection in general. On this account, however, it is of considerable
importance in the study of economic doctrines.

In the struggle for Free Trade, as on other points, Smith was forestalled
by the Physiocrats. But again has he shown himself superior in the
breadth of his outlook. Physiocratic Liberalism was the result of
their interest in agriculture, foreign trade being of quite secondary
importance. Smith, on the other hand, considered foreign trade in itself
advantageous, provided it began at the right moment and developed
spontaneously.[230] Although his point of view is far superior to that
of the Physiocrats, even Smith failed to give us a satisfactory theory.
It was reserved for Ricardo and his successors, particularly John Stuart
Mill, to find a solid scientific basis for the theory of international
trade. The doctrine of the Scotch economist is somewhat lame. But the
hesitancy of a great writer is often interesting, and some of his
arguments deserve to be recalled.

Already in our review of his theory of money we have become familiar
with Smith’s criticism of the balance of trade theory. But the balance
of trade theory is not the whole of Protection, and we find in Smith
something more than its mere refutation. In the first place, we have a
criticism of Protectionism in general considered in its Mercantilistic
aspect, followed by an attempt to demonstrate the positive advantages of
international commerce.

The first criticism that he offers might be summed up in the well-known
phrase: “Industry is limited by capital.” “The general industry of the
society can never exceed what the capital of the society can employ.”
But Protection, perhaps, increases the quantity of capital? No, “for it
can only divert a part of it into a direction into which it might not
otherwise have gone.” But the direction spontaneously given to their
capital by individuals is the most favourable to a country’s industry.
Has not Smith demonstrated this already? Protection, consequently, is not
merely useless; it may even prove injurious.[231]

The argument does not appear decisive, especially when we recall the
criticism of Smith’s optimism given above. To borrow an expression of M.
Pareto, it is the maximum of ophelimity and not the maximum of utility
that is realised by the capitalists under the action of personal interest.

A second and a more striking argument shows the absurdity of
manufacturing a commodity in this country at a great expense, when a
similar commodity might be supplied by a foreign country at less cost.
“It is the maxim of every prudent master of a family, never to attempt
to make at home what it will cost him more to make than to buy.… What is
prudence in the conduct of every private family, can scarce be folly in
that of a great kingdom.”[232] It is foolish to grow grapes in hothouses
in Scotland when better and cheaper can be got from Portugal or France.
Everybody is convinced of that. But a similar stupidity prevails when
we are hindered by tariffs from profiting by the natural advantages
which foreign nations possess as compared with ourselves. All “the mean
rapacity and the monopolizing spirit of merchants and manufacturers”[233]
was necessary to blind men to their true interests on this point.
According to Smith, there exists a natural distribution of products
among various countries, resulting in an advantage to all of them. It
is Protection that hinders our sharing in the advantages. This is the
principle known as the “territorial division of labour.”

But the argument is inconclusive, for capital and labour do not circulate
from one nation to another in the same way as they do within a country.
The distribution of industry among the various nations is regulated, not
by absolute cost of production, but by relative cost of production. The
credit of having shown this belongs to Ricardo.

Smith’s demonstration of the inconveniences of Protection is incomplete,
and we feel the incompleteness all the more when he attempts to prove the
advantages of international trade.

The real and decisive argument in favour of free exchange turns upon a
consideration of the consumer’s interests. Increased utilities placed at
his disposal mark the superiority of free exchange, or as John Stuart
Mill puts it, “the only direct advantage of foreign commerce consists in
the imports.”[234] With Smith this is the point of view developed least
of all. True, he wrote that “consumption is the sole end and purpose
of all production. But, in the mercantile system, the interest of the
consumer is almost constantly sacrificed to that of the producer.”[235]
This criticism, however, was placed at the end of his examination of the
Mercantilist system in chap. 8 of Book IV. It is not found in the first
edition of the work, and was only added in the third.[236]

It is the point of view of the producer that Smith invariably adopts when
attempting to illustrate the advantages of international trade.[237]

Just now foreign trade seemed to afford a means of disposing of a
country’s surplus products, and this extension of the market, it
was argued, would lead to further division of labour and increased
productivity.[238] But one is led to ask why, instead of producing the
superfluous goods which it must export, it does not produce those things
which it is obliged to import.

Smith, being now desirous of showing that international trade necessarily
benefits both countries, bases his argument upon the fact that the
merchants in both countries must make a profit—_i.e._ get an additional
exchange value, which must be added to the others. To this Ricardo justly
replied that the profits of a merchant do not necessarily increase the
sum of utilities possessed by any country.

Here again, in striking contrast with the attitude of the Physiocrats,
Smith, despite himself, has championed his own adversaries. As yet he is
not sufficiently rid of Mercantilist prejudice not to be concerned with
the welfare of the producer, and in his great work we find excellent
argument and debatable points of view placed side by side. It does not
appear that he himself realised this incompatibility. An irresistible
tide was sweeping everybody before it in the direction of a more liberal
policy. It proved too powerful for his contemporaries, who were not
concerned to give a careful consideration to every part of his thesis.
Enough that they found in him an ardent champion of an attractive cause.

We have already noticed more than once the hesitation which Smith
displays when he comes to apply his principle, and we must again refer to
it in this connection.

Theoretically a champion of absolutely free exchange, he mitigates his
belief in practice, and mentions an exception to his policy which seemed
to him a mere matter of common sense. “To expect, indeed, that the
freedom of trade should ever be entirely restored in Great Britain, is as
absurd as to expect that an Oceana or Utopia should ever be established
in it. Not only the prejudices of the public, but what is more
unconquerable, the private interests of many individuals, irresistibly
oppose it.”[239] Facts have belied this prophecy, like many others.
England of the nineteenth century succeeded in realising this Utopia of
free exchange—almost to perfection.

Without any illusion as to the future, his condemnation of the past was
not altogether unqualified. He justified some of the acts that were
inspired by Mercantilism. “The act of navigation[240] is not favourable
to foreign commerce,” said he; “as defence, however, is of much more
importance than opulence, the act of navigation is, perhaps, the wisest
of all the commercial regulations of England.”[241] In another instance
he justifies an import duty where a tax is levied upon goods similar to
those imported. Here an import duty merely restores that normal state of
competition which was upset by the imposition of the Excise. Retaliation
as a means of securing the abolition of foreign duties is not altogether
under his ban.[242] And he finally admits that liberty is best introduced
gradually into those countries in which industry has long enjoyed
Protection or where a great number of men are employed.[243]

His practical conclusion is somewhat as follows: Instead of innumerable
taxes which hinder importation and hamper production, England ought to
content herself with the establishment of a certain number of taxes of a
purely fiscal character, placed upon commodities such as wine, alcohol,
sugar, tobacco, cocoa. Such a system, though perfectly consonant with
a great deal of free exchange, would yield abundant revenue to the
Treasury, and would afford ample compensation for the losses resulting
from the introduction of Free Trade.[244]

England has followed his advice, and her financial system is to-day
founded on these bases. Few economists can boast of such a complete
realisation of their projects.


IV: THE INFLUENCE OF SMITH’S THOUGHT AND ITS DIFFUSION. J. B. SAY

The eighteenth century was essentially a century of levelling down. In
Smith’s conception of the economic world we have an excellent example
of this. Its chief charm lies in the simplicity of its outlines, and
this doubtless accounted for his influence among his contemporaries.
The system of natural liberty towards which both their political
and philosophical aspirations seemed to point were here deduced
from, and supported by, evidence taken direct from a study of human
nature—evidence, moreover, that seemed to tally so well with known
facts that doubt was out of the question. Smith’s work still retains
its irresistible charm. Even if his ideas are some day shown to be
untenable—a contingency we cannot well imagine—his book will remain as
a permanent monument of one of the most important epochs in economic
thought. It must still be considered the most successful attempt made at
embracing within a single purview the infinite diversity of the economic
world.

But its simplicity also constituted its weakness. To attain this
simplicity more than one important fact that refused to fit in with the
system had to remain in the background. The evidence employed was also
frequently incomplete. None of the special themes—price, wages, profits,
and rent, the theory of international trade or of capital—which occupy
the greater portion of the work, but has been in some way corrected,
disputed, or replaced. But the structure loses stability if some of the
corner-stones are removed. And new points of view have appeared of which
Smith did not take sufficient account. Instead of the pleasant impression
of simplicity and security which a perusal of Smith’s work gave to the
economists of the early nineteenth century, there has been gradually
substituted by his successors a conviction of the growing complexity of
economic phenomena.

To pass a criticism on the labours of Adam Smith would be to review
the economic doctrines of the nineteenth century. That is the best
eulogy one can bestow upon his work. The economic ideas of a whole
century were, so to speak, in solution in his writings. Friends and
foes have alike taken him as their starting-point. The former have
developed, extended, and corrected his work. The latter have subjected
his principal theories to harsh criticism at every point. All with tacit
accord admit that political economy commenced with him. As Garnier, his
French translator, put it, “he wrought a complete revolution in the
science.”[245] To-day, even although the _Wealth of Nations_ may no
longer appear to us as a truly scientific treatise on political economy,
certain of its fundamental ideas remain incontestable. The theory of
money, the importance of division of labour, the fundamental character
of spontaneous economic institutions, the constant operation of personal
interest in economic life, liberty as the basis of rational political
economy—all these appear to us as definite acquisitions to the science.

The imperfections of the work will be naturally demonstrated in the
chapters which follow. In order to complete our exposition of Smith’s
doctrines it only remains to show how they were diffused.

The rapid spread of his ideas throughout Europe and their incontestable
supremacy remains one of the most curious phenomena in the history of
ideas. Smith persuaded his own generation and governed the next.[246]
History affords us some clue. To attribute it solely to the influence of
his book is sheer exaggeration. A great deal must be set to the credit of
circumstances more or less fortuitous.

M. Mantoux remarks with much justice that “it was the American War
rather than Smith’s writings which demonstrated the decay of the ancient
political economy and compassed its ruin. The War of Independence proved
two things: (1) The danger lurking in a colonial system which could
goad the most prosperous colonies to revolt; (2) the uselessness of a
protective tariff, for on the very morrow of the war English trade with
the American colonies was more flourishing than ever before. “The loss
of the American colonies to England was really a gain to her.” So wrote
Say in 1803, and he adds: “This is a fact that I have nowhere seen
disputed.”[247] To the American War other causes must be added: (1) The
urgent need for markets felt by English merchants at the close of the
Napoleonic wars; they were already abundantly supplied with excellent
machinery. (2) Coupled with this was a growing belief that a high price
of corn as the result of agricultural protection increased the cost of
hand labour. These two reasons were enough to create a desire for a
general lowering of the customs duties.

Subsequent events have justified Smith’s attitude on the question of
foreign trade. In the matter of domestic trade he has been less fortunate.

The French Revolution, which owed its economic measures to the
Physiocrats, gave a powerful impulse to the principle of liberty. The
influence of the movement was patent enough on the Continent. Even in
England, where this influence was least felt; everybody was in favour of
_laissez-faire_. Pitt became anxious to free Ireland from its antiquated
system of prohibitions, and he succeeded in doing this by his Act of
Union of 1800. The regulations laid down by the Elizabethan Statute of
Apprentices, with its limitation of the hours of work and the fixing of
wages by justices of the peace, became more and more irksome as industry
developed. Every historian of the Industrial Revolution has described the
struggle between workers and masters and shown how the former clung in
despair to the old legislative measures as their only safeguard against
a too rapid change, while the latter refused to be constrained either in
the choice of workmen or the methods of their work.[248] They wished to
pay only the wages that suited them and to use their machines as long as
possible. These repeated attacks rendered the old Statute of Apprentices
useless, and Parliament abolished its regulations one after another, so
that by 1814 all traces of it were for ever effaced from the Statute Book.

But Smith did not foresee these things. He did not write with a view to
pleasing either merchants or manufacturers. On the contrary, he was never
weary of denouncing their monopolistic tendencies. But by the force of
circumstances manufacturers and merchants became his best allies. His
book supplied them with arguments, and it was his authority that they
always invoked.

His authority never ceased growing. As soon as the _Wealth of Nations_
appeared, men like Hume, and Gibbon, the historian, expressed to Smith
or to his friends their admiration of the new work. In the following
year the Prime Minister, Lord North, borrowed from him the idea of
levying two new taxes—the tax on malt and the tax on inhabited houses.
Smith was yet to make an even more illustrious convert in the person of
Pitt. Pitt was a student when the _Wealth of Nations_ appeared, but he
always declared himself a disciple of Smith, and as soon as he became
a Minister he strove to realise his ideas. It was he who signed the
first Free Trade treaty with France—the Treaty of Eden, 1786.[249] When
Smith came to London in 1787, Pitt met him more than once and consulted
him on financial matters. The story is told that after one of these
conversations Smith exclaimed: “What an extraordinary person Pitt is! He
understands my ideas better than myself.”

While Smith made converts of the most prominent men of his time, his book
gradually reached the public. Four editions in addition to the first
appeared during the author’s lifetime.[250] The third, in 1784, presents
important differences in the way of additions and corrections as compared
with the first. From the date of his death in 1790 to the end of the
century three other editions were published.[251]

Similar success attended the appearance of the work on the Continent. In
France he was already known through his _Theory of Moral Sentiments_.
The first mention of the _Wealth of Nations_ in France appears in the
_Journal des Savants_ in the month of February, 1777. Here, after a brief
description of the merits of the work, the critic gives expression to the
following curious opinion: “Some of our men of letters who have read it
have come to the conclusion that it is not a book that can be translated
into our language. They point out, among other reasons, that no one would
be willing to bear the expense of publishing because of the uncertain
return, and a book-seller least of all. They are bound to admit, however,
that the work is full of suggestions and of advice that is useful as well
as curious, and might prove of benefit to statesmen.” In reality, despite
the opinion of those men of letters, several translations of the work did
appear in France, as well as elsewhere in Europe. In little more than
twenty years, between 1779 and 1802, four translations had appeared.
This in itself affords sufficient proof of the interest which the book
had aroused.[252]

Few works have enjoyed such complete and universal success. But despite
admiration the ideas did not spread very rapidly. Faults of composition
have been burdened with the responsibility for this, and it is a reproach
that has clung to the _Wealth of Nations_ from the first. Its organic
unity is very pronounced, but Smith does not seem to have taken the
trouble to give it even the semblance of outward unity. To discover its
unity requires a real effort of thought. Smith whimsically regarded it
as a mere discourse, and the reading occasionally gives the impression
of conversation. The general formulæ which summarise or recapitulate
his ideas are indifferently found either in the middle or at the end
of a chapter, just as they arose. They represent the conclusions from
what preceded as they flashed across his mind. On the other hand, a
consideration of such a question as money is scattered throughout the
whole work, being discussed on no less than ten different occasions. As
early as April 1, 1776, Hume had expressed to Smith some doubts as to the
popularity of the book, seeing that its reading demanded considerable
attention. Sartorius in 1794 attributed to this difficulty the slow
progress made by Smith’s ideas in Germany. Germain Garnier, the French
translator, gave an outline of the book in order to assist his readers.
It was generally agreed that the work was a striking one, but badly
composed and difficult to penetrate owing to the confused and equivocal
character of some of the paragraphs. When Say referred to it as “a
chaotic collection of just ideas thrown indiscriminately among a number
of positive truths,”[253] he expressed the opinion of all who had read it.

But a complete triumph, so far as the Continent at least was concerned,
had to be the work of an interpreter. Such an interpreter must fuse
all these ideas into a coherent body of doctrines, leaving useless
digressions aside.[254] This was the task that fell into the hands of
J. B. Say. Among his merits (and it is not the only one) is that of
popularising the ideas of the great Scotch economist on the Continent,
and of giving to the ideas a somewhat classical appearance. The task of
discrediting the first French school of economists and of facilitating
the expansion of English political economy fell, curiously enough, to the
hands of a Frenchman.

J. B. Say was twenty-three years of age in 1789.[255] At that time he was
Clavières’ secretary. Clavières became Minister of Finance in 1792, but
at this period he was manager of an assurance company, and was already
a disciple of Smith. Say came across some stray pages of the _Wealth of
Nations_, and sent for a copy of the book.[256] The impression it made
upon him was profound. “When we read this work,” he writes, “we feel that
previous to Smith there was no such thing as political economy.” Fourteen
years afterwards, in 1803, appeared _Le Traité d’Économie politique_.
The book met with immediate success, and a second edition would have
appeared had not the First Consul interdicted it. Say had refused to
support the Consul’s financial recommendations, and the writer, in
addition to having his book proscribed, found himself banished from the
Tribunate. Say waited until 1814 before republishing it. New editions
rapidly followed, in 1817, 1819, and 1826. The treatise was translated
into several languages. Say’s authority gradually extended itself; his
reputation became European; and by these means the ideas of Adam Smith,
clarified and logically arranged in the form of general principles from
which conclusions could be easily deduced, gradually captivated the more
enlightened section of public opinion.

It would, however, be unjust to regard Say as a mere populariser of
Smith’s ideas. With praiseworthy modesty, he has never attempted to
conceal all that he owed to the master. The master’s name is mentioned in
almost every line, but he never remains content with a mere repetition
of his ideas. These are carefully reconsidered and reviewed with
discrimination. He develops some of them and emphasises others. Amid
the devious paths pursued by Smith, the French economist chooses that
which most directly leads to the desired end. This path is so clearly
outlined for his successors that “wayfaring men, though fools, could
not err therein.” In a sense he may be said to have filtered the ideas
of the master, or to have toned his doctrines with the proper tints. He
thus imparted to French political economy its distinctive character as
distinguished from English political economy, to which at about the same
time Malthus and Ricardo were to give an entirely new orientation. What
interests us more than his borrowing is the personal share which he has
in the work, an estimate of which we must now attempt.

(1) In the first place, Say succeeded in overthrowing the work of the
Physiocrats.

The work of demolition was not altogether useless. In France there
were many who still clung to the “sect.” Even Germain Garnier, Smith’s
translator, considered the arguments of the Physiocrats theoretically
irrefutable. The superiority of the Scotch economist was entirely in the
realm of practice.[257] “We may,” says he, “reject the _Economistes’_
theory [meaning the Physiocrats’] because it is less useful, although
it is not altogether erroneous.” Smith himself, as we know, was never
quite rid of this idea, for he recognised a special productiveness of
land as a result of the co-operation of nature, and doctors, judges,
advocates, and artists were regarded as unproductive. But Say’s admission
was the last straw. Not in agriculture alone, but everywhere, “nature is
forced to work along with man,”[258] and by the funds of nature was to
be understood in future all the help that a nation draws directly from
nature, be it the force of wind or rush of water.[259] As to the doctors,
lawyers, etc., how are we to prove that they take no part in production?
Garnier had already protested against their exclusion. Such services must
no doubt be classed as immaterial products, but products none the less,
seeing that they possess exchange value and are the outcome[260] of the
co-operation of capital and industry. In other respects also—_e.g._, in
the pleasure and utility which they yield—services are not very unlike
commodities. Say’s doctrine meets with some opposition on this point,
for the English economists were unwilling to consider a simple service
as wealth because of its unendurable character, and the consequent fact
that it could not be considered as adding to the aggregate amount of
capital. But he soon wins over the majority of writers.[261] Finally
Say, like Condillac, discovered a decisive argument against Physiocracy
in the fact that the production of material objects does not imply
their creation. Man never can create, but must be content with mere
transformation of matter. Production is merely a creation of utilities, a
furthering of that capacity of responding to our needs and of satisfying
our wants which is possessed by commodities; and all work is productive
which achieves this result, whether it be industry, commerce, or
agriculture.[262] The Physiocratic distinction falls to the ground, and
Say refutes what Smith, owing to his intimacy with his adversaries, had
failed to disprove.

(2) On another point Say carries forward Smith’s ideas, although at the
same time superseding them. He subjects the whole conception of political
economy and the _rôle_ of the economist to a most thorough examination.

We have already noticed that the conception of the “natural order”
underwent considerable modification during the period which intervened
between the writings of the Physiocrats and the appearance of the _Wealth
of Nations_. The Physiocrats regarded the “order” as one that was to be
realised, and the science of political economy as essentially normative.
For Smith it was a self-realising order. This spontaneity of the economic
world is analogous to the vitality of the human body, and is capable
of triumphing over the artificial barriers which Governments may erect
against its progress. Practical political economy is based upon a
knowledge of the economic constitution of society, and its sole aim is to
give advice to statesmen. According to Say, this definition concedes too
much to practice. Political economy, as he thinks, is just the science of
this “spontaneous economic constitution,” or, as he puts it in 1814, it
is a study of the laws which govern wealth.[263] It is, as the title of
his book suggests, simply an exposition of the production, distribution,
and consumption of wealth. It must be distinguished from politics, with
which it has been too frequently confused, and also from statistics,
which is a simple description of particular facts and not a science of
co-ordinate principles at all.

Political economy in Say’s hands became a purely theoretical and
descriptive science. The _rôle_ of the economist, like that of the
savant, is not to give advice, but simply to observe, to analyse, and
to describe. “He must be content to remain an impartial spectator,” he
writes to Malthus in 1820. “What we owe to the public is to tell them
how and why such and such a fact is the consequence of another. Whether
the conclusion be welcomed or rejected, it is enough that the economist
should have demonstrated its cause; but he must give no advice.”[264]

In this way Say broke with the long tradition which, stretching from the
days of the Canonists and the Cameralists to those of the Mercantilists
and the Physiocrats, had treated political economy as a practical art
and a guide for statesmen and administrators. Smith had already tried
to approach economic phenomena as a scientist, but there was always
something of the reformer in his attitude. Say’s only desire was to
be a mere student; the healing art had no attraction for him, and so
he inaugurates the true scientific method. He, moreover, instituted a
comparison between this science and physics rather than between it and
natural history, and in this respect also he differed from Smith, for
whom the social body was essentially a living thing. Without actually
employing the term “social physics,” he continually suggests it by
his repeated comparison with Newtonian physics. The principles of the
science, like the laws of physics, are not the work of men. They are
derived from the very nature of things. They are not established; they
are discovered. They govern even legislators and princes, and one never
violates them with impunity.[265] Like the laws of gravity, they are not
confined within the frontiers of any one country, and the limits of State
administration, which are all-important for the student of politics, are
mere accidents for the economist.[266] Political economy is accordingly
based on the model of an exact science, with laws that are universal.
Like physics, it is not so much concerned with the accumulation of
particular facts as with the formulation of a few general principles from
which a chain of consequences of greater or smaller length may be drawn
according to circumstances.

A delight in uniformity,[267] love of universality, and contempt for
isolated facts, these are the marks of the savant. But the same qualities
in men of less breadth of view may easily become deformed and result in
faults of indifference or of dogmatism, or even contempt for all facts.
And are these very faults not produced by the stress which he lays upon
these principles? Was not political economy placed in a vulnerable
position for the attacks of Sismondi, of List, of the Historical school,
and of the Christian Socialists by this very work of Say? In his radical
separation of politics and economics, in avoiding the “practical”
leanings of Adam Smith, he has succeeded in giving the science a greater
degree of harmony. But it also acquired a certain frigidity which his
less gifted successors have mistaken for banality or crudity. Rightly or
wrongly, the responsibility is ascribed to Say.

(3) We have just seen the influence which the progress of the physical
sciences had upon Say’s conception of political economy; but he was also
much influenced by the progress of industry. Between 1776, the date of
the appearance of the _Wealth of Nations_, and the year 1803, when Say’s
treatise appeared, the Industrial Revolution had taken place. This is a
fact of considerable importance for the history of economic ideas.

When Say visited England a little before 1789, he found machine
production already in full swing there. In France at the same date
manufactures were only just beginning. They increased rapidly under the
Empire, and the progress after 1815 became enormous. Chaptal in his work
_De l’Industrie française_ reckons that in 1819 there were 220 factories
in existence, with 922,200 spindles consuming 13 million kilograms of
raw cotton. This, however, only represented a fifth of the English
production, which twenty years later was quadrupled. Other industries
were developing in a similar way. Everybody was convinced that the
future must be along those lines—an indefinite future it is true, but
it was to be one of wealth, work, and well-being. The rising generation
was intoxicated at the prospect. The most eloquent exposition of this
debauchery will be found in Saint-Simonism.

Say did not escape the infection. While Smith gives agriculture the
premier place, Say accords the laurels to manufactures. For many years
industrial problems had been predominant in political economy, and
the first official course of lectures given by Say himself at the
Conservatoire des Arts et Métiers was entitled “A Course of Lectures on
Industrial Economy.”

In that hierarchy of activities which Smith had drawn up according to
the varying degree of utility each possessed for the nation, Smith had
placed agriculture first. Say preserved the order, but placed alongside
of agriculture “all capital employed in utilising any of the productive
forces of nature. An ingenious machine may produce more than the
equivalent of the interest on the capital it has cost to produce, and
society enjoys the benefit in lower prices.”[268] This sentence is not
found in the edition of 1803, and appears only in the second edition.
Say in the meantime had been managing his factory at Auchy-les-Hesdins,
and he had profited by his experience. This question of machinery, which
was merely touched on by Smith in a short passage, finds a larger place
in every successive edition of Say’s work. The general adoption of
machinery by manufacturers both in England and France frequently incited
the workers to riot. Say does not fail to demonstrate its advantages.
At first he admits that the Government might mitigate the resulting
evils by confining the employment of machinery at the outset to certain
districts where labour is scarce or is employed in other branches of
production.[269] But by the beginning of the fifth edition he changed his
advice and declared that such intervention involved interference with the
inventor’s property,[270] admitting only that the Government might set up
works of public utility in order to employ those men who are thrown out
of employment on account of the introduction of machinery.

The influence of these same circumstances must be accounted responsible
for the stress which is laid by Say upon the _rôle_ of an individual
whom Smith had not even defined, but one who is henceforth to remain an
important personage in the economic world, namely, the _entrepreneur_. At
the beginning of the nineteenth century the principal agent of economic
progress was the industrious, active, well-informed individual, either
an ingenious inventor, a progressive agriculturist, or an experienced
business man. This type became quite common in every country where
mechanical production and increasing markets became the rule. It is he
rather than the capitalist properly so called, the landed proprietor,
or the workman, who is “almost always passive,” who directs production
and superintends the distribution of wealth. “The power of industrial
_entrepreneurs_ exercises a most notable influence upon the distribution
of wealth,” says Say. “In the same kind of industry one _entrepreneur_
who is judicious, active, methodical, and willing makes his fortune,
while another who is devoid of these qualities or who meets with very
different circumstances would be ruined.”[271] Is it not the master
spinner of Auchy-les-Hesdins who is speaking here? We are easily
convinced of this if we compare the edition of 1803 with that of 1814,
and we can trace the gradual growth and development of this conception
with every successive edition of the work.

Say’s classic exposition of the mechanism of distribution is based upon
this very admirable conception, which is altogether superior to that
of Smith or the Physiocrats. The _entrepreneur_ serves as the pivot of
the whole system. The following may be regarded as an outline of his
treatment.

Men, capital, and labour furnish what Say refers to as productive
services. These services, when brought to market, are given in exchange
for wages, interest, or rent. It is the _entrepreneur_, whether merchant,
manufacturer, or agriculturist, who requires them, and it is he who
combines them with a view to satisfying the demand of consumers. “The
_entrepreneurs_, accordingly, are mere intermediaries who set up a claim
for those productive services which are necessary to satisfy the demand
for certain products.” Accordingly there arises a demand for productive
services, and the demand is “one of the factors determining the value of
those services.” “On the other hand, the agents of production, both men
and things, whether land, capital, or industrial employees, offer their
services in greater or less quantities according to various motives, and
thus constitute another factor which determines the value of these same
services.”[272] In this fashion the law of demand and supply determines
the price of services, the average rate of interest, and rent. Thanks
to the _entrepreneur_, the value produced is again distributed among
these “various productive services,” and the various services allotted
according to need among the industries. This theory of distribution is in
complete accordance with the theory of exchange and production.

Say’s very simple scheme of distribution constitutes a real progress.
In the first place, it is much more exact than the Physiocrats’, who
conceived of exchange as taking place between classes only, and not
between individuals. It also enables us to distinguish the remuneration
of the capitalist from the earnings of the _entrepreneur_, which
were confounded by Adam Smith. The Scotch economist assumed that the
_entrepreneur_ was very frequently a capitalist, and confused the
two functions, designating his total remuneration by the single word
“profit,” without ever distinguishing between net interest of capital
and profit properly so called. This regrettable confusion was followed
by other English authors, and remained in English economic theory for a
long time. Finally, Say’s theory has another advantage. It gave to his
French successors a clear scheme of distribution which was wanting in
Smith’s work, just at the time when Ricardo was attempting to overcome
the omission by outlining a new theory of distribution. According to
Ricardo, rent, by its very nature and the laws which give rise to it,
is opposed to other revenues, and the rate of wages and of profits must
be regarded as direct opposites, so that the one can only increase if
the other diminishes—an attractive but erroneous theory, and one which
led to endless discussion among English economists, with the result that
they abandoned it altogether. Say, by showing this dependence, which
becomes quite clear if we regard wages and profits from the point of
view of demand for commodities, and by his demonstration that rent is
determined by the same general causes—viz. demand and supply—as determine
the exchange value of other productive services, saved political economy
in France from a similar disaster. It was he, also, who furnished Walras
with the first outlines of his attractive conception of prices and
economic equilibrium. This explains why he never attached to the theory
of rent the supreme importance given to it by English economists. In this
respect he has been followed by the majority of French economists. On
the other hand, and for a similar reason, he never went to the opposite
extreme of denying the existence of rent altogether by regarding it
merely as the revenue yielded by capital sunk in land. In this way he
avoided the error which Carey and Bastiat attempted to defend at a later
period.[273]

(4) So far it is Say’s brilliant power of logical reasoning that we have
admired. But has he contributed anything which is entirely new to the
science?

His theory of markets was for a long time considered first-class work.
“Products are given in exchange for products.” It is a happy phrase, but
it is not in truth very profound. It simply gives expression to an idea
that was quite familiar to the Physiocrats and to Smith, namely, that
money is but an intermediary which is acquired only to be passed on and
exchanged for another product. “Once the exchange has been effected it is
immediately discovered that products pay for products.”[274] Thus goods
constitute a demand for other goods, and the interest of a country that
produces much is that other countries should produce at least as much.
Say thought that the outcome of this would be the advent of the true
brotherhood of man. “The theory of markets will change the whole policy
of the world,” said he.[275] He thought that the greater part of the
doctrine of Free Trade could be based upon this principle. But to expect
so much from such a vague, self-evident formula was to hope for the
impossible.

Still more interesting is the way in which he applied this “theory of
markets” to a study of over-production crises, and the light which that
sheds upon the nature of Say’s thought. Garnier had already pointed out
that a general congestion of markets was possible. As crises multiplied
this fear began to agitate the minds of a number of thinkers. “Nothing
can be more illogical,” writes Say. “The total supply of products and the
total demand for them must of necessity be equal, for the total demand
is nothing but the whole mass of commodities which have been produced:
a general congestion would consequently be an absurdity.”[276] It would
simply mean a general increase of wealth, and “wealth is none too
plentiful among nations, any more than it is among individuals.”[277] We
may have an inefficient application of the means of production, resulting
in the over-production of some one commodity or other—_i.e._ we may have
partial over-production.[278] Say wishes to emphasise the fact that we
need never fear general over-production, but that we may have too much
of some one product or other. He frequently gave expression to this
idea in the form of paradoxes. We might almost be led to believe that
he denies the existence of crises altogether in the second edition of
his work.[279] In reality he was very anxious to admit their existence,
but he wished to avoid everything that might prove unfavourable to an
extension of industry.[280]

He thought that crises were essentially transient, and declared that
individual liberty would be quite enough to prevent them. He was
extremely anxious to get rid of the vague terrors which had haunted
those people who feared that they would not be able to consume all this
wealth, of a Malthus who thought the existence of the idle rich afforded
a kind of safety-valve which prevented over-production,[281] of a
Sismondi who prayed for a slackening of the pace of industrial progress
and a checking of inventions. Such thoughts arouse his indignation,
especially, as he remarks, when it is remembered that even among the
most flourishing nations “seven-eighths of the population are without a
great number of products which would be regarded as absolute necessities,
not by a wealthy family, but even by one of moderate means.”[282] The
inconvenience—and he is never tired of repeating it—is not the result
of over-production, but is the effect of producing what is not exactly
wanted.[283] Produce, produce all that you can, and in the natural course
of events a lowering of prices will benefit even those who at first
suffered from the extension of industry.

In this once famous controversy between Say, Malthus, Sismondi, and
Ricardo (the latter sided with Say) we must not expect to find a clear
exposition of the causes of crises. Indeed, that is nowhere to be found.
All we have here is the expression of a sentiment which is at bottom
perfectly just, but one which Say wrongly attempted to state in a
scientific formula.

J. B. Say plays a by no means negligible part in the history of
doctrines. Foreign economists have not always recognised him. Dühring,
who is usually perspicacious, is very unjust to him when he speaks
of “the labour of dilution” to which Say devoted his energies.[284]
His want of insight frequently caused him to glide over problems
instead of attempting to fathom them, and his treatment of political
economy occasionally appears very superficial. Certain difficulties
are veiled with pure verbiage—a characteristic in which he is very
frequently imitated by Bastiat. Despite Say’s greater lucidity, it is
doubtful whether Smith’s obscurity of style is not, after all, more
stimulating for the mind. Notwithstanding all this, he was faithful in
his transmission of the ideas of the great Scotch economist into French.
Happily his knowledge of Turgot and Condillac enabled him to rectify
some of the more contestable opinions of his master, and in this way he
avoided many of the errors of his successors. He has left his mark upon
French political economy, and had the English economists adopted his
conception of the _entrepreneur_ earlier, instead of waiting until the
appearance of Jevons, they would have spared the science many useless
discussions provoked by the work of a thinker who was certainly more
profound but much less judicious than Say, namely, David Ricardo.[285]




CHAPTER III: THE PESSIMISTS


A new point of view is presented to us by the economists of whom we
are now going to speak. Hitherto we have heard with admiration of the
discovery of new facts and of their beneficent effects both upon nations
and individuals. We are now to witness the enunciation of new doctrines
which cast a deepening shadow across the radiant dawn of economics,
giving it that strangely sinister aspect which led Carlyle to dub it “the
dismal science.”

Hence the term “Pessimists,” although no reproach is implied in our use
of that term. On the contrary, we shall have to show that the theories
of the school are often truer than those of the Optimists, which we
must study at a later stage of our survey. While nominally subscribing
to their predecessors’ doctrine concerning the identity of individual
and general interests, the many cogent reasons which they have adduced
against such belief warrants our classification. The antagonism existing
between proprietors and capitalists, between capitalists and workmen,
is a discovery of theirs. Instead of the “natural” or “providential”
laws that were to secure the establishment of the “order” provided
they were once thoroughly understood and obeyed, they discovered the
existence of other laws, such as that of rent, which guaranteed a
revenue for a minority of idle proprietors—a revenue that was destined
to grow as the direct result of the people’s growing need; or the “law
of diminishing returns,” which sets a definite limit to the production
of the necessaries of life. That limit, they asserted, was already being
approached, and mankind had no prospect of bettering its lot save by
the voluntary limitation of its numbers. There was also the tendency of
profits to fall to a minimum—until it seemed as if the whole of human
industry would sooner or later be swallowed up by the stagnant waters of
the stationary State.

Lastly, they deserve to be classed as pessimists because of their utter
disbelief in the possibility of changing the course of these inevitable
laws either by legislative reform or by organised voluntary effort. In
short, they had no faith in what we call progress.

But we must never imagine that they considered themselves pessimists
or were classed as such by their contemporaries. This verdict is
posterity’s, and would have caused them no little surprise. As for
themselves, they seem to stand aloof from their systems with an
insouciance that is most disconcerting. The “present order of things”
possessed no disquieting features for them, and they never doubted the
wisdom of “Nature’s Lord.” They believed that property had been put upon
an immovable basis when they demonstrated the extent of its denotation,
and that the spirit of revolt had been disarmed by impressing upon the
poor a sense of responsibility for their own miseries.[286]

The best known representatives of the school are Malthus and Ricardo.
They claimed to be philanthropists and friends of the people, and we
have no reason to suspect their sincerity.[287] Their contemporaries,
also, far from being alarmed, received the new political economy with the
greatest enthusiasm. A warm welcome was extended to its apostles by the
best of English society,[288] and ladies of distinction contended with
one another for the privilege of popularising the abstract thoughts of
Ricardo in newspaper articles and popular tales.[289]

Neither should we omit to pay them full homage for the eminent services
rendered to the science, and among these not the least important
was the antagonism which their theories aroused in the minds of the
working classes. Pessimists unwittingly often do more for progress than
optimists. To these two writers fell the task of criticising economic
doctrines and institutions, a task that has been taken up by other
writers in the course of the century, but which seems as far from
completion as ever. Karl Marx, another critic, is intellectually a scion
of the Ricardian family. It would be a mistake to imagine that all their
theories savour of pessimism, but their reputation has always been more
or less closely linked with the gloomier aspect of their teaching.


I: MALTHUS[290]

Malthus is best known for his “law of population.” That he was a great
economist, even apart from his study of that question, might easily be
proved by reference to his treatise on political economy, or by a perusal
of the many miscellaneous articles which he wrote on various economic
questions. A consideration of many of these theories, notably the theory
of rent, must be postponed until we come to study them in connection with
the name of Ricardo.


THE LAW OF POPULATION

Twenty years had elapsed since the publication of Smith’s immortal work,
without economics making any advance, when the appearance of a small
anonymous volume, known to be the work of a country clergyman, caused
a great sensation. Even after the lapse of a century the echo of the
controversy which it aroused has not altogether passed away. At first
sight one might be led to think that the book touches only the fringe of
economics, seeing that it is chiefly a statistical study of population,
or demography, as the science is called to-day. But this new science,
of which Malthus must be regarded as the founder, was separated from
the main trunk of economics at a much later date. Furthermore, we shall
find that the influence of his book upon all economic theories, both
of production and distribution, was enormous. The essay might even be
considered a reply to that of Adam Smith. The same title with slight
modification would have served well enough, and James Bonar wittily
remarks that Malthus might have headed it _An Essay on the Causes of the
Poverty of Nations_.

The attempt to explain the persistence of certain economic phenomena by
connecting them with the presence of a new factor, biological in its
character and differing in its origin both from personal interest and
the mere desire for profit, considerably expanded the economic horizon
and announced the advent of sociology. We know that Darwin himself
acknowledged his indebtedness to the work of Malthus for the first
suggestion of what eventually became the most celebrated scientific
doctrine of the nineteenth century, namely, the conception of the
struggle for existence and the survival of the fittest as one of the
mainsprings of progress.

There is no necessity for thinking that the dangers which might result
from an indefinite growth of population had not engaged the attention of
previous writers. In France Buffon and Montesquieu had already shown some
concern in the matter. But a numerous population was usually regarded as
advantageous, and fear of excess was never entertained inasmuch as it
was believed that the number of people would always be limited by the
available means of subsistence.[291] This was the view of the Physiocrat
Mirabeau, stated in his own characteristic fashion in his book _L’Ami
des Hommes_, which has for its sub-title _Traité de la Population_. Such
a natural fact as the growth of population could possess no terrors for
the advocates of the “natural order.” But in the writings of Godwin
this “natural” optimism assumed extravagant proportions. His book on
_Political Justice_ appeared in 1793 and greatly impressed the public.
Godwin, it has been well said, was the first anarchist who was also
a doctrinaire. At any rate he seems to have been the first to employ
that famous phrase, “Government even in its best state is an evil.” His
illimitable confidence in the future of society and the progress of
science, which he thought would result in such a multiplicity of products
that half a day’s work would be sufficient to satisfy every need, and
his belief in the efficacy of reason as a force which would restrain
personal interest and check the desire for profit, really entitles him to
be considered a pioneer. But life having become so pleasant, was there
no possibility that men might then multiply beyond the available means
of subsistence? Godwin was ignorant of the terrible intricacies of the
problem he had thus raised, and he experienced no difficulty in replying
that such a result, if it ever came to pass, must take several centuries,
for reason may prove as powerful in controlling the sexual instinct as in
restraining the desire for profit. Godwin even goes so far as to outline
a social State in which reason shall so dominate sense that reproduction
will cease altogether and man will become immortal.[292]

Almost at the same time there appeared in France a volume closely
resembling Godwin’s, entitled _Esquisse d’un Tableau historique des
Progrès de l’Esprit humain_, written by Condorcet (1794). It displays the
same confidence in the possibility of achieving happiness through the
all-powerful instrumentality of science, which, if not destined actually
to overcome death, was at least going to postpone it indefinitely.[293]
This optimistic book, written by a man who was about to poison himself
in order to escape the guillotine, cannot leave us quite unmoved. But,
death abolished, Condorcet finds that he has to face the old question
propounded to Godwin: “Can the earth always be relied upon to supply
sufficient means of subsistence?” To this question he gives the same
answer: either science will be able to increase the means of subsistence
or reason will prevent an inordinate growth of population.

It was inevitable, in accordance with the law of rhythm which
characterises the movements of thought no less than the forces of nature,
that such hasty optimism should provoke a reaction. It was not long in
coming, and in Malthus’s essay we have it developed in fullest detail.

To the statement that there are no limits to the progress of mankind
either in wealth or happiness, and that the fear of over-population
is illusory, or at any rate so far removed that it need cause no
apprehension, Malthus replied that, on the contrary, we have in
population an almost insurmountable obstacle, not merely looming in
the distant future, but pressing and insistent[294]—the stone of
Sisyphus destined to be the cause of humanity’s ceaseless toil and final
overthrow. Nature has planted an instinct in man which, left to itself,
must result in starvation and death, or vice. This is the one fact that
affords a clue to men’s suffering and a key to the history of nations and
their untold woes.

Everyone, however little acquainted with sociological study, knows
something of the memorable formula by which Malthus endeavoured to show
the contrast between the frightful rapidity with which population grows
when it is allowed to take its own course and the relative slowness in
the growth of the means of subsistence. The first is represented by a
geometrical series where each successive number is a multiple of the
previous one. The second series increases in arithmetical progression,
that is, by simple addition, the illustration being simply a series of
whole numbers:

  1  2  4  8  16  32  64  128  256
  1  2  3  4   5   6   7   8    9

Every term corresponds to a period of twenty-five years, and a glance
at the figures will show us that population is supposed to double every
twenty-five years, while the means of subsistence merely increases by an
equal amount during each of these periods. Thus the divergence between
the two series grows with astonishing rapidity. In the table given
above, containing only nine terms, the population figure has already
grown to twenty-seven times the means of subsistence in a period of 225
years. Had the series been extended up to the hundredth term a numerical
representation of the divergence would have required some ingenuity.

The first progression may be taken as correct, representing as it
does the biological law of generation. The terms “generation” and
“multiplication” are not used as synonyms without some purpose. It is
true that doubling supposes four persons to arrive at the marriageable
age, and this means five or six births if we are to allow for the
inevitable wastage from infant mortality. This figure appears somewhat
high to those who live in a society where limitation of the birth-rate
is fairly usual. But it is certain that among living beings in general,
including humankind, who are least prolific, the number of births where
no restraint of any kind exists is really much higher. Women have been
known to give birth to twenty or even more children. And there are no
signs of diminishing capacity among the sexes, for population is still
growing. In taking two as his coefficient Malthus has certainly not
overstepped the mark.[295]

The period of twenty-five years as the interval between the two terms is
more open to criticism.[296] The practice of reckoning three generations
to a century implies that an interval of about thirty-three years must
elapse between one generation and another.

But these are unimportant details. It is immaterial whether we lengthen
the interval between the two terms from twenty-five to thirty-three
years, or reduce the ratio from 2 to 1½, or even to something between 1¼
and 1¹/₁₀. The movement will be a little slower, but it is enough that
its geometrical character should be admitted, for however slow it moves
at first it will grow by leaps and bounds until it surpasses all limits.
These corrections fail to touch the real force of Malthus’s reasoning
concerning the law of reproduction.

The series representing the growth of the means of subsistence is also
open to criticism. It is evidently of a more arbitrary character, and
we cannot say whether it is simply supposed to represent a possible
contingency like the first, or whether it pretends to represent reality.
At least it does not correspond to any known and certain law, such as the
law of reproduction. As a matter of fact it rather seems to give it the
lie; for, in short, what is meant by means of subsistence unless we are
to understand the animal and vegetable species that reproduce themselves
according to the same laws as human beings, only at a much faster rate?
The power of reproduction among plants, like corn or potatoes, or among
animals, like fowls, herrings, cattle even, or sheep, far surpasses that
of man. To this criticism Malthus might have replied as follows. This
virtual power of reproduction possessed by these necessaries of life is
in reality confined to very limited areas of the habitable globe. It
is further restricted by the difficulty of obtaining the proper kind
of nourishment, and by the struggle for existence. But if we admit
exceptions in the one case why not also in the other? It certainly
seems as if there were some inconsistency here. As a matter of fact we
have two different theses. The one attempts to show how multiplication
or reproduction need not of necessity be less rapid among plants or
animals than it is among men. The other expresses what actually happens
by showing that the obstacles to the indefinite multiplication of men
are not less numerous than the difficulties in the way of an indefinite
multiplication of vegetables or animals, or, in other words, that the
former is a function of the latter.

In order to grasp the true significance of the second formula it must
be translated from the domain of biology into the region of economics.
Malthus evidently thought of it as the amount of corn yielded by a given
quantity of land. The English economists could think of nothing except
in terms of corn! What he wished to point out was that the utmost we can
expect in this matter is that the increase in the amount of the harvest
should be in arithmetical progression—say, an increase of two hectolitres
every twenty-five years. This hypothesis is really rather too liberal.
Lavoisier in 1789 calculated that the French crop yielded on an average
about 7¾ hectolitres per hectare. During the last few years it has
averaged about 16, and if we admit that the increment has been regular
throughout the 120 years which have since elapsed we have an increase of
2 hectolitres per 25 years. This rate of increase has proved sufficient
to meet the small increase which has taken place in the population of
France. But would it have sufficed for a population growing as rapidly
as that of England or Germany? Assuredly not, for these countries,
despite their superior yields, are forced to import from outside a great
proportion of the grain which they consume. The question arises whether
France can continue indefinitely on the same basis during the course of
the coming centuries. This is, indeed, unlikely, for there must be a
physical limit to the earth’s capacity on account of the limited number
of elements it contains. The economic limit will be reached still earlier
because of the increasing cost of attempting to carry on production at
these extreme limits. Thus it seems as if the law of diminishing returns,
which we must study later, were the real basis of the Malthusian laws,
although Malthus himself makes no express mention of it.

It is a truism that the number of people who can live in any place
cannot exceed the number of people who can gain subsistence there. Any
excessive population must, according to definition, die of hunger.[297]
This is just what happens in the animal and vegetable kingdoms. Germs are
extraordinarily prolific, but their undue multiplication is pitilessly
retarded by a law which demands the death of a certain proportion, so
that life, like a well-regulated reservoir, always remains at a mean
level, the terrible gaps made by death being replenished by a new flow.
Among savages, just as among animals, which they much resemble, a large
proportion literally dies of hunger. Malthus devoted much attention to
the study of primitive society, and he must be regarded as one of the
pioneers of prehistoric sociology—a subject that has made much headway
since then.

He proceeds to show how insufficient nourishment always brings a thousand
evils in its train, not merely hunger and death, but also epidemics and
such terrible practices as cannibalism, infanticide, and slaughter of the
old, as well as war, which, even when not undertaken with a definite view
to eating the conquered, always results in robbing them of their land
and the food which it yielded. These are the “positive” or “repressive”
checks.

But it may be replied that both among savages and animals the cause of
this insufficiency of food is an incapacity for production rather than an
excess of population.

Malthus has no difficulty in answering this objection by showing how
savage customs prevailed among such civilised people as the Greeks. And
even among the most modern nations the repressive checks, somewhat
mitigated it is true, are never really absent. Famine in the sense of
absolute starvation is seldom experienced nowadays, except in Russia
and India, perhaps, but it is by no means a stranger even to the most
advanced communities. Tuberculosis, which involves such terrible bodily
suffering, is nothing but a deadly kind of famine. Lack of food is also
responsible for the abnormally high rate of infant mortality and for the
premature death of the adult worker. As for war, it still demands its
toll. Malthus was living during the wars of the Revolution and the First
Empire—bloody catastrophes that caused the death of about ten million
men, all in the prime of life.

In civilized communities equilibrium is possible through humaner
methods, in the substitution of the preventive check with its reduced
birth-rate for the repressive check with its abnormal death-rate. Here
is an expedient of which only the rational and the provident can avail
themselves, an expedient open only to man. Knowing that his children are
doomed to die—perhaps at an early age—he may abstain from having any.
In reality this is the only efficacious way of checking the growth of
population, for the positive check only excites new growth, just as the
grass that is mown grows all the more rapidly afterwards. The history of
war furnishes many a striking illustration of this. The year following
the terrible war of 1870-71 remains unique in the demographic annals of
France on account of the sudden upward trend of the declining curve of
natality.

It was in the second edition of his book that Malthus expanded his
treatment of the preventive checks, thus softening the somewhat harsher
aspects of his first edition. It is very important that we should grasp
his exact meaning. We therefore make no apology for frequently quoting
his views on one point which is in itself very important, but upon
which the ideas of the reverend pastor of Haileybury have been so often
misrepresented.

The preventive check must be taken to imply moral restraint. But does
this mean abstaining from sexual intercourse during the period of
marriage after the birth, say, of three children, which may be taken as
sufficient to keep the population stationary or moderately progressive?
We cannot find that Malthus ever advocated such abstention. We have
already seen that he considered six children a normal family, implying
the doubling of the population every twenty-five years. Neither is it
suggested that six should be the maximum, for he adds: “It may be said,
perhaps, that even this degree of prudence might not always avail, as
when a man marries he cannot tell what number of children he shall have,
and many have more than six. This is certainly true.” (P. 536.)

But where does moral restraint come in? This is how he defines
it: “Restraint from marriage which is not followed by irregular
gratifications may properly be termed moral restraint” (p. 9); and
to avoid any possible misunderstanding he adds a note: “By moral
restraint I would be understood to mean a restraint from marriage from
prudential motives with a conduct strictly moral during the period
of this restraint, and I have never intentionally deviated from this
sense.” All this is perfectly explicit. He means abstention from all
sexual intercourse outside the bonds of marriage, and the postponement
of marriage itself until such time as the man can take upon himself the
responsibility of bringing up a family—and even the complete renunciation
of marriage should the economic conditions never prove favourable.

Malthus unceremoniously rejected the methods advocated by those who
to-day bear his name, and expressly condemned all who favoured the free
exercise of sexual connection, whether within or without the marriage
bond, through the practice of voluntary sterilization. All these
preventive methods are grouped together as vices and their evil effects
contrasted with the practice of moral restraint. Malthus is equally
explicit on this point. “Indeed, I should always particularly reprobate
any artificial and unnatural modes of checking population. The restraints
which I have recommended are quite of a different character. They are not
only pointed out by reason and sanctioned by religion, but tend in the
most marked manner to stimulate industry.” (P. 572.) And he adds these
significant words, so strangely prophetic so far as France is concerned:
“It might be easy to fall into the opposite mistake and to check the
growth of population altogether.”

It is quite needless to add that if Malthus thus made short work of
conjugal frauds he all the more strongly condemned that other preventive
method, namely, the institution of a special class of professional
prostitutes.[298] He would similarly have condemned the practice of
abortion, of which scarcely anything was heard in his day, but which
now appears like a scourge, taking the place of infanticide and the
other barbarous practices of antiquity. Criminal law seems powerless to
suppress it, and it has already received the sanction of a new morality.

But apart from the question of immoral practices, did Malthus really
believe that moral restraint as he conceived of it would constitute an
effective check upon population?

He doubtless was anxious that it should be so, and he tried to rouse
men to a holy crusade against this worst of all social evils. “To the
Christian I would say that the Scriptures most clearly and precisely
point it out to us as our duty to restrain our passions within the
bounds of reason.… The Christian cannot consider the difficulty of
moral restraint as any argument against its being his duty.” (P. 452.)
And to those who wish to follow the dictates of reason rather than the
observances of religion he remarks: “This virtue [chastity] appears to
be absolutely necessary in order to avoid certain evils which would
otherwise result from the general laws of nature.” (P. 452.)[299]

At bottom he was never quite certain as to the efficacy of moral
restraint. The threatening hydra always peered over the fragile shield
of pure crystal with which he had hoped to do battle.[300] He also felt
that celibacy might not merely be ineffective, but would actually
prove dangerous by provoking the vices it was intended to check. Its
prolongation, or worse still its perpetuation, could never be favourable
to good morals.

Malthus was faced with a terrible dilemma, and the uncompromising ascetic
is forced to declare himself a utilitarian philosopher of the Benthamite
persuasion. He has now to condone those practices which satisfy the
sexual instinct without involving maternity, although at an earlier stage
he characterised them as vices. It seemed to him to be the lesser of two
evils, for over-population[301] is itself the cause of much immorality,
with its misery, its promiscuous living and licence. All of which is
very true.[302] At the same time the rule of conduct now prescribed is
no longer that of “perfect purity.” It is, as he himself says, the grand
rule of utility. “It is clearly our duty gradually to acquire a habit
of gratifying our passion, only in that way which is unattended with
evil.” (P. 500.) These concessions only served to prepare the way for the
Neo-Malthusians.

Malthus gives us a picture of man at the cross-roads. Straight in front
of him lies the road to misery, on the right the path of virtue, while
on the left is the way of vice. Towards the first man is impelled by a
blind instinct. Malthus warns him to rein in his desires and seek escape
along either by-road, preferably by the path on his right. But he fears
that the number of those who will accept his advice and choose “the
strait road of salvation” will be very small. On the other hand, he is
unwilling to admit, even in the secrecy of his own soul, that most men
will probably follow the road that leads on to vice, and that masses will
rush down the easy slope towards perdition. In any case the prospect is
anything but inviting.

       *       *       *       *       *

No doctrine ever was so much reviled. Imprecations have been showered
upon it ever since Godwin’s memorable description of it as “that black
and terrible demon that is always ready to stifle the hopes of humanity.”

Critics have declared that all Malthus’s economic predictions have been
falsified by the facts, that morally his doctrines have given rise to the
most repugnant practices, and not a few French writers are prepared to
hold him responsible for the decline in the French birth-rate. What are
we to make of these criticisms?

History certainly has not confirmed his fears. No single country has
shown that it is suffering from over-population. In some cases—that
of France, for example—population has increased only very slightly.
In others the increase has been very considerable, but nowhere has it
outstripped the increase in wealth.

The following table, based upon the decennial censuses, gives the _per
capita_ wealth of the population of the United States, the country from
which Malthus obtained many of his data:

  Year          Dollars

  1850            308
  1860            514
  1870            780
  1880            870
  1890           1036
  1900           1227
  1905           1370

In fifty years the wealth of every inhabitant has more than quadrupled,
although the population in the same interval also shows a fourfold
increase (23 millions to 92 millions).[303]

Great Britain, _i.e._ England and Scotland, at the time Malthus wrote
(1800-5), had a population of 10½ millions. To-day it has a population of
40 millions. Such a figure, had he been able to foresee it, would have
terrified Malthus. But the wealth and prosperity of Great Britain have in
the meantime probably quadrupled also.

Does this prove the claim that is constantly being made, that Malthus’s
laws are not borne out by the facts? We think that it is correct to
say that the laws still remain intact, but that the conclusions which
he drew from them were unwarranted. No one can deny that living beings
of every kind, including the human species, multiply in geometrical
progression. Left to itself, with no check, such increase would exceed
all limits. The increase of industrial products, on the other hand, must
of necessity be limited by the numerous conditions which regulate all
production—that is, by the amount of space available, the quantity of raw
material, of capital and labour, etc. If the growth of population has not
outstripped the increase in wealth, but, as appears from the figures we
have given, has actually lagged behind it, it is because population has
been voluntarily limited, not only in France, where the preventive check
is in full swing, but also in almost every other country. This voluntary
limitation which gave Malthus such trouble is one of the commonest
phenomena of the present time.

Malthus’s apprehensions appear to involve some biological confusion.
The sexual and the reproductive instincts are by no means one and the
same;[304] they are governed by entirely different motives. Only to
the first can be attributed that character of irresistibility which he
wrongly attributes to the second. The first is a mere animal instinct
which rouses the most impetuous of passions and is common to all men.
The second is frequently social and religious in its origins, assuming
different forms according to the exigencies of time and place.

To the religious peoples who adopted the laws of Moses, of Manu, or of
Confucius to beget issue was to ensure salvation and to realise true
immortality.[305] For the Brahmin, the Chinese, or the Jew not to have
children meant not merely a misfortune, but a life branded with failure.
Among the Greeks and Romans the rearing of children was a sacred duty
laid upon every citizen and patriot. An aristocratic caste demanded
that the glories of its ancestors and founders should never be allowed
to perish for the want of heirs. Even among the working classes, whose
lot is often miserable and always one of economic dependence, there are
some who are buoyed up by the hope that the more children they have the
larger will be their weekly earnings and the greater their power of
enlisting public sympathy. And in every new country there is a demand
for labourers to cultivate its virgin soil and to build up a new people.

The reproductive instinct, on the other hand, may be thwarted by
antagonistic forces—by the selfishness of parents who shun their
responsibilities, or of mothers who dread the pains and perils of
child-bearing; by the greed of parents who would endow old age rather
than foster youth; by the desire of women to enjoy independence rather
than seek marriage; by the too early emancipation of children, which
leaves to the parents no gains and no joys beyond the cost and trouble of
upbringing; by insufficient house-room or exorbitant taxation, or by any
one of a thousand causes.

Thus the considerations that influence reproduction are infinitely
varied, and being of a social character they are neither necessary nor
permanent, nor yet universal. They may very well be defeated by motives
that belong to the social order, and this is just what happens. And it is
at least possible to conceive of a state of society where religious faith
has vanished and patriotism is dead, where the family lasts only for one
generation, and where all land has been appropriated so that the calling
of the father is denied to the son; where existence has again become
nomadic and suffering unbearable, and where marriage, easily annulled by
divorce, has become more or less of a free union. In such a community,
with all incentives to reproduction removed and all antagonistic forces
in full operation, the birth-rate would fall to zero. And if all nations
have not yet arrived at this stage they all seem to be tending towards
it. It is true that a new social environment may give rise to new
motives. We believe that it will, but as yet we are ignorant of the
nature of these promptings.

Paradoxical as it may seem, the sexual instinct plays quite a secondary
_rôle_ in the procreation of the human species. Nature doubtless has
united the two instincts by giving them the same organs, and those who
believe in final causes can admire the ruse which Nature has adopted for
securing the preservation of the species by coupling generation with
sexual attraction. But man has displayed ingenuity even greater than
Nature’s by separating the two functions. He now finds that (since he has
known how to get rid of reproduction) he can gratify his lust without
being troubled by the consequences. The fears of Malthus have vanished:
the other spectre, race suicide, is new casting a gloom over the land.

Malthus’s condemnation of such practices was of little avail. Other
moralists more indulgent than the master have given them their sanction
by endeavouring to show that this is the only way in which men can
perform a double function, on the one hand giving full scope to sexual
instinct in accordance with the physiological and psychological laws of
their being, and on the other taking care not to leave such a supreme
duty as that of child-bearing to mere chance and not to impose upon
womankind such an exhausting task as that of maternity save when freely
and voluntarily undertaken. This is quite contrary to the pastor’s
teaching concerning moral restraint. The Neo-Malthusians, on the other
hand, consider his teaching very immoral, as being contrary to the
laws of physiology, infected with ideas of Christian asceticism, and
altogether worse than the evil it seeks to remedy. His rule of enforced
celibacy might, in their opinion, involve more suffering even than want
of food, and late marriages simply constitute an outrage upon morality
by encouraging prostitution and increasing the number of illegitimate
births. The Neo-Malthusians[306] persist in regarding themselves as
his disciples because they think that he clearly demonstrated, despite
himself perhaps, that the exercise of the blind instinct of reproduction
must result in the multiplication of human beings who are faced by want
and disease and liable to sudden extinction or slow degradation, and that
the only way of avoiding this is to check the instinct.

There is reason to believe, however, that were Malthus now alive he
would not be a Neo-Malthusian. He would not have willingly pardoned his
disciples the perpetration of sexual frauds which enable man to be freed
from the responsibilities which Nature intended him to bear. Nevertheless
we must recognise that the concessions which he made prepared the way for
this further development.

Malthus did not seem to realise the full import of these delicate
questions which contributed so powerfully to the overthrow of his
doctrine. Especially is this true of the emphasis which he laid upon
chastity, involving as he thought abstention from the joys of marriage.
Such celibacy he would impose only upon the poor.[307] The rich are
obviously so circumstanced that children cannot be a hindrance. We know
well enough that it was in the interests of the poor themselves that
Malthus imposed his cruel law “not to bring beings into the world for
whom the means of support cannot be found.” But that does not prevent its
emphasising in the most heartless fashion imaginable the inequality of
their conditions, forcing the poor to choose between want of bread and
celibacy. Malthus gave a quietus to the old song which eulogises love
in a cottage as the very acme of happiness. It is only just to remark,
however, that he does not go so far as to put an interdict upon marriage
altogether, which is actually the case in some countries. The old liberal
economist asserts himself here. He sees clearly enough that, leaving
aside all humanitarian considerations, the remedy offered would be worse
than the evil, for its only result would be a diminution in the number of
legitimate children and an increase in the number of those born out of
wedlock.[308]

When telling the poor that they themselves were the authors of their
misery,[309] because of their improvident habits, their early marriages,
and their large families, and that no written law, no institution, and
no effort of charity could in any way remedy it, he failed to realise
that he was furnishing the propertied classes with a good pretext for
dissociating themselves from the fate of the working classes.[310] And
during the century which has passed since he wrote the way to every
comprehensive scheme of socialistic or communistic organisation has
been barred and every projected reform which claimed to ameliorate the
condition of the poor effectively thwarted by the argument that the only
result would be to increase the number of participators as well as the
amount to be distributed, and that consequently no one would be any the
better off.

Whatever opposition Malthus’s doctrines may have aroused, his teaching
has long since become a part and parcel of economic science. Occasionally
it has thwarted legitimate claims, while at other times it has been used
to buttress some well-known Classical doctrine, such as the law of rent
or the wages fund theory. On more than one occasion it has done service
in the defence of family life and private property, two institutions
which are supposed to act as effective checks upon the growth of
population, because of the responsibilities which they involve.[311]

The population question has lost none of its importance, although it has
somewhat changed its aspect. What Malthus called the preventive check
has got such a hold of almost every country that modern economists and
sociologists are concerned not so much with the question of an unlimited
growth of population as with the regular and universal decline of the
birth-rate. Everyone is further agreed that the causes must be social.

It is not enough to say that the cause is a deliberate determination
of parents to have no children or to have only a limited number. The
question is, Why do they decide to have none or to limit their family to
a certain number only? Why is this limitation more marked in France than
elsewhere, and why is it more pronounced there to-day than it was say two
or three generations ago? The special causes which apply to the France of
to-day must somehow be discovered, and such causes may be expected to be
less active elsewhere. It may be that Paul Leroy-Beaulieu is right when
he claims that the progress of civilisation must always mean a declining
birth-rate, because the fresh needs and desires and the extra expenditure
which it necessarily involves are incompatible with the duties and
responsibilities of maternity. It is possible that it diminishes as
democracy advances, because the latter strengthens the telescopic
faculty and quickens the desire to rise in the social scale as rapidly
and as effectively as possible. M. Dumont, who advocates this view,
has happily named it the law of capillarity. More precise causes are
sometimes invoked, but they vary according to the particular school that
formulates them. Le Play thinks that it is due to the practice of social
inheritance. Paul Bureau takes it as a sign of the weakening of moral
and religious belief, and of the growth of intemperate habits of every
kind—alcoholism, debauchery, etc. Unfortunately none of the explanations
given seem quite satisfactory, and a second Malthus is required to open
up a new chapter in the history of demography.[312]


II: RICARDO

Next to Smith, Ricardo is the greatest name in economics, and fiercer
controversy has centred round his name than ever raged around the
master’s. Smith founded no school, and his wisdom and moderation saved
him from controversy. Hence every economist, whatever his views, is found
sitting at his feet straining to catch the divine accents as they fall
from his lips.

But Ricardo was no dweller in ethereal regions. He was in the thickest
of the fight—the butt of every shaft. In discussions on the question of
method the attack is always directed against Ricardo, who is charged
with being the first to lead the science into the fruitless paths of
abstraction. The Ricardian theory of rent affords a target for every
Marxian in his general attack upon private property. The Ricardian theory
of value is the starting-point of modern socialism—a kinship that he
could never have disavowed, however little to his taste. The same thing
is true of controversies concerning banks of issue and international
trade: Ricardo’s place was ever with the vanguard.

His defects are as interesting as his merits, and have been equally
influential. Of his theories, especially his more characteristic ones,
there is now little left, unless we recall what is after all quite as
important—the criticisms they aroused and the adverse theories which they
begot. The city banker was a very indifferent writer, and his work is
adorned with none of those beautiful passages so characteristic of Smith
and Stuart Mill. No telling phrase or striking epithet ever meets the
eye of the reader. His principal work is devoid of a plan, its chapters
being mere fragments placed in juxtaposition. His use of the hypothetical
method and the constant appeal to imaginary conditions makes its reading
a task of some difficulty. This abstract method has long held dominion
over the science, and it is still in full activity among the Mathematical
economists. His thoughts are penetrating, but his exposition is
frequently obscure, and a remark which he makes somewhere in speaking of
other writers, namely, that they seldom know their own strength, may very
appropriately be applied to him. But obscurity of style has not clouded
his fame. Indeed, it has stood him in good stead, as it did Marx at a
later date. We hardly like to say that a great writer is unintelligible—a
feeling prompted partly by respect and partly arising out of fear lest
the lack of intelligence should really be on our side. The result is an
attempt to discover a profound meaning in the most abstruse passage—an
attempt that is seldom fruitful, especially in the case of Ricardo.

It is clearly impossible to outline the whole of this monumental work. We
shall content ourselves with an attempt to place the leading conceptions
clearly before our readers.[313]

Speaking generally, Ricardo’s chief concern is with the distribution of
wealth. He was thus instrumental in opening up a new field of economic
inquiry, for his predecessors had been largely engrossed with production.
“To determine the laws which regulate this distribution is the principal
problem in political economy.” We have already some acquaintance with the
tripartite division of revenues corresponding with the threefold division
of the factors of production—the rent of land, the profits of capital,
and the wages of labour. Ricardo wanted to determine the way in which
this division took place and what laws regulated the proportion which
each claimant got. Although unhampered by any preconceptions concerning
the justice or injustice of distribution, we can easily understand how
he ushered in the era of polemics and of socialistic discussion, seeing
that the natural laws pale into insignificance when contrasted with the
influence wielded by human institutions and written laws. The latter
override the former, and individual interests which may co-operate in
production frequently prove antagonistic in distribution.

We shall follow him in his exposition of the laws of rent, wages, and
profits, but especially rent, for according to him the share given to
land determines the proportions which the other factors are going to
receive.

One would imagine that an indispensable preliminary to this study would
be an examination of the Ricardian theory of value, especially when we
recall the importance of his theory of labour-value in the history of
economics doctrine and how it prepared the way for the Marxian theory of
surplus value, which is the foundation-stone of contemporary socialism.
Despite all this we shall only refer to his theory of value incidentally,
and chiefly in connection with the laws of distribution. We have
Ricardo’s own authority for doing this: “After all, the great problem
of rent, of wages, or of profits might be elucidated by determining
the proportions in which the total product is distributed between
the proprietors, the capitalists, and the workers, but this is not
necessarily connected with the doctrine of value.”[314]

It is, moreover, probable that Ricardo himself did not begin with an
elaborate theory of value from which he deduced the laws of distribution,
but after having discovered, or having convinced himself that he had
discovered, the laws of distribution he attempted to deduce from them a
theory of value. One idea had haunted him his whole life long, namely,
that with the progress of time nature demanded an ever-increasing
application of human toil. No doubt it was this that suggested to him
that labour was the foundation, the cause, and the measure of value. But
he never came to a final decision on the question, and his statements
concerning it are frequently contradictory. We must also confess that
his theory of value is far from being his most characteristic work. In
the elucidation of that difficult question, vigorous thinker though
he was, he has not been much more fortunate than his predecessors. He
himself acknowledged this on more than one occasion, and shortly before
his death, with a candour that does him honour, he recognised his failure
to explain value.[315]


1. THE LAW OF RENT

Of all Ricardian theories that of rent is the most celebrated, and it
is also the one most inseparably connected with Ricardo’s name. So well
known is it that Stuart Mill spoke of it as the economic _pons asinorum_,
and it has always been one of the favourite subjects of examiners.

The question of rent—that is, of the return which land yields—had
occupied the attention of others besides Ricardo. It was the burning
question of the day. The problem of rent dominated English political
economy during the first half of the nineteenth century, and a later
period has witnessed a revival of it in the land nationalisation
policy of Henry George. In France there was but a feeble echo of the
controversy, for France even long before the Revolution had been a
country of small proprietors. Landlordism was far less common there, and
where it existed its characteristics were very different. That threefold
hierarchy which consisted of a worker toiling for a daily wage in the
employ of a capitalist farmer who draws his profits towered over by a
landlord in receipt of rents formed a kind of microcosmic picture of the
universal process of distribution, but it was seldom as clearly seen in
France as it was in England.

The first two incomes presented no difficulties. But how are we to
explain that other income—that revenue which had created English
aristocracy and made English history? The Physiocrats had named it the
“net product,” and they argued a liberality of nature and a gift of
God. Adam Smith, although withholding the title of creator from nature
and bestowing it upon labour, nevertheless admits that a notable
portion—perhaps as much as a third of the revenue of land—is due to the
collaboration of nature.[316]

Malthus had already produced a book on the subject,[317] and Ricardo
hails him as the discoverer of the true doctrine of rent. Malthus takes
as his starting-point the explanation offered by the Physiocrats and
Adam Smith, namely, that rent is the natural outcome of some special
feature possessed by the earth and given it by God—that is, the power of
enabling more people to live on it than are required to till it. Rent
is the result, not of a merely physical law, but also of an economic
one, for nature seems to have a unique power of creating a demand for
its products, and consequently of maintaining and even of increasing
indefinitely both its own revenue and value. The reason for this is that
the population always tends to equal and sometimes to surpass the means
of subsistence. In other words, the number of people born is seldom less
than the maximum number that the earth can feed. This new theory of rent
is a simple deduction from Malthus’s law concerning the constant pressure
of population upon the means of subsistence.

Malthus emphasised another important feature of rent, and it was this
characteristic that especially attracted Ricardo. Seeing that different
parts of the earth are of unequal fertility, the capitals employed in
cultivation must of necessity yield unequal profits. The difference
between the normal rate of profit on mediocre lands and the superior rate
yielded by the more fertile land constitutes a special kind of profit
which is immediately seized by the owner of the more fertile land. This
extra profit afterwards became known as differential rent.

To Malthus, as well as to the Physiocrats, this kind of rent seemed
perfectly legitimate and conformed to the best interests of the public.
It was only the just recompense for the “strength and talent” exercised
by the original proprietors. The same argument applies to those who have
since bought the land, for it must have been bought with the “fruits of
industry and talent.” Its benefits are permanent and independent of the
proprietor’s labour, and in this way the possession of land becomes a
much-coveted prize, the _otium cum dignitate_ which is the just reward of
meritorious effort.

Ricardo enters upon an entirely new track. He breaks the connection
with Smith and the Physiocrats—a connection that Malthus had been most
anxious to maintain. All suggestion of co-operation on the part of
nature is brushed aside with contempt. Business-man and owner of property
as he was, he had no superstitious views concerning nature, whose work
he contemplated without much feeling of reverence. As against the
celebrated phrase of Adam Smith he quotes that of Buchanan: “The notion
of agriculture yielding a produce and a rent in consequence because
nature concurs with human industry in the process of cultivation is a
mere fancy.”[318] He proceeds to defend the converse of Smith’s view and
to show how rent implies the avarice rather than the liberality of nature.

The proof that the earth’s fertility, taken by itself, can never be the
cause of rent is easily seen in the case of a new country. In a newly
founded colony, for example, land yields no rent, however fertile, if
the quantity of land is in excess of the people’s demand. “For no one
would pay for the use of land when there was an abundant quantity not yet
appropriated, and therefore at the disposal of whosoever might choose to
cultivate it.”[319] Rent only appears “when the progress of population
calls into cultivation land of an inferior quality or less advantageously
situated.” Here we have the very kernel of Ricardo’s theory. Instead of
being an indication of nature’s generosity, rent is the result of the
grievous necessity of having recourse to relatively poor land under the
pressure of population and want.[320] “Rent is a creation of value, not
of wealth,” says Ricardo—a profound saying, and one that has illuminated
many a mystery attaching to the theory of rent. In that sentence he
draws a distinction between wealth born of abundance and satisfaction and
value begotten of difficulty and effort, and he declares that rent is of
the second category and not of the first.

Still, this cannot be accepted as the final explanation. It is difficult
to understand how a purely negative condition such as the absence of
fertile land could ever create a revenue. It were better to say that the
want of suitable land supplies the occasion for the appearance of rent,
although it is not its cause. The cause is the high price of agricultural
products—say corn—due to the increased difficulty of cultivating the less
fertile lands.[321] In short, the cause and the measure of the rent of
corn-land are determined by the quantity of labour necessary to produce
corn under the most unfavourable circumstances, “meaning by the most
unfavourable circumstances the most unfavourable under which the quantity
of produce required renders it necessary to carry on production.”[322]

Let us assume, as Ricardo did, that first-class land yields a bushel of
corn as the result of ten hours’ work, the corn selling for ten shillings
a bushel.[323] In order to supply a population that is increasing in
accordance with the Malthusian formula, land of the second class has to
be cultivated, when the production of a bushel requires fifteen hours’
work. The value of corn will rise proportionately to fifteen shillings,
and landed proprietors of the first class will draw a surplus value or
a bonus of five shillings per bushel. So rent emerges. Presently the
time for cultivating lands of the third class will approach, when twenty
hours’ labour will be necessary for the production of a bushel. The price
of corn goes up to twenty shillings, and proprietors of the first class
see their gift increased or their rent raised from five to ten shillings
per bushel, while the owners of the second-class land obtain a bonus
of five shillings per bushel. This marks the advent of a new class of
rent-receivers, who modestly take their place a little below the first
class. The third class of landowner will receive a rent whenever the
cultivation of fourth-class land becomes a necessity.[324]

It has been said in criticism of the theory that the hierarchy of lands
has simply been invented for the purpose of illustrating the theory. But
what Ricardo has really done is to put in scientific language what every
peasant knows—what has been handed down to him from father to son in
unbroken succession, namely, that all land is not equally fertile.

Ricardo, so often represented as a purely abstract thinker, was in
reality a very practical man and a close observer of those facts that
were then occupying the attention of both public and Parliament. High
rents, following upon high prices, constituted the most important
phenomenon in the economic history of England towards the end of the
eighteenth and the beginning of the nineteenth centuries. Right through
the eighteenth century—that is, up to 1794—the highest price paid for
corn was only a few pence above 60s. per quarter. But in 1796 the price
rose to 92s., and in 1801 it reached 177s.—nearly three times the old
price. The exceptionally high price, due to extraordinary causes, chief
among them being the Napoleonic wars and the Continental blockade, could
not last long, although the average during the years 1810-13 remained as
high as 106s.[325]

This high price of corn was not entirely due to accidental causes.
Something must be attributed to the fact that the available land was
insufficient for the upkeep of the population, and that new land had
to be cultivated irrespective of situation or degree of fertility. The
pastures which had formerly covered England were daily disappearing
before the plough. It was the period of the iniquitous Enclosure Acts,
when landlords set their hearts upon enclosing the common lands.
Professor Cannan has drawn up an interesting chart to show the close
correspondence between the progress of the enclosure movement and the
high price of corn.[326]

In 1813 a Commission appointed by the House of Commons to inquire into
the price of corn—for the proprietors dreaded the day when the return
of peace would allow of importation—came to the conclusion that new
lands could not produce corn at a less cost than 80s. a quarter. What an
argument for Ricardo’s theory![327]

But is there no possible means of avoiding the cultivation of lands
of the second and third order? Intensive cultivation might doubtless
do something to swell the returns on the older lands, but only up to
a certain point. It would be absurd to imagine that on a limited area
of land an unlimited quantity of subsistence can be produced. There
must be a limit somewhere—an elastic limit perhaps, and one which the
progress of science will push farther and farther away, even beyond our
wildest hopes. But the cultivator stops long before this ideal limit
is reached, for practice has taught him that the game is not worth the
candle, because the outlay of capital and labour exceeds the profits on
the return. This practical limit is determined for him by the law of
diminishing returns.[328]

That law is indispensable to an understanding of the Ricardian theory,
and is implied in Malthus’s theory of population. Its discovery is still
earlier, and we have an admirable statement of it in Turgot’s writings:
“It can never be imagined that a doubling of expenditure would result
in doubling the product.” Malthus, unconsciously no doubt, repeated
Turgot’s dictum.[329] It is evident, says he, that as cultivation
extends, the annual addition made to the average product must continually
diminish.[330] Ricardo witnessed the operation of the law under his
very eyes, and he frequently hinted at the decreasing returns yielded
by capital successively applied to the same land. Even in cases of that
kind, where recourse to new lands was impossible, rents were bound to
increase.

Taking again land No. 1, which yields corn at 10s. a bushel, let us
imagine that there is an increased demand for wheat. Instead of breaking
up land No. 2 an attempt might be made to increase the yield on No. 1,
but nothing will be gained by it because the new bushel produced on
No. 1 will cost 15s., which is just what it would cost if raised on
second-class land. Furthermore, the price will now rise to 15s., and the
two bushels will be disposed of for 30s., thus giving the proprietor a
rent of 5s., because they have only cost 25s. to produce.[331]

There is still another possibility, however. Resort might be had to
emigration and colonists might be encouraged to cultivate the best soils
of distant lands, soils equal in fertility to those in the first class.
The products of such lands would be got in exchange for the manufactured
goods of the home country, to which the law of diminishing returns does
not apply. But some account of the cost of transport, which increases the
cost of production, must be taken, and this leads to the same result,
namely, a rent for those nearest the market, because of the advantages
of a superior situation. Distance and sterility, as J. B. Say remarks,
are the same thing. If land in America yields corn at 10s. a bushel and
freightage equals 5s., it is clear that corn imported into England must
sell for 15s.—exactly the same condition of things as if land of the
second order had been cultivated, and English landlords of the first
class will still draw a rent of 5s. This third possibility was scarcely
mentioned by Ricardo, and he could hardly have foreseen the wonderful
developments in transportation that took place during the next fifty
years, which resulted in a reversal of the law of diminishing returns and
the confuting of the prophets.[332]

The great Ricardian theory, _prima facie_ self-evident, is in reality
based upon a number of postulates to which we must pay more attention.
Some of them must be regarded as economic axioms, but the validity of
others is somewhat more doubtful.

In the first place there is the assumption that the produce of lands
unequally fertile and representing unequal amounts of labour will always
sell at the same price, or, in other words, will always possess the same
exchange value. Is this proposition demonstrably sound? It is true when
the product in question—for example, corn—is of uniform quality and
kind. When the goods offered on the same market are so much alike that
it is a matter of indifference to the buyer whether he takes the one or
the other, then it is true that he will not pay a higher price for the
one than he will for the other. This is what Jevons called the “law of
indifference.”[333] In the second place it is implied that this exchange
value, uniform for all identical products, is determined by the maximum
amount of labour required for its production, or, in other words, by the
amount of labour necessary for the production of the more costly portion.

This brings us to the Ricardian theory of value. We know that he
considered that the value of everything was determined by the amount of
labour necessary for its production.[334] Adam Smith had already declared
that value was proportional to the amount of labour employed, but that
this was the case only in primitive societies. “In civilised society,
on the contrary, there is a still smaller number [of cases] in which it
consists altogether in the wages of labour.” Labour was regarded by Smith
as one of the factors determining value—though by no means the only one,
land and capital being obviously the others.

But Ricardo simplified matters, as abstract thinkers frequently do, by
neglecting the last-named factors. This leaves us only labour. Land is
dismissed because rent contributes nothing to the creation of value, but
is itself entirely dependent upon value.[335] Corn is not dear because
land yields rent, but land yields rent because corn is dear. “The
clearly understanding this principle is, I am persuaded, of the utmost
importance to the science of political economy.” As for capital, why
should we make a special factor of it, seeing that it is only labour?
Its connotation might be extended so as to include “the labour bestowed
not on their immediate production only, but on all those implements or
machines required to give effect to the particular labour to which they
were applied.”[336] But Ricardo was not thoroughly satisfied with this
identification of capital and labour, and, great capitalist that he was,
it must have caused him much searching of heart. Furthermore, it was
not very easy to apply the conception to such commodities as timber and
wine, which increase in value as they advance in age. In a letter to
McCulloch he admits the weakness of his theory. After all the study that
he had given to the matter, he had to confess that the relative value of
commodities appeared to be determined by two causes: (1) the relative
quantity of labour necessary for its production; (2) the relative length
of time required to bring the commodity to market. He seems to have had
a presentiment of the operation of a new and distinct factor, to which
Böhm-Bawerk was to ascribe such importance.

The usual method of stating the Ricardian theory of value is to say that
value is determined by cost of production. It is also the correct way,
inasmuch as he stated it thus himself. It is, however, quite a different
thing to say on the one hand that value is determined by labour and on
the other that it depends upon the sum of wages and profits (supposing
we omit rent).[337] On this point, as on several others, obscurity of
thought alone saves Ricardo from the reproach of self-contradiction.

Suppose we proceed a step farther. The statement that value is determined
by labour is not enough to account for the phenomenon of rent. Let us
imagine a market where three sacks of corn are available for sale. Let us
further suppose that the production of each involved a different quantity
of labour, one being produced on land that was very fertile, the other
on soil that was less generous, etc. Every sack will sell at the same
price, but the question is, which of those different quantities of labour
is the one that determines the price? Ricardo replies that it is the
maximum quantity, and the value of the corn is determined by the value
of that sack which is produced under the greatest disadvantages. But why
should it not be determined by the value of the sack grown under the most
favourable circumstances, or by the value of that other sack raised under
conditions of average difficulty?

That is impossible. Let us imagine that the three sacks of corn
came from three different kinds of land, A, B, and C, where the
necessary quantities of labour were respectively 10, 15, and 20. It is
inconceivable that the price should fall below 20, the cost of production
of corn grown on C, for if it did C would no longer be cultivated; but
the produce of C is _ex hypothesi_ indispensable. The market price cannot
rise above 20, for in that case lands of the fourth class would be
brought under cultivation, and their yield would be added to the quantity
already on the market. The supposition is that the quantity of corn on
the market is already sufficient to meet the demand, and the increase
in supply would soon cause the price to fall again to the irreducible
minimum of 20.

We cannot but admire the ingenuity of a demonstration that seeks to
explain a phenomenon like rent—which is a revenue obtained independently
of all labour—by the aid of a generalisation which regards labour as
the one source of value. But the explanation is ingenious rather than
convincing, for it is quite clear that only in the case of one of the
sacks do value and amount of labour actually coincide. In the two other
instances the quantity of labour and exchange value are absolutely and
indefinitely divergent.

Most contemporary economists, while denying that value is solely the
product of labour and preferring to regard it as a reflection of human
preferences, would willingly recognise the element of truth contained
in the Ricardian view. But it must be understood in the sense that
competition, although tending to reduce price to the level of cost of
production, cannot reduce it below the maximum cost of production, or
the price necessary to repay the expenses of producing the most costly
portion of the total amount demanded by the market.[338] In this sense it
is true not only of agricultural but also of all other products, and it
has a wider scope than was at first ascribed to it by its authors. Rent
is nowadays recognised as an element which enters into all incomes. But
with an extension of sway has gone attenuation, and the term has lost
something of its original significance and precision. To-day rent is
treated as the outcome of certain favourable conjunctures, which are to
be found in all stations in life, and it is no uncommon thing to speak of
consumer’s rent even.

The Ricardian theory, moreover, presupposed the existence of a class of
land which yielded no rent, the returns which it gave being only just
sufficient to cover cost of production. In other words, Ricardo only
recognised the existence of differential rents, and dismissed the other
cases mentioned by Malthus.

It really seems as if Malthus were in this instance more correct than
Ricardo. It is quite possible that in the colonies, for example, there
may be lands which yield no rent because of the superabundance of fertile
land. Or the same thing may occur in an old country because of the
extreme poverty of the land. But it is quite evident that in a society
having a certain density of population the mere fact that there exists
only a limited amount of land is enough to give to all lands and to their
products a scarcity value independent of unequal returns. Nor would the
case be materially different if all lands were supposed to be of equal
fertility, for who would be willing to cultivate land which only yielded
the bare equivalent of the expenses of production?

Ricardo’s unwillingness to recognise this other class of rent, which
depends solely upon the limited quantity of land, was due to the
fact that it would have contradicted his other theory that there is
no value except labour. It is true that he made an exception of some
rare “products,” such as valuable paintings, statuary, books, medals,
first-class wines, etc., the quantity of which could not be increased by
labour. Nobody would have taken any notice of such a slight omission as
that, but had he left out such an important item of wealth as the earth
itself there would be great danger of the whole theory crumbling to
dust.[339]

       *       *       *       *       *

Such is the theory of rent, celebrated above all economic doctrines, and
concerning which it might be said that no doctrine, not even that of
Malthus, has ever excited such impassioned criticism. For this there are
several reasons.

In the first place, it led to an overthrow of the majesty of the “natural
order” by simply depicting some of its gloomier aspects. Men had been led
to believe that the “order” was for ever beyond challenge. Now, however,
it seemed that if the new doctrine was true then the interests of the
landed proprietors were opposed not only to those of every other class
in the community—for sharing always begets antagonism—but also to the
general interest of society as a whole.

For what are the real interests of proprietors? First, that population
and its demands should increase as rapidly as possible in order that men
may be forced to cultivate new lands, and that these new lands should be
as sterile as possible, requiring much toil and thus causing an increase
in rents. Exhaustive labour bestowed upon the cultivation of land that is
gradually becoming poorer and poorer would soon make the fortune of every
landlord.

As a class, proprietors have every interest in retarding the progress of
agricultural science, a paradox which the slightest reflection will show
to be true. Every advance in agricultural science must mean more products
from the same amount of land and a check upon the law of diminishing
returns, resulting in lower prices and reduced rents, since it would
no longer be necessary to cultivate the poorer soils. In a word, since
rent is measured by reference to the obstacles which thwart cultivation,
just as the level of water in a pond is determined by the height of the
sluice, everything that tends to lower this obstacle must reduce the
rent. In mitigation of this charge it must, however, be noted that, taken
individually, every proprietor is of necessity interested in agricultural
improvement, because he may have an opportunity of benefiting by larger
crops before the improvements have become general enough to lower prices
and to push back the margin of cultivation. If every proprietor argued
in this way, individual interest would finally cheat itself, to the
advantage of the general public. But this is nothing to be very proud of.

Ricardo set out to demonstrate the antagonism,[340] and with what a
vigorous pen does he not picture it! The study of this question of
rent made of him a Free Trader stauncher than Adam Smith, more firmly
convinced than the Physiocrats. Free Trade was for them founded upon
the conception of a general harmony of interests, while Ricardo built
his faith upon one clearly demonstrated fact—the high price of corn
and its concomitant, high rents. Free Trade seemed to be the means of
checking this disastrous movement. The free importation of corn implied
the cultivation of distant lands as rich as or even richer than any in
Britain. All this meant avoiding the cultivation of inferior lands and
reducing the high price of corn.

He was also desirous of proving to the proprietors that the practice of
free exchange, even though it might involve some loss of revenue to them,
was really to their interest. Their opposition, he thought, was very
short-sighted. “They fail to see,” he writes, “that commerce everywhere
tends to increase production, and that as a result of this increased
production general well-being is also improved, although there may be
partial loss as the result of it. To be consistent with themselves they
ought to try to arrest all improvement in agriculture and manufacture and
all invention of machinery.”[341]

The theory of rent, in the second place, endangered the reputation of
landowners by showing that their income is not the product of labour,
and is consequently anti-social. No wonder that it has been so severely
criticised by conservative economists. Ricardo himself, however,
seemed quite unconscious of the nature of the blow thus aimed at the
institution of private property. His indifference, which appears to us
so surprising, is partly explained by the fact that the theory absolved
the proprietor from all responsibility in the matter. Unlike profits and
wages, rent does not figure in cost of production because it makes no
contribution to the price of corn, but is itself wholly determined by
that price.[342] The landed proprietor thus appears as the most innocent
of the co-partners, playing a purely passive _rôle_. He does not produce
rent, but simply accepts it.

That may be; but the fact that the proprietor plays no part in the
production of rent, whilst exonerating him from complicity in its
invidious consequences, spells ruin to his title of proprietor—that is,
if we consider labour to be the only title to proprietorship. It was
just this aspect of the question that drew the attention of Ricardo’s
contemporary James Mill. Mill advocated the confiscation of rent or its
socialisation by means of taxation.[343] He thus became a pioneer in the
movement for land nationalisation, a cause that has since been championed
by such writers as Colins, Gossen, Henry George, and Walras.

Finally, the theory of rent seems to give colour to certain theories
which predict an extremely dark future for the race, corroborating the
gloomy forebodings of Malthus. As society grows and advances it will be
forced to employ lands that are less fertile and means of production that
are more onerous. It seems as if the curse uttered in Genesis has been
scientifically verified. “Thorns also and thistles shall it bring forth
to thee; … in the sweat of thy face shalt thou eat bread.”

True, he did not carry his pessimism so far as to say that as the result
of this fatal exhaustion of this most precious instrument of production
the progress of mankind would for ever be arrested by the ravages of
famine. Other beneficent forces, the progress of agricultural science and
a larger employment of capital, would surmount the difficulty. “Although
the lands that are actually being cultivated may be inferior to those
which were in cultivation some years ago, and consequently production is
becoming more difficult, can anyone doubt that the quantity of products
does not greatly exceed that formerly produced?”

Ricardo’s theory does not involve a denial of progress. But it shows
how the struggle is becoming more and more difficult, and how scarcity
and want, if not actual famine, must lie in the path along which we are
advancing. Suppose Great Britain were now to attempt to feed her 45
million inhabitants from her own soil, would there be much doubt as to
the correctness of Ricardo’s prophecy?

It is an easy matter to reproach Ricardo[344] with his failure to
foresee the remarkable development in the methods of transport and cheap
importation which resulted in the arrest, if not the reversal, of the
upward movement of the rent curve. The complaints of landlords both in
England and Europe seem to belie the Ricardian theory.[345] But who can
tell whether the peril is finally removed or not? The inevitable day will
arrive when new countries will consume the corn which to-day they export.
This may not come about in the history of England and Europe for some
centuries yet, but when it does happen, rent, instead of being stationary
and retrogressive, as it has been so long, will again resume its upward
trend.

It is true that we may reckon upon the aid of agricultural science even
if foreign importation should fail us. Ricardo was ever mindful of the
great possibilities of human industry. Other economists, notably Carey
and Fontenay, one of Bastiat’s disciples, have propounded a theory which
is the exact antithesis of the Ricardian, namely, that human industry
in its utilisation of natural forces always begins with the feeblest as
being more easily tamed, the more powerful and recalcitrant forces only
coming in for attention later on. The earth is no exception to the rule,
and agricultural industry might well become not less but more productive.

This thesis, which implies a negation of the law of diminishing returns,
is based upon a very debatable analogy.

When speaking of the future of industry it is well to remember that
forces now seldom used, and perhaps seldom thought of, such as the
energies liberated by chemical and intermolecular action, may hold
infinite resources in reserve for mankind. But agriculture is different.
Admitting that with nitrogen got from the atmosphere, or with phosphorus
extracted from the subsoil, we may enrich the land indefinitely, still we
are continually confronted with the limitations of time and space, which
must determine the development of living things, and of agricultural
products among them. When albumen can be scientifically produced then
will the Ricardian theory become obsolete. Until then it holds the field.


2. OF WAGES AND PROFITS

Let us now approach these two laws of Malthus and Ricardo—the law of
population and the law of rent—and ask what effect they are likely to
have upon the condition of the worker and the amount of his wages. The
answer is not very reassuring. On the one hand there is an indefinite
increase in the numbers of the proletariat—the result of unchecked
procreation, for “the moral restraint” can hardly be said to have
influence at all. The inevitable result is the degradation of human
labour. On the other hand, the law of diminishing returns causes a
continuous rise in the price of necessaries. Between low wages on the one
hand and high prices on the other, the worker feels himself crushed as
between the hammer and the anvil.

Turgot had long since given utterance to the tragic thought that the
wages of the worker are only just sufficient to keep him alive. His
contemporary Necker gave expression to the view in terms still more
melancholy. “Were it possible,” writes Necker, “to discover a kind of
food less agreeable than bread but having double its sustenance, people
would then be reduced to eating only once in two days.” These must be
looked upon as mere isolated statements, sufficiently well attested
by contemporary facts, perhaps, but laying no claim to be considered
general, permanent, and inevitable laws such as Ricardo and Malthus would
have regarded them.

And Ricardo still more emphatically declares that “the natural price of
labour is that price which is necessary to enable the labourers one with
another to subsist and to perpetuate their race without either increase
or diminution.” Note the last words, “without increase or diminution”;
that is, if a working man has more children than are necessary for
replacing their parents, then their wages will fall below the normal
rate until increased mortality shall have again established equilibrium.

This is not tantamount to saying that nominal wages measured in terms
of money cannot increase. Indeed, it is absolutely necessary that they
should increase, seeing that the price of commodities is continually
rising. If they were to remain the same the workman would soon be reduced
to starvation. Wages accordingly will show a tendency to rise in sympathy
with the rising price of corn, so that the workman will always be able to
procure just the same quantity of bread, no more and no less. It is his
real wages measured in corn that remain stationary, and upon this depends
the well-being of the working class.

But do they really remain stationary? Ricardo does not seem to think
so. “In the natural advance of society the wages of labour will have a
tendency to fall, as far as they are regulated by supply and demand;
for the supply of labourers will continue to increase at the same rate,
whilst the demand for them will increase at a slower rate.”[346]

It is even possible that an increase in nominal wages may hide a decrease
in real wages. In that case, of course, wages will appear to rise, but
“the fate of the labourer will be less happy; he will receive more money
wages it is true, but his corn wages will be reduced.” Only when the
working classes are sufficiently thoughtful to limit the number of their
children will it be possible to hope for a preservation of the _status
quo_. “It is a truth which admits not a doubt, that the comforts and
well-being of the poor cannot be permanently secured without some regard
on their part or some effort on the part of the legislature to regulate
the increase of their numbers, and to render less frequent among them
early and improvident marriages.”

In other words, there will always be a demand for a certain number of
individuals in order to supply the needs of industry. So long as this
indispensable minimum is not exceeded the wages even of the very lowest
order must be sufficient to maintain existence, for they must all be kept
alive at any rate. But should the working population exceed this demand
nothing can prevent wages falling even below the minimum necessary for
existence, for there will no longer be any necessity for keeping them all
alive.

It must be remarked here that on this question, as on that of rent,
Malthus is less pessimistic than Ricardo. Far from maintaining that
every rise in wages of necessity involves an excess of population and
a consequent lowering of wages, Malthus believed that a capacity for
forethought, which constitutes the most efficacious check upon the
operation of blind instinct, may be engendered even among the working
classes, and that a high standard of life once secured may become
permanent. All this may be very true, but the reasoning involves us in
a vicious circle. In order that a high rate of wages may produce its
beneficial effects it must first of all be established, but how can it
possibly be established as long as the working classes remain steeped in
the misery caused by not exercising this forethought?

An exit from the circle is only possible by recalling the fact that the
market wage incessantly oscillates about the natural wage according to
the exigencies of demand and supply. If this accidental rise could be
prolonged a little it might become permanent and modify the workman’s
standard of life.[347]

Such is the law of wages, which has long since passed into an axiom,
and whose authority is invoked in every discussion on social reform. To
every socialistic scheme, to every proposal for social reform, there is
always one answer: “There is no means of improving the lot of the worker
except by limiting the number of his children. His destiny is in his own
hands.”[348] Latter-day socialism, commencing with Lassalle, makes a
careful study of the law, and returns to the charge against the existing
economic order by affirming that in no respect is it a natural law, but
merely a result of the capitalist _régime_, upon which it supplies an
eloquent commentary.

We must not fail to note that in the Ricardian theory there is not what
we can exactly call antagonism between the landed proprietor and the
proletarian. To the latter it is a matter of indifference whether rents
be high or low, for his money wages move in sympathy with the price of
corn, but his real wages never change. The proprietor on his side is
equally indifferent to rising or falling wages, for they never affect his
receipts. His rent, as a matter of fact, is determined by the quantity of
labour employed on the least fertile lands, but this quantity of labour
has nothing to do with the rate of wages. The landlords are the grandees
of a different order.[349]

The real struggle lies between capitalist and worker. Once the value
of corn has been determined by the cost of producing it on the least
favoured land, the proprietor seizes whatever is over and above this,
saying to both worker and capitalist, “You can divide the rest between
you.” This clearly is Ricardo’s view.[350] “Whatever raises the wages of
labour lowers the profits of stock.” Wages can only rise at the expense
of profits, and _vice versa_—a terrible prophecy that has been abundantly
illustrated by the fortunes of the labour movement, but never more
clearly than at the present moment.

But the mere statement of the fatal antagonism between capitalist and
workman must have caused both grief and surprise to those economists who
had endeavoured to demonstrate the solidarity of interests between them
as between brothers. Bastiat was one of these, and he tried to show that
in the course of economic evolution the share of each factor tends to
grow, but that labour’s shows the greatest increase.

There can be no objection to Ricardo’s method of stating the law. The
whole thing is so evident that it is almost a truism. A cake is being
shared between two persons. If one gets more than his due share is it
not evident that the other must get less? It may be pointed out, on the
other hand, that the amount available for distribution is continually on
the increase, so that the share which each participant gets may really
be growing bigger. But that is hardly the problem to be solved.[351]
Increase the cake tenfold, even a hundredfold, but if one person gets
more than half of it the other must have less. Ricardo’s implication is
just that. His law deals with proportions and not with quantities.

Admitting that the proportion which one of the two factors receives can
be increased only if the other is lessened, the problem is to discover
which of the two, capital or labour, has the bigger portion. It really
seems as if it were labour, for Ricardo speaks of another law of profits,
namely, “the tendency of profits to a minimum.” Here is another thesis
which has had a long career in the history of economics, but what are the
reasons that can be adduced in support of it? The natural tendency of
profits, then, is to fall; “for in the progress of society and wealth the
additional quantity of food required is obtained by the sacrifice of more
labour.” It is determined by the same cause as determined rent—the system
is a solid piece of work at any rate.

But how does the cultivation of inferior land affect the rate of profits?
We have already seen how the worker’s share, the minimum necessary
for keeping body and soul together, goes to swell the high price of
corn.[352] But the manufacturer cannot transfer the cost of high wages to
the consumer, for the rate of wages has no effect on prices. (Labour has,
but wages have none.) As a consequence, the capitalist’s share must be
correspondingly reduced. We must remember that the workman gains nothing
by the high rate of wages, for his consumption of food is limited by
nature, but this does not hinder the capitalist losing a great deal by it.

And so there must come a time when the necessary wage will have absorbed
everything and nothing will remain for profit. There will be a new era
in history, for every incentive to accumulate capital will disappear
with the extinction of profit. Capital will cease growing, no new
lands will be cultivated, and population will be brought to a sudden
standstill.[353] The stationary state with its melancholy vistas will
be entered upon. Mill has described it in such eloquent terms that we
are almost reconciled to the prospect. But it could hardly have been
a pleasant matter for Ricardo, who was primarily a financier and had
but little concern with philosophy. He was very much attached to his
prophecies, and there is a delicate piece of irony in the thought that
the tendency of profits towards a minimum should have been first noted
by this great representative of capitalism. At the same time he felt a
little reassured when he thought of the opposing forces which might check
its downward trend and arrest the progress of rent. In both instances the
best corrective seemed to lie in the freedom of foreign trade.

The general lines of distribution are presented to us in a strikingly
simple fashion. The demonstration is neater even than the famous _Tableau
économique_, and it has the further merit of being nearer the actual
facts as they appeared in Ricardo’s day, for they are no longer quite the
same. It may be represented by means of a diagram consisting of three
lines.

At the top is an ascending line representing rent—the share of Mother
Earth. The proprietor’s rent reveals a double increase both of money and
kind, for as population and its needs grow it requires an increasing
quantity of corn at an increased price. Still, the high price cannot be
indefinitely prolonged, for beyond a certain point a high price of corn
would arrest the growth of population and at the same time the growth of
rent; then it would no longer be necessary to cultivate new lands.

In the middle is a horizontal line representing wages—labour’s share.
The real wages of labour remain stationary, for it simply receives the
quantity of corn necessary to keep it alive. It is true that as the corn
is gradually becoming dearer the worker’s nominal wages increase, but
with no real benefit to him.

Below this is a descending line representing profits—capital’s
share.[354] It shows a downward trend for the simple reason that it
finds itself squeezed between the proprietor’s share, which tends to
increase, and the labourer’s, which is stationary. The capitalist is
brought to our notice in the guise of an English farmer who is obliged
to raise his servants’ wages as the corn becomes dearer, but who gains
nothing by this rise because the extra revenue is taken by the proprietor
in the form of higher rent. But profits cannot fall indefinitely, for
beyond a certain point it would involve an end to the employment of
old capital and the formation of new capital. This would hinder the
cultivation of new lands, and would arrest the high price of corn and
lower rent.


3. THE BALANCE OF TRADE THEORY AND THE QUANTITY THEORY OF MONEY

Such are the more characteristic of Ricardo’s doctrines—at any rate,
those that left the deepest impression upon his successors and caused the
greatest stir among his contemporaries. There are other doctrines besides
which, regarded as contributions to the science, are much more important
and more definite; but just because they figured almost directly in the
category of universally accepted truths whose validity and authorship
have never been questioned they have contributed less to his fame. Such
are his theories of international trade and banking, where the theorist
becomes linked to a first-rate practical genius. Here at any rate there
is no note of pessimism and no suggestion of conflicting interests. On
the contrary, he was able to point out that “under a system of perfectly
free commerce the pursuit of individual advantage is admirably connected
with the universal good of the whole.”

In the matter of international trade he showed himself a more resolute
Free Trader than either Smith or the Physiocrats. It seemed to him that
the only way of arresting the terrible progress of rent and of checking
the rising price of corn and the downward tendency of profits was by the
freest importation of foreign corn.[355]

In addition to this twofold argument in favour of Free Trade, Ricardo
brings forward another which is of considerable importance even at the
present time. This argument is based upon the advantages which accrue
from the territorial division of labour. “By stimulating industry, by
rewarding ingenuity, and by using most efficaciously the peculiar powers
bestowed by Nature, it distributes labour most effectively and most
economically.”

It may be worth while remarking that his illustrious contemporary Malthus
remained more or less of a Protectionist.[356] It might seem strange
that Malthus, continually haunted as he was by the spectre of famine,
should refuse to welcome importation. But his point of view was doubtless
largely that of the modern agricultural Protectionist, who believes that
the surest way of preserving a country from famine is not to abandon its
agriculture to the throes of foreign competition, but, on the contrary,
to strengthen and develop the home industry by securing it a sufficiently
high price for its products. We must also remember that Malthus’s
theory of rent differed somewhat from Ricardo’s, and that he was not so
violently opposed to State intervention.[357]

But Ricardo’s principal contribution to the science was his discovery of
the laws governing the movements of commodities and the counter-movements
of money from one place to another, and the admirable demonstration which
he has given us of this remarkable ebb and flow.

As soon as the balance of commerce becomes unfavourable to France,
let us say—that is, as soon as importation exceeds exportation say by
£1,000,000—money is exported to pay for this excessive importation. Money
becomes scarce, its value rises, and prices fall. But a fall in price
will check foreign importation and will encourage exportation, so that
imports will show signs of falling off while exports will grow. Money
will no longer be sent abroad, and the current will begin to run the
other way, until the £1,000,000 sent abroad is returned again. Moreover,
the £1,000,000 sent abroad will cause a movement in the opposite
direction—superabundance and a depreciation in the value of money,
high prices, a premium on importation and a check upon exportation.
Accordingly economic forces on both sides will conspire to bring back
the balance of commerce to a position of equilibrium—that is, to that
position where each country will possess just the quantity of money that
it needs.

It might be pointed out, on the other hand, that this somewhat
complicated mechanism can only operate very slowly, and that considerable
time must elapse before the prices of goods begin to respond to the
change in the quantity of money. But as a matter of fact it is not
necessary to wait until this phenomenon becomes established, for another
striking feature precedes it and announces its approach so to speak,
and this is, as Smith had already noted, a change in the value of bills
drawn on foreign countries. The foreign exchanges are so sensitive that
the slightest rise is enough to stimulate exportation and to check
importation.

Accordingly money seldom leaves a country, or only leaves it for a short
time. In other words, contrary to the generally accepted opinion, silver
and gold in international trade do little more than oil the wheels of
commerce. The trade is carried on as if the metals were non-existent. In
short, it is essentially of the nature of barter.[358]

The explanation is very schematic. Every incidental phenomenon is
omitted, and the whole theory implies the validity of the quantity theory
of money, which is now open to considerable criticism as being altogether
inadequate for an explanation of the facts involved. But this theory of
the automatic regulation of the balance of trade by means of variations
in the value of money, although already hinted at by Hume and Smith,
is none the less a discovery of the first order, and one that has done
service as a working hypothesis for a whole century.[359]

Its explanation turns upon a particular theory of international trade
which we can only mention in passing, but which we shall find more fully
developed in Stuart Mill’s theory of international values.


4. PAPER MONEY, ITS ISSUE AND REGULATION

The enunciation of the principles which should govern the conduct of
bankers in issuing paper money is another debt that we owe to the genius
of Ricardo. The Bank Act of 1822, and that of 1844 especially, which laid
down the future policy of the Bank of England, represent an attempt on
the part of the Government to put his principles into practice.

Ricardo was an eye-witness of the great panic of February 26, 1797, when
the reserves of the Bank of England fell from ten millions to a million
and a half, necessitating an Order in Council suspending cash payments.
The suspension, which was supposed to be a temporary expedient, extended
right up to 1821. The depreciation in the value of the bank-note averaged
about 10 per cent., but at one period towards the end of the Napoleonic
wars it rose as high as 30 per cent. He also witnessed the suffering
which such depreciation caused. Landlords demanded the payment of their
rents in gold, or claimed an increase in the rent equal to the fall in
the value of the note.

Ricardo tried to unravel the causes of this depreciation in his pamphlet
entitled _The High Price of Bullion_, published in 1809, and came to the
conclusion that there was only one cause, namely, an excessive supply
of paper. At this distance of time it might not be thought such an
extraordinary discovery after all. Still, he had the greatest difficulty
in getting people to admit this, and in refuting the absurd explanations
which had previously been suggested. He showed how a depreciation in
the value of the note necessarily resulted in the exportation of gold,
although most of his contemporaries, on the contrary, believed that the
exportation of gold was the cause of all the mischief which they sought
to check by an Act of Parliament. “The remedy which I propose for all
the evils in our currency is that the Bank should gradually decrease the
amount of their notes in circulation until they shall have rendered the
remainder of equal value with the coins which they represent, or in other
words till the prices of gold and silver bullion shall be brought down to
their Mint price.”[360]

But if that is the case why not cut the Gordian knot and suppress paper
money altogether? The reply shows how well Ricardo had studied Smith:
“A well-regulated paper currency is so great an improvement in commerce
that I should greatly regret if prejudice should induce us to return
to a system of less utility.” “The introduction of the precious metals
for the purposes of money may with truth be considered as one of the
most important steps towards the improvement of commerce and the arts
of civilised life; but it is no less true that with the advancement of
knowledge and science we discover that it would be another improvement
to banish them again from the employment to which, during a less
enlightened period, they had been so advantageously applied.”[361]

Proceeding, he points out that where you have only metallic money it
might happen that the production of gold fails to keep pace with the
growth of population, in which case you have a rise in the value of
gold accompanied by a fall in prices. This danger might be obviated by
a careful issue of notes in accordance with the demands of society. In
short, Ricardo is so little disposed to abandon the system of paper
money and to return to the previous system of metallic money that, on
the contrary, he would prefer to abolish the metallic system altogether,
taking good care that paper money did not become superabundant.

So convinced was he of the superiority of paper money that he had no
desire to see the Bank resume cash payment. The result of the resumption
would be a demand on the part of the public for a conversion of their
paper money, “and thus, to indulge a mere caprice, a most expensive
medium would be substituted for one of little value.”

But if the notes are not convertible into cash, what is there
to guarantee their value or to regulate their issue and prevent
depreciation? This can be done merely by keeping a reserve of gold at the
bank, not necessarily in the form of money, but in the form of ingots.
The bank would not be allowed to issue any notes beyond the value of
these ingots. This regulation would have the effect of keeping the value
of the note at par, for bankers and money-dealers would immediately
proceed to convert these notes into gold as soon as they showed any signs
of depreciation. This would not mean, however, that the public at large
would again return to the use of metallic money, for these ingots would
be of little use for purposes of everyday life.

It is a curious system. One would hardly expect the great champion of
Liberal political economy to outline a banking system which could only
operate through a State bank. This was clearly his opinion, however.
He declared himself utterly opposed to the free banking system, and
doubted the ability of such a system to regulate the currency. “In that
sense there can be no excess whilst the bank does not pay in specie,
because the commerce of the country can easily employ and absorb any sum
which the bank may send into circulation.”[362] This shows what little
confidence a Liberal individualist like Ricardo had in the liberty of
individuals and their ability to judge of the kind of money that is most
serviceable.

       *       *       *       *       *

Ricardo’s disciples are legion, and among them is every economist
of standing of the earlier part of the nineteenth century. The best
known among these are the three writers who immediately follow
him in chronological order: James Mill, the father of John Stuart
Mill (_Elements of Political Economy_, 1821), his friend McCulloch
(_Principles of Political Economy_, 1825), and Nassau Senior (_Political
Economy_, 1836).

The two first-named writers contented themselves with a vigorous defence
of the master’s views without contributing anything very new. We have
already referred to the very different conclusions which James Mill
draws from the theory of rent, and how he became an advocate of land
nationalisation. McCulloch also was one of the earliest advocates of the
right to strike.

Senior deserves a few pages to himself, for his work in systematising the
Classical doctrines. We shall deal with him in our chapter on John Stuart
Mill.




BOOK II: THE ANTAGONISTS


With the completion of the work of Say, Malthus, and Ricardo it really
seemed as if the science of political economy was at last definitely
constituted.

It would, of course, be extravagant to imagine that these three writers
were unanimous on all questions. There were several points that still
remained obscure, and more than one theory that was open to discussion.
Despite its apparent rigidity, it would not have required much critical
ability to detect flaws in the symmetrical doctrine so recently
elaborated and to predict its ultimate discredit.

Hardly, indeed, was their task completed before the new doctrine found
itself subjected to a most formidable attack, which was simultaneously
directed against it from all points of the compass. The criticisms and
objections advanced against the new science of political economy form the
subject-matter of this second book.

First comes Sismondi, a purely critical mind, with a haunting catalogue
of the sufferings and miseries resulting from free competition. Spirits
still more daring will essay the discovery of new principles of social
organisation. The Saint-Simonians will demand the suppression of private
property, the extinction of inheritance, and the centralised control
of industry by the arm of an omniscient government. The voluntary
socialists—Owen, Fourier, Louis Blanc—will claim the substitution of
voluntary co-operation for personal interest. Proudhon will dream of the
reconciliation of liberty and justice in a perfect system of exchange
from which money shall be excluded. Finally, the broad cosmopolitanism
of the Classical writers is to find a formidable antagonist in Friedrich
List, and a new Protectionism, based on the sentiment of nationality, is
to regild the old Mercantilism which seemed so hopelessly battered under
the blows of Adam Smith and the Physiocrats.

These very diverse doctrines, along with much that is fanciful and
erroneous, contain many just ideas, many original conceptions. They
never succeeded in supplanting the doctrine of the founders; but they
demonstrated, once for all, that the science, apparently complete, was in
reality far from perfection. To the Orthodox school they flung the taunt
which Hamlet cast at Horatius: “There are more things in heaven and earth
than are dreamt of in your philosophy.” In this way fruitful discussions
were frequently raised, and the public proved sympathetic listeners. The
economists who were still faithful to the Classical creed began to doubt
the validity of their deductions and were forced to modify their methods
and to overhaul their conclusions.

Let us now attempt to realise the importance of the part which these
critics played.




CHAPTER I: SISMONDI AND THE ORIGINS OF THE CRITICAL SCHOOL


The first thirty years of the nineteenth century witnessed profound
transformations in the structure of the economic world.

Economic Liberalism had everywhere become triumphant. In France the
corporation era was definitely at an end by 1791. Some manufacturers,
it is true, demanded its re-establishment under the First Empire; but
they were disappointed, and their demands were never re-echoed. In
England the last trace of the Statute of Apprentices, that shattered
monument of the Parliamentary _régime_, was removed from the Statute
Book in 1814. Nothing remained which could possibly check the advent of
_laissez-faire_. Free competition became universal. The State renounced
all rights of interference either with the organisation of production
or with the relations between masters and men, save always the right of
prohibiting combinations in restraint of trade, and this restriction
was upheld with a view to giving free play to the law of demand and
supply. In France the Penal Code of the Empire proved as tyrannous as
the old _régime_ or the Revolution; and although freedom of combination
was granted in England by an Act of 1825, the defined limits were so
narrow that the privilege proved quite illusory. The general opinion of
the English legislator is well expressed in the report of a Commission
appointed by the House of Commons in 1810, quoted by Mr. and Mrs.
Webb.[363] “No interference of the legislature with the freedom of trade,
or with the perfect liberty of every individual to dispose of his time
and of his labour in the way and on the terms which he may judge most
conducive to his own interest, can take place without violating general
principles of the first importance to the prosperity and happiness of the
community.” In both countries—in England as well as in France—a _régime_
of individual contract was introduced into industry, and no legal
intervention was allowed to limit this liberty—a liberty, however, which
really existed only on the side of the employers.

Under this _régime_ the new manufacturing industry, born of many
inventions, was wonderfully developed. In Great Britain Manchester,
Birmingham, and Glasgow, in France Lille, Sedan, Rouen, Elbeuf, Mulhouse,
became the chosen centres of large-scale production.

Alongside of these brilliant successes we have two new phenomena
which were bound to draw the attention of observers and to invite the
reflection of the thoughtful. First we have the concentration in the
great centres of wealth of a new and miserable class—the workers; and,
secondly, we have the phenomenon of over-production.

Factory life during the earlier half of the nineteenth century has
been the subject of countless treatises, and attention has frequently
been drawn to the practice of employing children of all ages under
circumstances that were almost always unhealthy and often cruel,[364] to
the habit of prolonging the working day indefinitely, to the inadequate
wages paid, to the general ignorance and coarseness of the workers, as
well as to the deformities and vices which resulted under such unnatural
conditions. In England, medical reports, House of Commons inquiries, and
the speeches and publications of Owen aroused the indignation of the
public, and in 1819 an Act of Parliament was passed limiting the hours of
work of children in cotton factories. This, the first rudiment of factory
legislation, was to be considerably extended during the course of the
century. J. B. Say, who in 1815 was travelling in England, declared that
a worker with a family, despite efforts often of an heroic character,
could not gain more than three-quarters and sometimes only a half of what
was needed for his upkeep.[365]

In France we must wait until 1840 to find in the great work of Dr.
Villermé a complete description of the heartrending life of the
workers and the martyrdom of their children. Here, for example, we
learn that “in some establishments in Normandy the thong used for the
punishment of children in the spinner’s trade appears as an instrument
of production.”[366] Even before this, in an inquiry into the state
of the cotton industry in 1828, the Mulhouse masters expressed their
belief that the growing generation was gradually becoming enervated under
the influence of the exhaustive toil of a day of thirteen or fifteen
hours.[367] The _Bulletin_ of the Industrial Society of Mulhouse of the
same year states that in Alsace, among other places, the general working
day averaged from fifteen to sixteen hours, and sometimes extended even
to seventeen hours.[368] And all evidence goes to show that things were
equally bad, if not worse, in other industrial towns.[369]

Crises supplied phenomena no less disquieting than the sufferings of
the proletariat. In 1815 a first crisis shook the English market,
throwing a number of workmen on to the street and resulting in riots and
machine-breaking. It arose from an error of the English manufacturers,
who during the war period had been forced to accumulate the stocks which
they could not export, so that on the return of peace their supplies far
exceeded the demands of the Continent. In 1818 a new commercial panic,
followed by fresh riots, again paralysed the English market. In 1825 a
third and more serious crisis, begot probably of the extensive credit
given to the newly opened markets of South America, caused the failure of
about seventy English provincial banks, bringing much ruin in its train,
as well as a shock to several neighbouring countries. During the whole
of the nineteenth century similar phenomena have recurred with striking
regularity, involving ruin to ever-widening areas, as production on a
large scale has extended its sway. No wonder some people were driven to
inquire whether the economic system beneath all its superficial grandeur
did not conceal some lurking flaw or whether these successive shocks were
merely the ransom of industrial progress.

Poverty and economic crises were the two new facts that attracted
immediate attention in those countries where economic liberty had secured
its earliest triumphs; and no longer could attention be diverted from
them. Henceforth they were incessantly employed by writers of the most
various schools as weapons against the new _régime_. In many minds they
gradually engendered a want of confidence in the doctrines of Adam
Smith. With some philanthropic and Christian writers they provoked
sentimental indignation and aroused the vehement protest of humanity
against an implacable industrialism which was the source of so much
misery and ruin. With others, especially with the socialists, who
pushed criticism to much greater lengths, even to an examination of the
institution of private property itself, they resulted in a demand for the
complete overthrow of society. All critics whatsoever rejected the idea
of a spontaneous harmony between private and public interests as being
incompatible with the circumstances which we have just mentioned.

Among such writers no one has upheld the testimony of these facts more
strongly than Sismondi.[370] All his interest in political economy, so
far as theory was concerned, was summed up in the explanation of crises,
so far as practice, in the amelioration of the condition of the workers.
No one has sought the explanation or striven for the remedy with greater
sincerity. He is thus the chief of a line of economists whose works never
ceased to exercise influence throughout the whole of the nineteenth
century, and who, without being socialists on the one hand or totally
blind to the vices of _laissez-faire_ on the other, sought that happy
mean which permits of the correction of the abuses of liberty while
retaining the principle. The first to give sentiment a prominent place in
his theory, his work aroused considerable enthusiasm at the time, but was
subjected to much criticism at a later period.


I: THE AIM AND METHOD OF POLITICAL ECONOMY

Sismondi began his career as an ardent supporter of economic Liberalism.
In 1803, the year that witnessed the production of Say’s treatise, he
published an exposition of the ideas of Adam Smith in a book entitled
_La Richesse commerciale_, a volume which achieved a certain measure
of success. During the following years he devoted himself to work
exclusively historical, literary, or political, and he only returned to
the study of political economy in 1818. “At this period,” he writes,
“I was keenly interested in the commercial crises which Europe had
experienced during the past years, and in the cruel sufferings of the
factory hands, which I myself had witnessed in Italy, Switzerland, and
France; and which, according to public reports, were at least equally
bad in England, Belgium, and Germany.”[371] It was at this moment that
he was asked to write an article on political economy for the _Edinburgh
Encyclopædia_. Upon a re-examination of his ideas in the light of
these new facts he found to his surprise that his conclusions differed
entirely from those of Adam Smith. In 1819 he travelled in England, “that
wonderful country, which seems to have undergone a great experience in
order to teach the rest of the world.”[372] This seemed to confirm his
first impressions. He took the article which he had contributed to the
_Encyclopædia_ and developed it. From this work sprang the treatise which
appeared in 1819 under the significant title of _Nouveaux Principes
d’Économie politique_ and made him celebrated as an economist. His path
was already clear. His want of agreement with the predominant school
in France and England was further emphasised by the appearance of his
studies in economics,[373] in which he illustrates and confirms the ideas
already expounded in the _Nouveaux Principes_ by means of a great number
of descriptive and historical studies bearing more especially upon the
condition of the agriculturists in England, Scotland, Ireland, and Italy.

Sismondi’s disagreement was not upon the theoretical principles of
political economy. So far as these were concerned he declared himself a
disciple of Adam Smith.[374] He merely disagreed with the method, the
aim, and the practical conclusions of the Classical school. We will
examine his arguments on each of these points.

First of all as regards method. He draws an important distinction
between Smith and his followers, Ricardo and J. B. Say. “Smith,” says
he, “attempted to study every fact in the light of its own social
environment,” and “his immortal work is, indeed, the outcome of a
philosophic study of the history of mankind.”[375] Towards Ricardo, who
is accused of having introduced the abstract method into the science,
his attitude is quite different, and much as he admired Malthus, who,
“possessed of a singularly forceful and penetrative mind, had cultivated
the habit of a conscientious study of facts,”[376] still his spirit
shrank from admitting those abstractions which Ricardo and his disciples
demanded from him.[377] Political economy, he thought, was best treated
as a “moral science where all facts are interwoven and where a false
step is taken whenever one single fact is isolated and attention is
concentrated upon it alone.”[378] The science was to be based on
experience, upon history and observation. Human conditions were to be
studied in detail. Allowance was to be made for the period in which a man
lived, the country he inhabited, and the profession he followed, if the
individual was to be clearly visualised and the influence of economic
institutions upon him successfully traced. “I am convinced,” says he,
“that serious mistakes have ensued from the too frequent generalisations
which have been made in social science.”[379]

This criticism was levelled not only at Ricardo and McCulloch, but it
also included J. B. Say within its purview, for Say had treated political
economy as an exposition of a few general principles. It also prepared
the way for that conception of political economy upon the discovery of
which the German Historical school so prided itself at a later date.
Sismondi, himself an historian and a publicist interested in immediate
reforms, could not fail to see quite clearly the effects that social
institutions and political organisation were bound to have upon economic
prosperity. A good illustration of his method is furnished by his
treatment of the probable effects of a complete abolition of the English
Corn Laws. The question, he remarks, could not be decided by theoretical
arguments alone without taking some account of the various methods of
cultivating the soil. A country of tenant farmers such as England would
find it difficult to meet the competition of feudal countries such as
Poland or Russia, where corn only costs the proprietor “a few hundred
lashes judiciously bestowed upon the peasants.”[380]

Sismondi’s conception of economic method is incontestably just so long as
the economist confines himself to the discussion of practical problems
or attempts to gauge the probable effects of a particular legislative
reform or is unravelling the causes of a particular event. But should the
economist wish to picture to himself the general aspect of the economic
world, he cannot afford to neglect the abstract method, and Sismondi
himself was forced to have recourse to it. It is true that he used it
with considerable awkwardness, and his failure to construct or to discuss
abstract theories perhaps explains his preference for the other method.
At any rate it does partly explain the keen opposition which his book
aroused among the partisans of what he was the first to call by the happy
title of the “Orthodox” school.

But to imagine anything more confused than the reasonings by which
he attempts to demonstrate the possibility of a general crisis of
over-production is difficult.[381] For his point of departure he takes
the distinction between the annual revenue and the annual production of a
country. According to him the revenue of one year pays for the production
of the following.[382] Accordingly, if the production of any one year
exceeds the revenue of the previous year a portion of the produce will
remain unsold and producers will be ruined. Sismondi reasons as if the
nation were composed of agriculturists who buy the manufactured goods
they need with the revenue received from the sale of the present year’s
crop. Consequently if manufactured products are superabundant, the
agricultural revenue will not be enough to pay a sufficient price.

But within the argument there lurks a twofold confusion. At bottom a
nation’s annual revenue is its annual produce, and the one cannot be
less than the other. Moreover, it is not the produce of two different
years that is exchanged, but the various products of the same year, or
rather (for this subdivision of the movements of the economic world into
annual periods has no counterpart in actual life) it is the different
products created at every moment that are being continually exchanged,
thus constituting a reciprocal demand for one another. At any one moment
there may be too many or too few products of a certain kind, resulting in
a severe crisis in one or more industries. But of every product, at one
and the same time, there can never be too much. McCulloch, Ricardo, and
Say victoriously upheld this view against Sismondi.[383]

It is not only on the question of method, but still more on the
question of aim, that Sismondi finds himself in opposition to the
Classical school. To them political economy was the science of wealth,
or chrematistics, as Aristotle called it. But the real object of the
science should be man, or at least the physical well-being of man. To
consider wealth by itself and to forget man was a sure way of making a
false start.[384] This is why he gave such prominence to a theory of
distribution alongside of the theory of production, which had received
the exclusive attention of the Classical writers. The Classical school,
it is true, might have retorted that they gave first place to production
because the multiplication of products was a _sine qua non_ of all
progress in distribution. But Sismondi regarded it otherwise. Wealth
only deserves the name when it is proportionately distributed. He could
not conceive of an abstract treatment of distribution, and consequently
could not appreciate it. In his own treatment of distribution he devoted
a special section to the “poor,” who live by their labour and toil
from morn till eve in field or workshop. They form the bulk of our
population, and the changes wrought in their way of life by the invention
of machinery, the freedom of competition, and the _régime_ of private
property was what interested him most. “Political economy at its widest,”
he says, “is a theory of charity, and any theory that upon last analysis
has not the result of increasing the happiness of mankind does not belong
to the science at all.”[385]

What really interested Sismondi was not so much what is called political
economy, but what has since become known as _économie sociale_ in France
and _Sozialpolitik_ in Germany. His originality, so far as the history
of doctrines is concerned, consisted in his having originated this
study. J. B. Say scorned his definitions, so different were they from
his own. “M. de Sismondi refers to political economy as the science
charged with guarding the happiness of mankind. What he wishes to say
is that it is the science a knowledge of which ought to be possessed by
all those who are concerned with human welfare. Rulers who wish to be
worthy of their positions ought to be acquainted with the study, but the
happiness of mankind would be much jeopardised if, instead of trusting
to the intelligence and industry of the ordinary citizen, we trusted to
governments.”[386] And he adds: “The greater number of German writers, by
following the false notions spread by the Colbertian system, have come to
regard political economy as being purely a science of administration.”


II: SISMONDI’S CRITICISM OF OVER-PRODUCTION AND COMPETITION

Deceived as to the best method to follow, mistaken in its conception
of the nature of the object to be kept in view, it is not surprising
that the “Chrematistic school” should have gone astray in its practical
conclusions. The teaching of the school gave an undoubted incentive to
unlimited production, for it was loud in its praise of free competition.
It preached the doctrine of harmony of interests, and considered that the
best form of government was no government at all. These were the three
essential points to which Sismondi took exception.

First as regards its immoderate enthusiasm for production. According
to the Classical writers, the general growth of production presented
no inconvenience, thanks to that spontaneous mechanism which
immediately corrected the errors of the _entrepreneur_ if he in any way
under-estimated the necessities of demand. Falling prices warned him
against a false step and influenced him in directing his efforts towards
other ends. In a similar way rising prices proved to the producers that
supplies were insufficient and that more must be manufactured. Hence the
evils committed would always be momentary and transient.

To this Sismondi replied: If instead of reasoning in this abstract
fashion economists had considered the facts in detail, if instead of
paying attention to products they had shown some regard for man, they
would not have so light-heartedly supported the producers in their
errors. An increased supply, if supply were already insufficient to
meet a growing demand, would injure no one, but would be profitable for
all. That is true. But the restriction of an over-abundant supply when
the needs grow at a less rapid rate is not so easily accomplished. Does
anyone think that capital and labour could on the morrow, so to speak,
leave a declining industry in order to engage in another? The worker
cannot quickly leave the work he lives by, to which he has served a
long and costly apprenticeship, and wherein he is distinguished for a
professional skill that will be lost elsewhere. Rather than consent
to leave it, he will let his wages fall, he will prolong the working
day, remaining at work for fourteen hours, and will toil during those
hours that would otherwise be spent in pleasure or debauchery; so that
the produce raised by the same number of workmen will be very much
increased.[387] As for the manufacturer, he will not be less loath than
the worker to quit an industry into the management and construction
of which he has put half or even three-quarters of his fortune. Fixed
capital cannot be transferred from one use to another, for even the
manufacturer is bound by custom—a moral force whose strength is not
easily calculated.[388] Like the worker, he is tied to the industry
which he has created and from which he draws a living. Consequently
production, far from being spontaneously restrained, will remain the
same or will even perhaps tend to increase. In the end, however, he
must yield, and adaptation will take place, but only after much ruin.
“Producers will not withdraw from that industry entirely, and their
numbers will diminish only when some of the workshops have failed and
a number of workmen have died of misery.” “Let us beware,” says he in
conclusion, “of this dangerous theory of equilibrium which is supposed
to be automatically established. A certain kind of equilibrium, it is
true, is re-established in the long run, but it is only after a frightful
amount of suffering.”[389] The dictum which was to some extent true in
Sismondi’s day controls the policy of every trust and _Kartel_ of the
present day.

Nowadays production chiefly grows as the result of the multiplication
of machinery, and Sismondi’s most telling attacks were directed against
machinery. Consequently he has been regarded as a reactionary and treated
as an ignoramus, and for half a century was refused a place among the
economists.

On the question of machinery the Classical writers were unanimous.[390]
Machinery they considered to be very beneficial, furnishing commodities
at reduced rates and setting free a portion of the consumer’s revenue,
which accordingly meant an increased demand for other products and
employment for those dismissed as a result of this introduction.
Sismondi does not deny that theoretically equilibrium is in the long
run re-established. “Every new product must in the long run give rise
to some fresh consumption. But let us examine things as they really
are. Let us desist from our habit of making abstraction of time and
place. Let us take some account of the obstacles and the friction of the
social mechanism. And what do we see? The immediate effect of machinery
is to throw some of the workers out of employment, to increase the
competition of others, and so to lower the wages of all. This results in
diminished consumption and a slackening of demand. Far from being always
beneficial, machinery produces useful results only when its introduction
is preceded by an increased revenue, and consequently by the possibility
of giving new work to those displaced. No one will deny the advantage of
substituting a machine for a man, provided that man can obtain employment
elsewhere.”[391]

Neither Ricardo nor Say denies this; they affirmed that the effect of
machinery is just to create some part of this demand for labour. But
Sismondi’s argument is vitiated by the same false idea that, as we have
seen above, made him admit the possibility of general over-production—the
idea that increased production, if it is going to be useful, must always
be preceded by increased demand. He was unwilling to admit that the
growth of production itself created this demand. On the other hand, what
is true in Sismondi’s attitude—and we cannot insist too much on this—is
the protest he makes against the indifference of the Classical school in
the face of the evils of these periods of transition.

The Classical school regarded the miseries created by large-scale
production with that sang-froid which was to characterise the followers
of Marx amid the throes of the “inevitable Revolution.” Among many
similarities which may be pointed out between the writings of Marx
and the doctrines of the Classical school, this is one of the most
characteristic. The grandeur of the new _régime_ is worthy of some
sacrifice. But Sismondi was an historian. His interest lay primarily in
those periods of transition which formed the exit from one _régime_ and
the entrance into another, and which involved so much suffering for the
innocent. He was anxious to mitigate the hardships in order that the
process of transition might be eased. Nothing can be more legitimate than
a claim of this kind. J. B. Say recognised its validity to a certain
extent, and this is precisely the _rôle_ of social economics.

Sismondi makes another remark which is no less just. What disgusted him
was not merely that workmen should be driven out by machinery, but that
the workers who were retained only had a limited share of the benefits
which they procured.[392] For the Classical school it was enough that
workers and consumers should have a share in the general cheapening of
production. But Sismondi demanded more. So long as toil is as laborious
as it is to-day, is it not just that the workman should benefit by the
introduction of machinery in the way of increased leisure? In the social
system as at present existing, owing to the competition among workers as
the result of excessive population, machinery does not increase leisure,
but it rather strengthens competition, diminishes wages, provokes a more
intense effort on the part of the workman, and forces him to extend his
working day. Here again Sismondi appears correct. We cannot see why the
consumer alone should reap all the profit of improved machinery, which
never benefits the workman unless it affects articles which enter into
his consumption. There would be nothing very striking if the benefits
of progress, at least during a short time, were to be shared between
consumer and worker just as to-day they are shared between inventor,
_entrepreneur_, and society. This idea is the inspiring motive of certain
trade unions to-day, which only accept a new machine in exchange for less
work and more pay.

Sismondi’s method when applied to production and machinery leads to
conclusions very different from those of the Classics. This is also true
of his treatment of competition.

Adam Smith had written: “In general, if any branch of trade, or any
division of labour, be advantageous to the public, the freer and more
general the competition it will always be the more so.”[393] Sismondi
considered this doctrine false, and invoked two reasons of unequal value
in support of his view.

The first is a product of the inexact idea already mentioned above,
which regards any progress in production as useless unless preceded
by more intensive demand. Competition is beneficial if it excites the
_entrepreneur_ to multiply products in response to an increased demand.
In the opposite case it is bad, for if consumption be stationary, its
only effect will be to enable the more adroit _entrepreneur_ or the more
powerful capitalist to ruin his rivals by means of cheap sales, thus
attracting to himself their _clientèle_, but giving no benefit to the
public. This is the spectacle that in reality is too often presented to
us. The movements of our captains of industry are directed, not by any
concern for the presumed advantage of the public, but solely with a view
to increased profits.

Sismondi’s argument is open to the same objection as was made above.
Cheapened production dispenses with a portion of the income formerly
spent, and creates a demand for other products, thus repairing the evil
it has created. Concentration of industry gives to society the same
advantage as is afforded by machinery, and the same arguments may be used
in its defence.

But against competition Sismondi directs a still more serious argument.
Pursuit of cheapness, he remarks, has forced the _entrepreneur_ to
economise not only in the matter of stuff, but also of men. Competition
has everywhere enticed women and children to bear the burden of
production instead of adults. Certain _entrepreneurs_, in order to secure
a maximum return from human energy, have enforced day and night toil with
only a scanty wage in return. What is the use of cheapness achieved under
such circumstances? The meagre advantage enjoyed by the public is more
than counterbalanced by the loss of vigour and health experienced by the
workers. Competition impairs this most precious capital—the life-energy
of the race. He points to the workmen of Grenoble earning six or eight
sous for a day of fourteen hours, children of six and eight years working
for twelve or fourteen hours in factories “in an atmosphere loaded with
down and dust” and perishing of consumption before attaining the age of
twenty. He concludes that the creation of an unhappy and a suffering
class is too great a price to pay for an extension of national commerce,
and in an oft-quoted phrase he says, “The earnings of an _entrepreneur_
sometimes represent nothing but the spoliation of the workmen. A profit
is made not because the industry produces much more than it costs, but
because it fails to give to the workman sufficient compensation for his
toil. Such an industry is a social evil.”[394]

It is futile to deny the justice of the argument. When cheapness is only
obtained at the cost of permanent deterioration in the health of the
workers, competition evidently is a producer of evil rather than of good.
The public interest is no less concerned with the preservation of vital
wealth than it is with facilitating the production of material wealth.
Sismondi showed that competition was a double-edged sword, and in doing
so he prepared the way for those who very justly demand that the State
should place limits upon its use and prescribe rules for its employment.

We might be tempted to go farther and see in the passage just cited an
unreserved condemnation of profits even. That would involve placing
Sismondi among the socialists, and this is sometimes done, although, as
we think, wrongly.

In certain passages he doubtless expresses himself in a manner similar
to Owen, the Saint-Simonians, and Marx. Thus in his studies on political
economy we come across phrases such as the following: “We might almost
say that modern society lives at the expense of the proletariat, seeing
that it curtails the reward of his toil.”[395] And elsewhere: “Spoliation
indeed we have, for do we not find the rich robbing the poor? They draw
in their revenues from the fertile, easily cultivated fields and wallow
in their wealth, while the cultivator who created that revenue is dying
of hunger, never allowed to enjoy any of it.”[396] We might even say
that Sismondi enunciated the theory of surplus value, which was worked
out by Marx, when he makes use of the term _mieux value_.[397] But the
similarity is simply a matter of words. Sismondi, speaking of surplus
value, means to imply the value that is constantly growing or being
created every year in a progressive country, not by the effort of labour
alone, but by the joint operation of capital and labour.[398] Marx’s
idea that labour alone created value, and that consequently profit
and interest constituted a theft, is entirely foreign to Sismondi.
Sismondi, indeed, recognised that the revenues of landed proprietors
and capitalists were due to efforts which they themselves had never put
forth. He rightly distinguished between the wages of labour and the
revenues of proprietors, but to him the latter were not less legitimate
than the former, for, says he, “the beneficiaries who enjoy such revenues
without making any corresponding effort have acquired a permanent claim
to them in virtue of toil undertaken at some former period, which must
have increased the productivity of labour.”[399] When Sismondi says that
the worker is robbed he merely means to say that _sometimes_ the worker
is insufficiently paid; in other words, that he does not always receive
enough remuneration to keep him alive, and were it only for the sake of
humanity that he ought to be better paid. But he does not consider that
appropriation by proprietors or capitalists of a portion of the social
product is in itself unjust.[400] His point of view is not unlike that
adopted at a later period by the German socialists when they sought to
justify their social policy.

But although Sismondi’s criticism does not amount to socialism, he
causes considerable consternation among Liberals by the telling manner
in which he shows the falsity of the theory affirmed by the Physiocrats
and demonstrated by Smith, namely the natural identity of individual and
general interests. It is true that Smith hesitated to apply it except
to production. But Sismondi’s peculiar merit lies in the fact that he
examined its content in relation to distribution. Sismondi finds himself
forced by mere examination of the facts to dispute the very basis of
economic Liberalism. Curiously enough, he seems surprised at his own
conclusions. _A priori_ the theory of identity of interests appeared
to him true, for does it not, in fact, rest upon the two ideas, (1)
that “each knows his own interest better than an ignorant or a careless
Government ever can,” and (2) that “the sum of the interests of each
equals the interests of all”? “Both axioms are true.”[401] Why then is
the conclusion false?

Here we touch the central theme of Sismondi’s system, the point where
he leaves the purely economic ground to which the Classical writers had
stuck and approaches new territory—the question of the distribution of
property. Sismondi discovered the explanation of the contradiction which
exists between private and general interests in the unequal distribution
of property among men and the resulting unequal strength of the
contracting parties.[402]


III: THE DIVORCE OF LAND FROM LABOUR AS THE CAUSE OF PAUPERISM AND OF
CRISES

Sismondi was the first writer to give expression to the belief that
industrial society tends to separate into two absolutely distinct
classes—those who work and those who possess, or, as he often put it, the
rich and the poor. Free competition hastens this separation, causing the
disappearance of the intermediate ranks and leaving only the proletariat
and the capitalist.[403] “The intermediate classes,” says he somewhere,
“have all disappeared: the small proprietor and the peasant farmer of
the plain, the master craftsman, the small manufacturer, and the village
tradesmen, all have failed to withstand the competition of those who
control great industries. Society no longer has any room save for the
great capitalist and his hireling, and we are witnessing the frightfully
rapid growth of a hitherto unknown class—of men who have absolutely no
property.”[404] “We are living under entirely new conditions of which as
yet we have no experience. All property tends to be divorced from every
kind of toil, and therein is the sign of danger.”[405]

This law of the concentration of capital which plays such an important
_rôle_ in the Marxian system, though true of industry, seems hardly
applicable to property, for a considerable concentration of labour is
not incompatible with a fairly even distribution of property. It was
a memorable exposition that Sismondi gave of this law, showing how it
wrought its ravages in agriculture, in industry, and in commerce all at
the same time. “The tillage of the 34,250,000 acres under cultivation in
England was, in 1831, accomplished by 1,046,982 cultivators, and now it
is expected that the number may be still further reduced. Not only have
all the small farmers been reduced to the position of labourers, but
a great number of the day labourers have been forced to abandon field
work altogether. The industry of the towns has adopted the principle
of amalgamation of forces, and capital has been added to capital with
a vigour greater than that which has joined field unto field. The
manufacturer with a capital of £1000 was the first to disappear. Soon
those who worked with £10,000 were considered small—too small. They
were reduced to ruin and their places taken by larger employers. To-day
those who trade with a capital of £100,000 are considered of an average
size, and the day is not far distant when these will have to face the
competition of manufacturers with a capital of £1,000,000. The refining
mills of the Gironde dispensed with millers; the cask mills of the
Loire ruined the coopers; the building of steamboats, of diligences,
of omnibuses and railways with the aid of vast capitals have replaced
the unpretentious industries of the independent boatman, carriage- or
wagon-maker. Wealthy merchants have entered the retail trade and have
opened their immense shops in the great capitals, where, in virtue of the
improved means of transit, they are able to offer their provisions even
to consumers who live at the very extremities of the empire. They are
well on the way towards suppressing the wholesale trader as well as the
retail dealer, and the petty shopkeeper of the provinces. The places of
these independent tradesmen will soon be taken over by clerks, hirelings,
and proletarians.”[406]

And now for the consequences of such a condition of things. In this
opposition existing between these two social classes which formerly lived
together harmoniously we shall find an explanation of the workman’s
misery and of economic crises.

The sufferings of workmen, whence do they spring, if not from the fact
that their numbers are in excess of the demand for their labour, thus
forcing them to be content with the first wage that is offered them, even
though it be opposed to their own interests and the interest of the whole
class?[407] But “whence the necessity of submitting to these onerous
conditions and of tolerating a burden that is ever becoming heavier under
pain of hunger and death?” The explanation lies in the separation of
property and toil.[408] Formerly the workman, an independent artisan,
could gauge his revenue and limit his family accordingly, for population
is always determined by revenue.[409] Robbed of his belongings, all his
revenue is to-day got from the capitalist who employs him. Ignorant
of the future demand for his products, as well as of the quantity of
labour that may be necessary, he has no longer any excuse for exercising
forethought, and accordingly he discards it. Population grows or
diminishes in accordance with the will of the capitalist. “Let there
be an increased demand for labour and a sufficient wage offered it and
workmen will be born. If the demand fails, the workmen will perish.”[410]

This theory of population and wages is really Smith’s, who tried to prove
that men, like commodities, extended or limited their numbers according
to the needs of production. Sismondi, rather than accept it as a proof of
the harmonious adaptation of demand to supply, emphasises the lamentable
effects of the separation of wealth from labour.[411] Smith and Sismondi
both fell into the error of Malthus and Ricardo, who imagined that high
wages of necessity increased population. To-day facts seem to show that
a higher standard of well-being, on the contrary, tends to limit it,
and the proletarians, who constitute the majority of the nation, can no
longer be treated as mere tools in the hands of the capitalists, to be
taken up or thrown aside according to fancy or interest.

What is true of industrial employees is no less true of the toilers
of the field. In this connection Sismondi introduces the celebrated
distinction between net and gross production which has occupied the
attention of many economists since then. If the peasants collectively
owned all the land they would at least of a certainty find both the
security and the support of their life in the soil. They would never let
the gross produce fall below what was sufficient to support them.[412]
But with great landed proprietors, and with the peasant transformed into
the agricultural labourer, things have changed. The large proprietors
have the net product only in view—that is, the difference between the
cost of production and the sale price. It matters little to them if the
gross produce is sacrificed for the sake of increasing the net produce.
Here you have land which, when well cultivated, brings gross produce of
the value of 1000 shillings to the farmer and yields 100 shillings in
rent to the proprietor. But the proprietor thinks that he would gain
110 shillings if he left it fallow or let it as unprofitable pasture.
“His gardener or vinedresser is dismissed, but he gains 10 shillings
and the nation loses 890. By and by the capital employed in producing
this plentiful supply will no longer be so employed, and there will
be no profit. The workers whose former toil produced these products
will no longer be employed and no wages will be paid.”[413] Examples
are plentiful enough. A number of the great Scotch proprietors, in
order to replace the ancient system of cultivation by the open pasture
system, sent the tenants from their dwellings and drove them into the
towns or huddled them on board ships for America. In Italy a handful of
speculators called the _Mercanti di tenute_, animated by similar motives,
have hindered the repopulation and cultivation of the Roman Campagna,
“that territory formerly so very fertile that five acres were sufficient
to provide sustenance for a whole family as well as sending a recruit
to the army. To-day its scattered homesteads, its villages, the whole
population, together with the farm enclosures, the vineyards, and the
olive plantations—products that require the continual loving attention
of mankind—have all disappeared, giving place to a few flocks of sheep
tended by a few miserable shepherds.”[414] The criticism is just, but is
directed rather against the abuse of private property than against the
principle of the net product, for this principle is incident to peasant
proprietorship as well. It is inevitable wherever production for a market
takes place.[415]

It is just this opposition between proprietorship and labour that
supplies an explanation of economic crises.

Sismondi holds the view that crises are partly due to the difficulty of
acquiring exact knowledge of a market that has become very extensive,
and partly to the fact that producers are guided in their actions by the
amount of their capital rather than by the demand of the market.[416]
But above all he thinks that they are due to the unequal distribution of
revenues. The consequence of the separation of property from labour is
that the revenues of those who possess lands increase while the incomes
of the workers always remain strictly at the minimum. The natural result
is a want of harmony in the demand for products. With property uniformly
divided and with an almost general increase in the revenue there would
result a certain degree of uniformity in the growth of demand. Those
industries which supply our most essential and most general wants would
experience a regular and not an erratic expansion. But as a matter of
fact at the present time it is the revenue of the wealthy alone that
increases. Hence there is a growing demand for the more refined objects
in place of a regular demand for the ordinary things of life; a neglect
of the more fundamental industries, and a demand for the production
of luxuries. If the latter do not multiply quickly enough, then the
foreigner will be called in to satisfy the demand. What is the result
of these incessant changes? The old, neglected industries are obliged
to dismiss their workmen, while the new industries can only develop
slowly. During the interval the workmen who have suffered dismissal are
forced to reduce their consumption of ordinary goods, and permanent
under-consumption, attended by a crisis, immediately follows. “Owing
to the concentration of wealth in the hands of a few proprietors, the
home market is contracted and industry must seek other outlets for its
products in foreign markets, where even more considerable revolutions are
possible.”[417] Thus “the consumption of a millionaire master who employs
1000 men all earning but the bare necessities of life is of less value
to the nation than a hundred men each of whom is much less rich but who
employ each ten men who are much less poor.”[418]

Sismondi’s explanation of crises, though adopted by many writers since
then, is not one of the best. The difficulty of adaptation would in
all probability not disappear even if wealth were to be more equally
distributed. Moreover, what he attempts to explain is an evil that is
chronic in certain industries and not the acute periodical crises. But
the theory has the merit of attempting to explain what still remains
obscure, and what J. B. Say and Ricardo preferred to pass over in silence
or regarded as of secondary importance under pretext that in the long run
equilibrium would always be re-established.


IV: SISMONDI’S REFORM PROJECTS. HIS INFLUENCE UPON THE HISTORY OF
DOCTRINES

The principal interest of Sismondi’s book does not lie in his attempt to
give a scientific explanation of the facts that occupied his attention.
Indeed, these attempts have little that is altogether satisfactory, for
the analysis is frequently superficial, and even commonplace. His merit
rather lies in having placed in strong relief certain facts that were
consistently neglected by the dominant school of economists. Taken as
a whole, his doctrine must be regarded as pessimistic. He deliberately
shows us the reverse of the medal, of which others, even those whom we
have classed as Pessimists—Ricardo and Malthus—wished only to see the
brighter side. It is no longer possible to speak of the spontaneous
harmony of interests, or to forget the misery and suffering which lies
beneath an appearance of economic progress. Crises cannot be slipped
over and treated as transient phenomena of no great moment. No longer
is it possible to forget the important effects of an unequal division
of property and revenues, which frequently results in putting the
contracting parties in a position of fundamental inequality that annuls
freedom of bargaining. In a word, it is no longer possible to forget the
social consequences of economic transformations. And herein lies the
sphere of social politics, of which we are now going to speak.

The new point of view occupied by Sismondi enables him to see that the
free play of private interests often involves injury to the general
interest, and that the _laissez-faire_ doctrine preached by the school
of Adam Smith has no longer any _raison d’être_. On the contrary, there
is room for the intervention of society, which should set a limit to
individual action and correct its abuses. Sismondi thus becomes the first
of the interventionists.

State action, in the first place, ought to be employed in curbing
production and in putting a drag upon the too rapid multiplication of
inventions. Sismondi dreams of progress accomplished by easy stages,
injuring no one, limiting no income, and not even lowering the rate of
interest.[419] His sensitiveness made him timid, and critics smile at
his philanthropy. Even the Saint-Simonians, too sympathetic to certain
of his views, reproach him with having allowed himself to be misled by
it.[420] This state of mind was reflected by his habits in private life.
Sainte-Beuve[421] relates of him how he used to employ an old locksmith
who had become so useless and awkward that everybody had left him.
Sismondi remained faithful to the old man even to the very end, despite
his inefficiency, lest he should lose his last customer. He wished
society to treat the older industries in a similar fashion. He has been
compared to Gandalin, the sorcerer’s apprentice in the fable, who, having
unlocked the water-gate with the magic of his words, sees wave succeed
wave, and the house inundated, without ever being able to find the word
which could arrest its flow.

Governments ought to temper their “blind zeal” instead of urging on
production.[422] Addressing himself to the savants, he begs them
to desist from invention and recall the sayings of the economists,
_laissez-faire_, _laissez-passer_, by giving to the generations which
their inventions render superfluous at least time to pass away. For the
old _régime_, with its corporations and wardens, he had the sincerest
regard, while condemning them as being harmful to the best interests
of production. Still he wondered whether some lesson could not be
gleaned from them which might help us in fixing limits to the abuses of
competition.[423]

Sismondi never seems to have realised that any restriction placed
upon production with a view to alleviate suffering might hinder the
progress and well-being of the very classes that interested him most.
The conviction that the production of Europe was enough to satisfy all
demands supported these erroneous views.[424] Sismondi never suspected
the relative poverty of industrial society, a fact that struck J. B.
Say very forcibly. Moreover, he felt that on this point the policy of
Governments was not so easily modified, a feeling that undermined his
previous confidence.

Since the causes of the evils at present existing in society are (1) the
absence of property, (2) the uncertainty of the earnings of the working
classes, all Government action ought to be concentrated on these points.

The first object to be aimed at, wherever possible, was the union of
labour and property, and Sismondi eulogises the movement towards a new
patriarchal state—that is, towards a revival of peasant proprietorship.
The _Nouveaux Principes_ contains a celebrated description of the
idyllic happiness of such a state. In industry he wished for a return
of the independent artisan. “I am anxious that the industries of the
town as well as country pursuits should be carried on by a great
number of independent workers instead of being controlled by a single
chief who rules over hundreds and even thousands of workers. I hope
to see manufactures in the hands of a great number of capitalists of
average means, and not under the thumb of one single individual who
constitutes himself master over millions. I long to see the chance—nay,
even the certainty—of being associated with the master extended to
every industrious workman, so that when he gets married he may feel
that he has a stake in the industry instead of dragging on through the
declining years of life, as he too often does, without any prospect of
advancement.”[425] This for an end.

But the means? On this point Sismondi shows extraordinary timidity.
Appeal to the legislator is not followed up by a plan of campaign, and
in moments of scepticism and despair he even doubts whether reform is
ever possible. He declares himself an opponent of communism. He rejects
the Utopias of Owen, of Thompson, and of Fourier, although he recognises
that their aim was his also. He failed to perceive that his “breaking
up” process was quite as illusory as the communistic Utopias which he
shunned. He rejected Owen’s system because he saw the folly of attempting
to substitute the interest of a corporation for that of the individual.
But he never realised that it had nothing to do with a corporation, and
it is possible that were he alive at the present time he would be an
ardent champion of co-operation.

But until the union of property and labour is realised Sismondi is
content with a demand for a simpler reform, which might alleviate
the more pressing sufferings of the working classes. First of all he
appeals for the restoration, or rather the granting, of the right
of combination.[426] Then follows a limitation of child labour, the
abolition of Sunday toil, and a shortening of the hours of labour.[427]
He also demanded the establishment of what he called a “professional
guarantee,” whereby the employer, whether agriculturist or capitalist,
would be obliged to maintain the workman at his own expense during
a period of illness or of lock-out or old age. This principle once
admitted, the employers would no longer have any interest in reducing
the wages of the workman indefinitely, or in introducing machinery or in
multiplying production unduly. Having become responsible for the fate
of the workers, they would then take some account of the effect which
invention might have on their well-being, whereas to-day they simply
regard them from the point of view of their own profits.[428] One might
be tempted to regard this as an anticipation of the great ideal which has
to a certain extent been realised by the social insurance Acts passed
during the last thirty years. But this is only partly so. Sismondi placed
the charge of maintenance upon the master and not upon society, and his
criticism of methods of relief, especially of the English Poor Law, was
that they tended to decrease wages and to encourage the indifference of
masters by teaching the workers to seek refuge at the hands of the State
rather than at the hands of the masters.

In short, his reform projects, like his criticism of the economists,
reveal a certain degree of hesitation, due, no doubt, to the perpetual
conflict between reason and sentiment. Too keen not to see the benefits
of the new industrial _régime_, and too sensitive not to be moved by some
of its more painful consequences, too conservative and too wise to hope
for a general overthrow of society, he is content to remain an astonished
but grieved spectator of the helplessness of mankind in the face of this
evil. He did not feel himself competent to suggest a remedy. He himself
has confessed to this in touching terms:

“I grant that, having indicated what in my opinion is the principle of
justice in this matter, I do not feel myself equal to the task of showing
how it can be realised. The present method of distributing the fruits of
industry among those who have co-operated in its production appears to
me to be curious. But a state of society absolutely different from that
with which we are now acquainted appears to be beyond the wit of man to
devise.”[429]

       *       *       *       *       *

It is a striking fact that most of the important movements in the
nineteenth century can be traced back to Sismondi’s writings. He was the
first critic whom the Classical school encountered in its march, and
he treats us to a full _résumé_ of its many heresies. In the bitter
struggle which ensued the heretics won the day, their nostrums taking
the place of the Classical doctrines in the public favour. But it seems
hardly possible that Sismondi’s work should have determined the course of
these newer tendencies. His immediate influence was extremely limited.
It scarcely told at all except upon the socialists. His book was soon
forgotten, and not until our own day was its importance fully realised.
It would be truer to say that in the course of the nineteenth century
there was a spontaneous revival of interest in the ideas promulgated
by Sismondi. None the less he was the first writer to raise his voice
against certain principles which were rapidly crystallising into dogmas.
He was the earliest economist who dared resist the conclusions of the
dominant school, and to point to the existence of facts which refused
to tally with the large and simple generalisations of his predecessors.
If not the founder of the new schools that were about to appear,
he was their precursor. They are inspired by the same feelings and
welcome the same ideas. His method is an anticipation of that of the
Historical school. His definition of political economy as a philosophy
of history[430] works wonders in the hands of Roscher, Knies, and
Hildebrand. His plea for a closer observation of facts, his criticism of
the deductive process and its hasty generalisations, will find an echo in
the writings of Le Play in France, of Schmoller in Germany, and of Cliffe
Leslie and Toynbee in England. The founders of the German Historical
school, in their ignorance of foreign writers, regarded him as a
socialist,[431] but the younger representatives of that school have done
full justice to his memory, and recognise him as one of their earliest
representatives.

By his appeal to sentiment and his sympathy for the working classes, by
his criticism of the industrial _régime_ of machines and competition, by
his refusal to recognise personal interest as the only economic motive,
he foreshadows the violent reaction of humanitarianism against the stern
implacability of economic orthodoxy. We can almost hear the eloquence of
Ruskin and Carlyle, and the pleading of the Christian Socialists, who in
the name of Christian charity and human solidarity protest against the
social consequences of production on a large scale. Like Sismondi, social
Christianity will direct its attack, not against the science itself, but
against the easy _bourgeois_ complacency of its advocates. A charge of
selfishness will be brought, not against economic science as such, but
against its representatives and the particular form of society which it
upholds.

Finally, by his plea for State intervention Sismondi inaugurated a
reaction against Liberal absolutism, a reaction that deepened in
intensity and covered a wider area as the century wore on, and which
found its final expression in State socialism, or “the socialism of the
chair.” He was the first to advocate the adoption of factory legislation
in France and to seek to give the Government a place in directing
economic affairs. The impossibility of complete abdication on the part
of the State would, he thought, become clearer every day. But it was
little more than an aspiration with him; it never reached the stage of a
practical suggestion.

Thus in three different ways Sismondi’s proposals were destined to give
rise to three powerful currents of thought, and it is not surprising that
interest in his work should have grown with the development of the new
tendencies which he had anticipated.

His immediate influence upon contemporary economists was very slight.
Some of them allowed themselves to be influenced by his warmheartedness,
his tenderness for the weak, and his pity for the workers, but they
never found this a sufficient reason for breaking off their connections
with the Classical school. Blanqui[432] in particular was a convert
to the extent that he admitted some exceptions to the principle of
_laissez-faire_. Theodore Fix and Droz[433] seemed won over for a moment,
and Sismondi might rightly have expected that the _Revue mensuelle
d’Économie politique_, started by Fix in 1833, would uphold his views.
But the days of the _Revue_ were exceedingly few, and before finally
disappearing it had become fully orthodox. Only one author, Buret, in his
work on the sufferings of the working classes in England and France,[434]
has the courage to declare himself a whole-hearted disciple of Sismondi.
The name of Villeneuve-Bargemont, author of _Économie politique
chrétienne_, must be added to these. His work, which was published in
three volumes in 1834, bears frequent traces of Sismondi’s influence.

Sismondi, though not himself a socialist, has been much read and
carefully studied by socialists. It is among them that his influence is
most marked. This is not very surprising, for all the critical portion
of his work is really a vigorous appeal against competition and the
inequalities of fortune. Louis Blanc read him and borrowed from him
more than one argument against competition. The two German socialists
Rodbertus and Marx are still more deeply indebted to him. Rodbertus
borrowed from him his theory of crises, and owes him the suggestion
that social progress benefits only the wealthier classes. Rodbertus
quotes him without any mention of his name, but Marx in his _Manifesto_
has rendered him full justice, pointing out all that he owed to his
penetrative analysis. The most fertile idea borrowed by Marx was that
which deals with the concentration of wealth in the hands of a few
powerful capitalists, which results in the increasing dependence of the
working classes. This conception is the pivot of the _Manifesto_, and
forms a part of the very foundation of Marxian collectivism. The other
idea of exploitation does not seem to have been borrowed from Sismondi,
although he might have discovered a trace of the surplus value theory in
his writings. Marx endeavours to explain profit by drawing a distinction
between a worker selling his labour and parting with some of his labour
force. Sismondi employs terms that are almost identical, and says that
the worker when selling his labour force is giving his life. Elsewhere he
speaks of a demand for “labour force.” Sismondi never drew any precise
conclusion from these ideas, but they may have suggested to Marx the
thesis he took such pains to establish.

Many a present-day socialist, without acknowledging the fact, perhaps
without knowing it, loves to repeat the arguments which Sismondi was the
first to employ, to stir up his indifferent contemporaries.




CHAPTER II: SAINT-SIMON, THE SAINT-SIMONIANS, AND THE BEGINNINGS OF
COLLECTIVISM


Sismondi, by supplementing the study of political economy by a study
of social economics, had already much enlarged the area traced for the
science by its founders. But while giving distribution the position of
honour in his discussion, he never dared carry his criticism as far as
an examination of that fundamental institution of modern society—private
property. Property, at least, he thought legitimate and necessary. Every
English and French economist had always treated it as a thing apart—a
fact so indisputable and inevitable that it formed the very basis of all
their speculations.

Suddenly, however, we come upon a number of writers who, while definitely
rejecting all complicity with the earlier communists and admitting
neither equality of needs nor of faculties, but tending to an agreement
with the economists in claiming the maximum of production as the one aim
of economic organisation, dare lay their hands upon the sacred ark and
attack the institution of property with whole-hearted vigour. Venturing
upon what had hitherto been holy ground, they displayed so much skill and
courage that every idea and every formula which became a commonplace of
the socialistic literature of the later nineteenth century already finds
a place in their system. Having definite ideas as to the end which they
had in view, they challenged the institution of private property because
of its effects upon the distribution and production of wealth. They
cast doubt upon the theories concerning its historical evolution, and
concluded that its abolition would help the perfection of the scientific
and industrial organisation of modern society. The problem of private
property was at last faced, and a recurrence of the discussion was
henceforth to become a feature of economic science.[435]

Not that it had hitherto been neglected. Utopian communists from Plato
and More up to Mably, Morelly, Godwin, and Babeuf, the eighteenth-century
equalitarians, all rest their case upon a criticism of property. But
hitherto the question had been treated from the point of view of ethics
rather than of economics.[436] The originality of the Saint-Simonian
treatment is that it is the direct outcome of the economic and political
revolution which shook France and the whole of Europe towards the end
of the eighteenth and the beginning of the nineteenth centuries. The
socialism of Saint-Simon is not a vague aspiration for some pristine
equality which was largely a creation of the imagination. It is rather
the naïve expression of juvenile enthusiasm in the presence of the new
industrial _régime_ begotten of mechanical invention and scientific
discovery. The modern spirit at its best is what it would fain reveal.
It sought to interpret the generous aspirations of the new _bourgeois_
class, freed through the instrumentality of the Revolution from the
tutelage of baron and priest, and to show how the reactionary policy
of the Restoration threatened its triumph. Not content, however, with
confining itself to the intellectual orbit of the _bourgeoisie_, it
sought also to define the sphere of the workers in future society and
to lay down regulations for their benefit. But its appeal was chiefly
to the more cultured classes—engineers, bankers, artists, and savants.
It was to these men—all of them members of the better classes—that the
Saint-Simonians preached collectivism and the suppression of inheritance
as the easiest way of founding a new society upon the basis of science
and industry. Hence the great stir which the new ideas caused.

Consequently Saint-Simonism appears to be a somewhat unexpected
extension of economic Liberalism rather than a tardy renewal of ancient
socialistic conceptions.

We must, in fact, distinguish between two currents in Saint-Simonism. The
one represents the doctrine preached by Saint-Simon himself, the other is
that of his disciples, the Saint-Simonians. Saint-Simon’s creed can best
be described as “industrialism” plus a slight admixture of socialism,
and it thus naturally links itself with economic Liberalism, of which
it is simply an exaggerated development. The disciples’ doctrine, on
the other hand, can only be described as collectivism. But it is a
collectivism logically deduced from two of the master’s principles which
have been extended and amplified. For a history of economic ideas it is
the theories of the disciples that matter most, perhaps. But it would be
impossible to understand these without knowing something of Saint-Simon’s
theory. We shall give an explanation of his doctrine, first attempting
to show the links which surely, though strangely enough, affiliate the
socialism of Saint-Simon with economic Liberalism.


I: SAINT-SIMON AND INDUSTRIALISM

Saint-Simon was a nobleman who led a somewhat dissolute, adventurous
life. At the early age of sixteen he took part in the American War of
Independence. The Revolution witnessed the abandonment of his claim
to nobility, but by successful speculation in national property he
was enabled to retrieve his fortune to some extent. Imprisoned as a
suspect at Sainte-Pélagie, set free on the 9th Thermidor, he attained a
certain notoriety as a man of affairs interested chiefly in travels and
amusements and as a dilettante student of the sciences. From the moment
of his release he began to regard himself as a kind of Messiah.[437]
He was profoundly impressed by what seemed to him to be the birth of a
new society at which he had himself assisted, in which the moral and
political and even physical conditions of life were suddenly torn up by
the roots, when ancient beliefs disappeared and nothing seemed ready
to take their place. He himself was to be the evangelist of the new
gospel, and with this object in view on the 4th Messidor, An. VI, he
called together the capitalists who were already associated with him
and, pointing out the great necessity for restoring public confidence,
proposed the establishment of a gigantic bank whose funds might be
employed in setting up works of public utility—a proof of the curious
way in which economic and philosophic considerations were already
linked together in his thoughts.[438] An ill-considered marriage which
was hastily broken off, however, was followed by a period of much
extravagance and great misery. By the year 1805 so reduced were his
circumstances that he was glad to avail himself of the generosity of one
of his old servants. After her death he lived partly upon the modest
pension provided him by his family and partly upon the contributions of
a few tradesmen, but he was again so miserable that in 1823 he attempted
suicide. A banker of the name of Olinde Rodrigues came to the rescue
this time and supplied him with the necessary means of support. He died
in 1825, surrounded by a number of his disciples who had watched over
the last moments of his earthly life. During all these years, haunted
as he was by the need for giving to the new century the doctrine it so
much required, he was constantly engaged in publishing brochures, new
works, or selections from his earlier publications, sometimes alone
and sometimes in collaboration with others,[439] in which the same
suggestions are always revived and the same ideas keep recurring, but in
slightly different forms.

Saint-Simon’s earlier work was an attempt to establish a scientific
synthesis which might furnish mankind with a system of positive morality
to take the place of religious dogmas. It was to be a kind of “scientific
breviary” where all phenomena could be deduced from one single idea, that
of “universal gravitation.” He himself has treated us to a full account
of this system, which is as deceptive as it is simple, and which shows us
his serious limitations as a philosopher whose ambition far outran his
knowledge. Auguste Comte, one of his disciples, attempted a similar task
in his _Cours de Philosophie positive_ and in the _Politique positive_,
so that Saint-Simon, who is usually considered the father of socialism,
finds himself also the father of positivism.

From 1814 up to his death in 1825 he partly relinquished his interest in
philosophy and devoted himself almost exclusively to the exposition of
his social and political ideas, which are the only ones that interest us
here.

His economics might be summed up as an apotheosis of industry, using the
latter word in the widest sense, much as Smith had employed the term as
synonymous with labour of all kind.

His leading ideas, contained within the compass of a few striking pages,
have since become known as “Saint-Simon’s Parable.”

“Let us suppose,” says he, “that France suddenly loses fifty of her
first-class doctors, fifty first-class chemists, fifty first-class
physiologists, fifty first-class bankers, two hundred of her best
merchants, six hundred of her foremost agriculturists, five hundred
of her most capable ironmasters, etc. [enumerating the principal
industries]. Seeing that these men are its most indispensable producers,
makers of its most important products, the minute that it loses these
the nation will degenerate into a mere soulless body and fall into a
state of despicable weakness in the eyes of rival nations, and will
remain in this subordinate position so long as the loss remains and
their places are vacant. Let us take another supposition. Imagine that
France retains all her men of genius, whether in the arts and sciences
or in the crafts and industries, but has the misfortune to lose on the
same day the king’s brother, the Duke of Angoulême, and all the other
members of the royal family; all the great officers of the Crown; all
ministers of State, whether at the head of a department or not; all
the Privy Councillors; all the masters of requests; all the marshals,
cardinals, archbishops, bishops, grand vicars and canons; all prefects
and sub-prefects; all Government employees; all the judges; and on top
of that a hundred thousand proprietors—the cream of her nobility. Such
an overwhelming catastrophe would certainly aggrieve the French, for
they are a kindly-disposed nation. But the loss of a hundred and thirty
thousand of the best-reputed individuals in the State would give rise to
sorrow of a purely sentimental kind. It would not cause the community the
least inconvenience.”[440]

In other words, the official Government is a mere façade. Its action is
wholly superficial. Society might exist without it and life would be
none the less happy. But the disappearance of the savants, industrial
leaders, bankers, and merchants would leave the community crippled. The
very sources of wealth would dry up, for their activities are really
fruitful and necessary. They are the true governors who wield real power.
Such was the parable.

According to Saint-Simon, little observation is needed to realise that
the world we live in is based upon industry, and that anything besides
industry is scarcely worth the attention of thinking people. A long
process of historical evolution, which according to Saint-Simon commenced
in the twelfth century with the enfranchisement of the communes and
culminated in the French Revolution, had prepared the way for it.[441] At
least industry is the one cardinal feature of the present day.

The political concerns of his contemporaries were regarded with some
measure of despair. The majority of them were engaged either in
defending or attacking the Charter of 1814. The Liberals were simply
deceiving themselves, examining old and meaningless formulæ such as “the
sovereignty of the people,” “liberty,” and “equality”—conceptions that
never had any meaning,[442] but were simply metaphysical creations of
the jurists,[443] and they ought to have realised that this kind of work
was perfectly useless now that the feudal _régime_ was overthrown. Men
in future will have something better to do than to defend the Charter
against the “ultras.” The parliamentary _régime_ may be very necessary,
but it is just a passing phase between the feudalism of yesterday and the
new order of to-morrow.[444] That future order is Industrialism—a social
organisation having only one end in view, the further development of
industry, the source of all wealth and prosperity.

The new _régime_ implies first of all the abolition of all class
distinction. There will be no need for either nobles, _bourgeois_, or
clergy. There will be only two categories, workers and idlers—or the
bees and the drones, as Saint-Simon puts it. Sometimes he refers to
them as the national and anti-national party. In the new society the
second class[445] is bound to disappear, for there is only room for the
first. This class includes, besides manual workers,[446] agriculturists,
artisans, manufacturers, bankers, savants, and artists.[447] Between
these persons there ought to be no difference except that which results
from their different capacities, or what Saint-Simon calls their varying
stakes in the national interest. “Industrial equality,” he writes,
“consists in each drawing from society benefits exactly proportionate to
his share in the State—that is, in proportion to his potential capacity
and the use which he makes of the means at his disposal—including, of
course, his capital.”[448] Saint-Simon evidently has no desire to rob
the capitalists of their revenues; his hostility is reserved for the
landed proprietors.

Not only must every social distinction other than that founded upon
labour and ability disappear, but government in the ordinary sense of
the term will largely become unnecessary. “National association” for
Saint-Simon merely meant “industrial enterprise.” “France was to be
turned into a factory and the nation organised on the model of a vast
workshop”; but “the task of preventing thefts and of checking other
disorders in a factory is a matter of quite secondary importance and can
be discharged by subordinates.”[449] In a similar fashion, the function
of government in industrial society must be limited to “defending workers
from the unproductive sluggard and maintaining security and freedom for
the producer.”[450]

So far Saint-Simon’s “industrialism” is scarcely distinguishable from
the “Liberalism” of Smith and his followers, especially J. B. Say’s.
Charles Comte and Dunoyer, writing in their review, _Le Censeur_, were
advancing exactly similar doctrines,[451] sometimes even using identical
terms. “Plenty of scope for talent” and _laissez-faire_ were some of
the favourite maxims of the Liberal _bourgeois_. Such also were the
aspirations of Saint-Simon.

But it is just here that the tone changes.[452]

Assuming that France has become a huge factory, the most important task
that awaits the nation is to inaugurate the new manufacturing _régime_
and to seek to combine the interests of the _entrepreneurs_ with those
of the workers on the one hand and of the consumers on the other. There
is thus just enough room for government—of a kind. What is required is
the organising of forces rather than the governing of men.[453] Politics
need not disappear altogether, but “must be transformed into a positive
science of productive organisation.”[454] “Under the old system the
tendency was to increase the power of government by establishing the
ascendancy of the higher classes over the lower. Under the new system the
aim must be to combine all the forces of society in such a fashion as to
secure the successful execution of all those works which tend to improve
the lot of its members either morally or physically.”[455]

Such will be the task of the new government, where capacity will replace
power and direction will take the place of command.[456] Applying itself
to the execution of those tasks upon which there is complete unanimity,
most of them requiring some degree of deliberation and yet promptness
of action, it will gradually transform the character of politics by
concentrating attention upon matters affecting life or well-being—the
only things it need ever concern itself with.[457]

In order to make his meaning clearer, Saint-Simon proposes to confine
the executive power to a Chamber of Deputies recruited from the
representatives of commerce, industry, manufacture, and agriculture.
These would be charged with the final acceptance or refusal of the
legislative proposals submitted to them by the other two Chambers,
composed exclusively of savants, artists, and engineers. The sole concern
of all legislation would, of course, be the development of the country’s
material wealth.[458]

An economic rather than a political form of government, administering
things instead of governing men, with a society modelled on the workshop
and a nation transformed into a productive association having as its
one object “the increase of positive utility by means of peaceful
industry”[459]—such are the ruling conceptions which distinguish
Saint-Simon from the Liberals and serve to bring him into the ranks of
the socialists. His central idea will be enthusiastically welcomed by
the Marxian collectivists, and Engels speaks of it as the most important
doctrine which its author ever propounded.[460] Proudhon accepts it, and
as a practical ideal proposes the absorption of government and its total
extinction in economic organisation. The same idea occurs in Menger’s
_Neue Staatslehre_,[461] and in Sorel’s writings, where he speaks of
“reorganising society on the model of a factory.”[462]

It is this novel conception of government that most clearly distinguishes
Saint-Simon’s industrialism from economic Liberalism.[463]

But, despite the fact that he gave to socialism one of its most fruitful
conceptions, we hardly know whether to class Saint-Simon as a socialist
or not, especially if we consider that the essence of socialism consists
in the abolition of private property. It is true that in one celebrated
passage he speaks of the transformation of private property.[464] But it
is quite an isolated exception. Capital as well as labour, he thought,
were entitled to remuneration. The one as well as the other involved some
social outlay. He would probably have been quite content with a purely
governmental reform.

It would not be difficult, however, to take the ideal of industrialism as
outlined by Saint-Simon as the basis of a demand for a much more radical
reform and a much more violent attack upon society. Such was the task
which the Saint-Simonians took upon themselves, and our task now is to
show how collectivism was gradually evolved out of industrialism.


II: THE SAINT-SIMONIANS AND THEIR CRITICISM OF PRIVATE PROPERTY

Saint-Simon’s works were scarcely ever read. His influence was
essentially personal, and the task of spreading a knowledge of his ideas
devolved upon a number of talented disciples whom he had succeeded in
gathering round him. Augustin Thierry, who was his secretary from 1814 to
1817, became his adopted son. Auguste Comte, who occupied a similar post,
was a collaborator in all his publications between 1817 and 1824. Olinde
Rodrigues and his brother Eugène were both among his earliest disciples.
Enfantin, an old student of the Polytechnic, and Bazard, an old Carbonaro
who had grown weary of political experiments, were also of the number.
Soon after the death of Saint-Simon his following founded a journal
called _Le Producteur_ with a view to popularising his ideas. Most of the
articles on economics were contributed by Enfantin. The paper lasted only
for one year, although the number of converts to the new doctrine was
rapidly increasing. All of them were persuaded that Saint-Simon’s ideas
furnished the basis of a really modern faith which would at once supplant
both decadent Catholicism and political Liberalism, the latter of which,
in their opinion, was a purely negative doctrine.

In order to strengthen the intellectual ties which already united them,
this band of enthusiasts set up among themselves a sort of hierarchy
having at its summit a kind of college or institution composed of the
more representative members of the group, upon whom the title “fathers”
was bestowed. The next lower grade was composed of “sons,” who were to
regard one another as “brothers.” It was in 1828, under the influence
of Eugène Rodrigues, that the Saint-Simonians assumed this character of
an organised sect. About the same time Bazard, one of their number, was
giving an exposition of the creed in a series of popular lectures. These
lectures, delivered during the years 1828-30, and listened to by many men
who were afterwards to play an important part in the history of France,
such as Ferdinand de Lesseps, A. Carrel, H. Carnot, the brothers Péreire,
and Michel Chevalier, were published in two volumes under the title
_Exposition de la Doctrine de Saint-Simon_. The second volume is more
particularly concerned with philosophy and ethics. The first includes the
social doctrine of the school, and according to Menger forms one of the
most important expositions of modern socialism.[465]

Unfortunately, under the influence of Enfantin the philosophical and
mystical element gained the upper hand and led to the downfall of the
school.

The Saint-Simonians considered that it was not enough to take modern
humanity into its confidence and reveal to it its social destiny. It must
be taught to love and desire that destiny with all the ardour of romantic
youth. For the accomplishment of this end there must exist a unity of
action and thought such as a common religious conviction alone can
confer. And so Saint-Simonism became a religion, a cult with a moral code
of its own, with meetings organised and churches founded in different
parts of the country, and with apostles ready to carry the good tidings
to distant lands. A striking phenomenon surely, and worthy the fullest
study. It was a genuine burst of religious enthusiasm among men opposed
to established religion but possessed of fine scientific culture—the
majority of whom, however, as it turned out, were better equipped for
business than for the propagation of a new gospel.

Enfantin and Bazard were to be the popes of this new Catholicism. But
Bazard soon retired and Enfantin became “supreme Father.” He withdrew,
with forty of the disciples, into a house at Ménilmontant, where they
lived a kind of conventual life from April to December 1831. Meanwhile
the other propagandists were as active as ever, the work being now
carried on in the columns of _Le Globe_, which became the property
of the school in July 1831. This strange experiment was cut short by
judicial proceedings, which resulted in a year’s imprisonment for
Enfantin, Duverger, and Michel Chevalier, all of whom were found guilty
of forming an illegal association. This was the signal for dispersion.

The last phase was the most extravagant in the whole history of the
school, and naturally it was the phase that attracted most attention. The
simple social doctrine of Saint-Simon was overwhelmed by the new religion
of the Saint-Simonians, much as the Positivist religion for a while
succeeded in eclipsing the Positive philosophy. Our concern, of course,
is chiefly with the social doctrine as expounded in the first volume of
the _Exposition_. That doctrine is sufficiently new to be regarded as an
original development and not merely as a _résumé_ of Saint-Simon’s ideas.
Both Bazard and Enfantin had some hand in it. But it is almost certain
that it was the latter who supplied the economic ideas,[466] and that to
the formation of those ideas Sismondi’s work contributed not a little.
The work is quite as remarkable for the vigorous logical presentation of
the doctrine as it is for the originality of its ideas. The oblivion into
which it has fallen is not easily explicable, especially if we compare it
with the many mediocre productions that have somehow managed to survive.
There are not wanting signs of a revived interest in the doctrines, and
for our own part we are inclined to give them a very high place among the
economic writings of the century.

The _Doctrine de Saint-Simon_ resolves itself into an elaborate criticism
of private property.

The criticism is directed from two points of view—that of distribution
and that of the production of wealth, that of justice and that of
utility. The attack is carried on from both sides at once, and most of
the arguments used during the course of the century are here hurled
indiscriminately against the institution of private property. The
doctrines of Saint-Simon contributed not a little to the success of the
campaign.

(_a_) Saint-Simon had already emphasised the impossibility of workers and
idlers coexisting in the new society. Industrialism could hold out no
promise for the second class. Ability and labour only had any claim to
remuneration. By some peculiar misconception, however, Saint-Simon had
regarded capital as involving some degree of personal sacrifice which
entitled it to special remuneration. It was here that the Saint-Simonians
intervened. Was it not perfectly obvious that private property in capital
was the worst of all privileges? The Revolution had swept away caste
distinctions and suppressed the right of primogeniture, which tended to
perpetuate inequality among members of the same family, but had failed
to touch individual property and its privilege of “laying a toll upon
the industry of others.” This right of levying a tax is the fundamental
idea in all their definitions of private property.[467] Property,
according to the generally accepted meaning of the term to-day, consists
of wealth which is not destined to be immediately consumed, but which
entitles its owner to a revenue. Within this category are included
the two agents of production, land and capital. These are primarily
instruments of production, whatever else they may be. Property-owners
and capitalists—two classes that need not be distinguished for our
present purpose—have the control of these instruments. Their function
is to distribute them among the workers. The distribution takes place
through a series of operations which give rise to the economic phenomena
of interest and rent.[468] Consequently the worker, because of this
concentration of property in the hands of a few individuals, is forced to
share the fruits of his labour. Such an obligation is nothing short of
the exploitation of one man by another,[469] an exploitation all the more
odious because the privileges are carefully preserved for one section of
the community. Thanks to the laws of inheritance, exploiter and exploited
never seem to change places.

To the retort that proprietors and capitalists are not necessarily
idle—that many of them, in fact, work hard in order to increase their
incomes—the Saint-Simonians reply that all this is beside the point.
A certain portion of the income may possibly result from personal
effort, but whatever they receive either as capitalists or proprietors
can obviously only come from the labour of others, and that clearly is
exploitation.

It is not the first time we have encountered this word “exploitation.”
We are reminded of the fact that Sismondi made use of it,[470] and the
same term will again meet us in the writings of Marx and others. None of
them, however, uses it in quite the same sense, and it might be useful to
distinguish here between the various meanings of a term which plays such
an important _rôle_ in socialist literature and which leads to so much
confusion.

Sismondi, we know, regarded interest as the legitimate income of capital,
but at the same time admitted that the worker may be exploited.

Such exploitation, he thought, took place whenever the wages were barely
sufficient to keep the wage-earner alive, although at the same time
the master might be living in luxurious ease. In other words, there is
exploitation whenever the worker gets less than a “just” wage. It is
merely a temporary defect and not an ineradicable disease of the economic
system. It certainly does occur occasionally, although there is no
reason why it ever should, and it may be removed without bringing the
whole system to ruin. Conceived of in this vague fashion, what is known
as exploitation is as difficult to define as the “just price” itself.
It appears under several aspects, and is by no means peculiar to the
master-servant relation. An individual is exploited whenever advantage is
taken of his ignorance or timidity, his weakness or isolation, to force
him to part with his goods or his services at less than the “just price”
or to pay more for the goods or services of others than they are really
worth.

The Saint-Simonians, on the other hand, considered that exploitation
was an organic defect of our social order. It is inherent in private
property, of which it is an invariable concomitant. It is not simply an
incidental abuse, but the most characteristic trait of the whole system,
for the fundamental attribute of all property is just this right to
enjoy the fruits of labour without having to undergo the irksome task
of producing. Such exploitation is not confined to manual labourers; it
applies to every one who has to pay a tribute to the proprietor. The
_entrepreneur_, in his turn, becomes a victim because of the interest
which he pays to the capitalist, who supplies him with the funds which he
needs.[471]

The _entrepreneur’s_ profit, on the other hand, is not the result of
exploitation. It represents payment for the work of direction. The master
may doubtless abuse his position and reduce the wages of the workers
excessively. The Saint-Simonians would then agree with Sismondi in
calling this exploitation. But this is not a necessity of the system.
And the Saint-Simonians look forward to a future state of society in
which exceptional capacity will always be able to enjoy exceptional
reward.[472] This is one of the most interesting elements in their theory.

Marx conceives of exploitation as an organic vice inherent in capitalism.
But with him the term has quite a different connotation from that
given it by the Saint-Simonians. Following the lead of certain English
socialists, Marx comes to the conclusion that the origin of exploitation
must be sought in the present method of exchanging wealth. Labour, in his
opinion, is the source of all value, and consequently interest and profit
must be of the nature of theft. The _entrepreneur’s_ revenue is quite as
unjust as the capitalist’s or landlord’s.[473]

This last theory, with its wholesale condemnation of income of every kind
save the worker’s wage, seems much more logical than any of the others.
But as a matter of fact it is much more open to criticism. If it can be
demonstrated that the value of products is not the mere result of manual
labour, then Marx’s idea falls to the ground. The Saint-Simonians were
never embarrassed by any theory of value. Their whole contention rests
upon the distinction between the income which is got from labour and the
revenue which is derived from capital, which every one can appreciate. It
was a distinction which had already been emphasised by Sismondi, and no
conclusion other than the illegitimacy of all revenue not derived from
labour can be drawn from the premises thus stated. Some basis other than
labour must be discovered if this revenue is ever to be justified, and a
new defence of private property must somehow be attempted.

The exigencies of production itself may supply such justification.
Private property and the special kind of revenue which is derived from
its possession justifies itself, in the opinion of a growing number of
economists, on account of the stimulus it affords to production and
the accumulation of wealth. This seems the most advantageous method of
defence, and it is one of the grounds chosen by the Physiocrats.[474]

But the Saint-Simonians from the very first set this argument aside and
attacked the institution of private property in the interests of social
utility no less than in the interest of justice. Production as well as
distribution, in their opinion, demanded its extinction.

(_b_) This brings us to the second point, which Saint-Simon did little
more than suggest, namely, whether the institution of private property
as at present existing is in the best interests of producers. The
Saint-Simonians hold that it clearly is not, so long as the present
method of distributing the instruments of production continues. At
the present moment capital is transmitted in accordance with the laws
of inheritance. Individuals chosen by the accident of birth are its
depositors, and they are charged with the most difficult of all tasks,
namely, the best utilisation of the agents of production. Social
interest demands that they should be placed in more capable hands and
distributed in those places and among those industries in which the
need for those particular instruments is most keenly felt, without any
fear of a scarcity in one place or a glut in another.[475] To-day it
is a blind chance that picks out the men destined to carry out this
infinitely difficult task. And all the efforts of the Saint-Simonians are
concentrated just on this one point—inheritance.

Their indignation is easily explained. There is certainly something
paradoxical in the fact to which they draw attention. If we accept
Smith’s view, that government “is in reality instituted for the defence
of those who have some property against those who have none at all”—a
very narrow conception of the function of government[476]—inheritance is
simply inevitable. On the other hand, if we put ourselves at the point
of view of the Saint-Simonians, who lived in an industrial society where
wealth was regarded, not as an end, but as a means, not merely as the
source of individual income, but as the instrument of social production,
it seems utterly wrong that it should be left at the disposal of the
first comer. The practice of inheritance can only be justified on the
ground that it provides a stimulus to the further accumulation of wealth,
or that in default of a truly rational system the chances of birth are
not much more open to criticism than any other.

Such scepticism was little to the taste of the Saint-Simonians. But they
were firmly convinced that all the disorders of production, whether
apparent or real, were due to the dispersion of property according to the
chances of life and death.

“Each individual devotes all his attention to his own immediate
dependents. No general view of production is ever taken. There is no
discernment and no exercise of foresight. Capital is wanting here and
excessive there. This want of a broad view of the needs of consumers and
of the resources of production is the cause of those industrial crises
whose origin has given rise to so much fruitless speculation and so many
errors which are still circulating in our midst. In this important branch
of social activity, where so much disturbance and such frequent disorder
manifests itself, we see the evil result of allowing the distribution of
the instruments of production to be in the hands of isolated individuals
who are at once ignorant of the demands of industry, of other men’s
needs, and of the means that would satisfy them. This and nothing else is
the cause of the evil.”[477]

Escape from such economic anarchy, which has been so frequently
described, can only become possible through collectivism—at least so
the Saint-Simonians thought.[478] The State is to become the sole
inheritor of all forms of wealth. Once in possession of the instruments
of production, it can distribute them in the way it thinks best for
the general interest. Government is conceived on the model of a great
central bank where all the wealth of the country will be deposited and
again distributed through its numerous branches. The uttermost ends of
the kingdom will be made fertile, and the necessaries of life will be
supplied to all who dwell therein. The best of the citizens will be put
to work at tasks that will call forth their utmost efforts, and their pay
will be as their toil. This social institution would be invested with
all the powers which are so blindly wielded by individuals at the present
moment.[479]

We need not insist too much on this project or press for further details,
which the Saint-Simonians would have some difficulty in supplying.

Who, for example, is to undertake the formidable task of judging of the
capacity of the workmen or of paying for their work? They are to be the
“generals”—the superiors who are to be set free from the trammels of
specialisation and whose instinctive feelings will naturally urge them
to think only of the general interest. The chief will be he who shows
the greatest concern about the social destiny of the community.[480] It
is not very reassuring, especially when we remember that even with the
greatest men there is occasionally a regrettable confusion of general and
private interests.

But admitting the incomparable superiority of the “generals,” what of
obeying them? Will the inferiors take kindly to submission or will they
have to be forced to it? The first alternative was the one which they
seemed to favour, for the new religion, “Saint-Simonism,” would always be
at hand to inspire devotion and to deepen the respect of the inferiors
for their betters.[481] One is tempted to ask what would become of the
heretics if ever there happened to be any.

Further criticism of this kind can serve no useful purpose, and it
applies to every collective system, differing only in matters of
detail. Whenever it is proposed to set up an elaborate plan of economic
activity, directed and controlled by some central authority, with a view
to supplanting the present system of individual initiative and social
spontaneity, we are met at the threshold with the difficulty of setting
up a new code of morality. Instead of the human heart with its many mixed
motives, its insubordination and weaknesses, in place of the human mind
with all its failings, ignorance, and error, is to be substituted a heart
and mind altogether ideal, which only serve to remind us how far removed
they are from anything we have ever known. The Saint-Simonians recognised
that a change so fundamental could only be accomplished through the
instrumentality of religion. In doing this they have shown an amount of
foresight which is rare among the critics who treat their ideas with such
disdain.

It is more important that we should insist upon another fact, namely,
that the Saint-Simonian system is the prototype of all the collectivist
schemes that were proposed in the course of the century.

The whole scheme is very carefully thought out, and rests upon that
penetrative criticism of private property which differentiates it from
other social Utopias. The only equality which the Saint-Simonians
demanded was what we call equality of opportunity—an equal chance and the
same starting-point for every one. Beyond that there is to be inequality
in the interests of social production itself. To each according to his
capacity, and to every capacity according to the work which it has
accomplished—such is the rule of the new society.[482]

An interesting _résumé_ of the Saint-Simonians’ programme, given in a
series of striking formulæ which they addressed to the President of the
Chamber of Deputies,[483] is worth quoting:

“The Saint-Simonians do not advocate community of goods, for such
community would be a manifest violation of the first moral law, which
they have always been anxious to uphold, and which demands that in
future every one shall occupy a situation becoming his capacity and be
paid according to his labour.

“In view of this law they demand the abolition of all privileges of birth
without a single exception, together with the complete extinction of the
right of inheritance, which is to-day the greatest of all privileges and
includes every other. The sole effect of this system is to leave the
distribution of social advantages to a chance few who are able to lay
some pretence to it, and to condemn the numerically superior class to
deprivation, ignorance, and misery.

“They ask that all the instruments of production, all lands and capital,
the funds now divided among individual proprietors, should be pooled
so as to form one central social fund, which shall be employed by
associations of persons hierarchically arranged so that each one’s task
shall be an expression of his capacity and his wealth a measure of his
labour.

“The Saint-Simonians are opposed to the institution of private property
simply because it inculcates habits of idleness and fosters a practice of
living upon the labour of others.”

(_c_) Critics of private property, generally speaking, are not
content with its condemnation merely from the point of view either of
distribution or production. They almost invariably employ a third method
of attack, which might be called the historical argument. The argument
generally takes the form of a demonstration of the path which the gradual
evolution of the institution of private property has hitherto followed,
coupled with an attempt to show that its further transformation along the
lines which they advocate is simply the logical outcome of that process.
The argument has not been neglected by the Saint-Simonians.

The history of this kind of demonstration is exceedingly interesting, and
the _rôle_ it has played in literature other than that of a socialist
complexion is of considerable importance. Reformers of every type,
whether the immediate objective be a transformation of private property
or not, always base their appeals upon a philosophy of history.

Marx’s system is really a philosophy of history in which communism is set
forth as the necessary consummation of all industrial evolution. Many
modern socialists, although rejecting the Marxian socialism, still appeal
to history. M. Vandervelde builds his faith upon it.[484] The authors of
that quite recent work _Socialisme en Action_ rely upon it, and so do
Mr. and Mrs. Sidney Webb and all the Fabian Socialists. Dupont-White’s
State Socialism is inspired by similar ideas, and so is the socialism
of M. Wagner. Friedrich List has a way of his own with history; and the
earliest ambition of the Historical school was to transform political
economy into a kind of philosophy of history. If we turn to the realm of
philosophy itself we find somewhat similar conceptions—the best known,
perhaps, being Comte’s theory of the three estates, which was borrowed
directly from Saint-Simon.[485]

This is not the place to discuss historical parallels. The point will
come up in a later chapter in connection with the Historical school. What
we would remark here is the good use which the Saint-Simonians made of
the argument. All the past history of property was patiently ransacked,
and the arguments of other writers who have extolled the merits of
collectivism were thus effectually forestalled.

“The general opinion seems to be,” says the _Doctrine de
Saint-Simon_,[486] “that whatever revolutions may take place in society,
this institution of private property must for ever remain sacred and
inviolable; it alone is from eternity unto eternity. In reality nothing
could be less correct. Property is a social fact which, along with other
social facts, must submit to the laws of progress. Accordingly it may be
extended, curtailed, or regulated in various ways at different times.”
This principle, once it was formulated, has never failed in winning the
allegiance of every reformer. Forty years later the Belgian economist
Laveleye, who has probably made the most thoroughly scientific study of
the question, used almost identical words in summing up his inquiry into
the principal forms of property.[487]

The Saint-Simonians feel confident that a glance at the progress of
this evolution is enough to convince anyone that it must have followed
the lines which they have indicated. The conception of property was at
first broad enough to include men within its connotation. But the right
of a master over his slaves gradually underwent a transformation which
restricted its exercise, and finally caused its disappearance altogether.
Reduced to the right of owning things, this right of possession was at
first transmissible simply according to the proprietor’s will. But the
legislature intervened long ago, and the eldest son is now the sole
inheritor. The French Revolution enforced equal distribution of property
between all children, and so spread out the benefits which the possession
of the instruments of production confers. To-day the downward trend of
the rate of interest is slowly reducing the advantages possessed by
the owners of property, and goes a long way towards securing to each
worker a growing share of his product.[488] There remains one last step
which the Saint-Simonians advocate, which would secure to all workers
an equal right to the employment of the instruments of production. This
reform would consist in making everybody a proprietor, but the State
the sole inheritor. “The law of progress as we have outlined it would
tend to establish an order of things in which the State, and not the
family, would inherit all accumulated wealth and every other form of what
economists call the funds of production.”[489]

These facts might be employed to support a conclusion of an entirely
different character. That equality of inheritance which was preserved
rather than created by the French Revolution might be taken as a proof
that modern societies are tending to multiply the number of individual
proprietors by dividing the land between an increasing number of its
citizens. But such discussion does not belong to a work of this kind. We
are entitled to say, however, that the Saint-Simonian theory is a kind
of prologue to all those doctrines that ransack the pages of history for
arguments in favour of the transformation, or even the suppression, of
private property.

Here again the Saint-Simonians have merely elaborated a view which their
master had only casually outlined. Saint-Simon, also believed that in
history we have an instrument of scientific precision equal to the best
that has yet been devised.

Saint-Simon, who owes something in this matter to Condorcet, regarded
mankind as a living being having its periods of infancy and youth, of
middle and old age, just like the individuals who compose it. Epochs of
intellectual ferment in the history of the race are exactly paralleled
by the dawning of intellectual interests in the individual, and the one
may be foretold as well as the other. “The future,” says Saint-Simon, “is
just the last term of a series the first term of which lies somewhere in
the past. When we have carefully studied the first terms of the series
it ought not to be difficult to tell what follows. Careful observation
of the past should supply the clue to the future.”[490] It was while
in pursuit of this object that Saint-Simon stumbled across the term
“industrialism” as one that seemed to him to express the end towards
which the secular march of mankind appeared to lead. From family to city,
from city to nation, from nation to international federation—such is
the sequence which helps us to visualise the final term of the series,
which will be some kind of “a universal association in which all men,
whatever other relations they may possess, will be united.”[491] In a
similar fashion the Saint-Simonians interpret the history of individual
property and predict its total abolition through a process of its gradual
extension to all individuals combined with the extinction of private
inheritance.

The doctrine of the Saint-Simonians may well be regarded as a kind of
philosophy of history.[492] Contemplation of the system fills them with
an extraordinary confidence in the realisation of their dreams, to
which they look forward not merely with confidence, but with feelings
of absolute certainty. “Our predictions have the same origins and are
based upon the same kind of foundations as are common to all scientific
discoveries.”[493] They look upon themselves as the conscious, voluntary
agents of that inevitable evolution which has been foretold and defined
by Saint-Simon.[494] This is one trait which their system has in common
with that of Marx. But there are two important differences. The Marxians
relied upon revolution consummating what evolution had begun, while the
Saint-Simonians relied upon moral persuasion.[495] The Saint-Simonians,
true children of the eighteenth century that they were, believed
that ideas and doctrines were sufficiently powerful agents of social
transformation, while the Marxians preferred to put their hope in the
material forces of production, ideas, in their opinion, being nothing
better than a pale reflection of such forces.[496]


III: THE IMPORTANCE OF SAINT-SIMONISM IN THE HISTORY OF DOCTRINES

The doctrine of the Saint-Simonians consists of a curious mixture of
realism and Utopianism. Their socialism, which makes its appeal to
the cultured classes rather than to the masses, is inspired, not by a
knowledge of working-class life, but by close observation and remarkable
intuition concerning the great economic currents of their time.

The dispersion of the school gave the leaders an opportunity of taking
an active part in the economic administration of their own country, and
we find them throwing themselves whole-heartedly into various schemes
of a financial or industrial character. In 1863 the brothers Péreire
founded a credit association which became the prototype of the financial
institutions of to-day. Enfantin took a part in the founding of the
P.L.M. Railway, which involved an amalgamation of the Paris-Lyons,
Lyons-Avignon, and Avignon-Marseilles lines. Enfantin was also the first
to float a company for the purpose of making a canal across the isthmus
of Suez. At the Collège de France Michel Chevalier defended the action of
the State in undertaking certain works of a public character. It was he
also who negotiated the treaty of 1860 with England, which was the means
of inaugurating the era of commercial liberty for France. Other examples
might be cited to show the important part which the Saint-Simonians
played in nineteenth-century economic history.[497]

More especially did they realise the enormous place which banks and
institutions of a similar nature were bound to have in modern industrial
organisation. And whatever views we may hold as to the rights of
property, we are bound to recognise how these deposit banks have already
become great reservoirs of capital from which credit is distributed in a
thousand ways throughout the whole realm of industry. Some writers, all
of them by no means of the socialist way of thinking, would reproach the
banks, especially in France, with their lack of courage in regulating
and stimulating industry, which, as the Saint-Simonians foresaw, is a
legitimate part of their duty.[498] The important part which they saw
international financiers playing in the domestic affairs of almost
every European nation during the Restoration period, coupled with their
personal knowledge of bankers, helped the Saint-Simonians in anticipating
the all-important _rôle_ which credit was to play in modern industry.

Equally remarkable was the foresight they displayed in demanding a more
rigorous control of production, and in emphasising the need for some
better method of adapting that production to meet the exigencies of
demand than is possible under a competitive system. The State obviously
has neither the ability nor the inclination to discharge such functions,
but so great are the inconveniences of competition that manufacturers are
forced to enter into agreements with one another in order to exercise
some such control. This is nothing less than a partial application of the
doctrine of Saint-Simon.

In addition to the considerable personal influence which they were
able to exercise over economic development, we have to recognise that
in their writings we have the beginnings both of the critical and of
the constructive contribution made by socialists to nineteenth-century
economics. Their doctrine is, as it were, little more than an index to
later socialist literature.

In the first place one must be struck by the number of formulæ to be
met with in their work which have since become the commonplaces of
socialism. “The exploitation of man by man” was a phrase that was
exceedingly popular up to 1848. The term “class war,” which has taken
its place since the time of Marx, expresses the same idea. They spoke of
“the organisation of labour” even before Louis Blanc, and employed the
term “instrument of labour” as a synonym for land and movable capital
long before it was so used by Marx. Although we have not considered
it necessary to group them with the Associationists, they have been
as assiduous as any in proclaiming the superior merits of producers’
associations. Moreover, they anticipated the use which the socialists
would make of the theory of rent. In a curious passage written long
before the time of Henry George they refer to the possibility of applying
the doctrines of Ricardo and Malthus to justify the devotion of the
surplus produce of good land to the general needs of society, thus
anticipating the theory of another prominent socialist thinker.[499]
Other ideas might be mentioned, though not of a specifically socialist
character. Thus the theory of profit-sharing, as far as our knowledge
goes, was first developed in an article in _Le Producteur_.[500]

The more one examines the doctrines of the Saint-Simonians the more
conscious does one become of the remarkable character of these
anticipations and of the injustice of the oblivion which has since
befallen them. Marx’s friend Engels called attention to the “genial
perspicacity of Saint-Simon, which enabled him to anticipate all the
doctrines of subsequent socialists other than those of a specifically
economic character.”[501] The specifically economic idea of which Engels
speaks and which Saint-Simon, in his opinion, did wrong to neglect was
the Marxian theory of surplus value. We are inclined to the opinion
that it was more of a merit than a fault to place socialism on its real
foundation, which must necessarily be a social one, rather than to found
it upon an erroneous theory of value.

But new formulæ are not their only contribution. Due note was taken
of that fundamental opposition which exists between economists and
socialists and which has caused all the conflicts and misunderstandings
that disfigure the history of the century and resulted in their speaking
an entirely different language. We shall try to define the nature of the
conflict, in order, if possible, to help the reader over the difficulties
that arise just where the bifurcation of economic thought takes place.

No attempt was made either by Adam Smith, Ricardo, or J. B. Say to make
clear the distinction between the science of political economy and the
fact of social organisation.[502] Property, as we have already had
occasion to remark, was a social fact that was accepted by them without
the slightest demur. The methods of dividing property and of inheriting
it, the causes that determined its rise and the consequences that
resulted from its existence, were questions that remained outside the
scope of their discussions. By division or distribution of wealth they
meant simply the distribution of the annual revenue between the various
factors of production. Their interest centres round problems concerning
the rate of interest or the rate of wages or the amount of rent. Their
theory of distribution is simply a theory concerning the price of
services. No attention was paid to individuals, the social product being
supposed to be divided between impersonal factors—land, capital, and
labour—according to certain necessary laws. For convenience of discussion
the impersonal occasionally becomes personal, as when they speak of
proprietors, capitalists, and workers, but that is not allowed to affect
the general trend of the argument.

For the Saint-Simonians, on the other hand, and for socialists in
general the problem of distribution consists especially in knowing how
property is distributed. The question is to determine why some people
have property while others have none; why the instruments of production,
land, and capital should be so unevenly distributed, and why the revenues
resulting from this distribution should be unequal. For a consideration
of the abstract factors of production the socialists are anxious to
substitute the study of actual living individuals or social classes and
the legal ties which bind them together. These differing conceptions of
distribution have given rise to two different problems, the one primarily
economic, the other social, and sufficient care has not always been taken
to distinguish between these two currents, which have managed to coexist,
much to the confusion of social thinking in the nineteenth century.

Another essential difference between their respective points of view
consists of the different manner in which economists and socialists
conceive of the opposition that exists between the general interest and
the interests of individuals.

Classical writers envisaged it as a conflict between the interests of
consumers, _i.e._ everybody, and the interests of producers, which are
more or less the interests of a particular class.

The Saint-Simonians, on the other hand—and in this matter their
distinction has met with the hearty approval of every socialist—think it
better to regard it as between workers on the one hand and idlers on the
other, or between workers and capitalists, to adopt the cramped formula
of a later period. The worker’s is the general interest; the particular
interest is that of the idler who lives at the former’s expense. “We
have on several occasions,” writes Enfantin, “pointed out some of the
errors in the classification adopted by most present-day economists.
The antithesis between producer and consumer gives a very inadequate
idea of the magnitude of the gap that lies between the various members
of society, and a better differentiation would be that which would
treat them as workers and idlers.”[503] The difference in the point of
view naturally results in an entirely different conception of social
organisation. Economists think that society ought to be organised from
the point of view of the consumer and that the general interest is fully
realised when the consumer is satisfied. Socialists, on the contrary,
believe that society should be organised from the standpoint of the
worker, and that the general interest is only fully achieved when the
workers draw their full share of the social product, which is as great as
it possibly can be.[504]

There is one last element of difference which is very important.
Classical writers made an attempt to reduce the apparent disorder of
individual action within the compass of a few scientific laws. By the
time the task was completed so struck were they with the profound harmony
which they thought they had discovered that they renounced all attempts
at amelioration. They were so satisfied with the demonstration which
they had given of the way in which a spontaneous social force, such
as competition, for example, tended to limit individual egoism and to
complete the triumph of the general interest that they never thought of
inquiring whether the action of these forces might not be rendered a
little less harmful or whether the mechanism might not with advantage be
lubricated and made to run somewhat more smoothly.

The Saint-Simonians, on the other hand—and in this matter it is necessary
to couple with theirs the name of Sismondi—are convinced of the slowness,
the awkwardness, and the cruelty with which spontaneous economic forces
often go to work. Consequently they are concerned with the possibility
of substituting a more conscious, carefully thought-out effort on the
part of society. Instead of a spontaneous reconciliation of conflicting
interests they suggest an artificial reconciliation, which they strive
with all their might to realise. Hence the innumerable attempts to set up
a new mechanism which might take the place of the spontaneous mechanism,
and the childish efforts to co-ordinate or combine economic forces.
These attempts, most of them of necessity unsuccessful, furnished the
adversaries of socialism with their best weapons of attack. All of them,
however, did not prove quite fruitless, and some of them were destined to
exercise a notable influence upon social development.

It is in the Saint-Simonian doctrine that we find these contrasts between
political economy and socialism definitely marked and in full detail.
It matters little to us to-day that the school was ridiculed or that
the eccentricities of Enfantin destroyed his propaganda work just when
Fourier was pursuing his campaign with great success. Ideas are the
things that stand out in a history of doctrines. To us, at any rate,
Saint-Simonism appears as the first and most eloquent as well as the
most penetrating expression of the sentiments and ideals that inspire
nineteenth-century socialism.[505]




CHAPTER III: THE ASSOCIATIVE SOCIALISTS


The name “Associative Socialists” is given to all those writers who
believe that voluntary association on the basis of some preconceived plan
is sufficient for the solution of all social questions. Unfortunately the
plans vary very considerably, according to the particular system chosen.

They differ from the Saint-Simonians, who sought the solution in
socialisation rather than in association,[506] and thus became the
founders of collectivism, which is quite another thing. The advocates of
socialisation always thought of “Society” with a capital S, and of all
the members of the nation as included in one collective organisation.
The term “nationalisation” much better describes what they sought.
Associationism, on the other hand, more individualistic in character and
fearing lest the individual should be merged in the mass, would have him
safeguarded by means of small autonomous groups, where federation would
be entirely voluntary, and any unity that might exist would be prompted
from within rather than imposed from without.

On the other hand, the Associationists must be carefully distinguished
from the economists of the Liberal school. Fortunately this is not
very difficult, for by means of these very associations they claim to
be able to create a new social _milieu_. They are as anxious as the
Liberals for the free exercise of individual initiative, but they believe
that under existing conditions, except in the case of a few privileged
individuals, this very initiative is being smothered. They believe that
liberty and individuality never can expand unless transplanted into a
new environment. But this new environment will not come of itself. It
must be created, just as the gardener must build a conservatory if he
is to secure a requisite environment. Each one has his own particular
recipe for this, and none of them is above thinking that his own is the
best.[507] It is this conception of an artificial society set up in the
midst of present social conditions, bound by strict limitations which to
some extent isolate it from its surroundings, that has won for the system
its name of Utopian Socialism.

Had the Associationists only declared that the social environment can
and ought to be modified, despite the so-called permanent and immutable
laws, just as man himself is capable of modification, they would have
enunciated an important truth and would have forestalled all those who
are to-day seeking a solution of the social question in syndicalism, in
co-operation, and in the garden-city ideal.

On the other hand, had they succeeded in carrying out their plans on an
extensive scale, if we may judge by the desire to evade them on the part
of those experimented on, it seems probable that the new kind of liberty
would have proved less welcome than the liberty which is enjoyed under
the present constitution of society.

They would have been very indignant, however, if anyone had charged
them with desiring to create an artificial society. On the contrary,
their claim was that the present social environment is artificial, and
that their business was not to create but merely to discover that other
environment which is already so wonderfully adapted to the true needs of
mankind in virtue of its providential, natural harmony. At bottom it is
the same idea as the “natural order” of the Physiocrats, much as their
conception differs from that of the Physiocrats—an incidental proof that
the order is anything but “natural,” seeing that it varies with those
who define it. Some of their sayings, however, might very well have been
borrowed directly from Quesnay or Mercier de la Rivière—for example, that
of Owen’s in which he speaks of the commune as God’s special agent for
bringing society into harmony with nature. It is just the “good despot”
of the Physiocrats over again. Or take Fourier’s comparison in which he
ranks himself with Newton as the discoverer of the law of “attraction of
passion,” and believes that his “stroke of genius,” as Zola calls it,
lies in knowing how to utilise the passions which God has given us to the
best advantage.

What is still more interesting is that this newer socialism marks
a veritable reaction against the principles of 1789.[508] The
Revolutionists hated every form of association, and suspected it of being
a mere survival of the old _régime_, a chain to bind the individual. Not
only was it omitted from the Declaration of the Rights of Man,[509] but
it was formally prohibited in every province—prohibitions which have
been withdrawn only quite recently. It is difficult to imagine a greater
contrast to the spirit of the Revolution than the beliefs which inspired
Owen, Fourier, and Cabet, the founders of the new order.

But the men of 1789 were not so far wrong, nor were they deceived by
their recollections of corporations and guilds, when they expressed the
belief that any form of association was really a menace to liberty.
There is an old Italian proverb which states that every man who has an
associate has also a master. The Liberal school has to a certain extent
always shared these apprehensions, and ample justification might be found
for them in the many despotic acts of associates, whether capitalists or
workmen.

But the “associative” socialists of the early part of the last century
were impressed, even more than Sismondi and Saint-Simon were, by the new
phenomenon of competition. The mortal struggle for profit among producers
and the keen competition for wages among working men which immediately
ensued upon the disappearance of the old framework of society seemed to
them to wear all the hideousness of an apocalyptic beast. With wonderful
perspicacity they predicted that such breakneck competition must
inevitably result in combination and monopoly.[510] Voluntary association
of a co-operative character (they paid hardly any attention to the
possibilities of corporative association) appeared to supply the only
means of suppressing this competition without either endangering liberty
or thwarting the legitimate ambitions of producers. And it is not very
clear as yet that they were altogether mistaken in their point of view.

The two best known representatives of this school are Robert Owen and
Charles Fourier. Although they were contemporaries—the one was born in
1771, the other in 1772[511]—it does not appear that they ever became
known to one another. Owen never seems to have paid any attention to
Fourier’s system, and Fourier never refers to “Owen’s communistic scheme”
without showing some trace of bitterness. Indeed, it is doubtful whether
he knew anything at all about it except from hearsay.[512]

Such reciprocal ignorance does little credit to their powers of
observation. Still it is easily explained. Despite a certain similarity
in their plans for social regeneration—for example, they both proceed
to create small autonomous associations, the microcosms which were to
serve as models for the society of the future, or the yeast which was
to leaven the lump—and notwithstanding that after their deaths they
were both hailed as the parents of one common offspring, co-operation,
they spent their whole lives in two very different worlds. Without any
rhetorical exaggeration and without making any invidious distinctions
we may truthfully say that Owen was a rich, successful manufacturer and
one of the greatest and most influential men of his day and country,
while Fourier was a mere employee in the realm of industry, or a
“shop-sergeant,” as he liked to call himself. Later on Fourier became
the recipient of a small annuity; but his reputation only spread slowly
and with much difficulty among a small circle of friends. Contrary to
what might have been expected, the millionaire manufacturer was the more
ardent socialist of the two. A militant communist and an anti-cleric,
he loved polemics, and advanced his views both in the Press and on the
platform. His humble rival was just a grown-up boy with the habits of an
old woman. He scarcely ever left his house except to listen to a military
band; he wrote sedulously, attempting to turn out the same number of
pages each day, and spent most of his life on the look-out for a sleeping
partner, who, unfortunately, never turned up.

Other writers of whom we shall have something to say in connection with
this school are Louis Blanc, Leroux, and Cabet.


I: ROBERT OWEN

Robert Owen of all socialists has the most strikingly original, not to
say unique, personality. One of the greatest captains of industry of his
time, where else have we such a commanding figure? Nor is his socialism
simply the philanthropy of the kind-hearted employer. It is true that
it is not revolutionary, and that he could not bring himself to support
the Chartist movement, which seems harmless enough now.[513] He never
suggested expropriation as an ideal for working men, but he exhorted
them to create new capital, and it is just here that the co-operative
programme differs from the collectivist even to this day. But for all
practical purposes Owen was a socialist, even a communist. Indeed, he was
probably the first to inscribe the word “socialism” on his banner.[514]

His passion for Utopias did not prevent him initiating a number of
reforms and establishing several institutions of a thoroughly practical
character. Special mention ought to be made of his interest in the
welfare of his workers, an inspiration that has been caught by several
manufacturers since.

Nor must we imagine, simply because we have placed him along with the
Associative socialists, that association was the only solution that met
with his approval. As a matter of fact there is scarcely a solution of
any description which was not to some extent tried by him.

Beginning with the establishment of model workshops in his factory at New
Lanark, there is hardly a suggestion incorporated in his exposition of
socialism which was not attempted and even successfully applied in the
course of his experiments there. Among them are included such important
developments as workmen’s dwellings, refectories, the appointment of
officials to look after the social and moral welfare of the workers, etc.

These experiments had the further distinction of serving as a model for
the factory legislation of the next fifty years. We have only to glance
at the following programme of reforms effected by him to realise this:

1. He reduced the hours of labour from seventeen to ten _per diem_.

2. No children under ten years of age were employed, but free education
was supplied them in schools built for the purpose.

3. All fines—then a common feature of all workshops—were abolished.[515]

Seeing that neither his experiments nor his prestige as an employer was
sufficient to influence his fellow employers, he now tried to gain the
sympathetic attention of the legislature. He turned first of all to the
British Government, and then to that of other countries, looking to
legislation to provide what he believed should have been supplied by the
goodwill of the ruling classes themselves.

Even before the days of Lord Shaftesbury he had inaugurated a campaign
in favour of limiting the hours of children working in factories. In
1819 the first Factory Act was passed, fixing the minimum age at which
children might be employed at nine years, although Owen himself would
have put it at ten.

Discouraged by the little support which he obtained for his projects,
and having satisfied himself as to the impotence both of patronage and
legislation as forces of social progress, he turned his attention to a
third possibility, namely, association. Association, he imagined, would
create that new environment without which no solution of the social
question was ever possible.


1. THE CREATION OF THE _MILIEU_

The creation of a social _milieu_ was the one impelling force that
inspired all Owen’s various experiments. This was his one desire,
whether he asked it of the masters, the State, or of the workers
themselves.

He has thus some claim to be regarded as the father of etiology—etiology
being the title given by sociologists to that part of their subject which
treats of the subordination and adaptation of man to his environment.
His theory concerning the possibility of transforming the organism by
influencing its surroundings occupies the same position in economics
as Lamarck’s theory does in biology. By nature man is neither good
nor bad. He is just what his environment has made him, and if at the
present moment he is on the whole rather bad, it is simply because his
environment is so detestable. Scarcely any stress is laid upon the
natural environment which seemed of such supreme importance to writers
like Le Play. Owen’s interest was in the social environment, the product
of education and legislation or of deliberate individual action.[516]
Change the environment and the individual would be changed. He failed
to see that this meant begging the whole question. If man is simply the
product of his environment, how can he possibly change that environment?
It is like asking a man to raise himself by the hair of his head. But
the futility of such criticism will be readily appreciated if we remind
ourselves that it is to such insignificant beginnings as these that we
owe the conception of the garden city. It was Owen’s concern for the
worker and his great desire to provide him with a home where some degree
of comfort and some measure of beauty might be obtainable that gave the
earliest impetus to that movement.

From a moral point of view this deterministic conception resulted in the
absolute denial of all individual responsibility.[517] Every noble or
ignoble deed, every act, whether deserving of praise or blame, of reward
or punishment, reflects neither credit nor discredit upon its author, for
the individual can never be other than he actually is.

There was all the more reason, then, why all religious influences,
especially that of Christianity, should be excluded. This contempt for
religion explains why Owen found so little support in English society,
which revolted against what appeared like cynical atheism, although Owen
himself was really a deist.[518]

Economically, the doctrine of payment according to work rather than
capacity was to result in absolute equality. For why should higher
intelligence, greater vigour or capacity for taking pains entitle a man
to a greater reward if it is all a question of environment? Hence Owen’s
associations were to be communal.

We need not here detail the history of his experiments in colonisation.
It is the usual story of failure and disappointed hopes. At last Owen
himself was driven to the conclusion that his attempt to mould the
environment which was to recreate society had proved unsuccessful.
He renounced all his ambitions for building up a new social order,
and contented himself with an attempt to rid society as at present
constituted of some of the more potent evils that were sapping its
strength. And this brings us to his second essential idea, the abolition
of profit.


2. THE ABOLITION OF PROFIT

The first necessity, if the environment was ever to be changed, was to
get rid of profit. There was _the_ essential evil, the original sin.
Profit was the forbidden fruit which had compassed the downfall of man
and caused his expulsion from the Garden of Eden. Its very definition
conveyed an implication of injustice, for it was always defined as
whatever was over and above cost of production. Products ought to be sold
for what they cost; the net price is the only just price. But profit
is not merely an injustice, it is a perpetual menace. Economic crises
resulting from over-production, or rather from under-consumption,[519]
may always be traced back to an unhealthy desire for profit. The
existence of profit makes it impossible for the worker to repurchase the
product of his toil, and consequently to consume the equivalent of what
he produced. Immediately it is completed the product is snatched up by a
superior body which makes it inaccessible either to the maker or to the
men who could furnish an equivalent amount of labour or who could offer
as the price of acquiring it a value equal to that labour.

The problem is to abolish this parasitism, and the first question
that suggests itself is whether the ordinary operation of competition,
assuming it were altogether free and perfect, would be sufficient to
get rid of it. The economists declare that it would, and the Hedonistic
school makes bold to affirm that under a _régime_ of perfect competition
the rate of profit would fall to zero. But Owen believed nothing of the
kind.[520] He regarded competition and profit as inseparable, and if one
was war the other was simply the spoils of conflict.

Accordingly some form of combination must be devised which will suppress
profit, together with “all that gives rise to that inordinate desire
for buying in the cheapest market and selling in the dearest.” But the
instrument of profit is gold or money. Profits are always realised in the
form of money.[521] Gold is an intermediary in every act of exchange,
and its intervention goes a long way towards explaining the anomaly of
selling a commodity for more than cost price. The objective, then, must
be money, and it must be replaced by labour notes, which will supply us
with a measure of value altogether superior to money. Seeing that labour
is the cause and substance of value, it is only natural that it should
afford us the best means of measuring value. It is quite obvious that
ample homage is paid to the Ricardian theory of value, but conclusions
both novel and unproved are drawn from it.

The producer who wishes to dispose of his produce will be given labour
notes in proportion to the number of hours which he has worked. In the
same way the consumer who wishes to buy that product will be called
upon to pay an equivalent number of labour notes, and so profit will be
eliminated.

The condemnation of money was not new, but what was original was the
discovery that labour notes could supply the place of money, a discovery
which Owen considered “more valuable than all the mines of Mexico and
Peru.” It has truly been a wonderful mine, and has been freely exploited
by almost every socialist. But it hardly squares with Owen’s communistic
ideal, which aimed at giving to each according to his needs. The labour
notes evidently imply payment according to the capacity of each. Besides,
what is the use of any system of exchange that is not to be employed for
purposes of distribution?[522]

It remained to be seen whether this elimination of money could actually
be realised in practice. An experiment to that effect was tried in London
with the establishment of the National Equitable Labour Exchange. This
was the most interesting experiment in the whole movement, although Owen
himself was not very proud of his connection with it. It took the form
of a co-operative society with a central depot where each member of the
society could deposit the product of his labour and draw the price of it
in labour notes, the price depending upon the number of hours of work the
product had cost, which the member himself was allowed to state. These
products, or goods as they were now called, marked with a figure which
indicated the number of hours they had taken to produce, were at the
disposal of any member of the Exchange who wished to buy them. All that
a member had to do was to pay the ticketed price in labour notes. And so
every worker who had taken, say, ten hours to make a pair of stockings
was certain of being able to buy any other article which had also cost
ten hours’ labour. In this fashion everyone got whatever his product
had cost him, and every trace of profit automatically disappeared. The
profit-maker, whether industrial or commercial or merely an intermediary,
was effectively removed, because producers and consumers were brought
into direct contact with one another, and so the problem was apparently
solved.[523]

The experiment, which had about the same measure of success as the
attempts to establish a communal colony in America, did not last very
long. The slightest acquaintance with the laws of value would have
convinced the reformer of the futility of his attempt. But it marks an
important departure in the history of economic doctrines as being the
first of a long line of experiments designed to solve the same problem,
but with very different methods. It is the same idea that inspires
Proudhon’s Bank and Solvay’s _Comptabilisme social_.

The particular mechanism wherewith the elimination of profit was essayed
is really of quite secondary importance. But the essential idea which
lay behind the whole attempt—namely, the abolition of profit—is at least
partly realised in that solid and useful institution which is now found
all over the world, and which was bequeathed to us by this experiment of
Owen’s—the co-operative stores. Their first appearance dates from 1832,
the year of the Bank of Exchange experiment, but it was not until ten
years later that they assumed their present form as the outcome of the
efforts of the Rochdale Pioneers.

The co-operative retail societies have as their rule either to make no
profits or to restore any profit that may accrue to their members in
proportion to the amount of their purchases at the stores. In reality
there is no profit, but simply a cancelling of insurance against risks
which has been shared in by all the members. The process of elimination
is strictly in accordance with Owen’s method of putting producer and
consumer in direct contact with one another with a view to getting rid
of the middleman. But the elimination of profit is accomplished without
eliminating money.[524] That close relation which Owen and a number of
other socialists believed to exist between money and profit is purely
imaginary. We know as a matter of fact that the highest profits are to be
got under the truck system, in the African equatorial trade, for example,
where guns are exchanged at five times their value for caoutchouc
reckoned at a third of its value, representing a profit of 1500 per cent.
The employment of money has brought such definiteness into the method of
valuation that the rate of profit per unit on a yard of cloth, say, has
become almost infinitesimal. Such exactness of calculation would have
been impossible under either the truck or the labour note system.

The co-operative association, with its system of no profits, will for
ever remain as Owen’s most remarkable work, and his fame will for ever
be linked with the growth of that movement. But he was hardly conscious
of the important part which he was playing in the inauguration of the
new movement. It is seldom that we meet with the word “co-operation” in
his writings, although that is not a matter of any great consequence,
because the term at that time had not the significance which it has
to-day, being then simply synonymous with communism. Not only was Owen
unwilling to assume any parental responsibility for the co-operative
society, his latest offspring, but he expressly refused to consider it
as at all representative of his system. Shops of that description seemed
to him little better than philanthropic institutions, quite unworthy of
his great ideal.[525] Before passing judgment upon him it is only fair to
remember that since those early days the character of the co-operative
stores has been completely changed. He lived to see the establishment of
the Rochdale society, with its twenty-eight pioneers, six of whom were
ardent disciples of Owen himself, and two of these, Charles Howarth and
William Cooper, were the very soul of that immortal association. But Owen
was by this time seventy-three years of age, and he scarcely realised
that a child had been born to him. This somewhat late arrival was to
perpetuate his name, and more than any of his other schemes was to save
it from oblivion.

Owen had founded no school, unless of course we consider that the
co-operators are deserving of the title. There were, however, a few
disciples who attempted to apply his theories. One of these was William
Thompson, whose writings, forgotten for many years, have recently come in
for a good deal of extravagant praise. His principal work, _An Inquiry
into the Principles of the Distribution of Wealth_, was published in
1824. As compared with Owen he reveals a greater depth of thought and
shows a more thorough acquaintance with economic science, and he ought
perhaps to be given premier place as the founder of socialism. But, as
we have pointed out in the Preface, we cannot readjust the judgment
of history, and we are bound to accept the names which tradition has
made sacred. And if a person’s rank in history is to be measured by his
influence rather than his talent, then Thompson’s influence was _nil_,
for at the time his work seems to have passed almost unnoticed.

We will only remark that Thompson’s grasp of the idea that labour does
not enjoy all it produces is much firmer than Owen’s. This meant opening
the way for a discussion of surplus value and unproductive labour, of
which more anon. He agrees with Owen in thinking that expropriation
would not remedy the evil, and he also would rather build up a new form
of enterprise in which the worker would be able to retain for himself
all the produce of his labour. This was precisely the co-operative
ideal.[526]


II: CHARLES FOURIER

Owen’s practical influence has been much greater than Fourier’s, for most
of the important socialistic movements of the last century can easily be
traced back to Owen. But Fourier’s intellectual work, when taken as a
whole, though more Utopian and less restrained in character than Owen’s,
has a considerably wider outlook, and combines the keenest appreciation
of the evils of civilisation with an almost uncanny power of divining the
future.[527]

To some writers Fourier is simply a madman, and it is difficult not
to acquiesce in the description when we recall the many extravagances
that disfigure his work, which even his most faithful disciples can
only explain by giving them some symbolic meaning of which we may be
certain Fourier would never have thought.[528] The term “bourgeois
socialist” seems to us to describe him fairly accurately, but its
employment lays us open to the charge of using a term that he himself
would never have recognised. But what are we to make of one who speaks
of Owen’s communistic scheme as being so pitiable as to be hardly worth
refuting; who “shudders to think of the Saint-Simonians and of all
their monstrosities, especially their declamations against property and
hereditary rights[529]—and all this in the nineteenth century”; who
in his scheme of distribution scarcely drew any distinction between
labour, capital, and business ability, five-twelfths of the product
being given to labour, four-twelfths to capital (which is probably more
than it gets to-day), and three-twelfths to management; who outbid the
most brazen-faced company promoter by offering a dividend of 30 to 36
per cent., or for those who preferred it a fixed interest of 8 per
cent.;[530] who held up the right of inheritance as one of the chief
attractions that would be secured by the Phalanstère; and who finally
declared that inequality of wealth and “even poverty are of divine
ordination, and consequently must for ever remain, since everything that
God has ordained is just as it ought to be”?[531]

To the men of his time, and to every one who has not read him, which
means practically everybody, Fourier appears as an ultra-socialist or
communist. That opinion is founded not so much upon the extravagance of
his view or the hyperbolical character of his writing as upon the popular
conception of the Phalanstère, which was the name bestowed upon the new
association he was going to create. Visions of a strange, bewildering
city where the honour of women as well as the ownership of goods would be
held as common property are conjured up at the mention of that word. Our
exposition of his system must obviously begin with an examination of the
Phalanstère, upon the understanding of which everything turns.


1. THE PHALANSTÈRE

As a matter of fact nothing could be more peaceful than the prospect
which the Phalanstère presents to our view. Anything more closely
resembling Owen’s New Harmony or Cabet’s Icaria or Campanella’s Civitas
Solis or More’s Utopia would be difficult to imagine. Externally it
looks for all the world like a grand hotel—a Palace Hotel on a gigantic
scale with 1500 persons _en pension_. One is instinctively reminded of
those familiar structures which have lately become such a feature of all
summer and winter resorts, containing all manner of rooms and apartments,
concert halls and lecture rooms, etc. All of this is described by Fourier
with the minutest detail. No restrictions would be placed upon individual
liberty. Anyone so choosing could have a suite of rooms for himself, and
enjoy his meals in the privacy of his own room—that is, if he preferred
it to the _table d’hôte_. Hotel life is generally open only to the few.
The Phalanstère would have rooms and tables at all prices to suit all
five classes of society, with a free table in addition.

A number of people living under the same roof and eating at the same
table, and adopting this as their normal everyday method of living, sums
up the element of communism which the scheme contained. And the question
is naturally asked, Why should Fourier attach such supreme importance
to this mode of existence as to make it the _sine qua non_ of his whole
system and the key to any solution of the problem? The answer lies in the
conviction, which he fully shared with Owen, that no solution is possible
until the environment is changed, and so changed that an entirely new
type of man will result from it.

Economically, of course, life under the same roof can offer to the
consumer the maximum of comfort at a minimum of cost. Cooking, heating,
lighting, etc., would under such conditions be cheaper and more
efficient, and all the worries and anxieties of individual housekeeping
would be swept aside.

Socially a common life of this kind would gradually teach different
persons to appreciate one another. Sympathy would take the place of
mutual antipathy, which under the present _régime_, as Fourier eloquently
remarks, shows an “ascending scale of hatred and a descending scale of
contempt.” Besides, the multiplicity of relations and interests, and even
of intrigues, which would occasionally enliven this little world would at
any rate make life more interesting.

On this double series of advantages Fourier is quite inexhaustible. He
reckons up the economies with the painstaking care of an old clerk, and
boasts the superiority of the _table d’hôte_ over the family meal with
the enthusiasm of an old bachelor. The social and moral advantages seem
somewhat more doubtful. It is not very obvious that contact with the
rich would make the poor more polished or amicable, nor is it very clear
that either would be much happier for it. Fourier’s Utopia is already
in operation in the United States, where, owing to the increase in the
cost of living, the economic advantages of a communal life are more
fully taken advantage of. Not only are there a great number of bachelors
living at the clubs, but young couples have recently made a practice of
taking up their abode at the hotels. They are already on the way to the
Phalanstère.

This shows that Fourier was considerably in advance of his time, and
those who hold that doctrines, after all, are always suggested by facts
would find it difficult to discover anything pointing towards such
communal experiments in the earlier part of the nineteenth century.

His solution of the servant problem, which is becoming more difficult
every day, is one that is likely to be adopted in the near future. His
suggestion was the substitution of collective for individual services
as being more compatible with human dignity and independence, and the
development of industrial rather than domestic production. This has
already taken place in the case of bread-making and laundry work, and
there are signs of its extension to house-sweeping (by means of the
vacuum cleaner), carpet-cleaning, etc. A further extension to the art of
cooking may also be expected.[532]


2. INTEGRAL CO-OPERATION

Careful scrutiny of the internal arrangements of the Phalanstère shows
it to be something other than an ordinary hotel after all. It may
perhaps be regarded as a kind of co-operative hotel, belonging to an
association and accommodating members of that association only. It is
much more thoroughgoing than the ordinary co-operative society, which
is just content to buy commodities as an association without making any
real attempt to practise communism, except in those rare cases where a
co-operative restaurant is set up alongside of a co-operative warehouse.

The “Phalange,” not content to remain a mere consumers’ association,
was to attempt production as well. Around the hotel was to be an area
of 400 acres, with farm buildings and industrial establishments that
were to supply the needs of the inmates. The Phalange was to be a small
self-sufficing world, a microcosm producing everything it consumed,
and consuming—as far as it could—all it produced. Occasionally, no
doubt, there would be occasional surpluses or some needs would remain
unsatisfied, and then recourse would be had to exchange with other
Phalanges. Every Phalange was to be established as a kind of joint-stock
company. Private property was not to be extinguished altogether, but
to be transformed into the holding of stock—a transformation of a
capitalistic rather than of a socialistic nature. M. de Molinari states
that the future will witness the almost universal application of the
joint-stock principle, and he for one would welcome its extension.
Fourier has forestalled his prophecy by three-quarters of a century,
with an insight that is truly remarkable for the time in which he wrote,
for joint-stock undertakings were then exceedingly rare. He enumerates
the many advantages which would result from such a transformation in
the nature of property, and he roundly declares that “a share in such
concerns is really more valuable than any amount of land or money.”

How were the extravagant dividends which he promised when propounding
his scheme to be paid out? The usual method in financial and commercial
transactions is to distribute them according to the holding of each
individual. But such was not to be his plan. Capital was to have a
third of the profits, labour five-twelfths, and ability three-twelfths.
“Ability,” which signifies the work of management, was to devolve upon
those individuals who were chosen by the society and were considered best
fitted for the work. Fourier never realised that there was a possibility
of the wrong man being chosen. He had no experience of universal
suffrage, and he believed that within such a tiny group the election
would be perfectly _bona-fide_.

Associations known as Phalanges have actually been established in Paris,
and to some extent at any rate they have realised the ideal as outlined
by Fourier. The profits are divided in almost strict accordance with
Fourier’s formula,[533] and in order to emphasise their descent from him
the members have caused a statue to be raised to his memory in their
quarter of the town—the Boulevard de Clichy.

Not content with giving us an outline of a co-operative productive
society, Fourier has also left us an admirably concise statement of the
problem that faces modern society. “The first problem for the economist
to solve,” says he, “is to discover some way of transforming the
wage-earner into a co-operative owner.”[534]

The necessity for such transformation consists in the fact that this
is the only way of making labour at once attractive and productive,
for “the sense of property is still the strongest lever in civilised
society.”[535] “The poor individual in Harmony who only possesses a
portion of a share, say a twentieth, is a part proprietor of the whole
concern. He can speak of _our_ land, _our_ palaces and castles, _our_
forests and factories, for all of them belong partly to him.”[536] “Hence
the _rôle_ of capitalist and proprietor are synonymous in Harmony.”[537]

The worker will draw his share of the profits not merely as a worker,
but also as a capitalist who is a shareholder in the concern, and as a
member of the directorate, in which every shareholder has a voice. The
administration of the business will form a part of his responsibilities.
It is just what we are accustomed to call co-partnership. He will,
moreover, participate in the privileges and management of the Phalange as
a member of a consumers’ association.

All this seems very complicated, but it was a part of Fourier’s policy to
transmute the divergent interests of capitalists, workers, and consumers
by giving to each individual a share in these conflicting interests.[538]
Under existing conditions they are in conflict with one another simply
because they are focused in different individuals. Were they to be
united in the same person the conflict would cease, or at any rate the
battle-ground would be shifted to the conscience of each individual,
where reconciliation would not be quite such a difficult matter.

A programme which aims, not at the abolition of property, but at the
extinction of the wage-earner by giving him the right of holding property
on the joint-stock principle, which looks to succeed, not by advocating
class war, but by fostering co-operation of capital with labour and
managing ability, and attempts to reconcile the conflicting interests of
capitalist and worker, of producer and consumer, debtor and creditor,
by welding those interests together in one and the same person, is by
no means commonplace. Such was the ideal of the French working classes
until Marxian collectivism took its place, and it is quite possible that
its deposition may be only temporary after all. The programme which the
Radical Socialists swear allegiance to, and which they set against the
purely socialistic programme, is the maintenance and extension of private
property and the abolition of the wage-earner. By taking this attitude
they are unconsciously following in the wake of Fourier.[539]


3. BACK TO THE LAND

The title at the head of this section is to-day adopted as a motto by
several social schools. It also figured in Fourier’s programme long ago.
Fourier, however, employed the phrase in a double sense.

In the first place, he thought that there must be a dispersion of the
big cities and a spreading out of their inhabitants in Phalanstères,
which would simply mean moderate-sized villages with a population of
1600 people, or 400 families. Great care was to be exercised in choosing
a suitable site. Wherever possible the village was to be placed on
the bank of a beautiful river, with hills surrounding it, the slopes
of which would yield to cultivation, the whole area being flanked by
a deep forest. It was not, as some one has remarked, intended as an
Arcadia for better-class clerks.[540] It was simply an anticipation of
the garden cities which disciples of Ruskin and Morris are building
all over England. These are designed, as we know, not merely with a
view to promoting health and an appreciation of beauty, but also to
encouraging the amenities of life and to solving the question of housing
by counteracting the high rental of urban land.

In the second place, industrial work of every description, factory and
machine production of every kind, were to be reduced to the indispensable
minimum—a condition that was absolutely necessary if the first reform was
ever to become practicable. Contrary to what might have been expected,
Fourier felt no antipathy towards capitalism, but entertained the
greatest contempt for industrialism, which is hardly the same thing.[541]
A return to the land, if it was to mean anything at all, was to mean
more agriculture. But care must be taken not to interpret it in the old
sense of tillage or the cultivation of cereals. It was in no measured
terms that he spoke of the cultivation of corn and the production of
bread, which has caused mankind to bend under the cruellest yoke and for
the coarsest nourishment that history knows. The only attractive forms
of cultivation, in his opinion, were horticulture and arboriculture,
apple-growing, etc., joined, perhaps, with poultry-keeping and such
occupations as generally fall to the lot of the small-holder.[542] The
inhabitant of the Phalanstère would be employed almost exclusively in
looking after his garden, just as Adam was before the Fall and Candide
after his misfortunes.


4. ATTRACTIVE LABOUR

The attractiveness of labour was made the pivot of Fourier’s system.
Wherever we like to look, whether in the direction of so-called civilised
societies or towards barbarian or servile communities, labour is
everywhere regarded as a curse. There is no reason why it should be, and
in the society of the future it certainly will not be, for men will then
labour not because they are constrained to either by force or by the
pressure of need or the allurement of self-interest. Fourier’s ideal was
a social State in which men would no longer be forced to work, whether
from the necessity of earning their daily bread or from a desire for
gain or from a sense of social or religious duty. His ambition was to
see men work for the mere love of work, hastening to their task as they
do to a gala. Why should not labour become play, and why should not the
same degree of enthusiasm be shown for work as is shown by youth in the
pursuit of sport?[543]

Fourier thinks this would be possible if everyone were certain that he
would get a minimum of subsistence by his work. Labour would lose all
its coercive features, and would be regarded simply as an opportunity
for exercising certain faculties, provided sufficient liberty were
given everyone to choose that kind of work which suited him best, and
provided also the labour were sufficiently diversified in character to
stimulate imagination and were carried on in an atmosphere of joy and
beauty. The sole object of the Phalanstère, as we have already seen, was
to make labour more attractive by creating a new kind of social life
in which production as well as distribution would be on a co-operative
basis and horticulture would take the place of agriculture. But Fourier
was not content to stop at that, and he proceeds to show the importance
of combining different kinds of employment. Some of his suggestions are
very ingenious; others, on the other hand, are equally puerile. The most
notable of these is his proposal to bring individuals together into what
he calls groups and series. A person would be allowed to join these
groups according to his own individual preferences, and as it would not
involve his spending his whole life in any one of them, he would be free
to “flit” from one to the other.

       *       *       *       *       *

But it is about time we took leave of our guide. We cannot pretend to
follow the twists and turns of his labyrinthine psychology, with its
dozen passions, of which the three fundamental ones are the desire for
change, for order, and for secrecy; nor can we bring ourselves to accept
his theodicy, nor his views on climatic and cosmogenic evolution, which
was some day to result in sweetening the waters of the ocean, in melting
the polar glaciers, in giving birth to new animals, and in putting us
in communication with other planets. Yet even this muddy torrent is not
without some grain of gold in it.

Take the question of education, for example, which holds a very prominent
place in his writings. Old bachelor that he was, he never cared very much
for children, but he nevertheless foreshadowed the development of modern
education on several important points. Froebel, who conceived the idea of
the kindergarten (1837), was among his disciples.[544]

His teaching on the sex question bears all the marks of lax morality, and
indicates the fallacy of thinking that untrained passions and instincts
can be morally justified.[545] His extreme views on this question,
which even go beyond the advocacy of free union, have contributed a
great deal to the downfall of Fourierism. Paul Janet remarks somewhere
that the socialists have not been very happy in their treatment of the
woman question, and we have already shown how this weakness led to the
downfall of Saint-Simonism. But even on this subject Fourier has penned a
few pithy sentences. “As a general rule,” he says, “it may be said that
true social progress is always accompanied by the fuller emancipation
of woman, and there is no more certain evidence of decadence than the
gradual servility of women. Other events undoubtedly influence political
movements, but there is no other cause that begets social progress or
social decline with the same rapidity as a change in the status of
women.”[546] Unfortunately his feminism was not so much inspired by
respect for the dignity of woman as by his hatred of family life, and the
liberty which he thought to be the true test of progress was generally
nothing better than free love.

The anti-militarists have good claim to regard him as a forerunner.
Speaking of present-day society, he said that “it consists of a minority
of armed slaves who hold dominion over a majority of disarmed.”

It was not Fourier’s intention to introduce men into the world of Harmony
at one stroke. He thought that as an indispensable preliminary they
should go through a stage of transition which he calls _Garantisme_,
where each one would be given a minimum of subsistence, security,
and comfort—in short, everything that is considered necessary by the
advocates of working-class reform.

Fourierism never enjoyed the prestige and never exercised the influence
which Saint-Simonism did, but its action, though less startling, and
confined as it was to a narrower sphere, has not been less durable.
Nothing has been heard of Saint-Simonism these last fifty years, but
there is still a Phalanstère school. It is not very numerous, perhaps,
if we are only to reckon those who formally adhere to the doctrine, but
if we take into consideration the co-operative movement, as we ought at
least to some extent, it is seen to be very powerful still. For a long
time Fourier’s ideas were scouted by everybody, but during the last
fifteen years much more sympathetic attention has been given them.[547]

Among his disciples there are at any rate two who deserve special
mention. Victor Considérant, one of the strongest advocates of
Fourierism, has left us the best exposition of the doctrine that we have,
in his book _Doctrine sociale_ (1834-44). Like Owen, he experimented in
American colonisation,[548] and gained a measure of notoriety in the
Revolution of 1848 by insisting upon the right to work as a necessary
compensation for the loss of property.

André Godin left a monument more permanent than books, in the famous
Familistère which was founded by him. It consists of an establishment
for the manufacture of heating apparatus at Guise, run entirely on
co-partnership lines, the profits being distributed in accordance with
the rules of the master.[549] It is not a new co-operative society of
the humdrum kind, however. Close to the works, right in the middle of
a beautiful park, are one or two huge blocks which contain the “flats”
where the co-partners live, as well as schools, _crèches_, a theatre, and
a co-operative stores. But despite its fame, and notwithstanding the fact
that it has become a kind of rendezvous for co-operators all the world
over, there is nothing very attractive about it, and if one wants to get
a good idea of what a real Phalanstère is like it is better to visit
either Bournville or Port Sunlight, or Agneta Park in Holland.


III: LOUIS BLANC

It is not the most original work that always attracts most attention.
Stuart Mill, writing of Saint-Simonism and Fourierism, claims that
“they may justly be counted among the most remarkable productions of
the past and present age.” To apply such terms to the writings of Louis
Blanc would be entirely out of place. His predecessors’ works, despite
a certain mediocrity, are redeemed by occasional remarks of great
penetration; but there is none of that in Louis Blanc’s. Moreover, his
treatment is very slight, the whole exposition occupying about as much
space as an ordinary review article.[550] And there is no evidence of
exceptional originality, for the sources of its inspiration must be
sought elsewhere—in the writings of Saint-Simon, of Fourier, of Sismondi,
and of Buonarotti, one of the survivors of the Babeuf conspiracy,[551]
and in the democratic doctrines of 1793. In short, Blanc was content to
give a convenient exposition of such socialistic ideas as the public had
become accustomed to since the Restoration.

Nevertheless, no sooner was the _Organisation du Travail_ published in
1841 than it was read and discussed by almost everybody. Several editions
followed one another in rapid succession. The title, which is borrowed
from the Saint-Simonians, supplied one of those popular formulæ which
conveniently summed up the grievances of the working classes in 1848, and
during the February Revolution Louis Blanc came to be regarded as the
best qualified exponent of the views of the proletariat. Even for a long
time after 1848 the work was considered to be the most characteristic
specimen of French socialistic writing.

Its success was in a measure due to the circumstances of the period.
The brevity of the book and the directness of the exposition made the
discussion of the theme a comparatively easy matter. The personal
notoriety of the author also had a great deal to do with the interest
which his work aroused. During the short career of the July monarchy,
Blanc, both in the press and on the platform, had found himself one
of the most valiant supporters of the advanced democratic wing. His
_Histoire de Dix Ans_ gave him some standing as a historian. Later on the
_rôle_ which he played as a member of the Provisional Government of 1848,
and afterwards at the inauguration of the Third Republic, contributed to
his fame as a public man. And, last of all, his unfortunate experience in
connection with the failure of the national workshops, for which he was
unjustly blamed, added to the interest which the public took in him.

All this, however, would not justify his inclusion in our history were
it not for other reasons which give to the _Organisation du Travail_
something more than a mere passing interest.

In no other work is the opposition between competition and association so
trenchantly stated. Every economic evil, if we are to believe Blanc, is
the outcome of competition. Competition affords an explanation of poverty
and of moral degradation, of the growth of crime and the prevalence of
prostitution, of industrial crises and international feuds. “In the first
place,” writes Blanc, “we shall show how competition means extermination
for the proletariat, and in the second place how it spells poverty and
ruin for the _bourgeoisie_.”[552] The proof spreads itself out over the
whole work, and is based upon varied examples gleaned from newspapers and
official inquiries, from economic treatises and Government statistics,
as well as from personal observations carried on by Blanc himself. No
effort is spared to make the most disagreeable facts contribute of their
testimony. Everything is arranged with a view to one aim—the condemnation
of competition. Only one conclusion seems possible: “If you want to get
rid of the terrible effects of competition you must remove it root and
branch and begin to build anew, with association as the foundation of
your social life.”

Louis Blanc thus belonged to that group of socialists who thought
that voluntary associations would satisfy all the needs of society.
But he thinks of association in a somewhat different fashion from his
predecessors. He dreams neither of New Harmony nor of a Phalanstère.
Neither does he conceive of the economic world of the future as a
series of groups, each of which forms a complete society in itself.
Fourier’s integral co-operation, where the Phalanstère was to supply
all the needs of its members, is ignored altogether. His proposal is a
social workshop, which simply means a co-operative producers’ society.
The social workshop was intended simply to combine members of the same
trade, and is distinguished from the ordinary workshop by being more
democratic and equalitarian. Unlike Fourierism, it does not contain
within itself all aspects of economic life. By no means self-contained,
it merely undertakes the production of some economic good, which other
folk are expected to buy in the ordinary way. Louis Blanc’s is simply the
commonest type of co-operative society.[553] The schemes of both Owen and
Fourier were much more ambitious, and attempted to apply the principle of
co-operation to consumption as well as to production.

Nor was the idea altogether a new one. A Saint-Simonian of the name of
Buchez had already in 1831[554] made a similar proposal, but it met with
little success. Workers in the same trade—carpenters, masons, shoemakers,
or what not—were advised to combine together, to throw their tools into
the common lot, and to distribute among themselves the profits which had
hitherto gone to the _entrepreneur_. A fifth of the annual profits was
to be laid aside to build up a “perpetual inalienable reserve,” which
would thus grow regularly every year. “Without some such fund,” says
Buchez, with an unerring instinct for the future, “association will
become little better than other commercial undertakings. It will prove
beneficial to the founders only, and will ban everyone who is not an
original shareholder, for those who had a share in the concern at the
beginning will employ their privileges in exploiting others.”[555] Such
is the destiny that awaits more than one co-operative society, where
the founders become mere shareholders and employ others who are simply
hirelings to do the work for them.

Whereas Buchez was greatly interested in _petite_ industry,[556] Blanc
was in favour of the great industry, and that seems to be the only
difference between his social workshop and an ordinary co-operative
society. But in Blanc’s opinion the social workshop was just a cell out
of which a complete collectivistic society would some day issue forth.
Its ultimate destiny did not really interest him very much. The ideal
was much too vague and too distant to be profitably discussed. The
important thing was to make a beginning and to prepare for the future in
a thoroughly practical fashion, but “without breaking altogether with
the past.” That seemed clearly to be the line of procedure. To give an
outline of what that future would be like seemed a vain desire, and would
simply mean outlining another Utopia.

It is just because his plan was precise and simple that Louis Blanc
succeeded in claiming attention where so many beautiful but quite
impossible dreams had failed. Here at last was a project which everyone
could understand, and which, further, would not be very difficult
to adopt. This passion for the concrete rather than the ideal, for
some practical formula that might possibly point the way out of the
morass of _laissez-faire_, may be discovered in more than one of his
contemporaries. It is very pronounced in Vidal’s work, for example.
Vidal was the author of an interesting book on distribution which
unfortunately seems to be now quite forgotten.[557] Much of the success
of the project, like that of the State Socialism of a later period, was
undoubtedly due to this feeling.

The projected reform seemed exceptionally simple. A national workshop
was to be set up forthwith in which all branches of production would
be represented. The necessary capital was to be obtained from the
Government, which was expected to borrow it. Every worker who could give
the necessary moral guarantee was allowed to compete for this capital.
Wages would be equal for everybody, a thing which is quite impossible
under present conditions, largely because of the false anti-social
character of a good deal of our education. In the future, when a new
system of education will have improved morality and begotten new ideas,
the proposal will seem a perfectly natural one. Here we come across a
suggestion that seems common to all the associationists, namely, the idea
of a new environment effecting a revolution in the ordinary motives of
mankind. As to the hierarchy of the workshop, that will be established
by election, except during the first year, when the Government will
undertake to conduct the organisation, because as yet the members will
hardly be sufficiently trained to choose the best representatives. The
net revenue will be divided into three portions, of which the first will
be distributed between the various members of the association, thus
contributing to a rise in their wages; the second portion will go towards
the upkeep of the old, the sick, and the infirm, and towards easing the
burdens of some other industries; while the third portion will be spent
in supplying tools to those who wish to join the association, which will
gradually extend its sway over the whole of society. The last suggestion
inevitably reminds us of Buchez’s “inalienable and perpetual capital.”

Interest will be paid on the capital employed in founding the industry,
such interest being guaranteed against taxation. But we must not conclude
that Blanc favoured this condition because he believed in the legitimacy
of interest, as Fourier did. He was too pronounced a disciple of the
Saint-Simonians ever to admit that it was legitimate. The time will
come, he thinks, when it will no longer be necessary, but he gives no
hint as to how to get rid of it. For the present at any rate it must be
paid, were it only to enable the transition to be made. “We need not
with savage impatience destroy everything that has been founded upon the
abuses which as a whole we are so anxious to remove.” The interest paid,
along with the wages, will form a part of the cost of production. The
capitalists, however, will have no share in the net profit unless they
have directly contributed to it.

It seems that the only difference between the social workshop and the
present factory is its somewhat more democratic organisation, and the
fact that the workers themselves seize all the profit (_i.e._ over and
above net interest), instead of leaving it, as was hitherto the case, to
the _entrepreneur_.

But this social workshop, as we have said, is a mere cell out of
which a new society is expected to form. The amusing feature is this,
that the new society can only come into being through the activity of
competition—competition purged of all its more abominable features,
that is to say. “The arm of competition must be strengthened in order
to get rid of competition.” That ought not to be a very difficult task,
for the “social workshop as compared with the ordinary private factory
will effect greater economies and have a better system of organisation,
for every worker without exception will be interested in honestly
performing his duty as quickly as possible.” On every side will private
enterprise find itself threatened by the new system. Capital and workers
will gravitate towards the social workshop with its greater advantages.
Nor will the movement cease until one vast association has been formed
representing all the social shops in the same industry. Every important
industry will be grouped round some central factory, and “the different
shops will be of the nature of supplementary establishments.” To crown
the edifice, the different industries will be grouped together, and,
instead of competing with one another, will materially help and support
each other, especially during a time of crisis, so that the understanding
existing between them will achieve a still more remarkable success in
preventing crises altogether.

Thus by merely giving it greater freedom the competitive _régime_ will
gradually disappear, to make way for the associative _régime_, and as the
social workshops realise these wonderful ideals the evils of competition
will disappear, and moral and social life will be cleansed of its present
evils.

The remarkable feature of the whole scheme is that hardly anything new is
needed to effect this vast change. Just a little additional pressure on
the part of Government, some capital to set up the workshops, and a few
additional regulations to guide it in its operations, that is all.

This is really a very important point in Louis Blanc’s doctrine, which
clearly differentiates it both from Owen’s and Fourier’s. They appeared
to think that the State was not necessary at all: private initiative
seemed quite sufficient. It was hoped that society would renew itself
spontaneously without any extraneous aid, and this is still the working
creed of the co-operative movement. Wherever the co-operative movement
has flourished the result has been entirely due to the efforts of its
members. But Louis Blanc’s attention was centred on the highly trained
artisan, and the problem was to find capital to employ him. Were they
to rely upon their own savings, they would never make a beginning.[558]
Moreover, somebody must start the thing, and power is wanted for this.
That power will be organised force, which will be employed, however,
not so much as an ally, but rather as a “starter.” Intervention will
necessarily be only temporary. Once the scheme is started its own
momentum will keep it going. The State, so to speak, “will just give it a
push: gravity and the laws of mechanics will suffice for the rest.” That
is just where the ingenuity of the whole system comes in, and as a matter
of fact the majority of the producing co-operative societies now at work
owe their existence to the financial aid and administrative ability of
public bodies, without which they could hardly keep going.

Louis Blanc, accordingly, is one of the first socialists to take care to
place the burden of reform upon the shoulders of the State. Rodbertus
and Lassalle make an exactly analogous appeal to the State, and for this
reason the French writer deserves a place among the pioneers of State
Socialism.

This appeal of the socialists is beautifully naïve. On the one
hand they invite the adherence of Government to a proposal that is
frankly revolutionary, in which case it is asked to compass its own
destruction—naturally not a very attractive prospect. On the other
hand the project seems harmless enough, and the support which the
Government is asked to extend further emphasises the modest nature of the
undertaking. State socialism cannot escape the horns of this dilemma by
proclaiming itself frankly conservative, as it has done in Germany.

Louis Blanc, like Lassalle after him, was much concerned with immediate
results, and he failed to notice this objection. He paid considerable
attention to another line of criticism, however, and one that he
considered much more dangerous. He sought a way of escape by using
an argument which was afterwards frequently employed by the State
Socialists, as we shall see by and by.

The question was whether State intervention is contrary to liberty or
not. “It clearly is,” says Louis Blanc, “if you conceive of liberty
as an abstract right which is conferred upon man by the terms of some
constitution or other. But that is no real liberty at all. Full liberty
consists of the power which man has of developing and exercising his
faculties with the sanction of justice, and the approval of law.”[559]
The right to liberty without the opportunity of exercising it is simply
oppression, and wherever man is ignorant or without tools he inevitably
has to submit to those who are either richer or better taught than
himself, and his liberty is gone. In such cases State intervention is
really necessary, just as it is in the case of inferior classes or
minors. Lacordaire’s saying is more pithy still: “As between the weak and
the strong, liberty oppresses and law sets free.” Sismondi had already
employed this argument, and much capital has been made of it by every
opponent of laissez-faire.[560]

In the writings of Louis Blanc may be found the earliest faint outline
of a movement that had assumed considerable proportions before the end
of the century. State socialism, which was as yet a temporary expedient,
by and by becomes an important economic doctrine with numerous practical
applications.

The events of 1848 gave Louis Blanc an opportunity of partly realising
his ideas. We shall speak of these experiments when we come to discuss
the misdirected efforts of the 1848 socialists. But the ideas outlined in
the _Organisation du Travail_ were destined to a more permanent success
in the numerous co-operative productive societies which were founded as
a result of its teaching. They are still quite popular with a certain
class of French working men.

Though inferior to both Fourier and Owen, Blanc gave considerable impetus
to the Associative movement, and quite deserves his place among the
Associative socialists.

       *       *       *       *       *

Beside Louis Blanc it may be convenient to refer to two other writers,
Leroux and Cabet, who took part in the same movement right up to the
Revolution of 1848.

Pierre Leroux exercised considerable influence over his contemporaries.
George Sand’s works are full of social dissertations, and she herself
declares that most of these she owed to Leroux. However, one can hardly
get anything of the nature of a definite contribution to the science from
his own writings, which are vaguely humanitarian in character. We must
make an exception, perhaps, of his advocacy of association,[561] and
especially of the idea of solidarity, a word that has been exceedingly
fortunate in its career. Indeed, it seems that he was the first to employ
this famous term in the sense in which it is used to-day—as a substitute
for charity.[562]

Apparently, also, he was the first to contrast the word “socialism” with
its antithesis “individualism.”[563] The invention of these two terms
is enough to save his name from oblivion in the opinion of every true
sociologist.

Cabet had one experience which is rare for a socialist: he had filled
the office of Attorney-General, though only for a short time it is true.
Far greater celebrity came to him from the publication of his novel,
_Le Voyage en Icarie_. There is nothing very original in the system
outlined there. He gives the usual easy retort to those who question him
concerning the fate of idlers in Icaria: “Of idlers in Icaria there will
be none.” In his enthusiasm for his ideal he went farther than either
Owen or Considérant by personally superintending the founding of a colony
in the United States (1848). Despite many a grievous trial the settlement
managed to exist for fifty years, finally coming to grief in 1898.[564]

Cabet is frankly communistic, and in that respect resembles Owen rather
than Fourier, although he always considered himself a disciple of the
latter. But this was perhaps due to his admiration for Fourier, with
whom he was personally very well acquainted. Although he was a communist
he was no revolutionist. He was a good-natured fellow who believed in
making his appeal to the altruistic feelings of men, and was sufficiently
optimistic to believe that moral conversion was not a difficult
process.[565]




CHAPTER IV: FRIEDRICH LIST AND THE NATIONAL SYSTEM OF POLITICAL ECONOMY


By the middle of the nineteenth century the doctrine of Adam Smith had
conquered the whole of Europe. Former theories were forgotten and no
rival had appeared to challenge its supremacy. But during the course of
its triumphant march it had undergone many changes and had been subjected
to much criticism. Even disciples like Say and Malthus, and Ricardo
especially, had contributed many important additions and effected much
improvement. Through the influence of Sismondi and the socialists new
points of view had been gained, involving a departure from the narrow
outlook of the master in the direction of newer and broader horizons.

Of the principles of the Classical school the Free Trade theory was
the only one which still remained intact. This, however, was the most
important of all. Here the triumph had been complete. Freedom of
international trade was accepted as a sacred doctrine by the economists
of every country. In Germany as in England, in France as in Russia, there
was complete unanimity among scientific authorities. The socialists
at first neglected this topic, and when they did mention it it was to
express their complete approval of the orthodox view.[566] A few isolated
authors might have hinted at reservations or objections, but they never
caught the public ear.[567] It is true that Parliaments and Governments
in many countries hesitated to put these new ideas into practice. But
even here, despite the strength of the opposing forces, one can see the
growing influence of Smith’s doctrine. The liberal tariff of Prussia
in 1818, the reforms of Huskisson in England (1824-27), were expressly
conceived by their authors as partial applications of those principles.

However, there arose in Germany a new doctrine for which the peculiar
economic and political conditions of that country at the beginning of
the nineteenth century afforded a favourable environment. Although the
development was slow it was none the less startling. Friedrich List,
in his work entitled _Das Nationale System der Politischen Oekonomie_,
promulgated the theory of the new Protection. “The history of my book,”
he remarks in his preface, “is the history of half my life.” He might
have added that it was also the history of Germany from 1800 to 1840. It
was no mere coincidence that led to the creation of an economic system
based exclusively upon the conception of nationality in that country,
where the dominant political note throughout the nineteenth century
was the realisation of national unity. List’s work was a product of
circumstances, and these circumstances we must understand if we are to
judge of the author and his work.


I: LIST’S IDEAS IN RELATION TO THE ECONOMIC CONDITIONS IN GERMANY

The Germany of the nineteenth century presents a unique spectacle. Her
population was at first essentially agricultural, and the various states
politically and economically isolated. Her industry was fettered by the
corporative _régime_, and her agriculture was still in feudal thraldom.
Freed from these encumbrances, and having established first her economic
and then her political unity, she took her place during the last three
decades of the century among the foremost of industrial Powers.

The Act of Union of 1800 had ensured the economic unity of the British
Isles. The union of England and Scotland was already a century old, and
Smith regarded it as “one of the chief causes of the prosperity of Great
Britain.”[568] France had accomplished the same end by the suppression of
domestic tariffs in 1791. But Germany even in 1815 was still a congeries
of provinces, varying in importance and separated from one another by
tariff walls. List, in the petition which he addressed in 1819 to the
Federal Assembly in the name of the General Federation of German Trade
and Commerce, could reckon no less than thirty-eight kinds of tariffs
within the German Confederacy, without mentioning other barriers to
commerce. In Prussia alone there were no fewer than sixty-seven different
tariffs.[569] “In short,” says List in another petition, “while other
nations cultivate the sciences and the arts whereby commerce and industry
are extended, German merchants and manufacturers must devote a great part
of their time to the study of domestic tariffs and taxes.”[570]

These inconveniences were still further aggravated by the complete
absence of import duties. The German states were closed to one another,
but, owing to the absence of effective central control, were open to
other nations—a peculiarly galling situation on the morrow of the
Continental Blockade. The peace treaty was scarcely signed when
England—so long cut off from her markets and forced to over-stock her
warehouses with her manufactured goods—began to flood the Continent with
her products. Driven from France by the protective tariff established
by the Restoration Government, these goods, offered at ridiculously low
prices, found a ready market in Germany.

The German merchants and manufacturers became thoroughly alarmed, and
there arose a general demand for economic unity and a uniform tariff.
Public opinion urged a reform which appeared to be the first step in
the movement towards national unity. In 1818 Prussia secured her own
commercial unity by abolishing all internal taxation, retaining only
those duties which were levied at the frontier. Her new tariff of 10 per
cent. on manufactured goods, with free entrance for raw material, was not
regarded as prohibitive, and was actually approved of by Huskisson as a
model which the British Parliament might well imitate. But this reform,
confined as it was to Prussia alone, did nothing to improve the lot of
the German merchants elsewhere, for the Prussian tariff applied just as
much to them as to foreigners.

This particular reform, far from staying the movement towards uniform
import duties, only accelerated it. A General Association of German
Manufacturers and Merchants was founded at Frankfort in 1819 to urge
confederation upon the Government. The agitation was inspired by
Friedrich List. He had been for a short time professor at Tübingen
and was already well known as a journalist. He was nominated general
secretary of the association, and became the soul of the movement. He
wrote endless petitions and articles, and made personal application to
the various Governments at Munich, Stuttgart, Berlin, and Vienna. He was
anxious that Austria should take the lead. But all in vain. The Federal
Assembly, hostile as it was to every manifestation of public opinion,
refused to reply to the petition of the merchants and manufacturers.
List himself was soon taken up with other interests. He was named as the
deputy for Reutlingen, his native town, in the state of Würtemberg, in
1820, but was banished from the Assembly and condemned to ten months’
imprisonment for criticising the bureaucracy of his own country. After
seeking refuge in France he spent a few years travelling in England and
Switzerland, and then returned to Würtemberg, where he again suffered
imprisonment. Upon his release from prison he resolved to emigrate to
America, where Lafayette, whom he had met in Paris, promised him a warm
welcome.

Returning to Germany in 1832, after having made numerous friends and
accumulated a fortune, he found the tariff movement for which he had
struggled thirteen years before just coming to a head. It was to be
established, however, in a fashion quite different from what he had
expected. It was not to be a general reform, and Austria was not to be
leader. Prussia was to be the pivot of the movement, which was to be
accomplished by means of a series of general agreements. In 1828 there
were formed almost simultaneously two Tariff Unions, the one between
Bavaria and Würtemberg, the other between Prussia and Hesse-Darmstadt.
Within the areas of both of these unions goods were to circulate freely,
and a common rate of duty was to be established at the frontiers. From
the very first there was a _rapprochement_ between the unions, but a
definite fusion in one Zollverein was only decided upon on March 22,
1833. The new _régime_ actually came into being on January 1, 1834. Even
before that date Saxony and some of the other states had already joined
the new union.

Thus by 1834 the commercial union of modern Germany was virtually
accomplished. The Zollverein united the principal German states,[571]
Austria excepted, and under this _régime_ industry, assured of a large
domestic market, increased by leaps and bounds. But a new problem
presented itself, namely, what system of taxation was to be adopted by
the union as a whole. In 1834 the liberal Prussian tariff of 1818 was
adopted without much opposition, but nothing more was attempted just
then. Many of the manufacturers, however, especially the iron-smelters
and the cotton and flax spinners, demanded a more substantial means of
protection against foreign competition. This clamour became more intense
as the need for iron and manufactured goods increased the demand for raw
material. Hence from 1841—the date of the completed Zollverein—a new
discussion arose between the partisans of the _status quo_, inclining
towards free exchange, and the advocates of a more vigorous protection.

List’s _National System_, advocating Protection, appeared at the
psychological moment. This delightfully eloquent work is full of
examples borrowed from history and experience. The peculiar condition
of contemporary Germany was the one source of List’s inspiration, and
since the work was written for the public at large it is remarkably free
from all traces of the “schools.” Germany’s industry, the sole hope of
her future greatness, had found scope for development only during the
peace which followed 1815. It was still in its infancy, and found itself
hard hit by the competition of England, with her long experience, her
perfected machinery, and her gigantic output. This was the all-important
fact for List. England, whose rivalry appeared so dangerous, had closed
her markets to German agriculturists by her Corn Laws, while industrial
competition was out of the question. Two other nations, France and the
United States, destined, like Germany, to become great industrial Powers,
indicated the path of emancipation. France, warned by the results of the
Treaty of Eden (1786) as to the evils of English competition, hastened
to defend her fortunes by means of prohibitive tariffs. Still more
significant was the example of the United States, whose situation was
in all respects comparable with that of Germany. In both cases economic
independence was hardly yet fully established, the natural resources
were abundant, the territory was vast, the population intelligent and
industrious, with the hope of a great political future. Though scarcely
free as yet, the Americans made the establishment of industry and the
shutting out of English goods by means of protective tariffs their first
care. Thus there was everywhere the same danger, the tyrannical supremacy
of England, and the same method of defence, Protection. Would Germany
alone stand aloof from adopting similar measures?

That is the essential point of List’s thesis. But these very practical
views tended to damage the well-known arguments of those economists whom
List refers to collectively as “the school.” The “school” maintained
that nations as well as individuals should buy in the cheapest markets
and devote all their energies to producing just those commodities which
yield them the greatest gain. Industry can only grow in proportion to the
amount of capital saved, but a protective _régime_ hinders accumulation
and so defeats its own end. To overcome these objections it is not
necessary to combat them one by one, for the discussion may be carried
to an entirely different field. The “school” adopts a certain ideal of
commercial policy as the basis of its thesis, namely, the increase of
consumable wealth, or, as List puts it, in an awkward enough fashion,
“the increase of its exchangeable values.”[572] This fundamental point of
view must be changed if we would avoid the consequences which naturally
follow from it. List realised this, and in his attempt to accomplish the
task he gave expression to new truths which make his book one of lasting
theoretical value and ensure for it an important place in the history of
economic doctrines.

In fact, he introduces two ideas that were new to current theory, namely,
the idea of nationality as contrasted with that of cosmopolitanism, and
the idea of productive power as contrasted with that of exchange values.
List’s whole system rests upon these two ideas.

(_a_) List accuses Adam Smith and his school of cosmopolitanism. Their
hypothesis rested on the belief that men were henceforth to be united
in one great community from which war would be banished. On such a
hypothesis humanity was merely the sum of its individuals. Individual
interests alone counted, and any interference with economic liberty could
never be justified. But between man and humanity must be interpolated the
history of nations, and the “school” had forgotten this. Every man forms
part of some nation, and his prosperity to a large extent depends upon
the political power of that nation.[573]

Universal _entente_ is doubtless a noble end to pursue, and we ought to
hasten its accomplishment. But nations to-day are of unequal strength and
have different interests, so that a definite union could only benefit
them if they met on a footing of equality. The union might even only
benefit one of them while the others became dependent. Viewed in this new
light, political economy becomes the science which, by taking account
of the actual interests and of the particular condition of each nation,
shows along what path each may rise to that degree of economic culture at
which union with other civilised nations, accompanied by free exchange,
might be both possible and useful.[574]

List distinguishes several “degrees of culture,” or what we would to-day
call “economic stages,” and he even claims actual historical sequence for
his classification into the savage, the pastoral, the agricultural, the
agricultural-manufacturing, and the agricultural-manufacturing-commercial
stage.[575] A nation becomes “normal”[576] only when it has attained
the last stage. List understands by this that such is the ideal that
a nation ought to follow. As a matter of fact he would allow it to
possess a navy and to found colonies only on condition that it kept
up its foreign trade and extended its sphere of influence. It is only
at this stage that a nation can nourish a vast population, ensure
a complete development of the arts and sciences, and retain its
independence and power. The last two ideas constitute the _sine qua
non_ of nationality.[577] Not all nations, it is true, can pretend to
this complete development. It requires a vast territory, with abundant
natural resources, and a temperate climate, which itself aids the
development of manufactures.[578] But where these conditions are given
then it becomes a nation’s first duty to exert all its forces in order
to attain this stage. Germany possessed these desiderata to a remarkable
degree. All that was needed was an extension of territory, and List
lays claim to Holland and Denmark as a portion of Germany, declaring
that their incorporation would be regarded even by themselves as being
both desirable and necessary. Accordingly, he wished them to enter the
Confederacy of their own free will.[579]

Hence the aim of a commercial policy is no longer what it was for Smith,
viz. the enriching of a nation. It is a much more complex ideal that List
proposes, both historically and politically, but an ideal which implies
as a primary necessity the establishment of manufactures.

(_b_) This necessity becomes apparent from still another point of
view. The estimate of a nation’s wealth should not be confined to one
particular moment. It is not enough that the labour and economy of its
citizens should at the present moment assure for it a great mass of
exchange values. It is also necessary that these resources of labour
and of economy should be safeguarded and that their future development
should be assured, for “the power of creating wealth is infinitely more
important than the wealth itself.” A nation should concern itself with
the growth of what List in a vague fashion calls its productive forces
even more than with the exchange values which depend upon them.[580]
Even a temporary sacrifice of the second may be demanded for the sake
of the first. In these expressions List merely wishes to emphasise the
distinction between a policy which takes account of a nation’s future as
compared with one which takes account only of the present. “A nation must
sacrifice and give up a measure of material property in order to gain
culture, skill, and powers of united production; it must sacrifice some
present advantages in order to ensure to itself future ones.”[581]

But what are these productive forces which constitute the permanent
source of a nation’s prosperity and the condition of its progress?

With particular insistence List first of all mentions the moral and
political institutions, freedom of thought, freedom of conscience,
liberty of the press, trial by jury, publicity of justice, control
of administration, and parliamentary government. All these have a
stimulating and salutary effect upon labour. He is never weary of
recalling to mind the loss of wealth caused by the Revocation of the
Edict of Nantes, or by the Spanish Inquisition, which, says he, “had
passed sentence of death upon the Spanish navy long ere the English and
the Dutch fleets had executed the decree” (p. 88). He unjustly[582]
accuses Smith and his school of materialism, and condemns them for
neglecting to reckon those infinitely powerful but perhaps less
calculable forces.

But of all the productive forces of a nation none, according to List,
can equal manufactures, for manufactures develop the moral forces of a
nation to a superlative degree. “The spirit of striving for a steady
increase in mental and bodily acquirements, of emulation and of liberty,
characterise a State devoted to manufactures and commerce.… In a country
devoted to mere raw agriculture, dullness of mind, awkwardness of body,
obstinate adherence to old notions, customs, methods, and processes, want
of culture, of prosperity, and of liberty prevail.”[583] Manufactures
permit of a better utilisation of a country’s products than is the case
even with agriculture. Its water-power, its winds, its minerals, and its
fuel supplies are better husbanded. The presence of manufactures gives
a powerful impetus to agriculture, for the agriculturist profits even
more than the manufacturer, owing to the high rent, increased profits,
and better wages that follow upon an increased demand for agricultural
products. The very proximity of manufactures constitutes a kind of
permanent market for those agricultural products, a market which neither
war nor hostile tariffs can ever affect. It gives rise to varied demands
and allows of a variation of cultivation, which results in a regional
division of labour. This enables each district to develop along the most
advantageous line, whereas in a purely agricultural country each one
has to produce for his personal consumption, which means the absence of
division of labour and a consequent limitation of production.[584]

Industry for List is not what it was for Smith. For him it is a social
force, the creator of capital and of labour, and not the natural result
of labour and saving. It deserves introduction even at the expense
of a temporary loss, and its justification is that of all liberal
institutions, namely, the impetus given to future production. In a
beautiful comparison which would deserve a niche in a book of classical
economic quotations he writes as follows: “It is true that experience
teaches that the wind bears the seed from one region to another, and that
thus waste moorlands have been transformed into dense forests; but would
it on that account be wise policy for the forester to wait until the wind
in the course of ages effects this transformation?”[585] The tariff,
apparently, is the only method of raising the wind.

By placing himself at this point of view List is able to defeat the most
powerful arguments used by his opponents. All we can say in reply is that
manufactures will not produce these effects if they have not already a
_raison d’ètre_ in the natural evolution of a nation—that is, if they
do not demand too costly a sacrifice. The land on which the settler sows
his corn can scarcely be regarded as ready to receive it if it lacks the
power to make it grow.

List’s Protectionism, as we may guess from what precedes, possesses
original features. It is not a universal remedy which may be
indifferently applied to every country at any period or to all its
products. It is a particular process which can only be used in
certain cases and under certain conditions. Subjoined are some of the
characteristic traits of this Protectionism which List himself has neatly
described.

(1) The Protectionist system can only be justified when it aims at the
industrial education of a nation.[586] It is thus inapplicable to a
nation like the English, whose industrial education is already complete.
Nor should it be attempted by countries that have neither the aptitude
nor the resources necessary for an industrial career. The nations of the
tropical zone seem destined to the pursuit of agriculture, while those of
the temperate zone are accustomed to engage in many and varied forms of
production.[587]

(2) But a further justification is also necessary. It must be shown
that the nation’s progress is retarded by the competition of a powerful
manufacturing rival which has already advanced farther on the industrial
path.[588] “The reason for this is the same as that why a child or a boy
in wrestling with a strong man can scarcely be victorious or even offer
steady resistance.”[589] This was precisely the case with Germany in her
struggle with England. (It is interesting to come across a full account
of the process of “dumping” in List’s letters to Ingersoll. “Dumping,”
which has received much attention lately in connection with the trust
movement, consists in selling at a low price in foreign markets in order
to keep up prices in the home market.[590])

(3) Even in that case Protection can be justified “only until that
manufacturing Power is strong enough no longer to have any reason to fear
foreign competition, and thenceforth only so far as may be necessary for
protecting the inland manufacturing power in its very roots.”[591]

(4) Lastly, Protection ought never to be extended to agriculture.
The reasons for this exception are that on the one hand agricultural
prosperity depends to a great extent upon the progress of
manufactures—the protection of the latter indirectly benefits the
former—and on the other hand an increase in the price of raw materials or
of food would injure industry. Moreover, there exists a natural division
which is particularly advantageous to the system of cultivation pursued
by each country, a division dependent upon the natural qualities of their
soils, which Protection would tend to destroy. This territorial division
does not exist for manufactures, “for the pursuit of which every nation
in the temperate zone seems to have an equal vocation.”[592]

One might experience some difficulty in understanding the sudden
_volte-face_ of List in favour of free exchange in agriculture did we
forget the particular situation in Germany, to which his thoughts always
returned. This is equally true of many other points in his system.
Germany was an exporter of corn and suffered from the operation of the
English Corn Laws. German agriculture needed no protection, but suffered
from want of markets, and List would have been very happy to persuade
England to abandon her Corn Laws. Agricultural protection was only
revived in Germany towards the end of 1879, when the agriculturists
thought they were being threatened by foreign competition.


II: SOURCES OF LIST’S INSPIRATION. HIS INFLUENCE UPON SUBSEQUENT
PROTECTIONIST DOCTRINES.

The question of the origin of List’s Protectionist ideas has frequently
been raised. The works of the Frenchmen Dupin and Chaptal undoubtedly
gave him some material for reflection, but he was really confirmed in
his opposition to _laissez-faire_ by the men whom he met in America.
While there he came into intimate contact with the members of a society
which had been founded at Philadelphia for the encouragement of national
industry. The founder of this society was an American statesman named
Hamilton, the author of a celebrated report upon manufactures, who as
far back as 1791 had advocated the establishment of Protection for
the encouragement of struggling American industries.[593] Hamilton’s
argument, as List fully recognised, bears a striking similarity to the
thesis of the _National System_.[594] The Philadelphian society, which
was then presided over by Matthew Carey (the father of the economist of
whom we shall have to speak by and by), immediately after List’s arrival
in America inaugurated an active campaign on behalf of a revision of the
tariffs. Ingersoll, the vice-president, persuaded List to join in the
campaign, which he did by publishing in 1827 a number of letters which
caused quite a sensation.[595] They are really just a _résumé_ of the
_National System_. The policy which in the course of a few years he was
to advocate in Germany he now recommended to the consideration of the
Americans.

But facts were even more eloquent than books, and what chiefly struck the
practical mind and the observant eye of List was the material success
of American Protection, just as in Germany he had been impressed by the
beneficial effects which temporary Protection enforced by the Continental
Blockade had produced there.[596]

Far from being injurious to the economic development of the United
States, it seemed as if Protection had really helped it. What it actually
did was to quicken by the space of a few years an evolution which nature
herself was one day bound to accomplish. So vast was the territory, so
abundant the natural resources, and so advantageously were they placed
for the application of human energy that no system, however defective,
could long have delayed the accumulation of wealth. The similar condition
of Germany lent colour to the belief that the same experiment carried on
under similar circumstances would also succeed there.

Accordingly, List’s work, though not directly connected with any known
American system, is the first treatise which gives a clear indication of
the influence upon European thought of the economic experiences of the
New World.

In a beautiful paragraph in the _National System_ List has himself
confessed to this. “When afterwards I visited the United States, I cast
all books aside—they would only have tended to mislead me. The best
work on political economy which one can read in that modern land is
actual life. There one may see wildernesses grow into rich and mighty
states; and progress which requires centuries in Europe goes on there
before one’s eyes, viz. that from the condition of the mere hunter to
the rearing of cattle, from that to agriculture, and from the latter
to manufactures and commerce. There one may see how rents increase by
degrees from nothing to important revenues. There the simple peasant
knows practically far better than the most acute savants of the Old World
how agriculture and rents can be improved; he endeavours to attract
manufacturers and artificers to his vicinity. Nowhere so well as there
can one learn the importance of means of transport, and their effect on
the mental and material life of the people. That book of actual life I
have earnestly and diligently studied, and compared with the results of
my previous studies, experience, and reflections.”[597]

Though from this point of view List’s Protectionism seems closely
connected with the most modern of economic units, a still closer tie
links him to the Mercantilism of old. Nor did he ever dissemble his love
for the Mercantilists, especially for Colbert. He accused Smith and Say
of having misunderstood them, and he declared that they themselves more
justly deserved the title of Mercantilists because of their attempt to
apply to whole nations a very simple conception which they had merely
copied from a merchant’s note-book, namely, the advice to buy in the
cheapest and sell in the dearest market. He distinguishes between two
classes of Mercantilists according as they are influenced by one or other
of two dominating ideas. On the one hand we have those who emphasise the
importance of industrial education, which is the dominant note in List’s
philosophy. This idea has quite taken the place of the older idea of
a favourable balance of trade, and has been adopted by such a Liberal
thinker as John Stuart Mill, whereas the other has been definitely
rejected by the science. Furthermore, the Mercantilism of the seventeenth
century was a special instrument employed in the interests of a permanent
policy, which was exclusively national; while List’s Protection,
according to his own opinion, was merely a means of leading nations
towards the possibility of union on a footing of equality. It was a mere
transitory system, a policy dictated by circumstances.

List’s system cannot be regarded as the inspirer of modern Protection,
any more than he himself can be regarded as a direct descendant of the
old Mercantilists. Even in Germany, despite the great literary success
of his work, its influence was practically _nil_, unless we credit it
with the slight increase of taxation upon which the Zollverein decided in
1844, and couple with it the Protectionist campaign afterwards carried
on by List in the columns of his newspaper.[598] But the Liberal reforms
carried out by the English Parliament under the Premiership of Peel
were during that very same year crowned by the abolition of the Corn
Laws. This measure caused much consternation throughout Europe, and
the confirmation which Cobden’s ideas thus received influenced public
opinion a good deal and gave a Liberal trend to the commercial policy of
Europe during the next few years. The _régime_ of commercial treaties
inaugurated by Napoleon III was an outcome of this change of feeling.

Towards the end of 1879 a vague kind of Protectionism made its appearance
in Europe. Tariff walls were raised, but they never seemed to be high
enough. One would like to know whether these new tariffs, established
successfully by Germany and France, were in any way inspired by List’s
ideas.

It does not seem that they were. Neither of the two countries which
have remained faithful to a thoroughgoing Protection any longer needs
industrial education. Both of them have long since arrived at that
complex state which, according to List, is necessary for the full
development of their civilisation and the expansion of their power.
Germany and the United States have no longer any cause to fear England.
Their commercial fleets are numerous, their warships powerful, and their
empires are every day expanding. Were he to return to this world to-day,
List, who so energetically emphasised the relative value of the various
commercial systems, and the necessity of adapting one’s method to the
changing conditions of the times and the character of the nation, but
always laid such stress upon the essentially temporary character of
the tariffs raised, would perhaps find himself ranged on the side of
those who demand a lowering of those barriers in the interest of a more
liberal expansion of productive forces. Has he himself not declared
that “in a few years the civilised nations of the world, through the
perfection of the means of transport, through the influence of material
and intellectual ties, will be as united, nay, even more closely knit
together, than were the counties of England a hundred years ago”?[599]
Even the profound changes in the international economic situation during
the last sixty years fail to supply a serious justification for the
Protectionist policy of the great commercial nations, and the essential
traits of this new _régime_ differ _toto cælo_ from the outlines supplied
by List. Far from allowing agriculture to develop naturally, there has
arisen the cry for some protection for the farmer, which has served as
a pretext for a general reinforcement of tariffs in a great number of
cases, notably in France and Germany. The competition of American corn
has hindered European agriculture from benefiting by the advancement of
industry as List had predicted. Modern tariffs, involving as they do the
taxation of both agricultural and industrial products, imply a conception
of Protection entirely different from List’s. He would have confined
Protection to the most important branches of national production—to
those industries from which the other and secondary branches receive
their supplies. Only on this ground would he have justified exceptional
treatment.[600] It is an essentially vigorous conception, and what
he sought of Protection was an energetic stimulant and an agent of
progress. But a tariff which indifferently protects every enterprise,
which no longer distinguishes between the fertilising and the fertilised
industries, and increases all prices at the same time, can have only
one effect—a loss for one producer and a gain for another. Their
relative positions remain intact. It is no longer a means of stimulating
productive energy; it is merely a general instrument of defence against
foreign competition, and is essentially conservative and timorous.

To speak the truth, tariff duties are never of the nature of an
application of economic doctrines. They are the results of a compromise
between powerful interests which often enough have nothing in common with
the general interest, but are determined by purely political, financial,
or electoral considerations. Hence it is futile to hope for a trace of
List’s doctrines in the Protective tariffs actually in operation. His
influence, if indeed it is perceptible anywhere, must be sought amid the
subsidiary doctrines which uphold them.

The only complete exposition of Protectionism that has been given us
since List’s is that of Carey,[601] the American economist. Carey was
at first a Free Trader, but in 1858 became a Protectionist, and his
ideas, which were expounded in his great work _The Principles of Social
Science_, published in 1858-59, bear a striking resemblance to those of
his German predecessor.

Carey, like List, directs his attack against the industrial pre-eminence
of England, and substitutes for the ideal of international division
of labour the ideal of independent nationality, each nation devoting
itself to all branches of economic activity, and thus evolving its own
individuality. According to him, Free Trade tends to “establish one
single factory for the whole world, whither all the raw produce has to be
sent whatever be the cost of transport.”[602] The effect of this system
is to hinder or retard the progress of all nations for the sake of this
one. But a society waxes wealthy and strong only in proportion as it
helps in the development of a number of productive associations wherein
various kinds of employments are being pursued, which increase the demand
for mutual services and aid one another by their very proximity. Such
associations alone are capable of developing the latent faculties of
man[603] and of increasing his hold upon nature. These two traits help
to define economic progress. Under a slightly different form we have a
picture of the normal nation or the complex State so dear to the heart
of Friedrich List—an ideal of continuous progress as the object of
commercial policy being substituted for one of immediate enrichment.

Following List, but in a still more detailed fashion, Carey sought to
show the beneficial effects that the proximity of protected industry
would have upon agriculture. But unfortunately there are other arguments
upon which Carey lays equal stress that are really of a much more
debatable character.

Protection, according to Carey, by furnishing a ready market for
agricultural products, would free agriculture from the burden of an
exorbitant cost of carriage to a distant place. This argument, which
List[604] merely threw out as a passing suggestion, continually recurs
with the American author. But, as Stuart Mill justly remarked,[605] if
America consents to such expenditure it affords a proof that she procures
by means of international exchange more manufactured goods than if she
manufactured them herself.

Another no less debatable point: The exportation of agricultural
products, says Carey, exhausts the soil, for the products being consumed
away from the spot where they are grown, the fertilizing agents which
they contain are not restored to the earth; a manufacturing population
in the immediate neighbourhood[606] would remedy this. But, as John
Stuart Mill again remarks,[607] and justly enough, it is not Free Trade
that forces America to export cereals. If she does so, it is because
exhaustion of soil appears to her an insignificant inconvenience compared
with the advantage gained by exportation.

Carey, finally, was one of the first to discover in Protection a means of
increasing wages. Once the complex economic State is established there
arises a keen competition between the _entrepreneurs_ who require the
service of labour—a competition which naturally benefits the workman. But
this advantage, granting that it does exist, is more than counterbalanced
by the increased price of goods.

We see that Carey, although sharing the fundamental conceptions of List,
employs arguments that are much less valid. Both in power of exposition
and in the scientific value of his work, the German author shows himself
vastly superior to his American successor. He is also much more moderate.
Carey is not content with industrial Protection; he demands agricultural
Protection as well, and the duties, though a little higher than those
proposed by List, seem hardly sufficient for him.

Despite all this similarity of views, Carey does not owe his inspiration
to List. He was acquainted with the _National System_ and he quoted it.
But American economic literature had already supplied him with analogous
suggestions. Even more than books, the economic life of America itself
as it evolved before his very eyes had contributed to the formation of
his ideas. It was the progress of America under a Protective _régime_,
it was the spectacle of a country as yet entirely new and sparsely
populated, increasing the produce of her soil as colonisation extended,
and multiplying her wealth as population became more dense, that inspired
him with the idea of a policy of isolation with a view to hastening the
utilisation of those enormous resources. More fortunate than List, he saw
his ideas accepted, if not by the scientific experts of his country (who
on the whole remained aloof), at least by the American politician, who
has applied his principles rather freely.[608]

Carey’s doctrine, accordingly, cannot be attributed directly to the
influence of List. It remains to be seen whether List had any influence
upon European doctrines.

He undoubtedly succeeded in forcing the acceptance of the idea of a
temporary Protection for infant industries even upon Free Traders. The
most notable convert to this view was John Stuart Mill.[609] But it was
a somewhat Platonic concession that he made. He thought it inapplicable
to old countries, for their education was no longer incomplete, and at
best useful only for new countries.

Can modern Protectionists claim descent from List? In the absence of
any systematic treatise dealing with their ideas, it is not always easy
to glean the significance of their doctrines from the various articles,
discourses, and brochures amid which they are scattered.[610] Neglecting
those writers who are merely content to reproduce the old fallacies
of the Mercantile arguments concerning the balance of trade,[611] the
majority of them appear to base their case more or less explicitly
upon two principal arguments: (1) the necessity for economic autonomy;
(2) the patriotic necessity of securing a national market for national
products.[612] These two points of view, which are more or less clearly
avowed and accepted as political maxims, would, if applied with logical
strictness, result in making all external commerce useless. Each nation
would thus be reduced to using just those resources with which Nature
had happened to endow it, but it could get little if any of the goods
produced by the rest of mankind. These two ideas were not absolutely
foreign to List’s thought, although they never assumed anything more than
a secondary or subordinate character. He never considered them as the
permanent supports of a commercial policy.

List frequently spoke of making a nation independent of foreign
markets by means of industry. He considered that nation highest which
“has cultivated manufacturing industry in all its branches within its
territory to the highest perfection, and whose territory and agricultural
production is large enough to supply its manufacturing population with
the largest part of the necessaries of life and raw materials which they
require.” But he also recognised that such advantages were exceptional,
and that it would be folly for a nation to attempt to supply itself by
means of national division of labour—that is, by home production—with
articles for the production of which it is not favoured by nature,
and which it can procure better and cheaper by means of international
division of labour, or, in other words, through foreign commerce.
Complete autonomy is accordingly an illusion. But we cannot deny that
some of his expressions seem to give credit to the false idea that a
country which obtains a considerable portion of its consumption goods
from foreigners must be dependent upon those foreigners.[613] In fact,
it is no more dependent upon the foreigner than the foreigner is upon
it. In the case of a buyer and seller who is the dependent person? There
is but one instance in which the expression is justified, and that is
when a foreign country has become the only source of supply for certain
commodities. Then the buyer does become dependent, and List rightly
enough had in view the manufacturing monopoly enjoyed by England—a
monopoly that no longer exists.

He also spoke of retaining the home market for home-made goods; but he
thought that this guarantee would of necessity have to be limited to the
period when a nation is seeking to create an industry for itself: at
a later period foreign competition becomes desirable in order to keep
manufacturers and workmen from indolence and indifference.[614]

At no period was List anxious to make economic autonomy or the
preservation of the home market the pivot of his commercial policy. The
creation of native industry is the only justification of protective
rights, but this is the one point which modern Protectionists cannot
insist upon without anachronism.

List left no marked traces of his influence either upon practical
politics or upon Protectionist doctrines. It is in his general views that
we must seek the source of his influence and the reason for the position
which he holds in the history of economic doctrines.


III: LIST’S REAL ORIGINALITY

List’s method is essentially that of the pioneer. He was the first to
make systematic use of historical comparison as a means of demonstration
in political economy. Although he can lay no claim to be the founder of
the method, still the brilliant use which he made of it justifies us in
classifying him as the equal, if not the superior, of those who at the
same moment were attempting the creation of the Historical school and the
transformation of history into the essential organon of economic research.

List also introduced new and useful points of view into economics.
The principle of free exchange as formulated by Smith, and especially
by Ricardo and Say, was evidently too absolute and rested upon a
demonstration that was too abstract for the ordinary politician. If,
as List justly remarks, the practice of commercial nations has so long
remained contrary to a doctrine that all economists regard as admirable,
it is not without some just cause. As a matter of fact, can the statesman
ever place himself outside of the point of view of national interest of
which he is the custodian? It is not enough for him to know that the
interchange of products will in some degree increase wealth.[615] He
must be certain that this increased wealth will benefit his own nation.
He must be equally well assured that Free Trade will not result in too
sudden a displacement of population or industry, the social and political
results of which might be very harmful. In other words, political economy
must be subordinated to politics in general, and to-day there is no
single economist who does not recognise the impossibility of separating
them in practice.[616] There is none that does not perceive the influence
of political power on economic prosperity, and that consequently does not
recognise the necessity for the different complexion which the peculiar
circumstances of each country imposes upon the practical application of
the principle of commercial liberty.

This is not all. List by abandoning the favourite habit of
eighteenth-century writers who contrasted man and society, and by
giving us a picture of man as he really is, as a member of a nation,
has introduced a fruitful conception into economics of which we have
not yet seen the full results. He rightly treats of nations not merely
as moral and political associations created by history, but also as
economic associations. Just as a nation is politically strengthened by
the moral cohesion of its citizens, so its economic cohesion increases
the productive energy of each individual and enhances the prosperity of
the whole nation.

And Governments, while charged with maintaining the political unity of
a country, ought also to retain its economic unity by subordinating all
local interests to the general interest, by preserving intact the liberty
of internal trade, by organising railways and canals on a national basis,
by keeping watch over the central bank, and by aiming at a uniform code
of commercial legislation. This was the programme outlined by List in his
paper the _Zollvereinsblatt_.

This belief in the power which a unified economic organisation can bring
to a nation is by no means too common among individualists, who at bottom
are often particularists. But List possessed it in the highest degree.
He devoted many years of his life to advocating the establishment of a
German railway system, and it was he who traced the principal highways
which have since been established in Germany. Protection, in his opinion,
was one means of increasing the economic cohesion of Germany, because of
the solidarity of interests which would result from the presence of a
powerful industry.

With similar enthusiasm he devoted himself to two apparently
contradictory tasks—the suppression of inter-State duties and the
establishment of protective rights. To him there was no element of
contradiction in this, any more than there would be for us in a national
system of political economy with no protective rights.[617]

He also extended the political horizon of the Classical school and
substituted a dynamic for their purely static conception of national
development. His thorough examination of the conditions of economic
progress is a contribution to the study of international trade exactly
analogous to the contribution made by Sismondi to the study of national
welfare. But, unlike Sismondi, who wished to retard this progress, he is
anxious to stimulate it, and so he charges the State with the duty of
safeguarding the future prosperity of the country and with furthering its
production. The actual procedure, involving as it did the establishment
of protective rights, may appear to us to be unfortunate.[618] But the
idea which inspires it—the recognition that in the interests of the
future national power has a definitely economic _rôle_—is essentially
sound. To-day it is a mere commonplace, but when List enunciated it it
was quite a novel idea.

In attempting to define List’s real significance one feels that he
failed in the achievement of his chief aim. He has not succeeded in
breaking down the abstract theory of international trade. On the other
hand, he did make a real contribution to economic science, a contribution
which the whole of the nineteenth century seemed bent upon emphasising,
namely, that the Classical writers had been too ready to draw universal
conclusions from their doctrines, forgetting that in economics it is
never safe to pass from pure theory to practical applications without
taking account of the intermediate links and making allowance for change
of time and place—considerations which abstract theory rightly avoids.
List’s merit lies in his having emphasised this truth, especially in
the region of international trade, and in his doing it just at that
particular moment.




CHAPTER V: PROUDHON AND THE SOCIALISM OF 1848


Proudhon comes next, though his place in the history of economic
doctrines is not easily defined. Like all socialists he begins with a
criticism of the rights of property. The economists had carefully avoided
discussing them, and political economy had become a mere _résumé_ of the
results of private property. Proudhon regarded these rights as the very
basis of the present social system and the real cause of every injustice.
Accordingly he starts with a criticism of property in opposition to the
economists who defended it.

But how can we reform the present system or replace it by a better?
Herein lies the difficulty. Born twenty years earlier, Proudhon, like
many others, would perhaps have invented a Utopia. But what was possible
in 1820 was no longer so twenty years later. Public opinion was already
satiated with schemes of reform. Owen, Saint-Simon, Fourier, Cabet,
and Louis Blanc had each in his turn proposed a remedy. The fancy of
reformers had roamed at will over the whole wide expanse of possible
reforms. Proudhon was well acquainted with all these efforts, and had
come to the conclusion that they were all equally useless. Hence he turns
out to be a critic of the socialists as well as of the economists.

Proudhon attempts the correction of the vices of private property without
becoming a party to what he calls the “crass stupidity of socialism.”
Every Utopian scheme is instinctively rejected. He cares nothing for
those who view society as they do machinery and think that an ingenious
trick is all that is needed to correct all anomalies and to reset the
machine in motion. To him social life means perpetual progress.[619] He
knows that time is required for the conciliation of those social forces
that are warring against one another. He was engrossed with his attempt
to find a solution for this difficult problem when the Revolution of
1848 broke out, and Proudhon, suddenly thrown into action, finds himself
forced to express his ideas in a concrete form, such that all could
understand. The critic has to try his hand at construction, and almost
despite himself he outlines another Utopia in his Exchange Bank.

Other writers had sought a solution in the complete overthrow of the
present methods of production and distribution. But Proudhon thought it
lay in improved circulation. It was an ingenious idea, and it deserves
mention in a history of economic doctrines because of the truth, mingled
with error, which it contains, and because it has become the type of
a series of similar projects. It is upon this conception that we wish
to dilate here. Leaving aside his other ideas, which are no whit less
interesting, we shall treat of Proudhon the philosopher, moralist, and
political theorist only in so far as these have influenced Proudhon the
economist.[620]


I: CRITICISM OF PRIVATE PROPERTY AND SOCIALISM

The work that first brought Proudhon to the notice of the public was a
book published in 1840 entitled _Qu’est-ce que la Propriété?_ Proudhon
was then thirty-one years of age.[621] Born at Besançon, he was the son
of a brewer,[622] and was forced to earn his living at an early age. He
first became a proof-corrector, and then set up as a printer on his own
account. Despite hard work he became a diligent reader, his only guide
being his insatiable thirst for knowledge. The sight of social injustice
had sent the iron into his soul. Economic questions were faced with all
the ardour of youth, with all the enthusiasm of a man of the people
speaking on behalf of his brothers, and with all the confidence of one
who believes in the convincing force of logic and common sense. All this
is very evident in his brilliantly imaginative work. Mingled with it is
a good deal of that provoking swagger which was noted by Sainte-Beuve as
one of his characteristics, and which appears in all his writings.

Throughout this treatise from first page to last there periodically
flashes one telling phrase which sums up his whole argument, “Property is
theft.”[623]

The question then arises as to whether Proudhon regards all property
as theft. Does he condemn appropriation, or is it the mere fact of
possession that he is inveighing against? This is how the public at large
have viewed it, and it would be useless to deny that Proudhon owes a
great deal to this interpretation, and the consequent consternation of
the _bourgeoisie_. But his meaning is quite different. Private property
in the sense of the free disposal of the fruits of labour and saving is
in his opinion of the very essence of liberty. At bottom this is nothing
more than man’s control over himself.[624] But why attack property,
then? Property is attacked because it gives to the proprietor a right
to an income for which he has not worked. It is not property as such,
but the right of escheat, that forms the butt of Proudhon’s attack; and
following the lead of Owen and other English socialists, as well as the
Saint-Simonians, he directs his charges against that right of escheat
which, according to circumstances and the character of the revenue,
is variously known as rent, discount, money interest, agricultural
privilege, sinecure, etc.[625]

Like every socialist, Proudhon considered that labour alone was
productive.[626] Land and capital without labour were useless. Hence the
demand of the proprietor for a share of the produce as a return for the
service which his capital has yielded is radically false. It is based
upon the supposition that capital by itself is productive, whereas the
capitalist in taking payment for it literally receives something for
nothing.[627]

All this is simply theft. His own definition of property is, “The right
to enjoy the fruits of industry, or of the labour of others, or to
dispose of those fruits to others by will.”[628]

The theme is not new, and the line of thought will be resumed—by
Rodbertus among others. The originality of the work consists not so much
in the idea as in the brilliance of the exposition, the vehemence of the
style, and the verve of the polemics hurled against the old arguments
which based property upon labour, upon natural right, or upon occupation.
A German writer[629] has said that, published in Germany or in England,
the book would have passed unnoticed, because in both those countries the
defence of property had been much more scientific than in France.[630]

The whole force of the work lies, not in itself, but in the weakness of
the opposing arguments, and this fact is quite sufficient to give it a
certain permanent value. The treatise sent an echo through the whole
world, and its author may be said to have done for French socialism what
Lassalle did for German. The ideas set forth are not new, but they are
expressed in phrases of wonderful penetration.

There is also a wealth of ingenious remarks, which, if not, perhaps,
true, deserve retention because of their originality. How such spoliation
on the part of capitalists and proprietors can continue without a revolt
of the working men is a question which has been asked by every writer on
theoretical socialism, without its full import ever being realised. Is
there not something very improbable in this? The problem is a curious
one, indeed, and requires much ingenuity for its solution. Marx disposed
of it by his theory of surplus value. Rodbertus in a simpler fashion
showed the opposition between economic distribution as realised in
exchange and the social distribution which lurks behind it. Proudhon has
his own solution. There is, says he, between master and men continual
miscalculation.[631] The master pays each workman in proportion to
the value of his own individual labour, but reserves for himself the
product which results from the collective force of all—a product which
is altogether superior to that yielded by the sum of their individual
efforts. This excessive product represents profits. “It is said that
the capitalist pays his workmen by the day. But to be more exact we
ought to say that he pays a _per diem_ wage multiplied by the number of
workmen employed each day—which is not the same thing. For that immense
force which results from union and from the harmonious combination of
simultaneous efforts he has paid nothing. Two hundred grenadiers can deck
the base of the Louqsor statue in a few hours, a task which would be
quite impossible for one man though he worked two hundred days. According
to the capitalist reckoning the wages paid in both cases would be the
same.”[632] “And so the worker is led to believe that he is paid for
his work, whereas in reality he is only partly paid for it. Even after
receiving his wage he still retains a right of property in the things
which he has produced.”[633] His explanation, though very subtle, is none
the less erroneous.

The appearance of the pamphlet made Proudhon famous, not merely in the
eyes of the public, who knew little of him beyond his famous formula, but
also in the opinion of the economists. Blanqui and Garnier, among others,
interested themselves in his work. “It is impossible to have a higher
opinion of anyone than I have of you,” writes the former.[634] Blanqui by
his favourable report to the Academy of Moral Sciences was instrumental
in thwarting the legal proceedings which the Minister of the Interior
was anxious to take against Proudhon. And it was upon Garnier’s advice
that the publisher Guillaumin, although a strong adherent of orthodox
economics, consented to issue a new work by Proudhon in 1846. The book
was entitled _Les Contradictions économiques_, and Guillaumin was not a
little startled by it.[635]

The sympathy of the economists is easily explained. They realised from
the first that Proudhon was a vigorous opponent of their views, but it
was not long before they discovered that he was an equally resolute
critic of socialism. Let us briefly examine his attitude with regard to
the latter.

No one has ever referred to socialists in harsher terms. “The
Saint-Simonians have vanished like a masquerade.”[636] “Fourier’s system
is the greatest mystification of our time.”[637] To the communists he
writes as follows: “Hence, communists! Your presence is a stench in my
nostrils and the sight of you disgusts me.” Elsewhere he says: “Socialism
is a mere nothing. It never has been and never will be anything.”[638]
The violence of his attitude towards his predecessors springs from a
fear of being confused with them. The procedure is intended to put the
reader on his guard against all equivocation, and to afford him valuable
preparation for appreciating Proudhon’s solutions by showing how utterly
impossible the other solutions are.

His attack upon the socialists roughly amounts to a charge of failure
to realise that the destruction of the present _régime_ would involve
taking a course in the opposite direction. The difficult problem which
he set out to solve was not merely the suppression of existing economic
forces, but also their equilibration.[639] He never contemplated “the
extinction of such economic forces as division of labour, collective
effort, competition, credit, property, or even economic liberty.”[640]
His chief concern was to preserve them, but at the same time to suppress
the conflict that exists between them. The socialists aim merely at
destruction. For competition they would substitute an associative
organisation of labour; instead of private property they would set up
community of goods[641] or collectivism; instead of the free play of
personal interest they would, according to Fourier, substitute love, or
love and devotion, as the Saint-Simonians put it, or the fraternity of
Cabet. But none of these satisfies Proudhon.

He dismisses association and organisation as being detrimental to
the liberty of the worker.[642] Labour’s power is just the result of
“collective force and division of labour.” Liberty is the economic force
_par excellence_. “Economic perfection lies in the absolute independence
of the workers, just as political perfection consists in the absolute
independence of the citizens.”[643] “Liberty,” he remarks in an address
delivered to the electors of the department of the Seine in 1848, “is
the sum total of my system—liberty of conscience, freedom of the press,
freedom of labour, of commerce, and of teaching, the free disposal of the
products of labour and industry—liberty, infinite, absolute, everywhere
and for ever.” He adds that his is “the system of ’89,” and that he
is preaching the doctrines of Quesnay, of Turgot, and of Say. Indeed,
it would not be difficult to imagine ourselves reading the Classical
rhapsodies concerning the advantages of Free Trade over again.[644]

Communism as a juridical system is rejected no less energetically. There
is no suggestion of suppressing private property, which is the necessary
stimulant of labour, the basis of family life, and indispensable to all
true progress. His chief concern is to make it harmless and to place
it at the disposal of everyone.[645] “Communism is merely an inverted
form of private property. Communism gives rise to inequalities, but of a
different character from those of property. Property is the exploitation
of the weak by the strong, communism of the strong by the weak.”[646]
It is still robbery. “Communism,” he exclaims, “is the religion of
misery.”[647] “Between the institution of private property and communism
there is a world of difference.”[648]

Racial devotion or fraternity as possible motives for action are not
recognised. They imply the sacrifice and the subordination of one man
to another. All men have equal rights, and the freer exercise of those
rights is a matter of justice, not of fraternity. Proudhon thinks the
axiom so very evident that he takes no trouble to explain it, but merely
gives us a definition of justice. In his first _Mémoire_ it is defined
as “a kind of respect spontaneously felt and reciprocally guaranteed to
human dignity in any person and under all circumstances, even though the
discharge of that feeling exposes us to some risk.”[649]

His justice is tantamount to equality. If we apply the definition to
the economic links which bind men together, we find that the principle
of mutual respect is transformed into the principle of reciprocal
service.[650] Men must be made to realise this need for reciprocal
service. It is the only way in which equality can be respected. “Do unto
others as you would that others do unto you”—this principle of justice is
the ethical counterpart of the economic precept of mutual service.[651]
Reciprocal service must be the new principle which must guide us in
rearranging the economic links of society.

And so a criticism of socialism helps Proudhon to define the positive
basis of his own system. The terms of the social problem as it presents
itself to him can now be clearly followed. On the one hand there is the
suppression of the unearned income derived from property—a revenue which
is in direct opposition to the principle of reciprocal service. On the
other hand, property itself must be preserved, liberty of work and right
of exchange must be secured. In other words, the fundamental attribute
of property must be removed without damaging the institution of property
itself or endangering the principle of liberty.[652]

It is the old problem of how to square the circle. The extinction of
unearned incomes must involve the communal ownership of the instruments
of production, although Proudhon did not seem to think so. Hitherto the
reform of property had been attempted by attacking the production and
distribution of wealth. No attention was ever paid to exchange. But
Proudhon thought that in the act of exchange inequality creeps in and a
new method of exchange is needed. Towards the end of the _Contradictions
économiques_ he gives us an obscure hint of the kind of reform to be
aimed at. After declaring that nothing now remains to be done except
“to sum up all contradictions in one general equation,” he proceeds to
ask what particular form that equation is to take. We have already, he
remarks, been permitted a glimpse of it. “It must be a law of exchange
based upon a theory of mutual help. This theory of mutualism—that is,
of natural exchange—is from the collective point of view a synthesis
of two ideas—that of property and that of communism.”[653] No further
definition is attempted. In a letter written after the publication of
the _Contradictions_ he still refers to himself as a simple seeker, and
states that he has a new book in preparation, in which these propositions
are to be further developed.

About the same time he had laid out his plans for active propaganda in
the press. But the Revolution of 1848 threw him into the _mêlée_ of party
politics and hastened the publication of his theories.

In order to give a better idea of the place occupied by Proudhon’s ideas,
and to show how they were connected with the socialist experiments of the
time, we must say a few words about the Revolution itself.


II: THE REVOLUTION OF 1848 AND THE DISCREDIT OF SOCIALISM

Socialists of all shades of opinion, who from 1830 to 1840 had been
advocating radical reforms, were given a unique opportunity of putting
their theories to the test during the Revolution of 1848. During the
four months (February to June) which preceded the terrible ruin of the
socialist Republic by the _bourgeoisie_ projects of all kinds which
for many years had been discussed in books and newspapers appeared
to be on the point of bearing fruit. For a number of weeks nothing
seemed impossible. “The right to work,” “organisation of labour,” and
“association,” instead of being so many formulas, were by a mere stroke
of the magic wand to be translated into realities.

Enthusiasts were not wanting to attempt this task of transformation, but,
alas! only to find every scheme tumble into ruins. Every formula, when
put to the test, was found to be void. The malevolence of some people,
the impatience of others, the awkwardness and haste of the promoters
even, made the experiments odious and ridiculous. Public opinion was
at last thoroughly wearied and all the reformers were indiscriminately
condemned.

The year 1848 is accordingly a memorable one in the history of social
ideas. The idealistic socialism of Louis Blanc, of Fourier, and of
Saint-Simon was definitely discredited. _Bourgeois_ writers thought
that it was utterly destroyed. Reybaud, who contributed the article on
Socialism to the _Dictionnaire d’Économie politique_ (edited by Coquelin
and Guillaumin) in 1852, writes as follows: “To speak of socialism
nowadays is to deliver a funeral oration. It has exhausted itself. The
vein is worked out. Should the human mind in its vertigo ever take it up
again it will be in a different form and under the influence of other
illusions.”

It fared scarcely better at the hands of subsequent socialists. Marx
referred to all his predecessors under the rather misleading title of
Utopians, and against their fantastic dreams he set up the “scientific
socialism” of _Das Kapital_. Between the two epochs lies a distinct
cleavage, marked by the Revolution of 1848. We must briefly see how this
was brought about, and rapidly review the more important experiments that
were made.

First of all there is “the right to work.” Fourier’s formula, which was
developed by Considérant and adopted by Louis Blanc and other democrats,
became extremely popular during the reign of Louis Phillipe. Proudhon
speaks of it as the only true formula of the February Revolution. “Give
me the right to work,” he declares, “and I will give you the right of
property.”[654]

Workmen thought that the first duty of the Provisional Government
was to give effect to this formula. On February 25 a small group of
Parisian workmen came to the Hôtel de Ville to urge their claims, and
the Government hastened to recognise them. The decree drawn up by Louis
Blanc was as follows: “The Provisional Government of the French Republic
undertakes to guarantee the existence of every worker by means of his
labour. It further undertakes to give work to all its citizens.” The
following day another decree announced the immediate establishment
of national workshops with a view to putting the new principle into
practice. All that was necessary to gain admission was to have one’s name
inscribed in one of the Parisian municipal offices.

Louis Blanc in his book of 1841 had demanded the establishment of
“social” workshops. Public opinion, misled by the similarity of names,
and encouraged to persist in its error by the enemies of socialism,
thought that the national workshops were the creation of Louis Blanc.
Nothing could be more incorrect. The “social” workshops, as we know, were
to engage in co-operative production, whereas the national workshops
were to provide employment for idlers. Similar institutions had been
established during every crisis between 1790 and 1830, generally under
the name of “charity works.” Moreover, it was Marie, the Minister
of Public Works, and not Louis Blanc, who organised them. Far from
providing work as the socialists had hoped, the Government soon realised
that the workshops afforded an admirable opportunity for binding the
workmen together into brigades which might act as a check upon the
socialistic tendencies of the Luxembourg Commission, then presided
over by Louis Blanc. The workshops were placed under the management of
Émile Thomas, the engineer, who was an avowed opponent of the scheme.
In his _Histoire des Ateliers nationaux_, written in 1849, he tells us
how they were controlled by him in accordance with the wishes of the
anti-socialist majority of the Provisional Government.[655]

But they were mistaken in their calculations. Those who thought that
the national workshops could be used for their own political ends were
soon undeceived. The Revolution greatly increased the number of idlers,
already fairly considerable as the result of the economic crisis of 1847.
Moreover, the opening of the workshops brought the workmen from the
provinces into Paris. Instead of the estimated 10,000, 21,000 had been
enrolled by the end of March, and by the end of April there were 99,400.
They were paid two francs a day while at work, and a franc when there
was no work for them. In a very short time it became impossible to find
employment for so many. The majority of them, whatever their trade, were
employed upon useless earthworks, and even these soon proved inadequate.
Discontent soon became rife among this army of unfortunate workers,
humiliated by the nature of the ridiculous labour upon which they were
employed, and scarcely satisfied with the moderate salary which they
received. The wages paid, however, were more than enough for the kind
of work that was being done. The workshops became centres of political
agitation, and the Government, thoroughly alarmed, and acting under
pressure from the National Assembly, was constrained to abandon them.

Suddenly, on June 21, a summons was executed upon all men between
seventeen and twenty-five enrolled in the shops, ordering them to join
the army or to leave for the country, where more digging awaited them.
The exasperated workmen rose in revolt. Rioting broke out on June 23,
but it was crushed in three days. Hundreds of the workers died in the
struggle, and the country was terrorised into reaction.

That simple logic which is always so characteristic of political parties
held the principle of “the right to work” responsible for this disastrous
experience, and it was definitely condemned. This is quite clear from
the constitutional debates in the National Assembly. The constitutional
plan laid down by Armand Marrast on June 19, a few days before the riots,
recognised “the right to work.” “The Constitution,” says Article 2,
“guarantees to every citizen liberty, equality, security, instruction,
work, property, and public assistance.” But in the new plan of August
29—after the experience of June—the article disappeared. The right to
relief only was recognised. In the discussion on the article an amendment
re-establishing “the right to work” was proposed by Mathieu de la Drôme.
A memorable debate followed, in which Thiers, Lamartine, and Tocqueville
opposed the amendment, while the Radical Republicans Ledru-Rollin,
Crémieux, and Mathieu de la Drôme defended it.[656] The socialists had
become extinct. Louis Blanc was in exile, Considérant ill, while Proudhon
was afraid of startling his opponents and of compromising his friends.
Besides, the Assembly had already made up its mind. The amendment was
defeated, and Article 8 of the preamble to the Constitution of 1848 runs
as follows: “The Republic by means of friendly assistance should provide
for its necessitous citizens, either by giving them work as far as it
can, or by directly assisting those who are unable to work and have no
one to help them.”

During the reign of the July Monarchy “the organisation of labour” was
another phrase which divided the honours with “the right to work.” With
the spread of the Revolution came a similar menacing demand for its
realisation. By a strange coincidence the author of this formula was
also a member of the Provisional Government. And so when on February
28, three days after the recognition of “the right to work,” the workers
came in a body and claimed the creation of a Minister of Progress, the
organisation of labour, and the abolition of all exploitation, Louis
Blanc immediately seized the opportunity to urge his unwilling colleagues
to accede to their demands. He himself had pressed the Government to take
the initiative in social reform, and now that the Revolution had made him
a member of the Government how could he escape his responsibility? After
some difficulty his colleagues succeeded in persuading him to accept the
alternative of a Government commission on labour, of which he was to be
president. The commission was entrusted with the task of drawing up the
proposed reforms, which were afterwards to be submitted to the National
Assembly. To mark the contrast between the old and the new _régime_ the
commission carried on its deliberations in the Palais du Luxembourg,
where the Chambre des Paris formerly sat.

The Luxembourg commission was composed of representatives elected by
workmen and masters, three for each industry. The representatives met
in a general assembly to discuss the reports prepared by a permanent
committee of ten workers and an equal number of masters, to which Louis
Blanc had added a few Liberal economists and socialists, such as Le Play,
Dupont-White, Wolowski, Considérant, Pecqueur, and Vidal. Proudhon was
also invited, but refused to join. As a matter of fact, only the workers
took part in the sittings.

The commission, although it possessed no executive power, might have been
of some service. But Louis Blanc, as he himself confessed, regarded it
as “a golden opportunity where socialism had at its disposal a tribunal
from which it could address the whole of Europe.”[657] He still kept up
his _rôle_ of orator and writer, and devoted most of the sittings to an
eloquent appeal for the theories already outlined in his _Organisation
of Labour_.[658] Vidal and Pecqueur undertook the task of elaborating
the more definite proposals. In a lengthy report which appeared in the
_Moniteur_[659] they outlined a plan of State Socialism, with workshops
and agricultural colonies, with State depots and bazaars as places of
sale. Money in the form of warrants was to be borrowed on the security
of goods, and a State system of insurance—excepting life policies—was to
be established. Finally, the Bank of France was to be transformed into
a State bank. This was to extend the operation of credit, and to reduce
the rate of discount simply to insurance against risk. Vidal and not
Pecqueur is obviously the author of the report, for it contains some of
the projects that had already appeared in his book _De la Répartition des
Richesses_.

None of the projects was even discussed by the National Assembly. The
only positive piece of work accomplished by Louis Blanc’s commission
was done under pressure from the workmen. This was the famous decree of
March 2, abolishing piece-work and reducing the working day to ten hours
in Paris and eleven hours in the provinces. This decree, though it was
never put into operation, marks the first rudiments of French labour
legislation. Louis Blanc was forced to grant it because the working-class
element on the commission refused to take part in its proceedings until
they were satisfied on this point. The commission must also be credited
with several successful attempts at conciliation.

Not only did the commission fail to do anything permanent, but its
degeneracy into a mere political club thoroughly alarmed the public. It
became involved in elections, and even intervened in street riots. It
finally took a part in the demonstration of May 15, which, under pretext
of demanding intervention in favour of Poland, resulted in an invasion of
the National Assembly by the mob. Louis Blanc had already retired. Since
the reunion of the National Assembly the Government had been replaced
by an executive commission, and Blanc, no longer a supporter of the
Government, sent in his resignation on May 13. After that the commission
was at an end, and, like the national workshops, it all resulted in
nothing save a general discredit of socialist opinion.

There still remained the “working men’s associations.” Every socialist
writer of the early nineteenth century was agreed on this principle
of association. Every reformer, with the exception of Proudhon,[660]
who always pursued a path of his own, regarded it as the one method of
emancipation. It was quite natural that it should be put to the test.

In its declaration of February 26 the Provisional Government stated that
besides securing the right to work, the workers must combine together
before they could secure the full benefit of their labour. The moment
Louis Blanc attained to power he sought to guide the energies of the
commission in this direction. The “Association” was to be of the nature
of a co-operative productive society, supported by the State. Under the
influence of Buchez, an old Saint-Simonian, a Republican Catholic and
the founder of the newspaper called _L’Atelier_, there had been formed
in 1834 an association of jewellers and goldsmiths.[661] But it was a
solitary exception.

Louis Blanc was more fortunate. He successively founded associations
of tailors, of saddlers, of spinners and lace-makers, and he secured
Government orders for tunics, saddles, and epaulettes for them.
Other associations followed, and by July 5 the National Assembly was
sufficiently interested in these experiments to vote the sum of three
millions to their credit. A good portion of this sum passed into the
hands of mixed associations of masters and men formed with the sole
purpose of benefiting by the Government’s liberality. The workmen’s
associations pure and simple, however, received more than a million, and
there was not a sou of it left by 1849.

The first co-operative movement inspired by the ideas of Louis Blanc
was of short duration. The National Assembly took good care to place
the new societies under Ministerial control by appointing a _Conseil
d’Encouragement_, nominated by the Ministry to fix the conditions under
which loans should be granted. The Conseil hastened to publish model
regulations which left the associations little scope for internal
organisation. So stringent were the rules that several of them were
immediately jeopardised, and every society which failed to conform to one
of the three models outlined in Article 19 of the Commercial Code was
obliged to dissolve. This meant every society which was not nominally
a collective society, a joint stock or a limited liability company. By
1855, according to the testimony of Reybaud, there remained only nine out
of those subsidised in 1848. Consumers’ co-operative societies, that is,
the societies which aimed at securing cheap commodities, established at
Paris, Lille, Nantes, and Grenoble, were also dissolved.

And so all these experiments—the only ones that had not already brought
reformers into discredit—were destined to fail in their turn. Their
extinction was partly due to political causes, partly to their founders,
who had not yet been trained in the difficult task of building up such
associations.

The social experiments of 1848 one after another foundered, bringing
a distrust of theories in their train. There still remained one other
experiment connected with Proudhon’s name—that of free credit. But it
also was destined to fail like the rest.


III: THE EXCHANGE BANK THEORY

The Revolution of 1848 did not take Proudhon quite unawares, although he
considered the outbreak was rather sudden. He was soon convinced that the
real problem to be determined was economic rather than political, but he
also realised that the education of the masses was too backward to permit
of a peaceful solution. Proudhon, in this matter at one with his French
_confrères_, had hoped for such a solution.[662] He thought the February
Revolution was a child prematurely born.[663] In a striking article in
the columns of _Le Peuple_ he gave wistful expression to his fears as he
foresaw the Revolution impending. Its solution had been delivered to none
and its interpretation baffled the ingenuity of all.

“I have wept over the poor workman, whose daily bread is already
sufficiently uncertain and who has now suffered misery for many years. I
have undertaken his defence, but I find that I am powerless to succour
him. I have mourned over the _bourgeois_, whose ruin I have witnessed
and who has been driven to bankruptcy and goaded to opposition of
the proletariat. My personal inclination is to sympathise with the
_bourgeois_, but a natural antagonism to his ideas and the play of
circumstance have made me his opponent. I have gone in mourning and paid
penance for the spirit of the old Republic long before there were any
signs of its offspring. This Revolution which was to restore the public
order merely marks the beginning of a new departure in social revolution
which no one understands.”[664]

But the Revolution having once begun, Proudhon did not feel himself
justified in being behindhand. He had been a most severe critic of the
existing _régime_, and he felt that he was bound to attempt a solution
of the practical problems which suddenly came to the front. He became a
journalist and threw himself whole-heartedly into the struggle. Hitherto
he had been content with vague suggestions as to where the evil lay. But
now he was anxious to make reform practicable and to fill in the details
of the scheme; and so he invented the Exchange Bank.

Proudhon’s exposition of the scheme is contained in a number of
pamphlets, in newspapers, and in his books.[665] The explanations do
not always tally, and he is not always happy in stating exactly what he
thinks. This explains why he has been so often misunderstood. We shall
try to give a _résumé_ of his ideas before proceeding to criticise them
and to compare them with analogous projects formulated both before and
after his time. This will help us to understand where the originality of
the scheme lay.

The fundamental principle on which the whole scheme rests is somewhat as
follows: Of all the forms of capital which allow of a right of escheat to
the product of the worker, whether in the form of rent, of interest, or
of discount, the most important is money, for it is only in the form of
money that these dues are actually paid.[666] If we could suppress the
right of escheat in the case of this universal form of capital—in other
words, if interest were abolished—the right of escheat in every other
case would soon disappear.

Let us suppose that by means of some organisation or other money required
for the purchase of land, machinery, and buildings for industrial
purposes could be procured without interest. Were this the case the
required capital would then be obtained in that way instead of by payment
of interest or rent as is the case to-day. The suppression of money
interest would enable the worker to borrow capital gratuitously, and
would give him immediate control over all useful capital instead of
renting it. All attempts to hold up capital for the sake of receiving
interest without labour would thus be frustrated. The right of property
would be reduced to mere possession. Exchange would be reciprocal, and
the worker would secure all the produce of his labour without having to
share it with others. In short, economic justice would be secured.

This is all very well, but how can the necessary money be obtained
without paying interest? Everything depends upon that.

Proudhon invites us to consider what money really is. It is a mere medium
of exchange which is designed to facilitate the circulation of goods.
Proudhon, who had hitherto regarded money as capital _par excellence_,
now treats it as a mere instrument of exchange. “Money by itself is of
no use to me. I merely take it in order to part with it. I can neither
consume it nor cultivate it.”[667] It is a mere medium of exchange, and
the interest paid merely covers this cost of circulation.[668] But paper
money will fulfil this function quite as well and much more cheaply.
Banks advance money in exchange for commodities or supply bills which
are immediately transferable into cash. In exchange for this service the
banker receives a discount which goes to remunerate the shareholders who
have supplied the capital. Why not establish a bank without any capital
which, like the Bank of France, will discount goods with bills—either
circulation or exchange notes? The bills would be inconvertible, and
consequently would cost scarcely anything, and there would be no capital
to remunerate.

The service given would be equal to that given by the banks, but would
cost a great deal less. All that would be required to ensure the
circulation of the bills would be an understanding on the part of the
_clientèle_ of the new bank that they would accept them as payment for
goods. The bearer would thus be certain that they were always immediately
exchangeable, just as if they were cash. The clients would lose nothing
by accepting them, for the statutes would decree that the bank should
never trade in anything except goods actually delivered or under promise
of delivery. The notes in circulation would never exceed the demands
of commerce. They would always represent goods already produced and
actually sold, but not yet paid for.[669] Following the example of other
banks, the bank would advance to the seller of the goods a sum of money
which it would subsequently recover from the buyer. The merchants and
manufacturers would obtain not only their circulating capital without
payment of interest, but also the fixed capital necessary for the
founding of new industries. These advances obtained without interest
would enable them to buy and not merely to rent the instruments of
production which they needed.[670]

The consequences of a reform of this kind cannot be easily enumerated.
Not only would capital be freely placed at the disposal of everyone, but
every class distinction would disappear[671] as soon as the worker ceased
selling his products at cost price[672] and government itself would
become useless. The aim of all government is to check the oppression
of the weak by the strong.[673] But the moment fair exchange becomes
possible, free contract is sufficient to secure this; there is no longer
anyone who is oppressed. All are equally favoured, for the cause of
contention has been removed. “Once capital and labour are identified,
society will subsist of its own accord, and there will no longer be any
need for government.” Government has “its origin and its whole being
immersed in the economic system.” Proudhon’s system means anarchy—the
absence of government.[674]

Such is Proudhon’s plan, and such its consequences. To understand its
full significance we must inquire whether (1) the substitution of
exchange notes for bank-notes payable at sight is practicable, and, (2)
supposing it to be practicable, if it is likely to have the effects
anticipated by its author.

Proudhon states that his system merely involves the universal adoption of
exchange notes.[675] The Exchange Bank would merely append the manager’s
signature against the particular commodity discounted. But the issue of
bank-notes at the present time involves nothing more than this. Instead
of the bill of exchange which it now buys, and which enjoys only a
limited circulation because the signatories have only a very limited
credit, it is proposed that the Bank of France should substitute a note
bearing its own signature, which is universally known and testifies to
an illimitable amount of credit. In what respects, then, does Proudhon’s
circulating medium differ from a bank-note? It differs simply in the
fact that the signature of the Bank of France involves a promise of
reimbursement in metallic money, a commodity universally accepted and
demanded, while Proudhon’s Exchange Bank enters into no such definite
agreement, but merely undertakes to accept it in lieu of payment.

Theoretically, perhaps, the difference may appear insignificant, since
the signatures are the only guarantee of the solvency of the notes of
the Bank of France and the Exchange Bank alike. But in practice it is
enormous. The certainty that the note can be exchanged for money gives
it a wide currency and makes it acceptable to many people who rely
implicitly upon their confidence in the bank. They need give no thought
to the question of its solvency. A mere circulating medium, on the other
hand, in addition to transferring a claim to certain goods belonging
to clients of the bank, involves a certain amount of confidence in the
solvency of those clients—a confidence not always easily justified. A
note of this kind will only circulate among the bank’s _clientèle_. It
will never reach the general public as the bank-note actually does. The
clients themselves will keep their engagements just so long as the bank
continues to discount goods that have actually been delivered and never
refuses payment when it falls due. Failing this, the exchange notes,
instead of regularly returning to the bank, will remain in circulation.
A slight crisis or a little tension, and many of the clients will become
insolvent. The total nominal value of the exchange notes will quickly
surpass the actual value of the goods which they represent. There will be
a rapid depreciation, and clients even will refuse to take them.

It is just possible to conceive of the circulation of such exchange
notes, but the area of circulation will be a very limited one, and it
will be utterly impossible if all the clients are not perfectly solvent.

Let us, however, suppose that the practical difficulties have been
overcome, and that the exchange notes are already in circulation.
Interest will not disappear even then, and herein lies the essential
weakness of the system.

Why does the Bank of France charge a discount? Is it, as Proudhon
suggests, because it supplies cash in return for a bill of exchange,
so that “the seigneurial right of discount”[676] would disappear with
the adoption of a non-metallic currency? The bank charges discount
simply because it gives a certain quantity of merchandise immediately
exchangeable in return for a bill of exchange falling due some months
hence. It gives a tangible commodity in exchange for a promise—a present
good for a future. What the bank takes is the difference between the
present value of the bill of exchange and its value when it falls due. It
is not the mere whim of the banker or the employment of a particular kind
of money that gives rise to discount. It belongs to the very nature of
things. Proudhon notwithstanding, a sale for cash and a sale with future
payment must remain two different operations,[677] at least as long as
the actual possession of a good is judged to be more advantageous than
its future possession.

This difference, even in the case of the Exchange Bank, would very
soon reappear. The exchange notes would represent goods which were to
be sold at a certain date. Although the Bank may refuse to discount,
this will not lessen the advantage enjoyed by those merchants who are
paid in cash. In order to secure this advantage they will enter into
agreement with those buyers who pay cash either in the form of goods or
of precious metals (which are, after all, commodities), granting a slight
rebate on the paper price. There would thus be two sets of prices, the
paper prices of goods sold for future payment and the money price of
goods sold for cash. The first would be higher than the second, and the
difference—refused by the banks—would be pocketed by the sellers. Money
interest would then reappear under a new form.

To this Proudhon would reply that the clients of the bank, under the
terms of their agreement, are debarred from taking any such premiums. Of
course, if they remained faithful to their promises interest or discount
would be suppressed; but this would result, not from the organisation
of the Exchange Bank, but because of mutual agreement. This would be a
purely moral reform requiring no banking contrivance to aid it, but one
in which progress must inevitably be very slow.

The Bank of Exchange failing to suppress discount, or to check the right
of escheat in general, Proudhon’s other conclusions fall to the ground.

His theoretical error consists in his treating money at one moment as
capital _par excellence_, at another as a mere medium of exchange having
no value. He forgets that money is desired not merely for purposes of
exchange, but also as a store of value, as the proper instrument for
hoarding and saving; and although the exchange notes may replace it in
one respect, they fail in another. We may increase the circulating media
at pleasure, but we cannot multiply our capital. Money may be replaced
by goods, but this will not add a single franc to the capital which
already exists in society, of which money itself is a part. Nor will it
lessen the superior value of present as compared with future goods—a
superiority which gives rise to the phenomenon of interest. The only
result of multiplying the exchange notes without increasing the amount
of social capital would be to raise prices as a whole, the price of
land, houses, and machinery as well as the price of consumption goods.
Capital would be lent as before, and being less plentiful the high rate
of interest or rent would tend to maintain the high level of prices,
and these would in turn be still further increased—a strange outcome
of a reform intended to lower them! Proudhon, having exaggerated the
evil effects of gold, now accepts Say’s formula too literally. J. B.
Say allowed himself to be led into error by his own formula that “Goods
exchange for goods,” and it is interesting to note that the Exchange Bank
is the logical, though somewhat paradoxical, outcome of the reaction
against the Mercantilist ideas concerning money which can be traced to
Adam Smith and the Physiocrats.

This does not imply that Proudhon’s idea is devoid of truth. The false
ideal of free credit contains the germ of a true ideal, namely, mutual
credit. The Bank of France is a society of capitalists whose credit
is established by the public who accept their notes. They really deal
in public credit. Proudhon saw clearly enough that their notes are
ultimately guaranteed by the public. The public are the true signatories
of these commercial goods. Were the public insolvent the bank would
never recover its advances, which really constitute the security for the
bills. The shareholders’ capital is only a supplementary guarantee. The
Comte Mollien, the Financial Minister of Napoleon I, declared that in
theory a bank of issue should be able to operate without any capital. The
public lends money to itself through the intermediary, the bank. Why not
operate without the intermediary? Why not eliminate the _entrepreneur_ of
credit just as the industrial or commercial _entrepreneur_ is eliminated
in the case of the co-operative society? Discount would not disappear
altogether, perhaps, but the rate of discount for borrowers would be
diminished in proportion to the extent to which they stood to gain as
lenders. This is the principle of the mutual credit society, where the
initial capital is almost entirely superseded, its place being taken by
the joint liability of the co-operators. Proudhon’s initial conception
seems to be reducible to this very simple idea.[678]

It seems that Proudhon was merely following the idea of a co-operative
credit bank, just as in other parts of the work he copies other forms
of co-operation without ever showing much sympathy for the principle
itself.[679]

In addition to a correct conception of the value of mutual credit,
there runs throughout his whole system a more fundamental idea which
helps to distinguish it from other forms of official socialism which
arose either before or after his time. This is his profound belief in
individual liberty as the indispensable motive of economic activity in
industrial societies. He realised better than any of his predecessors
that economic liberty is a definite acquisition of modern societies, and
that every true reform must be based on liberty. He has estimated the
strength of spontaneous economic forces more clearly than anyone else.
He has demonstrated their pernicious effects, but at the same time he
has recognised, as Adam Smith had done, that this was the most powerful
lever of progress. His passionate love of justice explains his hatred of
private property, and his jealous belief in liberty aroused his hostility
to socialism. Despite his famous formula, _Destruam et ædificabo_, he
destroyed more than he built. His liberalism rested on his profound hold
of economic realities, and the social problem of to-day, as Proudhon
clearly saw, is how to combine justice with liberty.

Proudhon’s project for an Exchange Bank must not be confused with
analogous schemes that have appeared either before or after his day. All
these schemes have a common basis in a reform of exchange as a remedy
for social inequalities. Apart from this one idea the resemblance is
frequently superficial, and the economic bases differ considerably.

(1) Proudhon’s idea has often been contrasted with Robert Owen’s labour
notes, and with the scheme prepared by Mr. Bray in 1839, in a work
entitled _Labour’s Wrongs and Labour’s Remedy_,[680] as well as with the
later system outlined by Rodbertus. Proudhon’s circulating notes have
nothing in common with the labour notes described by these writers. The
circulating notes represent commercial goods produced for the purpose
of private exchange. Prices are freely fixed by buyer and seller, and
they bear no relation to the labour time, as is the case with the labour
notes. The final result, doubtless, was expected to be the same. Proudhon
hoped that in this way the price of goods, now that it was no longer
burdened with interest on capital, would equal cost of production.
This result was to be obtained indirectly. The economic errors in the
two cases are also different. Proudhon’s error lay in his failure to
realise that metallic money is a merchandise as well as an instrument of
circulation. The error of Owen, of Bray, and of Rodbertus consisted of
a failure to see that the price of goods includes something more than
the mere amount of labour which they have cost to produce—an error which
Proudhon at any rate did not commit.

(2) Proudhon’s bank has also been confused with other banks of exchange
which are really quite different. The ideas underlying such schemes
had become prominent before Proudhon’s days, and numerous practical
experiments had been attempted along the lines indicated. These
banks aimed, not at the suppression of interest, but at a gradual
_rapprochement_ between producer and consumer, the goods offered for
sale being bought by the bank, and paid for in exchange notes upon an
agreed basis of calculation. Buyers in their turn would come to the
bank to obtain the necessaries of life, paying for them in exchange
notes. An experiment of this kind was made by a certain Fulcrand Mazel
in 1829.[681] In this case the bank was merely an _entrepôt_ which
facilitated the marketing of the goods produced. Such a system is open
to the objection that the value of the notes issued in payment for goods
would necessarily vary with the fluctuations in the value of these goods
during the interval which would elapse between the time they are taken
in by the bank and their eventual purchase by consumers. Proudhon’s plan
was to discount the goods already bought or actually delivered. The
bank would only advance what was actually promised, but would make no
charge for accommodation. Depreciation could only arise if the buyer were
insolvent. It could never result from a fall in price as a result of a
diminished demand for the product. Proudhon renounced all dealings with
solidarity when he dismissed Mazel’s project.[682]

(3) M. Solvay, a Belgian _entrepreneur_, has recently elaborated a scheme
of “social accounting.” He also proposes the suppression of metallic
money and the introduction of a perfect system of payment. Here, however,
the analogy ends.

What Solvay proposed was the replacement of metallic money, not by
bank-notes, but by a system of cheques and clearing-houses. His plan owes
its inspiration to the modern development of the clearing-house system.
Solvay thought that the system might be so extended as to make the
employment of money entirely unnecessary. To every such clearing-house
the State would hand over a cheque-book, covering a sum varying with
the amount of real or personal property which the house possessed. This
cheque-book was to have two columns, one for receipts, the other for
expenditure. Whenever any commodity was sold, the liquidation of debt
would be effected by the buyer’s stamping the book on the receipt side
and the seller’s stamping it on the expenditure side. As soon as the
total value of these transactions equalled the initial sum which the
cheque-book was supposed to represent the book would be returned to
the State bureau, where each individual account would be made up. “In
this way everybody’s receipts and expenditure will always be known with
absolute clearness.”[683]

The advantage of such a system would in the first place consist in the
economy of metallic money. In the second place it would furnish the State
with information as to the extent of everybody’s fortune. The State would
then be in possession of the information necessary for setting up an
equable scheme of succession duties which would gradually suppress the
hereditary transmission of acquired fortune. Such gradual suppression
would result in the total extinction of the fundamental injustice of
modern society, namely, the inequality of opportunity.[684] It would also
help the application of that other principle of distributive justice,
namely, “to each according as he produces.” The idea is Saint-Simon’s
rather than Proudhon’s.

The scope of the proposed reform is quite clear. Social accounting,
according to Solvay, is a mere element in a more general conception,
that of “productivism,” which in various ways is to result in increasing
productivity to its maximum.[685]

In all this it is impossible to see anything of Proudhon’s ideas.
With the exception of the suggestion of suppressing metallic money
the fundamental conceptions are utterly different. M. Solvay makes no
pretence to ability to suppress interest, and he never imagines that
money is the cause of interest. The cheque and clearing system is a mere
device for facilitating cash payment. It has nothing in common with the
Proudhonian system, whereby circulating notes are supposed to place
credit sales and cash payments on an equal footing.[686]

The most serious objection to Solvay’s system lies in the fact that
the suppression of money as a circulating medium must also involve its
suppression as a measure of value. It seems difficult to imagine that
the universal cheque bank with no monetary support would not result in
a rapid inflation of prices because of the superabundance of paper. But
although the particular process advocated by Solvay is open to criticism
there can be no objection to his desire to diminish the quantity of
metallic money or to further the ideal of equal opportunity for all.

The project was never successfully put into practice. Like the cognate
ideas of “the right to work,” “the organisation of labour,” and “working
men’s associations,” the idea of “free credit” has left behind it a mere
memory of a sudden check.

On January 31, 1849, Proudhon, in the presence of a notary, set
up a society known as the People’s Bank, with a view to showing
the practicability of free credit. The actual organisation differs
considerably from the theoretical outline of the Exchange Bank. The
Exchange Bank was to have no capital: the People’s Bank had a capital of
5,000,000 francs, divided into shares of the value of 5 francs each. The
Exchange Bank was to suppress metallic money: the People’s Bank had to
be content with issuing notes against certain kinds of commercial goods
only. The Exchange Bank was to suppress interest: the People’s Bank fixed
it at 2 per cent., expecting that it could be reduced to a minimum of ¼
per cent.

Despite these important changes the bank would not work. At the end of
three months the subscribed capital was only 18,000 francs, although the
number of subscribers was almost 12,000. Just at that moment—March 25,
1849—Proudhon was brought before the Seine Assize Court to answer for
two articles published on January 16 and 27, 1849, containing an attack
on Louis Bonaparte. He was sentenced to three years’ imprisonment and
fined 3000 francs. On April 11 he announced that the experiment would be
discontinued, and that “events had already proved too strong for it,”
which seemed to suggest that he had lost faith in the scheme.

From that moment free credit falls into the background, and political and
social considerations obtain first place in his later works.


IV: PROUDHON’S INFLUENCE AFTER 1848

It is extremely difficult to follow the influence of Proudhon’s thought
after 1848.

Karl Marx, who was almost unknown in 1848, became by the publication of
his _Kapital_ in 1867 practically the sole representative of theoretical
socialism. Marx’s _Misère de la Philosophie_,[687] published in 1847,
is a bitter criticism of the _Contradictions économiques_, and shows
how violently he was opposed to Proudhon’s ideas. To the champion
of collectivism the advocate of peasant proprietorship is scarcely
comprehensible; the theorist of class war can hardly be expected to
sympathise with the advocate of class fusion, the revolutionary with
the pacificist.[688] The success of Marx’s ideas after 1867 cast all
previous social systems into the shade. Proudhon, he thought, was a
mere _petit bourgeois_. When the celebrated International Working Men’s
Association was being founded in London in 1864 the Parisian workmen who
took part in it seemed to be entirely under the influence of Proudhon.
At the first International Congress, held at Geneva in 1866, a memorial
was presented which bore clear indications of Proudhon’s influence, and
its recommendations were adopted. At the following Congress, in 1867,
Proudhon’s ideas met with a more determined resistance, and by the time
of the Congress of Brussels (1868), and that of Basle (1869), Marx’s
influence had become predominant.

One might even doubt whether the Proudhonian ideas defended by the
Parisian workmen in 1866 were really those of the Proudhon of 1848.
They seemed much more akin to the thesis of his last work, _La Capacité
politique des Classes ouvrières_, published in 1865. This book was itself
written under the inspiration of a working men’s movement which had
arisen in Paris after 1862 as the result of a manifesto signed by sixty
Parisian workmen. This manifesto had been submitted to Proudhon as the
best known representative of French socialism. The attitude of the French
workmen at the opening of the “International,” then, was the effect of
a revival of Proudhonism as the outcome of the publication of this new
volume rather than a persistence of the ideas of 1848.[689]

The revival was of short duration. Since then, however, the Marxian
ideas have been submitted to very thorough criticism, and certain recent
writers have displayed an entirely new interest in Proudhon’s ideas.
These writers, chief among whom is M. Georges Sorel, combine a great
admiration for Marx with a no less real respect for Proudhon. But even
in this case it is difficult to speak of the movement as a revival of
Proudhon’s ideas. It is rather a new current which owes its inspiration
to syndicalism and combines French anarchy and German collectivism. In
any case, it is so recent that we cannot yet determine its full import.




BOOK III: LIBERALISM


It is time we returned to the Classical writers. Now that the combat
had grown fierce among its critics, we are anxious to know what the
Classical school itself was doing to repel the onslaughts of the enemy.
Its apparent quiescence must not mislead us into the belief that it was
already extinct. Although the great works of Ricardo, Malthus, and Say
were produced early in the century, it cannot be said that economic
literature even after that period, especially in England, had remained
at a standstill. But no work worthy of comparison with the writings of
the first masters or their eloquent critics had as yet appeared. Now,
however, the science was to captivate the public ear a second time, and
for a short period at least to unite its many votaries.

But the union was no true one. The Classical school itself was about to
break up into two camps, the English and the French. In no sense can they
be regarded as rivals, for they are defenders of the same cause. They are
both champions of the twin principles of Liberalism and Individualism.
But while the first, with John Stuart Mill as its leader, lent a
sympathetic ear to the vigorous criticism now rampant everywhere, which
claimed that the older theories ought to yield place to the new, the
French school, on the other hand, with Bastiat as its chief, struggled
against all innovation, and reaffirmed its faith in the “natural order”
and _laissez-faire_.

This divergence really belongs to the origin of the science. Traces of it
may be discovered if we compare the Physiocrats with Adam Smith, or J. B.
Say with Ricardo; but it was now accentuated, for reasons that we shall
presently indicate.

Our third Book naturally divides itself into two parts, the one devoted
to the French Liberal school, the other to the English.




CHAPTER I: THE OPTIMISTS


The previous Book has shown us the unsettled state of economic science.
It has also indicated how the science was turned from its original
course by reverses suffered at the hands of criticism, socialism, and
interventionism, which were now vigorous everywhere. The time had come
for an attempt to bring economic science back into its true path and
to its old allegiance to the “natural order,” a position which it had
renounced since the days of the Physiocrats and Adam Smith. This was the
task more especially undertaken by the French economists.

The attitude of the French school is not difficult to explain, for
the French economists found themselves faced by both socialism and
Protection. We must never forget that France is the classic land of
socialism.[690] The influence exercised in England by Owen and in Germany
by Weitling or Schuster is unworthy of comparison with the exalted _rôle_
played by Saint-Simon, Fourier, or Proudhon in France. The latter writers
wielded a veritable charm, not merely over working men, but also over the
intellectuals, and on that account were all the more dangerous, in the
opinion of economists.

French Protection was never represented by such a prominent champion
as Germany had in List, but it was none the less active. Protection in
England succumbed after a feeble resistance to the repeal movement led
by Cobden, but in France it was powerful enough to resist the campaign
inaugurated by Bastiat. It is true that Napoleon III suppressed it, but
it soon reappeared, as vigorous as ever.

The French school had thus to meet two adversaries, disguised as one;
for Protection was but a counterfeit of socialism, and all the more
hateful because it claimed to increase the happiness of proprietors
and manufacturers—of the wealthy; while socialists did at least aim at
increasing the happiness of the workers—of the poor. Protection was
also more injurious, for being in operation its ravages were already
felt, whereas the other, happily, was still at the Utopian stage. But in
hitting at both adversaries at once the French school discovered that
it possessed this advantage: it was free from the reproach that it was
serving the interests of a particular class, and could confidently reply
that it was fighting for the common good.

A war of a hundred years can scarcely fail to leave a mark upon the
nation which bears the brunt of it, and we think that this affords
some explanation of the apologetic tendencies and of the normative and
finalistic hypotheses for which the French school has so often been
reproached.

It is necessary that we should try to understand the line of argument
adopted by the French writers in defending the optimistic doctrines which
they so easily mistook for the science itself. They argued somewhat as
follows:

“Pessimism is the great source of evil. The sombre prophecies of the
pessimists have destroyed all belief in ‘natural’ laws and in the
spontaneous organisation of society, and men have been driven to seek for
better fortune in artificial organisation. What is especially needed to
refute the attacks of the critics, both socialists and Protectionists, is
to free the science from the compromising attitude adopted by Malthus and
Ricardo, and to show that their so-called ‘laws’ have no real foundation.
We must strive to show that natural laws lead, not to evil, but to good,
although the path thither be sometimes by way of evil; that individual
interests are at bottom one, and only superficially antagonistic; that,
as Bastiat put it, if everyone would only follow his own interest he
would unwittingly find that he was advancing the interests of all.” In a
word, if pessimism is to be refuted it can only be by the establishment
of optimism.

It is true that the French school protests against the adjective
“optimistic,” and refuses to be called “orthodox.” Its protests would
be justified if optimism implied quietism—that selfish contentment of
the well-to-do _bourgeois_ who feels that everything is for the best
in this best of all worlds—or the attenuated humanitarianism of those
who think that they can allay suffering by kind words or good deeds. It
is nothing of the kind. We have already protested against interpreting
_laissez-faire_ as a mere negation of all activity. It ought to be
accepted in the English sense of fair play and of keeping a clear field
for the combatants. The economists both of the past and of the present
have always been indefatigable wranglers and controversialists of the
first order, and they have never hesitated to denounce abuses. But their
optimism is based upon the belief that the prevalence of evil in the
economic structure is due to the imperfect realisation of liberty. The
best remedy for these defects is greater and more perfect liberty;[691]
hence the title “Liberal,” to which the school lays claim. The liberty of
the worker is the best guarantee against the exploitation of his labour
and the reduction of wages. M. Émile Ollivier, the author of the law
which suppressed combination fines, declared that freedom of combination
would put an end to strikes. Free loans would cause the disappearance of
usury. Freedom of trade would put an end to the adulteration of goods and
the reign of trusts. Competition would everywhere secure cheap production
and just distribution.[692]

This optimism, strengthened and intensified, deepened their distrust of
every kind of social reform undertaken with a view to protecting the
weak, whether by the masters themselves or through the intervention of
the State. Liberty, so they thought, would finally remedy the evils which
it seemed to create, while State intervention merely aggravated the evils
it sought to correct.[693]

What seems still more singular is their scant respect for
“associationism” as outlined in our previous chapter. It found just as
little favour as State control. They did not display quite the same
contempt for it as was shown by the Revolutionists. It was no longer
actually condemned, and they put forward a formal plea for the right
of combination, in politics, in religion, industry, commerce, and
labour. But they always interpreted it as a mere right of coalition
or association with a view to protecting or strengthening individual
activity. Association as an instrument of social transformation that
would set up co-operation in place of competition, and which in the name
of solidarity demanded certain sacrifices from the individual for the
sake of the community, was not to the liking of the Liberal Individualist
school. Even the less ambitious and less complete forms, such as the
co-operative and the mutual aid society, seemed to them to be full of
illusions and deceptions, if not actually vicious.[694]

The most striking characteristic of the French school is its unbounded
faith in individual liberty. This distinctive trait has never been
lacking throughout the century and a half that separates us from the
time of the Physiocrats. Its most eminent representatives, while spurning
the title Orthodox or Classical, have repeatedly declared that they wish
for no other name than Liberal.[695]

It is also marked by a certain want of sympathy with the masses in their
sufferings. Science, doubtless, does not make for sympathy. But what
we merely wish to note is the presence of a certain tendency—already
very pronounced in Malthus—to believe that people’s misfortunes result
from their vices or their improvident habits.[696] The Liberal school
was quite prepared to extend an enthusiastic welcome to the teaching
of Darwin. He pointed out that a necessary condition of progress was
the natural selection of the best by the elimination of the incapable,
and that the price paid is not a bit too high. Belief in the virtue of
competition led to the glorification of the struggle for life.

But the Liberal school failed to demonstrate the goodness of all natural
laws; neither did it succeed in arresting the progress of either
socialism or Protection. The end of the nineteenth century found it
submerged beneath the waters of both currents. Yet it never once lost
confidence. Its fidelity to principle, its continuity of doctrine,
its resolute, noble disdain of unpopularity, have won for it a unique
position; and it deserves better than the summary judgment of foreign
economists, who describe it as devoid of all originality, or at best as
only a pale reflection of the doctrine of Adam Smith.

In this chapter we are to study the period when Liberalism and Optimism
were at the height of their fame. It runs from 1830 to 1850. It was
during this epoch that the union of political and economic liberty took
place. Henceforth they are combined in a single cult known as Liberalism.
Economic liberty—that is, the free choice of vocation and the free
exchange of the fruits of one’s toil—no longer figured in the category
of necessary liberties, alongside of liberty of conscience or freedom of
the press. Like the others it was one of the successes already achieved
by democracy or civilisation, and to attempt to suppress it was as vain
as to try to make a river flow backward. It was just a part of the wider
movement towards freedom from all servitude.

The appearance of political economy at the time when the old _régime_
was showing signs of disintegration is not without significance. The
Physiocrats, who were the first Liberal Optimists, were unjustly ignored
and neglected by their own descendants, not because of their economic
errors so much as because of their political doctrines, especially their
acceptance of legal despotism, which seemed to the Liberals of 1830, if
not an actual monstrosity, at least a sufficiently typical survival of
the old _régime_ to discredit the whole Physiocratic system.[697]

Charles Dunoyer’s book, which appeared in 1845,[698] and which bears the
significant title of _De la Liberté du Travail, ou simple Exposé des
Conditions dans lesquelles les Forces humaines s’exercent avec le plus
de Puissance_, exactly marks this era of politico-economic Liberalism.
But although Dunoyer’s book is a eulogy of liberty in all its forms,
especially its competitive aspects, the optimistic note is not so marked
as it is in another much more celebrated work which appeared about the
same date—_Les Harmonies économiques_ of Bastiat (1850). The _Harmonies_
and the other works of Bastiat contain all the essential traits of the
Liberal doctrine. His extreme optimism and his belief in final causes
have been disavowed by a great many of the Liberal economists, but he
remains the best known figure of the Optimistic Liberal group, and
possibly of the whole French school.

Another economist whose name is inseparably linked with the Optimistic
doctrine, and of whom we have already made some mention, is the American
Carey.[699] In many respects Carey ought to be given first place, were it
only because of his priority as a writer, and especially, perhaps, since
he accuses Bastiat of plagiarism. In his treatment of certain aspects of
the subject, such as the question of method, in the logical consistency
of his argument, and in the scope of his discussion of such a problem
as that of rent, he displays a marked superiority. In our exposition
of Bastiat’s doctrine we shall give to Carey’s the attention which it
deserves. Our decision to give Bastiat and not Carey the central position
in this chapter is due in the first place to the consideration that we
are writing primarily for French students, who will be more frequently
called upon to read Bastiat than Carey; and in the second place to
the fact that the works of the American economist appeared at a time
when economic instruction scarcely existed in the United States, and
consequently his writings never exercised the same influence as those of
the French economist, which appeared just when the war of ideas was at
its fiercest. Finally, Carey’s doctrine is lacking in the beautiful unity
of conception of the _Harmonies_, so that alongside of the advocacy of
free competition among individuals is presented an outline of national
Protection. Thus we have been forced to divide our treatment of Carey
into two sections. The heterogeneous, not to say contradictory, character
of his doctrines accounts for his appearing in two different chapters.

Bastiat,[700] both at home and abroad, has always been regarded as
the very incarnation of _bourgeois_ political economy. Proudhon,
Lassalle in his famous pamphlet _Bastiat Schulze-Delitzsch_, Cairnes,
Sidgwick, Marshall, and Böhm-Bawerk all think of him as the advocate
of the existing order. None of them considers him a scientific writer.
They treat his writings as a kind of amplification of Franklin’s _Poor
Richard’s Almanac_, where apologues take the place of demonstration and a
much-vaunted transparency of style is simply due to absence of thought.

Bastiat deserves a juster estimate. The man who wrote that “if capital
merely exists for the advantage of the capitalist I am prepared to become
a socialist,” or who declared that “one important service that still
requires to be done for political economy is to write the history of
spoliation,” was not a mere well-to-do _bourgeois_. It is true that he
carried the “isms” of the French school to absurd lengths. An unkind fate
decreed that his contribution should mark the culminating-point of the
doctrine, to be followed by the inevitable reaction. To the force of that
reaction he had to bow, and his whole work was demolished.

Bastiat’s arguments against socialism are somewhat antiquated, but so
are the peculiar forms of socialist organisation which he had in view
when writing. This is not true of the arguments dealing with Protection.
These have not been entirely useless. Though they failed to check the
policy of Protection, they definitely invalidated some of its arguments.
If modern Protectionists no longer speak of the “inundation of a country”
or of an “invasion of foreign goods,” and if the old and celebrated
argument concerning national labour is less frequently invoked as a kind
of final appeal, we too often forget that all this is due to the small
but admirable pamphlets written by Bastiat. Such were _The Petition
of the Candle-makers_ and _The Complaint of the Left Hand against the
Right_. No one could more scornfully show the laughable inconsistency
of tunnelling the mountains which divide countries, with a view to
facilitating exchange, while at the same time setting up a customs
barrier at each end; or expose the patent contradiction involved in
guaranteeing a minimum revenue to the landed proprietors and capitalists
by the establishment of protective rights, while refusing a minimum wage
to the worker. No one has better emphasised the difficulty of justifying
an import duty as compared with an ordinary tax, for a tax is levied upon
the individual for the benefit of all, while a duty is levied upon all
for the benefit of the few.

He has not been quite so happy in his exposition of individualism. The
problem has been over-simplified: individual and international exchange
have been treated as if they were on all fours. Analogies, more amusing
than solid, are employed to show that the advantages of international
trade are greater if a country has an unfavourable balance against it,
and that international exchange benefits poor countries most.[701]

The thesis of the constructive portion of his work is as follows: “The
general laws of the social world are in harmony with one another, and
in every way tend to the perfection of humanity.” _A priori_, however,
are we not confronted with rank disorder everywhere? To that he replies
in his well-known apologue, “Things are not what they seem,” pointing
out that we cannot always trust what we see, and that what is not seen
is very often true. Apparent antagonisms on closer view often reveal
harmonious elements. But man’s freedom sometimes breaks the harmony
and destroys the liberty of others. Especially is this the case with
spoliation, which Bastiat never attempts to justify, but denounces
whenever he has the chance. But around man and within him are diverse
forces which must lead him the way of the good, deviate he never so
often, and which will finally and automatically re-establish the harmony.
“My belief is that evil, far from being antagonistic to the good, in some
mysterious way promotes it, while the good can never end in evil. In the
final reckoning the good must surely triumph.”[702]

It is quite evident that this doctrine goes far beyond the conception
of “natural laws,” and implies a belief in a Providential order. Bastiat
never shrinks from this position. He never misses an opportunity
of declaring his faith in language much clearer than that of the
Physiocrats. “God,” he writes, “has placed within each individual an
irresistible impulse towards the good, and a never-failing light which
enables him to discern it.”[703]

Auguste Comte has delivered an eloquent protest against the vain and
irrational disposition to think that only the spontaneous can be regarded
as conforming to the “order” of nature. Were this the case any practical
difficulty “that presented itself in the course of industrial development
could only be met with a kind of solemn resignation under the express
sanction of political economy.”[704]

Even as an exposition of the Providential order Bastiat’s faith is not
easy to justify. It by no means agrees with the Christian teaching on
the point. For we cannot forget that although Scripture teaches us that
both man and nature were declared good when first created by God, it also
teaches that both have been entirely perverted by man’s iniquity, and
that never will they become good of their own accord, since there is no
natural means of salvation.[705] Christian people are exhorted to kill
the natural man within them and to foster the growth of the new man.
Christianity promises a new heaven and a new earth—an infinitely more
revolutionary doctrine than that of the economic Optimists. Bastiat’s God
is, after all, just “_Le Dieu des bonnes gens_” whose praises are sung by
Béranger.

What are the facts of this pre-established harmony? What are its laws,
and where are they operative? They are in evidence everywhere, Bastiat
thinks—in value and exchange, in the institution of private property, in
competition, production and consumption, etc. We shall content ourselves
with a consideration of the circumstances under which Bastiat thought it
was most clearly seen.


I: THE THEORY OF SERVICE-VALUE

First of all we have the law of value, “which is to political economy
what numbers are to arithmetic.”[706]

Ricardo taught that value was determined by the quantity of labour
necessary for production. This theory is entirely at one with
Bastiat’s, and he would have felt no compunction about inserting it
in the _Harmonies_, for a theory of value which showed that every
form of property is really based upon labour seemed to accord with
the requirements of justice. But although Bastiat’s method was almost
exclusively deductive, and as little realistic as possible, he could
never content himself with an explanation which was all too clearly in
conflict with the facts. Such a theory could never explain why the value
of a pearl accidentally discovered should equal the value of another
laboriously brought from the depths of the sea. Accordingly he sought
another explanation, juster, and more in accordance with facts, than
Ricardo’s.

Carey effected just the needed correction of the Ricardian theory,
by propounding another ingenious explanation, namely, that value
is determined, not by the quantity of labour actually employed in
production, but by the quantity of labour saved. This would account for
those facts that refused to fit in with the Ricardian theory, and the
chance pearl was no longer a stumbling-block. Bastiat was evidently
attracted by this theory.[707] But his satisfaction was by no means
complete, for it is not quite clear how a value which is proportional
to the amount of labour saved—that is, to labour which never has been
and never will be undertaken—can be considered as an economic harmony.
But a ray of light illumines the darkness. The labour saved is a kind
of service rendered to the person who acquires the commodity. The
long-sought explanation is found at last! “Value is the ratio between
two exchanged services.”[708] And, seeing that individual property and
private fortunes represent sums of values, we might say that a person’s
property is merely the sum of the services rendered by him. Herein lies
the harmony. Nothing better could be wished for, and Bastiat exults in
his discovery. Everything becomes quite clear, every contradiction is
removed, every difficulty solved, if we take for our starting-point the
crux of economic theory—namely, why diamonds are considered more valuable
than water. The diamond is more valuable simply because the person who
gives it to me is rendering me a greater service than he who merely gives
me a glass of water. This was not the case on the Medusan raft, but even
in that instance, seeing that the service rendered was incalculable, the
value must have been immense.

Every solution propounded by economists—utility, scarcity, difficulty
of acquisition, cost of production, labour—is included within this
conception of service, and “economists of all shades of opinion ought to
feel satisfied.” “My decision is favourable to every one of them, for
they have all seen some aspect of the truth; error being on the other
side of the shield.”[709] Moreover, the word “service” has the advantage
of including, besides value properly so called (that is, the price of
goods), the price of all productive services such as appear under the
heads of loans, rent, discount, and interest—in short, “everything that
can be said to render a service.”[710]

One cannot help smiling at Bastiat’s naïve exultation, for he never
realises that his formula is so comprehensive and includes everything
within itself simply because it is an empty form—a mere _passe-partout_.
It really amounts to saying that value depends upon desirability, and
we are not so much farther on after all.[711] On closer view, it even
lacks that apologetic tone which evidently attracted Bastiat to it. It
legitimises neither value nor property, and even if it did it would
simply be by the help of a hypocritical formula, for the word “service”
gives rise to the belief that all value implies a benefit for those who
receive it and a virtue in those who give it. But very frequently it is
nothing of the kind. The owner of a house or of a piece of land in the
city of London which is let or sold at a fabulous price, the capitalist
who lends money to a needy borrower at a usurious rate, or the politician
even who in return for an enormous bribe secures some financial
concession, cannot be said to be rendering any real service, for all
these have either been solicited or demanded, or perhaps even extorted
under pressure. Such abnormal rates of discount, interest, or rent can
find no place in Bastiat’s formula. From a moral and ethical point of
view it is equally futile. It is a mere mask which affords protection as
well to the worst exploiter as to the honest tradesman: all are thrown
promiscuously into the “universal harmony.”[712]

Despite the justness of these criticisms, and although Bastiat’s
attempt to explain value by employing the term “service” must be
regarded as futile, the word has not remained a mere ingenious epithet.
On the contrary, it has won for itself a permanent place in economic
terminology. We shall again meet with it in the vocabulary of that
school which prides itself upon the exactness of its method, namely, the
Hedonistic and Mathematical school. These later writers constantly make
use of the term “productive services,” and would find it hard to discover
another word having a sufficiently wide connotation.[713] It is true that
the word “service” with all the noble associations of unselfish interest
and professional honour which cling to it (compare the phrase “his
Majesty’s service”), may lead us astray as to the economic arrangements
of society, and that a recollection of the less distinguished uses of the
term may cause us to doubt the wisdom of Bastiat’s choice. Still, it is
the best that we can imagine when speaking of the society of the future.
It is employed in the same sense as Auguste Comte used the term “social
function,” or as the equivalent of Marshall’s “economic chivalry.”[714]
In attempting to present to ourselves the society of the future, or at
least the society of our dreams, we must hope that the present incentive
to economic activity, which is merely the desire for profit, will
gradually give place to the idea of social service. When that day dawns a
statue ought to be erected to the memory of Bastiat.


II: THE LAW OF FREE UTILITY AND RENT

Ricardo’s law of rent was the optimist’s nightmare. Should it by any
chance prove true, then the institution of property must be abandoned
altogether, and victory must lie with the socialists, whom the economists
regarded as somewhat of a social nuisance. It was necessary, then, at all
costs, to show that this law had in reality no foundation, and with this
end in view Bastiat attempts to defend the paradox that nature or land
gratuitously gives its products to all men. But must we really say that
corn and coal, the products of soil and mine, literally do not pay for
the trouble of getting them? In other words, have they no value? Bastiat
replies that they doubtless possess some value, but that the price paid
for them does not cover the natural utility of those products. It merely
covers cost of production, and is only just sufficient to reimburse the
proprietor for the expense incurred.

Every product contains two layers of superimposed utilities. The one is
begot of onerous toil and must be paid for. It constitutes what we call
value. The other, which is thrown into the bargain, is a gift of nature,
and as such is never paid for. This lower stratum, though it is of
considerable importance, is ignored simply because it is not revealed in
price. It is invisible because it is free.

But whenever a commodity is free, like air, light, or running water, it
is the common possession of everybody. The same idea may be expressed
by saying that below the apparent layer of value which constitutes
individual property there lies an invisible layer of common property
which benefits everybody alike. “What Providence decreed should be common
has remained so throughout the whole history of human transactions.”

“This,” says Bastiat, “is the essential law of social harmony.” The
proprietor, who in the Ricardian theory figures as a kind of dragon,
jealously guarding the treasures of national wealth, which can only be
enjoyed on payment of a fine, or who in Proudhon’s passionate invectives
is denounced as an interceptor of the gifts of God, appears to Bastiat
as a mere intermediary between nature and consumer. He is like a good
servant who draws water from a common fount, and receives payment, not
for the water drawn, but solely for the trouble of drawing it.[715]

But there is a still greater degree of harmony. Of the two elements—the
onerous and the gratuitous—which enter into the composition of all forms
of wealth, the former gradually tends to lose its importance relatively
to the latter. It is a general law of industry that as invention
progresses the human effort necessary to obtain the same satisfaction
diminishes. New labour is almost always more productive than old, and
this is true with regard to all products, whether corn or coal, steel
or cotton. It is true not only of the products of the land, but also of
the land itself. The cost of clearing new land is diminishing, just as
the expense of making new machinery is decreasing. The natural utility,
on the contrary, is never diminished. Corn has to-day exactly the same
utility as it had on the morrow of the Deluge.

Property being nothing more than a sum of values, every diminution of
value must be interpreted as a constant restriction of the rights of
property.

Hence this result, “which reveals a most important fact for the science,
a fact, if I mistake not, as yet unperceived,”[716] namely, that in every
progressive society common or gratuitous utility never stops growing,
while the more arduous portion, which is usually appropriated, gradually
contracts. Present society is already communistic, and is becoming more
so every day.

The idea is indeed an attractive one. Individual property is like a
number of islands surrounded by a vast communal sea which is continually
rising, fretting their coasts and reducing their areas. When labour
has become all-powerful and when science has dispensed with effort the
last islet of property will sink beneath the wave of free utility. And
so Bastiat triumphantly exclaims: “You communists dream of a future
communism. Here you have the actual thing. All utilities are freely given
by the present social order provided we facilitate exchange.”[717]

Bastiat, usually so logical, seems inclined to be sophistical here.
If we seek beneath this brilliant demonstration we shall merely
find the statement that rent is non-existent because the value of
commodities—including all natural products—can never exceed cost of
production. This cost of production is being continually lowered, and so
the value of goods must be falling.

But the statement requires proof. There is nothing to show how the price
of natural goods under the influence of competition would tend to fall to
the level of cost of production—still less to the minimum level. There is
no refutation either of the differential or monopolistic theory of rent.
There is doubtless this much truth in it: nature does not create value,
nor does it demand payment for it. No one would to-day say that a single
cent of the price of corn or coal was meant as payment for the alimentary
properties of the one or the calorific capacity of the other. But
although it is true that nature asks nothing in return, it is not correct
to say that the landowner demands nothing except payment for trouble and
expenditure incurred. And this extra gain he never relinquishes unless
under pressure of competition. But this very seldom happens, and economic
theorists have to be content merely with showing how the sale price
usually exceeds the cost of production, and how this excess is variously
known as rent, profits, or surplus value.

Bastiat was fully conscious of the weakness of his argument. He saw quite
clearly that possession of a suitable piece of land in the Champs-Élysées
would earn something more than mere payment for labour and outgoings. It
is then that he takes refuge in his theory of value, and attempts to show
that the proprietor will never draw more than the price of the service
rendered. This may be true. But the mere fact of possessing a natural
source of wealth permits of the raising of the price of these goods a
great deal, and then what becomes of community of interests, and of the
theory that the goods are handed on by the proprietor free of any charge?

How superior is Carey’s theory, both in its scientific value and in its
social import! Carey follows Ricardo step by step, whereas it seems
that Bastiat had only a very imperfect acquaintance with the Ricardian
theory.[718] In reply to the statement that the value of corn rises
progressively because the more fertile lands are occupied first, and the
less fertile have to be utilised afterwards, Carey points out that, on
the contrary, cultivation begins with the poorer land first, and that
the richest is the last to be cultivated. The consequence is just the
reverse of what Ricardo predicted. As production increases, the price of
corn will be lowered. The process of reasoning by which this reversal
of the order of cultivation is demonstrated is very interesting. The
domestication of land, if the phrase be permissible, like the utilisation
of all natural forces, takes place according to the inverted order of
their strength. Animals are domesticated before man harnesses wind or
water, and water and wind are employed before there is any thought of
vapour or electricity. The same is true of land. Fertile land in its
natural state is either overrun with vegetation, which must be grubbed
up, or is covered with water, which must be drained off. “Rich land is
the terror of the emigrant.”[719] Its virgin forests must be felled, its
wild animals destroyed, its marshes drained, and its pestilential miasmas
rendered innocuous if it is not to become a mere graveyard. And not until
several generations have given of their toil will it be of much use.
Rather than undertake the task the earliest emigrant seeks the lighter
soils of the hill-side, which are better adapted to his feeble means, as
well as safer and more easily defended.

That this theory is well founded may be very clearly seen if we watch
the progress of cultivation or the colonisation of new lands, or glance
at the general history of civilisation. Men group themselves in villages
on the higher levels or build their castles on the slopes of the hills,
and only descend slowly and carefully into the lower plains. How many are
the localities in France where the new town may be seen overspreading
the plain close to the old city which still crests the hill! The various
national gods—Hercules, for example, who stifled the hydra of Lerna in
his arms and shot the birds of Stymphalus’s pool with his arrows—are in
all probability just the men who first dared break up the alluvial soils.

This theory, again, is open to the same objection as Ricardo’s. It
applies to some cases only, and under certain conditions. Ricardo’s
theory explained the facts relative to England, where population presses
heavily upon the limited area of a small island already well occupied.
Carey’s theory is equally well adapted to an immense continent, with
a thinly scattered population, occupying only a few cultivated islets
amid the vast ocean of virgin forest and prairie. The two theories are
not contradictory. They apply to two different sets of conditions, or
to successive phases of economic evolution. And seeing that Ricardo’s
applies to the more advanced stage of civilisation, it certainly ought to
have the last word. If Carey were writing now he would probably express
himself somewhat differently, for it is no longer true even of the United
States that the more fertile lands are still awaiting cultivation. Only
the poorer and the more arid plains remain uncultivated, and here dry
farming has to be resorted to. So that even in the “Far West” Ricardo’s
theory is closer to the facts than Carey’s. Rents are rising everywhere,
and not a few American millionaires owe their fortunes to this fact.[720]

It is just possible that Bastiat had some knowledge of Carey’s theory,
for the theory is outlined in _The Past, the Present, and the Future_,
published by Carey a little before Bastiat’s death, as well as in his
_Social Science_, which appeared ten years later. At any rate, let us
render thanks to both of them for the suggestive thought that as human
power over nature increases, effort, difficulty, and value, which is the
outcome of difficulty, will disappear, and that, consequently, the sum
total of real wealth at the disposal of everyone will increase, but that
the poor will be those who will benefit most.[721]


III: THE RELATION OF PROFITS TO WAGES

The law of rent was not the only discordant note. That other law which
stated that profits vary inversely with wages was also dissonant and
needed refuting. Bastiat emphasises the contrast between it and his new
law of harmony, according to which the interests of capital and labour
are one, their respective shares increase together, and the proportion
given to labour grows more rapidly even than capital’s.[722]

That is the conclusion which Bastiat wishes to illustrate by means of the
following table:

                Total Product   Capital’s Share      Labour’s Share
  First period      1000         500 (50 per cent.)    500 (50 per cent.)
  Second period     2000         800 (40    ”     )   1200 (60    ”     )
  Third period      3000        1050 (35    ”     )   1950 (65    ”     )
  Fourth period     4000        1200 (30    ”     )   2800 (70    ”     )

This law he speaks of as “the great, admirable, comforting, necessary,
and inflexible law of capital.”

The proof is very simple—too simple, perhaps. It rests entirely upon the
law concerning the lowering of the rate of interest, noted by Turgot
and other economists long before Bastiat’s time. If capital, instead
of asking 5 per cent., only demands 3 per cent., then its share is
diminished, and any further diminution of its share must mean an increase
of the proportion available for labour.

But a _relative_ diminution of this kind will not prevent capital
drawing an _absolutely_ greater share, provided the total produce goes
on increasing, as is the case in every progressive community. Its total
share, though on the increase, may be decreasing relatively to the share
which goes to labour. For example, the total product may be tripled,
capital’s share having doubled in the meantime, while labour’s portion
is quadrupled. Unfortunately this is a purely sophistical argument. The
figures given in the table are simply invented to meet the needs of the
case. Even the universality of the law concerning the lowering of the
rate of interest is open to dispute. Economic history seems to point to
a series of periodic oscillations of the rate, and quite recently it has
risen very considerably.

The so-called “law” becomes more than doubtful if, following Bastiat,
we include under the term interest, not merely net interest, but also
profits and dividends and all kinds of returns from capital.

But, even admitting that such a law is thoroughly established, does
that prove that capital’s share is decreasing? A lowering of the rate
of interest cannot affect the capital already invested in factories,
mines, railways, State funds, etc. The latter will not draw a penny less,
and a fall in the rate of interest will increase the value of all old
capital. Every capitalist knows this and speculates on the chance of its
happening.[723]

Only in the case of new capital, then, will a lower rate of interest
reduce the capitalist’s share. If by any chance this new capital should
prove less productive than the old it may then happen that the reduced
rate of interest will mean an equal or even a greater rise in the
remuneration of labour. This is quite a probable contingency, and the
proof advanced by economists who believe in a gradual lowering of the
rate of interest is just this very fact that new capital is generally
less productive than old.

In short, the problem presented by the rate of interest, implying as it
does a certain connection between the value of the capital and the value
of the revenue, is entirely different from the question as to what share
of the produce will eventually fall to the lot of the capitalist and what
to the workers.[724]

Not only is the demonstration which Bastiat thought he had given false,
but the thesis itself is very doubtful when tested by the facts.
Statistics seem to show quite clearly—Bastiat’s law notwithstanding, and
not depreciating the influence of other powerful factors, such as trade
unions, strikes, and State intervention—that during the course of the
nineteenth century the share of the social revenue which falls to the lot
of capital has increased more rapidly than labour’s.[725]


IV: THE SUBORDINATION OF PRODUCER TO CONSUMER

Bastiat laid considerable stress upon this principle, but it is not easy
to realise its harmonic significance.

The subordination of producer to consumer is nothing less than the
subordination of private to general interest. Producers always consult
their own interests, and are continually in search of profits. Still,
everything invented with a view to increasing profits results in lowering
prices, so that the consumer is the person who finally benefits by
it.[726] And so economic laws, the law of competition and of value,
constrain the producer who really wishes to be selfish to be altruistic,
even despite himself. The laws outwit him, but his undoing benefits
everyone else. While working for a maximum profit he is really toiling to
satisfy the needs of others in the most economical fashion, and therein
lies the harmony.

In all difficult economic problems the criterion should be this: What
solution will prove most advantageous to consumers? Never ought we ask
what will be most profitable for producers, although, unfortunately,
this is the more usual question. In matters of international trade, when
the interest of the producer is uppermost, Protection is established. If
we only consulted the interest of consumers, Free Trade would become an
immediate necessity. Or take the case of public or private expenditure.
The producer can bring himself to excuse or even to approve of breaking
windows or wasting powder,[727] but the consumer unceremoniously condemns
all such destruction of wealth as useless consumption.

But Bastiat is not content with giving the consumer mere economic
pre-eminence. He is equally anxious to demonstrate his moral superiority.
“If humanity is to be perfected, it must be by the conversion of
consumers, and not by the moralising of producers,”[728] and so, he holds
consumers responsible for the production of unnecessary or worthless
commodities, such as alcohol.[729] Bastiat’s contribution to this subject
is quite first-class, and may possibly be his best claim to a place
among the great economists. He was not far wrong when on his death-bed
he delivered to his disciples as his last instructions—his _novissima
verba_, “Political economy should be studied from the consumer’s
standpoint.” This distinguishes him from his famous antagonist, Proudhon,
who always had the producer’s interest at heart.

The only things with which we can reproach Bastiat are a too persistent
faith in natural harmonies and a belief in the efficacy of ordinary
economic laws to bring about the supremacy of the consumer. In fact, the
consumer’s reign has not yet come, and the economic mechanism is becoming
more and more the tool of the profit-maker. The consumer has had to seek
in organisation a method of defending his own interests and those of the
public, with whose interests his own are often confused. This is why
we have institutions like the co-operative society and the consumers’
league. His moralisation, moreover, is not entirely his own affair.
Before the consumer realises the full measure of his responsibility and
the extent of his duties a great deal of work will be necessary on the
part of buyers’ social leagues, temperance leagues, etc.

Strangely enough, economists of the Liberal Individualist school view
such institutions with a somewhat critical eye.[730]


V: THE LAW OF SOLIDARITY

We must not forget, as most writers on the subject seem to have done,
that Bastiat was the first to give the law of solidarity—so popular
in the economics of to-day—a position of honour within the science
of political economy.[731] One of the unfinished chapters of the
_Harmonies_, entitled “Solidarity,” was meant to expound the thesis that
“society is just a collection of solidarities woven together.”[732]

The name is deceptive, however, and his conception of solidarity is quite
different from the one current to-day, while the conclusions drawn are by
no means similar.

The fundamental doctrine upon which the Solidarists of to-day would base
a new morality is briefly this: Every individual owes all the good with
which he is endowed, and all the evil with which he is encumbered, to
others. So whether he is wealthy or poor, virtuous or vicious, it is his
duty to share with those who are worse off, and he has a right to demand
a share from those who are better off. Only in this way can we justify
legal assistance, insurance, Factory Acts, education, and taxation. The
doctrine is a negation, or at the very least a modification, of the
strict principle of individual responsibility.

But Bastiat views it differently. He has no desire to weaken individual
responsibility, for responsibility must be the indispensable corrective
of liberty. And solidarity, because of the feeling of interdependence
to which it gives rise, is so bewildering that Bastiat anxiously asks
whether solidarity is actually necessary “in order to hasten or to secure
the just retribution of deeds done.” A closer survey reconciles him
to the prospect, for he sees in it a means of extending and deepening
individual responsibility. Seeing that the results of good and bad
deeds react upon everyone, everybody must be interested in furthering
every good deed and in repressing the bad, especially since every deed
reacts upon its author with its original force multiplied a thousand,
and perhaps a million times.[733] The harmony just consists in that.
Bastiat’s solidarity aims, not at the development of fraternity, but at
the strengthening of justice. It does not urge upon society the duty of
permitting no differences among its members, but it does emphasise the
importance of handling the scourge or bestowing the palm with greater
impartiality. And Bastiat, despite his law of solidarity—nay, possibly
_because_ of that very law—definitely rejects all legal assistance, even
in the case of deserted children! National insurance, old age pensions,
profit-sharing, free education, everything that is comprised under the
term “social solidarity” is cast aside.[734]

It is a terribly individualistic conception of solidarity. Comparison
with Carey’s ideas is again interesting. Carey may seem to ignore it
altogether, inasmuch as he never mentions the name. But if the name was
unknown to him he gave a good description of the principle itself when he
referred to it as “the power of association.” And he was also probably
the first to put the double character of solidarity, as we know it
to-day, in a clear light:

(1) As the differences among mankind increase in number and intensity the
more perfect will solidarity become.

(2) Individuality, instead of being weakened by it, is strengthened and
intensified.[735]

Someone may perhaps point out that in our treatment of the Optimists’
attack upon the great Classical laws no mention has been made of that
terribly discordant theme, Malthus’s law of population, which ascribes
all vice and misery to the operation of a natural instinct. On this
particular point Bastiat’s treatment is lacking in both vigour and
originality. His reply merely amounts to showing that the preventive
obstacles, such as shame and continence, religious feeling and the desire
for equality, all of which limit the number of children, are equally
_natural_, so that nature has placed a remedy alongside of the evil.

A more solid argument, borrowed from Carey, attempts to show how a
growing density of population allows of a growth of production, so
that the production of commodities may develop _pari passu_ with the
growth of population, or may even exceed it. Carey relied upon his own
observations. All over the vast American continent, especially on the
immense plains of the Mississippi, he noticed that the few encampments
of the poor tribes that dwelt there were being rapidly replaced by
large industrial centres. Such an increase of population in immediate
contiguity naturally resulted in a great amassing of wealth.

We have already noted the fact that the growth of wealth in the United
States has outstripped the increase in its population. The simultaneous
development of Germany, both in numbers and wealth, is still more
striking.

But Carey’s population theory is open to the same criticism as was urged
against his theory of rent. Up to a certain degree of density it is
undoubtedly true, but there is no ground for believing that it holds good
beyond this.

       *       *       *       *       *

Bastiat’s name is frequently linked with Dunoyer’s, to whom we have
already had occasion to refer.[736] Dunoyer was one of the most militant
of the politico-economic Liberals, and fully shared their belief that
free competition was a sufficient solution for every social problem.[737]
The obvious drawbacks of free competition, he thought, were due to its
imperfect character. No one was more opposed to State Socialism and to
intervention of every kind. He was opposed to labour legislation, to
Protection, to the regulation of the rights of property, and even to the
State management of forests. As we have already remarked, he was against
every kind of combination, because it stood as an obstacle in the path of
free competition.

Logically enough he was in favour of the free disposal of land, and
would not even make any reservations in favour of heirs. He refuses to
recognise the right of entail because the exercise of the testator’s
liberty necessarily involves the curtailment of the liberty of his
successors.[738]

Some of the arguments which he employs in support of free exchange are
quite novel. The following is one of the most interesting. Admitting
that it is not to the advantage of a poor country to trade with another
which is wealthier or industrially superior, the same thing must apply
to the poorer districts of a country in their dealings with other
provinces that have suddenly become rich, or with rich provinces recently
acquired by conquest. But “as soon as they are annexed their superiority
presumably disappears.” The argument is amusing, but not very solid.
It is not impossible that free exchange, even within the bounds of the
same country, may have the effect of drawing capital and labour from the
poorer districts towards the richer, from Creuse or Corsica to Paris.
This is just what does happen. It is not, perhaps, a very serious evil,
because what France loses on the one hand she gains on the other; but
if Creuse or Corsica were independent states, anxious to preserve their
individuality, we could understand their taking measures to prevent this
drainage. It is true that it is not easy to see how protective rights
could accomplish this—a point which Dunoyer might well have emphasised.

We cannot speak of Dunoyer without saying a word about his theory of
production. Labour with him is everything. Nature and raw material are
nothing. He stands at the opposite pole to the Physiocrats,[739] and
supplied a handle to those socialists who before Marx’s day had thought
that labour was the only source of wealth, and that consequently all
wealth should belong to the worker. But he pays no very great attention
to this idea. His chief concern is with production, and not with
distribution.

From this view of production he draws several interesting conclusions.

In the first place, it matters little to him whether labour is applied
to material objects or not. That makes no difference, so far as its
character or productivity is concerned, for in both cases what is
produced is an immaterial thing called utility. What the baker produces
is not bread, but the wherewithal to satisfy a certain desire. This
is exactly what the _prima donna_ produces. The so-called liberal
professions are placed in the same category as manual work, and in
this respect again Dunoyer takes up a position opposed to that of the
Physiocrats.[740]

Contrary to what might have been expected, this large extension of the
concept production fails to include commerce. Dunoyer applies the title
productive to the singer, but refuses it to the merchant, and by this
strange reversal he arrives once again at the Physiocratic position.
Exchange is not productive[741] because buying and selling does not
involve any work, and where there is no work there is no production.
Exchange creates utilities, and it is not easy to understand what more
Dunoyer expects from it, seeing he admits that labour can do nothing
more. Exchange, he thought, was a purely legal transaction, and he was
loath to admit that any act of a “corporate will” without labour or
physical effort could create wealth, just as the Physiocrats found it
impossible to think of wealth other than as a product of the soil.




CHAPTER II: THE APOGEE AND DECLINE OF THE CLASSICAL SCHOOL. JOHN STUART
MILL


While the French economists, alarmed at the consequences involved in the
theories of Malthus and Ricardo, strove to transmute the Brazen laws into
Golden ones, the English economists pursued their wonted tasks, never
once troubled by the thought that they were possibly forging a weapon
for their own destruction at the hands of socialists.

The thirty years which separate the publication of Ricardo’s _Principles
of Political Economy_ (1817) from Mill’s book bearing the same title are
occupied by economists of the second rank, who apply themselves, not to
the discovery of new principles, but to the development and co-ordination
of those already formulated. Of course we must not lose sight of the mass
of critical work bearing upon certain aspects of current doctrines, which
was produced by English economists just about this time. But their ideas
attracted as little attention as did Cournot’s in France or Gossen’s in
Germany.[742]

These were the days when Miss Martineau and Mrs. Marcet gave expositions
of political economy in the form of tales, or conversations with
“young Caroline,”[743] when MacWickar, writing his _First Lessons in
Political Economy for the use of Elementary Schools_, expressed the
belief that the science was already complete. “The first principles of
political economy,” he wrote, “are mere truisms which children might
well understand, and which they ought to be taught. A hundred years ago
only savants could fathom them. To-day they are the commonplaces of the
nursery, and the only real difficulty is their too great simplicity.”[744]

We cannot attempt the individual study of all the economists of this
period.[745] However, one of them, Nassau Senior,[746] certainly deserves
more space than we can give him in this history, and is perhaps the best
representative of the Classical school, showing its good and bad points
better than any other writer. He removed from political economy every
trace of system, every suggestion of social reform, every connection with
a moral or conscious order, reducing it to a small number of essential,
unchangeable principles. Four propositions seemed sufficient for this new
Euclid,[747] all necessary corollaries being easily deducible from one or
other of these. Senior’s ambition was to make an exact science of it, and
he deserves to be remembered as one of the founders of pure economics.

He is responsible for the introduction into political economy of a new
and hitherto neglected element, namely, an analysis of abstinence or
saving. (The former word, which is Senior’s choice, is the more striking
and precise term.) It is true enough, as Senior remarks, that abstinence
does not create wealth, but it constitutes a title to wealth, because
it involves sacrifice and pain just as labour does. Hitherto the income
of capital had been the least defensible of all revenues, for Ricardo
had only discussed it incidentally, and had represented it as a surplus
left over after paying wages. The claim of capital was believed to be as
evident as that of land or labour, and there was no need for any further
inquiry. But has it any real right to separate remuneration, seeing that,
unlike the other two agents, it is itself a product of those two and
not an original factor of production? Here at last is its title, not in
labour, but in abstinence.

But if on the one hand Senior succeeds in establishing the claim of
interest, he invalidates the claim of most other capital revenues on
the other. Let us follow his argument. Cost of production is made up
of two elements, labour and abstinence, and wherever free competition
obtains, the value of the products is reduced to this minimum. Where
competition is imperfect, where there is a greater or less degree of
monopoly, then between cost of production and value lies a margin which
constitutes extra income for those who profit by it. This revenue by
definition of labour and abstinence is independent of every sacrifice
or personal effort. This revenue Senior calls rent, and his theory
is thus a mere extension of the Ricardian. Rent is not the result of
appropriating the better situated or the more fertile lands only. It may
be due to the appropriation of some natural agent or to the possession
of some personal quality such as the artiste’s voice or the surgeon’s
skill,[748] or it may simply be the result of social causes or fortuitous
circumstances. Senior shows that rent, far from being an exceptional
phenomenon, is really quite normal. This kind of revenue which is wanting
in title—drawn, but not earned—is extremely important, and absorbs a
great share of the total wealth. Indeed, Senior goes much further, and
states that whenever, as in the case of death, capital passes from the
hands of those who have earned it into the possession of others, it
immediately becomes rent. The inheritor cannot plead abstinence—the
virtue is not transmissible, and he has no title to his fortune except
just good luck.[749]

No revolutionary socialist could ever have invented a better argument for
the abolition of the existing order. And how different from the “natural
order”! But Senior is quite unmoved, and the superb indifference with
which economists of the Ricardian school affirm their belief in their
doctrines without taking any account of the consequences which might
uphold or might destroy those very beliefs has a peculiar scientific
fascination for us.

Also, it was Senior who laid stress upon scarcity as the basis of
economic value. But a thing to possess value must be not merely rare, it
must also satisfy some want. It must be a rare utility. It is the same
term, “scarcity,” that was employed by Walras.

The Classical doctrines were taught during the first half of the
nineteenth century, not in England alone, but in every country of the
world. In Germany they were expounded by von Thünen, of whom we have
already spoken, and by his contemporary Rau.[750] In France, despite the
growing influence of the optimistic politico-liberal creed considered
in our last chapter, English Classical economics was still taught by a
large number of economists, among whom Rossi deserves special mention.
His _Cours d’Économie politique_, published in 1840, enjoyed a fair
success, due, not to any originality in the contribution itself, but to
the somewhat oratorical style of the work.[751]

But to proceed to the central figure of this chapter—John Stuart
Mill.[752] With him Classical economics may be said in some way to have
attained its perfection, and with him begins its decay. The middle of
the nineteenth century marks the crest of the wave. What makes his
personality so attractive is his almost dramatic appearance, and the
consciousness that he was placed between two schools, even between two
worlds. To the one he was linked by the paternal ties which bound him
to the Utilitarian school, wherein he was nurtured; the other beckoned
him towards the new horizons that were already outlined by Saint-Simon
and Auguste Comte. During the first half of his life he was a stern
individualist; but the second found him inclined to socialism, though
he still retained his faith in liberty. His writings are full of
contradictions; of sudden, complete changes, such as the well-known
_volte-face_ on the wages question. Mill’s book exhibits the Classical
doctrines in their final crystalline form, but already they were showing
signs of dissolving in the new current.

Like other theorists of the “Pure” school, he declared that there was no
room in political economy for the comparative judgment of the moralist,
but it was he also who wrote: “If, therefore, the choice were to be made
between communism with all its chances and the present state of society
with all its sufferings and injustices; if the institution of private
property necessarily carried with it as a consequence that the produce of
labour should be apportioned as we now see it, almost in an inverse ratio
to the labour—the largest portions to those who have never worked at
all, the next largest to those whose work is almost nominal, and so in a
descending scale, the remuneration dwindling as the work grows harder and
more disagreeable, until the most fatiguing and exhausting bodily labour
cannot count with certainty on being able to earn even the necessaries of
life; if this or communism were the alternative, all the difficulties,
great or small, of communism, would be but as dust in the balance.”[753]

It was Mill the utilitarian philosopher who declared that a person of
strong conviction “is a social power equal to ninety-nine who have only
interests.” It was he also who wrote that “competition may not be the
best conceivable stimulus, but it is at present a necessary one, and no
one can foresee the time when it will not be indispensable to progress.”
But he also admits that “co-operation is the noblest ideal,” and that it
“transforms human life from a conflict of classes struggling for opposite
interests to a friendly rivalry in the pursuit of a good common to
all.”[754]

Mill, it has been said, was simply a gifted popular writer. But this
is to under-estimate his ability. It is true that, unlike Ricardo,
Malthus, or Say, his name is not associated with any economic law, but
he opened up a wider prospect for the science which will secure him a
reputation long after the demise of these so-called laws. His fame is
doubly assured, for in no other work on political economy, not excepting
even the _Wealth of Nations_, are there so many pages of fine writing,
so many unforgettable formulæ which will always be repeated by everyone
who has to teach the science. It is not for nought that the _Principles_
has served as a text-book for half a century in most of the English
universities.

Before examining the changes in the Classical doctrines which Mill
himself effected, we must give a brief outline of those theories as
they appeared in all their inflexible majesty towards the middle of the
nineteenth century, during the period between the publication of the
_Principles_ and the death of John Stuart Mill, between 1848 and 1873.
This was the period when the Classical Liberal school believed that its
two old rivals, Protectionism and socialism, were definitely crushed.
Reybaud, in his article on socialism in the _Dictionnaire d’Économie
politique_ of 1852, wrote as follows: “To speak of socialism to-day is
to deliver a funeral oration.” Protection had just been vanquished in
the struggle that led to the repeal of the English Corn Laws, and was
to suffer a further check, alike in France and in the other countries
of Europe, as a result of the treaties of 1860. The future lay with the
Classics. It was little thought that 1867 would witness the publication
of _Kapital_, that in 1872 the Congress of Eisenach would reassemble,
when the treaties of 1860 would be publicly denounced.

Let us profit by its hour of glorious existence to give an exposition of
the doctrines which it taught. The treatment must necessarily be very
summary, seeing that we are not writing a treatise on political economy,
and that our attention must be confined to writers who are definitively
members of the Liberal school.


I: THE FUNDAMENTAL LAWS

A belief in natural laws was always an article of faith with the
Classical school. Without some such postulate it seemed to them that no
collection of truths, however well attested, could ever lay claim to the
title of science. But these natural laws had none of that “providential,”
“finalistic,” and “normative” character so frequently dwelt upon by the
Physiocrats[755] and the Optimists. They are simply natural laws like
those of the physical order, and are clearly non-moral. They may prove
useful or they may be harmful, and men must adapt themselves to them
as best they can. To say that political economy is a “dismal science”
because it shows that certain laws may have unfortunate results is
as absurd as it would be to call physics a “dismal science” because
lightning kills.

Far from being irreconcilable with individual liberty, these laws are
among its direct results. They are the spontaneous links which bind
together all free men. Freedom is always subject to conditions. Men
are not free in the matter of eating or not eating, and if they would
eat they _must_ cultivate the soil. Freedom is limited not only by the
actions of other human beings, but also by the laws of the physical world
which surrounds us.

These laws are universal and permanent, for the elementary needs of
mankind are always and everywhere the same. Economics is in quest of such
permanent laws, and has no concern with the merely temporary. It is only
by seeking the more general and consequently the more nearly universal
laws that economics can apprehend truth or hope to become a science.
It must study man, not men—the type, not the individual—the _homo
œconomicus_ stripped of every attribute except self-interest. It does not
deny the existence of other qualities, but merely relegates them to the
consideration of other sciences.

It now remains to see what those natural laws were.

(1) _The Law of Self-interest._ This law has since been named the
Hedonistic principle—a term that was never employed by the Classical
school. Every individual desires well-being, and so would be possessed of
wealth. Similarly he would, if possible, avoid evil and escape effort.
This is a simple psychological law. Could anything be more universal or
permanent than this law, which is simply the most natural and the most
rational (using the term in its Physiocratic sense) statement of the
law of self-preservation? In virtue of this fundamental principle the
Classical school is frequently known as the Individualist school.

But individualism need imply neither egoism nor egotism. This confusion,
which is repeatedly made with a view to discrediting the Classical
writers, is simply futile. No one has displayed greater vigour in
protesting against this method of treating individualism than Stuart
Mill. To say that a person is seeking his own good is not to imply
that he desires the failure of others. Individualism does not exclude
sympathy,[756] and a normal individual feels it a source of gratification
whenever he can give pleasure to others.

But this did not prevent Ricardo and Malthus showing the numerous
instances in which individual interests conflict, where it is necessary
that one interest should be sacrificed to another. And Mill, far from
denying the existence of these conflicts, has taken special pains to
emphasise them. The Classical writers, together with the Optimists,
reply that such contradictions are apparent only, and that beneath these
appearances there is harmony; or they point out that these antinomies are
due to the fact that both individualism and liberty are only imperfectly
realised, and as yet not even completely understood, but that as soon
as they are securely established the evils which they have momentarily
created will be finally healed.[757] Liberty is like Achilles’ lance,
healing the wounds it inflicts. Other individualists, such as Herbert
Spencer, declare that the conflict of individual interests is not merely
advantageous to the general interests of society, but is the very
condition of progress, weeding out the incapable to make room for the
fittest.

(2) _The Law of Free Competition._ Admitting that each individual is the
best judge of his own interests, then it is clearly the wisest plan to
let everyone choose his own path. Individualism presupposes liberty, and
the Individualist school is also known as the Liberal school. This second
title is more exact than the first, and is the only one which the French
school will accept. It emphatically repudiates every other, whether
Individualist, Orthodox, or Classical.[758]

The English school is equally decisive in its preference for
“Liberalism.” The terms “Manchesterism” and “Manchesterthum” have also
been employed, especially by German critics, in describing this feature
of their teaching.

But the Classical school itself thought of _laissez-faire_ neither as
a dogma nor a scientific axiom. It was treated merely as a practical
rule which it was wise to follow, not in every case, but wherever a
better had not been discovered. Those who act upon it, in Stuart Mill’s
opinion, are nearer the truth nineteen times out of twenty than those
who deny it.[759] This practical Liberalism is intended to apply to
every aspect of economic life, and their programme includes liberty to
choose one’s employment, free competition, free trade beyond as well as
within the frontiers of a single country, free banks, and a competitive
rate of interest; and on the negative side it implies resistance to
all State intervention wherever the necessity for it cannot be clearly
demonstrated, as in the case of protective or parental legislation.

In the opinion of Classical writers, free competition was the sovereign
natural law. It was sufficient for all things. It secured cheapness for
the consumer, and stimulated progress generally because of the rivalry
which it aroused among producers. Justice was assured for all, and
equality attained, for the constant pursuit of profits merely resulted
in reducing them to the level of cost of production. The _Dictionnaire
d’Économie politique_ of 1852, which may perhaps be considered as the
code of Classic political economy, expressed the opinion that competition
is to the industrial world what the sun is to the physical. And Stuart
Mill himself, the author of _Liberty_, no longer distinguishing between
economic and political liberty, in less poetic but equally conclusive
terms states that “every restriction of competition is an evil,” but
that “every extension of it is always an ultimate good.”[760] On this
point he was a stern opponent of socialism, although in other respects
it possessed many attractions for him. “I utterly dissent,” says he,
“from the most conspicuous and vehement part of their teaching, their
declamations against competition.”

But the Classical school, despite its glorification of free competition,
never had any intention of justifying the present _régime_. The
complaints urged against it on this score, like the similar charge of
egoism, are based upon a misconception. On the contrary, the Classics,
both new and old, complain of the imperfect character of competition.
Senior had already pointed out what an enormous place monopoly still
holds in the present _régime_. A _régime_ of absolutely free competition
is as much a dream as socialism, and it is as unjust to judge competition
by the vices of the existing order as it would be to judge of
collectivism by what occurred in the State arsenals.

(3) _The Law of Population_ also held an honourable place among Classical
doctrines, so honourable, indeed, that even the Optimists never dared
contradict it. And of all economists Mill seems most obsessed by it.[761]
In his dread of its dire consequences he surpasses Malthus himself. And
he reveals a far greater regard for moral considerations than was ever
shown by the latter. Mill was already a Neo-Malthusian in the respect
which he felt for the rights and liberty of women, which are too seldom
consulted when maternity is forced upon them.[762] A numerous family
appeared to him as vicious and almost as disgusting as drunkenness.[763]
Time and again he declares that the working classes can hope for no
amelioration of their lot unless they check the growth of population. One
reason for his favourable view of peasant proprietorship is the restraint
which it exercises upon the birth-rate. “The rate of increase of the
French population is the slowest in Europe,” he writes, and this result
he thought very encouraging.

To exorcise this terrible demon he would even sacrifice the principle of
liberty which everywhere else he is at so much pains to defend. He was
prepared to support a law to prohibit the marriage of indigents,[764]
a proposal to which Malthus was absolutely opposed. His plea for this
measure of restraint is expounded, not in the _Principles_, but in
another of his works entitled _Liberty_. It is, of course, possible that
_Liberty_ may owe something to the collaboration of Mrs. Stuart Mill.

(4) _The Law of Demand and Supply_—the law that determines the value of
products and of productive services, such as labour, land, and capital—is
usually stated in the following terms: Price varies directly with demand,
inversely with supply. One of the most important contributions which
Mill made to the science was to show that this apparently mathematically
precise formula was merely a vicious circle. If it be true that demand
and supply cause a variation of price, it is equally true that price
causes a variation of demand and supply. Mill corrects the dictum by
saying that price is fixed at a margin where the quantity offered
is equal to the quantity demanded. All price variations move about
this point, just as the beam of a balance oscillates about a point
of equilibrium.[765] He thus gave to the law of demand and supply a
scientific precision which it formerly lacked, and by substituting the
conception of equilibrium for the causal relation he introduced a new
principle into economics which was destined to lead to some important
modifications.

The law of demand and supply explains the variations of value, but
fails to illuminate the conception of value itself. A more fundamental
cause must be sought, which can be found in cost of production. Under a
_régime_ of free competition the fluctuations in value tend toward this
fixed point, just as “the sea tends to a level; but it never is at one
exact level.”[766]

A temporary, unstable value dependent upon the variations of demand
and supply, a permanent, natural, or normal value regulated by cost
of production, such was the Classical law of value. Mill was entirely
satisfied with it, as will be seen from the following phrase, which seems
rather strange, coming from such a cautious philosopher. “Happily,”
says he, “there is nothing in the laws of value which remains for the
present or any future writer to clear up; the theory of the subject is
complete.”[767]

The law which regulates the value of goods applies also to the value of
money. Money also has a temporary value, determined by the quantity in
circulation and the demand for it for exchange purposes—the celebrated
quantity theory. But it also has a natural value, determined by the cost
of production of the precious metals.

(5) _The Law of Wages._ A similar law determined wages—the price of
hand-labour. Here again is a double law. Temporary wages depend upon
demand and supply—understanding by supply the quantity of capital
available for the upkeep of the workers, the wages fund, and by demand
the number of workers in search of employment.[768] This law was more
familiarly expressed by Cobden when he said that wages rose whenever two
masters ran after the same man, and fell whenever two men ran after the
same master.

Natural or subsistence wages in the long run are determined by the
cost of production of labour—by the cost of rearing the worker. The
oscillations of temporary wages always tend to a position of equilibrium
about this point.

This “brazen law,” as Lassalle calls it, well deserves its title.
According to it wages depend entirely upon causes extraneous to the
worker, and bear no relation either to his need or to the character
of his work or his willingness to perform it. He is at the mercy of a
fatalistic law, and is as helpless to influence his market as a bale of
cotton. And not only is the law independent of him, but no intervention,
legal or otherwise, no institution, no system, can alter this state of
things without influencing one or other of the two terms of the equation,
the quantity of capital employed as wages—the wage fund—or the numbers
of the working population in search of work. “Every plan of amelioration
which is not founded upon this principle is quite illusory.” Only by
encouraging the growth of capital by means of saving, or by discouraging
the growth of population and restraining the sexual instinct, can the
terms of the equation be favourably modified. Upon final analysis there
are only two chances of safety for the workers, and of these the first
is beyond their power,[769] while the second means the condemnation to
celibacy or onanism of all proletarians, as they are ironically called.

And thus Mill, who formulated the law with greater rigour than any of his
predecessors, found himself alarmed at its consequences. He was specially
impressed by the courageous but impotent efforts of trade unionism, then
at the beginning of its career. Mill and the economists of the Liberal
school were as strongly in favour of the removal of the Combination
Laws as they were persistent in their demands for the repeal of the
Corn Laws; but of what use was the right of association and combination
when a higher law frustrated every attempt to raise wages? Just at this
time Longe, writing in 1866, and Thornton, in his volume on _Labour_,
began to question the validity of the wage fund theory. They experienced
no difficulty in converting John Stuart Mill, who followed with his
famous recantation in the pages of the _Fortnightly_. His defection
caused a remarkable stir, and was thought almost an offence against
the sacred traditions of the Classical school. The conversion was not
quite complete, however, for the last edition of the _Principles_ still
contains the passages we have already quoted, as well as others equally
discouraging to the working classes, and equally fatal to the hopes which
they had reasonably placed in their own efforts.[770]

The wage fund theory, though badly shaken as a result of Mill’s
defection, was not abandoned by all the Classical writers, and some
recent American publications have attempted a revival of it.[771]

(6) _The Law of Rent._ The law of competition tends to reduce the selling
price until it is equal to the cost of production. But suppose, as is
often the case, that there are two costs of production, which of the two
will determine the price? The higher will be the determinant, and so
there exists a margin for all similar products whose cost of production
is less. Ricardo showed that this was the case with agricultural products
as well as with certain manufactured goods.[772] Mill included personal
ability, and though the conception of rent was thus very considerably
extended, it had not the scope which it had with Senior.

(7) _The Law of International Exchange._ According to the Liberal
economists Ricardo and Dunoyer (see p. 346), international trade is
subject to the laws regulating individual exchange, and the results
in the two cases are almost identical, namely, a saving of labour to
both parties. One party exchanges a product which has cost fifteen
hours’ labour for another which, had an attempt been made to produce
it directly, would have involved a labour of twenty hours. The gain is
credited to the importing side, for exportation is merely the means
whereby it is obtained. Its measure is the excess of the imported value
over the value exported.

It is clear that each party gains by the transaction. It is not quite
clear, nor is it altogether probable, that the advantages are equally
distributed. But it is generally believed that if any inequality does
exist the greater gain goes to the poorer country—to the one that is less
gifted by nature or less fitted for industrial life. The latter country
by very definition would experience great difficulty in attempting the
direct production of the imported goods, and would even, perhaps, find it
quite impossible. On this point the English Classical or the Manchester
school is in complete agreement with the French school.[773]

It might possibly be pointed out that under a _régime_ of free
competition all values would be reduced to the level of cost of
production, and products would be exchanged in such a fashion that a
given quantity of labour embodied in one commodity would always exchange
for an equal quantity embodied in any other. But in such a case where
would be the advantage of exchanging? Ricardo had already anticipated
this objection, and had shown that if the rule of equal quantity in
exchange for equal quantity were true of exchange between individuals, it
did not hold of exchange between different countries, for the equalising
action of competition no longer operated, because of the difficulty of
moving capital and labour from one to the other. A comparison should
be made, not of the respective costs of the same product in the two
countries, but of the respective costs of the imported and the exported
products in the same country. Another buttress to strengthen the theory
which measures the advantages of international commerce by the amount of
labour economised![774]

But the value of the exchanged product is still undetermined. It lies
somewhere between the real cost of production of the goods exported and
the virtual cost of production of the goods imported, in such a way
that each country gains something. That is all we are able to say. Mill
has gone a step farther. He has abandoned the comparison of costs of
production, which is purely abstract, and can afford no practical measure
of the advantages, preferring to measure the value of the imported
product by the value of the product which must be given in exchange for
it.[775] We require to find the causes that enable a country like England
to obtain a greater or a lesser quantity of wine in exchange for her
coal. In other words, the law of international values no longer involves
a comparison of costs of production, but is simply the law of demand and
supply. The prices of the two goods arrange themselves in such a fashion
that the quantities demanded by the respective countries exactly balance.
If there is a greater demand for coal in France than there is for wine in
England, England will obtain a great quantity of wine in exchange for her
coal, and will consequently find herself in a very advantageous position.

Mill’s theory[776] constitutes a real advance as compared with
Ricardo’s, for it affords a means of gauging the strength of the foreign
demand, and of judging of the circumstances favourable to a good bargain.
Mill was of the opinion that a poor country stood to benefit most by the
transaction—thus confirming Bastiat’s belief. A rich country will always
have to pay more for its goods than a poor one.[777]

Protectionists affect the opposite belief, holding that it is the poor
country that is duped. The English trade with Portugal is one of their
favourite illustrations. But it is simply an illustration, and it can
never take the place of actual proof.

Notwithstanding these divergent views, Mill is more sympathetic to the
Protectionists than any other economist of the Liberal school. His
theory provides them with at least one excellent argument. Seeing that
the advantages of international commerce depend upon demand and supply,
a country may make it operate to its own advantage by merely pursuing a
different policy. New industries might be developed whenever there is a
considerable demand for new products, and that demand might easily be
so considerable that the price would be lowered.[778] Mill recognises
the justice of merely temporary protection, set up with a view to
naturalising a new industry, and considers it logically deducible from
his principles.[779]

Although Mill may in this way have done something to lighten the task of
the Protectionists, we must never forget that he himself remained an
entirely faithful adherent of the Free Trade doctrine and, except in the
case of infant industries, vigorously denounced all protective rights.
“All is sheer loss.… They prevent the economy of labour and capital,
thereby annihilating a general gain to the world which would be shared in
some proportion between itself and other countries.”[780]

The Free Trade doctrine has not remained where it was any more than the
other special doctrines of the Classical school. It gave birth to one
of the most powerful movements in economic history, which led to the
famous law of June 25, 1846, abolishing import duty on corn. This law
was followed by others, and ended in the complete removal of all tariff
barriers. But the eloquence of Cobden, of Bright, and of others was
necessary before it was accomplished. A national Anti-Corn League had to
be organised, no less than ten Parliamentary defeats had to be endured,
the allegiance of Peel and the approval of the Duke of Wellington had
to be secured before they were removed. All this even might have proved
futile but for the poor harvest of 1845. This glorious campaign did more
for the triumph of the Liberal economic school and for the dissemination
of its ideas than all the learned demonstrations of the masters. Fourteen
years were still to elapse before Cobden and Michel Chevalier were
able to sign the treaty of 1860. Even this was due to a personal act
of Napoleon III, and Cobden was not far wrong when he declared that
nine-tenths of the French nation was opposed to it.


II: MILL’S INDIVIDUALIST-SOCIALIST PROGRAMME

Such were the doctrines taught by the Classical school about the
middle of the nineteenth century. The writers in question, however,
strongly objected to the term “school,” believing that they themselves
were the sole guardians of the sacred truth. And we must admit that
their doctrines are admirably interwoven, and present an attractive
appearance. On the other hand, it must be confessed that the prospects
which they hold out for anyone not a member of the landowning class
are far from attractive. For the labourer there is promise of daily
toil and bare existence, and at best a wage determined by the quantity
of capital or the numbers of the population—causes which are clearly
beyond the workers’ influence, and even beyond the assuaging influence
of association and combination. And although the latter rights are
generously claimed for the workers, the occasional antagonism between
masters and men presages the eternal conflict between profits and wages.
The possession of land is a passport to the enjoyment of monopolistic
privileges, which the right of free exchange can only modify very
slightly. Rent—the resultant of all life’s favourable chances—reserved
for those who need it least, monopolises a growing proportion of the
national revenue. Intervention for the benefit of the worker, whether
undertaken by the State or by some other body, is pushed aside as
unworthy of the dignity of labour and harmful to its true interests.
“Each for himself” is set up as a principle of social action, in the
vain hope that it would be spontaneously transformed into the principle
of “Each for all.” The search for truth was the dominant interest of
the school, and these doctrines were preached, not for the pleasure
they yielded, but as the dicta of exact science. Little wonder that
men were prepared to fight before they would recognise these as
demonstrable truths. And just as it was Mill who so powerfully helped
to consolidate and complete the science of economics that Cossa refers
to his _Principles_ as the best _résumé_, the fullest, most complete
and most exact exposition of the doctrines of the Classical school that
we have,[781] it was Mill also who, in successive editions of his book,
and in his other and later writings, pointed out the new vistas opening
before the science, freed the doctrine from many errors to which it was
attached and set its feet on the paths of Liberal Socialism.

We might say without any suggestion of bias that Mill’s evolution was
largely influenced by French ideas.[782] A singularly interesting volume
might be written in illustration of this statement. Without referring to
the influence of Comte, which Mill was never tired of recognising, and
confining our attention only to economics, he has himself acknowledged
his debt to the Saint-Simonians for the greater part of his doctrines
of heredity and unearned increment, to Sismondi for his sympathy with
peasant proprietorship, and to the socialists of 1848 for his faith in
co-operative association as a substitute for the wage nexus.

It would hardly be true to say that Mill became a convert to socialism,
although he showed himself anxious to defend it against every undeserved
attack. To those who credit socialism with a desire to destroy personal
initiative or to undermine individual liberty he disdainfully points out
that “a factory operative has less personal interest in his work than a
member of a communist association, since he is not, like him, working for
a partnership of which he is himself a member,” and that “the restraints
of communism would be freedom in comparison with the present condition
of the majority of the human race.”[783] And although he expresses the
belief that “communism would even now be practicable among the _élite_
of mankind, and may become so among the rest,” and hopes that one day
education, habit, and culture will so alter the character of mankind that
digging and weaving for one’s country will be considered as patriotic
as to fight for it,[784] still he was far from being a socialist. Free
competition, he thought, was an absolute necessity, and there could be no
interference with the essential rights of the individual.

The first blow which he dealt at the Classical school was to challenge
its belief in the universality and permanence of natural law. He never
took up the extreme position of the Marxian and Historical schools, which
held that the so-called natural laws were merely attempts at describing
the social relations which may exist at certain periods in economic
history, but which change their character as time goes on. He draws a
distinction between the laws which obtain in the realm of production
and those that regulate distribution. Only in the one case can we speak
of “natural” laws; in the other they are artificial—created by men—and
capable of being changed, should men desire it.[785] Contrary to the
opinion of the Classical school, he tries to show that wages, profits,
and rent are not determined by immutable laws against which the will of
man can never prevail.

The door was thus open for social reform, which was no small triumph.
Of course it cannot be said of the Classical school, or even of the
Optimists, that they were prepared to deny the possibility or the
efficacy of every measure of social reform, but it must be admitted
that they were loath to encourage anything beyond private effort, or
to advocate the abolition of any but the older laws. Braun, speaking
at a conference of Liberal economists at Mayence in 1869, expressed
the opinion that “that conference had given rise to much opposition
because it upheld the principle that human legislation can never
change the eternal laws of nature, which alone regulate every economic
action.” Similar declarations abound in the French works of the period.
But, thanks to the distinction drawn by Mill, all this was changed.
Though the legislator be helpless to modify the laws of production,
he is all-powerful in the realm of distribution, which is the real
battle-ground of economics.

But, as a matter of fact, Mill’s distinction is open to criticism,
especially his method of stating it; and we feel that he is unjust to
himself when he regards this as his most important and most original
contribution to economic science. Production and distribution cannot
be treated as two separate spheres, for the one invariably involves
the other. And Mill himself is forced to abandon his own thesis when
he advocates the establishment of co-operative associations or peasant
proprietorship, for each of these belongs as much to the domain of
production as to that of distribution. Rodbertus, at almost the same
period, gave a much truer expression to Mill’s thought by emphasising the
distinction which exists between economic and legal ties.[786] Even these
may mutually involve one another; still we know that the economic laws
which regulate exchange value or determine the magnitude of industrial
enterprise are not of the same kind as the rules of law which regulate
the transfer of property or lay down the lines of procedure for persons
bound by agreement concerning wages, interest, or rent. The first may
well be designated natural laws, but the latter are the work of a
legislative authority.

Stuart Mill, not content with merely opening the door to reform,
deliberately enters in, and, in striking contrast to the economists of
the older school, outlines a comprehensive programme of social policy,
which he formulates thus:[787] “How to unite the greatest individual
liberty of action, with a common ownership in the raw material of the
globe, and an equal participation of all in the benefits of combined
labour.”

We may summarise his proposals as follows:

(1) Abolition of the wage system and the substitution of a co-operative
association of producers.

(2) The socialisation of rent by means of a tax on land.

(3) Lessening of the inequalities of wealth by restrictions on the rights
of inheritance.

This threefold measure of reform possesses all the desiderata laid
down by Mill. Moreover, it does not conflict with the individualistic
principle, but would somewhat strengthen it. It involves no personal
constraint, but tends to extend the bounds of individual freedom.

Let us briefly review these projects _seriatim_.

(1) Mill thought that the wages _régime_ was detrimental to individuality
because it deprived man of all interest in the product of his labour,
with the result that a vast majority of mankind is living under
conditions which socialism could not possibly make much worse.

It is necessary to replace this condition of things by “a form of
association which, if mankind continue to improve, must be expected
in the end to predominate, and is not that which can exist between a
capitalist as chief and workpeople without a voice in the management,
but the association of the labourers themselves on terms of equality,
collectively owning the capital with which they carry on their
operations, and working under managers elected and removable by
themselves.”[788] This noble ideal of a co-operative community was
borrowed, not from Owen, but from the French socialists. Mill had already
eulogised the French movement, even before its brilliant but ephemeral
triumph in 1848. He was not the only one to be attracted by the idea of a
co-operative community, for the English Christian Socialists drew their
inspiration from the same source.

Mill lived long enough to witness the decline of co-operative production
in England, and of the Co-operative Consumers’ Union in France, but
neither failure seems to have had any influence upon his projects.[789]
Whatever the method might be, the object in his ideal was always the
same, the self-emancipation of the workers.

(2) The rent of land, which Ricardo and his disciples accepted as a
natural if not as a necessary phenomenon, appeared to Mill as an
abnormal fact which was as detrimental to individuality as the wage
system itself. Its peculiar danger was, of course, not quite the same.
What rent did was to secure to certain individuals something which was
not the result of their own efforts, whereas individualism always aimed
at securing for everyone the fruits of his own labour—_suum cuique_.
On the principle of giving to each what each produced, everything not
directly produced by man himself was to be restored to the community.
It is immaterial whether this extra product is due to the collaboration
of nature, as Smith and the Physiocrats believed, or whether it is the
result of the pressure of population, as Ricardo and Malthus thought, or
the mere result of chance and favourable circumstance, as Senior put it.
Nothing could be easier than to levy a land tax which would gradually
absorb rent, and which could be periodically increased as rents advanced.
The idea was a brilliant one, and Mill had learned it from his father. It
soon became the rallying-cry of a new school of economists closely akin
to the socialists.

The movement begot of this idea of confiscation deserves the fuller
treatment which will be found in another chapter of this work.

Meanwhile, and until the larger and more revolutionary reform becomes
practical, Mill would welcome a modest instalment of emancipation in
the shape of peasant proprietorship. Like the co-operative ideal,
this also was of French extraction. Admiration of the French peasant
had been a fashionable cult in England ever since the days of Arthur
Young.[790] Mill thought that among the principal advantages of peasant
proprietorship would be a lessening of the injustice of rent, because its
benefits would be more widely distributed. The feeling of independence
would check the deterioration of the wage-earner, individual initiative
would be encouraged, the intelligence of the cultivator developed, and
the growth of population checked.

Mill inspired a regard for the frugal French peasantry in the English
Radical party. To his influence are due the various Small Holdings Acts
which have resulted in the establishment of small islets of peasant
tillers amid the vast territories of the English aristocracy.

(3) Mill was equally shocked at our antiquated inheritance law, which
permits people to possess wealth which they have never helped to
produce. To Senior inheritance ranked with the inequality of rent,
and he placed both in the same category. To Mill it appeared to be
not merely antagonistic to individual liberty, but a source of danger
to free competition, because it placed competitors in positions of
unequal advantage. In this matter Mill was under the influence of the
Saint-Simonians, and he made no attempt to hide his contempt for the
“accident of birth.”

This right of bequest, he felt, was a very difficult problem, for the
right of free disposal of one’s property even after death constituted
one of the most glorious attributes of individuality. It implied a kind
of survival or persistence of the human will. Mill showed considerable
ingenuity in extricating himself from this difficult position. He
would respect the right of the proprietor to dispose of his goods, but
would limit the right of inheritance by making it illegal to inherit
more than a certain sum. The testator would still enjoy the right of
bequeathing his property as he wished, but no one who already possessed
a certain amount of wealth could inherit it. Of all the solutions of
this problem that have been proposed, Mill’s is the most socialistic.
He puts it forward, however, not as a definite project, but as a mere
suggestion.[791]

Mill might well have been given a place among the Pessimists, especially
as he inherits their tendency to see the darker side of things. Not
only did the law of population fill him with terror, but the law of
diminishing returns seemed to him the most important proposition in the
whole of economic science; and all his works abound with melancholy
reflections upon the futility of progress. There is, for instance, the
frequently quoted “It is questionable if all the mechanical inventions
yet made have lightened the day’s toil of any human being.”[792] In his
vision of the future of society he prophesies that the river of human
life will eventually be lost in the sea of stagnation.

It is worth while dwelling for a moment on this idea of a stationary
state. Though the conception is an old one, it is very characteristic
of Mill’s work, and he feels himself forced to the belief that only by
reverting to the stationary state can we hope for a solution of the
social question.

Economists, especially Ricardo, had insisted upon the tendency of profits
to a minimum as a correlative of the law of diminishing returns. This
tendency, it was believed, would continue until profits had wholly
disappeared and the formation of new capital was arrested.[793] Mill took
up the theory where Ricardo had left it, and arrived at the conclusion
that industry would thus be brought to a standstill, seeing that the
magnitude of industry is dependent upon the amount of available capital.
Population must then become stationary, and all economic movement must
cease. Though alarmed at the economic significance of this prospect,
Mill acquiesced in its ethical import. On the whole he thinks that
such a state would be a very considerable improvement on our present
condition. With economic activity brought to a standstill the current of
human life would simply change its course and turn to other fields.[794]
The decay of Mammon-worship and the thirst for wealth would simply
mean an opportunity for pursuing worthier objects. He hoped that the
arrest of economic progress would result in a real moral advance, and in
the appeasement of human desires he looked for a solution and for the
final disappearance of the social problem. And as far as we can see the
reformers of to-day have nothing better to offer us.


III: MILL’S SUCCESSORS

Mill’s influence was universal, though, properly speaking, he had no
disciples. This was, no doubt, partly because writers like Toynbee, who
would naturally have become disciples, were already enrolled in the
service of the Historical school.

The Classical school failed to follow his socialistic lead. It still
preached the old doctrines, but with waning authority, and no new work
was produced which is at all comparable with the works which we have
already studied. We will mention a few of the later writings, however,
for, though belonging to the second class, they are in some respects
excellent.

In the first place we have several books written by Cairnes,[795]
notably _Some Leading Principles of Political Economy_ (1874). Cairnes
is generally regarded as a disciple of Mill, though as a matter of fact
he was nothing of the kind. Cairnes was purely Classic, and shared
the Classical preference for the deductive method, which he thought
the only method for political economy. His preference for that method
sometimes resulted in his abusing it, and he was curiously indifferent
to all social iniquities. He accepted _laissez-faire_, not as the basis
of a scientific doctrine, but simply as a safe and practical rule
of conduct.[796] The old wage fund theory has in him a champion who
attempted to defend it against Stuart Mill. It cannot be said that he
made any new contribution to the science, unless we except his teaching
concerning competition. He pointed out that competition has not the
general scope that is usually attributed to it. It only obtains between
individuals placed in exactly similar circumstances. In other words, it
operates within small areas, and is inoperative as between one area and
another. This theory of non-competing groups helps to throw some light
upon the persistent inequality shown by wages and profits.

In France the most prominent representative of political economy during
the Second Empire was Michel Chevalier, a disciple of Saint-Simon. He
nevertheless remained faithful to the Classical tradition of Say and
Rossi,[797] his predecessors at the Collège de France. He waged battle
with the socialists of 1848, made war upon Protection, and had the good
fortune to be victorious in both cases, sharing with Cobden the honour of
being a signatory to the famous commercial treaty of 1860. He realised
the important place that railways would some day occupy in national
economy, and the great possibilities of an engineering feat like the
Suez Canal. He was also alive to the importance of credit institutions,
which were only at the commencement of their useful career just
then.[798] Although connected with the Liberal school, he was not
indifferent to the teaching of the Saint-Simonians on the importance
of the authority and functions of the State, and he impressed upon the
Government the necessity of paying attention to labour questions—a
matter to which Napoleon III was naturally somewhat averse. Every
subject which he handles is given scholarly and eloquent treatment.

About the same time Courcelle-Seneuil published a treatise on political
economy which was for a long time regarded as a standard work. Seneuil
was a champion of pure science—or “plutology,” as he called it, in
order to distinguish it from applied science, to which he gave the name
“ergonomy.” For a long time he was regarded as a kind of pontiff, and the
pages of the _Journal des Économistes_ bear evidence of the chastisement
which he bestowed upon any of the younger writers who tried to shake
off his authority. This was the time when Maurice Block was meting out
the same treatment to the new German school in those bitterly critical
articles which appeared in the same journal.

It is to be regretted that we cannot credit France with the _Précis de la
Science économique et de ses Principales Applications_, which appeared
in 1862. Cherbuliez, the author, was a Swiss, and was professor first
at Geneva and then at Zurich. Cossa, in his _Histoire_, speaks of it as
“undoubtedly the best treatise on the subject published in France,” and
as being “possibly superior even to Stuart Mill’s.” Cherbuliez belonged
to the Classical school. He was opposed to socialism, and wrote pamphlets
_à la_ Bastiat in support of Liberal doctrines and the deductive method.
But, like the Mills before him, and Walras, Spencer, Laveleye, Henry
George, and many others who came after, he found it hard to reconcile
private property with the individualistic doctrine, “To each the product
of his labour.” He reconciles himself to this position merely because he
thinks that it is possibly a lesser evil than collective property.

The Liberal school had still a few adherents in Germany, although a
serious rival was soon to make its appearance. Prince Smith (of English
extraction) undertook the defence of Free Trade, pointing out “the
absurdity of regarding it as a social question,” and “how much more
absurd it is to think that it can ever be solved other than by the logic
of facts.” Less a doctrinaire than a reformer, Schulze-Delitzsch, about
1850, inaugurated that movement which, notwithstanding the gibes of
Lassalle, has made magnificent progress, and to-day includes thousands of
credit societies; though up to the present it has not benefited anyone
beyond the lower middle classes—the small shopkeeper, the well-to-do
artisan, and the peasant proprietor.




BOOK IV: THE DISSENTERS


With Bastiat economic Liberalism, threatened by socialism, sought
precarious refuge in Optimism. With Mill the older doctrines found new
expression in language scientific in its precision and classical in its
beauty.

It really seemed as if political economy had reached its final stage and
that there could be no further excuse for prolonging our survey.

But just when Liberalism seemed most triumphant and the principles of the
science appeared definitely settled there sprang up a feeling of general
dissatisfaction. Criticism, which had suffered a temporary check after
1848, now reasserted its claims, and with a determination not to tolerate
any further interruption of its task.

The reaction showed itself most prominently in Germany, where the new
Historical school refused to recognise the boundaries of the science
as laid down by the English and French economists. The atmosphere of
abstractions and generalisations to which they had confined it was
altogether too stifling. It demanded new contact with life—with the life
of the past no less than that of the present. It was weary of the empty
framework of general terms. It was athirst for facts and the exercise of
the powers of observation. With all the ardour of youth it was prepared
to challenge all the traditional conclusions and to reformulate the
science from its very base.

So much for the doctrine. But there was one thing which was thought more
objectionable than even the Classical doctrine itself, and that was the
Liberal policy with which the science had foolishly become implicated,
and which must certainly be removed.

In addition to such critics as the above there are also the writers who
drew their inspiration from Christianity, and in the name of charity, of
morality, or of religion itself, uttered their protest against optimism
and _laissez-faire_. Intervention again, so tentatively proposed by
Sismondi, makes a bold demand for wider scope in view of the pressure
of social problems, and under the name of State Socialism becomes a
definitely formulated doctrine.

Socialism, which Reybaud believed dead after 1848, revived in its turn.
Marx’s _Kapital_, published in 1867, is the completest and most powerful
exposition of socialism that we have. It is no longer a pious aspiration,
but a new and a scientific doctrine ready to do battle with the
champions of the Classical school, and to confute them out of their own
mouths.

None of these currents is entirely new. Book II has shown us where they
originated, and their beginnings can be traced to the earlier critical
writers.

But we must not forget the striking difference between the ill-fated
doctrines of the pre-1848 period and the striking success achieved by
the present school. Despite the sympathy shown for the earlier critics,
they remained on the whole somewhat isolated figures. Their protests were
always individualistic—Sismondi’s no less than Saint-Simon’s, Fourier’s
no less than Owen’s. Proudhon and List never seriously shook the public
confidence in Liberalism. Now, on the contrary, Liberalism finds itself
deserted, and sees the attention of public opinion turning more and more
in the direction of the new school.

The triumph, of course, was not immediate. Many of the doctrines were
formulated between 1850 and 1875, but victory was deferred until the last
quarter of the century. But when it did come it was decisive. In Germany
history monopolised the functions of economics, at least for a time.
Intervention has only become universal since 1880. Since then, also,
collectivism has won over the majority of the workers in all industrial
countries, and has exercised very considerable influence upon politics,
while Christian Socialism has discovered a way of combining all its most
fervent adherents, of whatever persuasion, in one common faith.

The advance of this new school meant the decline of the Classical
doctrine and the waning of Liberalism. Public interest gravitated away
from the teaching of the founders. But in the absence of a new and a
definite creed, what we find is a kind of general dispersion of economic
thought, accompanied by a feeling of doubt as to the validity of theory
in general and of theoretical political economy in particular. The old
feeling of security gave place to uncertainty. Instead of the comparative
unanimity of the early days we have a complete diversity of opinions,
amid which the science sets out on a new career.

In the last Book we shall find that certain eminent writers have
succeeded in renewing the scientific tradition of the founders. But every
connection with practical politics had to be removed and a new body of
closely knit doctrines had to be created before social thinkers could
have this new point of view from which to co-operate.




CHAPTER I: THE HISTORICAL SCHOOL AND THE CONFLICT OF METHODS


The second half of the nineteenth century is dominated by Historical
ideas, though their final triumph was not fully established until the
last quarter of the century. The rise of these ideas, however, belongs to
a still earlier period, and dates from 1843, when there appeared a small
volume by Roscher entitled _Grundriss_. We shall have to return to that
date if we wish to understand the ideas of the school and to appreciate
their criticisms.

The successors of J. B. Say and Ricardo gave a new fillip to the abstract
tendency of the science by reducing its tenets to a small number of
theoretical propositions. The problems of international exchange, of
the rate of profits, wages, and rent, were treated simply as a number
of such propositions, expressed with almost mathematical precision.
Admitting their exactness, we must also recognise that they are far
from being adequate, and could not possibly afford an explanation of
the different varieties of economic phenomena or help the solution of
the many practical problems which the development of industry presents
to the statesman. But McCulloch, Senior, Storch, Rau, Garnier,[799]
and Rossi, the immediate successors of Ricardo and Say in England and
France, repeated the old formulæ without making any important additions
to them. The new system of political economy thus consisted of a small
number of quite obvious truths, having only the remotest connection with
economic life. It is true that Mill is an exception. But the _Principles_
dates from 1848, which is subsequent to the foundation of the Historical
school. With this exception we may say, in the words of Schmoller, that
after the days of Adam Smith political economy seems to have suffered
from an attack of anæmia.[800]

Toynbee gives admirable expression to this belief in his article on
_Ricardo and the Old Political Economy_:[801] “A logical artifice became
the accepted picture of the real world. Not that Ricardo himself, a
benevolent and kind-hearted man, could have wished or supposed, had
he asked himself the question, that the world of his treatise actually
was the world he lived in; but he unconsciously fell into the habit of
regarding laws which were those only of that society which he had created
in his study for purposes of analysis as applicable to the complex
society really existing around him. And the confusion was aggravated by
some of his followers and intensified in ignorant popular versions of
his doctrines.” In other words, there was a striking divergence between
economic theory and concrete economic reality, a divergence that was
becoming wider every day, as new problems arose and new classes were
being formed. But the extent of the gap was best realised when an attempt
was made to apply the principles of the science to countries where the
economic conditions were entirely different from those existing either in
England or in France.

This divergence between theory and reality might conceivably be narrowed
in one of two ways. A more harmonious and a more comprehensive theory
might be formulated, a task which Menger, Jevons, and Walras attempted
about 1870. A still more radical suggestion was to get rid of all
abstract theory altogether and to confine the science to a simple
description of economic phenomena. This was the method of procedure that
was attempted first, and it is the one followed by the Historical school.

Long before this time certain writers had pointed out the dangers of a
too rigid adherence to abstraction. Sismondi—an essentially historical
writer—treated political economy as a branch of moral science whose
separation from the main trunk is only partial, and insisted upon
studying economic phenomena in connection with their proper environment.
He criticised the general conclusions of Ricardo and pleaded for a closer
observation of facts.[802] List showed himself a still more violent
critic, and, not content with the condemnation of Ricardian economics,
he ventured to extend his strictures even to Smith. Taking nationality
for the basis of his system, he applied the comparative method, upon
which the Historical school has so often insisted,[803] to the commercial
policy of the Classical school; but history was still employed merely
for the purpose of illustration. Finally, socialists, especially the
Saint-Simonians, whose entire system is simply one vast philosophy of
history, had shown the impossibility of isolating economic from political
and juridical phenomena, with which they are always intermingled.

But no author as yet had deliberately sought either in history or in the
observation of contemporary facts a means of reconstructing the science
as a whole. It is just here that the originality of the German school
lies.

Its work is at once critical and constructive. On the critical side we
have a profound and suggestive, though not always a just, analysis of the
principles and methods of the older economists, while its constructive
efforts gave new scope to the science, extended the range of its
observations, and added to the complexity of its problems.

Generally speaking, it is not a difficult task to give an exposition
of the critical ideas of the school, as we find them set forth in
several books and articles, but it is by no means easy to delineate the
conceptions underlying the positive work. Though implicit in all their
writings, these conceptions are nowhere explicitly stated; whenever
they have tried to define them it has always been, as their disciples
willingly admit, in a vague and contradictory fashion.[804] To add
further to the difficulty, each author defines them after his own
fashion, but claims that his definition represents the ideas of the whole
school.

In order to avoid useless repetitions and discussions without number we
shall begin with a rapid survey of the outward development of the school,
following with a _résumé_ of its critical work, attempting, finally,
to seize hold of its conception of the nature and object of political
economy. From our point of view the last-named object is by far the most
interesting.


I: THE ORIGIN AND DEVELOPMENT OF THE HISTORICAL SCHOOL

The honour of founding the school undoubtedly belongs to Wilhelm Roscher,
a Göttingen professor, who published a book entitled _Grundriss zu
Vorlesungen über die Staatswirtschaft nach geschichtlicher Methode_
in 1843. In the preface to that small volume he mentions some of the
leading ideas which inspired him to undertake the work, which reached
fruition in the celebrated _System der Volkswirtschaft_ (1st ed., 1854).
He makes no pretence to anything beyond a study of economic history. “Our
aim,” says he, “is simply to describe what people have wished for and
felt in matters economic, to describe the aims they have followed and
the successes they achieved—as well as to give the reasons why such aims
were chosen and such triumphs won. Such research can only be accomplished
if we keep in close touch with the other sciences of national life,
with legal and political history, as well as with the history of
civilisation.”[805] Almost in the same breath he justifies an attack upon
the Ricardian school. He recognises that he is far from thinking that
his is the only or even the quickest way of attaining the truth, but
thinks that it will lead into pleasant and fruitful quests, which once
undertaken will never be abandoned.

What Roscher proposed to do was to try to complete the current theory
by adding a study of contemporary facts and opinions, and, as a matter
of fact, in the series of volumes which constitute the _System_, every
instalment of which was received with growing appreciation by the German
world of letters, Roscher was merely content to punctuate his exposition
of the Classical doctrines with many an erudite excursus in the domain of
economic facts and ideas.[806]

Roscher referred to his experiment as an attempt to apply the historical
method which Savigny had been instrumental in introducing with such
fruitful results into the study of jurisprudence.[807] But, as Karl
Menger[808] has well pointed out, the similarity is only superficial.
Savigny employed history in the hope of obtaining some light upon the
organic nature and the spontaneous origin of existing institutions.
His avowed object was to prove their legitimacy despite the radical
pretensions of the Rationalist reformers of the eighteenth century.
Roscher had no such aim in view. He was himself a Liberal, and fully
shared in their reforming zeal. History with him served merely to
illustrate theory, to supply rules for the guidance of the statesman or
to foster the growth of what he called the political sense.

Schmoller thinks that Roscher’s work might justly be regarded
as an attempt to connect the teaching of political economy with
the “Cameralist” tradition of seventeenth- and eighteenth-century
Germany.[809] These Cameralists were engaged in teaching the principles
of administration and finance to students who were to spend their lives
in administrative work of one kind or another, and they naturally took
good care to keep as near actual facts as possible. Even in England and
France political economy soon got involved in certain practical problems
concerning taxation and commercial legislation. But in a country like
Germany, which was industrially much more backward than either England or
France, these problems wore a very different aspect, and some correction
of the Classical doctrines was absolutely necessary if they were to bear
any relation to the realities of economic life. Roscher’s innovation was
the outcome of a pedagogic rather than of a purely scientific demand, and
he was instrumental in reviving a university tradition rather than in
creating a new scientific movement.

In 1848 another German professor, Bruno Hildebrand, put forward a much
more ambitious programme, and his _Die Nationalökonomie der Gegenwart
und Zukunft_ shows a much more fundamental opposition to the Classical
school. History, he thought, would not merely vitalise and perfect the
science, but might even help to recreate it altogether. Hildebrand
points to the success of the method when applied to the science of
language. Henceforth economics was to become the science of national
development.[810]

In the prospectus of the _Jahrbücher für Nationalökonomie und Statistik_,
founded by him in 1863, Hildebrand goes a step farther. He challenges
the teaching of the Classical economists, especially on the question
of national economic laws, and he even blames Roscher because he had
ventured to recognise their existence.[811] He did not seem to realise
that a denial of that kind involved the undoing of all economic science
and the complete overthrow of those “laws of development” which he
believed were henceforth to be the basis of the science.

But Hildebrand’s absolutism had no more influence than Roscher’s
eclecticism, unless we make an exception of his generalisation concerning
the three phases of economic development, which he differentiates as
follows: the period of natural economy, that of money economy, and
finally that of credit. Beyond that he merely contented himself with
publishing a number of fragmentary studies on special questions of
statistics or history, without, for the most part, making any attempt to
modify the Classical theory of production and distribution.

The critical study of 1848 hinted at a sequel which was to embody the
principles of the new method. But the sequel never appeared, and the
difficult task of carrying the subject farther was entrusted to Karl
Knies, another professor, who in 1853 published a bulky treatise bearing
the title of _Political Economy from the Historical Point of View_.[812]
But there is as much divergence between his views and those of his
predecessors as there is between Roscher’s and Hildebrand’s. He not only
questions the existence of natural laws, but even doubts whether there
are any laws of development at all—a point Hildebrand never had any
doubts about—and thinks that all we can say is that there are certain
analogies presented by the development of different countries. Knies
cannot share in the belief of either Hildebrand or Roscher, nor does
he hold with the Classical school. He thinks that political economy is
simply a history of ideas concerning the economic development of a nation
at different periods of its growth.

Knies’s work passed almost unnoticed, ignored by historians and
economists alike, until the younger Historical school called attention to
his book, of which a new edition appeared in 1883. Knies makes frequent
complaints of Roscher’s neglect to consider his ideas.

Such heroic professions naturally lead us to expect that Knies would
spare no effort to show the superiority of the new method. But his
subsequent works dealing with money and credit, upon which his real
reputation rests, bear scarcely a trace of the Historical spirit.

The three founders of the science devoted a great deal of time to a
criticism of the Classical method, but failed to agree as to the aim
and scope of the science and left to others the task of applying their
principles.

This task was attempted by the newer Historical school, which sprang up
around Schmoller towards the end of 1870. This new school possesses two
distinctive characteristics.

(1) The useless controversy concerning economic laws which Hildebrand
and Knies had raised is abandoned. The members of the school are careful
not to deny the existence of natural social laws or uniformities, and
they considered that the search for these was the chief object of the
science. In reality they are economic determinists. “We know now,”
says Schmoller,[813] “that psychical causation is something other than
mechanical, but it bears the same stamp of necessity.” What they do deny
is that these laws are discoverable by Classical methods, and on this
point they agree with every criticism made by their predecessors.

As to the possibility of formulating “the laws of development” upon which
Hildebrand laid such stress, they professed themselves very sceptical.
“We have no knowledge of the laws of history, although we sometimes
speak of economic and statistical laws,”[814] writes Schmoller. “We
cannot,” he regretfully says later, “even say whether the economic life
of humanity possesses any element of unity or shows any traces of uniform
development, or whether it is making for progress at all.”[815] This
very characteristic passage from Schmoller was written in 1904,[816] and
forms the conclusion of the great synthetic treatise. All attempts at a
philosophy of history are treated with the same disdain.[817]

(2) The newer Historical school, not content merely with advocating the
use of the Historical method, hastened to put theory into practice. Since
about 1860 German economists have shown a disposition to turn away from
economic theory and to devote their entire energy to practical problems,
sociological studies and historical or realistic research. The number of
economic monographs has increased enormously. The institutions of the
Middle Ages and of antiquity, the economic doctrines of the ancients,
statistics, the economic organisation of the present day, these are
some of the topics discussed. Political economy is lost in the maze of
realistic studies, whether of the present day or of the past.

Although the Historical school has done an enormous amount of work we
must not forget that historical monographs were printed before their
time, and that certain socialistic treatises, such as Marx’s _Kapital_,
are really attempts at historical synthesis. The special merit of the
school consists in the impulse it gave to systematic study of this
description. The result has been a renewed interest in history and in the
development of economic institutions. We cannot attempt an account of all
these works and their varied contents. We must remain satisfied if we
can catch the spirit of the movement. The names of Schmoller, Brentano,
Held, Bücher, and Sombart are known to every student of economic history.
Marshall, the greatest of modern theorists, has on more than one occasion
paid them a glowing tribute.[818]

The movement soon left Germany, and it was speedily realised that
conditions abroad were equally favourable for its work.

By the end of 1870 practical Liberalism had spent its force. But new
problems were coming to the front, especially the labour question,
which demanded immediate attention.[819] Classical economists had no
solution to offer, and the new study of economic institutions, of social
organisation, and of the life of the masses seemed to be the only hopeful
method of gaining light upon the question. Comparison with the past was
expected to lead to a better understanding of the present. The Historical
method seemed to social reformers to be the one instrument of progress,
and a strong desire for some practical result fostered belief in it. When
we remember the prestige which German science has enjoyed since 1871,
and the success of the Germans in combining historical research with the
advocacy of State Socialism, we can understand the enthusiasm with which
the method was greeted abroad.

Even in England, the stronghold of Ricardian economics, the influence of
the school becomes quite plain after 1870.

Here, as elsewhere, a controversy as to the method employed manifests
itself. Cairnes in his work _The Character and Logical Method of
Political Economy_ (1875[820]), writing quite in the spirit of the old
Classical authors, strongly advocates the employment of the deductive
method. In 1879 Cliffe Leslie, in his _Essays on Political and Moral
Philosophy_, enters the lists against Cairnes and makes use of the new
weapons to drive home his arguments. The use of induction rather than
deduction, the constant necessity for keeping economics in living touch
with other social sciences, the relative character of economic laws, and
the employment of history as a means of interpreting economic phenomena,
are among the arguments adopted and developed by Leslie. Toynbee, in
his _Lectures on the Industrial Revolution_, gave utterance to similar
views, but showed much greater moderation. While recognising the claims
of deduction, he thought that history and observation would give new life
and lend a practical interest to economics. The remoteness and unreality
of the Ricardian school constituted its greatest weakness, and social
reform would in his opinion greatly benefit by the introduction of new
methods. Toynbee would undoubtedly have exercised tremendous influence;
but his life, full of the brightest hopes, was cut short at thirty.

The lead had been given; the study of economic institutions and classes
was henceforth to occupy a permanent position in English economic
writings, and the remarkable works which have since been published,
such as Cunningham’s _Growth of English Industry and Commerce_,
Ashley’s _Economic History_, the Webbs’ _Trade Unionism and Industrial
Democracy_, Booth’s _Life and Labour of the People_, bear witness to the
profound influence exerted by the new ideas.

In France the success of the movement has not been quite so pronounced,
although the need for it was as keenly felt there. Although it did
not result in the founding of a French school of economic historians,
the new current of ideas has influenced French economic thought in a
thousand ways. In 1878 political economy became a recognised subject in
the various curricula of the Facultés de Droit. The intimate connection
between economic study and the study of law has given an entirely new
significance to political economy, and the science has been entirely
transformed by the infusion of the historical spirit. At the same time
professional historians have become more and more interested in problems
of economic history, thus bringing a spirit of healthy rivalry into the
study of economic institutions. Several Liberal economists also, without
breaking with the Classical tradition, have devoted their energies to the
close observation of contemporary facts or to historical research.[821]

Finally, we have a new group of workers in the sociologists. Sociology
is interested in the origin and growth of social institutions of all
kinds and in the influence which they have exerted upon one another.
After studying institutions of a religious, legal, political, or social
character it is only natural that they should ask that the study of
economic institutions should be carried on in the same spirit and with
the help of the same method. This object has been enthusiastically
pursued for some time. The mechanism and the organisation of the
economic system at different periods have been closely examined by the
aid of observation and history. Abstraction has been laid aside and a
preference shown for minute observation, and for induction rather than
deduction.[822]


II: THE CRITICAL IDEAS OF THE HISTORICAL SCHOOL

Among so many writers whose works cover such a long period of time we
can hardly expect to find absolute unanimity, and we have already had
occasion to note some of the more important divergencies between them,
especially those separating the newer from the older writers of the
Historical school. We cannot here enter into a full discussion of all
these various shades of opinion, and we must be content to mention the
more important features upon which they are almost entirely at one,
noticing some of the principal individual doctrines by the way.

The German Historical school made its _début_ with a criticism of
Classical economics, and we cannot better begin than with a study of its
critical ideas.[823]

Although these ideas had already found expression in the writings of
Knies, Hildebrand, and Roscher, there was nothing like the discussion
which was provoked by them when the newer Historical school, at
a much later period, again brought them to public notice. The
publication of Karl Menger’s work, _Untersuchungen über die Methode der
Socialwissenschaften_, in 1883—a classic both in style and matter—ushered
in a new era of active polemics. This remarkable work, in which the
author undertakes the defence of pure political economy against the
attacks of the German Historical school, was received with some amount of
ill-feeling by the members of that school,[824] and it caused a general
searching of hearts during the next few years. We must try to bring out
the essential elements in the discussion, and contrast the arguments
advanced by the Historians with the replies offered by their critics.

Broadly speaking, three charges are levelled at the Classical writers.
(i) It is pointed out that their belief in the universality of their
doctrines is not easily justified. (ii) Their psychology is said to be
too crude, based as it is simply upon egoism. (iii) Their use, or rather
abuse, of the deductive method is said to be wholly unjustifiable. We
will review these charges _seriatim_.

The Historians held that the greatest sin committed by Smith and his
followers was the inordinate stress which they laid upon the universality
of their doctrines. Hildebrand applies the term “universalism” to this
feature of their teaching, while Knies refers to it as “absolutism” or
“perpetualism.” The belief of the Anglo-French school, according to their
version of it, was that the economic laws which they had formulated
were operative everywhere and at all times, and that the system of
political economy founded upon them was universal in its application.
The Historians, on the other hand, maintained that these laws, so far
from being categorically imperative, should be regarded always as being
subject to change in both theory and practice.

First with regard to practice. A uniform code of economic legislation
cannot be indifferently applied to all countries at all epochs of their
history. An attempt must be made to adapt it to the varied conditions
of time and place. The statesman’s art consists in adapting principles
to meet new demands and in inventing solutions for new problems. But,
as Menger points out, this obvious principle, which was by no means a
new one, would have met with the approval of Smith and Say, and even of
Ricardo himself;[825] although they occasionally forgot it, perhaps,
especially when judging the institutions of the past or when advocating
the universal adoption of _laissez-faire_.

The second idea, namely, that economic theory and economic laws have
only a relative value, is treated with even greater emphasis, and this
was another point on which the older economists had gone wrong. Economic
laws, unlike the laws of physics and chemistry, with which the Classical
writers were never tired of comparing them, have neither the universality
nor the inevitability of the latter. Knies has laid special stress on
this point. “The conditions of economic life determine the form and
character of economic theory. Both the process of argument employed
and the results arrived at are products of historical development. The
arguments are based upon the facts of concrete economic life and the
results bear all the marks of historical solutions. The generalisations
of economics are simply historical explanations and progressive
manifestations of truth. Each step is a generalisation of the truth as it
is known at that particular stage of development. No single formula and
no collection of such formulæ can ever claim to be final.”[826]

This paragraph, though somewhat obscure and diffuse, as is often the
case with Knies, expresses a sound idea which other economists have
stated somewhat differently, by saying that economic laws are at once
provisional and conditional. They are provisional in the sense that the
progress of history continually gives rise to new facts of which existing
theories do not take sufficient account. Hence the economist finds
himself obliged to modify the formulæ with which he has hitherto been
quite content. They are conditional in the sense that economic laws are
only true so long as other circumstances do not hinder their action. The
slightest change in the conditions as ordinarily given might cancel the
usual result. Those economists who thought of their theory as a kind of
final revelation, or considered that their predictions were absolutely
certain, needed reminding of this.

But Knies is hopelessly wrong in thinking that this relativity is enough
to separate the laws of economics from the laws of other sciences.
Professor Marshall justly remarks that chemical and physical laws
likewise undergo transformation whenever new facts render the old formulæ
inadequate. All these laws are provisional. They are also hypothetical in
the sense that they are true only in the absence of any disturbing cause.
Scientists no longer consider these laws as inherent in matter. They are
the product of man’s thought and they advance with the development of
his intelligence.[827] They are nothing more or less than formulæ which
conveniently express the relation of dependence that exists between
different phenomena; and between these various laws as they are framed by
the human mind there is no difference except a greater or lesser degree
of proof which supports them.

What gives to the laws of physics or chemistry that larger amount of
fixity and that greater degree of certainty which render them altogether
superior to economic law as at present formulated is a greater uniformity
in the conditions that give rise to them, and the fact that their action
is often measurable in accordance with mathematical principles.[828]

Not only has Knies exaggerated the importance of his doctrine of
relativity,[829] but the imputation that his predecessors had failed
to realise the need for it was hardly deserved. We shall have to refer
to this matter again. Mill’s _Principles_ was already published, and
even in the _Logic_, which appeared for the first time in 1843, and
several editions of which had been issued before 1853, the year when
Knies writes, we meet with the following sentence:[830] “The motive that
suggests the separation of this portion of the social phenomenon from
the rest … is that they do mainly depend at least in the first resort on
one class of circumstances only; and that even when other circumstances
interfere, the ascertainment of the effect due to the one class of
circumstances alone is a sufficiently intricate and difficult business
to make it expedient to perform it once for all and then allow for the
effect of the modifying circumstances.” Consequently sociology, of which
political economy is simply a branch, is a science of tendencies and
not of positive conclusions. No better expression of the principle of
relativity could ever be given.

Notwithstanding all this, modern economists have come to the conclusion
that the criticisms of the Historical school are sufficiently well
founded to justify them in demanding greater precision so as to avoid
those mistakes in the future. Dr. Marshall, for one, adopts Mill’s
expression, and defines an economic law as “a statement of economic
tendencies.”[831]

Even the founders of pure political economy, although their method is
obviously very different from that of the Historians, have taken similar
precautions. They expressly declare that the conclusions of the science
are based upon a certain number of preliminary hypotheses deliberately
chosen, and that the said conclusions are only provisionally true. “Pure
economics,” says Walras, “has to borrow its notion of exchange, of demand
and supply, of capital and revenue, from actual life, and out of those
conceptions it has to build the ideal or abstract type upon which the
economist exercises his reasoning powers.”[832] Pure economics studies
the effects of competition, not under the imperfect conditions of an
actual market, but as it would operate in a hypothetical market where
each individual, knowing his own interests, would be able to pursue
them quite freely, and in full publicity. The conception of a limited
area within which competition is fully operative enables us to study as
through a magnifying-glass the results of a hypothesis that really very
seldom operates in the economic life of to-day.

We may dispute the advantages of such a method, but we cannot say that
the economists ever wished to deny the relativity of a conclusion arrived
at in this fashion.

While willing to admit that the Historians have managed to put this
characteristic in a clear light just when some economists were in danger
of forgetting it, and that it is a universally accepted doctrine to-day,
we cannot accept Knies’s contention that it affords a sufficient basis
for the distinction between natural and economic laws. And such is the
opinion of a large number, if not of the majority, of economists.[833]

The second charge is levelled against the narrowness and insufficiency
of the psychology. Adam Smith treated man as a being solely dominated by
considerations of self-interest and completely absorbed in the pursuit
of gain. But, as the Historians justly point out, personal interest
is far from being the sole motive, even in the economic world. The
motives here, as elsewhere, are extremely varied: vanity, the desire for
glory, pleasure afforded by the work itself, the sense of duty, pity,
benevolence, love of kin, or simply custom.[834] To say that man is
always and irremediably actuated by purely selfish motives, says Knies,
is to deny the existence of any better motive or to regard man as a
being having a number of centres of psychical activity, each operating
independently of the other.[835]

We cannot deny that the Classical writers believed that “personal
interest”—not in the sense of egoism, which is the name given it
by Knies, and which somewhat distorts their view—held the key to
the significance and origin of economic life. But the claims of the
Historians are again immoderate. Being themselves chiefly concerned
with concrete reality in all its complexity of being, and with all its
distinctive and special features rather than its general import, they
forgot that the primary aim of political economy is to study economic
phenomena _en masse_. The Classical economists studied the crowd, not
the individual. If we neglect the differences that occasionally arise
in special cases, and allow for the personal equation, do we not find
that the most constant motive to action is just this personal desire
for well-being and profit? This is the opinion of Wagner, who on this
question of method is not quite in agreement with other members of the
school. In his suggestive study of the different motives that influence
economic conduct he definitely states that the only motive that is
really constant and permanent in its action is this self-interest. “This
consideration,” he says, “does something to explain and to justify the
conduct of those writers who took this as the starting-point of their
study of economics.”[836]

But having admitted this, we must also recognise, not that they denied
the changes occasionally undergone by self-interest under the pressure of
other motives, as Knies suggests, but that they have neglected to take
sufficient account of such modifications. Sometimes it really seems as if
they would “transform political economy into a mere natural history of
egoism,” as Hildebrand says.

We can only repeat the remark which we have already made, namely, that
when this criticism was offered it was scarcely justified. Stuart
Mill had drawn attention to this point in his _Logic_ ten years
previously.[837] “An English political economist, like his countrymen in
general, has seldom learned that it is possible that men in conducting
the business of selling their goods over the counter should care more
about their ease or their vanity than about their pecuniary gain.” For
his own part he ventures to say that “there is perhaps no action of a
man’s life in which he is neither under the immediate nor under the
remote influence of any impulse but the mere desire of wealth.”[838]

It is evident that Mill did not think that self-interest was the one
unchangeable and universal human motive. Much less “egoism,” for, as we
have seen in the previous chapter, his “egoism” includes a considerable
admixture of altruism.

But here again the strictures of the Historians, though somewhat
exaggerated, have forced economists of other schools to be more precise
in their statements. The economists of to-day, as Marshall remarks, are
concerned “with man as he is; not with an abstract or ‘economic’ man,
but a man of flesh and blood.”[839] And if the economist, as Marshall
points out, pays special attention to the desire for gain among the
other motives which influence human beings, this is not because he is
anxious to reduce the science to a mere “natural history of egoism,”
but because in this world of ours money is the one convenient means of
measuring human motive on a large scale.[840] Even the Hedonists, whose
economics rest upon a calculus of pleasure and pain, are careful to
note that their hypothesis is just a useful simplification of concrete
reality, and that such simplification is absolutely necessary in order
to carry the analysis of economic phenomena as far as possible. It is an
abstraction—imposed by necessity, which is its sole justification, but an
abstraction nevertheless.

It is just here that the final reproach comes in, namely, the charge of
abusing the employment of abstraction and deduction, and greater stress
is laid upon this count than upon either of the other two.

Instead of deduction the new school would substitute induction based upon
observation.

Their criticism of the deductive method is closely connected with their
attack upon the psychology of the older school. The Classical economists
thought, so the Historians tell us, that all economic laws could be
deduced by a simple process of reasoning from one fundamental principle.
If we consider the multiplicity of motives actually operative in the
economic world, the insufficiency of this doctrine becomes immediately
apparent. The result is not a faithful picture, but a caricature of
reality. Only by patient observation and careful induction can we hope
to build up an economic theory that shall take full account of the
complexity of economic phenomena. “There is a new future before political
economy,” writes Schmoller in 1883, in reply to a letter of Menger,
“thanks to the use that will be made of the historical matter, both
descriptive and statistical, that is slowly accumulating. It will not
come by further distillation of the abstract propositions of the old
dogmatism that have already been distilled a hundred times.”[841]

The younger school especially has insisted on this; and Menger has
ventured to say that in the opinion of the newer Historical school “the
art of abstract thinking, even when distinguished by profundity and
originality of the highest order, and when based upon a foundation of
wide experience—in a word, the exercise of that gift which has in other
sciences resulted in winning the highest honour for the thinkers—seems
to be of quite secondary importance, if not absolutely worthless, as
compared with some elaborate compilation or other.”[842]

But the criticism of the Historical school confuses two things, namely,
the particular use which the Classical writers have made of the abstract
deductive method, and the method itself.

No one will deny that the Classical writers often started with
insufficient premises. Even when the premises were correct, they were too
ready to think and not careful enough to prove that their conclusions
were always borne out by the facts. No one can defend their incomplete
analysis, their hasty generalisations, or their ambiguous formulæ.[843]

But this is very different from denying the legitimacy of abstraction
and deduction. To isolate a whole class of motives with a view to a
separate examination of their effects is not to deny either the presence
or the action of other motives, any more than a study of the effect of
gravitation upon a solid involves the denial of the action of other
forces upon it. In a science like political economy, where experiment is
practically impossible, abstraction and analysis afford the only means
of escape from those other influences which complicate the problems
so much. Even if the motives chosen were of secondary importance, the
procedure would be quite legitimate, although the result would not be of
any great moment. But it is of the greatest service and value when the
motive chosen is one, like the search for gain or the desire for personal
satisfaction, which exercises a preponderant influence upon economic
action.[844]

So natural, we may even say so indispensable, is abstraction, if we
are to help the mind steer its way amid the complexity of economic
phenomena, that the criticism of the Historical school has done nothing
to hinder the remarkable development which has resulted from the use of
the abstract method during the last thirty years. But, although the
Neo-Classical school has succeeded in replacing the old methods in their
position of honour once more, it no longer employs those methods in the
way the older writers did. A more solid foundation has been given them
in a more exact analysis of the needs which personal interest ought to
satisfy.[845] And the mechanism of deduction itself has been perfected by
a more rigid use of the ordinary logical forms, and by the adoption of
mathematical phraseology.

Happily the controversy as to the merits of the rival methods, which
was first raised by the Historical school, has no very great interest
at the present moment. Most eminent economists consider that both are
equally necessary. There seems to be a general agreement among writers
of different schools to consider the question of method of secondary
importance, and to forget the futile controversies from which the
science has gained so little. Before concluding this section it may be
worth while to quote the opinion of men who represent very different
tendencies, but are entirely agreed with regard to this one subject.
“Discussion of method,” says Pareto, “is a pure waste of time. The aim of
the science is to discover economic uniformities, and it is always right
to follow any path or to pursue any method that is likely to lead to that
end.”[846] “For this and other reasons,” says Marshall, “there always has
been, and there probably always will be, a need for the existence side
by side of workers with different aptitudes and different aims.… All the
devices for the discovery of the relations between cause and effect which
are described in treatises on scientific method have to be used in their
turn by the economist.”[847]

These writers generally employ the abstract method. Let us now hear some
of the Historians. Schmoller is the author of that oft-quoted phrase,
“Induction and deduction are both necessary for the science, just as the
right and left foot are needed for walking.”[848]

More remarkable still, perhaps, is the opinion of Bücher, an author to
whom the Historical school is indebted for some of its most valuable
contributions. “It is therefore a matter of great satisfaction that,
after a period of diligent collection of material, the economic problems
of modern commerce have in recent times been zealously taken up again and
that an attempt is being made to correct and develop the old system in
the same way in which it arose, with the aid, however, of a much larger
store of facts. For the only method of investigation which will enable
us to approach the complex causes of commercial phenomena is that of
abstract isolation and logical deduction. The sole inductive process that
can likewise be considered—namely, the statistical—is not sufficiently
exact and penetrating for most of the problems that have to be handled
here, and can be employed only to supplement or control.”[849]


III: THE POSITIVE IDEAS OF THE HISTORICAL SCHOOL

What made the criticism of the Historians so penetrating was the fact
that they held an entirely different view concerning the scope and aim
of economics. Behind the criticism lurked the counter-theory. Nothing
less than a complete transformation of the science would have satisfied
the founders, but the younger school soon discovered that so ambitious
a scheme could never be carried out. It is important that we should
know something of the view of those older writers on this question, and
the way they had intended to give effect to their plans. The positive
contribution made by the Historical school to economic study is even
more important than its criticisms, for it gives a clue to an entirely
different point of view with which we are continually coming into contact
in our study of economic doctrines.

The study of economic phenomena may be approached from two opposite
standpoints, which we may designate the mechanical and the organic. The
one is the vantage-ground of those thinkers who love generalisations, and
who seek to reduce the complexity of the economic world to the compass
of a few formulæ; the other of those writers who are attracted by the
constant change which concrete reality presents.

The earlier economists for the most part belonged to the former class.
Amid all the wealth and variety of economic phenomena they confined
their attention almost entirely to those aspects that could be
explained on simple mechanical principles. Such were the problems of
price fluctuations, the rate of interest, wages, and rent. Production
adapting itself to meet variation in demand, with no guide save personal
interest, looked for all the world like the intermolecular action of free
human beings in competition with one another. The simplicity of the idea
was not without a certain grandeur of its own.

But such a conception of economic life is an extremely limited one. A
whole mass of economic phenomena of the highest importance and of the
greatest interest is left entirely outside. The phenomena of the economic
world, as a matter of fact, are extremely varied and changeable. There
are institutions and organisations without number, banks and exchanges,
associations of masters and unions of men, commercial leagues and
co-operative societies. Eternal struggle between the small tradesman
and the big manufacturer, between the merchant and the combine, between
the peasant proprietor and the great landowner, between classes and
individuals, between public and private interests, between town and
country, is the common feature of economic life. A state rises to
prosperity again to fall to ruin. Competition at one moment makes it
superior, at another reduces its lead. A country changes its commercial
policy at one period to reintroduce the old _régime_ at another.
Economic life fulfils its purposes by employing different organs
that are continually modified to meet changing conditions, and are
gradually transformed as science progresses and manners and beliefs are
revolutionised.

Of all this the mechanical conception tells us nothing. It makes no
attempt to explain the economic differences which separate nations and
differentiate epochs. Its theory of wages tells us nothing about the
different classes of workpeople, or of their well-being during successive
periods of history, or about the legal and political conditions upon
which that well-being depends. Its theory of interest tells us nothing of
the various forms under which interest has appeared at different times,
or of the gradual evolution of money, whether metallic or paper. Its
theory of profits ignores the changes which industry has undergone, its
concentration and expansion, its individualistic nature at one moment,
its collective trend at another. No attempt is made to distinguish
between profits in industry or commerce and profits in agriculture.
The Classical economists were simply in search of those universal and
permanent phenomena amid which the _homo œconomicus_ most readily
betrayed his character.

The mechanical view is evidently inadequate if we wish to delineate
concrete economic life in all its manifold activity. We are simply given
certain general results, which afford no clue to the concrete and special
character of economic phenomena.

The weakness of the mechanical conception arises out of the fact that
it isolates man’s economic activity, but neglects his environment. The
economic action of man must influence his surroundings. The character of
such action and the effects which follow from it differ according to the
physical and social, the political and religious surroundings wherein
they are operative. A country’s geographical situation, its natural
resources, the scientific and artistic training of its inhabitants, their
moral and intellectual character, and even their system of government,
must determine the nature of its economic institutions, and the degree of
well-being or prosperity enjoyed by its inhabitants. Wealth is produced,
distributed, and exchanged in some fashion or other in every stage of
social development, but each human society forms a separate organic unit,
in which these functions are carried out in a particular way, giving,
accordingly, to that society a distinctive character entirely its own.
If we want to understand all the different aspects of this life we must
make a study of its economic activity, not as it were _in vacuo_, but in
connection with the medium through which it finds expression, and which
alone can help us to understand its true nature.[850]

This was the first doctrine on which they laid stress: the other follows
immediately. This social environment cannot be regarded as fixed. It is
constantly undergoing some change. It is in process of transformation and
of evolution. At no two successive moments of its existence is it quite
the same. Each successive stage calls for explanation, which history
alone can give. Goethe has given utterance to this thought in a memorable
phrase which serves as a kind of epigraph to Schmoller’s great work,
the _Grundriss_. “A person who has no knowledge of the three thousand
years of history which have gone by must remain content to dwell in
obscurity, living a hand-to-mouth existence.” We must have some knowledge
of the previous stages of economic development if we are to understand
the economic life of the present. Just as naturalists and geologists
in their anxiety to understand the present have invented hypotheses to
explain the evolution of the globe and of living matter upon it, so must
the student of economics return to the distant past if he wants to get
hold of the industrial life of to-day. “Man as a social being,” says
Hildebrand, “is the child of civilisation and a product of history. His
wants, his intellectual outlook, his relation to material objects, and
his connection with other human beings have not always been the same.
Geography influences them, history modifies them, while the progress of
education may entirely transform them.”[851]

The Historians maintained that the earlier economists by paying exclusive
attention to those broader conclusions which had something of the
generality of physical laws about them had kept the science within too
narrow limits. Alongside of theory as they had conceived of it—some
Historians would say instead of it—there is room for another study more
closely akin to biology, namely, a detailed description and a historical
explanation of the constitution of the economic life of each nation. Such
is the positive contribution of the school to the study of political
economy, and it fairly represents the attitude of the present-day
Historians towards the older economists.

Their aim was a perfectly natural and legitimate one, and at first sight,
at least, seemed very attractive. But beneath its apparent simplicity
there is some amount of obscurity, and its adversaries have thought that
upon close analysis it is really open to serious objections.

In the first place, is it the aim of the science to present us with an
exact, realistic picture of society, as the Historians loved to think?
On the contrary, do we not find that a study can only aspire to the
name of a science in proportion as its propositions become more general
in their nature? There is no science without generalisation, according
to Aristotle, and concrete description, however indispensable, is
only a first step in the constitution of a science. A science must be
explanatory rather than descriptive.

Of course Historians are not always content with mere description. Some
Historians have attempted explanation and have employed history as their
organon. Is the choice a suitable one?

“History,” says Marshall, “tells of sequences and coincidences; but
reason alone can interpret and draw lessons from them.”[852]

Moreover, is there a single important historical event whose cause has
ceased to be a matter of discussion? It will be a long time before people
cease to dispute about the causes of the Reformation or the Revolution,
and the relative importance of economic, political, and moral influences
in determining the course of those movements has yet to be assigned.
The causes that led to the substitution of credit for money or money
for barter are equally obscure. Before narrative can become science
there must be the preliminary discovery by a number of other sciences
of the many diverse laws whose combination gives rise to concrete
phenomena.[853] Not history but the sciences give the true explanation.
The evolutionary theory has proved fruitful in natural history simply
because it took the succession of animal species as an established fact
and then discovered that heredity and selection afforded a means of
explaining that succession. But history cannot give us any hypothesis
that can rival the theory of evolution either in its scientific value
or in its simplicity. In other words, history itself is in need of
explanation. It gives no clue to reality and it can never take the place
of economics.[854]

The earlier Historians claimed a higher mission still for the historical
study of political economy. It must not only afford an explanation
of concrete economic reality, but it must also formulate the laws of
economic development. This idea is only held by a few of them, and even
the few are not agreed as to how it should be done. Knies, for example,
thinks that it ought to be sufficiently general to include the economic
development of all nations. Saint-Simon held somewhat similar views.
Others, and among them Roscher, hold that there exist parallelisms in
the history of various nations; in other words, that every nation in the
course of its economic development passes through certain similar phases
or stages. These similarities constitute the laws of economics. If we
were to study their movements in the civilisations of the past we might
be able to estimate their place in existing societies.[855]

Neither point seems very clear. Even if we admit that there is only
one general law of human development we cannot forecast the line of
progress, because scientific prediction is only applicable to recurrent
phenomena. They fail just when the conditions are new. Of course one
can always guess at the nature of the future, but divination is not
knowledge. And predictions of this kind are almost always false.[856]
Historical parallelism rests on equally shaky foundations. A nation,
like any other living organism, passes through the successive stages of
youth, maturity, and old age, but we are not justified in thinking that
the successive phases through which one nation has passed must be a kind
of prototype to which all others must conform. All that we can say is
that in two neighbouring countries the same effects are likely to follow
from the same causes. Production on a large scale, for example, has been
accompanied by similar phenomena in most countries in Western Europe. But
this is by no means an inevitable law. It is simply a case of similar
effects resulting from similar causes. Such analogies are hardly worthy
of the name of laws. The discovery of the law, as Wagner says,[857] may
be a task beyond human power; and Schmoller, as we have already seen, is
of the same opinion.

One remark before concluding. There is a striking similarity between the
ideas just outlined and those of a distinguished philosopher whose name
deserves mention here, although his influence upon political economy was
practically _nil_. We refer to Auguste Comte.

It is curious that the earliest representatives of the school should have
ignored him altogether, but just as Mill remained unknown to them, so
the _Cours de Philosophie positive_, though published in 1842, remained
a sealed book so far as they were concerned. Comte’s ideas are so very
much like those of Knies and Hildebrand that some Positivist economists,
such as Ingram and Hector Denis, have attempted to connect the Historical
tendency in political economy with the Positive philosophy of Comte.[858]

The three fundamental conceptions which formed the basis of the teaching
of the Historical school are clearly formulated by Comte. The first is
the importance of studying economic phenomena in connection with other
social facts. The analysis of the industrial or economic life of society
can never be carried on in the “positive” spirit by simply making an
abstraction of its intellectual, political, or moral life, whether of the
past or of the present.[859] The second is the employment of history as
the organon of social science. “Social research,” says he, “must be based
upon a sane analysis of the all-round development of the best of mankind
up to the present moment, and the growing predilection for historical
study in our time augurs well for the regeneration of political
economy.” He was fully persuaded that the method would foster scientific
prediction—a feature which is bound to fuse all those diverse conditions
which will form the basis of Positive politics.

Comte wished to found sociology, of which political economy was to be
simply a branch. The Historical school, and especially Knies, regarded
economics in the same spirit. Hence the analogies with which Knies had
to content himself, but which the younger school refused to recognise.
But there was a fundamental difference between their respective points of
view, and this will help us to distinguish between them.

Comte was a believer in inevitable natural laws, which, according to the
earlier Historians, had wrought such havoc. The Historical method also,
as he conceived of it, was something very different from what the older
or the newer Historical school took it to be.

Adopting a dictum of Saint-Simon, Comte speaks of the Historical method
as an attempt to establish in ascending or descending series the curve
of each social institution, and to deduce from its general outlines
conclusions as to its probable growth or decline in the future. This
is how he himself defines the process: “The essence of this so-called
historical spirit, it seems to us, consists in the rational use of what
may be called the social series method, or, in other words, in the due
appreciation of the successive stages of human development as reflected
in a succession of historical facts. Careful study of such facts, whether
physical, intellectual, moral, or political, reveals a continuous growth
on the one hand and an equally continuous decline on the other. Hence
there results the possibility of scientific prophecy concerning the
final ascendancy of the former and the complete overthrow of the latter,
provided always such conclusion is in conformity with the general laws
of human development, the sociological preponderance of which must never
be lost sight of.”[860] It was in virtue of this method that Saint-Simon
predicted the coming of industrialism and that Comte prophesied the
triumph of the positive spirit over the metaphysical and religious.

There is considerable difference between this attitude and the Historical
method as we know it,[861] and the attempt at affiliation seems to
us altogether unwarranted. But the coincidence between Comte’s views
and those of Knies and Hildebrand is none the less remarkable, and it
affords a further proof of the existence of that general feeling which
prompted certain writers towards the middle of the century to attempt a
regeneration of political economy by setting it free from the tyranny of
those general laws which had nearly stifled its life.

It seems to us, however, that the Historical school is mistaken if it
imagines that history alone can afford an explanation of the present or
will ever enable us to discover those special laws which determine the
evolution of nations.

On the other hand, it has a perfect right to demand a place beside
economic science, and it is undoubtedly destined to occupy a position
still more prominent in the study of economic institutions, in
statistical investigation, and above all in economic history. Not only is
a detailed description of the concrete life of the present of absorbing
interest in itself, but it is the condition precedent to all speculations
concerning the future. The theorist can never afford to neglect the
minute observation of facts unless he wills that his structure shall hang
in the void. Most abstract economists feel no hesitation in recognising
this. For example, Jevons, writing in 1879,[862] gave it as his opinion
that “in any case there must arise a science of the development of
economic forces and relations.”

This newer historical conception came to the rescue just when the science
was about to give up the ghost, and though they may have failed to give
us that synthetic reconstruction which is, after all, within the ability
of very few writers, its advocates have succeeded in infusing new life
into the study and in stimulating new interest in political economy by
bringing it again into touch with contemporary life. They have done
this by throwing new light upon the past and by giving us a detailed
account of the more interesting and more complex phenomena of the present
time.[863] Such work must necessarily be of a fragmentary character. The
school has collected a wonderful amount of first-class material, but it
has not yet erected that palace of harmonious proportions to which we in
our fond imagination had likened the science of the future. Nor has it
discovered the clue which can help it to find its way through the chaos
of economic life. This is not much to be wondered at when we remember
the shortcomings of the method to which we have already had occasion to
refer. Indeed, some of the writers of the school seem fully convinced
of this. Professor Ashley, in an article contributed to the _Economic
Journal_, employs the following words:[864] “As I have already observed,
the criticisms of the Historical school have not led so far to the
creation of a new political economy on historical lines: even in Germany
it is only within very recent years that some of the larger outlines of
such an economics have begun to loom up before us in the great treatise
of Gustav Schmoller.”

In view of considerations like these one might have expected that the
Historical school would have shown greater indulgence to the attempts
made both by the Classical and by the Hedonistic schools to give by a
different method expression to the same instinctive desire to simplify
matters in order to understand them better.[865]




CHAPTER II: STATE SOCIALISM


The nineteenth century opened with a feeling of contempt for government
of every kind, and with unbounded confidence on the part of at least
every publicist in the virtue of economic liberty and individual
initiative. It closed amid the clamour for State intervention in all
matters affecting economic or social organisation. In every country the
number of public men and of economists who favour an extension of the
economic function of government is continually growing, and to-day such
men are certainly in the majority. To some writers this change of opinion
has seemed sufficiently important to warrant special treatment as a new
doctrine, variously known as State Socialism or “the Socialism of the
Chair” in Germany and Interventionism in France.

Really it is not an economic question at all, but a question of practical
politics upon which writers of various shades of economic opinion may
agree despite extreme differences in their theoretical preconceptions.
The problem of defining the limits of governmental action in the matter
of producing and distributing wealth is one of the most important in
the whole realm of political economy, but it can hardly be considered a
fundamental scientific question upon which economic opinion is hopelessly
divided. It is clear that the solution of the problem must depend not
merely upon purely economic factors, but also on social and political
considerations, upon the peculiar conception of general interest which
the individual has formed for himself and the amount of confidence which
he can place in the character and ability of Governments.[866] The
problem is always changing, and whenever a new kind of society is created
or a new Government is established a fresh solution is required to meet
the changed conditions.

How is it, then, that this question has assumed such extravagant
proportions at certain periods of our history?

Had the issue been confined to the limits laid down by Smith it is
probable that such passionate controversies would have been avoided.
Smith’s arguments in favour of _laissez-faire_ were largely economic.
Gradually, however, under the growing influence of individual and
political liberty, a kind of contempt for all State action took the place
of the more careful reasoning of the earlier theory, and the superiority
of individual action in matters non-economic became an accepted axiom
with every publicist.

This method of looking at the problem is very characteristic of Bastiat.
The one feature of government that interested him was not the fact that
it represented the general interest of the citizens, but that whenever it
took any action it had to employ force,[867] whereas individual action
is always free. Every substitution of State for individual action meant
victory for force and the defeat of liberty. Such substitution must
consequently be condemned. Smith’s point of view is totally different.
To appreciate this difference we need only compare their treatment of
State action. In addition to protecting the citizens from invasion and
from interference with their individual rights, Smith adds that the
sovereign should undertake “the duty of erecting and maintaining certain
public works and certain public institutions, which it can never be
for the interest of any individual, or small number of individuals, to
erect and maintain; because the profit could never repay the expense to
any individual or small number of individuals, though it may frequently
do much more than repay it to a great society.”[868] The scope is
sufficiently wide, at any rate. If we turn to Bastiat, on the other hand,
we find that the Government has only two functions to perform, namely,
“to guard public security and to administer the common land.”[869] Viewed
in this light, the problem of governmental intervention, instead of
remaining purely economic, becomes a question of determining the nature,
aims, and functions of the State, and individual temperament and social
traditions play a much more important part than either the operation
of economic phenomena or any amount of economic reasoning. It is not
surprising that some writers thought that the one aim of economics was to
defend the liberty and the rights of the individual!

Such exaggerated views were bound to beget a reaction, and the defence of
State action assumes equally absurd proportions with some of the writers
of the opposite school. Even as far back as 1856 Dupont-White, a French
writer, had uttered a protest against this persistent depreciation of the
State, in a short work entitled _L’Individu et l’État_. His ideas are
so closely akin to those of the German State Socialists that they have
often been confused with them, and it is simpler to give an exposition
of both at the same time. But he was a voice crying in the wilderness.
Public opinion under the Second Empire was very little disposed to listen
to an individual who, though a Liberal in politics, was yet anxious
to strengthen the power and to add to the economic prerogative of the
Crown. More favourable circumstances were necessary if there was to be a
change of public opinion on the matter. The times had ripened by the last
quarter of the century, and the elements proved propitious, especially in
Germany, where the reaction first showed itself.

The reaction took the form not so much of the creation of a new doctrine
as of a fusion of two older currents, which must first be examined.

During the course of the nineteenth century we find a number of
economists who, while accepting Smith’s fundamental conception, gradually
limit the application of his principle of _laissez-faire_. They thought
that the superiority of _laissez-faire_ could not be scientifically
demonstrated and that in the great majority of cases some form of State
intervention was necessary.

On the other hand, we meet with a number of socialists who prove
themselves to be more opportunistic than their comrades, and though
equally hostile to private property and freedom of production, yet never
hesitate to address their appeals on behalf of the workers to existing
Governments.

State Socialism represents the fusion of these two currents. It surpasses
the one in its faith in the wisdom of Governments, and is distinguished
from the other by its greater attachment to the rights of private
property; but both of them contribute some items to its programme. In
the first place we must try to discover the source of these separate
tendencies, and in the second place watch their amalgamation.


I: THE ECONOMISTS’ CRITICISM OF _LAISSEZ-FAIRE_

The doctrine of absolute _laissez-faire_ was not long allowed to go
unchallenged. From the time of Smith onward there is an uninterrupted
sequence of writers—all of them by no means socialists—who ventured
to attack the fundamental propositions of the great Scotsman and who
attempted to show that his practical conclusions were not always borne
out by the facts.

Smith based his advocacy of _laissez-faire_ upon the supposed
identification of public and private interests. He showed how competition
reduced prices to the level of cost of production, how supply adapted
itself to meet demand in a perfectly automatic fashion, and how capital
in an equally natural way flowed into the most remunerative occupations.

This principle of identity of interests was, however, rudely shaken by
the teachings of Malthus and Ricardo, although both of them remained
strong adherents of the doctrine of individual liberty.

Sismondi, who was the next to intervene, laid stress upon the evils of
competition, and showed how social inequality necessitated the submission
of the weak to the will of the strong. His whole book was simply a
refutation of Smith’s providential optimism.

In Germany even, as early as 1832, that brilliant economist Hermann was
already proceeding with his critical analysis of the Classical theories;
and after demonstrating how frequently individual interest comes into
conflict with public welfare, and how inadequate is the contribution
which it can possibly make to the general well-being, he declares his
inability to subscribe to the doctrine laid down by most of Smith’s
followers, namely, that individual activity moved by personal interest is
sufficient to meet all the demands of national economy. Within the bounds
of this national economy[870] he thinks there ought to be room for what
he calls the civic spirit (_Gemeinsinn_) as well.

The next critic, List, bases his whole case upon the opposition between
immediate interests, which guide the individual, and the permanent
interests of the nation, of which the Government alone can take account.

Stuart Mill, in the famous fifth book of the _Principles_, refuses
even to discuss the doctrine of identity of interests, believing it
to be quite untenable. On the question of non-intervention he admits
the validity of one economic argument only, namely, the superiority
of self-interest as an economic motive. But he is quick to recognise
its shortcomings and the exceptions to its universal operation—in the
natural incapacity of children and of the weak-minded, the ignorance of
consumers, the difficulty of achieving it, even when clearly perceived,
without the help of society as a whole, as in the case of the Factory
Acts. Mill also points out how this motive is frequently wanting in
modern industrial organisation, where, for example, we have joint stock
companies acting through the medium of a paid agency, or charitable
work undertaken by an individual who has to consider, not his own
interests, but those of other people. Private interest is also frequently
antagonistic to public interest, as in the case of the public supply of
gas or water, where the individual _entrepreneur_ is influenced by the
thought of a maximum profit rather than by considerations of general
interest. In matters of that kind Stuart Mill was inclined to favour
State intervention.[871]

M. Chevalier, from his professorial chair in the Collège de France,
extended his congratulations to Mill upon his successful restoration
of the legitimate duties of Governments.[872] Chevalier thought that
those who believed that the economic order could be set up simply by
the aid of competition acting through personal interest were either
illogical in their arguments or irrational in their aims. Government
was simply the manager of the national organisation, and its duty was
to intervene whenever the general interest was endangered. But the
duties and privileges of government are not exactly those of the village
policeman.[873] Applying this principle to public works, he points out
that they are more or less State matters, and the guarantee for good work
is quite as great when the State itself undertakes to perform it as when
it is entrusted to a private individual.

In 1863 Cournot, whose reputation was unequal to either Mill’s or
Chevalier’s, but whose penetrating thought, despite its small immediate
influence, is quite important in the history of economic doctrines,
treats of the same problem in his _Principes de la Théorie des
Richesses_. Going straight to the heart of the problem, he asks whether
it is possible to give a clear definition of this general interest—the
economic _optimum_ which we are anxious to realise—and whether the system
of free competition is clearly superior to every other. He justly remarks
that the problem is insoluble. Production is determined by demand, which
depends both upon the preliminary distribution of wealth and also upon
the tastes of consumers. But if this be the case, it is impossible to
outline an ideal system of distribution or to fix upon the kind of tastes
that will prove most favourable for the development of society. A step
farther and Cournot must have hit upon the distinction so neatly made by
Pareto between maximum utility, which is a variable, undefined notion,
and maximum ophelimity, “the investigation of which constitutes a clearly
defined problem wholly within the realm of economics.”[874]

But Cournot does not therefore conclude that we ought to abstain from
passing any judgment in the realm of political economy and abandon all
thought of social amelioration. Though the absolutely best cannot be
defined, it does not follow that we cannot determine the relatively good.
“Improvement or amelioration is possible,” says he, “by introducing a
change which operates upon one part of the economic system, provided
there are no indirect effects which damage the other parts of the
system.”[875] Such progress is not necessarily the result of private
effort. Following Sismondi, he quotes several instances in which the
interests of the individual collide with those of the public and in which
State intervention might prove useful.

Every one of these authors—in varying degrees, of course—admits the
legitimacy of State intervention in matters economic. Liberty doubtless
is still the fundamental principle. Sismondi was content with mere
aspiration, so great did the difficulties of intervention appear to
him. Stuart Mill thought that the _onus probandi_ should rest with the
innovator. Cournot considered liberty as being still the most natural and
simple method, and should the State find it necessary to intervene it
could only be in those instances in which science has clearly defined the
aim in view and demonstrated the efficacy of the methods proposed. Every
one of them has abandoned liberty as a scientific principle. To Cournot
it was an axiom of practical wisdom;[876] Stuart Mill upheld it for
political reasons as providing the best method of developing initiative
and responsibility among the citizens. They all agree that the State,
far from being a _pis aller_, has a legitimate sphere of action. The
difficulty is just to define this.[877] This was the task to which Walras
addressed himself with remarkable success in his lectures on the theory
of the State, delivered in Paris in 1867-68.[878]

And so we find that the progress of thought since the days of Adam Smith
had led to important modifications of the old doctrines concerning the
economic functions of the State. The publicists, however, were not
immediately converted. Even when the century was waning they still
remained faithful to the optimistic individualism of the earlier period.
The organon of State Socialism merely consists of these analyses
incorporated into a system. The authors just mentioned must consequently
be regarded, if not as the precursors of State Socialism, at any rate as
unconsciously contributing to the theory.


II: THE SOCIALISTIC ORIGIN OF STATE SOCIALISM. RODBERTUS AND LASSALLE

State Socialism is not an economic doctrine merely. It has a social
and moral basis, and is built upon a certain ideal of justice and a
particular conception of the function of society and of the State. This
ideal and this conception it received, not from the economists, but from
the Socialists, especially Rodbertus and Lassalle. The aim of these two
writers was to effect a kind of compromise between the society of the
present and that of the future, using the powers of the modern State
simply as a lever.

The idea of a compromise of this kind was not altogether new. A faint
suggestion of it may be detected more than once in the course of the
century, and an experiment of the kind was mooted in France towards the
end of the July Monarchy. At that time we find men like Louis Blanc and
Vidal—who were at least socialists in their general outlook—writing
to demand State intervention not merely with a view to repairing the
injustice of the present society, but also with a view to preparation for
the society of the future with as little break with the past as possible.
Louis Blanc was in this sense the first to anticipate the programme of
the State Socialists. But its more immediate inspirers were Rodbertus and
Lassalle, both of whom belonged to that country in which its effects were
most clearly seen.

Their influence upon German State Socialism cannot be exactly measured by
the amount of direct borrowing that took place. They were linked by ties
of closest friendship to the men who were responsible for creating and
popularising the new ideas, and it is important that we should appreciate
the personal influence which they wielded. Rodbertus formed the centre
of the group, and during the two years 1862-64 he carried on an active
correspondence with Lassalle. They were brought together by the good
offices of a common friend, Lothar Bucher, an old democrat of 1848 who
had succeeded in becoming the confidant of Bismarck. Strangely enough,
Bismarck kept up his friendship with Lassalle even when the latter was
most busily engaged with his propaganda work.[879] Wagner, also, the most
eminent representative of State Socialism, was in frequent communication
with Rodbertus, and he never failed to recognise his great indebtedness
to him. Wagner himself was on more than one occasion consulted by
Bismarck.

But apart altogether from their connection with State Socialism,
Rodbertus and Lassalle would deserve a place in our history. Rodbertus
is a theoretical writer of considerable vigour and eloquence, and his
thoughts are extraordinarily suggestive. Lassalle was an agitator and
propagandist rather than an original thinker, but he has left a lasting
impression upon the German labour movement. Hence our determination to
give a somewhat detailed exposition of their work, especially of that of
Rodbertus, and to spare no effort in trying to realise the importance of
the contribution made by both of them.


1. RODBERTUS

In a history of doctrines Rodbertus has a place peculiarly his own. He
forms, as it were, a channel through which the ideas first preached
by Sismondi and the Saint-Simonians were transmitted to the writers
who belong to the last quarter of the century. His intellectual
horizon—largely determined for him by his knowledge of these French
sources[880]—was fixed as early as 1837, when he produced his
_Forderungen_, which the _Gazette universelle d’Augsburg_ refused to
publish. His first work appeared in 1842,[881] and the earliest of
the _Soziale Briefe_[882] belong to 1850 and 1851. At the time these
passed almost unnoticed. It was only when Lassalle in his treatise in
1862 referred to him as the greatest of German economists, and when
conservative writers like Rudolf Meyer and Wagner drew attention to
his work, that his books received the notice which they deserved. The
German economists of the last thirty years have been greatly influenced
by him. His ideas, it is true, are largely those of the earliest
French socialists, who wrote before the movement had lost its purely
intellectual tone and become involved in the struggle of the July
Monarchy, but his clear logic and his systematic method, coupled with his
knowledge of economics, which is in every way superior to that of his
predecessors, gives to these ideas a degree of permanence which they had
never enjoyed before. This “Ricardo of socialism,” as Wagner[883] calls
him, did for his predecessors’ doctrines what Ricardo had succeeded in
doing for those of Malthus and Smith. He magnified the good results of
their work and emphasised their fundamental postulates.

Rodbertus’s upbringing decreed that he should not become involved in
that democratic and radical socialism which was begotten of popular
agitation, and whose best-known representative is Marx. Marx considered
socialism and revolution, economic theory and political action, as
being indissolubly one.[884] Rodbertus, on the other hand, was a great
liberal landowner who sat on the Left Centre in the Prussian National
Assembly of 1848, and his political faith is summed up in the two phrases
“constitutional government” and “national unity.”[885] The success
won by the Bismarckian policy gradually drew him nearer the monarchy,
especially towards the end of his life.[886] His ideal was a socialist
party renouncing all political action and confining its attention solely
to social questions. Although personally favourably inclined towards
universal suffrage, he refused to join Lassalle’s _Arbeiterverein_
because Lassalle had insisted upon placing this article of political
reform on his programme.[887] The party of the future, he thought,
would be at once monarchical, national, and socialistic, or at any rate
conservative and socialistic.[888] At the same time we must remember that
“in so far as the Social Democratic party was aiming at economic reforms
he was with it heart and soul.”[889]

Despite his belief in the possibility of reconciling the monarchical
policy with his socialistic programme, he carefully avoided the
economic teachings of the socialists. His too logical mind could never
appreciate their position, and he had the greatest contempt for the
Socialists of the Chair. He would be the first to admit that in practice
socialism must content itself with temporary expedients, although he
cannot bring himself to believe that such compromise constitutes the
whole of the socialistic doctrine. He refers to the Socialists of
the Chair as the “sweetened water thinkers,”[890] and he refused to
join them at the Eisenach Congress of 1872—the “bog of Eisenach,” as
he calls it somewhere. He regarded the whole thing as a first-class
comedy. Even labour legislation, he thought, was merely a caprice
of the humanitarians and socialists.[891] So that whenever we find
him summing up his programme in some such sonorous phrase as _Staat
gegen Staatslosigkeit_[892] (“the State as against the No-State”)
we must be careful to distinguish it from the hazy doctrines of the
State Socialists.[893] Despite himself, however, he proved one of the
most influential precursors of the school, and therein lies his real
significance.

Rodbertus’s whole theory rests upon the conception of society as an
organism created by division of labour. Adam Smith, as he points out,
had caught a faint glimmer of the significant fact that all men are
linked together by an inevitable law of solidarity which takes them out
of their isolation and transforms an aggregate of individuals into a
real community having no frontiers and no limits save such as division
of labour imposes, and sufficiently wide in scope to include the whole
universe.[894] As soon as an individual becomes a part of economic
society his well-being no longer depends upon himself and the use which
he makes of the natural medium to which he applies himself, but upon
the activity of his fellow-producers. The execution of certain social
functions, which Rodbertus enumerates as follows, and which he borrows
partly from Saint-Simon, henceforth become the determining factors: (1)
The adaptation of production to meet demand; (2) the maintenance of
production at least up to the standard of the existing resources; (3) the
just distribution of the common produce among the producers.

Should society be allowed to work out these projects spontaneously, or
should it endeavour to carry out a preconceived plan? To Rodbertus this
was the great problem which society had to consider. The economists of
Smith’s school treated the social organism as a living thing. The free
play of natural laws must have the same beneficial effects upon it as
the free circulation of the blood has upon the human body. Every social
function would be regularly discharged provided “liberty” only was
secured. Rodbertus thought this was a mistake. “No State,” says he, “is
sufficiently lucky or perhaps unfortunate enough to have the natural
needs of the community satisfied by natural law without any conscious
effort on the part of anyone. The State is an historical organism, and
the particular kind of organisation which it possesses must be determined
for it by the members of the State itself. Each State must pass its
own laws and develop its own organisation. The organs of the State do
not grow up spontaneously. They must be fostered, strengthened, and
controlled by the State.”[895] Hence, after 1837 we find Rodbertus
proposing the substitution of a system of State direction[896] for the
system of natural liberty, and his whole work is an attempt to justify
the introduction of such a system. Let us examine his thesis and review
the various economic functions which we defined above. Let us also
watch their operation at the present day and see how differently these
functions would be discharged in a better organised community.

1. It is hardly correct to speak of production adapting itself to social
need under existing conditions, because production only adapts itself
to the effective demand, _i.e._ to the demand when expressed in terms
of money. This fact had been hinted at by Smith, and Sismondi had laid
considerable stress upon it; but Rodbertus was the earliest to point
out that this really meant that only those people who already possess
something can have their wants satisfied.[897] Those who have nothing
to offer except their labour, and find that there is no demand for that
labour, have no share in the social product. On the other hand, the
individual who draws an income, even though he never did any work for
it, is able to make effective his demand for the objects of his desire.
The result is that many of the more necessitous persons must needs go
unsatisfied, while others wallow in luxury.

Truer word was never spoken. Rodbertus had a perfect right to insist
on the fundamental fallacy lurking within a system which could treat
unemployment—that modern form of famine—as simply an over-production
of goods, and which found itself unable to modify it except through
public or private charity. His remedy consisted of a proposal to set
up production for social need as a substitute for production for
demand. The first thing to be done was to find out the time which each
individual would be willing to give to productive work, making a note of
the character and quantity of goods required at the same time.[898] He
thought that “the wants of men in general form an even series, and that
the kind and number of objects required can easily be calculated.”[899]
Knowing the time which society could afford to give to production, there
would be no great difficulty in distributing the products among the
various producers.

This is to go to work a little too precipitately and to shun the greatest
difficulty of all. The uniform series of wants of which Rodbertus speaks
exist only in the imagination. What we really find is a small number
of collective needs combined with a great variety of individual needs.
Social need is merely a vague term used to designate both kinds of wants
at once. The slightest reflection shows that every individual possesses
quite a unique series of needs and tastes. To base production upon social
need is to suppress liberty of demand and consumption. It implies the
establishment of an arbitrary scale of needs which must be satisfied and
which is to be imposed upon every individual. The remedy would be worse
than the evil.

But the opposition between social need and effective demand by no means
disposes of his argument. The opposition needs some proving, and some
explanation of the producers’ preference for demand rather than need
ought to be offered. The explanation must be sought in the fact that the
capitalistic producer of to-day manages his business in accordance with
the dictates of personal interest, and personal interest compels him to
apply his instruments to produce whatever will yield him the largest net
product. He is more concerned about the amount of profit made than about
the amount of produce raised. He produces, not with a view to satisfying
any social need, but simply because it yields him rent or profit.[900]

This contrast between profit-making and productivity deserves some
attention. Sismondi had already called attention to it by distinguishing
between the net and the gross product. A number of writers have treated
of it since, and it holds a by no means insignificant place in the
history of economic doctrines.[901]

The opposition is dwelt upon in no equivocal fashion by Rodbertus. This
pursuit of the maximum net product is clearly the producer’s only guide,
but the conclusions which he proceeds to draw from it are somewhat
more questionable. If we accept his opinion that the satisfaction of
social need and not of individual demand is the determining factor in
production, we are driven to the conclusion that modern society, actuated
as it is by this one motive, cannot possibly satisfy every individual
demand. But we have already shown that the phrase “social need” has no
precise connotation; neither has the term “productivity,” which is so
intimately connected with it. Further, if society has no desire to impose
upon its members an arbitrary scale of wants that must be satisfied—in
other words, if demand and consumption are to remain free—it can only be
by adopting that system which recognises a difference between the present
and the future “rentability” of the product. This difference between the
sale price and the real cost of production of any commodity must, it
seems to us, be recognised even by a collectivist society as the only
method of knowing whether the satisfaction which a commodity gives is in
any way commensurate with the labour involved in its production.[902]
Pareto has given an excellent demonstration of this by showing how
collectivist society will have to take account of price indications if
social demand is to be at all adequately supplied.

2. Turning to the other desideratum, namely, a fuller utilisation of
the means of production, Rodbertus contents himself with quoting the
criticisms of the Saint-Simonians concerning the absence of conscious
direction which characterises the present _régime_ and the hereditary
element which is such a common feature of economic administration. He is
in full agreement with Sismondi when the latter declares that production
is entirely at the option of the capitalist proprietor.[903] In this
matter he is content merely to follow his leaders, without making any
contribution of his own to the subject.

3. There still remains a third economic function which society ought
to perform, and which Rodbertus considered the most important of all,
namely, the distribution of the social product. An analysis of the
present system of distribution was one of the tasks he had set himself
to accomplish, believing with Sismondi and other socialists that a
solution of the problem of distribution and the explanation of such
phenomena as economic crises and pauperism constitute the most vital
problems which face the science at the present moment.

A just distribution, in Rodbertus’s opinion, should secure to everyone
the product of his labour.[904] But does not the present _régime_ of free
competition and private property accomplish this?

Let us watch the mechanism of distribution as we find it operating at the
present time. Rodbertus’s description of it is not very different from
J. B. Say’s, and it tallies pretty closely with the Classical scheme. On
the one hand we have the _entrepreneur_ who purchases the services of
labour, land, and capital, and sells the product which results from this
collaboration. The prices which he pays for these services and the price
he himself receives from the consumer are determined by the interaction
of demand and supply. What remains after paying wages, interest, and rent
constitutes his profits.[905]

The distribution of the product is effected through the mechanism of
exchange, and the result of its operation is to secure to the owner of
every productive service the approximate market value of that service.
Could anything be juster? Apparently not. But if we examine the social
and economic hinterland behind this mechanism what we do find is the
callous exploitation of the worker by every capitalist and landlord.
The various commodities which are distributed among the different
beneficiaries are really the products of labour. They are begotten
of effort and toil—largely mechanical. Rodbertus did not under-value
intellectual work or under-estimate the importance of directive energy.
But intelligent effort seemed to him an almost inexhaustible force, and
its employment should cost nothing, just as the forces of nature may be
got for nothing. Only manual labour implies loss of time and energy—the
sacrifice of something that cannot be replaced.[906] Consequently he does
not recognise the intellectual or moral effort (the name is immaterial)
involved in the postponement of consumption, whereby a present good
is withheld with a view to contributing to the sum total of future
good.[907] And he proceeds to define and to develop the opening paragraph
of Smith’s _Wealth of Nations_: “The annual labour of every nation is
the fund which originally supplies it with all the necessaries and
conveniences of life which it annually consumes, and which consist always
either in the immediate produce of that labour or in what is purchased
with that produce from other nations.”

The difference between his attitude and Marx’s is also interesting.
Marx was thoroughly well versed in political economy, and had made a
special study of the English socialists. His one object was to set
up a new theory of exchange, with labour as the source of all value.
Rodbertus, who drew his inspiration from the Saint-Simonians, focused
attention upon production, and treated labour as the real source of
every product—a simpler, a truer, but a still incomplete proposition.
Rodbertus never definitely commits himself to saying that labour by
itself creates value, but, on the other hand, he never denies it.[908]
Social progress, he always maintained, must consist in the greater degree
of coincidence[909] between the value of a product and the quantity of
labour contained in it. But this is a task which the future must take
in hand.[910] Again, if it be true that the worker creates the product,
but that the proprietors of the soil and the capitalists who have had no
share in its production are able to manipulate exchange in such a way as
to retain a portion of it for themselves, it is clear that our judgment
concerning the equity of the present system needs some revision. This
secret embezzlement for the profit of the non-worker and to the injury
of the diligent proceeds without any outward display of violence through
the free play of exchange operating within a system of private property.
Its sole cause lies in the present social system, “which recognises
the claim of private landowners and capitalists to a share of the
wealth distributed, although they have contributed nothing towards its
production.”[911]

Hence his exposition of the twofold aspect of distribution. Economically
exchange attributes to each of the factors land, capital, and labour a
portion of the produce corresponding to the value of their respective
services as estimated in the market. Socially it often means taking away
from the real producers—from the workers—a part of the goods which their
toil has created. This portion Rodbertus refers to under the simple name
“rent,” which includes both the revenue of capitalists and the income of
landlords.

No economist ever put the twofold aspect of the problem in a clearer
light. Laying hold of the eternal opposition between the respective
standpoints, he emphasises the difficulties which they present to so
many minds. Justice would relate distribution to merit, but society is
indifferent provided its own needs are satisfied. Society simply takes
account of the market value of these products and services without ever
showing the least concern for their origin or the efforts which they may
originally have involved—the weary day of the industrious labourer and
the effortless lounge of the lazy capitalist being similarly rewarded.
Rodbertus’s great merit was to separate this truth from the other issues
so frequently confused with it in the writings of the earlier economists
and to bring it clearly before the notice of his fellow economists.

Rodbertus’s criticism did not end there, although the demonstration which
we have just given of the distinction between the social and the purely
economic point of approach to distribution constitutes its essential
merit. We must not omit the practical conclusions which he draws from it.

What concerned Rodbertus most—at least, so we imagine from the standpoint
which he adopted—was not the particular way in which the rate of wages
or interest, high or low rents, are determined, but the proportion of
the revenue that goes to the workers and non-workers respectively. The
former question is a purely economic one of quite secondary importance
compared with this other social problem. Believing that he had already
shown the possibility of the workers being robbed, the problem now
was to determine whether this spoliation was likely to continue. Does
economic progress give any ground for hoping that rent or unearned
income will gradually disappear? Bastiat and Carey had replied in the
affirmative. The proportion that goes to capital, so they affirmed, is
gradually becoming less, to the great advantage of the labourer. Ricardo,
faced with the same dilemma, had come to the conclusion that with the
inevitable increase in the cost of producing food the landowner’s share
must be constantly growing. Say had asked himself the same question in
the earliest edition of his treatise, but had found no reply. Rodbertus
adopts none of their solutions, but independently arrives at the
conclusion that the worker’s share gradually dwindles, to the advantage
of the other participants.[912]

Theorist as he was, a simple deduction was all that was needed to
convince him of the truth of this view. The rate of wages, we have
already seen, is determined by the interaction of demand and supply in
the labour market. The market price of labour, however, like that of any
other product, is always gravitating towards a normal value—this normal
value being none other than Ricardo’s necessary wage. “The share of the
product that falls to the lot of the producer both in an individual
instance and as a general rule is not measured by the amount which he
himself has produced, but by that quantity which is sufficient for the
upkeep of his strength and the upbringing of his children.”[913] This
celebrated “brazen law” became the pivot of Lassalle’s propaganda,
although it was never definitely recognised by Marx.

Granting the existence of such a law, and admitting also that the amount
produced by labour is always increasing, so that the mass of commodities
produced always keeps growing, a very simple arithmetical calculation
suffices to show that the total quantity obtained by the workers always
remains the same, representing a diminished fraction of the growing
totality.

A similar demonstration affords a clue to the prevalence of crises. The
_entrepreneur_ keeps adding to the mass of commodities produced until he
touches the full capacity of social demand.[914] But while production
grows and expands the worker’s share dwindles, and thus his demand for
some products remains permanently below production level. The structure
is giving way under the very feet of the unsuspecting producer.[915]
This theory of crises is simply a re-echo of Sismondi,[916] and gives an
explanation of a chronic evil rather than of a crisis pure and simple.
Its scientific value is just about equal to Sismondi’s other theory
concerning proportional distribution.

This theory upon which Rodbertus laid such emphasis had already been
outlined in his _Forderungen_, and a fuller development is given in his
_Soziale Briefe_, where he expressly states it to be the fundamental
point of his whole system, all else being mere scaffolding. His one
ambition all his life long was to be able to give a statistical proof of
it, but its importance is not nearly as great as he imagined it to be.

In the first place, doubt as to the validity of the “brazen” or “iron
law of wages”—upon which the theory is based—is entertained not merely
by economists, but also by socialists. And even if it were true,
Rodbertus’s proof would still be inconclusive, for the workers’ share of
the total product depends not upon one fact alone, but upon two—the rate
of wages _and_ the number of workers. Rodbertus’s error and Bastiat’s are
very similar. Bastiat had tried to determine the capitalists’ share of
the total product by taking account of one fact only, namely, the rate of
interest, whereas he ought to have taken the amount of existing capital
into consideration as well.

But we must admit that although the arguments used by Rodbertus are
scarcely more reliable than Bastiat’s, his theory itself is nearer the
facts as judged by statistics. No amount of _a priori_ reasoning without
some recourse to statistics can ever solve the problem. Statistics
themselves seem to prove that labour’s portion, in some countries at
least, has shown signs of diminishing since the beginning of the present
century.

This does not necessarily mean that the worker must be worse off, for it
may well happen that a diminution in the general share obtained by labour
is accompanied by a growth of individual wages. All that we can conclude
is that wages have not increased as rapidly as has capital’s share,[917]
but this has not prevented the workers sharing in the general growth of
prosperity.

Logically enough, Rodbertus proceeds to draw certain practical
conclusions, including the necessity for the suppression of private
property and of individual production. The community should be the sole
owner of the means of production. Unearned income must go. Everyone
should contribute something to the national dividend, and each should
share in the total produce in proportion to his labour. The value of all
commodities will depend upon the amount of time spent on them and effort
put into them; and since the supply will always adapt itself to the needs
of society the measure will be constant and exact, and equal distribution
will be assured.

But Rodbertus recoils from his own solution, and the ardent socialist
becomes a simple State Socialist. What frightens him is not the terrible
tyranny of a system under which production and even consumption would
be strictly regulated. “There would be as much personal freedom under a
system of this kind as in any other form of society,” he remarks,[918]
“society” evidently always implying some measure of restraint. His
apprehension was of a different kind. He had a perfect horror of any
revolutionary change, and stood aghast at the lack of education displayed
by the masses. He realised how unwilling they were to sacrifice even a
part of their wages in order to enable other men to have the necessary
leisure to pursue the study of the arts and sciences—the noblest fruits
of civilisation. Finally it seemed to him that illegal appropriation and
the rightful ownership which results from vigorous toil are too often
confused by being indiscriminately spoken of as private property. “There
is,” says he, “so much that is right mixed up with what is wrong that one
goads the lawful owner into revolt in trying to lay hold of the unlawful
possessor.”[919]

Some kind of compromise should at all costs be effected. If private
property—one of the great evils of the present day—cannot be got rid of
without some inconvenience, cannot we possibly dispense with freedom
of contract, the other source of inequality? Let us assume, then,
that we have got rid of free contract while retaining the institution
of private property. By doing this, although we are not immediately
able to clear away unearned income, we shall have removed some of the
greatest inconveniences that result from it. We shall arrest the downward
trend of labour’s remuneration, and poverty and crises will disappear
together.[920]

Such an attempt might be made even now. Let the State estimate the
total value of the social product in terms of labour and determine
the fraction that should go to the workers. Let it give to each
_entrepreneur_ in accordance with the number of workers he employs a
number of wage coupons, in return for which the _entrepreneur_ shall be
obliged to put on the market a quantity of commodities equal in value.
Lastly, let the said workers, paid in wage coupons, supply themselves
with whatever they want from the public stores in return for these
coupons. The national estimate would from time to time be subject to
revision; and in order that the proportions should always be the same,
the number of coupons given to labour would have to be increased if the
number of commodities produced ever happened to increase. Rodbertus’s aim
was to give the workers a share in the general progress made, and such
was the plan which he laid down.[921]

There is no need to emphasise its theoretical, let alone its practical
difficulties. We were led to mention it for a double reason. In the first
place, it is interesting as an attempt to effect a compromise between the
society of the present and the collectivism of the future. Marx regards
the growing servility of the worker with a certain measure of equanimity
as a necessary preliminary to his final emancipation. Rodbertus would
speed the process of amelioration and would better his lot here and
now.[922] It also throws an interesting light upon his extraordinary
confidence in the all-powerful sovereignty of the State, and the ability
of government to bend every individual will, even the most recalcitrant,
to the general will. At the same time it reveals his utter indifference
to individual liberty as an economic motive.

This indifference gradually merges into extreme hostility, while his
confidence in the centralised executive becomes all the more thoroughly
established. His later historical works contain an exposition of an
organic theory of the State which is meant to justify such confidence.
Just as in the animal world the higher animals are found to possess
the most highly differentiated organs as well as the most closely
co-ordinated, so in history as we pass from the lower social strata to
the higher ones “the State advances both in magnitude and efficiency; and
its action, while increasing in scope, grows in intensity as well. The
State in its passage from one evolutionary stage to another presents
us not merely with a greater degree of complexity, each function being
to a greater and greater extent discharged by some special organ, but
also with an increasing degree of harmony. The social organisms, despite
their ever-increasing variation, are placed in growing dependence upon
one another by being linked to some central organ. In other words, the
particular grade that a social organism occupies in the organic hierarchy
depends upon the degree to which division of labour and centralisation
have been carried.”[923]

We are thus driven back upon the fundamental question set by Rodbertus
at the outset of his inquiry: Can the various social functions, acting
spontaneously, efficiently further the good of the social body, or should
these functions be discharged by the mediation of a special organ, the
State or Government? There is also the further question as to whether the
reply which he gives is entirely satisfactory.

We are immediately struck by a preliminary contradiction: the economic
boundaries of the community do not coincide with its political
boundaries. The one is the result of division of labour and is
coextensive with the limits set by division of labour, while the second
is the product of the changing conditions of history. It is only logical
that the economic functions of the State should be performed by other
organs than those of the political Government, since its sphere of action
is necessarily different. But it is to the State, as evolved in the
course of a long historical process, that Rodbertus would entrust this
directing power. Between Rodbertus’s description of the State’s economic
activity and his final recourse to a national monarchical State is an
element of contradiction which strikes us rather forcibly, especially
when he comes to speak of “national” socialism.

In order to demonstrate how inadequately the present social organisation
performs its duties, Rodbertus appeals to an ideal method of discharging
them which he himself has created, and he has not the slightest
difficulty in showing that hardly any of his ideal functions are being
performed at the present time. Production is not based upon social need,
nor is the wealth produced distributed in accordance with the labour
spent. But we must never forget that Rodbertus’s conception of the social
need was extremely hazy. His distribution formula, “to everyone according
as he produces,” if applied logically is impossible, and satisfies
neither the demands of humanity nor the needs of production. Had his
definition of social function been less ambitious, his argument, perhaps,
would have been more convincing.

Let us admit, however, that the existence of an economic society implies
the successful accomplishment of certain functions which we need not
trouble to define just now. The question then arises—a question that
implies the severest criticism of the present organisation: Can the
control and oversight which men ought to exercise over these functions
be performed otherwise than through the instrumentality of the State?
There was only one alternative for Rodbertus—extreme individualism or
State control. But nature and history both escape the dilemma. The
biological analogy has been carried too far, and most writers would
be content to abandon it altogether. Like most of his contemporaries,
Rodbertus imagined that economic individualism and personal liberty
were indissolubly bound together, and that it was impossible to check
individualism without endangering liberty. It is now realised, however,
that this association of ideas, like many another, is temporary and not
eternal, and the growth of voluntary associations intermediate between
the State and the individual is every day showing it to be false.

We are now in a better position to appreciate the kind of appeal which
this doctrine would make to State Socialists—people who are essentially
conservative, but nevertheless genuinely desirous of seeing a larger
element of justice introduced into our industrial _régime_. The
distinction drawn between politics and economic socialism makes a first
claim upon their respect. Then would follow the organic conception of
society, which is a feature of all Rodbertus’s writings. It was his
belief that production and distribution could only be regarded as social
functions, and that the breakdown of individualism implied a need for
greater centralisation or a greater degree of State control. On the
other hand, the State Socialists refuse to associate themselves with the
radical condemnation of private property and unearned income, both of
which are features of Rodbertus’s teaching. The State Socialists set out
to transform the Rodbertian compromise into a self-sufficing system, and
instead of regarding their doctrine as a diluted form of socialism they
are rather inclined to treat socialism as an exaggerated development of
their theory.[924]


2. LASSALLE

Rodbertus’s efforts to establish a doctrine of State Socialism upon the
firm foundation of a new social theory had already met with a certain
measure of success, but it was reserved for Lassalle to infuse vitality
into these new ideas.

Lassalle’s brief but brilliant political career, ever memorable for
the natural vigour of his eloquence, at once popular and refined, and
its indelible impression of a strikingly original nature aflame with
a passion both for thought and action, together with the romantic,
dramatic character of his checkered existence, lent wonderful force to
his utterances. In 1848, at the early age of twenty-three, he was a
Marxian revolutionist. The revolutionary period was followed by a time
of enforced inactivity, when he devoted himself almost exclusively to
philosophical, legal, and literary pursuits. In 1862 the silence was at
last broken by his re-entry into the political arena. The whole political
life of Germany was at that moment convulsed by the half-hearted
opposition which the Prussian Liberal party was offering to Bismarck’s
constitutional changes. Lassalle declared war both upon the Government
and upon the _bourgeois_ Opposition—upon the latter more than the former,
perhaps. Turning to the working classes, he urged them to form a new
party which would avoid all purely political questions and to concentrate
upon their own economic emancipation. For two eventful years the whole of
Germany resounded with his speeches and his declamations before various
tribunals, while the country was flooded with his pamphlets advocating
the complete establishment of the _Allgemeiner deutscher Arbeiterverein_
(General Association of German Workers), which he had already founded at
Leipzig in 1863. The workers of the Rhineland received with open arms
the agitator who thus took up in their midst the tangled skein of a
broken career, and welcomed him with songs and decked him with garlands.
The Liberal press, on the other hand, thoroughly taken aback by his
unexpected onslaughts, mercilessly attacked him, even accusing him of
having secret dealings with the Government. Suddenly the clamour ceased:
Lassalle died on August 31, 1864, as the result of a wound which he had
received in a duel,[925] and only the _Deutscher Arbeiterverein_, the
earliest embryo of the great German Social Democratic party, remained as
a memento of those violent attacks upon individualist Liberalism.

As far as theory goes, Lassalle’s socialism is hardly distinguishable
from Marx’s. Social evolution is summed up in a stricter limitation of
the rights of private property,[926] which in the course of a century
or two must result in its total disappearance.[927] But Lassalle was
pre-eminently a man of action, bent upon practical results. At that
particular moment the German working class was only just waking up to
the possibility of political existence. The path that it should follow
was still undecided. In the year 1863 a number of workmen had tried to
persuade their comrades to meet together in a kind of general congress.
They further appealed to Lassalle and to other well-known democrats for
their advice concerning the labour question. This gave Lassalle the
opportunity he required for forming a political party of his own, with
himself as chief. The next question was to fix upon a programme. “Working
men,” says Lassalle, “must have something definite,”[928] and, on the
other hand, “it is almost impossible to get the public to understand the
final object which we must keep in view.”[929] So, without burdening his
propaganda with too remote an ideal, he concentrates all his efforts
upon two demands, the one political, the other economic—universal
suffrage on the one hand and the establishment of producers’ associations
supported by the State on the other. In order to win over the masses,
he invoked, not the doctrine of the exploitation of the workers by
the proprietors—which would have alienated the middle classes from
him[930]—but the “brazen law of wages,” which is the happy title by which
he chose to designate the Ricardian law of wages.

Rodbertus realised the necessity for distinguishing between an esoteric
and an exoteric Lassalle[931]—between the logical theorist of the study
and the opportunist politician of the public platform. Only to his
contemporaries was the latter Lassalle really known. But his letters,
which have been published since his death, go to show that there is at
least no need to attach any greater importance to his proposed reforms
than he was prepared to give them himself. It is not necessary to
emphasise the fact that his plan was really borrowed from Louis Blanc or
to call attention to the letter written to Rodbertus in which he declares
himself quite prepared to change his plan provided a better one can be
found. This idea of association was one that was by no means unknown to
the German Liberal party; nor was it the first time that it had been
preached to the working classes. Lassalle’s rival, Schulze-Delitzsch,
had begun an active campaign even as far back as 1849, and had succeeded
in establishing a great number of co-operative credit societies,
composed largely of artisans, and aiming at supplying them with cheap
raw materials. But such associations were to receive no support from the
Government.

What was new in Lassalle’s scheme was just this appeal for State
intervention. It was his energetic protest against eternal
_laissez-faire_ that impressed public opinion, and he himself was anxious
that it should be presented in this light. Speaking to the workers of
Frankfort on May 19, 1863, he declared that “State intervention is
the one question of principle involved in this campaign. That is the
consideration that has weighed with me, and there lies the whole issue of
the battle which I am about to wage.”[932]

He harks back to this fundamental idea in all his principal writings. It
was the theme of his first address delivered to the workers in Berlin in
1862. It is there presented with all his customary force. The _bourgeois_
conception of the State is contrasted with the true conception, which is
identical with the workers’. The _bourgeoisie_ seem to think that the
State has nothing to do except to protect the property and defend the
liberties of the individual—a conception of State action that would be
quite sufficient were everybody equally strong and intelligent, equally
cultured and equally rich.[933] But where such equality does not exist
the State is reduced to the position of a “night watchman,” and the weak
is left at the mercy of the strong. In reality the State exists for
quite other purposes. The history of mankind is the story of one long
struggle to establish liberty in the face of natural forces, to overcome
oppression of every kind, and to triumph over the misery, ignorance,
want, and weakness with which human nature has always had to reckon. In
that struggle the individual, in his isolation, is hopeless and union
becomes indispensable. This union is a creation of the State, and its
object is to realise the destiny of mankind, namely, the attainment of
the highest degree of culture of which humanity is capable. It is a means
of educating and of furthering the development of humanity along the path
of liberty.

The formula savours of metaphysics rather than of economics. There is
a striking similarity between it and the formula employed by Hegel,
the philosopher.[934] Lassalle was really a disciple of Hegel and
Fichte.[935] Through the influence of Lassalle the theories of the
German idealists came into conflict with the economists’, and his
incomparable eloquence contributed not a little to the rising tide of
indignation with which the Manchester ideas came to be regarded.


III: STATE SOCIALISM—PROPERLY SO CALLED

The years that elapsed between the death of Lassalle and the Congress
of Eisenach (1872) proved to be the decisive period in the formation of
German State Socialism.

Bismarck’s remarkable _coups d’état_ in 1866 and 1870 had done much to
discredit the political reputation of the leaders of the Liberal party,
who had shown themselves less than a match for the Chancellor’s political
insight. This reacted somewhat upon economic Liberalism, because it
so happened that the leaders of both parties were the same.[936] On
the other hand, the idea of a rejuvenated empire incarnate in the
Iron Chancellor seemed to add fresh lustre to the whole conception of
the State. The _Jahrbücher für Nationalökonomie_, first issued by the
Historical school in 1863, had by this time become the recognised organ
of the University Economists, and had done a great deal to accustom men’s
minds to the relative character of the principles of political economy
and to prepare their thoughts for an entirely new point of view.

Labour questions had also suddenly assumed an importance quite undreamt
of before this. The German revolution of 1848 was presumably political
in character: the great capitalistic industry had not reached that stage
of development which characterised it both in England and in France; and
it is a significant fact that the two great German socialists, Rodbertus
and Marx, had to go abroad to either of those two countries to get their
illustrations. But since 1848 German industry had made great strides. A
new working-class community had come into being, and Lassalle had further
emphasised this transformation by seeking to found a party exclusively
upon this new social stratum. The association which was thus founded
still survives. Another agitation, largely inspired by Marxian ideas,
was begun about the same time by Liebknecht and Bebel. In 1867 both of
them were elected to the Reichstag, and two years later they founded the
_Socialdemokratische Arbeiterpartei_ (Social Democratic party), which was
destined to play such an important part in the history of the next thirty
years.

In this way labour questions suddenly attracted attention, just as they
had previously done in France during the July Monarchy; and just as in
France a new current of opinion—unceremoniously set aside by the _coup
d’état_, it is true—had urged upon the educated classes the importance
of abandoning the doctrine of absolute _laissez-faire_ and of claiming
the support of Government in the struggle with poverty, so in Germany
an increasing number of authors had persuaded themselves that a purely
passive attitude in face of the serious nature of the social problem
which confronted them was impossible, and that the establishment of some
sort of compact between the warring forces of capital and labour should
not prove too much of an undertaking for the rejuvenated vitality of a
new empire.

The new tendencies revealed themselves in unmistakable fashion at
Eisenach in 1872. A conference, which was largely composed of professors
and economists, of administrators and jurists, decided upon the
publication of a striking manifesto in which they declared war upon
the Manchester school. The manifesto spoke of the State as “a great
moral institution for the education of humanity,” and claimed that it
should be “animated by a high moral ideal,” which would “enable an
increasing number of people to participate in the highest benefits
of civilisation.”[937] At the same time the members of the congress
determined upon the establishment of the _Verein für Sozialpolitik_, an
association charged with the task of procuring the necessary scientific
material for this new political development. This was the beginning
of the “Socialism of the Chair,” as it was derisively named by the
Liberals on account of the great number of professors who took part in
this conference. The same doctrine, with a somewhat more radical bias,
became known as State Socialism. The imparting of such a bias was the
task undertaken by Wagner,[938] in his _Grundlegung_, which appeared in
1876.[939]

Difficult though the task may prove, we must try to distinguish between
the work of the earlier economists and the special contributions
made by the State Socialists. Like all doctrines that purport to sum
up the aspirations of a group or an epoch and to supply a working
agreement between principles in themselves irreconcilable, it lacks the
definiteness of a purely individualistic or theoretical system. Its ideas
are borrowed from various sources, but it is not always scrupulous in
recognising this.

It is first and foremost a reaction, not against the fundamental
ideas of the English Classical school, as is generally believed, but
against the exaggerations of their second-grade disciples, the admirers
of Bastiat and Cobden—known to us as the “Optimists” and styled the
“Manchestrians” in Germany. The manifesto, drawn up by Professor
Schmoller at the Eisenach Congress, speaks of the “Manchester school,”
but makes no mention of the Classical writers.[940] It is true that
a great many German writers regard the expressions “Smithianismus”
and “Manchesterthum” as synonymous, but these are perhaps polemical
exaggerations upon which we ought not to lay too much stress. On the
other hand, Liberalism had nowhere assumed such extravagant proportions
as it had in Germany. Prince Smith, who is the best-known representative
of Liberalism after Dunoyer, was convinced that the State had nothing to
do beyond guaranteeing security, and denied that there was any element
of solidarity between economic agents save such as results from the
existence of a common market. “The economic community, as such, is a
community built upon the existence of a market, and it has no facility to
offer other than free access to a market.”[941]

The State Socialists, on the contrary, are of opinion that there exists
a moral solidarity which is much more fundamental than any economic tie
between the various individuals and classes of the same nation—such
solidarity as results from the possession of a common language,
similar manners, and a uniform political constitution. The State is
the organ of this moral solidarity, and because of this title it has
no right to remain indifferent to the material poverty of a part of
the nation. It has something to do besides protecting people against
internal or external violence. It has a real work of “civilisation and
well-being”[942] which it ought to perform. In this way State Socialism
becomes reconciled to the philosophic standpoint which Lassalle had
chosen for it. Lassalle’s insistence upon the mission of Governments and
the importance of their historic _rôle_ has been incorporated into its
system, and the attention that is paid to national considerations reminds
one of the teaching of Friedrich List.

It is impossible not to ask whether the State is capable of carrying
out the duties that have been entrusted to it. There is little use in
emphasising duty where there is no capacity for discharging it. The
State’s incapacity as an economic agent has long been a notorious fact.
Wagner and his friends were particularly anxious to correct this false
impression, and as far as their doctrine contains anything original it
may most conveniently be described as an attempt to rehabilitate the
State. Optimists of Bastiat’s genre looked upon the State as the very
incarnation of incapacity. The State Socialists, on the other hand,
regard government as an economic agent very similar to other agents
which the community employs, only a little more sympathetic perhaps.
Much of their argument consists of an attempt to create a presumption in
favour of government as against the ordinarily accepted opinion which
individualism had begotten. Such was the nature of the task which they
undertook.

Their first action was to insist upon the weaknesses of individuals.
Following in the wake of Sismondi and other socialists, they emphasised
the social inconveniences of competition, which is, however, generally
confused with individual liberty.[943] They also insisted upon the
social inequality of masters and workers when it comes to a question of
wage-bargaining—a fact that had already been noted by Adam Smith—as well
as upon the universal opposition that exists between the weak and the
strong. The inadequacy of merely individual effort to satisfy certain
collective wants is another fact that was considerably emphasised.

As far back as the year 1856 Dupont-White, a Frenchman, had complained
bitterly that all the paths of civilisation remained closed merely
because of the existence of one obstacle—the infirmity and malignity
of the individual.[944] He also attempted to show how the collective
interests of modern society are becoming increasingly complex in
character and of such magnitude as to be utterly beyond the compass of
individual thought.[945] “There are,” says he in that excellent formula
in which he summarises the instances in which State intervention may
be necessary, “certain vital things which the individual can never do,
either because he has not the necessary strength to perform them or
because they would not pay him; or, again, because they require the
co-operation of everybody, which can never be got merely by common
consent. The State is the one person—the _entrepreneur_—who can undertake
such tasks.”[946] But his words went unheeded.

Writing in a similar vein, Wagner invokes the testimony of history in
support of his State doctrine, showing us how the State’s functions
vary from one period to another, so that one never feels certain about
prescribing limits to its action. Individual interest, private charity,
and the State have always had to divide the field of activity between
them. Never has the first of these, taken by itself, proved sufficient,
and in all the great modern states its place is taken by State action.
To conclude that this solution was useful and necessary and in accordance
with the true law of historical development only involved one further
step.[947] One almost unconsciously proceeds from the mere statement
of a fact to the definite formulation of a law. “Anyone,” says Wagner,
“who has appreciated the immanent tendencies of evolution (_i.e._ the
essential features of economic, social, or political evolution) may very
properly proceed from such a historical conception of social evolution
to the formulation of postulates relative to what ought to be.”[948] In
virtue of this conception there is a demand for the extension of the
State’s functions, which may easily be justified on the ground of its
capacity for furthering the well-being and civilisation of the community.
The influence of Rodbertus’s thought, especially his theory concerning
the development of governmental organs to meet the needs of a higher
social development,[949] is quite unmistakable in this connection.

The similarity between his views and those of Dupont-White, though
entirely fortuitous, perhaps, is sufficiently remarkable to justify our
calling attention to it. White is equally emphatic in his demand that the
State should exercise charity and act beneficently.[950] He shows how the
modern State has extended its dominion, substituting local government
for class dominion and parental despotism, taking women, children,
and slaves successively under its care, and adding to its duties and
responsibilities in proportion as civilisation grows and liberty broadens
downward. Fresh life requires more organs, new forces demand new
regulations. But the ruler and the organ of society is the State.[951] In
a moment of enthusiasm he even goes so far as to declare that “the State
is simply man minus his passions; man at such a stage of development
that he can commune even with truth itself, fearing neither God nor his
own conscience. However imperfect it may be, the State is still vastly
superior to the individual.”[952] Such writing is not without a touch of
mysticism.

Without going the extent of admitting, as M. Wagner would have us do,
that the simple demonstration of the truth of historical evolution is
enough to justify his policy, we must commend State Socialism for
the service it has performed in combating the Liberal contempt for
government. If we admit the right of a central power to regulate social
relations, it is difficult to understand why certain economic relations
only should be subjected to such supervision.

But the real difficulty, even when the principle is fully recognised, is
to define the spheres that should respectively belong to the State and to
the individual. How far, within what limits, and according to what rules
should the State intervene? We must at any rate, as Wagner says, begin
with a rough distribution of attributes. It is impossible to proceed
by any other method unless we are to assume, as the collectivists seem
to do, a radical change in human psychology resulting in the complete
substitution of a solicitude for the public welfare for private interest.

Dupont-White thought the problem insoluble,[953] and Wagner is equally
emphatic about the impossibility of formulating an absolute rule. The
statesman must decide each case on its merits. He does, however, lay down
a few general rules. As a first general principle it is clear that the
State can never completely usurp the place of the individual.[954] It can
only concern itself with the general conditions of his development. The
personal activity of the individual must for ever remain the essential
spring of economic progress. The principle is apparently the same as
Stuart Mill’s, but there is quite a marked difference between them. Mill
wished to curtail individual effort as little as possible, Wagner to
extend Government action as much as he could. Mill insists throughout
upon the negative _rôle_ of Government; Wagner emphasises the positive
side, and claims that it should help an ever-increasing proportion of the
population to share in the benefits of civilisation. No inconvenience,
Wagner thinks, would result from a little more communism in our social
life. “National economy should be transferred from the control of the
individual to the control of the community in general,” he writes, in a
sentence that might have been borrowed directly from Rodbertus.[955]
Both he and Mill are agreed that the limit of Government action must
be placed just at that point where it threatens to cramp individual
development.[956]

The practical application of these ideas would affect both the production
and the distribution of wealth. But on this question State Socialism has
done little more than seize hold of ideas that were current long before
its day.

In the matter of distribution it takes exactly the same standpoint as
Sismondi. There is no condemnation either of profits or interest as
a matter of principle, such as is the case with the Socialists, nor
is there any suggestion of doing away with private property as the
fundamental institution of society; but there is the expression of a
desire for a more exact correspondence between income and effort[957] and
for such a limitation of profits as the economic conjuncture will allow
of, and, on the other hand, for such an increase of wages as will permit
of a more humane existence. It is impossible to disguise the fact that
all this sounds very vague.[958]

The State would thus undertake to see that distribution conformed
to the moral sentiment of each period. Taxation was to be employed
as the instrument of such reforms. Dupont-White, in his _Capital et
Travail_,[959] which was written as early as the year 1847, had hit upon
the precise formula in which to describe these projects: “To levy a tax
such as will strike the higher classes and to apply the yield to help
and reward labour.” Wagner says just the same thing. “Logically State
Socialism must undertake two tasks which are closely connected with one
another. In the first place it must raise the lower strata of the working
classes at the expense of the higher classes, and in the second place it
must put a check upon the excessive accumulation of wealth among certain
strata of society or by certain members of the propertied classes.”[960]

In the matter of production State Socialism has simply been content to
reproduce the list given by Mill, Chevalier, and Cournot of the cases
in which there is no economic principle against the direct control or
management of an industrial enterprise by the State. Speaking generally,
Wagner is of the opinion that the State should take upon itself the
control of such industries as are of a particularly permanent or
universal character, or such as require either uniform or specialised
methods of control or are likely to become monopolies in the hands
of private individuals. The same argument would apply to industries
satisfying some general want, but in which it is almost impossible to
determine the exact advantage which the consumer derives from them.
The State administration of rivers, forests, roads, and canals, the
nationalisation of railways and banks, and the municipalisation of water
and gas, are justified on the same grounds.

Such are the essential features of State Socialism, which bases its
appeal, not on any precise criticism of property or of unearned income,
such as we are accustomed to get from the socialists, but entirely upon
moral and national considerations. A juster distribution of wealth
and a higher well-being for the working classes appear to be the only
methods of maintaining that national unity of which the State is the
representative. But it neither specifies the rules of justice nor
indicates the limits of the ameliorative process. The fostering of
collective effort affords another means of developing moral solidarity
and of limiting purely selfish action; but the maintenance of private
property and individual initiative seemed indispensable to the growth of
production—a consideration which renders it inimical to collectivism. Its
moral character explains the contrast between the precise nature of some
of its positive demands and the somewhat vague character of its general
principles, which may be applied to a greater or lesser extent according
to individual preferences. It is impossible to deny the essentially
subjective character of its criteria, and this affords some indication
of the vigorous criticism offered by the economists, who are above all
anxious for scientific exactitude, and the measure of enthusiasm with
which it has been welcomed by all practical reformers. It forms a kind
of cross-roads where social Christianity, enlightened conservatism,
progressive democracy, and opportunistic socialism all come together.

But its success was due not so much to the value of its principles as
to the peculiar nature of the political and economic evolution toward
the end of the century. Its most conspicuous representative in Germany
was Prince Bismarck, who was totally indifferent to any theory of State
Socialism, and who preferred to justify his policy by an appeal to the
principles of Christianity or the Prussian Landrecht.[961] One of his
great ambitions was to consolidate and cement the national unity which he
had succeeded in creating. A system of national insurance financed and
controlled by the State appealed to him as the best way of weaning the
working classes from revolutionary socialism by giving them some positive
proof of the sympathy of the Government in the shape of pecuniary
interest in the welfare of the empire. In a somewhat similar fashion the
French peasant became attached to the Revolution through the sale of
national property. “I consider,” says Bismarck, speaking of invalidity
insurance, “that it is a tremendous gain for us to have 700,000
annuitants among the very people who think they have nothing to lose, but
who sometimes wrongly imagine that they might gain something by a change.
These individuals would lose anything from 115 to 200 marks, which
just keeps them above water. It is not much, perhaps, but it answers
the purpose admirably.”[962] Such was the origin of those important
laws dealing with sickness, accidents, invalidity, and old age which
received the imperial seal between 1881 and 1889. But just because the
Chancellor did not consider that there was the same pecuniary advantage
to be derived from labour laws in the narrow sense of the term—that is,
in laws regulating the duration of labour, Sunday rest, the inspection of
factories, etc.—he was less favourably inclined towards their extension.
The personal predilection of the Emperor William II, as expressed in the
famous decrees of February 4, 1890, was needed to give the Empire a new
impetus in this direction.

Accordingly it was the intelligent conservatism of a Government almost
absolute in its power, but possessed of no definitely social creed, that
set about realising a part of the programme of the State Socialists. In
England and France and the other countries where political liberty is an
established fact similar measures have been carried out at the express
wish of an awakening democracy. The working classes are beginning to find
out how to utilise for their own profit the larger share of government
which they have recently secured. Progressive taxation, insurance,
protective measures for workmen, more frequent intervention of Government
with a view to determining the conditions of labour, are just the
expressions of a tendency that operates independently of any preconceived
plan.

The regulation of the relationship between masters and workmen gave to
State Socialism a legislative bias. Governments and municipalities have
long since extended their intervention to the domain of production,
the new character of social life rather than any social theory being
again the determining motive. Public works, such as canals, roads, and
railways, have multiplied enormously in the course of the nineteenth
century, thanks to the existence of new productive forces. The demand for
public services has increased because of the increasing concentration of
population. Communal life keeps encroaching upon what was formerly an
isolated, dispersive existence, and community of interest is extending
its sway in village and borough as well as in the great city and the
nation at large. Industry also is being gradually linked together, and
the area of free competition is perforce becoming narrower. In the labour
market, as well as in the produce and the money markets, concentration
has taken the place of dispersion. Monopoly is everywhere. Collective
enterprise, instead of being the exception, tends to be the rule, and
public opinion is gradually being reconciled to the idea of seeing the
State—the “collective being” _par excellence_—becoming in its turn
industrial.

Under conditions such as these it was impossible that the doctrine of
State Socialism should not influence public opinion.

State Socialism has the peculiar merit of being able to translate the
confused aspirations of a new epoch in the history of politics and
economics into practical maxims without arousing the suspicions of the
public to the extent that socialism generally does. Legislators and
public men generally have been supplied with the necessary arguments with
which to defend the inauguration of that new policy upon which they had
secretly set their hearts. A common ground of action is found for parties
that are generally opposed to one another and for temperaments that are
usually incompatible. That is the outstanding merit of a doctrine that
seems eminently suitable for the attainment of tangible results.

And so by a curious inversion of functions by no means exceptional
in the history of thought, State Socialism at the end of the century
finds itself playing the part of its great adversary, the Liberal
Optimism of the early century. One of the outstanding merits of that
earlier Liberalism was the preparation it afforded for a policy of
enfranchisement or liberty, which was absolutely necessary for the
development of the industrial _régime_. And so it became the interpreter
of the great economic currents of the time. In pursuance of this
exclusive task all traces of its scientific origin disappeared, the
elaboration of economic theory was neglected, and the habit of close
reasoning so essential to systematic thinking was abandoned. In a
somewhat similar manner State Socialism has become the creed of all
those who desire to put an end to the abuses of economic liberty in its
extremer aspects, or such as are generally concerned about the miserable
condition of an increasing number of the working classes. Absorbed in
immediate matters of this kind, the promoters of State Socialism have
managed to influence practical politics without shedding much light
upon economic theory. And now they in their turn find their system
threatened by the fate which awaits all political doctrines. Even at the
present moment one is tempted to ask whether this growing multiplicity
of State function is not in danger of arousing on the part of consumers,
_entrepreneurs_, and workmen a general feeling of contempt for the
economic capacity of the State.

In conclusion, we must note another characteristic fact. Whereas during
the greater part of the nineteenth century the attacks of Socialism
were directed against Liberalism and economic orthodoxy, Neo-Marxian
syndicalism is concentrating its attention almost exclusively upon
State Socialism. Sorel emphasises the similarity that exists between
Marxism and Manchesterism, and on more then one point he finds himself
in agreement with a “Liberal” like Pareto. On the other hand, no words
are sufficiently vigorous to express his condemnation of the partisans
of social peace and interventionism, which appear to him to corrupt the
working classes. Syndicalist working men have on more than one occasion
shown their contempt for the State by refusing to avail themselves of
measures passed on their behalf—old-age pensions, for example. This
attitude is perhaps due to the influence of the anarchists upon the
leaders of French syndicalism.

The fusion of these two currents of ideas—the Neo-Marxian and the
anarchist—and their effect in turning the attention of the French working
classes away from State Socialism, is an interesting fact whose political
results will by no means prove negligible.[963]




CHAPTER III: MARXISM


I: KARL MARX[964]

Everyone knows of the spell cast over the socialism of the last forty
years by the doctrines of Karl Marx and the contempt with which this
newer so-called scientific socialism refers to the earlier or Utopian
kind. But what is even more striking than the success of Marxian
socialism is its want of sympathy with the heretical doctrines of its
predecessors the Communists and Fourierists, and the pride it takes in
regarding itself as a mere development or rehabilitation of the great
Classical tradition.

To give within the limits of a single chapter a _résumé_ of a doctrine
that claims to review and to reconstruct the whole of economic theory is
clearly impossible, and we shall merely attempt an examination of two of
Marx’s more essential doctrines, namely, his theory of surplus labour and
value and his law of automatic appropriation, more familiarly but less
accurately known as the law of concentration of capital. The first is
based upon a particular conception of exchange value and the second upon
a special theory of economic evolution. To employ Comtean phraseology,
the one belongs to the realm of economic statics, the other to the domain
of economic dynamics.


1. SURPLUS LABOUR AND SURPLUS VALUE

The laborious demonstration which follows will become clearer if we
remind ourselves of the objects Marx had in view. Marx’s aim was to
show how the propertied class had always lived upon the labour of the
non-propertied classes—the possessors upon the non-possessing. This was
by no means a new idea, as we have already made its acquaintance in the
writings of Sismondi, Saint-Simon, Proudhon, and Rodbertus. But the
essence of the criticism of these writers was always social rather than
economic, the institution of private property and its injustice being
the chief object of attack. Karl Marx, on the other hand, deliberately
directed the gravamen of the charge against economic science itself,
especially against the conception of exchange. He endeavours to prove
that what we call exploitation must always exist, that it is an
inevitable outcome of exchange—an economic necessity to which both master
and man must submit.

It is convenient to begin with an examination of economic value. Marx
lays down the doctrine that labour is not merely the measure and cause
of value, but that it is also its substance. We have already had occasion
to note how Ricardo was somewhat favourably inclined to the same view,
though hardly willing to adopt it. There is no such hesitation on the
part of Marx: it is all accepted in a characteristically thorough
fashion. Of course, he does not deny that utility is a necessary
condition of value and that it is really the only consideration in the
case of “value in use.” But utility alone is not enough to explain value
in exchange, since every act of exchange implies some common element,
some degree of identity between the exchanged commodities. This identity
is certainly not the result of utility, because the degree of utility is
different in every commodity, and it is this difference that constitutes
the _raison d’être_ of exchange. The common or homogeneous element which
is contained in commodities themselves heterogeneous in character is the
quantity of labour, great or small, which is contained in them. The value
of every commodity is simply the amount of crystallized human labour
which it contains, and commodities differ in value according to the
different quantities of labour which are “socially necessary to produce
them.”[965]

Let us take the case of a working man, an employee in any kind of
industry, working ten hours a day.

What will be the exchange value of the produce of his labour? It will be
the equivalent of ten hours’ labour, whether the commodity produced be
cloth or coal or what not. And since the master or the capitalist, as
Marx always calls him, in accordance with the terms of the wage bargain,
reserves for himself the right of disposing of that commodity, he sells
it at its real value, which is the equivalent of ten hours’ labour.

The worker himself is cut off with a wage which simply represents the
price which the capitalist pays for his labour force (_Arbeitskraft_),
and the capitalist reserves to himself the right of disposing of the
commodity at his own good pleasure. Its value is determined in the same
way as that of every other exchangeable commodity. Labour-force or manual
labour is just a commodity, and its value is determined by the number of
hours of labour necessary for its production.[966]

“The quantity of labour necessary to produce the labour-force” is a
somewhat formidable expression, and it is very difficult for any one who
is beginning a study of Marx to appreciate its significance, but it is
very essential that we should try, since everything turns upon a clear
understanding of this phrase. But it is really not so mysterious after
all. Suppose that instead of the labour of an artisan we take the work
of a machine. No engineer would be surprised if we asked him the running
expenses of that machine, and he might reply that it was costing one or
two tons of coal per hour or eight or twelve _per diem_; and since the
value of the coal merely represents a certain amount of human labour on
the part of the coal-miner, there would be no difficulty in expressing
it in terms of labour. Under the wage system the labourer is simply a
machine, differing from the latter merely in the smaller quantity of
wealth which he produces. The value of an hour’s labour or a day’s toil
can be measured by the quantity of necessaries required to keep the
worker in full productive efficiency during that period. Every employer
who pays wages in kind—which is still the case in agriculture—always
makes that kind of calculation, and even when the worker is paid a money
wage things are much the same, for the money simply represents the cost
of those necessaries.

Let us proceed a step farther. The value of the commodities necessary for
the upkeep of labour is never equal to the value of the produce of that
labour. In the instance given it would not equal the value of ten hours’
labour—perhaps not even five. Human labour under normal conditions
always produces more than the mere value of the goods consumed.[967]

This is the crux of the problem. The mystery surrounding capitalist
production is at last solved. The value produced by the labourer passes
into the hands of the capitalist, who disposes of it and gives back to
the labourer enough to pay for the food consumed by him during the time
he was producing the commodity. The difference goes into the capitalist’s
pocket. The product is sold as the equivalent of ten hours’ labour, but
the labourer receives the equivalent of five hours only. Marx speaks of
this as surplus value (_Mehrwerth_), a term that has become exceedingly
popular since.[968]

Thus the capitalist gets ten hours’ labour out of the workman and only
pays him for five,[969] the other five hours costing him nothing at all.
During the first five hours the workman produces the equivalent of his
wages, but after the end of the fifth hour he is working for nothing.
The labour of this extra number of hours during which the surplus value
is being produced and for which the worker receives nothing Marx calls
surplus labour. By that he means the supererogatory labour which yields
nothing to the worker, but merely involves an extra tax upon his energies
and simply increases the capitalist’s fortune.

Naturally the capitalist’s interest is to augment this surplus value
which goes to swell his profits. This can be effected in a number of
ways, and an analysis of some of these processes is one of the most
characteristic features of the Marxian doctrine. This analysis may be
summed up under two main divisions.

1. The first method is to prolong the working day as much as possible in
order to increase the number of hours of surplus labour. If the number
of working hours can be increased from ten to twelve the surplus will
automatically grow from five to seven. This is exactly what manufacturers
have always tried to do. Factory legislation, however, has forced some
of them to limit the number of hours, and this has resulted in checking
the growth of surplus value somewhat. But this check applies only to a
limited number of industries.

2. A second method is to diminish the number of hours necessary to
produce the worker’s sustenance. Were this to fall from five to three
it is clear that the surplus would again rise from five to seven. Such
reduction is possible through the perfection of industrial organisation
or through a reduction in the cost of living, a result which is usually
effected by means of co-operation.[970] The capitalist also often
manages to bring this about by setting up philanthropic institutions or
by employing women and children, who require less for their upkeep than
adults. Women and children have been taken from the house and the task of
housekeeping and cookery has been left in the hands of the men. But laws
regulating the employment of women and children have again defeated these
tactics.[971]

Such is a very brief summary of Marx’s demonstration. Its real
originality lies in the fact that it does not consist of commonplace
recriminations concerning the exploitation of workers and the greed of
exploiters, but shows how the worker is robbed even when he gets all that
he is entitled to.[972] It cannot be said that the capitalist has robbed
him. He has paid him a fair price for his labour; that is, he has given
it its full exchange value. The conditions of the wage bargain have been
observed in every particular: equal value has been given in exchange for
equal value. Given the capitalistic _régime_ and the free competition
of labour, the result could not be otherwise. The worker, perhaps, may
be surprised at this unexpected result, which only secures him half the
value of his labour, but he can only look on like a bewildered spectator.
Everything has passed off quite correctly. The capitalist, no doubt, is a
shrewd person, and knows that when he buys labour power he has got hold
of a good thing, because it is the only merchandise which possesses the
mysterious capacity of producing more value than it itself contains.[973]
He knows this beforehand, and, as Marx says, it is “the source of
considerable pleasure to him.” “It is a particularly happy condition of
things when the buyer is also allowed to sell it wherever and whenever
he likes without having to part with any of his privileges as a vendor.”
The result is that the worker has no means of defence either legal or
economic, and is as helpless as a peasant who has sold a cow in calf
without knowing it.

Hitherto we have spoken only of labour. But the outstanding personage in
the book—the hero of the volume—is capital, whose name appears on the
title-page. Our exposition of the Marxian doctrine of production would
accordingly be very incomplete if we omitted to make reference to his
treatment of capital.

Taken by itself capital is, of course, sterile, for it is understood that
labour is the sole source of value. But labour cannot produce unless it
consumes a certain proportion of capital, and it is important that we
should understand something of the combination of capital and labour.

Marx distinguishes between two kinds of capital. The first serves for
the upkeep of the working-class population, either in the way of wages
or direct subsistence. The older economists referred to it as the Wages
Fund, and Marx calls it “variable capital.” If this kind of capital does
not directly take part in production, it is this fund, after all, when
consumed by labour that begets value and the surplus which is attached to
it.

That other kind of capital which directly assists the productive activity
of labour by supplying it with machinery, tools, etc., Marx calls
“constant capital.” This latter kind of capital, which is not absorbed or
vitalized by labour, does not result in the production of surplus value.
It simply produces the equivalent of its value, which is the sum total of
all the values absorbed during the time when it was being produced. This
constant capital is evidently the crystallized product of labour, and
its value, like that of any other product, is determined solely by the
number of hours of labour it has taken to produce. This value, whether
it include the cost of producing the raw material or merely the cost
of labour employed in elaborating it, should be rediscoverable in the
finished product. But there is nothing more—no surplus. The economists
refer to this as depreciation, and everyone knows that depreciation
implies no profits at any rate.[974]

It seems quite obvious that it is to the interest of the capitalist to
employ only variable capital, or at least that it will pay him to reduce
the amount of constant capital used to the irreducible minimum.[975] But
we are here met with an anomaly which is the despair of all Marxian
commentators, and which must have caused Marx himself some amount of
embarrassment, if we may judge by the laborious demonstration which he
gives.[976]

If fixed capital is really unproductive, how is it that modern
production is always increasing the quantity of fixed capital which it
employs, until this has now become one of its most familiar features?
Is it because it yields less profit than that yielded by the smaller
handicrafts or agriculture? Again, how are we to account for the
variation in the rates of profit in different industries according to
the different quantities of capital employed, seeing that it is an axiom
of political economy that under a _régime_ of free competition with
equal security for everybody the returns on different capitals should
everywhere be the same?

Marx replies by saying that the rate of profit is the same for all
capitalists within the country, but that this rate is the average of the
different rates in all the different industries. In other words, it is
the rate that would obtain if every industry in the country employing
varying amounts of fixed and circulating capital formed a part of one
whole. It must not be thought of as a kind of statistical average, but
simply as a kind of average which competition brings about. The result is
other than might have been expected.[977] Those industries which have a
large amount of variable capital—agriculture, for example—find themselves
with just the average rate of return, but draw much less in the way of
surplus value than they had expected, and so Marx refers to them as
undertakings of an inferior character. On the contrary, those industries
which possess a large amount of constant capital draw more than their
capital had led them to hope for, and Marx refers to them as industries
of a superior character.[978] Hence those industries which employ a
considerable amount of machinery expand at the expense of the others. It
is because the latter kind find themselves in a more favourable position,
or, in other words, realize greater profits, that they do employ surplus
labour, from which surplus value is naturally derived.[979]

While admiring the ingenuity of the dialectics, we must not blind
ourselves to the simple fact which Marx was so anxious to hide, but which
is nevertheless implicit in all this, namely, that the rate of profit,
which means also the value of the goods, is regulated by competition—that
is, by demand and supply—but bears no relation to the quantity of labour
employed. We must also remember that the _entrepreneur_, far from
seeing his profits diminish as he employs less human labour, finds them
increasing. This contradiction is just one of those flaws that finally
cause the downfall of the majestic edifice so laboriously raised by Marx.


2. THE LAW OF CONCENTRATION OR APPROPRIATION

The law of concentration of capital,[980] which can only be interpreted
in the light of economic history, is an attempt to show that the _régime_
of private property and personal gain under which we live is about to
give place to an era of social enterprise and collective property.[981]
Let us try to follow the argument as given by Marx.

Again must we cast back our thoughts to a period before the earliest
beginnings of capital in the sixteenth century—a period when, according
to the socialists, there existed neither capital nor capitalist. Capital
in the economic sense of a mere instrument of production must have
existed even before this time, but the socialists are of opinion that
it had quite a different significance then, and it is important that we
should appreciate their point of view. Their employment of the term is
closely akin to the vulgar use of the word as anything that yields a
rent, and yields the said rent as the result, not of the capitalist’s
labour, but of the toil of others. But under the guild system which
preceded this condition of things the majority of the workers possessed
most of the instruments of production themselves.

Then follows a description of a series of changes which we cannot attempt
to study in detail, but which forms a singularly dramatic chapter in the
writings of Marx. New means of communication are established and new
markets opened as the result of important mechanical discoveries coupled
with the consolidation of the great modern States. The rise of banks and
of trading companies, together with the formation of public debts, all
this resulted in the concentration of capital in the hands of a few and
the expropriation of the small proprietor.

But all this was only a beginning. If capital in this newer sense of an
instrument for making profit out of the labour of others was ever to come
into its own and develop, if the surplus labour and surplus value of
which we have given an analysis were really to contribute to the growth
and upkeep of this capital, it was necessary that the capitalist should
be able to buy that unique merchandise which possesses such wonderful
qualities in the open market. But labour-force can never be bought unless
it has been previously detached from the instruments of production
and removed from its surroundings. Every connexion with property must
be severed, every trace of feudalism and of the guild system must be
removed. Labour must be free—that is, saleable; or, in other words, it
“must be forced to sell itself because the labourer has nothing else
to sell.” For a long time the artisan was in the habit of selling his
goods to the public without the intervention of any intermediary, but a
day dawned when, no longer able to sell his products, he was reduced to
selling himself.[982]

The creation of this new kind of property based upon the labour of others
meant the extinction of that earlier form of property founded upon
personal labour and the substitution for it of the modern proletariat.
This was the task to which the _bourgeoisie_ resolutely set itself
for about three centuries, and its proclamation of the liberty of the
labourer and the rights of man is just its pæan of victory. Its task was
accomplished. The expropriated artisan who was already swelling the
ranks of the proletariat seemed an established fact.

In reality this end was only partially accomplished even in the more
capitalistic countries, but that there is a general movement in that
direction seems clear in view of the following considerations.

(_a_) The most suggestive fact in this connexion is the growth of
production on a large scale, resulting in the employment of machinery
and in the rise of new forms of organisation such as trusts and cartels,
new systems that were unknown in Marx’s day, but which have helped to
confirm his suspicions. These trusts and cartels are especially important
from a social point of view because they not only absorb the capital of
the small independent proprietor, but swallow the medium-sized industry
as well. This wonderful expansion of production on a large scale means a
corresponding growth in the numbers of the proletariat, and capitalism,
by increasing the number of wage-earners, helps to swell the ranks of its
own enemies. “What the _bourgeoisie_ produces, above all, therefore, are
its own gravediggers.”[983]

(_b_) Over-production is another fruitful method. A contraction of the
market results in a superabundance of workmen whose services are always
available. They form a kind of industrial reserve army upon which the
capitalist may draw at his pleasure—at one moment indiscriminately taking
on a number of them, and throwing them back on to the streets again as
soon as the demand shows signs of slackening.[984]

(_c_) The concentration of the rural population in towns is another
contributing factor. This movement itself is the result of the
disappearance of the small holder and the substitution of pastoral for
arable farming, the outcome of it all being an addition to the ranks
of the expropriated proletariat of an increasing number of hitherto
independent proprietors and producers.

Such is the advent and growth of capitalism. It comes into the world
“with bloody putrescence oozing out of every pore.” How different is
the real history of capital from the idyllic presentation to which we
are treated by the economists! They love to picture it as the slowly
accumulated fruit of labour and abstinence, and the coexistence of the
two classes, the capitalists and the workers, is supposed to date from an
adventure that befell them both a few days after creation, when the good
and the wise decided to follow the high road of capitalism and the idle
and vicious the stony path of toil.

In reality capitalism is the outcome of class struggle—a struggle
that will some day spell the ruin of the whole _régime_, when the
expropriators will themselves be the expropriated. We are given no
details as to how this is to be accomplished, and this abstention from
prophecy distinguishes Marx from the Utopian socialists of the last two
thousand years. His one object was to show how those very laws that
led to the establishment of the _régime_ would some day encompass its
ruin.[985] The force of circumstance seemed to make self-destruction
inevitable. “The capital _régime_,” writes one Marxian socialist, “begets
its own negation, and the process is marked by that inevitability which
is such a feature of all natural laws.”[986] The following facts are
deduced as proofs that this process of self-destruction is already in
course of being accomplished.

(_a_) Industrial crises, whether of over-production or under-consumption,
have already become a chronic evil. The fact that to some extent they
are to be regarded as the direct outcome of the capitalist system of
production cannot prevent their damaging that system. The continual
growth of fixed at the expense of circulating capital, involving as it
does the substitution of machinery for hand labour, must also involve a
continual reduction of the surplus value. In order to counteract this
tendency the capitalists find themselves forced to keep ahead with
production; they are driven to rely upon quantity, as they put it. The
workers, on the other hand, find that it is gradually becoming impossible
for them to buy the products of their labour with the wages which they
get, because they never get a wage which is equal to the value of the
product of their labour. Moreover, they periodically find themselves out
of employment altogether and almost on the verge of starvation. Proudhon,
as we have already seen, laid considerable stress upon this, and it is
one of the instances in which Marx is obviously influenced by Proudhon.

The idea which underlies the Marxian theory is that every crisis involves
a readjustment of the equilibrium between fixed and circulating capital.
The growth of the former, though continuous, is not always uniform,
and whole sections of it may occasionally be found to be without solid
foundation which would warrant such expansion. But the crises which
result in the destruction of these speculative accretions give a new
spirit to the creation of further surplus value, which results in the
creation of further fixed capital and more crises, and so the process
goes on.[987]

(_b_) The growth of pauperism, which is the direct outcome of crises and
want, is another factor. “The _bourgeoisie_ is unfit any longer to be
the ruling class in society, and to impose its conditions of existence
upon society as an overriding law. It is unfit to rule because it is
incompetent to assure an existence to its slave within his slavery,
because it cannot help letting him sink into such a state that it has to
feed him instead of being fed by him.”[988]

(_c_) The rapid multiplication of joint stock companies is the final
buttress with which the Marxians have strengthened their contention.
Under the joint stock principle the right of property is simply reduced
to the possession of a few strips of paper giving the anonymous owner the
right to draw dividends in some commercial concern or other. Profit is
seen in all its nakedness as a dividend which is wholly independent of
all personal effort and produced entirely as the result of the workers’
drudgery. The duty of personally supervising the methods of production
and of opening up new and better ways of manufacturing, which served to
disguise the real character of the individual employer and to justify his
existence, is no longer performed by the owner, but falls to the lot of
two new functionaries, the parasitic company director on the one hand and
the salaried official on the other.

Once the whole industry of a country becomes organized on a joint stock
basis—or, better still, once it passes over into the hands of a trust,
which is simply a manifestation of the joint-stock principle at its
highest—expropriation will be a comparatively simple matter. By a mere
stroke of the pen property hitherto held by private shareholders will be
transferred into the custody of the State with hardly a change in the
economic mechanism itself.

Thus the expropriation of the _bourgeoisie_ will be a much easier task
than was the expropriation of the artisan by the _bourgeois_ a few
centuries ago. In the past it was a case of the few subjugating the many,
but in the future the many will overwhelm the few—thanks to the law of
concentration.

But what is to be the outcome of the Marxian programme (we cannot speak
of its aim or ideals, for Marx scorned such terms)? The general opinion
seems to be that it involves the abolition of private property, and
that the opinion is not altogether without foundation may be seen from
a perusal of the _Manifesto_, where we read that “the theory of the
Communists may be summed up in the single sentence: Abolition of private
property.”[989]

The _Manifesto_ also explains in what sense we are to understand this.
The private property which so much needs suppressing is not the right of
the worker to the produce of his own toil, but the right of others to
appropriate for themselves the produce of that labour. This is private
property as they understand it. They think, however, it would be better
to call it _bourgeois_ property, and they feel quite confident that it
is destined to disappear under a collectivistic _régime_. As to a man’s
right to the product of his own labour, that surely existed formerly,
before the peasant and the craftsman were overwhelmed by capitalism and
replaced by the proletariat. Collectivism, far from destroying this kind
of property, will rather revive it, not in the antiquated individualistic
form of letting each man retain his own, which is obviously impossible
under division of labour and production on a large scale, but of giving
to every man a claim upon the equivalent of what he has produced.[990]

This twofold task can only be accomplished by undoing all that
capitalism has done; by taking from the capitalists the instruments of
production which they now possess and restoring them to the workmen,
not individually—that would be impossible under modern conditions—but
collectively. To adopt the formula which figures at the head of the
party’s programme, this means the socialisation of the means of
production—land, including surface and subsoil, factories and capital.
The produce of everyone’s labour, after allowing for certain expenses
which must be borne by the community as a whole, will be distributed
according to each one’s labour. Surplus labour and surplus value will
thus disappear simultaneously.

This expropriation of the capitalists will be the final stage, for,
unlike the preceding movements, it will not be undertaken for the benefit
of a single class—not even for the benefit of the workers. It will be
for the interest of everybody alike, for the benefit of the nation as a
whole. It will also be adequate to cope with the change which industry
has recently undergone; in other words, both production and distribution
will be on a collective basis.


II: THE MARXIAN SCHOOL

After this summary exposition of the principal theories of Karl Marx, we
must now try to fix the general character of the school that bears his
name[991] and to distinguish it from the other socialist schools that we
have already studied.

(_a_) In the first place, it proudly claims for its teaching the title of
_scientific_ socialism, but much care must be exercised in interpreting
the formula. No economist has ever shown such contempt or betrayed such
passion in denouncing Phalanstères, Utopias, and communistic schemes
of every kind. To think that the Marxians should add to the number of
such fantastic dreams! What they claim to do, as M. Labriola points out
(may the shades of Fourier forgive their presumption!), is to give a
thoroughly scientific demonstration of the line of progress which has
actually been followed by civilised societies.[992] Their one ambition
is to gauge the significance of the unconscious evolution through which
society has progressed and to point the goal towards which this cosmic
process seems to be tending.

The result is that the Marxian school has a conception of natural
laws which is much nearer the Classical standpoint than that of its
predecessors. Of this there can be no doubt. The Marxian theories are
derived directly from the theories of the leading economists of the
early nineteenth century, especially from Ricardo’s. Marx is in the line
of direct succession. Not only is this true of the labour-value theory
and of his treatment of the conflict between profits and wages, but it
also applies to his theory of rent and to a whole host of Ricardian
doctrines that have been absorbed wholesale into the Marxian philosophy.
And, paradoxical as it may sound, his abstract dogmatic method, his
obscure style, which encourages disciples to retort that the critics
have misunderstood his meaning and to give to many a passage quite an
esoteric significance, is of the very essence of Ricardo.[993] Marx’s
theories are, of course, supported by a wealth of illuminating facts,
which unfortunately have been unduly simplified and drawn upon for purely
imaginary conclusions. We have already had occasion to remark that
Ricardo also owes a good deal more to the observation of facts than is
generally believed, and his practice of postulating imaginary conditions
is of course notorious. The impenitent Marxian who still wishes to
defend some of the more untenable theories of Marx, such as his doctrine
of labour-value, generally finds himself forced to admit that Marx had
supposed (the use of suppositions is an unfailing proof of Ricardian
influence) the existence of society wherein labour would be always
uniform in quality.[994]

Marxism is simply a branch grafted on the Classical trunk. Astonished
and indignant as the latter may well seem at the sight of the strange
fruit which its teaching has borne, it cannot deny the fact that it has
nourished it with its own life-blood. “_Das Kapital_,” as Labriola notes,
“instead of being the prologue to the communal critique, is simply the
epilogue of _bourgeois_ economics.”[995]

Not only has Marxism always shown unfailing respect for political economy
even when attacking individual economists, who are generally accused of
inability to grasp the full significance of their own teaching, but,
strangely enough, it betrays an equal affection for capitalism.[996] It
has the greatest respect for the task which it has already accomplished,
and feels infinitely grateful for the revolutionary part (such are the
words used) which it has played in preparing the way for collectivism,
which is almost imperceptibly usurping its place.[997]

But the Marxians have one serious quarrel with the older economists.
It seemed to them that the earliest writers on political economy never
realized the relatively transient nature of the social organism which
they were studying. This was possibly because they were conservative
by instinct and had the interest of the _bourgeois_ at heart. They
always taught, and they fully believed it, that private property and
proletarianism were permanent features of the modern world, and that
social organisation was for ever destined to remain upon a middle-class
foundation. They were at least unwilling to recognize that this also,
like the rest, was simply a historical category, and, like them, also was
destined to vanish.[998]

(_b_) The Marxian school also differs from every previous socialist
school in the comparative ease with which it has eschewed every
consideration of justice and fraternity, which always played such an
important _rôle_ in French socialism. It is interested, not in the ideal,
but in the actual, not in what ought to be, but in what is likely to
be. “The theoretical conclusions of the communists are in no way based
on ideas or principles that have been invented, or discovered by this
or that would-be universal reformer. They merely express, in general
terms, actual relations springing from an existing class struggle, from a
historical movement going on under our very eyes.”[999]

To economic facts they attributed an importance altogether transcending
their influence in the economic sphere. Their belief was that the
several links which unify the many-sided activities of society, whether
in politics, literature, art, morality, or religion, are ultimately
referable to some economic fact or other. None of them but is based upon
a purely economic consideration. Most important of all are the facts
relating to production, especially to the mechanical instruments of
production and their operation. If we take, for example, the production
of bread and the successive stages through which the mechanical operation
of grinding has passed from the hand-mill of antiquity to the water-mill
of the Middle Ages and the steam-mill of to-day, we have a clue to the
parallel development of society from the family to the capitalistic
system and from the capitalistic to the trust, with their concomitants
slavery, serfdom, and proletarianism. This affords a far better
explanation of the facts than any _bourgeois_ cant about “the growth of
freedom” or humbug of that nature. These are the real foundations upon
which every theory has to be reared. This materialistic conception of
history,[1000] implying as it does a complete philosophy of history, is
no longer confined to the purely economic domain.

Taken in the vulgar sense, it seems to involve the exclusion of every
moral and every humanitarian consideration. As Schäffle put it in that
oft-quoted phrase of his, it means reducing the social question to a
“mere question of the belly.” The French socialists find the doctrine
somewhat difficult to swallow, and they hardly display the same reverence
for Marx as is shown in some other countries.[1001]

The orthodox Marxians immediately proceed to point out that such
criticism is useless and shows a complete misunderstanding of Marx’s
position. Materialism in the Marxian sense (and all his terms have a
Marxian as well as the ordinary significance) does not exclude idealism,
but it does exclude ideology, which is a different thing. No Marxian has
ever advocated leaving mankind at the mercy of its economic environment;
on the contrary, the Marxian builds his faith upon evolution, which
implies man’s conscious, but not very successful, effort to improve his
economic surroundings.[1002] The materialistic conception of history
apparently is simply an attempt at a philosophy of human effort.[1003]
Criticism of such elusive doctrines is not a very easy task.

(_c_) The socialism of Karl Marx is exclusively a working-class gospel.
This is its distinctive trait and the source of the power it wields. To
some extent it also explains its persistence. Other socialist systems
have been discredited and are gone, but the Marxian gospel—no longer, of
course, the sublime masterpiece it was when its author first expounded
it—has lost none of its ancient vigour, despite the many transformations
which it has undergone.

The socialists of the first half of the nineteenth century embraced all
men without distinction, worker and _bourgeois_ alike, within their broad
humanitarian schemes. Owen, Fourier, and Saint-Simon reckoned upon the
co-operation of the wealthy governing classes to found the society of the
future. Marxism implies a totally different standpoint. There is to be
no attempt at an understanding with the _bourgeoisie_, there must be no
dallying with the unclean thing, and the prohibition is to apply not only
to the capitalists, but also to the intellectuals[1004] and to the whole
hierarchical superstructure that usually goes by the name of officialdom.
Real socialism aims at nothing but the welfare of the working classes,
which will only become possible when they attain to power.

It may, of course, be pointed out that socialism has always involved
some such struggle between rich and poor, but it is equally correct
to say that the battle has hitherto been waged over the question of
just distribution. Beyond that there was no issue. But in the Marxian
doctrine the antagonism is dignified with the name of a new scientific
law, the “class war”—the worker against the capitalist, the poor _versus_
the rich. The individuals are the same, but the _casus belli_ is quite
different. “Class war” is a phrase that has contributed not a little to
the success of Marxism, and those who understand not a single word of the
theory—and this applies to the vast majority of working men—will never
forget the formula. It will always serve to keep the powder dry, at any
rate.

“Class war” was not a new fact. “The history of all hitherto existing
society is the history of class struggles.”[1005] But although it has
always existed, it cannot continue for ever. And the great struggle that
is now drawing nigh and which gives us such a tragic interest in the
whole campaign will be the last. The collectivist _régime_ will destroy
the conditions that breed antagonism, and so will get rid of the classes
themselves. Let us note in passing that this prophecy is not without a
strong tinge of that Utopian optimism which the Marxians considered such
a weakness in the earlier French socialism.

(_d_) A final distinction of Marxism is its purely revolutionary or
catastrophic character, which is again unmistakably indicated by its
adoption of “class war” as its watchword. But we have only to remind
ourselves that the adjective “revolutionary” is applied by the Marxians
to ordinary middle-class action to realize that the term is employed in a
somewhat unusual fashion.

The revolution will result in the subjection of the wealthier classes
by the working men, but all this will be accomplished, not by having
recourse to the guillotine or by resorting to street rioting, but in a
perfectly peaceful fashion. The means may be political and the method
even within the four corners of the law, for the working classes may
easily acquire a majority in Parliament, seeing that they already form
the majority of the electors, especially in those countries that have
adopted universal suffrage. The method may be simply that of economic
associations of working men taking all economic services into their own
hands.[1006]

The final catastrophe may come in yet another guise, and most Marxians
seem to centre their hopes upon this last possibility. This would take
the form of an economic crisis resulting in the complete overthrow of
the whole capitalist _régime_—a kind of economic _felo de se_. We have
already noted the important place which crises hold in the Marxian
doctrines.

But if Marxism does not necessarily involve resort to violence, violent
methods are not excluded. Indeed, it considers that some measure of
struggle is inevitable before the old social forms can be delivered of
the new—before the butterfly can issue from the chrysalis. “Force is the
birth-pangs of society.”[1007]

This is not the place for false sentimentalism. Evil and suffering seem
to be the indispensable agents of evolution. Had anyone been able to
suppress slavery or serfdom or to prevent the expropriation of the worker
by the capitalist, it would have merely meant drying up the springs of
progress and more evil than good would probably have resulted.[1008]
Every step forward involves certain unpleasant conditions, which must
be faced if the higher forms of existence are ever to become a reality.
And for this reason the reform of the _bourgeois_ philanthropist and
the preaching of social peace would be found to be harmful if they
ever proved at all successful. There is no progress where there is no
struggle. This disdainful indifference to the unavoidable suffering
involved in transition is inherited from the Classical economists, and
provides one more point of resemblance between the two doctrines. Almost
identical terms were employed by the Classical economists when speaking
of competition, of machinery, or of the absorption of the small industry
by a greater one. In the opinion of the Marxians no attempt at improving
matters is worthy the name of reform unless it also speeds the coming
revolution. “But it can shorten and lessen the birth-pangs.”[1009]


III: THE MARXIAN CRISIS AND THE NEO-MARXIANS

To speak of Neo-Marxism, which is of quite recent growth, is to
anticipate the chronological order somewhat, but some such procedure
seems imperative in the interests of logical sequence. It has the further
merit of dispensing with any attempt at criticism, a task which the
Neo-Marxians[1010] have exclusively taken upon their own shoulders.

The two phases of the crisis must needs be kept distinct. The one, which
is predominantly critical—or reformative, if that phrase be preferred—is
best represented by M. Bernstein and his school. The other, which is more
or less of an attempt to revive Marxism, has become current under the
name of Syndicalism.


1. THE NEO-MARXIAN REFORMISTS

If we take Marx’s economic theories one by one as we have done, we shall
find that there is nothing very striking in any of them, and that even
the most important of them will not stand critical scrutiny. We might
even go farther and say that this work of demolition is partly due to
the posthumous labours of Marx himself. It was the publication of his
later volumes that served to call attention to the serious contradiction
between the later and the earlier sections of his work. Marxism itself,
it seems, fell a prey to that law of self-destruction which threatened
the overthrow of the whole capitalistic _régime_. Some of Marx’s
disciples have, of course, tried to justify him by claiming that the work
is not self-contradictory, but that the mere enumeration of the many
conflicting aspects of capitalistic production strikes the mind as being
contradictory.[1011] If this be so, then _Kapital_ is just a new edition
of Proudhon’s _Contradictions économiques_, which Marx had treated with
such biting ridicule. And if the capitalist _régime_ is really so full
of contradictions that are inherent in its very nature, how difficult
it must be to tell whether it will eventuate in collectivism or not
and how very rash is scientific prophecy about annihilation and a final
catastrophe![1012]

The fundamental theory of Marxism, that of labour-value, appears to
be abandoned by the majority of modern Marxians, who are gradually
veering round and adopting either the “final utility” or the “economic
equilibrium” theory.[1013] Even Marx himself, despite his formal
acceptance of the labour-value theory, is constantly obliged to admit—not
explicitly, of course—that value depends upon demand and supply.[1014]
Especially is this the case with profits, as we have already had occasion
to remark. What appears as an indisputable axiom in the first volume is
treated as a mere working hypothesis in the later ones.

But seeing that the other Marxian doctrines—the theories of surplus value
and surplus labour, for example—are mere deductions from the principle of
labour-value, it follows that the overthrow of the first principle must
involve the ruin of the other two. If labour does not necessarily create
value, or if value can be created without labour, then there is no proof
that labour _always_ begets a surplus value and that the capitalist’s
profit must largely consist of unremunerated labour. The Neo-Marxians in
reply point to the fact that surplus labour and surplus value do exist,
else how could some individuals live without working? They must obviously
be dependent upon the labour of others.[1015] All this is very true, but
the fact had been announced by Sismondi long before, and the evil had
been denounced both by him and the English critics. It is the old problem
of unearned increment which formed the basis of Saint-Simon’s doctrine
and Rodbertus’s theory, and which has been taken up quite recently by the
English Fabians.

It is difficult to see what definite contribution Marx has made to the
question, and the old problem as to whether workers are really exploited
or not and whether the revenues obtained by the so-called idle classes
correspond to any real additional value contributed by themselves still
remains unsettled. We can only say that his historical exposition
contains several very striking instances which seem to prove this
exploitation, and that this is really the most solid part of his work.

Passing on to the law of concentration—the vertebral column of the
Marxian doctrine—we shall find upon examination that it is in an equally
piteous condition. The most unsparing critic in this case has been a
socialist of the name of Bernstein, who has adduced a great number of
facts[1016]—many of them already advanced by the older economists—which
go to disprove the Marxian theory. It may be impossible to deny that
the number of great industries is increasing rapidly and that their
power is growing even more rapidly than their numbers, but it certainly
does not seem as if the small proprietors and manufacturers were being
ousted. Statistics, on the contrary, show that the number of small
independent manufacturers (the artisans who, according to Marxian
theory, had begun to disappear as far back as the fourteenth century) is
actually increasing. Some new invention, such as photography, cycling,
or the application of electricity to domestic work, or the revival of an
industry such as horticulture, gives rise to a crowd of small industries
and new manufactures.

But concentration as yet has scarcely made an appearance even in
agriculture, and all the efforts of the Marxians to make this industry
fit in with their theory have proved utterly useless. America as well as
Europe has been laid under tribute with a view to supplying figures that
would prove their contention. The statistics, however, are so confusing
that directly opposite conclusions may be drawn from the same set of
figures. The amount of support which they lend to the Marxian contention
seems very slight indeed. On the whole they may be said to lend colour
to the opposite view that the number of businesses is at least keeping
pace with the growth of population. Were this to be definitely verified
it would set a twofold check upon the Marxian theory. Not only would it
be proved that _petite culture_ is on the increase, but it would also be
found that it is on the increase simply because it is more productive
than “the great industry.”

But suppose for the sake of hypothesis that we accept the law of
concentration as proved. That in itself is not enough to justify
the Marxian doctrine. To do this statistics proving an increasing
concentration of property in the hands of fewer individuals are also
necessary; but in this case the testimony of the figures is all in the
opposite direction. We must not be deceived by the appearance of that
new species, the American millionaire. There are men who are richer than
the richest who ever lived before, but there are also more men who are
fairly rich than ever was the case before. The number of men who make a
fortune—not a very great one, perhaps, but a moderate-sized or even a
small one—is constantly growing. Joint stock companies, which according
to the Marxian view afforded striking evidence of the correctness of his
thesis, have, on the contrary, resulted in the distribution of property
between a greater number of people, which proves that the concentration
of industry and the centralisation of property are two different
things. Or take the wonderful development of the co-operative movement
and reflect upon the number of proletarians who have been transformed
into small capitalists entirely through its instrumentality. To think
that expropriation in the future will be easier because the number of
expropriated will be few seems quite contrary to facts. It looks as if
it were the masses, whose numbers are daily increasing, who will have
to be expropriated, after all. More than half the French people at the
present day possess property of one kind or another—movable property,
land, or houses. And yet the collectivists never speak except with the
greatest contempt of these rag-ends and tatters of property, fondly
imagining that when the day of expropriation comes the expropriated will
joyfully throw their rags aside in return for the blessings of social
co-proprietorship. Apparently, however, the Marxians themselves no
longer believe all this. Their language has changed completely, and just
now they are very anxious to keep these rags and tatters in the hands of
their rightful owners.

The changes introduced into the programme as a result of this have
transformed its character almost completely. When it was first drawn
up and issued as a part of the _Communist Manifesto_ nearly fifty
years ago everybody expected that the final disappearance of the small
proprietor was a matter of only a few years, and that at the end of
that time property of every description would be concentrated in the
hands of a powerful few. This continuous expropriation would, of course,
swell the ranks of the proletariat, so that compared with their numbers
the proprietors would be a mere handful. This would make the final
expropriation all the easier. With such disparity in numbers the issue
was a foregone conclusion, no matter what method was employed, were it a
revolution or merely a parliamentary vote.

Unfortunately for the execution of this programme, not only do we find
the great capitalist still waxing strong, which is quite in accordance
with the orthodox Marxian view, but there is no evidence that the small
proprietor or manufacturer is on the wane. The Marxian can scarcely
console himself with the thought that the revolution is gradually
being accomplished without opposition when he sees hundreds of peasant
proprietors, master craftsmen, and small shopkeepers on every side of
him. Nor is there much chance of forcing this growing mass of people,
which possibly includes the majority of the community even now, to change
its views. We can hardly expect them to be very enthusiastic about a
programme that involves their own extinction.

A distinction has obviously been drawn between two classes of
proprietors. The socialisation of the means of production is only to
apply to the case of wealthy landowners and manufacturers on a large
scale—to those who employ salaried persons. But the property of the
man who is supporting himself with the labour of his own hands will
always be respected. The Marxians defend themselves from the reproach
of self-contradiction and opportunism by stating that their action is
strictly in accordance with the process of evolution. You begin by
expropriating those industries that have arrived at the capitalistic and
wage-earning stage. The criterion must be the presence or otherwise of a
surplus value.

The conclusion is logical enough, but one would like to know what
is going to become of the small independent proprietor. Will he be
allowed to grow and develop alongside of the one great proprietor—the
State? We can hardly imagine the two systems coexisting and hopelessly
intermingled, as they would have to be, but still with freedom for the
individual to choose between them. The collectivists have at any rate
made no attempt to disguise the fact. They look upon it merely as a
temporary concession to the cowardice of the small proprietor, who will
presently willingly abandon his own miserable bit of property in order to
share in the benefits of the new _régime_, or who will at any rate be put
out of the running by its economic superiority. But since the prospects
do not seem very attractive to those immediately concerned, it may be as
well to dispense with any further consideration of the subject.

But there is another question. What has become of the class struggle in
Neo-Marxism? The doctrine, though not altogether denied, is no longer
presented as a deadly duel between two classes and only two, but as a
kind of confused _mêlée_ involving a great number of classes, which
makes the issue of the conflict very uncertain. The picture of society
as consisting merely of two superimposed layers is dismissed as being
altogether too elementary. On the contrary, what we find is increasing
differentiation even within the capitalist class itself. There is
a perpetual conflict going on between borrower and lender, between
manufacturer and merchant, between trader and landlord, the last of which
struggles is especially prominent in the annals of politics. It has a
long history, but in modern times it takes the form of a political battle
between the Conservative and Liberal parties, between Whigs and Tories.
These undercurrents complicate matters a great deal, and on occasion
they have a way of dramatically merging with the main current, when both
parties seek the help of the proletariat. In England, for example, the
manufacturers succeeded in repealing the Corn Laws, which dealt a hard
blow at the landed proprietors, who in turn passed laws regulating the
conditions of labour in mines and factories. In both cases the working
classes gained something—_tertius gaudens_! Then there are the struggles
among the working classes themselves. Not to speak of the bitter
animosity between the _syndicats rouges_ and the _syndicats jaunes_,
there is the rivalry between syndicalists and non-syndicalists, between
skilled workmen and the unskilled. As Leroy-Beaulieu remarks, not only
have we a fourth estate, but there are already signs of a fifth.

And what of the great catastrophe? The Neo-Marxians no longer believe
in it. The economic crises which furnished the principal argument in
support of the catastrophic theory are by no means as terrible as they
were when Marx wrote. They are no longer regarded as of the nature of
financial earthquakes, but much more nearly resemble the movements of the
sea, whose ebb and flow may to some extent be calculated.

And the materialistic conception of history? “Every unbiased
person must subscribe to that formula of Bernstein: The influence
of technico-economic evolution upon the evolution of other social
institutions is becoming less and less.”[1017] What a number of proofs
of this we have! Marxism itself furnishes us with some. The principle of
class war and the appeal to class prejudice owe much of the hold which
they have to a feeling of antagonism against economic fatalism. In other
words, they draw much of their strength from an appeal to a certain
ideal. It is, of course, true that facts of very different character,
economic, political, and moral, react upon one another, but can anyone
say that some one of them determines all the others? Economists have
been forced to recognise this, and the futile attempt to discover cause
or effect has recently given place to a much more promising search for
purely reciprocal relations.

It is by no means easy to determine how much Marxism there is in
Neo-Marxism. “Is there anything beyond the formulæ which we have quoted,
and which are becoming more disputable every day? Is it anything more
than a philosophical theory which purports to explain the conflicts of
society?”[1018] Bernstein tells us somewhere that socialism is just a
movement, and that “the movement is everything, the end is nothing.”[1019]


2. THE NEO-MARXIAN SYNDICALISTS

Doctrinaire Marxism seemed languishing when a number of professed
disciples found a fresh opportunity of reviving its ideals and of
justifying its aims in a new movement of a pre-eminently working-class
character known as Syndicalism.

Our concern is not with the reformist movement, occasionally spoken of as
Trade Unionism, which constitutes the special province of M. Bernstein
and the Neo-Marxians of his school,[1020] but rather with militant
syndicalism, which as yet scarcely exists anywhere except in France and
Italy, and which in France is represented by the Confédération générale
du Travail.

What connection is there between Marxism and syndicalism? Of conscious,
deliberate relationship there is scarcely any. The men who direct the
Confédération have never read Marx, possibly, and would hardly concern
themselves with the application of his doctrines. On the other hand, we
have recently been told that the programme of the Confédération générale
du Travail (C.G.T.) is in strict conformity with the Marxian doctrine;
that since the reforming passion has so seized hold of the Neo-Marxians
as to drive them to undermine the older doctrine altogether, it is
necessary to turn to the new school to find the pure doctrine. They
make the further claim of having aroused new enthusiasm for the Marxian
doctrines.

(_a_) In the first place they have re-emphasised the essentially
proletarian character of socialism. Not only is there to be no dealing
with capitalist or _entrepreneur_, but no quarter is to be given to the
intellectuals or the politicians. The professional labour syndicate is to
exclude everyone who is not a workman, and it has no interest at heart
other than that of the working class.[1021] Contempt for intellectualism
is a feature of Marxism, and so is the emphasis laid upon the beauty and
worth of labour, not of every kind of labour, but merely of that labour
which moulds or transforms matter—that is, of purely manual labour.

No institution seems better fitted to develop class feeling—that is, the
sense of community of interests binding all the proletarians together
against the owners—than the _syndicat_. Organisation is necessary if
social consciousness is to develop. This is as true in the economic as
it is in the biological sphere, and this is why the _syndicat_ is just
what was needed to transform the old socialistic conception into real
socialism. Marx could not possibly have foreseen the vast potentialities
of the _syndicat_. If he had only known it how his heart would have
rejoiced! The Neo-Marxians can never speak of syndicalism without going
into raptures. No other new source of energy seems left in this tottering
middle-class system. But syndicalism has within it the promise of a new
society, of a new philosophy, even of a new code of morality which we may
call producers’ ethics, which will have its roots in professional honour,
in the joy that comes from the accomplishment of some piece of work, and
in their faith in progress.[1022]

(_b_) New stress has been laid upon the philosophy of class war, and
a fresh appeal has been made for putting it into practice. The only
real, sensible kind of revolution is that which must sooner or later
take place between capitalists on the one hand and wage-earners on the
other, and this kind of revolution can only be effected by appealing to
class feeling and by resorting to every instrument of conflict, strikes,
open violence, etc. All attempts at establishing an understanding with
the _bourgeois_ class, every appeal for State intervention or for
concessions, must be abandoned. Explicit trust must be placed in the
method of direct action.[1023]

Strife is to be the keynote of the future, and in the pending struggle
every trace of _bourgeois_ legalism will be ruthlessly swept aside. The
fighting spirit must be kept up, not with a view to the intensification
of class hatred, but simply in order to hand on the torch.

The struggle has hitherto been the one concern of the revolutionary
syndicalists. Unlike the socialists, they have never paid any attention
either to labour or to social organisation. All this has, fortunately,
been done by the capitalist, and all that is required now is simply to
remove him.[1024]

(_c_) Nor has the catastrophic thesis been forgotten. This time it has
been revived, not in the form of a financial crisis, but in the guise
of a general strike. What will all the _bourgeois_ generalship, all the
artillery of the middle class, avail in a struggle of that kind? What
is to be done when the worker just folds his arms and instantly brings
all social life to a standstill, thus proving that labour is really the
creator of all wealth? And although one may be very sceptical as to the
possibility of a general strike—the scepticism is one that is fully
shared in by the syndicalists themselves—still this “myth,” as Sorel
calls it, must give a very powerful stimulus to action, just as the
Christians of the early centuries displayed wonderful activity in view of
their expectation of the second coming of Christ.

The word “myth” has been a great success, not so much among working men,
to whom it means nothing at all, but among the intellectuals. It is very
amusing to think that this exclusively working-class socialism, which is
not merely anti-capitalist, but also violently anti-intellectual, and
which is to “treat the advances of the _bourgeoisie_ with undisguised
brutality,” is the work of a small group of “intellectuals” possessed
of remarkable subtlety, and even claiming kinship with Bergsonian
philosophy.[1025] A myth perhaps! But what difference is there between
being under the dominion of a myth and following in the wake of a star
such as guided the wise men of the East, or being led by a pillar of
flame or a cloud such as went before the Israelites on their pilgrimage
towards the Promised Land?[1026] Such faith and hope borrowed from the
armoury of the triumphant Church of the first century, such a conception
of progress which swells its followers with a generous, almost heroic
passion, puts us out of touch with the historic materialism so dear
to the heart of Marx and brings us into line with the earlier Utopian
socialists whom he so genuinely despised. Sorel recognises this. “You
rarely meet with a pure myth,” says he, “without some admixture of
Utopianism.”




CHAPTER IV: DOCTRINES THAT OWE THEIR INSPIRATION TO CHRISTIANITY


Everyone who knows the Bible at all or has the slightest acquaintance
with the writings of the early Fathers must have been struck by the
number of texts which they contain bearing upon social and economic
questions. And one has only to recall the imprecations of the prophets
as they contemplate the misdeeds of merchants and the greed of
land-grabbers, or strive to catch the spirit of the parables of Jesus or
the epistles of the Fathers concerning the duty of the rich towards the
poor—a point emphasised by Bossuet in his sermon on _The Eminent Dignity
of the Poor_—or dip into the folios of the Canonists or the Summa of
Aquinas, to realise how imperative were the demands of religion and with
what revolutionary vehemence its claims were upheld.[1027]

But not until the middle of the nineteenth century do we meet with
social doctrines of a definitely Christian type, and not till then do
we witness the formation of schools of social thinkers who place the
teaching of the Gospel in the forefront of their programme, hoping
that it may supply them with a solution of current economic problems
and with a plan of social reconstruction.[1028] It is not difficult to
account for their appearance at this juncture. Their primary object
was to bear witness to the heresy of socialism, and the nature of the
object became more and more evident as socialism tended to become more
materialistic and anti-Christian. It became the Church’s one desire to
win back souls from the pursuit of this new cult. It was the fear of
seeing the people—her own people—enrol themselves under the red flag of
the Anti-Christ that roused her ardour.[1029] But to regard it as a mere
question of worldly rivalry would be childish and misleading. Rather must
we see in it a reawakening of Christian conscience and a searching of
heart as to whether the Church herself had not betrayed her Christ, and
in contemplation of her heavenly had not forgotten her earthly mission,
which was equally a part of her message; whether in repeating the Lord’s
Prayer for the coming of the Kingdom and the giving of daily bread she
had forgotten that the Kingdom was to be established on earth and that
the daily bread meant, not charity, but the wages of labour.

Both doctrines and schools are of a most heterogeneous character, ranging
from authoritative conservatism to almost revolutionary anarchism, and it
will not be without some effort that we shall include them all within the
limits of a single chapter. But it is not impossible to point to certain
common characteristics, both positive and negative, which entitle us to
regard them all as members of one family.

As a negative trait we have their unanimous repudiation of Classical
Liberalism. This does not necessarily imply a disposition to invoke State
aid, for some of them, as we shall see, are opposed even to the idea of
a State. Neither does it imply a denial of a “natural order,” for under
the name of Providence and as a manifestation of the will of God the
“order” was a source of perennial delight to them. But man was to them an
outcast without lot or portion in the “order.” Fallen and sinful, bereft
of his freedom, it was impossible that of himself he should return to his
former state of bliss. To leave the natural man alone, to deliver him
over to the pursuit of personal interest in the hope that it might lead
him to the good or result in the rediscovery of the lost way of Paradise,
was clearly absurd. It was as futile in the economic as it was in the
religious sphere. On the contrary, the Christian schools maintained that
the “natural” man, the old man, the first Adam of the New Testament,
must somehow be got rid of before room could be found for the new man
within us. Every available force, whether religious, moral, or merely
social, must be utilised to keep people from the dangerous slope down
which egoism would inevitably lead them.[1030]

The new doctrines are also distinct from socialism, despite the fact
that their followers frequently outbid the socialists in the bitterness
of their attacks upon capital and the present organisation of society.
They refuse to believe that the creation of a new society in the sense
of a change in economic conditions or environment is enough. The
individual must also be changed. To those who questioned Christ as
to when the Kingdom of God should come, He replied, “The kingdom of
God cometh not with observation … for, behold, the kingdom of God is
within you,” and His answer is witness to the fact that social justice
will only reign when it has achieved victory over human hearts. Social
Christianity must never be compared with the socialism of the Liberals
or the Associationists, for the latter believed man to be naturally
good apart from the deteriorating effects of civilisation. Nor must
it ever be classed with the collectivism of Marx, which has its basis
in a materialistic conception of history and class war. Some of these
Christian authors, it is true, regard State Socialism with a certain
degree of favour and would possibly welcome co-operation, but to most
of them legal coercion does not seem very attractive and they prefer to
put their faith in associations such as the family, the corporation,
or the co-operative society. We could hardly expect otherwise, seeing
that every church is an organisation of some kind or other. The Catholic
Church especially, whatever opinion we may have of it, is at once the
greatest and the noblest association that ever existed. Its bonds are
even stronger than death. The Church militant below joins hands with the
Church triumphant above, the living praying for the dead and the dead
interceding for the living.

From a constructive standpoint they defy classification. They have a
common aspiration in their hope of a society where all men will be
brothers, children of the one Heavenly Father,[1031] but many are the
ways of attaining this fraternal ideal. In the same spirit they speak
of a just price and a fair wage much as the Canonists of the Middle
Ages did. In other words, they refuse to regard human labour as a mere
commodity whose value varies according to the laws of supply and demand.
The labour of men is sacred, and Roman law even refused to recognise
bartering in _res sacræ_. But when it becomes a question of formulating
means of doing this, the ways divide. Numerous as are the Biblical texts
which bear upon social and economic questions, they are extraordinarily
vague. At least they seem capable of affording support to the most
divergent doctrines.

Some might consider it a mistake to devote a whole chapter to these
doctrines, seeing that they are moral rather than economic, and
that, with perhaps the exception of Le Play, who is only indirectly
connected with this school, we have no names that can be compared with
those already mentioned. But not a few intellectual movements are of
an anonymous character. The importance of a doctrine ought not to be
measured by the illustrious character of its sponsor so much as by the
effect which it has had upon the minds of men. No one will be prepared to
deny the influence which these doctrines have exercised upon religious
people, an influence greater than either Fourier’s, Saint-Simon’s,
or Proudhon’s. Moreover, they are connected with the development of
important economic institutions, such as the attempt to revive the system
of corporations in Austria, the establishment of rural banks in Germany
and France, the development of co-operative societies in England, the
growth of temperance societies, the agitation for Sunday rest, etc. Nor
must we forget that the pioneers of factory legislation, the founders
of workmen’s institutes, men like Lord Shaftesbury in England, Pastor
Oberlin, and Daniel Legrand the manufacturer, were really Christian
Socialists.


I: LE PLAY’S SCHOOL

Le Play’s[1032] school is very closely related to the Classical Liberal,
some of its best known representatives actually belonging to both.
There is the same antipathy to socialism and the same dread of State
intervention.

But it is not difficult to differentiate from the more extreme Liberal
school which finds its most optimistic expression in the works of certain
French writers. The cardinal doctrine of that school, namely, that
individual effort is alone sufficient for all things, finds no place in
Le Play’s philosophy. Man, it seemed to him, was ignorant of what his
own well-being involved. In the realm of social science no fact seemed
more persistent or more patent than error. Every individual appeared to
be born with a natural tendency to evil, and he picturesquely remarks
that “every new generation is just an invasion of young barbarians that
must be educated and trained. Whenever such training is by any chance
neglected, decadence becomes imminent.”[1033]

Among the errors more particularly denounced by Le Play were the special
idols of the French _bourgeois_—the “false dogmas of ’89” as he calls
them.[1034] It seemed to him that no society could ever hope to exist for
any length of time and still be content with the rule of natural laws,
which merely meant being ruled by the untamed instincts of the brute.
It must set to and reform itself. Hence his book is entitled _Social
Reform_, and the school which he founded adopted the same title.

Some kind of authority is clearly indispensable; the question is what it
should be. The old paterfamilias relation immediately suggests itself
as being more efficacious than any other, seeing that it is founded in
nature and not on contract or decree, and springs from love rather than
coercion. The family group under the authority of its chief, which was
the sole social unit under the patriarchal system, must again be revived
in the midst of our complex social relations. But parental control cannot
always be relied upon, for the parent is frequently engrossed with
the other demands of life, and there is positive need for some social
authority. This new social authority will not be the State—that is, if Le
Play can possibly avoid it. The first chance will be given to “natural”
authorities—those authorities which rise up spontaneously. The nobility
is well fitted for the task where it exists. In the absence of nobility,
or where, as was unfortunately the case in France, they were impervious
to a sense of duty, society must fall back upon the landed proprietors,
the employers, and persons of ripe judgment—men who hardly deserve the
title of savants, but nevertheless with considerable experience of
life. Failing these it could still appeal to the local authorities,
to those living nearest the persons concerned, to the parish rather
than the county, the county rather than the State. State intervention
is indispensable only when all other authorities have failed—in the
enforcement of Sunday observance, for example, where the ruling classes
have shown a disposition to despise it. The necessity for State
intervention is evidence of disease within the State, and the degree of
intervention affords some index of the extent of the malady.[1035]

Seeing that he attaches such importance to the constitution of the
family, Le Play is also bound to give equal prominence to the question of
entail, which determines the permanence of the family. Herein lies the
kernel of Le Play’s system. He distinguishes three types of families:

1. The patriarchal family. The father is the sole proprietor, or, more
correctly, he is the chief administrator of all family affairs. At
his death all goods pass by full title to the eldest son. Such is the
most ancient form of government of which we have any record. It is the
political counterpart of the pastoral _régime_, and both may still be
seen in full operation on the Russian steppes.

2. The family group. Children and grandchildren no longer remain under
paternal authority throughout life. With a single exception they leave
the family hearth and proceed to found new homes. Whoever remains at
home becomes the heir, after first becoming his father’s associate during
the latter’s lifetime. He becomes the new head of the family by paternal
wish, and not of legal right or necessity. The property thus passes to
the worthiest, to him who is thought best able to preserve it. It is
this _régime_, Le Play thinks, that explains the extraordinary stability
of China; and the same system, though somewhat shaken, is the source of
England’s strength and vitality. There were some parts of France where,
in spite of the Civil Code, a similar system was still in vogue. There
was one such family in particular, that of the Pyrenean peasant Melouga,
whose history showed a wonderful continuity, and the story of that family
recurs as a kind of _leitmotiv_ through the whole of the writings of Le
Play and his immediate disciples. The Melouga family has since become
extinct.

3. The unstable family, where all the children, as soon as they arrive at
maturity, quit the home and set up for themselves. At the father’s death
the family, already scattered, is completely dissolved. The patrimony
is divided equally between all its members, and any business which the
father may have possessed, whether agricultural or industrial, goes into
immediate liquidation. This is the _régime_ born of individualism which
is characteristic of all modern societies, especially France.

Le Play’s sympathy is entirely with the second, for the family group
seems to hold the balance evenly between the two antagonistic forces
which are both indispensable for the welfare of society, namely,
the spirit of conservatism and the spirit of innovation. Under the
patriarchal system the former preponderates,[1036] while under the
_régime_ of the unstable family it is utterly wanting. The latter
reminds us of Penelope’s web—each generation making a fresh beginning.
But this periodical division of wealth fails to give the desired degree
of equality, for the removal of every trace of solidarity between the
members means that the one may become rich and the other sink into
poverty. Everyone fights for his own hand. Moreover, when children only
remain with their parents for just a short period of tutelage there is
a powerful incentive given to race suicide, as is clearly shown in the
case of France. As soon as the offspring find themselves in a position of
self-sufficiency they leave the old home, just as the young animal does.
Under such circumstances it is clearly to the interest of parents to have
as few children as possible.[1037]

The family group, on the other hand, entrusts its traditions and their
preservation to the keeping of the child who remains at home. Those who
leave have their way to make, and become heirs of that industrial spirit
which has made England the mistress of the world. True fraternal equality
is also preserved, for the old home always remains open—a harbour of
refuge to those who fail in the industrial struggle. To mention but one
instance, the “old maid,” whose lot is often exceedingly hard, need never
be without a home.

Apart from moral reform, there seemed only one way of establishing the
family group in France, namely, by greater freedom of bequest, or at the
very least by increasing the amount of goods that may be given to any one
child, so that a father might be able to transmit the whole of his land
or his business to any one of his children on condition that the heir
fairly indemnified each of his brothers should their respective shares be
insufficient.[1038]

A father’s authority over his children is an indispensable element in
the stability of society, and a master’s authority over his men, though
derivative in character, is scarcely less so. The continuance of social
peace largely depends upon the latter, and the preservation of social
peace should be the essential aim of social science.[1039] We are
continually meeting with the expression “social peace” in the writings of
Le Play and his school, and the associations which they founded became
known as “Unions of Social Peace.”

Play’s first essay, an admirably planned _Exposition of Social
Economics_, was published in 1867. The sole object of its author was to
further the establishment of such institutions as were likely to promote
understanding among all persons employed in the production of the same
goods. We might even be tempted to say that the whole co-partnership
movement started by Dollfus at Mulhouse in 1850 with the utterance of
the famous phrase, “The master owes something to the worker beyond his
mere wages,” was inspired by Le Play.[1040] Le Play pinned his faith
to the benevolent master. It was quite natural that the apostle of the
family group should regard the factory as possessing a great deal of the
stability and many of the other characteristics of the family, such as
its quasi-permanent engagements[1041] and its various grades of working
men all grouped together under the authority of a well-respected chief.

Le Play’s thesis that the salvation of the working classes can only come
from above seems to have even less foundation than the opposite doctrine
of syndicalism, which claims that their deliverance is in their own
hands, and it was once for all refuted in a brilliant passage of Stuart
Mill’s:[1042] “No times can be pointed out in which the higher classes
of this or any other country performed a part even distantly resembling
the one assigned them in this theory. All privileged and powerful classes
as such have used their power in the interest of their own selfishness.…
I do not affirm that what has always been must always be. This at least
seems to be undeniable, that long before the superior classes could be
sufficiently inspired to govern in the tutelary manner supposed, the
inferior classes would be too much improved to be so governed.”

Besides the master and the State there was still another factor of
social progress which is of prime importance at the present time,
namely, working men’s unions. One might reasonably have expected a more
sympathetic treatment for them at Le Play’s hands, especially when we
remember that they were proscribed by the “false dogmas of ’89.” But
he had little faith in union, whether a corporation or a co-operative
society.[1043] Trade unionism especially seemed rather useless, because
it tended to destroy the more natural and more efficient organisation
which appeared to him to be merely an extension of the family group. It
is true that Le Play never saw unionism in operation, but it is hardly
probable that he would have modified his opinion. At any rate, the
attitude of his disciples is not much more favourable.

One feels tempted to say that there is nothing very new in all this. The
remark would have been particularly gratifying to Le Play, who considered
that invention was impossible in social science and that what he himself
had done was merely to make a discovery.

The discovery of “the essential constitution of humanity,” as he called
it, was, he thought, the outcome of his methods of observation. His
method was really always more important than his doctrine. It has always
enjoyed a considerable measure of success, and it seems to-day as if it
would survive the doctrine. Le Play was brought up as a mining engineer
and had travelled extensively.[1044] Twenty years of his life had been
spent in this way, and during that period he had travelled over almost
the whole of Europe, even as far as the Urals. It was while staying
in the neighbourhood of those mountains that he conceived the idea of
writing monographs dealing with individual families belonging to the
working classes, a method of investigation which he is never weary of
contrasting with that other “disdainful method of invention.”[1045]

To write a family monograph[1046] _à la_ Le Play is not merely to relate
its history, to describe its mode of life, and to analyse its means of
subsistence, but also to sum up its daily life in a kind of double-entry
book-keeping where every item of expenditure is carefully compared and
balanced with the receipts. But there is much that is artificial and a
great deal that is childish in this seemingly mathematical precision,
where not merely economic wants but such needs as those of education, of
recreation, and of intemperance, virtues as well as vices, are catalogued
and reckoned in terms of £ s. d. Its advantage lies in its holding the
attention of the observer, even when he is a mere novice at the work,
by obliging him to put something in every column and allowing nothing to
escape his notice.[1047]

But when Le Play proceeds to declare that this method has revealed
the truth to him and helped him to formulate the doctrines of which
we have just given a _résumé_ it really seems as if he were making a
great mistake. Actually it has only revealed what Le Play expected to
find; in other hands it might have yielded quite different results. He
declares that it has proved to him that only those families which are
grouped under paternal authority and which obey the Ten Commandments are
really happy.[1048] That may be, but how would he define a happy family?
“A happy family is one that dwells in unity and abides in the love of
God.” He has thus armed himself with a definite _a priori_ criterion
of happiness;[1049] but there is nothing to prove that the unstable
disorganised family of the Parisian factory hand may not be infinitely
more happy than the family group of Melouga or the patriarchal family of
the Bashkirs of Turkestan.

A comparison has often been drawn between Le Play’s school and the German
Historical school. It is pointed out that both schools lay great emphasis
upon the method of observation and focus attention upon the institutions
of the past, and that to some extent they both represent a reaction
against Liberalism and Classical optimism. But the resemblance is wholly
superficial. At bottom the two schools are not merely different, but
even divergent. The German school seeks the explanation of the present
in the past, while Le Play’s school is merely out to learn a few
lessons. The one studies the germ which is to develop and to bear fruit,
while the other admires the type and the model to which it thinks it
necessary to conform. The one is evolutionary, the other traditional,
and the conclusions of the former are radical in the extreme, and even
socialistic, while those of the latter are usually conservative.

And so Play’s true position is in the chapter dealing with Social
Christianity, and not among the writers of the Historical school.

His unshaken belief in the natural propensity of man to evil and error
is sufficient to give him his place. But we must beware of confusing
his doctrine with that of the Social Catholics, for, unlike them, he
is rather prone to invoke the authority of the Mosaic law, especially
the Decalogue, and to take his illustrations from England, which is a
Protestant country, or from China or Mohammedan lands. His importance
among authorities on social questions is not very great, but his attitude
towards Church and clergy was on the whole defiant,[1050] and the plan of
reform of which we have just given an outline is very different from that
of the Social Catholics.

There was a schism in the school in 1885. The “Unions of Social Peace,”
with their organ, _La Réforme sociale_, have on the whole remained
faithful to the programme as outlined in this chapter. The dissenting
branch, on the other hand, with M. Demolins and the Abbé de Tourville
as leaders, has developed the doctrine on its ultra-individualistic or
Spencerian side, so that only in origin can it be regarded as at all
connected with the school of Le Play.

The “School of Social Science,” as it is called—at least, that is the
name it has given to its review—claims that it is still faithful to the
method of the master. It even goes so far as to say that Le Play was
ignorant of the full possibilities of this method, and condemns his
failure to establish a positive science by means of it. In reality,
however, the master’s method has quite a subordinate _rôle_ in the
activities of this new school, for the simple reason that it is
practically useless except for the production of monographs. The new
school arranges its facts according to their natural relations, and
attempts to link the study of social science to the study of geographical
environment.[1051] The study of environment receives some attention in
the works of Le Play himself, but it has assumed much greater importance
since then. To give but a single instance, the new school attempts to
show how the configuration of the Norwegian fiord, the almost complete
absence of arable land, and the consequent recourse to fishing as a
means of livelihood, even the very dimensions of their sea-craft, have
helped to fix the type of family and even the political and economic
constitutions prevalent among the Anglo-Saxon race. In a similar
fashion, the vast steppes of central and southern Asia have begotten
a civilisation of their own. It is the Historical materialism of the
Marxian school reappearing in the more picturesque and more suggestive
guise of geographical determinism.[1052]

The new school, however, is not very favourably inclined to Le Play’s
programme of social reform, especially its teaching concerning the
family. Their aim is not the preservation of the family, but the placing
of each child in a position to found a family of his own as soon as
possible. Their object is neither family nor communal solidarity, but
self-help, not the family group, but the single individual family, not
the English, but the American home. Demolins is an ardent believer
in the struggle for existence, and no one has ever professed greater
contempt for the solidarist doctrine. “Social salvation, like eternal
life,” says he, “is essentially a personal affair”—a singularly heterodox
declaration, by the way, for if salvation is a purely personal matter of
what use is the Church?[1053]


II: SOCIAL CATHOLICISM

The term “Catholic Socialism,” which is occasionally employed as an
alternative to the above title, is objected to by the majority of
Catholics as being excessively restrictive. The generic term “Christian
Socialism” was first employed by a Frenchman, Francis Huet, in a book
entitled _Le Règne social du Christianisme_, published in 1853.[1054]

But at least two other authors, namely, Buchez in his _Essai d’un Traité
complet de Philosophie au point de vue du Catholicisme et du Progrès_
(1838-40), and the fugitive Abbé de Lamennais in _La Question du Travail_
(1848), can lay considerable claims to priority in the matter. Buchez
was the founder of the Co-operative Association of Producers (1832), and
Lamennais outlined a scheme of co-operative banks almost exactly like
those afterwards established in Germany by Raiffeisen.[1055]

Present-day Catholicism, however, shows no great desire to honour any of
them. The one ambition of these three republicans was to effect a union
between the Church and the Revolution.[1056] The most advanced of the
Social Catholics of to-day, on the other hand, would be well satisfied
could they establish some kind of understanding between the Church and
democracy. Such at least is the programme recently laid down by M. Marc
Sangnier, the founder of the Sillon.

About the same time we find Monseigneur von Ketteler, Bishop of Mayence,
preaching a doctrine which drew its inspiration, not from “the false
dogmas of ’89,” but from the institutional life of the Middle Ages, from
the guilds and the other corporative associations, which are minutely
described by him and his disciples, especially Canon Moufang and the
Abbé Hitze. Some such institutional activity was again to form the
corner-stone of Social Catholicism.[1057]

During the period of the Second Empire most of the Social Catholics seem
to have fallen asleep, but they were aroused from their slumbers by the
disaster of 1870. The Comte Albert de Mun proved the inspirer this time,
and his noble eloquence, which led to the formation of unions of Catholic
working men, was instrumental in giving the movement a vigorous start.
The same period witnessed the appearance of _L’Association catholique_,
a review which took as its programme the study of economic facts in a
Catholic spirit—an object that has always been kept steadily in view.

Organisation in the form of corporations was given first place in the
Social Catholic programme.[1058] Le Play’s corner-stone—the family
organisation—was not rejected, but they considered that though the family
was to remain the basis for moral reform a wider association of an
economic character must serve as a basis for economic reform.

At first sight this may seem somewhat surprising. The connection between
these professional associations and the teaching of the Gospel is not
very evident, nor is it very clear how such organisations could ever
hope to Christianise society. But although the Gospels know nothing of
a corporative or any other _régime_ we must not forget their prominence
during the Middle Ages—when the authority of the Church was in the
ascendant. As long as this _régime_ lasted what we understand as the
social question—the vexed problem as to whether we possess sufficient
moral strength to keep the peace between capital and labour—never
presented itself. The problem is, of course, somewhat different to-day,
but its solution may possibly require the exercise of similar virtues,
namely, obedience to a detailed system of organisation coupled with a
feeling of brotherhood—the chastening of the whole complexity of social
relations by the spirit of Christianity.

Some of their opponents have not hesitated to charge these Catholics
with a desire to return to the feudalism of the Middle Ages, which is of
course utterly false. What the Social Catholics wished to do was to build
up the new social structure upon the basis of the modern trade union,
or upon syndicalism; and the proof that the foundation is not at any
rate too narrow lies in the fact that the new schools of socialists can
conceive of none better. With this as the foundation they looked forward
not merely to the development of a new society, but also to the rise of a
new ethic. The fact that they forestalled the socialists in this respect
shows that the Social Catholics were at least not hopelessly antiquated.

Early in the history of the movement they tried to organise a kind of
mixed _syndicat_ consisting both of masters and men, because this seemed
to them to offer the best guarantee for social peace. But the results
proved disappointing, and they were soon forced to relinquish that idea
and to content themselves with a separate organisation of masters and
men co-operating only in matters relating to the regulation of work or
the settling of differences.[1059] Such collateral unions, it was at
first thought, would gradually become the organs of labour legislation,
and the State would entrust them with the discharge of that function
because of their greater freedom in the making of experiments. All
questions affecting the interests of a trade, the hours of labour, Sunday
observance, apprenticeship, the sanitary condition of the workshops, the
labour of women and children, and even the rate of wages paid, instead
of being regulated as they are at present by brutal, inflexible laws
which are seldom suited to meet every individual case, would henceforth
be settled by the union, and the rules of the union would be incumbent
upon all the members of the trade or profession, both masters and men.
Everyone would be free to enter the union or to decline membership just
as he chose, but no member would be allowed to violate the rules of the
union or to lower the conditions of labour in any way. “Free association
within an organised profession,” such is the formula.[1060]

To those Liberals who feign indignation at seeing purely private
institutions thus invested with legislative authority it may be answered
that the “labour union” so constituted forms an association which is as
natural and as necessary—understanding by this that it is independent
of the voluntary conventions of the parties interested—as one based
upon community of residence. Everybody admits that the inhabitants of
the commune ought to submit to the rule of the organised majority. What
difference would it make if the majority thus organised constituted a
corporation rather than a commune?[1061]

Some go so far as to regard these professional associations as possessed
of an important political _rôle_, and would even go the length of making
this new corporative unit the basis of a new franchise for the election
of at least one of the two Chambers.

It is not very easy, perhaps, to get a clear idea of what a society built
upon a plan of this kind would really be like, but the difficulty is no
greater in this case than in some others.

In the first place it would have to be a society professing the Catholic
faith.[1062] Should the enemies of religion or even the indifferent
by any chance ever gain the upper hand in the social unit the whole
structure would immediately fall to the ground. Its realisation,
accordingly, is quite hypothetical.

It would also be a society founded upon brotherhood in the full sense of
the term. The only real brotherhood is that founded upon the fatherhood
of God, and not upon any socialistic conception of equality. But even
brotherhood and a common parentage may not be sufficient to prevent
irregularities, and the family relation in addition to this almost
inevitably implies the rights of the youngest and the duties of the
oldest. Within the corporative unit already outlined true equality would
always reign, for the humblest, meanest task would be of equal dignity
with the most exalted office in the State, and everyone would be content
and even proud to live where God had placed him.[1063]

Such a society would be a pure hierarchy. All the authority and
responsibility, all the duties involved, would be on the master’s side.
On the worker’s side would be rights respected, life assured on the
minimum level, and a re-establishment of family life.[1064]

Social Catholicism further undertook to disprove the first article in
the socialist creed, namely, that “the emancipation of the workers can
only be accomplished by the workers themselves.” It maintained that,
on the contrary, this object could only be accomplished by the help of
the masters and of all the other classes in society, not excluding even
the non-professional classes, landed proprietors, rent-receivers, and
consumers generally,[1065] all of whom ought to be informed of the
responsibilities which their different positions impose upon them and of
the special duty which is incumbent upon all men of making the most of
the talents with which the Master has entrusted them.

The German Christliche Gewerkvereine, which gets most of its recruits
among the Catholics, is already taking an important part in German
political life and is doing something to counterbalance the “Reds,” or
the revolutionary socialists. They advocate the union of masters and men,
but are extremely anxious not to be confused with the “Yellows,” or those
who advocate mixed unions. In other words, they are independent both of
the masters and the socialists.

State intervention might be necessary at first in order to establish the
corporative _régime_, but once founded it would naturally monopolise
all the legislative and police power which affects labour in any way,
especially in the matter of fixing wages,[1066] arranging pensions,
etc. The legislature would still find ample material to exercise its
powers upon outside these merely professional interests, especially
in regulating the rights of property, prohibiting usury, protecting
agriculture, etc.[1067]

“The State,” says the _Immortale Dei_, an Encyclical of Pope Leo
XIII—repeating a text of St. Paul—“is the minister of God for good.”
Elsewhere St. Paul declares that the Law is the schoolmaster to bring us
unto Christ, and if we paraphrase this to mean that the function of law
is to lead men to a higher conception of brotherhood we have a fairly
exact idea of what Social Catholicism considered to be the function of
the State. Occasionally the party has betrayed signs of more advanced
tendencies which would bring it more into line with modern socialism. But
for the most part such indications have been of the nature of individual
utterances, which have generally resulted in the formal disapproval of
Rome and the submission of the rebel.

It was M. Loesewitz in 1888 who made the first violent attack upon
the so-called productivity theory of capital in _L’Association
catholique_.[1068] It caused quite a sensation at the time, and provoked
a disapproving reply from the Comte de Mun. Afterwards, however, the
article became the programme of a party known as “Les jeunes Abbés.”
Nor must we omit to mention the growth of the Sillon, founded in 1890,
the political ambition of whose members is the reconciliation of the
Church and democracy and even republicanism, and whose economic aim is
the abolition of the wage-earner and his master.[1069] This is also the
aim of the syndicalists, and Article 2 of the Confédération générale
du Travail (C.G.T.) declares that one of the avowed objects of the
federation is the disappearance of the wage-earner and the removal of
his master. Instead of seeking a solution of the problem in the parallel
action of _syndicats_ of men on the one hand and of masters on the other,
it would suppress the latter altogether, leaving the men the right of
possessing their own instruments of production and of keeping intact the
produce of their labour. It is true that the Sillon is under the ban of
the Pope, but this essentially syndicalist movement is still in existence.

If the Catholic school has experienced some difficulty in throwing out a
left wing it has never been without a right wing which has always shown
a predilection for the masters. “The problem is not how to save the
worker through his own efforts, but how to save him with the master’s
co-operation”—the benevolent master of Le Play’s school over again.[1070]
The right wing, moreover, thinks that the existing institutions would
prove quite equal to a solution of the so-called social question if
they were once thoroughly permeated with the Christian spirit or if the
leaders really knew how to deal with the people.


III: SOCIAL PROTESTANTISM

Belief in the essentially individualistic nature of Protestantism is
fairly widespread.[1071] For confirmation there is the emphasis it has
always laid upon the personal nature of salvation and its denial of
the necessity for any mediator between God and man, save only the Man
Christ Jesus, whereas Roman Catholicism teaches that only through the
Church—that great community of the faithful—is salvation ever possible.
Protestantism is the religion of self-help, and naturally enough its
social teaching is somewhat coloured by its theological preconceptions.
Nor must we lose sight of its connection with middle-class Liberalism;
and thus while in politics it is generally regarded as belonging to the
left, in matters economic it is generally on the extreme right.[1072]

Whatever truth there may be in this attempt to sum up its doctrine and
history, we shall find as a matter of actual fact that on economic
grounds it is much more advanced than the Social Catholic school; and
its extreme left, far from being content with the extinction of the
proletariat, also demands the abolition of private property and the
establishment of complete communal life.

Social Protestantism, or Christian Socialism as it is known in England,
has a birthday which may be determined with some degree of accuracy.
It was in the year 1850 that there was founded in England a society
for promoting working men’s associations, having for its organ a paper
entitled _The Christian Socialist_.[1073] Its best known representatives
were Kingsley and Maurice, who subsequently became respectively
professors of history and philosophy at Cambridge. A small number
of lawyers also joined the society, among whom Ludlow, Hughes, and
Vansittart Neale are the most familiar names. Kingsley was much in the
public eye just then, not only because of his impassioned eloquence,
but also on account of the success of his novel _Alton Locke_, which is
perhaps the earliest piece of socialistic fiction that we possess. It is
the story of a journeyman tailor and his sufferings under the sweating
system—the horrors of which were thus revealed to the public for the
first time.[1074]

The object which the Christian Socialists[1075] had in view, as we have
already seen, was the establishment of working men’s associations. What
type they should adopt as their model was not very easily determined.
The trade unions, little known as yet, were just then struggling through
the convulsions of their early infancy. Moreover, they were exclusively
concerned with professional matters, with the struggle for employment
and the question of wages, and altogether did not seem very well fitted
to develop the spirit of sacrifice and love which was indispensable for
the realisation of their ideal. Neither did the co-operative associations
of consumers seem very attractive. True they had attained to some degree
of success at Rochdale, but they were inspired by the teaching of Owen,
which was definitely anti-Christian. The fact also that they merely
proposed to make life somewhat less costly and a little more comfortable
implied a certain measure of stoicism which hardly fitted them to be the
chosen vessels of the new dispensation. And so the Christian Socialists
naturally turned their attention to producers’ associations, just as
the earliest Social Catholics had done before them. But it would be a
mistake to imagine that they owed anything to Buchez, whom they appear to
have ignored altogether. The reawakened interest in the possibilities of
association which exercised such a fascination over John Stuart Mill in
1848 had touched their imagination, and Ludlow, one of their number, had
the good fortune to be resident in Paris, and so witnessed this glorious
revival. Such associations seemed to be just the economic instruments
needed if a transformation was ever to be effected, and the very process
of establishing them, it was hoped, would supply a useful means of
discipline in the subordination of individual to collective interests.
But the process of disillusion proved as rapid as it was complete.
Contrary to what was the case in France, it cannot be said that they were
ever really attempted in England.

But the work of the “Association” had not been altogether in vain.
Defeated in its attempts to arouse the worker from his lethargy, and
thwarted in its efforts by legal restrictions of various kinds, it began
a campaign in favour of a more liberal legislation in matters affecting
the welfare of the working classes. The result was the passing of the
Industrial and Provident Societies Acts of 1852-62, which conferred legal
personality for the first time upon co-operative associations, with
consequent benefit to themselves and to other working men’s associations.

The Christian Socialists thought that the methods by which their ideals
might be attained were of quite secondary importance. Experience had
taught them that voluntary association or legislation even by itself
could never be of much avail until the whole mental calibre of the worker
was changed.[1076] What they strove for above all else was moral reform,
and whenever they use the word “co-operation” they conceive of it not
merely as a particular system of industry, but rather as the antithesis
of the competitive _régime_ or as the negation of the struggle for
existence. Their thoughts are admirably summed up in a letter of Ludlow’s
to Maurice written from Paris in March 1848, in which he speaks of the
necessity for “Christianising socialism.”

Christian Socialism in England, though it has survived its founders, has
been obliged to change its programme. It has abandoned the idea of a
producers’ association, but still advocates other forms of co-operation.
Just now its chief demand is for a reorganisation of private property,
which is a particularly serious question in England, where the land
is in the hands of a comparatively few people. In the words of the
Psalmist, the Christian Socialists often cry out, “The earth is the
Lord’s,” and they are never weary of pointing out how under the Mosaic
law the land was redistributed every forty-nine years with a view
to bringing it back to its original owners. And so it finds itself
supporting the doctrines of Henry George, who may himself be classed as
one of the Christian Socialists.[1077] There is also the Institutional
Church, with its network of organisations for the satisfaction of the
material, intellectual, and moral needs of the worker, which is becoming
a prominent feature of modern English Church life. Moreover, several of
the Labour leaders—Keir Hardie, for example—are earnest Christians. The
Federation of Brotherhoods, which to-day includes over 2000 societies,
with a membership of over a million working men, combines an ardent
evangelical faith with a strong advocacy of socialism.[1078]

In the United States of America Christian Socialism is still more
aggressive and outspoken in its attacks upon capitalism. The earliest
society of Christian Socialists was founded at Boston in 1889. Since then
these associations have multiplied rapidly. The latest of them defines
its objects in the following terms: “To help the message of Jesus to
permeate the Christian Churches and to show that socialism is necessarily
the economic expression of the Christian life.” A little farther on it
declares itself persuaded “that the ideal of socialism is identical
with that of the Church, and that the gospel of the co-operative
commonwealth is the Gospel of the Kingdom of God translated into economic
terms.”[1079]

For the other extreme—the extreme right—we must look to Germany. In
1878 Pastors Stöcker and Todt founded the Christian Social Working
Men’s Party, which, despite its title, drew most of its recruits from
the middle classes. Later on Stöcker became Court preacher, and during
his occupation of that post this kind of socialism found such favour
in official quarters that he was able to say that it was his personal
conviction that a social revolution was within the bounds of practical
politics.[1080] But in 1890 the Emperor William II dismissed his pastor,
and Christian Socialism immediately lost its official status.[1081]

At the Congress of Erfurt in 1896 two young pastors of Frankfort
named Naumann and Goehre[1082] tried to win the adherence of the
working classes by endeavouring to give the Protestant churches a more
distinctively socialist bias. But the suggestion was condemned by the
official Lutheran Church, the masters opposed it, and it received but
very slight support from the Social Democrats. Altogether the movement
proved abortive, and the pastors have long since turned aside to other
interests.

In Switzerland also the movement is making considerable headway, and in
Professor Ragaz and Pastors Kutter[1083] and Pflüger, the latter of whom
has recently been made a deputy, it has found advocates whose views are
at any rate sufficiently advanced.

In France there is at least one—there may possibly be more—Social
Protestant school. But as it only includes a small fraction of
Protestantism, which is itself in a hopeless minority, its influence is
not very great. There are several important social movements, however,
such as the crusades against alcoholism and pornography, the revival of
co-operation and the demand for the erection of “People’s Palaces”—known
as _Solidarités_—which are entirely due to the activities of this
school. An association for the inductive study of social questions
was founded in 1887 by Pastor Gouth, another pastor named Tomy Fallot
being its president and inspirer.[1084] At first the demands of this
group were extremely moderate, co-operation being their only mode of
action and solidarity their social doctrine.[1085] This new doctrine of
solidarity, although rather belonging to the Radical wing, being the very
antithesis of Christian charity, as we shall see by and by, has been
enthusiastically welcomed by the Social Protestants. The Protestants even
claim that it was originally their own peculiar doctrine, and that other
schools merely borrowed it; for where can be found a fuller expression of
the law of solidarity than the two Christian doctrines of the fall and
redemption of man? “For as in Adam all die, even so in Christ shall all
be made alive.”

Curiously enough there is another group of young pastors who closely
resemble what is known in Catholic circles as the Abbots’ Party. They are
dissatisfied with the moderate claims of the Catholics as a whole, and
like their American colleagues they demand the establishment of a form
of collectivism.[1086] They think, at any rate, that the question of
property ought to come up for consideration almost immediately.

In short, it seems true to say that in almost every country Social
Christianity is gradually evolving into Christian Socialism, and the
change of title is an index to the difference of attitude. In other
words, Social Protestantism accepts the essential principles of
international socialism, such as the socialisation of the means of
production, class war, and internationalism, and endeavours to show that
they are in complete accordance with the teaching of the Gospels.

But the stress which it lays upon the necessity for moral reform saves
Social Protestantism from being hopelessly confused with collectivism,
and the fact that it believes that individual salvation is impossible
without social transformation helps to distinguish it from individual
Protestantism.[1087] Conversion implies a change of environment. What
is the use of preaching chastity when people have to sleep together in
the same room without distinction of age or of sex? “Society,” says
Fallot, “ought to be organised in such a fashion that salvation is at
least possible for everyone.” “The _régime_ of the great industry,”
says M. Gounelle, “is the greatest obstacle to the salvation of sinners
that the religion of Christ has yet met.” Protestant Socialism remains
individualistic in the sense that while seeking to suppress individualism
in the form of egoism as a centripetal force, it wishes to uphold it
and to strengthen it as a principle of disinterested activity—as a
centrifugal force. It takes for its motto those words of Vinet which may
be found carved on the pedestal of his statue at Lausanne: “I want man to
be his own master in order that he may give better service to everybody
else.”[1088]


IV: THE MYSTICS

No review of Christian Social doctrines, however summary, can afford to
omit the names of certain eminent writers who, though belonging to none
of the above-mentioned schools, and having no definite standing either
as socialists or economists, being for the most part _littérateurs_,
historians, and novelists, have nevertheless lent the powerful support of
their eloquence to the upholding of somewhat similar doctrines.[1089]

Tolstoy and Ruskin are the best known representatives of this movement on
the borderland of Social Christianity, although they are by no means the
only ones.[1090] These two grand old men, who both died at an advanced
age, appeared to their contemporaries in much the same light as the
prophets of old did to Israel. True descendants of Isaiah and Jeremiah,
they exultantly prophesied the downfall of capitalism—the modern Tyre
and Sidon—and announced the coming of the New Jerusalem—the habitation
of justice. Their language even is modelled on Holy Writ, and Ruskin, we
know, was from his youth upwards a diligent reader of the Bible.[1091]
Both of them condemn the Hedonistic principle and denounce money as an
instrument of tyranny which has resulted in setting up something like a
new system of slavery,[1092] and they both advocate a return to manual
labour as the only power that can free the individual and regenerate
social life. They differ, however, in their conception of future society,
which to Ruskin must be aristocratic, chivalrous, and heroic, while
Tolstoy lays stress upon its being equalitarian, communal, and above all
ethical. The one looks at society from the standpoint of an æsthete,
the other from that of a _muzhik_: the one would breed heroes, the other
saints.

Thomas Carlyle also deserves mention. Among the numerous books which
he wrote we may mention, among others, his _French Revolution_ (1837)
and his _Heroes and Hero-worship_. Chronologically he precedes both
Tolstoy and Ruskin, and his influence upon economic thought was greater
than either of theirs. But we could hardly put him among the Christian
Socialists because of his extreme individualism, and if he were to
be given a place at all it would be with such writers as Ibsen and
Nietzsche. His economic ideas, however, run parallel to Ruskin’s; and
nowhere except perhaps in the choruses of the old Greek tragedies do
we get anything approaching the passion which is displayed in their
declamations against the present economic order.[1093]

Carlyle is possibly the strongest adversary that the old Classical school
ever encountered. It was he who spoke of political economy as “the
dismal science.” That abstract creation of the Classicists, the economic
man, afforded him endless amusement, and he very aptly described their
ideal State as “anarchy plus the policeman.” He is no less fierce in his
denunciation of _laissez-faire_ as a social philosophy.[1094] But he left
us no plan of social reconstruction, being himself content to wait upon
individual reform—a trait which brings him into intimate connection with
the Christian Socialists.[1095]

Ruskin, on the other hand, has given us a programme of social
regeneration which might be summarised as follows:[1096]

1. Manual labour should be compulsory for everybody. His readers were
reminded of those words of St. Paul, “If any would not work, neither
should he eat.” He thought it both absurd and immoral that a man should
live in idleness merely by using money inherited from his ancestors
to pay for the services of his fellow-men. Life is the only real form
of payment; in other words, labour ought to be given in return for
labour. To _live_ upon the fruits of _dead_ labour is surely absurd
and contradictory. And it must be real human labour. Machinery of all
kinds must be renounced except that which may be driven by wind or
water—natural forces which, unlike coal, do not defile, but rather purify.

Ruskin wanted labour to be artistic, and he longed to see the artisan
again become an artist as he was in the Middle Ages (which is a somewhat
hasty generalisation perhaps). In practice this is not very easy. Some
of his immediate disciples have set up as artistic bookbinders, but
the number of people who can find employment at such trades must be
exceedingly few.

Tolstoy, on the other hand, does not strive for artistic effect. His
heart is set upon rural work, which he magnificently describes as “bread
work,” and which seemed to him sufficiently noble without embellishment
of any kind.

2. Work for everyone is the natural complement and the necessary
corrective of the preceding rule of no idleness and no unemployment. In
society as at present organised everybody is not obliged to work, while
some individuals are obliged to be idle.[1097] This monstrous inequality
must be remedied. There would be no difficulty about finding plenty of
work for everyone if everyone did something. Under such a system there
would be no unemployment, although there would be more leisure for some.

3. Labour would no longer be paid for according to the exigencies of
demand and supply, which tend to reduce manual work to the level of
a mere commodity. It would be remunerated according to the eternal
principles of justice, which would not of necessity imply an appeal to
any written law, but solely to custom, which even now fixes the salaries
of doctors, lawyers, and professors. In these professions there are no
doubt some individual inequalities, but there is also the norm, and it is
a breach of professional etiquette to take less than this. The norm does
occasionally find expression in the rules of the association, and in some
such way Ruskin would fix not merely a minimum but also a maximum wage.
Whatever profession a person follows, whether he be workman, soldier, or
merchant, he should always work not merely for profit but for the social
good. He must, of course, be suitably rewarded if his position as a
worker is to be maintained and the work itself efficiently performed, but
it can never be done if gain becomes the end and labour merely the means.

4. The natural sources of wealth—land, mines, and waterfalls—and the
means of communication should be nationalised.

5. A social hierarchy graded according to the character of the services
rendered should be established. The gradation must be accepted in no
intolerant spirit, and must be respected by everybody. Chivalry is as
necessary in an industrial as in a military society, and a new crusade
against Mammonism[1098] should be preached both far and wide.

6. Above all else must come education—not mere instruction. What needs
developing above everything is a sense of greatness, a love of beauty,
respect for authority, and a passion for self-sacrifice. What especially
need acquiring are the faculties of admiration, of hope, and of
love.[1099]

Only the last item on the programme seems anywhere near realisation, but
that by itself would justify our reference to Ruskin’s scheme. Not only
has the suggestion resulted in the creation of working men’s colleges at
Oxford and of Ruskin Colleges elsewhere, but it has also given rise to
the garden city movement. These new cities are built with the express
purpose of relieving the worst features of industrial life, and are so
planned as not to interfere in any way either with the beauties of nature
or with the health of the citizens.[1100]

Ruskin speaks of himself somewhere as an out-and-out communist, but his
communism had also a touch of the aristocrat and the æsthete about it
which possibly proved a recommendation in English society. Tolstoy is a
much more thoroughgoing communist, and is violently opposed to “that low,
bestial instinct which men call the right of private property.”[1101] His
cry was “Back to the land,” and the practice of coaration; his ideal the
mir. He was not anxious to know that everyone was working at some trade
or other, but he thought everyone ought to produce his own food, which
is the one inevitable law of human existence. Division of labour, which
has been so extravagantly praised by economists, he thought of as a mere
machination of the devil enabling men to evade the Divine commandment. At
any rate it should only be adopted when the need for it arises, and after
consultation with all the parties interested, and not indiscriminately,
as is at present the case, with competition, over-production, and crises
as the result.[1102]

If we are to take Tolstoy’s words literally, as he suggested we should
take Christ’s words, then the society that he dreamt of is very far
beyond even the communist ideal. More towns, more commerce, more
subdivision of trades, more money, more art for art’s sake—such was to be
the economic Nirvana of the communists.




BOOK V: RECENT DOCTRINES


In the earlier sections of this work no special difficulty was
experienced in giving the essential traits of the economic thought of
each period. But on the threshold of this last book we naturally feel
some trepidation. The newer theories can scarcely be said to have fallen
into their true perspective, and their full import is not clear to
us contemporaries. Here, if anywhere, we shall run the risk of being
arbitrary in our choice. It seems to us, however, that the economic
thought of the end of the nineteenth and the beginning of the twentieth
centuries reveals at least four dominant tendencies.

1. In the first place there is a quite unexpected revival of theoretical
studies. Pure economic theory, which had been deliberately neglected by
the Historical school, by the State and Christian Socialists, was in 1875
again taken up by a group of eminent writers who flourished in England,
France, and Austria. With the aid of conceptions that had not been in
current use since the days of Condillac, coupled with the application
of the mathematical method, which had not been attempted since the
time of Cournot, they have succeeded in substituting an attractive and
ingenious theory of prices for the somewhat halting hypothesis put forth
by the Classical theorists. The success of the method in other fields
of economic inquiry is every day enhancing its reputation. A number
of writers both in America and Europe (excepting France, perhaps) are
engaged upon this task, following in the wake of Walras, of Jevons,
and of Menger. Diagrams, algebraical formulæ, and subtle reasoning
again characterise the works of economists. Pure economics, so much
decried since the days of Ricardo, has once more justified its claim
to a position of honour, and despite keen opposition it is attracting
attention everywhere. From the point of view of economic science this is
the most notable fact of recent years.

2. Parallel with this has gone on a profound change in socialism. We have
already shown in the course of the preceding book the transformations
undergone by Marx’s ideas at the hands of even his own followers. The
decline is equally evident everywhere else. All pretension to set up a
proletarian in opposition to a _bourgeois_ economics has been renounced.
“It is necessary,” says M. Sorel somewhere, “to abandon every thought of
transforming socialism into a science.” In fact, French syndicalists,
English Fabians, and German revisionists have rallied with more or less
good grace to the scientific ideas of Pareto, Marshall, or Böhm-Bawerk.
But the real reason for this change of attitude is the strong desire to
devote themselves with greater vigour to the social and political demands
of socialism. The general strike, the creation of _syndicats_, the
establishment of co-operative societies, and the problems of municipal
socialism are attracting more and more attention, whereas the theory of
surplus value is falling into the background. Even more striking still,
as we shall see, is the attempt made by some of them, especially the
advocates of land nationalisation—to reconcile Liberalism and socialism
upon the basis of a doctrine that is Classical _par excellence_—the
theory of rent.

3. This is not the only change that socialism has undergone. The ideal
of collectivism which long prevailed among the working classes was that
of a centralised sovereign authority, and the active part taken by the
collectivist party in the legislative and even in the administrative
work of some countries still further encouraged this belief. But the
old revolutionary spirit, always individualistic to the core, was still
alive, especially in the Latin countries, and it began to show signs
of impatience at the turn things had taken. And so we witness among
the working classes a revival of Liberalism, harsh and violent in its
expression perhaps, and doubtless very different from the founders’.
Smith and Bastiat would have some difficulty in recognising it, and with
a view to avoiding confusion with the older doctrine it has assumed
the name _libertaire_, but is generally known by the no less authentic
title of “anarchism.” This tendency towards extreme individualism and
anarchy, of which there is unmistakable evidence even in the annals of
the International, has gained the ascendancy over the working classes,
leaving a deep mark upon the recent syndicalist movement in France and
Italy. At the same time there has also appeared among writers of the
_bourgeois_ class a kind of philosophical and moral anarchism which
affords further proof of the revival of individualism.

4. Owing to these transformations in the theories of individualism and
socialism, that other doctrine which in an earlier book went by the
name of State Socialism has also undergone a change. In France, at any
rate, it has reappeared under the name of Solidarism, which attempts a
justification of State intervention by basing it on new foundations and
confining it within just limits. It thus really represents an effort at
synthesising individualism and socialism.

These are the main currents which we have attempted to describe in the
following chapters. By describing them as recent doctrines our aim was
not to emphasise the date of their appearance—which indeed is often in
the distant past—but to show that they are merely a fresh effort to
rejuvenate the older theories of which they are the latest manifestation.
We might perhaps have borrowed a term from another domain and referred
to them as modernist doctrines did it not seem rash to group under a
perfectly definite term conceptions that are so very diverse in character
and which have nothing more than a chronological order binding them
together.




CHAPTER I: THE HEDONISTS


I: THE PSEUDO-RENAISSANCE OF THE CLASSICAL SCHOOL

If we are to give this new doctrine its true setting we must return
for a moment to our study of the Historical school. The criticism of
that school, as we have already seen, was directed chiefly against the
method of the Classical writers. The faith which their predecessors had
placed in the permanence and universality of natural law was scornfully
rejected, and the possibility of ever founding a science upon a chain of
general propositions emphatically denied. Political economy, so it was
decreed, was henceforth to be concerned merely with the classification of
observed facts.

It would not have been difficult to foretell that the swing of the
pendulum—in accordance with that strange rhythm which is such a feature
of the history of thought—would at the opportune moment cause a reversion
to the abstract method. That is exactly what happened. Just at the moment
when Historical study seemed to be triumphantly forging ahead—that
is, about the years 1872-74—several eminent economists in Austria,
England, Switzerland, and America suddenly and simultaneously made
their appearance with an emphatic demand that political economy should
be regarded as an independent science. They brought forward the claims
of what they called pure economics. Naturally enough there ensued the
keenest controversy between the champions of the two schools, notably
between Professors Schmoller and Karl Menger.

The new school had one distinctive characteristic. In its search for
a basis upon which to build the new theory it hit upon the general
principle that man always seeks pleasure and avoids pain, getting as much
of the former with as slight a dilution of the latter as he possibly
can.[1103] A fact of such great importance and one that was not confined
to the field of economic activities, but seemed present everywhere
throughout nature in the guise of the principle of least resistance,
could scarcely have escaped the notice of the Classical theorists. They
had referred to it simply as “personal interest,” but to-day we speak
of it as Hedonism, from the Greek ἠδονή (pleasure or agreeableness).
Hence the name Hedonists, by which we have chosen to designate these two
schools.

The elimination of all motives affecting human action except one does not
imply any desire on the part of these writers to deny the existence of
others. They simply lay claim to the right of abstraction, without which
no exact science could ever be constituted. In other words, they demand
the right of eliminating from the field of research every element other
than the one which they wish to examine. The study of the other motives
belongs to the province of other social sciences. The _homo œconomicus_
of the Classicals which has been the object of so much derision has
been replaced on its pedestal. But it has in the meantime undergone
such a process of simplification that it is scarcely better than a mere
abstraction. Men are again to be treated as forces and represented by
curves or figures as in treatises on mechanics. The object of the study
is to determine the interaction of men among themselves, and their
reaction upon the external world.

We shall also find that the new schools arrive at an almost identical
conclusion with the old, namely, that absolutely free competition
alone gives the maximum of satisfaction to everybody. Allowing for the
differences in their respective points of view, to which we shall refer
later on, what is this but simply a revival of the great Classical
tradition?

Little wonder, then, that we find a good deal of sympathy shown for the
old Classical school. Indeed, it is throughout regarded with almost
filial piety.[1104]

This does not mean that the Classical doctrine is treated as being wholly
beyond reproach, although it does mean that the new school could scarcely
accuse it of being in error, seeing that it comes to similar conclusions
itself. But what it does lay to the charge of the older writers is a
failure to prove what they assumed to be true and a tendency to be
satisfied with a process of reasoning which too often meant wandering
round in a hopeless circle. Especially was this the case with their study
of causal relations, forgetting that as often as not cause was effect and
effect cause. The attempt to determine which is cause and which effect is
clearly futile, and the science must rest content with the discovery of
uniformities either of sequence or of coexistence.

This applies especially to the three great laws which form the framework
of economic science, namely, the law of demand and supply, the law
of cost of production, and the law of distribution, none of which is
independent of the others. Let us review them briefly.

The law stating that “price varies directly with demand and inversely
with supply” possessed just that degree of mathematical precision
necessary to attract the attention of the new writers. In fact, it
just served for the passage from the old to the new economics. But no
sooner was the crossing effected than the bridge was destroyed. Little
difficulty was experienced in pointing out that this so-called law which
had been considered to be one of the axioms of political economy, the
_quid inconcussum_ upon which had been raised all the superstructure of
economic theory, was an excellent example of that circular reasoning
of which we have just spoken. There was a considerable flutter among
the economists of the mid-nineteenth century when they found themselves
forced to recognise this. However true it may be that price is determined
by demand and supply, it is equally true that demand and supply are each
in their turn determined by the price, so that it is impossible to tell
which is cause or which is effect. Stuart Mill had already noted this
contradiction, and had attempted correction in the way already described
(p. 359). But he was ignorant of the fact that Cournot had completely
demolished the formula by setting up another in its place, namely, that
“demand is a function of price.”[1105] The substitution of that formula
marks the inauguration of the Hedonistic calculus. Demand is now shown
to be connected with price by a kind of see-saw movement, falling when
prices rise and rising when prices fall. Supply is equally a function
of price, but it operates in the opposite fashion, moving _pari passu_
with it—rising as it rises and falling as it falls. Thus price, demand,
and supply are like three sections of one mechanism, none of which can
move in isolation, and the problem is to determine the law of their
interdependence.

This does not by any means imply that there is no longer any place in
economics for the law of demand and supply. It has merely been given a
new significance, and the usual way of expressing it nowadays is by means
of a supply and demand curve, which simply involves translating Cournot’s
dictum into figures.

The same is true of the law stating that cost of production determines
value. There is the same _petitio principii_ here. It is easy enough
to see, on the contrary, that the _entrepreneur_ regulates his cost of
production according to price. The Classical school had realised this
as far as one of the elements in the cost of production was concerned,
for it was quite emphatic in its teaching that price determined rent,
but that rent did not determine price. It is just as true of the
other elements. In other words, the second law is just as fallible as
the first. It is obviously imperative that the vain quest for causal
relations should be abandoned and that economists should be content with
the statement that between cost of production and price there exists a
kind of equilibrating action in virtue not of any mysterious solidarity
which subsists between them, but because the mere absence of equilibrium
due either to a diminution or an increase in the quantity of products
immediately sets up forces which tend to bring it back to a position of
equilibrium. This interdependent relation, which is extremely important
in itself and upon which the Hedonists lay great store, is simply one
example taken from among many where the value of one thing is just a
function of another.

Similar criticism applies to the law of distribution, to the Classical
doctrine of wages, interest, and rent. The way the Classical writers
treated of these questions was extraordinarily naïve. Take the question
of rent. You just subtract from the total value of the product wages,
interest, and profit, and you are left with rent. Or take the question
of profit. In this case you will have to subtract rent, if there is any,
then wages and interest, the other component elements, and what remains
is profit. Böhm-Bawerk wittily remarks that the saying that wages are
determined by the product of labour apparently only amounts to this—that
what remains (if any) after the other co-operators have had their share
is wages. Each co-partner in turn becomes a residual claimant and the
amount of the residuum is determined by assuming that we already know the
share of the other claimants![1106]

The new school refuses any longer to pay honour to this ancient trinity.
It is impossible to treat each factor separately because of the intimate
connection between them, and their productive work, as the Hedonists
point out, must necessarily be complementary. In any case, before we can
determine the relative shares of each we must be certain that our unknown
_x_ is not reckoned among the known. This naturally leads them on to the
realm of mathematical formulæ and equations.

All the Hedonists, however, do not employ mathematics. The Psychological
school, especially the Austrian section of it, seems to think that little
can be gained by the employment of mathematical formulæ. Some of the
Mathematical economists, on the other hand, are equally convinced of
the futility of psychology, especially of the famous principle of final
utility, which is the corner-stone of the Austrian theory.[1107]

For the sake of clearness it may be better to take the two branches—the
Psychological and the Mathematical—separately.


II: THE PSYCHOLOGICAL SCHOOL

The feature of the Psychological school is its fidelity to the doctrine
of final utility, whatever that may mean.[1108] The older economists had
got hold of a similar notion when they spoke of value in use, but instead
of preserving the idea they dismissed it with a name, and it was left to
the Psychological school to revive it in its present glorified form.

It must not be imagined that the term is employed in the usual popular
sense of something beneficial. All that it connotes is ability to satisfy
some human want, be that want reasonable, ridiculous, or reprobatory.
Bread, diamonds, and opium are all equally useful in this sense.[1109]

Nor must we fall into the opposite error of thinking of it as the utility
of things in general. Rather is it the utility of a particular unit
of some specific commodity relative to the demand of some individual
for that commodity, whether the individual in question be producer or
consumer. It is not a question of bread in general, but of the number
of loaves. To speak of the utility of bread in general is absurd, and,
moreover, there is no means of measuring it. What is interesting to me is
the amount of bread which I want. This simple change in the general point
of view has effectively got rid of all the ambiguities under which the
Classical school laboured.[1110]

1. The first problem that suggests itself in this connection is this: Why
is the idea of value inseparable from that of scarcity? Simply because
the utility of each unit depends upon the intensity of the immediate need
that requires satisfaction, and this intensity itself depends upon the
quantity already possessed, for it is a law of physiology as well as of
psychology that every need is limited by nature and grows less as the
amount possessed increases, until a point zero is reached. This point is
called the point of satiety, and beyond it the degree of utility becomes
negative and desire is transformed into repulsion.[1111] Hence the first
condition of utility is limitation of supply.

So long as people held to the idea of utility in general it was
impossible to discover any necessary connection between utility
and scarcity. It was easy enough to see that an explanation that
was not based upon one or other of these two ideas was bound to be
unsatisfactory, but nobody knew why. As soon as the connection between
the two was realised, however, it became evident that utility must be
regarded as a function of the quantity possessed, and that this degree of
utility constitutes what we call value.

2. Just as the notion of final utility solved one of the most difficult
problems in economics, namely, why water, for example, has less value
than diamonds, it also helped to clear up another mystery that had
perplexed many economists from the Physiocrats downward, namely, how
exchange, which by definition implies the equivalence of the objects
exchanged, can result in a gain for both parties. Here at last is the
enigma solved. In an act of exchange attention must be focused not upon
the total but upon the final utility. The equality in the case of both
parties lies in the balance between the last portion that is acquired and
the last portion that is given up.

Imagine two Congoese merchants, the one, A, having a heap of salt, and
the other, B, a heap of rice, which they are anxious to exchange. As
yet the rate of exchange is undetermined, but let them begin. A takes a
handful of salt and passes it on to B, who does the same with the rice,
and so the process goes on. A casts his eye upon the two heaps as they
begin mounting up, and as the heap of rice keeps growing the utility of
each new handful that is added keeps diminishing, because he will soon
have enough to supply all his wants. It is otherwise with the salt, each
successive handful assuming an increasing utility. Now, seeing that the
utility of the one keeps increasing, while that of the other decreases,
there must come a time when they will both be equal. At that point A will
stop. The rate of exchange will be determined, and the prices fixed by
the relative measures of the two heaps. At that moment the heap of rice
acquired will not have for A a much greater utility than has the heap of
salt with which he has parted.

But A is not the only individual concerned, and it is not at all probable
that B will feel inclined to stop at the same moment as A; and if he had
made up his mind to stop before A had been satisfied with the quantity
of rice given him no exchange would have been possible. We must suppose,
then, that each party to the exchange must be ready to go to some point
beyond the limit which the other has fixed _in petto_. This point can
only be arrived at by bargaining.[1112]

3. Another question that requires answering is this: How is it that there
is only one price for goods of the same quality in the same market? Once
it is clearly grasped that the utility spoken of is the utility of each
separate unit for each separate individual it will be realised that there
must be as many different utilities as there are units, for each of them
satisfies a different need. But if this is the case, why does a person
who is famishing not pay a much higher price for a loaf than a wealthy
person who has very little need for it? or, why do I not pay more when I
am hungry than when I am not? The reason is that it would be absurd to
imagine that goods which are nearly identical and even interchangeable
should have different exchange values on the same market and especially
for the same person. This law of indifference,[1113] as it is called,
is derived from another law to which the Psychological school rightly
attaches great importance, and which constitutes one of its most precious
contributions to the study of economics, namely, the law of substitution.
This law implies that whenever one commodity can be exchanged for another
for the purpose of satisfying the same need, the commodity replaced
cannot be much more valuable than the commodity replacing it.[1114]

For what is substitution but mutual exchange? And exchange implies
equality, so that if there is a series of interchangeable goods none of
them can be of greater value than any of the rest.

Consequently, if an individual has at his disposal 100 glasses of water,
which is easily available everywhere except in the Sahara, perhaps, no
one of these glasses, not even that one for which he would be willing to
give its weight in gold were he very thirsty and that the only glassful
available, will have a greater value than has the hundredth, which
is worth exactly nothing. The hundredth is always there ready to be
substituted for any of the others.

But the best way of getting a clear idea of final utility is not to
consider the value of the object A, but of the object B, which can
replace it. It becomes evident, then, that if I am about to lose some
object, A, which I value a good deal but which can be perfectly replaced
by another object, B, that object A cannot be much more valuable than
B; and if I had the further choice of replacing it by C, C being less
valuable than B, then A itself cannot be much more valuable than C.[1115]

We arrive, then, at this conclusion: The value of wealth of every kind is
determined by the value of its least useful portion—that is, by the least
satisfaction which any one portion of it can give.

       *       *       *       *       *

Hitherto we have been concerned with the notion of final utility as
applied to the problems of value and exchange, but has it the same effect
when applied to problems of production, distribution, or consumption?
The Hedonists have no doubt as to the answer, for what are production,
distribution, and consumption but modifications of exchange?

Take production, for example. How is it that under a system of free
competition the value of the product is regulated by its cost of
production? It is because a competitive _régime_ is by every definition a
_régime_ where at any moment one product may be exchanged for another of
a similar character, the similarity in this case being simply the result
of a certain transformation of the raw material. The law of substitution
is operative here, and the reason why cost of production regulates
value is that the cost of production at any moment represents the last
interchangeable value.

The same is true of consumption, as we can see if we only watch the
way in which each of us distributes his purchases and arranges his
expenditure. There is evident everywhere an attempt to get the best
out of life—to get all the enjoyment which our different incomes may be
made to yield; here spending more on house-room and less on food, there
curtailing on amusement and extending on charity, until a rough kind of
equilibrium is reached where the final utility of the last exchanged
objects—or, if another phrase be preferred, the intensities of the last
satisfied needs—are equal. If the coin spent in purchasing the last cigar
does not yield the same pleasure as the same coin yields when spent on a
newspaper, the newspaper will in future probably take the place of the
cigar. Consumption seems really to be a kind of exchange, with conscience
for mart and desires as buyers and sellers.[1116]

Nor is the realm of distribution even beyond the reach of the utility
theory. Its application to the problems of interest, wages, and rent is
largely the work of American economists, especially of J.B. Clark. It
is quite impossible for us to give an exposition of the subtle analyses
in which the quarterly reviews of the American universities take such
a delight, and which undoubtedly afford a very welcome relaxation in
an atmosphere so charged with pragmatism and realism. But we must
just glance at the theory of wages. Wages, like other values, must be
determined by final utility. But the final utility of what, and for
whom? The final utility of the services which the worker renders to
the _entrepreneur_. Following other factors of production, the final
productivity of the workers will determine their wages. That is, their
final utility is fixed by the value produced by the marginal worker—no
matter how worthless he may be—who only just pays the _entrepreneur_. The
value produced by this almost supernumerary worker not only fixes the
maximum which the employer can afford to give him, but also the wages
given to all the other workers who can take his place, _i.e._ who are
employed upon the same kind of work as his, although they may produce
much more than he does; just as in the case of the 100 glasses of water
the least valuable glassful determines the value of all the rest.[1117]

Thus is the productivity theory of wages at once confirmed and corrected.
But this time it is the productivity of the least productive worker, of
the individual who barely keeps himself. No wonder the theory has lost
its optimistic note. Somehow or other it does not seem very different
from the old “brazen law.”

The rate of interest follows a similar line—the marginal item of
capital fixing the rate. It is even more true of capital, which is
more completely standardised, with the result that the principle of
substitution works much more easily.[1118]

Rent is treated at greater length in the next chapter.

Gradually we begin to realise how the observation of certain facts
apparently of a worthless or insignificant character, such as the
substitution of chicory for coffee or the complete uselessness of a
single glove, enabled the Psychological school to propound a number of
general theories such as the law of substitution and the doctrine of
complementary goods which shed new light upon a great number of economic
questions. There is something very impressive about this deductive
process that irresistibly reminds one of the genie of the _Thousand
and One Nights_, who grew gradually bigger and bigger until he finally
reached the heavens. But then the genie was nothing but flame. It still
remains to be seen whether this is equally true of the Hedonistic
theories.


III: THE MATHEMATICAL SCHOOL[1119]

The Mathematical school is distinguished for its attachment to the study
of exchange, from which it proposes to deduce the whole of political
economy. Its method is based upon the fact that every exchange may be
represented as an equation, A = B, which expresses the relation between
the quantities exchanged. Thus the first step plunges us into mathematics.

However true this may be, the application of the method must necessarily
be very limited if it is always to be confined to exchange. It is,
however, a mistake to suppose that this is really the case, and one of
the most ingenious and fruitful contributions made by the new school was
to show how this circle could be gradually enlarged so as to include the
whole of economic science.

Distribution, production, and even consumption are included within
its ambit. Let us take distribution first and inquire what wages and
rent are. In a word, what are revenues? A revenue is the price of
certain services rendered by labour, capital, and land, the agents of
production, and paid for by the _entrepreneur_ as the result of an act of
exchange.

And what is production? It is but the exchanging of one utility for
another—a certain quantity of raw materials and of labour for a certain
quantity of consumable goods. Even nature might be compared to a merchant
exchanging products for labour, and Xenophon must have had a glimpse
of this ingenious theory when he declared that “the gods sell us goods
in return for our toil.” The analogy might be pushed still farther,
and every act of exchange may be considered an act of production.
Pantaleoni puts it elegantly when he says that “a partner to an exchange
is very much like a field that needs tilling or a mine that requires
exploiting.”[1120]

And what are capitalisation, investment, and loan but the exchange of
present goods and immediate joys for the goods and enjoyments of the
future?

It was a comparison instituted between the lending of money and an
ordinary act of exchange that led Böhm-Bawerk to formulate his celebrated
theory of interest. Böhm-Bawerk, however, is a representative of the
Austrian rather than the Mathematical school.

Even consumption—that is, the employment of wealth—implies incessant
exchanging, for if our resources are necessarily limited that must
involve a choice between the object which we buy and that which with a
sigh we are obliged to renounce. To give up an evening at the theatre
in order to buy a book is to exchange one pleasure for another, and the
law of exchange covers this case just as well as any other.[1121] It is
the same everywhere. To pay taxes is to give up a portion of our goods
in order to obtain security for all the rest. The rearing of children
involves the sacrifice of one’s own well-being and comfort in exchange
for the joys of family life and the good opinion of our fellow-men.

It is not impossible, then, to discover among economic facts certain
relations which are expressible in algebraical formulæ or even reducible
to figures. The art of the Mathematical economist consists in the
discovery of such relations and in putting them forth in the form of
equations.

For example, we know that when the price of a commodity goes up the
demand for it falls off. Here are two quantities, one of which is a
function of the other.[1122] Let us see how the law of demand in its
amended form would express this.

If along a horizontal line A B we take a number of fixed points
equidistant from one another to represent prices, _e.g._ 1, 2, 3, 4, 5 …
10, and from each of these points we draw a vertical line to represent
the quantity demanded at that price, and then join the summits of these
vertical lines, which are known as the ordinates, we have a curve
starting at a fairly high point—representing the lowest prices—and
gradually descending as the prices rise until it becomes merged with the
horizontal, at which point the demand becomes _nil_.[1123]

What is very interesting is that the curve is different for different
products. In some cases the curve is gentle, in others abrupt, according
as the demand, as Marshall puts it, has a greater or lesser degree of
elasticity. Every commodity has, so to speak, its own characteristic
curve, enabling us, at least theoretically, to recognise that product
among a hundred.[1124]

Geometrical figures can always take the place of equations, for
every equation can be expressed in the form of a curve. Geometrical
representation makes a quicker appeal to the eye, and it is extremely
useful where people are not conversant with the calculus which is
frequently employed by Cournot and other Mathematical writers. But it is
hardly as fruitful, for a geometrical figure can only trace the relation
between two quantities, one of which is fixed and the other is variable,
or between three at most, when two would be variable. Even in this case
recourse would be necessary to projections, and the figures in that case
would not be very clear. In the case of algebraical formulæ, on the other
hand, we can have as much variation as we like provided we have as many
equations as there are variables.

We would naturally expect the supply curve to be just the inverse of the
demand curve, rising with a rising price and descending with a falling
one, so that by the time the price is zero supply is _nil_, whereas the
demand is infinite.[1125]

But it is not quite correct to regard it as merely the inverse of the
demand curve. A supply curve is really a much more complicated affair,
because supply itself depends upon cost of production, and there are some
kinds of production—agriculture, for example—where the cost of production
increases much more rapidly than the quantity produced. In industry, on
the other hand, the cost of production decreases as the quantity produced
increases.

Mathematical political economy, not content with seeking relations of
mutual dependence between isolated facts, claims to be able to embrace
the whole field within its comprehensive formulæ. Everything seems to be
in a state of equilibrium, and any attempt to upset it is immediately
corrected by a tendency to re-establish it.[1126] To determine the
conditions of equilibrium is the one object of pure economics.

The most remarkable attempt at systematisation of this kind was made by
Professor Walras, who endeavoured to bring every aspect of the economic
world within his formula, a task almost as formidable as that attempted
by Laplace in his _Mécanique céleste_.[1127]

Let us imagine the whole of society included within one single room,
say the London Stock Exchange, which is full of the tumult of those who
have come to buy and sell, and who keep shouting their prices. In the
centre, occupying the place usually taken up by the market, sits the
_entrepreneur_, a merchant or manufacturer or an agriculturist, as the
case may be, who performs a double function.

On the one hand he buys from producers, whether rural or urban,
landlords, capitalists, or workers, what Walras calls their “productive
services,” that is, the fertility of their lands, the productivity
of their capital or their labour force, and by paying them the price
fixed by the laws of exchange he determines the revenue of each; to the
proprietor he pays a rent, to the capitalist interest, to the workman
wages. But how is that price determined? Just as at the Exchange all
values whatsoever are determined by the law of demand and supply, so the
_entrepreneur_ demands so many services at such and such a price and the
capitalist or workman offers him so many at that price, and the price
will rise or fall until the quantity of services offered is equal to the
quantity demanded.

The _entrepreneur_ on his side disposes of the manufactured goods
fashioned in his factory or the agricultural products grown on his farm
to those very same persons, who have merely changed their clothes and
become consumers. As a matter of fact the proprietors, capitalists, and
workers who formerly figured as the vendors of services now reappear as
the buyers of goods. And who else did we expect the buyers to be? Who
else could they be?

And in this market the prices of products are determined in just the same
fashion as we have outlined above.

All at once, however, a newer and a grander aspect of the equilibrium
comes to view. Is it not quite evident that the total value of the
productive services on the one hand and the total value of the products
on the other must be mathematically equal? The _entrepreneur_ cannot
possibly receive in payment for the goods which he has sold to the
consumers more than he gave to the same persons, who were just now
producers, in return for their services. For where could they possibly
get more money? It is a closed circuit, the quantity that comes out
through one outlet re-enters through another.

With the important difference that it keeps much closer to facts,
the explanation bears a striking resemblance to Quesnay’s _Tableau
économique_.[1128]

We have two markets in juxtaposition,[1129] the one for services and the
other for products, and in each of them prices are determined by the same
laws, which are three in number:

(_a_) On the same market there can be only one price for the same class
of goods.

(_b_) This price must be such that the quantity offered and the quantity
demanded shall exactly coincide.

(_c_) The price must be such as will give maximum satisfaction to the
maximum number of buyers and sellers.

All these laws are mathematical in character and involve problems of
equilibrium.

In some such way would the new school reduce the science of economics
to a sort of mechanism of exchange, basing its justification upon the
contention that the Hedonistic principle of obtaining the maximum of
satisfaction at the minimum discomfort is a purely mechanical principle,
which in other connections is known as the principle of least resistance
or the law of conservation of energy. Every individual is regarded simply
as the slave of self-interest, just as the billiard-ball is of the cue.
It is the delight of every economist as of every good billiard-player
to study the complicated figures which result from the collision of the
balls with one another or with the cushion.[1130]

Another problem of equilibrium is to discover the exact proportion in
which the different elements combine in production. Jevons compares
production to the infernal mixture which was boiled in their cauldron by
the witches in _Macbeth_. But the ingredients are not mixed haphazard,
and Pareto thinks that they conform to a law analogous to the law known
in chemistry as the law of definite proportions, which determines that
molecules shall combine in certain proportions only. The combination
of the productive factors is perhaps not quite so rigidly fixed as is
the proportion of hydrogen and oxygen which goes to form water. Similar
results, for example, may be obtained by employing more hand labour and
less capital, or more capital and less hand labour. But there must be
some certain proportion which will yield a maximum utility, and this
maximum is obtainable in precisely the same way as in other cases of
equilibrium—that is, by varying the “doses” of capital and labour until
the final utility in the case both of capital and labour becomes equal.
Generally speaking, this is the law that puts a limit to the indefinite
expansion of industry, for whenever one element runs short, be it land
or capital, labour or managing ability or markets, all the others are
directly affected adversely and the undertaking as a whole becomes more
difficult and less effective. Pareto rightly enough attaches the greatest
importance to this law, and we have only to remember that it is the
direct antithesis of the famous law of accumulation of capital to realise
its full significance.

There are several other cases of interdependence to which the new school
has drawn attention, as, for example, that of certain complementary goods
whose values cannot vary independently. What is the use of one glove or
one stocking without another, of a motor-car without petrol, of a table
service without glasses? Not only is this true of consumption goods;
it also applies to production goods. The value of coke is necessarily
connected with the value of gas, for you cannot produce the one without
the other, and this applies to all by-products. The possibility of
utilising a by-product always lowers the price of the main commodity.


IV: CRITICISM OF THE HEDONISTIC DOCTRINES

The triumph of the new doctrines has been by no means universal. England,
Italy, and Germany, and even the United States, where one would least
expect enthusiasm for abstract speculation, have supplied many disciples,
and several professorial chairs and learned reviews have been placed at
their disposal. But up to the present France seems altogether closed to
them. Not only was Walras, the _doyen_ of the new school, forced to leave
France to find in foreign lands a more congenial environment for the
promulgation of his ideas, but until recently it would have been quite
impossible to mention a single book or a single course of lectures given
either in a university or anywhere else in which these doctrines were
taught or even criticised.[1131]

We might have understood this antipathy more easily if France, like
Germany, had already been annexed by the Historical school. There
would have been some truth in a theory of incompatibility of tempers
under circumstances of that kind. But the great majority of French
economists were still faithful to the Liberal tradition, and one
might naturally have expected a hearty welcome for a school that is
essentially Neo-Classical and pretends nothing more than to give a fuller
demonstration of the theories already taught by the old masters.[1132]

The mere fact, however, that they presumed to draw fresh lessons or to
deduce new principles from those already formulated by the older writers
appeared an unwarranted interference with doctrines that had hitherto
seemed good enough for everyone. Criticism of that kind, of course, is
not worth serious attention.

An easier line of criticism, and one very frequently adopted, is
to maintain that the wants and desires of mankind are incapable of
measurement and that mathematical causations can never be reconciled
with the doctrine of free will. But such claims as these were never
put forward by the Mathematical school. On the contrary, it has always
recognised that every man is free to follow his own bent—_trahit sua
quemque voluptas_—merely inquiring how man is to act if he is to obtain
the maximum satisfaction out of the means at his disposal and to overcome
the obstacles that stand in his way. Neither has it ever ventured to say
that such and such a man is forced to sell corn or to buy it, but simply
that if he does buy or sell it will be with a determination to make the
best of the bargain, and that such being the case the buying or selling
will take place in such and such a fashion. It further claims that the
action of a number of individuals under similar circumstances is equally
calculable. So is the movement of the balls on the billiard-table, but
that does not interfere with the liberty of the players.[1133]

Nor do they pretend to be able to measure our desires. What they
do—and it is not so absurd after all, because we are all doing it—is
to express in pounds, shillings, and pence the value we put upon the
acquisition or loss of an object that satisfies our desire. Moreover,
the Mathematical school does not make much use of numbers, but confines
itself to algebraical notation and geometrical figures—that is, to the
consideration of abstract quantities. To write down a problem in the form
of a mathematical equation is to show that the problem can be solved and
to give the conditions under which solution is alone possible. Beyond
this the economist never goes. He never tries to fix the price of corn,
whatever it may be; he leaves that to the speculators.[1134]

From the other side—that is, from the historians, interventionists,
solidarists, socialists—comes criticism which is quite as bitter and not
a whit easier to justify. The Hedonistic doctrine appears to them simply
as a fresh attempt to restore the optimistic teaching of the Manchester
school, with its individualism and egoism, its free competition and
general harmony, its insidious justification of interest, rent, and
starvation wages—in the name of some imaginary entity which they call
marginal utility. In short, it looks just like another proof of the
thesis that the present economic order is the best possible—a proof
that is all the less welcome seeing that it claims to be scientific and
mathematically infallible.

This sort of criticism is nothing less than caricature. It would be
futile to deny that the new school has undertaken the task of carrying on
the work of the Classical writers, but what possible harm can there be in
that? The royal road of science often turns out to be nothing better than
a very narrow path—but it does lead somewhere. There would be no progress
in economic science or in any other if every generation were to throw
overboard all the work done by its predecessors. What the Hedonistic
school has tried to do is to distinguish between the good and the bad
work of the Classical writers and to retain the one while rejecting the
other.

The main object of the equilibrium and final utility theories is not to
justify the present economic _régime_, but merely to explain it,[1135]
which is quite a different matter. But it does happen in this case that
the explanation justifies the conclusion that under the conditions of
a free market the greatest good of the greatest number would naturally
be secured. The term “good,” however, is used in a purely Hedonistic
and not in the ethical sense. No attention is paid to the pre-existing
conditions of the exchange, and none is bestowed upon its possible
consequences. The old-time bargain between Esau and Jacob, when the
former sold his birthright for a mere mess of pottage, gave the maximum
of satisfaction to both, even to Esau, of whom it is related that he was
at the point of death, and to whom accordingly the pottage must have been
of infinite value. Even if Jacob had offered him a bottle of absinthe
instead the result would have been equally satisfactory from a Hedonistic
standpoint. The theory takes as little account of hygiene as it does of
morals.

The Hedonist, by way of amendment, might suggest that Esau would have
made a better bargain if there had been, not one, but several Jacobs
offering the pottage, which helps to explain why they are so partial to
competition and so strongly opposed to monopoly.[1136] No Hedonist would
deny that Esau was exploited by Jacob; but, on the other hand, they would
point out that there is no necessity to imagine that society is made up
only of Esaus and Jacobs.[1137]

The same thing applies to Böhm-Bawerk’s celebrated theory of interest.
Indeed, Böhm-Bawerk quite definitely states that he merely wants to
discover some explanation of interest, but does not anticipate that he
will be able to justify it, and in that spirit he condemns the ethical
justifications that were attempted some centuries back. His object is to
show that interest is neither due to the productivity of capital nor to
the differential advantages enjoyed by its possessor. Neither is it a tax
levied upon the exploited borrower: it is simply a _time_-payment. In
other words, it represents the difference between the value of a present
good and the same good on some future occasion. It is just the result of
exchanging a present good for a future one. A hundred francs a year hence
are not equal in value to a hundred francs here and now. To make them
equal we must either add something by way of interest to the future item
or take away something by way of discount from the present one.[1138]

Turning to the theory of wages, according to which the wages of each
class of producers is supposed to be determined by the productivity of
the marginal worker in that class, we are struck by the fact that it is
only a little less pessimistic than the old “brazen law.” What it really
implies is that the marginal worker—the worker whom the _entrepreneur_ is
only just induced to employ—consumes all that he produces.

The Hedonistic school, in short, has no theory of distribution, neither
does it seem very anxious to have one. It speaks, not of co-sharers, but
of productive services, whose relative contributions it is interested to
discover. But it is one thing to know exactly what fraction of the work
is due to a certain unit of capital or a given individual workman, and
quite another to know whether workers or capitalists are being unfairly
treated.

The best proof that the Hedonists are not mere advocates of
_laissez-faire_ is the general attitude of the leaders. It is true that
the Austrian school has always shown itself quite indifferent to the
social or working-class question,[1139] as it is sometimes called, but
it certainly has a perfect right to confine itself to pure economics if
it wishes. The other leaders of the school, however, have clearly shown
that the method followed need involve no such approval or acquiescence.
Not to mention Stanley Jevons, who in his book _Social Reform_ makes a
very strong case for intervention, we have also Professor Walras, who
stands in the front rank of agrarian socialists. Leaving aside merely
utilitarian considerations, he points out that in the interest of
justice, which, as he has been careful to emphasise, involves quite a
different point of view, he wants to establish a _régime_ of absolutely
free competition. But how is this to be accomplished? Merely by means of
_laissez-faire_, as the old Liberal school had thought? Not at all. It
can only be done through the abolition of monopoly of every kind, and
land monopoly, which is the foundation of every other, must go first.
The reform advocated in his _Économie sociale_ consists of two items,
land nationalisation and the abolition of all taxation. The two items
are intimately connected because the rents now become the possession of
the State will take the place of the taxes, and the object of both is
the same, namely, the extension of free competition by securing to every
citizen the full produce of his work. Under existing conditions the
producer is doubly taxed—in the first place by the landowner and then by
the State.[1140] Moreover, when we remember that the point of equilibrium
in Walras’s system occurs just where the selling price exactly coincides
with the cost of production—in other words, where profit is reduced to
zero—we begin to realise how far it is from anything in the nature of an
apology for the present condition of things.

Vilfredo Pareto, another representative of this school, although
ultra-individualistic in his opinions and extremely hostile to
interventionism or solidarity, takes good care not to connect his
personal opinion with the Hedonistic doctrines. As a matter of fact he
thinks that, theoretically at least, the maximum of well-being might be
equally attainable under a collectivist _régime_, although he does not
think that collectivism is yet possible. But this opinion is founded upon
“ethical and other considerations which are quite outside the scope of
economics.”[1141]

M. Pantaleoni, who soars higher still into the realm of pure,
transcendental science, ventures to declare that the substitution of
purely altruistic motives for merely selfish ones would involve about
as much change in the calculation as would the substitution throughout
of a plus for a minus sign in an algebraical equation. All extremes
meet. Complete disinterestedness and absolute egoism would necessarily
work out very much the same. Devotion to duty would replace the clamour
for rights; sacrifices would be exchanged instead of utilities. But the
laws determining their exchange would still be the same. The Hedonists
are not so much concerned with the morality of such laws as with the
productive capacity of a given economic state, just as in the case of a
piece of machinery the engineer’s sole concern is to gauge the output of
that machine.

But the most serious criticism passed upon the work of the school is
that at the end of the reckoning nothing has been discovered that was
not already known, to which the Hedonists reply that they have at least
succeeded in making certain what was only tentative before. The discovery
of truth appears to be an intermittent process, and the first vague
presentiment is often as useful as the so-called scientific discovery.
Astronomy, which is the most perfect of the sciences, has progressed
just in this way. The older economists felt fully convinced that the
_régime_ of free competition was best, but they gave no reason for the
faith that was in them and no demonstration of the conditions under which
the doctrine was true. Such a demonstration the Mathematical economists
claim to have given by showing that a _régime_ of free competition is
the only one where a maximum of satisfaction is available at a minimum
of sacrifice for both parties. The same consideration applies to the
law of demand and supply, the law of indifference, cost of production,
wages, interest, rent, etc. To have given an irrefutable demonstration
of theories that were formerly little better than vague intuitions[1142]
or amorphous hypotheses is certainly something. We may laugh as much as
we like at the _homo œconomicus_, who is by this time little better than
a skeleton, but it is the skeleton that has helped the science to stand
upright and make progress. It has helped forward the process from the
invertebrate to the vertebrate.

But admitting that all these doctrines have been definitely proved, as
the Hedonists claim they have, is the science going to profit as much as
they thought by it? Somebody has remarked that mathematics is a mere mill
that grinds whatever is brought to it. The important question is, What
is the corn like? In this case it consists of a mass of abstractions—a
number of individuals actuated by the same selfish motives, alike in what
they desire to get and are willing to give,[1143] the assumed ubiquity of
capital and labour, facility for substitution, etc. It is possible enough
that the flour coming from the mill may not prove very nutritious. When
ground out the result would at any rate be as unlike reality as the new
society outlined by Fourier, the Saint-Simonians, or the anarchists, and
its realisation quite as improbable, unless we presuppose an equally
miraculous revolution. The Hedonists frankly recognise this, and in this
respect they show themselves superior to the Classical economists, who
when they talk of free competition believe that it actually exists.[1144]

But however sceptical they are about the possibility of ever realising
all this, they are somewhat emphatic about the virtues of the new method,
and they are not exempt, perhaps, from a certain measure of dogmatic
pride which irresistibly reminds one of the Utopian socialists. Could
we not, for example, imagine Fourier writing in this strain: “What
has already been accomplished is as nothing compared with what may be
discovered” (by the application of the mathematical method);[1145] or
“The new theories concerning cost of production have the same fundamental
importance in political economy that the substitution of the Copernican
for the Ptolemaic system has in astronomy”?[1146] We have already
called attention to the comparison of Walras’s system with Newton’s
_Principia_—all of which rather savours of enthusiasm outrunning judgment.

While recognising the very real services which the Mathematical and
Austrian schools have rendered to the science, and admitting that they
mark an era in the history of economics which can never be forgotten,
we cannot do better than conclude with the advice of an economist
who is himself an authority both in the Mathematical and Classical
schools, and who is therefore well qualified to judge: “The most useful
applications of mathematics to economics are those which are short and
simple and which employ few symbols; and which aim at throwing a bright
light on some small part of the great economic movement rather than at
representing its endless complexities.”[1147]




CHAPTER II: THE THEORY OF RENT AND ITS APPLICATIONS


The revival of interest in Classical theories, of which mention was made
in the last chapter, cannot be passed over without a special reference
to the theory of rent. The theory of rent has always held a prominent
place in economic science, especially during the earlier years of the
nineteenth century, and the recent developments it has undergone are
significant equally from a theoretical as from a practical standpoint.

Theoretically it has been shown that the concept rent, which for a
long time was supposed to be indissolubly bound up with a particular
economic phenomenon, namely, the revenue of landed proprietors, is
capable of several applications and extensions, some of which might throw
considerable light into more than one obscure corner of the economic
world. Particularly does it seem applicable to a kind of revenue of
which we hardly heard mention until recently—that is, the profits of the
_entrepreneur_ as distinct from the interest of the capitalist.

Practically also it is very important. Rent is “unearned increment” _par
excellence_. In other words, it is a revenue for which the receiver has
ostensibly done nothing. One can well imagine what fruitful ground for
socialistic theories this must be! And, as a matter of fact, all systems
of land nationalisation or of socialisation of rent—and they are by no
means few in number—trace descent from the old Ricardian theory.

What we propose to do in this chapter is to examine the doctrine of rent
in its twofold aspect, inquiring in the first place what developments it
has recently undergone as a scientific theory, and, secondly, how it is
proposed to apply this theory with a view to reforming society. The chief
aim in view is, of course, to glean some knowledge of recent theories,
but to do this we shall often find ourselves obliged to follow the stream
backward towards its source in Mill or Ricardo, for in many cases it is
the only way of appreciating the development of ideas.


I: THE THEORETICAL EXTENSION OF THE CONCEPT RENT

In a former chapter we were led to investigate the utterly futile
attempts made both by Carey and Bastiat to undermine the Ricardian
theory of rent. Open to criticism the theory certainly is, but in their
anxiety to do away with it altogether these critics were led to deny that
the land had any value at all.

But this denial has been refuted in no equivocal fashion by the emergence
of what is perhaps the most striking phenomenon in nineteenth-century
history, namely, the fabulous prices paid for land in the neighbourhood
of large cities. The last century was pre-eminently the century of big
towns. No other epoch in history can point to such growth of urban
centres. England, America, Germany, and to a lesser degree France,
have all had a share in this development. One result of this rapid
agglomeration of population in restricted areas has been a wonderful
growth of rents, or unearned increment. A quarter of an acre of land in
the city of Chicago which was bought in 1830 for $20, at a time when
the population was only fifty, and which in 1836 was sold for $25,000,
was valued at $1,250,000 at the time of the International Exhibition in
1894. It has been calculated that the increase in ground-rents in London
between 1870 and 1895 is represented by no less a sum than £7,000,000.
Hyde Park, bought by the City of London in 1652 for £17,000, is to-day
valued at about £8,000,000. M. d’Avenel states that in Paris a piece of
land belonging to the Hôtel Dieu which was valued at 6 fr. 40 c. a square
metre in 1775 is worth 1000 fr. to-day,[1148] and M. Leroy-Beaulieu
mentions a piece of land in the neighbourhood of the Arc de Triomphe
which between 1881 and 1904, _i.e._ in twenty-three years, has doubled
its value and is now selling at 800 fr. a metre as compared with 400 fr.
formerly.[1149] We have merely quoted a few isolated examples, but they
may be regarded as typical.

Carey and Bastiat have not made many converts, evidently. The majority of
economists have either accepted Ricardo’s theory or, having been induced
to examine his position thoroughly, have been led to develop it, but none
of them has denied the reality of the income derived from land. Hence the
very curious twofold evolution which the theory presents.

On the one hand there has been discovered a whole series of differential
revenues analogous to the rent of land, which, according to the
expression of a great contemporary economist, “is not a thing by itself,
but the leading species of a large genus.”[1150] On the other hand (and
this second line of development is perhaps more curious than the first),
while Ricardo considered that the rent of land was an economic anomaly
resulting from special circumstances, such as the unequal fertility of
the land or the law of diminishing returns, modern theorists regard
it simply as the normal result of the regular operation of the laws
of value. The rent of land and similar phenomena seem to fit in with
the general theory of prices, and the theory of rent so laboriously
constructed by the Classical school falls into the background as being
comparatively useless. Despite its prestige throughout the nineteenth
century, in a few more years it will be regarded as a mere historical
curiosity.

This double evolution is the result of simultaneous efforts on the part
of a great number of economists. It is almost impossible to trace a
regular sequence of advances from one to the other, and we shall content
ourselves with a mere mention of the names of those who have contributed
most to it, their actual words being quoted whenever possible.[1151]

(_a_) In the first place, we have a number of differential revenues which
are exactly analogous to the rent of land. Equal quantities, or, as the
English economists prefer to put it, equal doses of capital and labour
applied to different lands yield different revenues: such was the classic
statement of the law of rent. Ricardo attributed the existence of rent to
the presence of particular phenomena appertaining only to land, such as
diminishing returns, unequal fertility, greater or lesser distance from a
market. But it has long been realised that agriculture is by no means the
only domain in which capital and labour yield unequal returns.

All natural sources of wealth—mines, salt-works, and fisheries—give rise
to exactly similar phenomena. Their productivity is not identical, their
fertility (if the term is permissible) presents the same differences and
their position relative to a market the same variety as in the case of
cultivated lands. Consequently every mine, every salt-work and fishery
that is not on the margin of cultivation yields a differential revenue or
rent because of its greater productivity or more convenient situation.
Ricardo had recognised this in the case of mines, and Stuart Mill
insisted upon its farther extension.[1152]

Further, land is not employed for tilth only; it is also frequently used
for building purposes. The services which it renders in this connection
are not less important than the others, and between different sites
there are as many distinctions as there are between the various grades
of cultivated lands. Their commercial productivity, if we may so put it,
is by no means uniform. “The ground-rent of a house in a small village
is but a little higher than the rent of a similar patch of ground in
the open fields, but that of a shop in Cheapside will exceed this by
the whole amount at which people estimate the superior facilities of
money-making in the more crowded place. In this way the value of these
sites is governed by the ordinary principles of rent.”[1153]

But why even confine attention to land and its uses? Degrees of
productivity and differences of returns are equally evident in the case
of capital. The machinery in one shop may be better, the organisation
more efficient, division of labour more fully developed than in another
because of the relatively greater abundance of capital, with the result
that the production in the one case will exceed the production in the
other, resulting in a supplementary gain in the case of the first
shop.[1154] Similarly, the production of one worker as compared with
another is frequently unequal. One man without any greater effort may get
through more work than another, and the earnings of that man will exceed
those of the other, so that even a workman may enjoy a supplementary
gain of the nature of a differential rent. And not among workmen only do
aptitudes differ, but also among _entrepreneurs_. Rent of ability plays
an important _rôle_ in determining the different degrees of success
experienced by different undertakings and the unequal revenues which they
yield. “The extra gains which any producer or dealer obtains through
superior talents for business or superior business arrangements are very
much of a similar kind.” That is how Mill[1155] expressed it, content
merely to repeat an idea which Senior had expressed in his _Political
Economy_ as early as the year 1836, where he applies the term “rent”
to “all peculiar advantages of extraordinary qualities of body and
mind.”[1156]

The simple suggestion thrown out by Mill and Senior has long since been
developed into a full-blown theory by Francis Walker, the American
economist. The conception of profits as the remuneration of the
_entrepreneur’s_ exceptional skill is examined in his _Treatise on
Political Economy_, and is further treated in considerable detail in the
_Quarterly Journal of Economics_ for April 1887.[1157]

We have already commented upon the optimistic tendencies of certain
American economists. Carey was a case in point; so is Walker. In a
work entitled _The Wages Question_, published in 1876, Walker made a
successful attack upon that most pessimistic of theories, the wages fund,
and forced economists to recognise that to some extent at any rate the
wages depended upon the productivity of the undertaking. But to show
the possibility of wages growing with the increased productivity of
industry was hardly enough to satisfy sensitive consciences. Walker was
particularly anxious to foil the socialists by showing that profit is not
the outcome of exploitation, and it was with a view to such demonstration
that the doctrine of rent was so greedily seized upon.

By the term “profit” Walker understands the special remuneration of the
_entrepreneur_,[1158] omitting any interest which he may draw as the
possessor of capital. This distinguishes him from the majority of English
economists, who, contrary to Continental practice, have always persisted
in confusing the functions of the _entrepreneur_ and the capitalist.
Neither is he content to regard his work as confined to simple business
arrangement and superintendence, which would result in his being paid
a salary equal to that of a managing director. His work is altogether
of a more dignified character, and consists largely in anticipating the
fluctuations of the market and in organising production to meet them—in a
word, in adapting supply to demand. The _entrepreneur_ is the true leader
of economic progress—a real “captain of industry.”[1159]

All this implies, says Walker, differences in industrial revenues exactly
analogous to the differences in agricultural incomes. Some industries
yield no profit at all beyond remunerating capital and labour at the
normal rate and leaving enough for the _entrepreneur_ to prevent his
abandoning the undertaking altogether. Other industries yield a little
more, and by imperceptible gradations we pass from such mediocre
undertakings to more prosperous ones, and finally reach those that yield
immense profits. The question then arises as to whether such abnormal
profits in any way represent wages that have been withheld from the
workers. This is not at all likely, because wages are often highest where
profits are greatest. _Cæteris paribus_, the probability is that the
greater profit in the one industry as compared with another implies the
greater capacity of the _entrepreneur_ in the one case than in the other.
The superior income is a pure surplus like the rent of land. “Under free
and full competition,” says Walker, “the successful employers of labour
would earn a remuneration which would be exactly measured, in the case of
each man, by the amount of wealth which he could produce, with a given
application of labour and capital, over and above what would be produced
by employers of the lowest industrial, or no-profits, grade, making use
of the same amounts of labour and capital, just as rent measures the
surplus of the produce of the better lands over and above what would
be produced by the same application of labour and capital to the least
productive lands which contribute to the supply of the market, lands
which themselves bear no rent.”[1160]

Walker’s theory contains a good deal of truth, although it is not,
perhaps, quite as new as he thought it was. The opinions of Mill and
Senior have already been referred to, and more than one Continental
economist, from J. B. Say to Mangoldt, and including Hermann,[1161] have
propounded similar views. Nor has the doctrine ever been completely
triumphant in economic circles. Most contemporary writers, no doubt,
regard profit as a kind of rent, due partly, but only partly, to the
personal ability of the _entrepreneur_.[1162] Other economists—such
as Marshall,[1163] for example—think that they can trace some other
elements as well, such as insurance against risk and payment for the
necessary expenses of training the _entrepreneur_.[1164] Walras, on
the other hand, omits these last two items and points out that under
static conditions the _entrepreneur_ would neither gain nor lose. The
sole source of profit, then, are those “dynamic” rents which are the
result, so to speak, of the perpetual displacements of equilibrium in
a progressive society. But these dynamic rents are extremely varied
in character and bear no relation to the personal qualities of the
_entrepreneur_.

Clark[1165] and others, although subscribing to Walras’s dictum that
profits are really composed of rents, think that there may be static as
well as dynamic rents and that Walras’s hypothesis of a uniform net cost
for all undertakings is altogether too abstract. Only in the case of the
marginal producer, whose expenses are highest, is there anything like
equilibrium between costs and price. The other producers even when there
is no such thing as a temporary displacement of equilibrium, are able to
make substantial incomes out of the various species of differential rents
already mentioned—proximity to market, better machinery, greater capital,
etc. Marshall speaks of such incomes as composite rent.[1166]

Walker’s theory has evidently not been accepted without considerable
reservations. And we need only remind ourselves of the way in which
dividends are usually distributed among shareholders to realise the
inadequacy of his conception of rent and the exaggerated nature of his
attempted justification. Would anyone suggest, for example, that such
dividends are merely the result of exceptional ability?[1167]

This attempted explanation of profit affords, perhaps, the most
interesting illustration of the extension of the concept rent, although
it is by no means the only one. The Ricardian theory, worked out to
its logical conclusion, reveals the interesting fact that there are as
many kinds of rents as there are different situations in the economic
world. Whenever it becomes necessary to unravel the mystery surrounding
individual inequalities of income recourse is had to a generalised
theory of rent. “All advantages, in fact, which one competitor has over
another, whether natural or acquired,[1168] whether personal or the
result of social arrangements … assimilate the possessor of the advantage
to a receiver of rent.”[1169] Something of the variety of concrete life
is thus reintroduced into the Classical theory of distribution, although
all this was at first rigidly excluded by the doctrine of equality
of interest and uniformity of wages.[1170] The theory of rent is an
indispensable complement of the Classical theory of distribution, giving
the whole thing a much more realistic aspect. It is, as it were, the
keystone of the whole structure.

(_b_) But the theory has also undergone another species of
transformation. Ricardo conceived of rent as essentially a differential
revenue arising out of the differences in the fertility of soils.[1171]
Were all lands equally fertile there would be no rent. The same remark
applies to the various species of rent discovered since then. There is
always some inherent difference which explains the emergence of rent,
such as the greater suitability of a building site, the greater vigour
of the worker, or the superior intelligence of the _entrepreneur_.
They are all of a type. _Entrepreneurs_ who produce the same article,
workmen toiling at the same trade, capitals employed in the same kind of
undertaking, may be grouped in an order of diminishing productivity, much
as Ricardo grouped the various species of lands. The last _entrepreneur_
of the series, the last worker, or the last item of capital each earns
just enough to keep them at that kind of employment. All the others
produce more, and, seeing that they all sell their goods or services at
the same price, they draw a rent which is greater than the income enjoyed
by the others by the difference between their productivity and that of
the last of the series. The whole economic world seems to be under the
dominion of a kind of law of unequal fertility, not of lands merely, but
of capital and individual capacity as well—a law which is sufficiently
general in its application to explain all inequalities in the revenues
of the different factors of production.

We cannot help feeling the artificiality of this conception and wondering
whether the differences in revenues are not capable of explanation upon
the basis of a simpler and more general principle. Is it impossible to
take account of them directly and to treat them as something other than
an exception or an anomaly? One cannot avoid asking such questions, and
the reply is not far to seek.

Doubts arise as soon as we realise that land may yield rent apart
from any inequality in its fertility. “If the whole land of a country
were required for cultivation, all of it might yield a rent,” says
Stuart Mill.[1172] Apparently all that is needed is an intense demand
and a supply that is never equal to that demand, so that the price is
permanently above the cost of production.[1173] In such a case even the
worst land—assuming that all is not of equal fertility—would yield a
rent. Mill was of opinion that this rarely happened in the case of land,
but was by no means uncommon in the case of mines.[1174] Obviously, then,
rent is not merely the outcome of unequal fertility, and the cause must
be sought elsewhere. Stuart Mill had obviously foreseen this when he
said that “a thing which is limited in quantity is still a monopolised
article.”[1175]

But if such be the explanation of rent on land which is the last to be
put under cultivation, what is the explanation in the case of better
lands? We are not sure that Stuart Mill foresaw this problem.

This is how he explains the emergence of rent on land No. 1. Production
having become insufficient to meet demand, prices go up; but it is
only when they have reached a certain level—a level, that is to say,
sufficiently high to secure a normal return on the capital and labour
employed—that these lands will be brought under cultivation.[1176]

The cause of rent in this case is obviously the growth of demand and not
the cultivation of land No. 2, because the cultivation only took place
when the prices had risen.[1177] Moreover, the effect of this cultivation
will be rather to check than to encourage the growth of rent by arresting
this upward trend of prices through increasing the quantity of corn on
the market. The rent of land No. 1 is consequently a scarcity rent which
results directly from an increased demand and is independent of the
quality of the land. The real cause of rent on all lands, whether good
or bad, is really the same, namely, the insufficiency of supply to meet
demand.

A similar process of reasoning might be applied to the other differential
rents already mentioned, and the conclusion arrived at is that rent,
whatever form it take, is not an anomaly, but a perfectly normal
consequence of the general laws of value. Whenever any commodity, from
whatever cause, acquires scarcity value and its price exceeds its cost of
production, there results a rent for the seller of that product. Such is
the general formula, and therein we have a law that is quite independent
of the law of diminishing returns and of the unequal fertility of
land.[1178]

But the issue was not decided at a single stroke. English political
economy is so thoroughly impregnated with Ricardian ideas that it still
adheres to the conception of a differential rent. Continental economists,
on the other hand, have always regarded it as a more or less natural
result of the laws of demand and supply. J. B. Say had long since
made the suggestion that the existence of rent is due to the needs of
society and the prices which it can afford to pay for its corn.[1179] A
German economist of the name of Hermann, a professor at Munich, in his
original and suggestive work, _Staatswirtschaftliche Untersuchungen_,
published in 1832, claims that the rent of land is simply a species of
the income of fixed capital. Whereas circulating capital, because of
its superior mobility, has almost always a uniform rate of interest,
fixed capital, which has not that mobility and which cannot be increased
with the same facility, has a revenue which is generally greater than
that of circulating capital. This surplus revenue or rent, instead
of being a mere transitory phenomenon, might easily become permanent
provided the new fixed capital which enters into competition with it
has a lesser degree of productivity. Such precisely is the case with
land.[1180] A little later another German of the name of Mangoldt defined
rent as a scarcity price which does not benefit all the factors of
production equally, but only those which cannot be readily increased in
amount. And rent appears in the guise of a differential revenue simply
because scarcity is always relative and is frequently kept in check
by substitutes which generally give a smaller margin of profit.[1181]
Schäffle, in a work partly devoted to the subject of rent,[1182]
published in 1867, insists on the idea that the soil furnishes rent not
because it is a gift of nature, but simply because of its immobility and
the impossibility either of removing it or of increasing its quantity.
Finally, Karl Menger, in his _Grundsätze der Volkswirtschaftslehre_,
published in 1872, in outlining the foundations of the modern doctrine of
value, assimilated the theory of rent to the general theory of prices by
categorically declaring that “the products of land as far as the nature
of their value is concerned afford no exception to the general rule,
which applies to the value of the services of a machine or a tool, of a
house or a factory, or any other economic good.”[1183]

The only difference, apparently, which recent economists recognise
between rents conceived of in this fashion is their greater or lesser
duration. The rent furnished by a first-class machine will disappear very
readily because new machines can be turned out to compete with it. But
when the rent is due to superior natural qualities, whether of land or
of men, the element of rent will not be so easily got rid of. To borrow
a phrase of Pareto’s, we may say that the rent will be of a more or
less permanent character, according to the ease with which savings can
be transformed into capital of a more or less durable kind.[1184] Dr.
Marshall sums up his subtle analysis of the problem under consideration
as follows: “In passing from the free gifts of nature through the more
permanent improvements in the soil, to less permanent improvements, to
farm and factory buildings, to steam-engines, etc., and finally to the
less durable and less slowly made implements we find a continuous series
[of rents].”[1185]

The series, we might add, may be extended to a point at which rent
becomes negative, _i.e._ until the conditions of demand and supply
become such that the factor of production which previously yielded
a supplementary revenue no longer gives even the normal rate of
remuneration. Thünen had suggested the possibility of a negative rent,
and the idea has been further developed by Pareto.

These modern writers seem to regard rent simply as a result of the
ordinary operation of the laws of supply and demand. The concept rent
has been generalised so that it can no longer be regarded as a curiosity
or an anomaly. The law of diminishing returns loses much of its economic
importance, and even the Ricardian theory which is based upon it seems
imperilled. After the numerous polemics to which it has given rise, it
seems as if this theory, along with the Classical theory of value, were
about to be relegated to the class of doctrines in which the historian is
still interested but which are apparently of little practical value.[1186]


II: UNEARNED INCREMENT AND THE PROPOSAL TO CONFISCATE RENT BY MEANS OF
TAXATION

It does not appear that Ricardo fully realised the damaging consequences
which would ensue if the doctrine of rent ever happened to be made the
basis of an attack upon the institution of private property. He was quite
satisfied with the inference which he had drawn from it in support of
the free importation of corn, and did not feel called upon to defend the
rent of land any more than the interest of capital, both of which seemed
inseparable from a conception of private property.

Other writers proved more exacting. Despite the numerous exceptions
met with in actual life, the feeling that all forms of revenue ought
to be justified by some kind of personal effort on the part of the
beneficiary is fairly deeply rooted in our moral nature. But according
to the Ricardian theory the rent of land is a kind of income got without
corresponding toil—a reward without merit, and as such it is unjust. Such
seems to be the logical conclusion of the Ricardian thesis.

The conclusion thus established is further confirmed by the natural
feeling that not only is rent unjust, but the whole institution of
private property as well. This feeling is one which all of us share
(except those fortunate individuals who happen to be landlords,
perhaps!), and is, of course, much older than any doctrine of rent.
Movable property is generally the personal creation of man, the result of
the toil or the product of the savings, if not of the present possessor,
at least of a former one. But land is a gift of nature, a bountiful
creation of Providence placed at the disposal of everyone without
distinction of wealth or of station. Proudhon’s celebrated dictum is
known to most people: “Who made the land? God. Get thee hence, then,
proprietor.”[1187] That line of argument is really very old, and Ricardo
unwittingly gave it new strength.

The idea of a natural right to the land and of a common interest in it is
the instinctive possession of every nation. But in England the feeling
seems more general than elsewhere, because, possibly, of the number of
large proprietors and of the serious abuses to which the system has
given rise. It seems rooted in the legal traditions of the nations. “No
absolute ownership of land,” writes Sir Frederick Pollock, “is recognised
by our law-books except in the Crown. All lands are supposed to be held,
immediately or mediately, of the Crown, though no rent or services may be
payable, and no grant from the Crown on record.”[1188] Even as far back
as the seventeenth century, Locke, in his work _On Civil Government_, had
ventured to declare that God had given the land as common property to the
children of men.

As one approaches the end of the eighteenth century the demands that
all lands unlawfully taken from the public should be again restored
to it become much more frequent. Sometimes the demand is put forward
by otherwise obscure writers, but occasionally it finds support in
distinguished and influential quarters. In 1775 a Newcastle schoolmaster
of the name of Thomas Spence, in the course of a lecture given before
the Philosophical Society of that town, proposed that the parishes
should again seize hold of the land within their own area. Thereupon he
was obliged to flee to London, where he carried on an active propaganda
in support of these ideas, achieving a certain measure of success. In
1781 a distinguished professor of the University of Aberdeen of the
name of Ogilvie published an anonymous essay on the rights of landed
proprietorship, wherein confiscation was proposed by taxing the whole
of the value of the soil which was not due to improvements effected by
proprietors. But little notice was taken of his suggestions, despite
the fact that they had won the approval of Reid the philosopher. Tom
Paine, in a pamphlet published in 1797, gave expression to similar
ideas,[1189] and the same views were put forward in a book published in
1850 by a certain Patrick Edward Dove.[1190] The following year Herbert
Spencer, in his book _Social Statics_, claimed that the State in taking
back the land would be “acting in the interests of the highest type of
civilisation” and in perfect conformity with the moral law. It is true
that in a subsequent work he took pains to point out that all that can be
claimed for the community is the surface of the country in its original
unsubdued state. “To all that value given to it by clearing, making up,
prolonged culture, fencing, draining, making roads, farm buildings, etc.,
constituting nearly all its value, the community has no claim.”[1191] But
despite this reservation the justice of the general principle is clearly
recognised by him.

Other communities besides England have put forward a similar demand. Not
to mention the claims made by socialists like Proudhon and the Belgian
Baron Colins, and Christian Socialists like François Huet, we find that a
similar method of procedure is advocated by philosophers like Renouvier,
Fouillée, and Secrétan. Some of them even go the length of claiming
compensation for the loss which this usurpation has involved to the
present generation.

Thus, a conception that was already ancient even when the law of rent
was first formulated proclaimed the inalienable right of man to the soil
and demanded the re-establishment of that right. We shall hear an echo
of that ancient belief in all the advocates of land nationalisation, in
Stuart Mill, Wallace, Henry George, and Walras;[1192] and this is one
of the many links that bind them to those earlier writers. Gossen is a
solitary exception.

But a simple pronouncement on the illegality of property does not take
us very far. Appropriation of public property for private purposes
is undoubtedly a great injustice, but the transaction is so old that
retribution would serve little useful purpose, and the authors, were
they still alive, would be safely ensconced behind their prescriptive
rights. Moreover, most of the present proprietors, possibly all of them,
cannot be accused of violent theft. They have acquired their land in
a perfectly regular fashion, giving of their toil or their savings in
exchange for it. To them it is merely an instrument of production, and
their possession of it as legally justifiable as the ownership of a
machine or any other form of capital. To take it away from them without
some indemnity would not be to repair the old injustice, but to create a
new one. Hence it is that the doctrine of the right of the community to
the land had little more than philosophic interest until such time as it
begot a new theory—the theory of rent.

What the Ricardian theory really proves is the accumulative nature of
the benefits accruing from the possession of land. This spontaneous,
automatic character of rent makes it unique: to no other form of revenue
does it belong. The extension of cultivation, the increase of population,
the growing demand for commodities, means an indefinite progression in
the value of land. The interest, initiative, and intelligence of the
proprietor are of no account. Everything depends upon the development
of the social environment. This value which is created by the community
should also belong to it. Just as the landed proprietors in times past
filched the land, so they to-day absorb this income. But why allow this
injustice to continue?

“Suppose,” says Stuart Mill, “that there is a kind of income which
constantly tends to increase without any exertion or sacrifice on the
part of the owners, these owners constituting a class in the community
whom the natural course of things progressively enriches consistently
with complete passiveness on their own part. In such a case it would be
no violation of the principles on which private property is founded if
the State should appropriate this increase of wealth, or part of it, as
it arises. This would not properly be taking anything from anybody; it
would merely be applying an accession of wealth created by circumstances
to the benefit of society, instead of allowing it to become an unearned
appendage to the riches of a particular class. Now this is actually
the case with rent.”[1193] The argument seems quite decisive. At any
rate, Ricardo’s book was hardly out of the press before the demand for
confiscation was renewed.

His friend James Mill, writing in 1821, claimed that the State could
legitimately appropriate to itself not only the present rent of land, but
also all future increments of the same, with a view to compensating for
public expenditure.[1194] The Saint-Simonians, a little later, expressed
a similar view.[1195] But it was James Mill’s son, John Stuart Mill, who
showed the warmest attachment to this idea. The _Principles_ contains
a general outline of his reform plan, which took a still more definite
shape in the programme of the Land Tenure Reform Association, founded in
1870, and in the discussions and explanations which accompanied it.[1196]

The following are the essential points: (1) The State will only
appropriate for its own use the future rents of land; that is, the rents
paid after the proposed reform has been accomplished. (2) A practical
beginning will be made by valuing the whole of the land, and a periodical
revaluation will be made with a view to determining the increase in its
value, and whether such increase is or is not the result of communal
activity. A general tax would transfer this benefit to the State.[1197]
(3) Should any proprietor consider himself unfairly treated the State
would give him the option of paying the new tax or of buying back the
property at the price obtainable for it had he determined to sell just
when the reform was being brought in.

Mill was opposed to immediate nationalisation. Not that he thought it
unjust; on the contrary, he was fully convinced of its equity. But our
experience of State administration and of the work of municipal bodies
did not seem to him to warrant any great faith in the utility of any such
measure. He was afraid that “many years would elapse before the revenue
realised for the State would be sufficient to pay the indemnity which
would be justly claimed by the dispossessed proprietors.”[1198]

Nor did he attempt to disguise the fact that the financial results would
in his opinion be somewhat insignificant and the scope of the reform
naturally somewhat limited. A few years only were to elapse before
another writer proposed a much more radical measure which was to effect
a veritable social revolution. It was a project to abolish poverty and
to secure distributive justice that Henry George now launched on the
strength of his belief in the doctrine of rent.

Henry George (1839-1897) was not a professional economist. He was a
self-made, self-taught man who followed a variety of occupations before
he finally blossomed forth as a publicist. At the age of sixteen he
went to sea, and led a roving life until 1861, when he settled down
at San Francisco as a compositor, finally becoming editor of a daily
paper in that city. He witnessed the rapid expansion of San Francisco
and the development of the surrounding districts as the result of the
great influx of gold-diggers. He also saw something of the agricultural
exploitation of the western States. The enormous increase in the value of
land and the fever of speculation which resulted from this naturally left
a lasting impression upon him. _Progress and Poverty_ (1879), the book
which established his fame, is wholly inspired by these ideas.[1199]

The book aroused the greatest enthusiasm. It has all the liveliness of
journalism and the eloquence of oratory, but has neither the precision
nor the finality of a work of science. Its economic heresies, though
obvious enough, detracted nothing from its powerful appeal, and the
wonderful setting in which the whole problem of poverty was placed has
not been without its effect even upon economists;[1200] nor is the
powerful agitation to which the book gave rise by any means extinct.

It seemed to Henry George that landed proprietors, in virtue of the
monopoly which they possess, absorb not merely a part but almost the
whole of the benefits which accrue from the increase of population and
the perfection of machinery. The progress of civilisation seems helpless
to narrow the breach separating the rich from the poor. While rents go up
interest goes down and wages fall to a minimum. Every country presents
the same phenomena—extreme poverty at one end of the scale accompanied by
extravagant luxury at the other.

Is this unhappy result a kind of hybrid begotten of the Malthusian law
and the law of diminishing returns? Must we, after all, agree with
Malthus, Ricardo, and Mill when they say that the cause is to be sought
in the increase of population outrunning the means of subsistence? Henry
George thinks not, for experience everywhere seems to show that the rich
are growing in numbers much more rapidly than the growth of population
warrants, and that organisation is really performing wonderful feats
under very difficult conditions.[1201]

Is it caused by the exploitation of labour by capital, as the socialists
seem to think? George apparently thinks not, for the two factors,
capital and labour, seem to him so intimately connected that both of
them are easily exploited by the landowners. Every man, he thinks, could
devote his energies either to the production of capital or to supplying
labour—capital and labour being merely different manifestations of the
same force, human effort. The benefits resulting from the formation of
capital on the one hand and from the exercise of labour on the other
tend to be equal, and any inequality is immediately counteracted by a
larger production of one or other of these two factors, with the result
that equilibrium is soon re-established. The rate of interest and the
rate of wages can never vary inversely.[1202]

But if we can neither accuse over-population nor lay the blame at the
door of exploitation, how are we to account for the fact that the
labourer is still so miserably paid? It is entirely, he thinks, the
result of rent. Hitherto exceedingly severe in his handling of some
Ricardian theories, George has no hesitation in pushing the doctrine of
rent to its extreme limits.

He points out that owing to the existence of competition between
capital and labour the rates of interest and wages are determined by
the yield of that capital and labour when applied to land on the margin
of cultivation—that is, to land that yields no surplus or rent. And in
virtue of the natural monopoly which landowners possess they can exact
for the use of other lands any amount they like beyond this minimum.
The result is that rent goes on gradually increasing as the limits of
cultivation extend. As population grows and needs become more extensive
and varied, as technical processes become more perfect and labour becomes
less and less necessary, new lands are brought under cultivation, such
lands being generally of an inferior character. The result is that the
lands which were previously cultivated will always yield a rent to the
proprietor. Thus the progress of civilisation, whatever form it take,
always tends to the same result—a higher rent for the benefit of the
landed proprietor.[1203]

“Here is a little village; in ten years it will be a great city—in ten
years the railroad will have taken the place of the stage-coach, the
electric light of the candle; it will abound with all the machinery and
improvements that so enormously multiply the effective power of labour.
Will, in ten years, interest be any higher?” He will tell you “No!”
“Will the wages of common labour be any higher?” He will tell you “No!”
“What, then, will be higher?” “Rent: the value of land. Go, get yourself
a piece of ground, and hold possession.… You may sit down and smoke your
pipe; you may lie around like the _lazzaroni_ of Naples or the lepers
of Mexico; you may go up in a balloon or down a hole in the ground; and
without doing one stroke of work, without adding one iota to the wealth
of the community, in ten years you will be rich! In the new city you
may have a luxurious mansion; but among its public buildings will be an
almshouse.”[1204]

Accordingly Henry George regards rent not so much as a species of revenue
which, as Stuart Mill saw, is particularly easy to absorb by means of
taxation, but as the very source of all evil. Once get rid of rent,
poverty will be banished, inequality of wealth will be removed, and
economic crises—which George thought were the result of speculation in
land—will no longer disturb the serenity of commercial life. But it is
hardly enough to aim at the future increments of rent, for the damning
consequences of privilege would still remain if landowners were allowed
to retain even their present rents. The whole abomination must be taxed
out of existence.[1205] Such a tax would yield sufficient to defray all
State expenditure, and other forms of taxation could then be dispensed
with. In the single tax advocated by Henry George we have a curious
revival of the Physiocrats’ _impôt unique_.

George’s system is open to serious criticism both from the economic
and from the ethical standpoint. From the economic point of view it
is obvious that the right of private property does confer upon the
proprietor the right to such benefit as may accrue from a possible
surplus value, but it is not at all clear—nor has George succeeded in
proving it—that such a right absorbs the _whole_ benefit which accrues
from social progress. Besides, it seems rather childish to think that
rent is the sole cause of poverty and that its confiscation would result
in the removal of the evils of poverty.

From the point of view of equity it seems clear that George in removing
one injustice is at the same time creating another. To rob the present
proprietors of the rents which they draw is simply to deprive them of
advantages which many of them have acquired either by means of labour or
economy. Land is no longer acquired merely by occupation: the usual way
of getting hold of it to-day is to buy it. And if we consider that such
a transaction is just, we are bound to recognise the legitimacy of rent
just as much as the interest of capital. Confiscation might be justified
in the case of those who first unlawfully occupied the land. But how many
of them are left now?

Further, if we are going to relieve the landowner of the rent which
results from the progress of civilisation, we ought to indemnify him
for any “decrement” which may have resulted through no error of his.
Stuart Mill anticipated this objection[1206] and gave the dissatisfied
proprietor the option of selling his land at a price equal to its market
value at the time when the reform was inaugurated.[1207] Henry George
apparently never faced this aspect of the question. He thought that
“decrement” would be very exceptional indeed, and that the persistence of
increment values is as thoroughly established as any law in the physical
world ever was.

Mill’s system, though much more moderate than George’s, is by no means
beyond reproach. The common element in both systems—i.e. the emphasis
laid upon unearned increments—has been criticised both by socialists and
economists.

The socialists point out that if the object is to get rid of unearned
incomes the interest of capital as well as the rent of land ought to
be confiscated. While agreeing with the object, they claim that they
are more logical in demanding the extinction of both kinds. But this
criticism is not quite a complete answer to Mill and his supporters, for
the latter regarded interest as the legitimate remuneration, if not of
the labour, at least of the abstinence of the capitalist. Interest is the
remuneration of sacrifice.[1208] But the socialists are not convinced.
They cannot see how the negative effort of the capitalist is to be
compared with the positive effort of the labourer, and they have not been
sparing in their denunciation of Mill and his followers.

The economists adopt a different line of criticism. The argument is
that the rent of land is illegal because the progress of society has
contributed more to it than the work of the proprietor. But is there
any kind of revenue which is altogether free from such criticism? Every
kind of revenue contains some elements that are essentially social in
character; that is, elements that depend entirely upon the demands of
society. The growth of social demand often brings to capital as well
as to land, to labour as well as to capital, quite unexpected and
occasionally extravagant incomes. Has not political economy in the course
of its development been forced to recognise the existence of a whole
series of rents differing from the rent of land merely in respect of
their shorter duration? Was the fortune of the celebrated hunchback of
Quincampoix Street, who lived in the glorious days of Law’s system, in
any way different from the fortune of the Duke of Westminster, who owns
large areas of the city of London? Or is the surplus value conferred
upon old capital by a mere fall in the rate of interest in any respect
different from the surplus value acquired by land under the pressure of
growing population? The most striking thing, apparently, about unearned
increment is its ubiquity. Society, presumably, does not distribute its
revenues in the way a schoolmaster rewards the most painstaking or the
most meritorious pupil. It puts a premium upon the services that are
rarest, but never inquires whether they involved any greater amount of
sacrifice. Such premiums simply denote the intensity of its own demands.
What right have we to isolate one of these and demand that it and it
alone shall be confiscated?

Stuart Mill has given the only reply that is possible by showing that
none of the other rents has either the persistence or the generality of
the rent of land.[1209] That reply seems clear enough to justify at least
a partial application of the systems of Henry George and Stuart Mill.

About the year 1880 several leagues were founded in England, America, and
Australia with a view to propagating what George’s followers call his
“sublime truths.” During the last few years they have not been nearly so
active, although several attempts have since been made, especially by
municipalities, to tax surplus values.[1210] Even as far back as 1807 a
law was passed in France requiring riparian owners to pay compensation
in cases where their estates bordered upon public works which in any
way contributed to the greater value of the property. But the law is
very seldom enforced.[1211] In London the principle was recognised as
far back as the seventeenth century, but has long since fallen into
desuetude.[1212] The idea is again gaining ground very rapidly in England
and Germany especially. Numerous projects have been launched with a
view to taxing the surplus value of urban lands not used for building
purposes, and some of the schemes have been fairly successful. The
adoption of this principle was one of the more prominent features of
the famous English Budget of 1909, which roused so much opposition and
brought the long constitutional struggle between the Liberal Government
and the House of Lords to a head. The economists are still divided on
the question. The imposition of a _Werthzuwachssteuer_ by certain German
municipalities led to a fresh discussion of the topic in a number of
reviews and polemical works, but the principle stands enshrined in the
German Imperial Act of 1911.

These ideas have never obtained the same hold in France, where property
is subdivided to a much greater extent than it is in England, and where
rent is accordingly distributed among a greater number of cultivators and
naturally raises less opposition. In addition to this, the slow growth
of the population in France makes the problem less acute than it is in
Germany, where the workers find that an increasing proportion of wages is
absorbed in the payment of rent. But the question will demand attention
sooner or later, and France, like other countries, will have to look for
an answer.


III: SYSTEMS OF LAND NATIONALISATION

The “land-nationalisers,” whose schemes now come under consideration, not
content with the taxation of a part of the revenue of the land, demand
that the whole of it should again become the property of the State.

Apparently a much more thoroughgoing suggestion than any of the preceding
ones, especially Mill’s, in reality it is a much simpler system that is
proposed. The advocates of land nationalisation think, with Mill, that
the surplus value of the land should be reserved for the State, and, like
him, they have great faith in the persistence and continuity of this
surplus value. They also agree with him when he puts forward the claim
of society to the possession of the soil, but they never suggest that
it should be taken from its present owners. They reject the distinction
between earned and unearned income and consider that they are both
equally legitimate. But, unlike Mill, they never feel that they can
say to the landed proprietor, “Thus far and no farther.” Appropriation
is advocated simply on the ground of its public utility, and care is
taken to hedge it round with all kinds of guarantees. Proprietors are to
be indemnified not merely for the loss of income it would immediately
involve, but also for the loss of any future revenue upon which they had
reckoned. Could anything be simpler or more reasonable?

The practical interest of a system of this kind obviously cannot be very
great. Such a fundamental change in the institution of private property,
especially in old countries, could only be accomplished by means of a
revolution. Revolutions are to be undertaken in no light-hearted fashion,
and never without the sanction of absolute necessity. Curiously enough,
all the changes made in France, for example, since the Revolution,
in Russia since the emancipation of the serfs, and in Ireland during
the last hundred years have been in the opposite direction. They have
extended rather than contracted the area of private property. Russia
at the present moment is engaged in this very task. The prospects of
nationalisation are certainly not very rosy. New countries may perhaps
prove more favourable grounds for experiment: there the State may
possibly show itself more jealous of its rights. But as a matter of fact
it is just in those countries that the State is most reckless, the reason
undoubtedly being that the abuses of private property have not yet had
time to make their influence felt.

The extremely hypothetical character of the schemes now under
consideration relieves us of the necessity of examining their
organisation in any detail, although this question of the minutiæ is
apparently one that strongly appeals to the creative instinct of these
Utopians.

Of greater interest are the grounds on which they base their demand
and the economic processes by means of which they hope to accomplish
their aims. From this point of view the most interesting systems are
those of Gossen and Walras. Gossen’s scheme is expounded in a curious
volume entitled _Entwickelung der Gesetze des menschlichen Verkehrs_,
and Walras’s is developed in a memorandum addressed by the author to the
Vaudoise Society of Natural Sciences in 1880. Both works contain ideas
from which the economist may learn a good deal, and both writers claim
that the successful adoption of their schemes would enable the State to
make an offer of free land to all citizens.

(_a_) Gossen’s book appeared in 1853.[1213] It is a curious coincidence
that the French Bastiat, the American Carey, and the German Gossen should
all be engaged in developing an optimistic thesis just about the same
time. Of the three, Gossen’s was the most optimistic and by far the most
scientific. He concurred in the judgment of the Physiocrats, who believed
that the world was providentially subjected to the action of beneficent
laws which men must know and obey if they are ever to become happy. Such,
he thought, are the laws of enjoyment, or of utility or ophelimity, as
we call them to-day. A person who merely follows his own interests finds
that unconsciously, perhaps, he has been contributing to the happiness of
the whole of society. Gossen gives a remarkably clear proof of the theory
of maximum ophelimity, based upon a very ingenious analysis of wants.
According to this theory, every individual who pursues the satisfaction
of his own desires under a _régime_ of free competition helps in the
realisation of the maximum satisfaction by everybody concerned.

If it be true that each individual in pursuit of personal enjoyment
unwittingly contributes to the well-being of the whole community, it is
clear that everyone ought to be given the utmost possible freedom in the
pursuit of his interests. But there are two great obstacles in the way of
this. The first of these is want of capital, which Gossen thought could
be obviated by creating a huge Government bank which would lend capital
whenever required. The mechanism of the bank is described in considerable
detail. The second obstacle is the existence of private property in land.
If man is to develop all his faculties and to use them to their utmost
extent in the production of wealth, he must be allowed to choose his
work freely and to carry it on under the most advantageous circumstances
possible. But private property hinders free choice. “Thanks to this one
fact,” says Gossen, “the obstinacy of a single proprietor often hinders
the best development of the land which belongs to him and prevents its
utilisation in the fashion that would best meet the needs of production.
The necessity for the compulsory purchase of land for industrial
purposes, for the making of roads, railways, or for developing mines,
affords an indication of the unsatisfactory condition of landholding as
it exists at present.”[1214]

It is obviously necessary that the community’s right to the soil should
again be restored to it, so that everyone might be free to demand and to
obtain the use of as much of it as he required. Every industry could then
choose that locality which seemed best fitted for it. The right of using
the land might be disposed of by public auction and given to the bidder
who offered the highest rent. There would thus be a kind of guarantee
that the organisation of production at any one moment was being carried
on in the most favourable fashion—relatively, that is to say, to the
knowledge possessed by the community at that period.[1215]

(_b_) Walras’s position is not quite so frankly utilitarian as Gossen’s.
It was the analysis of the respective rôles of the individual and the
State, of which he gave an exposition in his lectures on _La Théorie
générale de la Société_ (1867), that inspired his reform. Following Henry
George, he sought a reconciliation of individualism and socialism[1216]—a
reconciliation which he variously speaks of under the terms “liberal
socialism,” “synthetic socialism,” or simply “syntheticism.”[1217]

It was his opinion that no real opposition existed between the State and
the individual, that the one is just the complement of the other. Taken
separately, it has been well said that they are nothing better than
abstractions; the only real man is the social man—man living in society.
This man, as we know, has two kinds of interests—the one personal or
individual, and as such opposed to the interests of other beings; the
other social or collective, common both to himself and his fellows—and
unless these are secured the existence of the race is immediately
jeopardised. The two groups of interests are equally important, for
they are both equally necessary for the life of the social being. The
State and the individual are mere phases in the life of the same being,
according as we think of him pursuing the collective interests which he
has in common with his fellow-men or his more personal and individual
interests. Each has its own sphere of activity definitely marked off from
the other by the diverse nature of the respective tasks which they have
to perform.

The duty of the State is to secure those general conditions of existence
which are necessary for everybody alike. Upon the individual devolves
the duty of determining his own personal position in society through
perseverance in the exercise of his own capacity in any line of activity
which he may himself choose. But if both of them, individual and State
alike, are to perform their respective tasks efficiently, they must be
supplied with all necessary resources. To the individual should accrue
the wealth which results from labour and saving, to the State the revenue
which results from general social progress—_i.e._ the rent of land.
Provided for in the manner indicated, there would be no necessity for
taking away from the individual a portion of the fruit of his labour
by means of taxation. Collective ownership of land and rent, private
ownership of capital and labour, together with their incomes—such is
the social organisation which Walras thought would solve the problem of
distribution: equal conditions, coupled with unequal situations.[1218]

The reforms of Gossen and Walras, starting from a different angle as
they do, depend for their realisation upon conditions that are exactly
identical. Both of them evince the most scrupulous respect for the
prescriptive rights of the present owners; and both agree that the State
has no more right to appropriate future rents[1219] upon which these
owners rely, in the manner suggested by John Stuart Mill, than it has to
confiscate present rents, as Henry George proposed. The only way in which
reform can be fairly carried out is to buy back the land, including in
the purchase price any surplus values upon which the present proprietors
have set their hopes. The most expedient way, perhaps, would be to issue
bonds and to offer these to the proprietors in exchange for the land.
The rents, which would still be received by the State—for there is no
prospect of cessation of growth—would be employed partly in paying
interest on the debt and partly in redeeming it; so that at the end of a
certain period, say fifty years, the State would have paid back all the
capital and it alone would henceforth draw the rents.[1220]

It would have been unnecessary to add anything to the exposition as
given by Walras but for the objection which he himself raised to it, and
which led him to give a very interesting account of his belief in the
permanence of rent.

“If,” says Walras, “the State pays to the proprietors the exact value of
their lands, reckoning in that price a sum equal to the estimated value
of the future rent, what is it going to gain by the bargain?” If the
value of the soil is carefully computed in the manner indicated above,
then the interest on the capital borrowed to effect the purchase and the
rents received must exactly balance one another, for one is just the
price of the other, and the State will find that the rent of land is
insufficient to repay the outlay involved. The results will cancel one
another. Some inconveniences will doubtless be avoided, but there will be
no outstanding advantage. How are we to get rid of this objection?

The difficulty is soon removed, for once the system outlined above is
adopted there will be an end to all speculation in land. When individual
buyers find that they must pay the owners a price that covers all surplus
values which the land may possibly yield in the future, which would mean
that _they_ would not get any of that surplus value themselves, they will
not be quite so keen. This is not the case, however, at the present time.
Speculation of this kind is rife everywhere, for the good reason that a
surplus value is always a possible contingency. The more perspicacious
or better informed a buyer is, the more firmly does he believe in this
advance and the more careful is he to safeguard his future interests.
The State, so soon as it has bought back the land, will be in the
position of the speculator in question. Walras is of the opinion that the
surplus value is certain to grow in future even more rapidly than the
actual possessors of the land imagine. Thanks to economic evolution, what
the private proprietor can only speculate on the State can rely upon with
absolute certainty.[1221]

“I believe, along with several competent economists, that when humanity
left the purely agricultural system under which it had lived for
thousands of years and entered upon a _régime_ of industry and commerce,
under which agriculture is still necessary to feed a growing population,
but only possible with the expenditure of a vast amount of capital, it
achieved a notable triumph, and the step it then took marks a veritable
advance in economic evolution. I also believe that as the result of
this evolution rent will continue to grow, but without involving any
scarcity or increase in the value of agricultural produce—a fact that has
escaped everyone except the wideawake and the well-informed, and by which
proprietors alone have profited. I further believe that if the State had
bought the land before this evolution had taken place and had then given
of its resources to further such development, even the normal growth of
this surplus value would have been ample to clear the debt.”[1222]

Walras agrees with Ricardo, and a kind of rehabilitation of the Ricardian
thesis drives him to the conclusion that the future must witness a
further growth of this surplus value of land—merely because of the
limited quantity of land in existence. There is this difference, however.
Whereas Ricardo bases his whole contention upon the validity of the law
of diminishing returns, Walras will not even entertain the thought of a
possible diminution in the amount of agricultural produce. The inevitable
progress of society which leads it on from a purely agricultural stage
right up to the industrial-commercial stage, from extensive to intensive
cultivation, must result in increasing the value of land. The State
would ease this transitional process by a measure of appropriation,
and could make a solid contribution to the success of this gigantic
undertaking, which is to apply not merely to land, but also to railways
and mines, etc.[1223]

(_c_) Numerous and various are the reasons invoked by the advocates
of land nationalisation. Gossen’s ideal is the maximum product, while
Walras’s first care is to supply the State with all necessary resources.
A final class of writers regards it as an excellent opportunity of
giving everybody access to the soil. It was this ideal of free land
that inspired the late Alfred Russel Wallace to write his book _Land
Nationalisation: its Necessity and its Aims_, and to inaugurate his
campaign in favour of nationalisation in 1882.

Wallace imagined that the mere right of free land would put an end for
ever to the worker’s dependence upon the goodwill of the capitalist.
Nobody would be found willing to work for starvation wages were everyone
certain that on a free piece of land he would always obtain his daily
bread. None would suffer hunger any longer, for the soil, at any rate,
would always be there awaiting cultivation. Free access to the land would
by itself solve the problem of poverty and want, and this would be by no
means one of the least of the benefits of land nationalisation.[1224]

The essential thing, in his opinion, is to give to every worker the right
to possess and to cultivate a portion of the soil.[1225] His proposal is
that once nationalisation is an accomplished fact every individual at
least once in his lifetime should be given the opportunity of choosing
a plot of land of from one to five acres in extent wherever he likes on
condition that he personally occupies and cultivates it.[1226]

The extremely simple character of the proposal makes it all the more
notorious. Unlike the other schemes, it is not based upon any subtle,
complex economic analysis. But it supplies a most convincing platform
theme. Closer scrutiny, however, reveals its almost childish nature.

The cultivation even of the smallest piece of land requires some capital,
which the advocates of free land appear to forget altogether. The
amount of capital so required may not infrequently be in excess of the
modest sum possessed by the working man. They also seem oblivious of
the fact that the land does not produce all the year round: there must
of necessity be a period of quiescence when the seeds are germinating.
And if we are to suppose that the worker has sufficient reserve to
wait for the harvest, why not admit at once that he has also enough
to tide over a period of unemployment? A few pounds in the bank to
which he can have access whenever he likes would certainly be much
more serviceable in mid-winter, say, than a plot of land situated some
distance away. Cultivation also requires capacity as well as capital. You
cannot improvise the peasant, and a first-class artisan may be a very
indifferent cultivator. The experience of distress committees seems to
prove this point. The advocates of free land have a mistaken belief in
the efficacy of the proposed remedy, and experience would quickly show
them how difficult it would be to apply it.[1227]


IV: SOCIALIST EXTENSIONS OF THE DOCTRINE OF RENT

The writers who have hitherto engaged our attention were all of them
individualists. They had no quarrel with the institution of private
property as such, nor were they hostile to the existence of capital
or to the personal advantage which may accrue from the possession of
exceptional talent or ability. The orthodox socialist, on the other hand,
is distinguished by an aversion to both interest and rent, and some of
them even go the length of denying the individual’s claim to any special
benefit accruing from personal ability if it has the effect of increasing
his income beyond the mere remuneration of labour.

Between the two conceptions is a veritable abyss, and the question arises
as to whether it can ever be bridged. Some writers confidently reply in
the affirmative. “It is the easiest thing in the world. Just treat your
interest on capital and the revenue derived from exceptional capacity as
rent, and the theory of rent will supply a justification not only for the
appropriation of land, but also for universal collectivism.” It was in
England that this idea was first mooted.

England, the true home of socialism, the England of Godwin and Hall,
of Thompson and Owen, after the first outburst of socialist activity
over seventy years before, had not given birth to a single socialist
scheme. With the exception of John Stuart Mill, who was impressed by the
French socialists, English writers had remained quite indifferent to the
ideas that were agitating Europe. Karl Marx toiled at the production
of his masterpiece, _Das Kapital_, in the very heart of London without
arousing the curiosity of a single English economist. The formation of
socialist parties in Germany and France after 1870 had to intervene
before the ideas of the great collectivist aroused any real enthusiasm
in Great Britain, and it was not until 1880 that a small Marxian party
was formed in England.[1228] Just about the same time another group of
writers known as the Fabian Socialists began to preach an original and
characteristically English kind of socialism.[1229]

The Fabian Society at first consisted of a small group of young men,
for the most part belonging to the middle classes, and holding
themselves aloof from the older political parties. The object was “the
prompt reconstruction of society in accordance with the highest moral
possibilities.” Success appearing somewhat remote, and being anxious for
more immediate results, they allowed themselves to be led astray by ideas
borrowed from the Marxian and anarchist doctrines of the Continent. But
they very soon renounced the revolutionary spirit, which has so little
in common with the English temperament; and in order to emphasise the
difference between themselves and the advocates of brute force and the
believers in a sensational historical crisis[1230] they adopted the name
Fabian, which is derived from Fabius Cunctator, the famous adversary of
Hannibal. The school has always been very critical both of itself and
of others, somewhat afraid of public ridicule, but possessing none of
the enthusiasm of apostles. Always ready to banter one another,[1231]
to destroy their ancient idols, and to dispense with every social or
definitely political creed, the Fabians rapidly became transformed into
a society of students and propagandists whose interests are exclusively
intellectual, and who believe that “in the natural philosophy of
socialism light is a more important factor than heat.”[1232]

Such an attitude is hardly conducive to success in a socialist crusade,
but the Fabians have left a deep impression—not so much upon working men,
perhaps, as upon members of the _bourgeois_ or middle class. Several of
their members are persons of great literary distinction, such as Mr.
Bernard Shaw, the dramatist and critic, Mr. and Mrs. Webb, the historians
of _Industrial Democracy_, and Mr. H. G. Wells, the novelist. By throwing
themselves into the study of social conditions of different kinds, by
collaborating in the publication of reviews and newspapers without
distinction of party, by publishing pamphlets and calling conferences,
they have managed to stimulate interest in their ideas. A _résumé_ of
these ideas is given in a curious collection of articles entitled the
_Fabian Essays_, published in 1889. These essays represent the opinions
of the more prominent Fabians rather than of the Fabian Society, for the
society as such has only a practical policy, but no theoretical doctrine
which it holds in common. It calls itself socialist,[1233] and would
welcome the transformation of individual into collective property. On
the other hand, it declares that it has “no distinctive opinions on the
marriage question, religion, art, abstract economics, historic evolution,
currency, or any other subject than its own special business of practical
democracy and socialism.”[1234] The economic theories which immediately
interest us here are peculiar to certain members of the society. The
society as a whole was doubtless inspired by these ideas, but they have
not all received official recognition at its hands, and they are not even
accepted by some adherents of the school.[1235]

It is Sidney Webb more especially who has essayed the task of finding
a new theoretical basis for Fabian collectivism. Having rejected the
Marxian theory of labour-value, and conscious of the charm possessed by
the modern theories of Jevons, of Marshall, and the Austrians, he felt
the need of some new justification for the collective ownership of the
means of production. Unable to free himself from the fascination which
Ricardo has always exercised over his fellow-countrymen, he turns to the
theory of rent of that great economist, and that theory, in his opinion,
is “the very corner-stone of collectivist economy.”[1236]

It is perfectly obvious that this theory of rent affords ample
justification for the appropriation of the revenue of land by proving
that this revenue is purely supplementary, produced as it is only on the
best lands and not on the worst, where the worker only produces the
exact equivalent of his wages. There is nothing very new in this, however.

Equally valid is its justification of confiscated interest. Different
kinds of capital, different machines, implements, and buildings, all of
which are employed for purposes of production, show the same variety
of quality, and consequently produce different quantities of material
goods, just as different lands do. The employee who works with “marginal
capital,” if we may so put it, or, in other words, has to make shift with
the minimum of tools and machinery, without which no work at all would
be possible, barely produces the equivalent of his wages. Everything
that exceeds this minimum may be claimed by the capitalist as payment
for the superior yield of the capital which he has supplied. Interest,
accordingly, is a differential revenue—a rent which ought to be expressed
as a definite quantity of produce, for such it really is, and not as so
much per cent.[1237]

Finally, any who possess superior ability as compared with those who work
not merely with a minimum of capital and labour, but with a minimum of
intelligence and ability, produce a surplus, which they generally retain
for themselves. This surplus is of the nature of a differential rent—the
rent of ability. Generally it is the result of the better education
received by the children of proprietors and capitalists, and it is thus
the indirect outcome of private property.[1238]

This ingenious argument is not very convincing. Even though we admit
that interest and possibly the greater portion of wages may only
be differential revenues, their confiscation would require special
justification. The attributes of capital, unlike those of land as defined
in the Ricardian theory, are not natural, but have been conferred
upon it by the efforts of human beings. And as to the rent of ability,
it still remains to be seen whether society would benefit by the
confiscation of this rent. As a scientific explanation of distribution
it does not seem to us a particularly attractive one. The distribution
of incomes is effected by means of exchange and depends upon prices, but
Webb makes an abstraction of prices in order to concentrate upon the
material product. We do not deny the existence of rent derived from fixed
capital, such rent being approximately measured by comparison with the
current rate of interest. But after the labours of Böhm-Bawerk and Fisher
it would seem impossible to explain this rate itself by reference to the
material productivity of capital, which seems to be the essence of Webb’s
theory.

The latest attempt to deduce revolutionary conclusions from the older
economics and to found a theory of collectivism upon the Ricardian
doctrine of rent has proved a failure. Even Webb’s friends have not shown
the enthusiasm for it that they might[1239]—and this despite the constant
allusion to the “three monopolies” which one meets with in their writings.

The interest of the experiment lies not so much in itself as in the
indication which it affords of the more recent trend of thought in
this matter. We have already drawn attention to the fact that the more
immediate disciples of Marx both in France and Germany have refuted his
theory of value, showing a disposition to rally to the counter-theory
of final utility. We have here a group of English socialists undergoing
a somewhat similar process of evolution. On every hand it seems that
socialism has given up all pretension to creating a working men’s
political economy alongside of the _bourgeois_, and it is now generally
recognised that there can only be one political economy, independent
altogether of all parties and social ideals, whose sole function is to
give a scientific explanation of economic phenomena.

The Fabians even outdo the syndicalists in their reaction against the
Marxian theories. Not only is the theory of value thrown overboard, but
Marx’s whole social doctrine is rejected as well. There are two points on
which the opposition is particularly marked, and although these may be
outside the scope of the present chapter it is necessary to mention them
in order to complete our exposition of Fabian ideas.

Marx’s social doctrine was built upon the theory of class war. Socialism
was simply the creed of the proletarian. Its triumph would mean the
victory of the proletariat over the _bourgeoisie_. Its principles are
the direct antithesis of those which govern society at the present time,
just as the two classes are directly opposed to one another. The Fabians
entertain no such views. They think of socialism as a mere extension of
the ideals of _bourgeois_ democracy, and they would be quite content with
a logical development and application of the principles which at present
govern society. “The economic side of the democratic ideal is, in fact,
socialism itself,” writes Sidney Webb.[1240] Our object should not be
to replace the _bourgeois_ supremacy by the proletarian ascendancy, nor
even to emancipate the worker from the tyranny of the wage system (for
under the socialist _régime_, as the Fabians point out, everybody will
be a wage-earner), but merely to organise industry in the interest of
the community as a whole. “We do not desire to see the mines and the
profits from the mines transferred to the miners, but to the community
as a whole.”[1241] Socialism is not a class doctrine, but a philosophy
of general interest. “Socialism is a plan for securing equal rights
and opportunities for all.”[1242] Webb questions the existence of an
English class struggle in the Marxian sense of the word.[1243] On the
contrary: “In view of the fact that the socialist movement has been
hitherto inspired, instructed, and led by members of the middle class or
_bourgeoisie_, the Fabian Society … protests against the absurdity of
socialists denouncing the very class from which socialism has sprung as
specially hostile to it.” One cannot see much similarity between this
point of view and that of the French syndicalists.[1244]

The Fabian philosophy of history is equally distinct. For Marx the
capital fact in nineteenth-century history is the concentration
of property in the hands of a privileged few, and the consequent
pauperisation of the masses. The necessary consequence of this twofold
development will be the revolutionary dispossession of the former by the
latter.

Optimistic as they are, the Fabians are not prepared to deny the
concentration of capital. According to their view, the prime fact in
nineteenth-century history is not the servility of the masses, but the
waning authority of the capitalists, the growing importance of collective
government in national economy, and the gradual dispossession of the
idlers for the sake of the workers, a process that is already well on
the way towards consummation. Webb is of the opinion that socialism is
being realised without any conflict, and even with the tacit approval of
its victims. “Slice after slice has gradually been cut from the profits
of capital, and therefore from its selling value, by socially beneficial
restrictions on its user’s liberty to do as he liked with it. Slice
after slice has been cut off the incomes from rent and interest by the
gradual shifting of taxation from consumers to persons enjoying incomes
above the average of the kingdom.… To-day almost every conceivable trade
is, somewhere or other, carried on by parish, municipality, or the
national Government itself without the intervention of any middleman
or capitalist.… The community furnishes and maintains its own museums,
parks, art galleries, libraries, concert halls, roads, streets, bridges,
markets, slaughter-houses, fire-engines, lighthouses, pilots, ferries,
surf-boats, steam-tugs, lifeboats, cemeteries, public baths, washhouses,
pounds, harbours, piers, wharves, hospitals, dispensaries, gasworks,
waterworks, tramways, telegraph cables, allotments, cow meadows,
artisans’ dwellings, schools, churches, and reading-rooms.” And even
where private industry is allowed to survive it is rigorously supervised
and inspected. “The State in most of the larger industrial operations
prescribes the age of the worker, the hours of work, the amount of
air, light, cubic space, heat, lavatory accommodation, holidays, and
meal-times; where, when, and how wages shall be paid; how machinery,
staircases, lift-holes, mines, and quarries are to be fenced and guarded;
how and when the plant shall be cleaned, repaired, and worked.… On
every side the individual capitalist is being registered, inspected,
controlled, and eventually superseded by the community.”[1245]

We are already in the full current of socialism, declares Mr. Webb. Our
legislators are socialists without knowing it. “The economic history
of the century is an almost continuous record of the progress of
socialism.”[1246] The Fabians, adopting a saying of the Saint-Simonians,
point out to the socialists that they ought to be content with a clear
exposition of the evolution of which everyone knows something, although
perhaps in a hazy fashion. “Instead of unconscious factors we become
deliberate agents either to aid or resist the developments coming to our
notice.”[1247]

We are some distance away from Marx here, and farther still from his
syndicalist disciples. We have really been led back to the philosophy of
history as it was interpreted by the German State Socialists. Must we,
then, conclude that the Fabians are State Socialists who feign ignorance
of the fact?

Fabian socialism, strictly speaking, is not a new scientific doctrine.
It is rather a plea for economic centralisation, an idea begotten of the
modern conditions of existence in Europe, as against orthodox Liberalism,
which is somewhat threadbare but still holds an honourable place in
the opinion of many English writers. It is highly probable that the
legislative activity of the last thirty years, which friends and foes
alike regard as somewhat socialistic, will appear to our descendants as a
moderate movement in the direction of greater centralisation.

English politics even long before this had begun to shake off its
individualism and to rid itself of the philosophic and political
doctrines of the utilitarian Radicals, which Bentham and his friends had
formulated early in the nineteenth century, and which still exercise a
considerable influence over some people. The Fabians regard themselves
as the special protagonists of the new standpoint. They would be proud
to consider themselves the intellectual successors of the utilitarian
Radicals, who simply claim to express the new desires of a great
industrial democracy. Labour legislation and its many ramifications,
municipal socialism spontaneously developing in all the big towns, the
great co-operative “wholesales” in Glasgow and Manchester, furnish
persuasive illustration of the practical socialism which they advocate.
“It is not,” writes Mrs. Sidney Webb, “the socialism of foreign
manufacture which cries for a Utopia of anarchy to be brought about by
a murderous revolution, but the distinctively _English_ socialism, the
socialism which discovers itself in works and not in words, the socialism
that has silently embodied itself in the Factory Acts, the Truck Acts,
Employers’ Liability Acts, Public Health Acts, Artisans’ Dwellings Acts,
Education Acts—in all that mass of beneficent legislation forcing the
individual into the service and under the protection of the State.”[1248]

The Fabian doctrine is the latest avatar of the Ricardian theory. It
would really seem impossible to draw any further conclusions from it.
Everything that could possibly be attempted in that direction has already
been done, although other weapons of war forged against the institution
of private property may yet come out of that old armoury. But that is
hardly probable, especially when we remember that economic science
no longer regards rent as a kind of anomaly amid the other economic
phenomena. There is no doubt as to its reality, but it has been deprived
of much of the social importance that was attributed to it by Ricardo and
his followers, and it has consequently lost much of its revolutionary
fecundity.




CHAPTER III: THE SOLIDARISTS


I: THE CAUSES OF THE DEVELOPMENT OF SOLIDARISM

The word “solidarity,” formerly a term of exclusively legal import,[1249]
has during the last twenty years been employed to designate a doctrine
which has aroused the greatest enthusiasm—at least in France. Every
official speech pays homage to the ideal, every social conference ends
with an expression of approval. Those who wish to narrow the scope
of industrial warfare as well as those who wish to extend the bounds
of commercial freedom base their demands upon “a sense of social
solidarity,” and it is becoming quite a common experience to find writers
on ethics and education who have fallen under its spell. The result is
that no history of French economic doctrines can pass it by.[1250]

The fundamental idea underlying the doctrine of solidarity, namely, that
the human race, taken collectively, forms one single body, of which
individuals are the members, is not by any means new. St. Paul and
Marcus Aurelius among the writers of antiquity, not to mention Menenius
Agrippa’s well-known apologue, gave expression to this very idea in terms
almost identical with those now commonly used.[1251]

Nor was the importance of heredity wholly lost upon the ancients. The
hereditary transmission of moral qualities was a doctrine taught with the
express sanction of a revealed religion. This doctrine of original sin
is perhaps the most terrible example of solidarism that history has to
reveal. Turning to profane history, we are reminded of the line of Horace:

    _Delicta majorum immeritus lues!_

We must also remember that it was always something more than a mere
theory or dogma. It was a practical rule of conduct, and as such was
enjoined by law, exhorted by religion, and enforced by custom, with the
result that what was preached was also practised with a thoroughness that
is quite unknown at the present day. We have an illustration of this in
the collective responsibility of all the members of a family or tribe
whenever one of their number was found guilty of some criminal offence. A
survival of this pristine custom is the Corsican vendetta of to-day.

Finally, there is that other aspect of solidarity which is based upon
division of labour and the consequent necessity of relying upon the
co-operation of others for the satisfaction of our wants. The Greek
writers had caught a glimpse of this interdependence many centuries
before the brilliant exposition of Adam Smith was given to the world.

All the manifold aspects of the doctrine, whether biological,
sociological, moral, religious, legal, or economic, were obviously
matters of common knowledge to the writers of antiquity. But each phase
of the subject seemed isolated from the rest, and it was not until the
middle of the nineteenth century that it dawned upon thinkers that there
was possibly something like unity underlying this apparent diversity.
It has already been impressed upon us that Pierre Leroux and a few of
the disciples of Fourier, as well as Bastiat, had realised something
of the value of the doctrine of solidarity and of the appropriateness
of the term. But it was reserved for Auguste Comte to appreciate its
full possibilities. “The new philosophy, viewed as a whole, emphasises
the intimacy that exists between the individual and the group in their
different relations, so that the conception of social solidarity
extending throughout time and embracing the whole of humanity has become
a fairly familiar idea.”[1252]

It is necessary, however, to inquire somewhat more closely into the
success of the new doctrine in holding the attention both of the public
and of economists. It is possible that the seed would have borne little
fruit but for the presence of extraneous circumstances which helped to
impress the public with a sense of the importance of these new theories.

Nothing has left a deeper impression upon the public or afforded a
better illustration of the infinite possibilities of the new doctrine
than the study of bacteriology. The prevalence of certain contagious
maladies or epidemics had been too terribly prominent in the history
of the human race to require any confirmation; but it was something to
learn that the most serious diseases and maladies of all kinds were
communicated from man to man by means of invisible bacilli. It was now
realised that men who were supposed to be dying a natural death were in
reality being slowly murdered. It was with something like horror that men
learned that the consumptive, the hero of a hundred sentimental tales,
every day expectorated sufficient germs to depopulate a whole town.
Such “pathological” solidarity is being more closely interwoven every
day by the ever-increasing multiplicity and rapidity of the means of
communication. The slow caravan journey across the desert was much more
likely to destroy the vitality of the bacilli picked up at Mecca than
the much more rapid railway journey of the future, which will speed the
pilgrim across the sandy wastes in a few hours. The traveller of former
days, who went either afoot or on horseback, ran less risk of infection
than his descendant of to-day, who perhaps only spends a few hours in the
metropolis.

Sociology has also brought its contingent of facts and theories.[1253]
The sociologist stakes his reputation upon being able to prove that the
fable of the body and its members is no fable at all, but a literal
transcription of actual facts, and that the union existing between
various members of the social body is as intimate as that which
exists between the different parts of the same organism. Such is the
fullness and minuteness with which the analogy has been pushed even
into obscure points of anatomical detail that it is difficult not to
smile at the _naïveté_ of its authors. It is pointed out that so close
is the resemblance between the respective functions in the two cases
that the term “circulation” does duty in both spheres, and a comparison
is instituted between nutrition and production, reproduction and
colonisation, and accumulation of fat and capitalism. In Florence during
the Middle Ages the _bourgeois_ were spoken of as the fat people, the
workers as the small people. The organs also are very similar. Arteries
and veins have their counterpart in the railway system, with its network
of “up” and “down” lines. The nervous system of the one becomes the
telegraphic system of the other, with its rapid communication of news
and sensations. The brain becomes the seat of government, the heart is
the bank; and between the two, both in nature and in society, there is a
most intimate connection. Even the white corpuscles have a prototype in
the police force, whose duty is to rush to the seat of disorder and to
attempt to crush it immediately.

The sociological analogy, ingenious rather than scientific, did not have
a very long vogue.[1254] But it has at least supplied a few conclusions
which are thoroughly well established, and which serve as the basis of
the solidarist doctrine. Among these we may mention the following:

(_a_) That solidarity in the sense of the mutual dependence of members
of the same body is a characteristic of all life. Inorganic bodies are
incomplete simply because they are mere aggregates. Death is nothing but
the dissolution of the mysterious links which bind together the various
parts of the living organism, with the result that it relapses into the
state of a corpse, in which the various elements become indifferent to
the presence of one another and are dissipated through space, to enter
into new combinations at the further call of nature.

(_b_) That solidarity becomes more perfect and intimate with every rise
in the biological scale. Completely homogeneous organisms scarcely differ
from simple aggregates. They may be cut into sections or have a member
removed without suffering much damage. The section cut off will become
the centre of independent existence and the amputated limb will grow
again. In the case of some organisms of this kind reproduction takes the
form of voluntary or spontaneous segmentation. But in the case of the
higher animals the removal of a single organ sometimes involves the death
of the whole organism, and almost always imperils the existence of some
others.

(_c_) That a growing differentiation of the parts makes for the greater
solidarity of the whole. Where every organ is exactly alike each is
generally complete in itself. But where they are different each is just
the complement of the other, and none can move or exist independently of
the rest.

One has only to think of the treatment meted out to the innovator by
primitive tribes to realise the tremendous solidarity of savage society.
The “boycotting” familiar in civilised countries provides a similar
example.

Political economy, in addition to an unrivalled exposition of division
of labour (which, as we have seen, was not unknown in classical times),
has adduced several other incidental proofs of solidarity, such as bank
failures in London or Paris and short time in the diamond or automobile
industry as the result of a crisis in New York or an indifferent rice
harvest in India. To take a simpler case, consider how easy it would
be for the secretary of an electrical engineers’ union to plunge whole
cities into darkness. The general strike, the latest bugbear of the
_bourgeoisie_, owes its very existence to the growing sense of solidarity
among working men. A sufficient number of workmen have only to make up
their minds to remain idle and society has either to give way to their
demands or perish.

Add to this the remarkable development which has taken place in the
spreading of news and the perfecting of telegraphic communication, by
which daily and even hourly men of all nations are swayed with feelings
of sorrow or joy at the mere recital of some startling incident which
formerly would have influenced but a very small number of people.[1255]
Such agencies are not unworthy of comparison with those subtle human
sympathies which are known by the name of spiritualism or telepathy.
Thus from every side, from the limbo of occultism as well as from the
full daylight of everyday life, the presence of numberless facts goes to
show that each for all and all for each is not a mere maxim or counsel
of perfection, but a stern, practical fact. The good or bad fortune of
others involves our own well-being or misfortune. The _ego_, as someone
has said, is a social product. These are some of the founts from which
the stream of solidarism take its rise.

But that is not all. The doctrine of solidarity had the good fortune
to appear just when people were becoming suspicious of individualist
Liberalism, though unwilling to commit themselves either to collectivism
or State Socialism.

In France especially a new political party in process of formation was on
the look-out for a cry. The new creed which it desired must needs be of
the nature of a _via media_ between economic Liberalism on the one hand
and socialism on the other. It must repudiate _laissez-faire_ equally
with the socialisation of individual property; it must hold fast to the
doctrine of the rights of man and the claims of the individual while
recognising the wisdom of imposing restrictions upon the exercise of
those rights in the interests of the whole community. This was the party
which called itself Radical then, but now prefers to be known as the
Radical-Socialist party. German State Socialism as expounded about the
same time was closely akin to it. But the German conception of the State
as something entirely above party was an idea that was not so easily
grasped in France as in Prussia. History in the two countries had not
emphasised the same truths. Solidarism, so to speak, is State Socialism
in a French garb, but possessed of somewhat better grace in that it does
not necessarily imply the coercive intervention of the State, but shows
considerable respect for individual liberties.[1256]

The new word performed one final service by usurping the functions
of the term “charity,” which no one was anxious to retain because of
its religious connection. The other term, “fraternity,” which had
done duty since the Revolution of 1848, was somewhat antiquated by
this time, and charged with a false kind of sentimentalism. The word
“solidarity,” on the contrary, has an imposing, scientific appearance
without a trace of ideology. Henceforth every sacrifice which is demanded
in the interests of others, whether grants to friendly societies or
workmen’s associations, cheap dwellings, workmen’s pensions, or even
parish allowances, is claimed, not in the interests of charity, but of
solidarity. And whenever such demand is made the approved formula is
always used—it is not a work of charity, but of solidarity, for charity
degradeth whereas solidarity lifteth up.


II: THE SOLIDARIST THESIS

The current is seldom very clear when the tributaries are numerous, and
the stream must deposit its sediment before it becomes limpid. So here
much greater precision was needed if the doctrine was ever to become
general in its scope or even popular in its appeal.

M. Léon Bourgeois, one of the leaders of the Radical-Socialist party,
to his eternal credit attempted some such clarification by employing
the term “solidarity,” hitherto so vaguely metaphysical, in a strictly
legal fashion to designate a kind of quasi-contract. Quite a sensation
was caused by M. Bourgeois’s work—a result due alike to the prominent
position of the author and the opportune moment at which the book
appeared. The greatest enthusiasm was shown for the new doctrine,
especially in the universities and among the teachers in 100,000
elementary schools. An equally warm welcome was extended to it in
democratic circles, where the desire for some kind of lay morality had
by this time become very strong. It becomes necessary, accordingly, to
give a more detailed analysis of the theory than was possible within the
compass of the small volume in which it was first expounded.[1257]

In the first place it must be noted that the doctrine connotes something
more than the mere application or extension of the idea of natural
solidarity to the social or moral order. On the contrary, it is an
attempt to remove some of the anomalies of natural solidarity. A firm
belief in the injustice of natural solidarity, or at least a conviction
that things are so adjusted that some individuals obtain advantages which
they by no means deserve while others are burdened with disadvantages
which are none of their seeking, lies at the root of the doctrine. There
is a demand for intervention in order that those who have benefited by
the accidents of natural solidarity should divide the spoils with those
who have been less fortunate in drawing prizes in the lottery of life.
It is for Justice to restore the balance and correct the abnormalities
which a fickle sister has created. Just as it has been seen that man
may utilise the forces of nature, against which he formerly was wont to
struggle, to further his own ends, so solidarity puts forth a claim for
the co-operation of Justice to correct the anomalies begotten of brute
strength, believing that only in this way is real advance possible or any
kind of improvement even remotely attainable.

Natural solidarity[1258] tells us that as a result of the division of
labour, of the influence of heredity, and of a thousand other causes
which have just been described, every man owes either to his forbears
or his contemporaries the best part of what he has, and even of what
he himself is. As Auguste Comte has put it, “We are born burdened with
all manner of social obligations.” Nor is it an uncommon thing to meet
with the word “debt” or “obligation” in the articles of the French
Constitution. In the Constitution of 1793, for example, the duty of
public assistance is spoken of as a sacred debt. But the term was loosely
employed in the sense of _noblesse oblige_ or _richesse oblige_, every
individual being left free to carry out the obligation as best he could
in accordance with the dictates of his own conscience. It is necessary,
however, to transform the duty into a real debt, to give it a legal
status, and when not voluntarily performed a legal sanction as well.
If we are anxious to know exactly how this is to be done we have only
to turn to Articles 1371-81 of the Civil Code, where in the chapter
dealing with quasi-contracts we shall come across a section headed “Of
Non-conventional Contracts.”

The title would seem to imply the validity of debts not explicitly
contracted—that is to say, the existence of obligations which have
not involved any volitional undertaking on the part of either party
concerned. The first case, that of injury inflicted upon others, whether
wilfully or not, is referred to as quasi-misdemeanour, and other
instances mentioned in the section are spoken of as quasi-contracts.
Illustrations, which are plentiful enough, include payments made when not
really due, attention to the business of another without any definite
mandate authorising such interference, the obligation of the inheritor of
property to pay off debts incurred by the previous owner, the recognition
of the common interest which people living in the same neighbourhood
possess, and which also exists between those who own property and those
who lease it, between those who use it and those who inherit it.

Wherever anything of the nature of a quasi-contract exists we may be
tolerably certain that it is the product of _de facto_ or natural
solidarity. Such solidarity may take its rise in the mere fact of
propinquity or the mere feeling of neighbourliness; but more often than
not it involves a measure of control over the lives of others, which is
one of the outstanding features of a _régime_ of division of labour. Then
follow the familiar phenomena of fortunes amassed to the detriment of
others through the acquisition of unearned increment and the operation of
the laws of inheritance—the source of so many inequalities. Nor must we
forget the prejudicial effect of quasi-misdemeanour upon the fortunes
of others. The result is that the whole of society seems built, if not
upon an original explicit contract, as Rousseau imagined, at least upon
a quasi-contract; and seeing that this quasi-contract receives the tacit
submission of the parties concerned, there is no reason why it should not
be legally binding as well.

Now the existence of a debt implies that someone must pay it, and the
next question is to determine who that someone ought to be.

Obviously it can only be those who have benefited by the existence of
natural solidarity—all those who have amassed a fortune, but whose
fortune would be still to make but for the co-operation of a thousand
collaborators, both past and present. Such individuals have already
drawn more than their share and have a balance to make up on the debit
account. This debt should certainly be paid. It is all the better if it
is done voluntarily, as an act of liberality arising out of goodness of
heart—_quia bonus_, as the Gospel narrative puts it, of the rich good
man. But this is hardly probable. Most people will pay just when they
are obliged to; but such people have no right to consider themselves
free, and no claim to the free disposal of their goods until they have
acquitted themselves honourably.[1259] Individual property will be
respected and free when every social debt which it involves has been
adequately discharged, and not before then.[1260] Until this is done it
is useless to speak of the existence of competition.

The next question is to determine who is to receive payment. Payment
ought to be made to those who, instead of benefiting by the existence
of natural solidarity, have suffered loss through its operation—the
disinherited, as they are rightly called.[1261] All those who have not
received a fair share of the total wealth produced by the co-operation
of all naturally find themselves in the position of creditors. It is
not easy to name them, perhaps, but the State can reach them a helping
hand in a thousand different ways. State action of this kind was formerly
spoken of as public assistance; nowadays it is termed solidarity or
mutual insurance.

The payment may take the form either of a voluntary contribution to help
some solidarist effort or other, or an obligatory contribution levied by
the State. Some advocate progressive taxation, for if it be true that
profits tend to grow progressively in proportion as an increase in the
variety and strength of the means of production takes place, why not a
progressive tax as well?[1262] Besides, the tax would be of a semi-sacred
character, because it would mean the discharging of an important social
debt. Nor is there anything very extravagant in the demand that the
State should see that everyone makes a contribution in proportion to
his ability, seeing that the natural function of the State is to be the
guardian of contracts.[1263]

It is still more difficult to assess the rate of payment. The conditions
under which payment would be made, says M. Bourgeois, would be such
as the associates themselves would have adopted had they been free to
discuss the terms of their engagement. In other words, everything must
be regulated as if society were the result of an express convention, or
rather of a retroactive contract mutually agreed upon. The difficulty is
to determine the conditions which individual associates would demand as
the price of their adhesion to the terms of the contract. We shall have
to imagine what they would demand were they able to make fresh terms.

But we are not much farther ahead after all, for the individual
himself knows nothing at all about it. Renouncing the attempt to solve
the insoluble, one has to fix some kind of minimum claim which the
disinherited may reasonably expect to see fulfilled. Such a minimum claim
would be a guarantee against the ordinary risks of life. Society would
become a kind of association for mutual insurance, with the good and bad
fortune spread out equally over everybody.[1264]

But a quasi-contract is something very different from this. Contracts and
quasi-contracts are based upon the giving and receiving of equivalent
values, _do ut des_, whereas mutual insurance is a kind of substitute for
direct liability. A contract is essentially individualistic—mutualism is
primarily socialistic.

This idea of a quasi-contract contributed not a little to the success of
M. Bourgeois’s theory, but it makes no vital contribution to the doctrine
itself, and he might very easily have omitted it altogether.[1265] It is
nothing better than an artifice, almost a logomachy, invented for the
express purpose of affording some kind of justification for demanding a
legal contribution by treating it as an implicit or retroactive contract.
It is more of a concession to individual liberty than anything else.
A taxpayer grumbles at a tax which goes to provide pensions for the
old, but it is pointed out to him that the contribution is owing from
him in virtue not of an explicit agreement perhaps, but at least of a
quasi-agreement.

But what useful purpose can be served by such ironical subterfuge? If
it can be shown that owing to inferior moral education the law must
have the making of a conscience for those who have none, and must
enforce a certain minimum of social duties which appear necessary for
the preservation of life and the perpetuation of social amenities, what
is that but a form of State Socialism? If it is pointed out, on the
other hand, that moral progress consists in transforming debts into
duties[1266] rather than _vice versa_, one readily realises that it
is best to multiply the number of free institutions of a solidarist
complexion, such as mutual aid and co-operative societies, trade unions,
etc.

Another objective which the quasi-contract theory had in view was to
supply the debtor with a kind of guarantee that nothing would be
required of him beyond the exact equivalent of his debt.[1267] But, as we
have already noted, it would be a somewhat illusory guarantee, because
it is almost impossible to determine the amount of the debt in the first
place. Since the amount of this debt is in some way to be fixed by law it
may be well to begin with it.

Should the legislator find himself driven to accept M. Bourgeois’s
valuation, the demands made upon the taxpayer will not be so exorbitant
after all. The whole mass of obligations is summed up under three heads:

1. Free education for all classes of the community. Intellectual capital
more than any other kind of capital is a collective good, and should
never be other than common property, upon which every one may draw
whenever he wishes. A necessary corollary would be a shorter working day.

2. A minimum of the means of existence for everybody. It is difficult to
imagine a retroactive contract which refuses to grant men the right to
live. Regarded in this light, the “guarantism” of Sismondi and Fourier,
the “right to work” of Louis Blanc and Considérant, gain new significance
and throb with fresh vitality.

3. Insurance against the risks of life, which, being fortuitous, are
escaped by none. We know the promptness with which the feeling of kinship
is aroused whenever one of these accidents happens on a scale somewhat
larger than usual and assumes the proportions of a catastrophe. Why
should it be otherwise when a single individual falls a victim to the
fickleness of fate?

       *       *       *       *       *

If M. Bourgeois has given his theory a distinctly politico-legal bias, M.
Durkheim has taken good care to approach the question from the standpoint
of moralist and sociologist.

M. Durkheim draws a distinction between two kinds of solidarities.

The first of these, which he regards as a quite inferior type, depends
upon external resemblances, and is of a purely mechanical character, like
the cohesion of atoms in a physical body. The other, which consists of a
union of dissimilars, is the result of division of labour, and of such is
the union between the various members of the human body. Durkheim regards
this kind of unity as of immense significance, not so much because of its
economic consequence as of its important moral results, “which might even
supply the basis of a new moral order.” Seeing that individuals really
follow divergent paths, the struggle for existence cannot be quite so
keen as it is generally supposed to be,[1268] and this differentiation
between the individual and the mass enables the former to dissociate
himself from the collective conscience. Durkheim’s desire was to see the
new ethic developed by the professional associations; hence the important
_rôle_ which trade unionism holds in his philosophy.

Without disputing the validity of the distinction thus made, we may be
allowed to question the advisability of treating one kind of solidarity
with such contempt and of showing such enthusiasm for the other. Our hope
is that the future lies with the former kind. For what is the object of
evolution if it is not to make what seems similar really alike? The world
is not merely marching in the direction of greater differentiation; it
is also moving towards a deeper unity. This seems a well-established
fact, at least so far as the physical world is concerned. Mountains are
brought low and the hollow places filled. Heat is dissipated throughout
space, causing minute gradations of temperature, and the establishment of
a kind of final equilibrium.[1269] The same law applies to human beings.
Differences of caste, of rank, of manners and customs, of language and
measurements, are everywhere being obliterated. And it seems by this
time a tolerably well-established fact that the wars of the past were
wars between strangers—strangers in race or religion, in culture or
education—and consequently it was between people who were dissimilar
that they appeared most violent. Therefore the march towards unity also
represents a movement in the direction of peace.[1270]

Such a conception of solidarity seems more akin to the ideal which we
have formed respecting it, and has by far the greatest moral value; for
if I am to be responsible for the evil that has befallen another, or
to be considered an accomplice in the evil which he has done, that can
only be just in proportion to the extent to which that other is also
myself.[1271] The practical result will be a preference for such modes
of association as will group men together according to some general
characteristic—a co-operative association rather than a trade union; for
while the interest of the latter is in opposition both to that of the
producer and that of the public, the method of association in the former
case is the most general imaginable, for everyone at some time or other
must be regarded as a consumer.


III: THE PRACTICAL APPLICATION OF SOLIDARIST DOCTRINES[1272]

There is no such thing as a Solidarist school in the sense in which we
speak of a Historical, a Liberal, or a Marxian school. Solidarity is a
banner borne aloft by more than one school, and a philosophy that serves
to justify aims that are occasionally divergent. As we have already had
occasion to point out, the solidarists are more of a political party than
a doctrinal school, and their best work has been done in association
with the Radical-Socialist party. Behind them is the State Socialist
or “interventionist” school. It has been suggested that the social
legislation of the last twenty years, such as the regulations governing
the conditions of labour, factory and general hygiene, insurance against
accidents and old age, State aid for the aged and the disabled,[1273]
the establishment of societies for mutual credit, rural banks and cheap
cottages, and school clinics, all of which are the direct outcome of
preaching solidarity, as well as the grants in aid of these objects which
are paid out of the progressive taxation levied upon inherited wealth or
extraordinary incomes of such as have plucked the fruit from the tree of
civilisation to the deprivation of those who caused that fruit to grow,
should be known as “the laws of social solidarity.”

Nor are workmen the only class who are likely to benefit by the adoption
of this principle. The Protectionist or Nationalist party claims to be
the party of solidarity, as well as the mutualists, who employ the term
oftener than anyone else. When the taxpayer complains about the taxes
which he has to pay in order to grant a bounty to certain proprietors or
manufacturers, and the consumer grumbles because the levying of import
duties results in increasing his cost of living, the reply is that the
spirit of solidarity demands that preference should be given to their own
kith and kin.[1274]

Fiscal reform, with its twofold attribute of a progressive tax at one
end of the scale and total exemption at the other, also claims to be
solidarist. Progressive taxation is justified on the ground that those
who have made their fortunes are the debtors of society, while exemption
at the other end is only fair, seeing that the disinherited have nothing
to give, but have already a strong claim upon society.

However closely akin to State Socialism practical solidarism may appear,
the fact that the latter may achieve its results merely by means of
associationism is sufficient to distinguish it from the former. The
result is that it has given quite a fresh impetus to the associative
movement. Syndicalists, mutualists, and co-operators vie with one another
in their anxiety to swear allegiance to the principle of free solidarism
as distinct from the forced solidarism of the State Socialists.[1275] It
is not that they fail to recognise the necessity for the latter and its
superiority over free competition, but on moral grounds they think that
such forced solidarism is even inferior to competition. It is imperative,
however, that we should make some distinction between such heterogeneous
elements as enter into the composition of the solidarist party.

The syndicalists, who come first, will hear of nothing except trade
unionism, which is to become the basis of a new economic organisation
and a new kind of ethics. The sense of solidarity is in this case
very strong, because the _syndicat_ poses as the sworn foe of the
_bourgeoisie_. Nothing develops this sense like a struggle, and the
struggle becomes a means of discipline. The attempts made by the trade
unionists to enforce this solidarity, not only upon their own members,
but also upon workmen who are unwilling to enrol themselves as members of
the union, the antagonism shown for the _jaunes_, and the advent of the
solidarist or sympathetic strike, constitute one of the most interesting
aspects of the syndicalist movement.

Next came the mutualists, who are loudest and most persistent in
their appeal to solidarity.[1276] It is not difficult to understand
this when we realise the battle which they wage against the ills of
life—invalidity, old age, poverty, and death. It is just here that men
most feel the need of sticking together. But if we are to judge by the
sacrifices which they make, the sense of solidarity among the mutualists
themselves is not very great. They are loud in their demands that the
State or the commune, or even voluntary subscribers, should complete
what they have begun,[1277] and that the State should delegate to them
the task of establishing workmen’s pensions and of dispensing State aid.
Containing as they do some members of the middle classes as well as
employees, they show no pronounced revolutionary leanings, nor have they
even a plan of social reorganisation.

Co-operation, on account of its scope and the variety of its aims, has
some claim to be regarded as in a measure a realisation of the ideals of
solidarism. But co-operation presents a twofold aspect with different
programmes and aims that are not always easily reconcilable. The oldest
movements in which the fraternal tradition of 1848 may still be viewed
in all its pristine vigour are the producers’ associations, of which we
have already spoken. Their ideal is to emancipate the worker by setting
up a kind of industrial republic, and they make a practical beginning
with “guarantism,” which Sismondi expected the masters to give and
which Fourier thought would naturally follow the establishment of the
Phalanstère.[1278] But however rosy the prospects may be they can never
affect more than a very small proportion of the working classes.

Distributive societies have met with a greater measure of success. Their
membership is reckoned by the million, and in some towns in England,
Germany, and Switzerland the members actually comprise the majority of
the population. Such is the colossal magnitude of the “wholesale” that it
might even alter the whole character of commercial organisation—that is,
if we are to judge not merely by the record of its transactions, but also
by the feeling of awe which it inspires in the minds of merchants in all
countries, who are already claiming the protection of their respective
Governments. Although the number of such societies is rapidly increasing
in France, they have never had quite the same practical influence there,
simply because they have been lacking in the true spirit of solidarity.
Curiously enough, these French co-operators have formulated a most
ambitious programme of social reform, which is wholly inspired by the
experience of the Rochdale Pioneers.[1279]

The gospel of solidarity has even penetrated into the rural districts,
and although the temperament of the peasant is strongly individualistic
it is already beginning to bear fruit in the shape of numerous
associations of various kinds. The most interesting of these is the
mutual credit society, which implies collective responsibility for social
debts.[1280]

This by no means exhausts the practical consequences of the solidarist
ideal. One notable result which has already shown itself is a serious
modification of the whole conception of the rights and attributes of
private property. The old formula in which property was spoken of as
a social trust rather than as a strictly individualistic right at the
_dominium ex jure Quiritium_, but which until quite recently was nothing
more than a mere metaphor, becomes a reality under the inspiration of
this new doctrine of solidarity. Once it is realised that property is
simply the result of the unconscious co-operation of a large number of
causes, most of which are impersonal, the tendency will be to eliminate
it altogether or to adapt it more and more to collective ends. M. Alfred
Fouillée,[1281] a French philosopher, aptly put this aspect of the
question when he spoke of social co-proprietorship being grafted on to
individual property.

The modifications introduced into the study of jurisprudence by
emphasising its solidarist aspect are occasionally spoken of as
“juridical socialism,” a term that is not very clear, to say the least.
The jurists who have undertaken the task of applying this new principle
to the study of jurisprudence have not merely adopted the quasi-contract
theory as the basis of their work of reconstruction, but have also
refused to recognise any absolute rights of property; in other words,
they claim that the proprietor has other responsibilities besides the
mere exercise of those rights (_qui suo jure utitur neminem lædere
videtur_).

Instead of emphasising the new principle known as the “abuse of rights,”
they prefer to claim the complete subjection of all private rights to the
public weal. They point to a thousand instances in which a proprietor
ought to be held responsible, though through no fault of his own, for the
results following from the discharge of his economic duties.[1282] The
existence of such a thing as an acquired right is also denied, chiefly on
the ground that fictitious rights of this kind bar the way to progress by
setting up a claim for indemnity.[1283]


IV: CRITICISM

Notwithstanding the popularity of the term “solidarity” and the numerous
attempts made to give effect to the doctrine of which we have just given
a summary account, it would be a mistake to imagine that the theory has
met with sympathy everywhere. On the contrary, it has been subjected to
the liveliest criticism, especially by the Liberal economists.

It is not that the Liberals deny the existence of solidarity or
disapprove of the results which follow from its operation. The discovery
of the law of solidarity under the familiar aspect of division of
labour and exchange constitutes a part of their own title to fame, and
extravagant were the eulogiums which they bestowed upon its working.

They do, however, hold firmly to the belief that economic solidarity is
quite sufficient, and that it is also the best imaginable, despite the
fact that it may be our duty to organise it afresh. Is it possible to
improve upon a system of division of functions which gives everyone,
every day of his life, the equivalent of the service which he has
rendered to society? Bastiat in his fable _The Blind and the Paralytic_
compares this distribution of social effort to an understanding between
two such persons, whereby the blind does the walking and the maimed
indicates the direction.

Members of this school are strongly of the opinion that it is quite
enough to let this principle of each for all work itself out under
the pressure of competition. And as a matter of fact is it not to the
interest of the producer to consult the wants and tastes and even the
fancies of the public? Altruism pursued in this spirit, as it well
might be, manifests itself as an incessant desire to satisfy the wants
of others, and even to live for others. It loses none of its force by
becoming, instead of a mere ideal, a professional necessity which no
producer can afford to neglect without running the risk of failure.[1284]
And it is not only between producers and consumers, but also between
capital and labour, that such solidarity exists. Neither can produce
without the other, and the interest of both is to have as large a produce
as possible. A similar kind of solidarity exists among nations. The
richer our neighbours are the better chance of our finding an outlet for
our products.

Moreover, none of these _solidarités_ but is essentially just, since
everyone receives the exact equivalent of what he gives. What can the new
doctrine of solidarity add to this, unless it be, perhaps, an element of
pure parasitism?[1285]

For what is the essence of the new doctrine if it is not that those
members of society who are possessed of a certain superiority of
position, either material or intellectual (which is very often the result
of the greater contribution which they have made to the material or
intellectual capital of society), by a bold inversion of their material
positions should find themselves treated as the debtors of such as
have not succeeded? The natural result is that there are springing up
everywhere in society whole classes who are living upon the claims of
solidarity, just as their predecessors lived upon the claims of Christian
charity. More daring than their forbears, they have none of the humility
of the ordinary beggar, but boldly demand their due; not for the love
of God, as was wont with the true mendicant, but in the name of some
quasi-contract, with a policeman within hailing distance lest the debtor
should not acquit himself in a sufficiently graceful fashion. Hence
the swarm of pensioners and semi-invalids, of unemployed who patronise
the relief works, and of victims of accidents more or less real, of
parents who have their children reared for nothing, of manufacturers and
proprietors who make a profit directly or indirectly out of the existence
of public rights, and of public servants who in the name of professional
solidarity trample national solidarity underfoot and sacrifice the
interests both of taxpayer and consumer.

The economists have never held the doctrine that commutative justice by
itself—mere _do ut des_—is enough. Adjacent to the realm of justice lies
the domain of charity. But to annex this zone to the dominion of justice
and to claim solidarity as a justification seems utter futility.

There is no avoiding this dilemma. Either they get the equivalent of what
they give, which is the case under a system of free exchange, or they
do not—in which case they must be either getting more or less. In other
words, they are either parasites or destitutes—a case of exploitation or
of charity.

It is further pointed out that the whole trend of evolution appears to
give no countenance to this doctrine of solidarity, and that consequently
it is of the nature of a retrograde movement. Even in the biological
realm we come across what looks like a persistent effort to attain
independence or autonomy, a struggle on the part of the individual to
free himself from the trammels of his descent.[1286] Such must be the
explanation of the recent heroic efforts to leave the earth and rise
towards the skies, and the consequent exultation which the aviator
feels when he finds that he has overcome the force of gravity and
broken the last link which bound man to his mother earth. Turning
to criminal law, we are met with similar considerations there. The
collective responsibility of the whole family or tribe seemed quite just
to the primitive mind, and the sons of the Atridæ and the descendants
of Adam suffered with hardly a murmur for the sins committed by their
parents.[1287] But to us the doctrine is simply revolting. Whenever such
penalties are demanded by nature we can only submit with the best grace
that we can command. We are reluctantly bound to admit that the innocent
does suffer for the faults of others—that the child perishes because the
parent was a drunkard. But we, at any rate, regard such things as evil,
and valiantly struggle against them. We are not much given to raising
altars to Eumenides. When solidarity breeds contamination we seek to
counteract it by a strict individualism that immunes. The innumerable
fetters that had been riveted together by the old co-operative _régime_
were ruthlessly torn off by the French Revolution. Why attempt to forge
new chains by giving to each individual a hypothetical claim upon his
fellows?

The moralists in their turn have also raised objections. They want to
know what new principle of morality solidarity professes to teach. When
it has been shown that my neighbour’s illness may easily compass my own
death, what new feeling will the mere proving of this beget in me? Will
it be love? Is it not much more likely to reveal itself as a desire to
keep him as far from me as possible—to get rid of him altogether like
a plague-stricken rat, or at least to see that he is locked up in some
sanatorium or other? I may perhaps be found more willing to contribute
towards the upkeep of the sanatorium, but the dominant motive will be
fear, or self-interest, if that word seems preferable.[1288]

Thus solidarity, while it does not seem to contain any new doctrine of
love, tends to weaken and to suppress the sense of responsibility by
treating society as a whole, or at least the social environment, as the
source of our errors, our vices and crimes. Individual responsibility,
however, is the very basis of morality.

Such are the criticisms preferred by individualist economists. It would
be a mistake to imagine, however, that the socialists, the anarchists,
or the syndicalists have treated the doctrine with any greater degree of
indulgence. The proposal to reconcile masters and workmen, rich and poor,
in a kind of silly, sentimental embrace is a menace to socialism and a
denial of the principle of class war.[1289]

All such criticism, however, utterly fails to convince us. It may be
well, perhaps, to get rid of the coercive element in the discharge of
social debt, but that does not do away with the valuable contribution
made by solidarity both to social economics and to ethics.

Solidarity by itself does not furnish a principle of moral conduct,
since it is just a natural fact, and as such it is non-moral. Whenever
we imagine that solidarity is something evil, that judgment in itself is
a proof that we have had recourse to some criterion outside solidarity
itself by which to judge of its good or evil features. It is quite
possible also that the idea may be exploited for the profit of the
egoist. If solidarity is nothing but a mere cord binding us together
it may quite possibly happen that it will be used to exalt some people
and to pull others down, and the number brought low may even exceed the
number raised up. We need not be surprised if occasionally we find that
instead of increasing the power of good we have extended the opportunity
for evil. But we must speed the coming of these new powers in the hope
that in the end good will triumph over evil. Solidarity by itself cannot
furnish a rule of moral conduct to such as have none already; but,
granting the existence of a moral principle, it matters not whether
it be egoism or altruism, solidarity supplies us with a leverage of
incomparable strength.

In short, it teaches us three important lessons:

1. It shows us that all the good which has happened to others has added
to our own well-being, and that all the evil that has befallen them has
done us harm, and that consequently we ought to encourage the one and
discourage the other, so that a policy of indifferent abstention is no
longer possible for any of us.

The mode of action prescribed may be frankly utilitarian, but there is
an element of triumph in getting the egoist to forget himself and to
remember others, even though it be but for a time. A heart that beats
for others, though the reason perhaps be selfish, is a somewhat nobler
heart. It is doubtful whether we can ever get pure altruism without some
admixture of self-interest. The Gospel only asks that we should love our
neighbour as ourselves. Solidarity makes a similar demand, neither more
nor less, but undertakes to prove that the neighbour is really myself.

2. It shows us how the results of our actions return upon ourselves with
their harvest of suffering or joy a thousand times increased. This gives
it its character for solemnity and majesty which has made it such an
exceedingly favourable instrument for moral education. To our care is
entrusted the welfare of souls, and just as we are led to see that we
never really had a right to say that this or that matter was no concern
of ours, so we also find ourselves relieved of that other equally heinous
maxim, namely, that certain matters concern ourselves alone. Far from
weakening the sense of responsibility, as some writers maintain, it is
obvious that it increases it indefinitely.

3. It is true that in a contrary fashion it renders us more indulgent
of the faults of others, by showing how often we have been unconscious
accomplices in their crime. Morally this is a gain, for it helps us to be
more indulgent towards others, but more severe upon ourselves.

From the standpoint of sociological evolution we are confronted with
the dissolution of many of the older forms of solidarity and with the
emergence of new ones. What really takes place is an extension of the
circle of solidarity through the family, the city, and the nation
until it reaches humanity—such expansion being accompanied by a doubly
fortunate result. On the one hand corporate egoism becomes so ennobled
and extended that it includes the whole of humanity, with the result that
the strife between antagonistic interests becomes less acute. The old
argument from independence had already grown blunt in the struggle with
division of labour. Degree of independence is not the sole measure of
personality. The savage beneath his ancestral tree is independent, and
so perhaps is Ibsen’s hero in revolt against society. The king on his
throne, on the other hand, who never speaks except in the plural number,
is always conscious of his dependence. But the savage because of his
independence is powerless, whereas the king because of his dependence is
very powerful. Solidarity, whether it be like the rope that binds the
Alpine climber to his guide which may lead them both to the abyss, or
like the patriotism that rivets the soldier’s gaze upon his country’s
flag, cannot detract from individuality. If it be true, as was said
just now, that the crystal is the earliest effort of the individual to
render itself independent of its environment, we must never forget that
it is also the earliest realisation of true solidarity in the form of
association.

As to the argument of the economists that mere exchange is the only form
of solidarity that is at all compatible with the demands of justice, all
the schools whose fortunes we have followed in the course of this volume
have declared against this view, not excepting even the Mathematical
school, the latest offspring of the Classical tradition. Esau’s bargain
with Jacob, the contracts between the Congo Company and the blacks, or
between the _entrepreneur_ and the home-worker, are irreproachable from
a Hedonistic standpoint (see p. 540). But no one would consider such
primitive exchanges, which, as Proudhon eloquently remarks, savour of
retaliation—an eye for an eye and a tooth for a tooth—as evidence of the
existence of solidarity.

Even if we conceived of exchange as a balance the two sides of which
are in equilibrium, it is impossible to escape the conclusion that the
contracting parties fare rather differently when they do not start on a
footing of complete equality. There is always a Brennus ready to throw
his sword into the scales.

It is only natural that we should ask ourselves what is to be done under
such circumstances. Must we be content simply to resign ourselves to
our fate? This seems inevitable if it be true, as the economists seem
to suggest, that human relations depend entirely upon exchange and
its derivatives—selling, lending, wage-earning, etc. But it is quite
otherwise when these human relations are regarded as the outcome of
association, whether professional, mutualist, or co-operative.[1290]

In this spirit the worker subscribes to his union with a view to
increasing its strength. Undoubtedly he reckons upon getting a higher
wage, but there is no necessary relation between his membership of the
union and the eventual rise in wages which he expects. The mutualist
supports his society in the hope that he may add to the general feeling
of security. Undoubtedly in his case again he reckons upon the society
paying his doctor should he fall ill, but scores of members pass through
life without making any demand upon their society at all, contributing
much more than they withdraw. In this way the good lives pay for the bad
ones. The member of the co-operative society, in a similar fashion, is
more concerned about a fuller satisfaction of his need than he is about
the amount of profit that he can get out of it. In short, whereas under
a competitive system each one tries to get rid of his neighbour, under
a _régime_ of association everyone would try to make some use of him.
The object of solidarity is to substitute “each for all” as a principle
of action instead of “each for himself.”[1291] Every step taken in this
direction, whether we wish it or no, implies a movement away from the
_régime_ of exchange in the direction of solidarity.




CHAPTER IV: THE ANARCHISTS


The social creed of the anarchist is a curious fusion of Liberal and
socialist doctrines. Its economic criticism of the State, its enthusiasm
for individual initiative, as well as its conception of a spontaneous
economic order, are features which it owes to Liberalism; while its
hatred of private property and its theory of exploitation represent its
borrowings from socialism.

Doctrinal fusions of this kind which seek to combine two extreme
standpoints not infrequently outdo them both. Dunoyer, for example, was
the extremest of Liberals, but he took great care to remind his readers
of at least one function which none but the State could perform: no other
authority, he thought, could ever undertake to provide security. True
_bourgeois_ of 1830 that he was, Dunoyer always considered that “order”
was a prime social necessity.[1292] But, armed with the criticism of
the socialists, the anarchists soon get rid of this last vestige of the
State’s prerogative. In their opinion the security of which Dunoyer spoke
merely meant the security of proprietors; “order” is only necessary for
the defence of the possessors against the attack of the non-possessors.
The socialists themselves (with the exception of Fourier, perhaps, whom
the anarchists claim as one of themselves), however opposed to private
property, were exceedingly anxious to retain considerable powers in the
hands of the State, such as the superintendence of social production, for
example. Armed this time with the criticism of the Liberal school, the
anarchists experience no difficulty in demonstrating the economic and
administrative incapacity of the State. “Liberty without socialism means
privilege, and socialism without liberty means slavery and brutality”—so
writes Bakunin.[1293]

It is only fitting that a few pages at the end of this book should be
devoted to a doctrine that attempts to fuse the two great social currents
that strove so valiantly for the upper hand in nineteenth-century history.

It is not our first acquaintance with anarchy, however. It has already
been given a “local habitation and a name” by Proudhon, who is the
real father of modern anarchism. This does not imply that similar
doctrines may not be discovered in writings of a still earlier date,
as in Godwin’s, for example. But such writers remained solitary
exceptions,[1294] while the links connecting the anarchical teaching of
Proudhon with the political and social anarchy of the last thirty years
are easily traced. Not only is the similarity of ideas very striking, but
their transmission from Proudhon to Bakunin, and thence to Kropotkin,
Reclus, and Jean Grave, is by no means difficult to follow.

Alongside of the political and social anarchism which form the principal
subject of this chapter there is also the philosophical and literary
anarchism, whose predominant characteristic is an almost insane
exaltation of the individual. The best known representative of this
school, which hails from Germany, is Max Stirner, whose book entitled
_Der Einzige und sein Eigenthum_ appeared in 1844.[1295] The work was
forgotten for a long time, although it enjoyed a striking success
when it first appeared. Some twenty years ago, just when Nietzsche
was beginning to win that literary renown which is so unmistakably
his to-day, it was seen that in Stirner he had a precursor, although
Stirner’s works probably remained quite unknown to Nietzsche himself,
with the result that Stirner has since enjoyed posthumous fame as the
earliest _immoraliste_. A few words only are necessary to show the
difference between his doctrines and those of Proudhon, Bakunin, and
Kropotkin.[1296]


I: STIRNER’S PHILOSOPHICAL ANARCHISM AND THE CULT OF THE INDIVIDUAL

Stirner’s book was written as the result of a wager. The nature of the
circumstances and the character of the epoch that gave birth to it were
briefly these. Stirner was a member of a group of young German Radicals
and democrats whom Bruno Bauer had gathered round him in 1840. They
drew their inspiration from Feuerbach, and accepted the more extreme
views of the Hegelian philosophy. Their ideal was the absolute freedom
of the human spirit, and in the sacred name of liberty they criticised
everything that seemed in any way opposed to this ideal, whether
nascent communism, dogmatic Christianity, or absolute government. The
intellectual leaders of the German Revolution of 1848 were drawn from
this group, but they were soon swept aside in the reaction of 1850. A few
of them who were in the habit of meeting regularly in one of the Berlin
restaurants assumed the name _die Freien_. Marx and Engels occasionally
joined them, but soon left in disgust. Their joint pamphlet, which bears
the ironical title of _The Holy Family_, is supposed to refer to Bauer
and his friends. A few of the German Liberal economists, including Julius
Faucher among others, paid occasional visits to the Hippel Restaurant.
Max Stirner, who was one of the most faithful members and a most
attentive listener, although it does not seem that he contributed much
to the discussion, conceived the idea of preparing a surprise for his
friends in the form of a book in which he attempted to prove that the
criticism of the supercritics was itself in need of criticism.

The extreme Radicals who formed the majority of the group were still
very strongly attached to a number of abstract ideas which to Stirner
seemed little better than phantoms. Humanity, Society, the Pure, and
the Good seemed so many extravagant abstractions; so many fetishes made
with hands before whom men bow the knee and show as much reverence as
ever the faithful have shown towards their God. Such abstractions, it
seemed to him, possess about as much reality as the gods of Olympus or
the ghosts that people the imagination of childhood. The only reality we
know is the individual; there is no other. Every individual constitutes
an independent original force, its only law its own personal interest,
and the only limit to his development consists in whatever threatens
that interest or weakens its force. Every man has a right to say, “I
want to become all that it is within my power to become, and to have
everything I am entitled to.”[1297] Bastiat had already expressed it as
his opinion that there could be no conflict of legitimate rights, and
Stirner declares that “every interest is legitimate provided only it is
possible.” “The crouching tiger is within his rights when he springs at
me; but so am I when I resist his attacks.” “Might is right, and there is
no right without might.”[1298]

Granting that the individual is the only reality, all those collective
unities that go by the name of the family, the State, society, or the
nation, and all of which tend to limit his individuality by making the
individual subservient to themselves, at once become meaningless. They
are devoid of substance and reality.[1299] Whatever authority they
possess has been ascribed to them by the individual. Mere creatures of
the imagination, they lose every right as soon as I cease to recognise
them, and it is only then that I become a really free man. “I have a
right to overthrow every authority, whether of Jesus, Jehovah, or God,
if I can. I have a right to commit a murder if I wish it—that is to
say, unless I shun a crime as I would a disease. I decide the limits of
my rights, for outside the ego there is nothing.… It may be that that
nothing belongs to no one else; but that is somebody else’s affair, not
mine. Self-defence is their own look-out.”[1300] The workers who complain
of exploitation, the poor who are deprived of all property, have just one
thing which they must do. They must recognise the right to property as
inherent in themselves and take as much of it as they want. “The egoist’s
method of solving the problem of poverty is not to say to the poor, ‘Just
wait patiently until a board of guardians shall give you something in the
name of the community,’ but ‘Lay your hands upon anything you want and
take that.’ The earth belongs to him who knows how to get hold of it, and
having got hold of it knows how to keep it. If he seizes it, not only has
he the land, but he has the right to it as well.”[1301]

But what kind of a society would we have under such conditions? It
would simply be a “Union of Egos,” each seeking his own and joining
the association merely with a view to greater personal satisfaction.
Present-day society dominates over the individual, making him its tool.
The “Union of Egos”—for we cannot call it a society—would be simply a
tool in the hand of the individual. No scruples would be felt by anyone
leaving the union if he thought something was to be gained by such
withdrawal. Every individual would just say to his neighbour, “I am not
anxious to recognise you or to show you any respect. I simply want you
to be of some service to me.”[1302] It would be a case of _bellum omnium
contra omnes_, with occasional precarious alliances. But it would at
least mean liberty for all.

Such strange, paradoxical doctrines are irrefutable if we accept
Stirner’s postulates. But we must reject his whole point of view and
dispute the stress laid upon the individual as the only reality, as well
as his denial of the reality of society. Granting that the individual
is the only reality, then society and the nation are mere abstractions
created by man and removable at his pleasure. But that is just the
mistake. The individual has no existence apart from society, nor has he
any greater degree of reality. He is simply an element, not a separate
entity. His existence or non-existence does not depend upon himself. Nor
is society merely an idea. It is a natural fact. The individual may be
quite as appropriately described as an abstraction or a mere phantom.

The fundamental difference between Stirner and the other anarchists who
will engage our attention is just this recognition of the reality of the
social fact which Stirner denies _in toto_. It also marks the cleavage
between literary and political anarchism.[1303]


II: SOCIAL AND POLITICAL ANARCHISM AND THE CRITICISM OF AUTHORITY

Stirner spent his life between his study and the Hippel Restaurant, the
rendezvous of his friends. Bakunin and Kropotkin are men of a different
stamp who have risked their freedom, and even their lives, for the sake
of the cause which they have at heart. It is true that the seed sown in
the mind of the ignorant as the result of their teaching has often had
most deplorable results, but no one can deny the quality of courage to
either Kropotkin or Reclus, or withhold from them the title of greatness
both of mind and character.

Bakunin was reared in much the same intellectual atmosphere as
Stirner.[1304] By birth he belonged to the Russian nobility, and spent
the earliest years of his life in the Russian army. In 1834, at the
age of twenty, he resigned his commission in order to devote himself
to the study of philosophy, and, like Proudhon, Stirner, and Marx, he
came under the universal spell of Hegel. In 1840 he proceeded to Berlin,
where he became acquainted with the school of young Radicals of whom
we have already spoken. From 1844 to 1847 we find him in Paris, where
he used to spend whole nights in discussion with Proudhon. Proudhon’s
influence upon him is very marked, and one constantly meets with
passages in the writings of the Russian anarchist which are nothing
but paraphrases of ideas already put forward by Proudhon in the _Idée
générale de la Révolution au XIXe Siècle_. The year 1848 revealed to the
dilettante nobleman his true vocation, which he conceived to be that of
a revolutionary. He successively took part in the risings at Prague and
in the Saxon Revolution at Dresden. He was arrested and twice condemned
to death, in Saxony and again in Austria, but was finally handed over to
the Russian authorities, who imprisoned him in the fortress of St. Peter
and St. Paul, where an attack of scurvy caused him to lose all his teeth.
He was exiled to Siberia in 1857, but managed to escape in 1861. Making
his way to London, he undertook the direction of a vigorous revolutionary
campaign, which was carried on in Switzerland, Italy, and France. During
the years 1870 and 1871 he successfully planned a popular rising at
Lyons. Bernard Lazare has graphically described him as “a hirsute giant
with an enormous head which seems larger than it really is because of
the mass of bushy hair and untrimmed beard which surrounds it. He always
sleeps rough, has no roof above him, and no homeland which he can call
his own, and like an apostle is always prepared to set out on his sacred
mission at any hour of the night or day.”

The most striking fact in his history was his rupture with Karl Marx
at the last International Congress, held at The Hague in 1872. Bakunin
joined the International in 1869. Disgusted with the pontifical
tendencies of the General Council, which was entirely under the heel
of Marx, he proposed a scheme of federal organisation under which each
section would be left with considerable autonomy. The Jura Federation
supported his proposals, and so did several of the French, Belgian, and
Spanish delegates, as well as all the Italian. But he was expelled from
the International by Marx’s own friends. The official rupture between
Marxian socialism and anarchy, grown to considerable proportions since,
dates from that very moment. That Hague congress marks also the end of
the International. Marx soon afterwards transferred the centre of the
administration to the United States, and no conference has been held
since. Bakunin also retired from the struggle about the same time, but
not before he had set up a new association at Geneva, composed of a few
faithful friends. In 1876 Bakunin died at Berne.

It was in the region of the Jura, in the neighbourhood of Neuchâtel,
where Bakunin had still a few followers among the extremely
individualistic but somewhat mystical population of those parts, that
Kropotkin in the course of a short stay in the district in 1872 imbibed
those anarchist ideas to the propagation of which he has so strenuously
devoted his life.[1305] Although personally unacquainted with Bakunin,
Kropotkin must be regarded as his direct descendant.

Prince Kropotkin is also a Russian aristocrat, and he, like his master,
joined the army after a short period of study. He attracted public
notice first of all as the author of several remarkable works dealing
with natural history and geography, which showed him to be a confirmed
disciple of Darwin. But science was by no means his only interest.
By 1871 Hegelian influence was on the wane in Russia, and the more
thoughtful of the younger generation turned their attention to democracy.
The new watchword was, “Go, seek the people, live among them, educate
them and win their confidence if you want to get rid of the yoke of
autocracy.” Kropotkin caught the inspiration. He himself has told us how
one evening after dinner at the Winter Palace he drove off in a cab,
took off his fine clothes, and, putting on a cotton shirt instead of his
silk one, and boots such as the peasants wore, hurried away to another
quarter of the city and joined a number of working men whom he was trying
to educate. But his propaganda proved short-lived, for one evening when
he was leaving the headquarters of the Geographical Society, where he
had just been reading a paper and had been offered the presidency of one
of the sections, he was arrested on a charge of political conspiracy
and imprisoned in the fortress of St. Peter and St. Paul. He managed to
escape in 1876, and found refuge in England. Afterwards he was wrongfully
condemned to three years’ imprisonment at Clairvaux on account of his
supposed complicity in an anarchist outbreak which took place at Lyons in
1884. But there was something extraordinary about a prisoner who could
get the libraries of Ernest Renan and the Paris Academy of Sciences
placed at his disposal during his term of imprisonment in order to
enable him to pursue his scientific investigations. During his previous
imprisonment in Russia the Geographical Society of St. Petersburg had
extended him a similar privilege. Kropotkin has since lived in England.

The best known French anarchists, Élisée Reclus, the geographer, and Jean
Grave, simply reproduce Kropotkin’s ideas, with an occasional admixture
of Bakunin’s or Proudhon’s.[1306]

Our concern is with the expression of anarchist ideas as we find them in
the best known writers of the school. Consequently we must pass over the
very striking but immature formulæ which are not infrequently to be met
with in the works of more obscure writers.[1307]

Here again the distinguishing features are the emphasis laid upon
individual rights and a passion for the free and full development of
personality, which, as we have seen, was the keynote of Stirner’s
system. “Obedience means abdication,” declares Élisée Reclus.[1308]
“Mankind’s subjection will continue just so long as it is tolerated. I
am ashamed of my fellow-men,” writes Proudhon in 1850 from his prison at
Doullens.[1309] “My liberty,” says Bakunin, “or what comes to the same
thing, my honour as a man, consists in obeying no other individual and
in performing only just those acts that carry conviction to me.”[1310]
Jean Grave declares that society can impose “no limitations upon the
individual save such as are derived from the natural conditions under
which he lives.”[1311]

But this cult of the individual which is present everywhere in anarchist
literature rests upon a conception which is the direct antithesis of
Stirner’s. To Stirner every man was a unique being whose will was his
only law. The anarchists who follow Proudhon, on the other hand, regard
man as a specimen of humanity, _i.e._ of something superior to the
individual. “What I respect in my neighbour is his manhood,”[1312]
wrote Proudhon. It is this humanity or manhood that the anarchist would
have us respect by respecting his liberty, for, as Bakunin declares,
“liberty is the supreme aim of all human development.”[1313] It is not
the triumph of the egoist but the triumph of humanity in the individual
that the anarchists would seek, and so they claim liberty not merely
for themselves but for all men. Far from wishing to be served by their
fellow-men, as Stirner desired, they want equal respect shown for human
dignity wherever found. “Treat others as you would that others should
treat you under similar circumstances,”[1314] writes Kropotkin, employing
Kantian and even Christian phraseology. Bakunin, a faithful disciple of
Proudhon’s, considered that “all morality is founded on human respect,
that is to say, upon the recognition of the humanity, of the human rights
and worth in all men, of whatever race or colour, degree of intellectual
or moral development”;[1315] and he adds that “the individual can only
become free when every other individual is free. Liberty is not an
isolated fact. It is the outcome of mutual goodwill; a principle not of
exclusion, but of inclusion, the liberty of each individual being simply
the reflection of his humanity or of his rights as a human being in the
conscience of every free man, his brother and equal.”[1316] This idea
of humanity, which the latest anarchists owe to Proudhon, is not simply
foreign to Stirner, but is just one of those phantoms which Stirner was
particularly anxious to waylay.[1317]

Along with this extravagant worship of individual liberty goes a
hatred of all authority. Here the political anarchists join hands with
Stirner. For the exercise of authority of one man over another means
the exploitation of one man by another and a denial of his humanity.
The State is the summation of all authority, and the full force of
anarchist hatred is focused upon the State. No human relation is too
sacred for State intervention, no citizen but is liable to have his
conduct minutely prescribed by law. There are officers to apply the law,
armies to enforce it, lecturers to interpret it, priests to inculcate
respect for it, and jurists to expound it and to justify everybody. Thus
has the State become the agent _par excellence_ of all exploitation and
oppression.[1318] It is the _one_ adversary, in the opinion of every
anarchist—“the sum total of all that negates the liberty of its members.”
“It is the grave where every trace of individuality is sacrificed and
buried.” Elsewhere, “it is a flagrant negation of humanity.”[1319]
Bakunin, who in this matter as well as in many others is a follower of
Bastiat, speaks of it as “the visible incarnation of infuriated force.”
That is enough to label it for ever with the evil things of life, for
the aim of humanity is liberty, but force is “a permanent negation of
liberty.”[1320]

A necessary agent of oppression, government always and inevitably becomes
the agent of corruption. It contaminates everything that comes into
contact with it, and the first to show signs of such contamination are
its own representatives. “The best man, whoever that may be, whatever
degree of intelligence, magnanimity, and purity of heart he may have, is
unavoidably corrupted by his trade. The person who enjoys any privilege,
whether political or economic, is intellectually and morally a depraved
character.” So Bakunin thought,[1321] and Elisée Reclus writes in a
similar strain. “Every tree in nature bears its own peculiar fruit, and
government, whatever be the form it take, always results in caprice or
tyranny, in misery, villainy, murder, and evil.”[1322] The governing
classes are inevitably demoralised, but so are the governed, and for
just the same reasons. Government is a worker of evil even when it would
do good, for “the good whenever it is enjoined becomes evil. Liberty,
morality, real human dignity consists in this, that man should do what is
good not because he is told to do it, but simply because he thinks that
it really is the best that he can ever wish or desire.”[1323]

It matters little what form government takes. Absolute or constitutional
monarchy, democratic or aristocratic republicanism, government on the
basis of a universal or a restricted suffrage, are all much the same,
for they all presuppose a State of some sort. Authority, whether of a
despot or of the majority of the community, is none the less authority,
and implies the exercise of a will other than the individual’s own. The
great error committed by all the revolutions of the past has been this:
one government has been turned out, but only to have its place usurped
by another. The only true revolution will be that which will get rid of
government itself—the fount and origin of all authority.

Still closer scrutiny reveals the interesting fact that the State, which
is naturally oppressive, gradually becomes employed as the instrument for
the subjugation of the weak by the strong, the poor by the rich. It was
Adam Smith who ventured to declare that “civil government … is in reality
instituted for the defence of the rich against the poor, or of those
who have some property against those who have none at all.”[1324] Pages
of anarchist literature simply consist of elaborate paraphrases of this
remark of Smith’s.

Kropotkin thinks that every law must belong to one or other of three
categories. To the first category belong all laws concerned with the
security of the individual; to the second all laws concerned with the
protection of government; and to the third all those enactments where
the chief object in view is the inviolability of private property.[1325]
In the opinion of the anarchist, all laws might more correctly be placed
under the last category only, for whenever the safety of the individual
is in any way threatened it is generally the result of some inequality
of fortune.[1326] Indirectly, that is to say, the attack is directed
against property. The real function of government is to defend property,
and every law which is instrumental in protecting property is also
effective in shielding the institution of government from attack.

Property itself is an organisation which enables a small minority of
proprietors to exploit and to hold in perpetual slavery the masses of
the people. In this instance the anarchists have not made any weighty
contribution of their own, but have merely adopted the criticisms of
the socialists.[1327] Proceeding in the usual fashion, they point to
the miserable wages which are usually paid to the workers, and show
how the masters always manage to reserve all the leisure, all the joys
of existence, all the culture and other benefits of civilisation for
themselves. Private property is of the essence of privilege—the parent
of every other kind of privilege. And the State becomes simply the
bulwark of privilege. “Exploitation and government,” says Bakunin,
“are correlative terms indispensable to political life of every kind.
Exploitation supplies the means as well as the foundation upon which
government is raised, and the aim which it follows, which is merely to
legalise and defend further exploitation.”[1328] “Experience teaches
us,” says Proudhon,[1329] “that government everywhere, however popular
at first, has always been on the side of the rich and the educated as
against the poor and ignorant masses.”[1330]

Whether the extinction of private property, which would free the worker
from the danger of being exploited by the rich, would also render the
State unnecessary is a question upon which the anarchists are not agreed.
Proudhon, we remember, had hoped by means of the Exchange Bank to reduce
the right of property to mere possession. Bakunin, on the contrary,
is under the spell of the Marxians, and, like a true collectivist, he
thinks that all the instruments of production, including land, should
be possessed by the community. Such instruments should always be at the
disposal of groups of working men expert in the details of agriculture
or industrial production, and such workers should be paid according to
their labour.[1331] Kropotkin, on the other hand, regards communism
as the ideal and looks upon the distinction drawn by the collectivist
between instruments of production and objects of consumption as utterly
futile. Food, clothing, and fuel are quite as necessary for production as
machinery or tools, and nothing is gained by emphasising the distinction
between them. Social resources of every kind should be freely placed at
the disposal of the workers.[1332]

But the State and the institution of private property by no means
exhausts the list of tyrannies. Individual liberty is as little
compatible with irrevocable vows—that is, with a present promise which
binds for ever the will of man—as it is with submission to external
authority. The present marriage law, for example, violates both these
conditions. Marriage ought to be a free union. A contract freely
entered upon and deliberately fulfilled is the only form of marriage
that is compatible with the true dignity and equality of both man
and woman.[1333] A free and not a legal contract is the only form of
engagement which the anarchists recognise. Free contract between man
and wife, between an individual and an association, between different
associations pursuing the same task, between one commune and another, or
between a commune and a whole country. But such engagements must always
be revocable, otherwise they would merely constitute another link in the
chain that has shackled humanity. Every contract that is not voluntarily
and frequently renewed becomes tyrannical and oppressive and constitutes
a standing menace to human liberty. “Because I was a fool yesterday, must
I remain one all my life?”[1334] asks Stirner; and on this point Bakunin,
Kropotkin, Reclus, Jean Grave, and even Proudhon are agreed.

To regard their social philosophy as nothing but pure caprice because of
the wonderful faith which they had in their fellow-men would, however, be
a great mistake.

Notwithstanding the merciless criticism of authority of every kind, there
was still left one autocrat, of a purely abstract character perhaps,
but none the less imperious in its demands. This was the authority of
reason or of science. The sovereignty of reason was one of the essential
features of Proudhon’s anarchist society.[1335] What Proudhon calls
reason Bakunin refers to as science, but his obeisance is not a whit
less devotional. “We recognise,” says he, “the absolute authority of
science and the futility of contending with natural law. No liberty is
possible for man unless he recognise this and seek to turn this law to
his own advantage. No one except a fool or a theologian, or perhaps a
metaphysician, a jurist, or a _bourgeois_ economist, would revolt against
the mathematical law which declares that 2 + 2 = 4.” The utmost that a
man can claim in this matter is that “he obeys the laws of nature because
he himself has come to regard them as necessary, and not because they
have been imposed upon him by some external authority.”[1336]

Not only does Bakunin bow the knee to science, but he also swears
allegiance to technical or scientific skill. “In the matter of boots I am
willing to accept the authority of the shoemaker; of clothes, the opinion
of the tailor; if it is a house, a canal, or a railway, I consult the
architect and the engineer. What I respect is not their office but
their science, not the man but his knowledge. I cannot, however, allow
any one of them to impose upon me, be he shoemaker, tailor, architect,
or savant. I listen to them willingly and with all the respect which
their intelligence, character, or knowledge deserves, but always
reserving my undisputed right of criticism and control.”[1337] Bakunin
has no doubt that most men willingly and spontaneously acknowledge the
natural authority of science. He agrees with Descartes and employs
almost identical terms[1338] when he declares that “common sense is
one of the commonest things in the world.” But common sense simply
means “the totality of the generally recognised laws of nature.” He
shares with the Physiocrats a belief in their obviousness, and invokes
their authority whenever he makes a vow. He is also anxious to make
them known and acceptable of all men through the instrumentality of a
general system of popular education. The moment they are accepted by
“the universal conscience of mankind the question of liberty will be
completely solved.”[1339] Let us again note how redolent all this is of
the rationalistic optimism of the eighteenth century, and how closely
Liberals and anarchists resemble one another in their absolute faith in
the “sweet reasonableness” of mankind. Bakunin only differs from the
Physiocrats in his hatred of the despot whom they had enthroned.

A society of free men, perfectly autonomous, each obeying only himself,
but subservient to the authority of reason and science—such is the
ideal which the anarchists propose, a preliminary consideration of its
realisation being the overthrow of every established authority. “No God
and no master,” says Jean Grave; “everyone obeying his own will.”[1340]


III: MUTUAL AID AND THE ANARCHIST CONCEPTION OF SOCIETY

At first sight it might seem that a conception of social existence which
would raise every individual on a pedestal and proclaim the complete
autonomy of each would speedily reduce society to a number of independent
personalities. Every social tie removed, there would remain just a few
individuals in juxtaposition, and society as a “collective being” would
disappear.

But it would be a grievous mistake to conceive of the anarchist ideal
in this light. There is no social doctrine where the words “solidarity”
and “fraternity” more frequently recur. Individual happiness and social
well-being are to them inseparable. Hobbes’ society, or Stirner’s, where
the hand of everyone is against his brother, fill the anarchists with
horror. To their mind that is a faithful picture of society as it exists
to-day. In reality, however, man is a social being. The individual and
society are correlative: it is impossible to imagine the one without
thinking of the other.

No one has given more forcible expression to this truth than Bakunin;
and this is possibly because no one ever had a keener sense of social
solidarity. “Let us do justice once for all,” he remarks, “to the
isolated or absolute individual of the idealists. But that individual
is as much a fiction as that other Absolute—God.… Society, however, is
prior to the individual, and will doubtless survive him, just as Nature
will. Society, like Nature, is eternal; born of the womb of Nature, it
will last as long as Nature herself.… Man becomes human and develops a
conscience only when he realises his humanity in society; and even then
he can only express himself through the collective action of society. Man
can only be freed from the yoke of external nature through the collective
or social effort of his fellow-men, who during their sojourn here have
transformed the surface of the earth and made the further development of
mankind possible. But freedom from the yoke of his own nature, from the
tyranny of his own instincts, is only possible when the bodily senses are
controlled by a well-trained, well-educated mind. Education and training
are essentially social functions. Outside the bounds of society, man
would for ever remain a savage beast.”[1341]

Whether we read Proudhon or Kropotkin, we always meet with the same
emphasis on the reality of the social being, on the pre-existence of
the State, or at least of its necessary coexistence, if the individual
is ever to reach full development. It is true that there are a few
anarchists, such as Jean Grave, who still seem to uphold the old futile
distinction between the individual and society, and who conceive of
society as made up of individuals just as a house is built of bricks.

But is there no element of contradiction between this idea and the
previous declaration of individual autonomy? How is it possible to exalt
social life and at the same time demand the abolition of all traditional
social links?[1342]

The apparent antinomy is resolved by emphasising a distinction which
Liberalism had drawn between government and society. Society is the
natural, spontaneous expression of social life. Government is an
artificial organ, or, to change the metaphor, a parasite preying upon
society.[1343] Liberals from the days of Smith onward had applied the
distinction to economic institutions; the anarchists were to apply it to
every social institution. Not only the economic but every form of social
life is the outcome of the social instinct which lies deep in the nature
of humanity. This instinct of solidarity urges men to seek the help of
their fellow-men and to act in concert with them. It is what Kropotkin
calls mutual aid, and seems as natural to man and as necessary for the
preservation of the species as the struggle for existence itself. What
really binds society together, what makes for real cohesion, is not
constraint (which, contrary to the time-honoured belief of the privileged
classes, is really only necessary to uphold their privileges), but
this profound instinct of mutual help and reciprocal friendship, whose
strength and force have never yet been adequately realised. “There is in
human nature,” says Kropotkin, “a nucleus of social habits inherited from
the past, which have not been as fully appreciated as they might. They
are not the result of any restraint and transcend all compulsion.”[1344]

Law, instead of creating the social instinct, simply presupposes it.
Laws can only be applied so long as the instinct exists, and fall into
desuetude as soon as the instinct refuses to sanction them. Government,
far from developing this instinct, opposes it with rigid, stereotyped
institutions which thwart its full and complete development. To free
the individual from external restraint is also to liberate society by
giving it greater plasticity and permitting it to assume new forms
which are obviously better adapted to the happiness and prosperity of
the race.[1345] Kropotkin in his delightful book _Mutual Aid_ gives
numerous examples of this spontaneous social instinct. He shows how
it assumes different forms in the economic, scientific, educational,
sporting, hygienic, and charitable associations of modern Europe; in the
municipalities and corporations of the Middle Ages; and how even among
animals this same instinct, which forms the real basis of all human
societies, has enabled them to overcome the natural dangers that threaten
their existence.

Anarchist society must not be conceived as a _bellum omnium contra
omnes_, but as a federation of free associations which everyone would
be at liberty to enter and to leave just as he liked. This society,
Kropotkin tells us, would be composed of a multitude of associations
bound together for all purposes that demand united action. A federation
of producers would have control of agricultural and industrial, and
even of intellectual and artistic, production; an association of
consumers would see to questions of housing, lighting, health, food, and
sanitation. In some cases the federation of producers would join hands
with the consumers’ league. Still wider groups would embrace a whole
country, or possibly several countries, and would include people employed
in the same kind of work, whether industrial, intellectual, or artistic,
for none of these pursuits would be confined to some one territory.
Mutual understanding would result in combined efforts, and complete
liberty would give plenty of scope for invention and new methods of
organisation. Individual initiative would be encouraged; every tendency
to uniformity and centralisation would be effectively checked.[1346]

In such a society as this complete concord between the general and
the individual interests, hitherto so vainly sought after by the
_bourgeoisie_, would be realised once for all in the absolute freedom
now the possession of both the individual and the group, and in the
total disappearance of all traces of antagonism between possessors and
non-possessing, between governors and governed. Again we note a revival
of the belief in the spontaneous harmony of interests which was so
prominent a feature of eighteenth-century philosophy.[1347]

Such an attractive picture of society was bound to invite criticism. The
anarchists foresaw this, and have tried to meet most of the arguments.

In the first place, would such extravagant freedom not beget abuse,
unjustifiable repudiation of contracts, crimes and misdemeanours? Would
it not give rise to chronic instability? and would the conscientious
never find themselves the victims of the fickle and the fraudulent?

The anarchists agree that there may be a few pranks played, or, as Grave
euphemistically calls them, “certain acts apparently altogether devoid
of logic.”[1348] But can we not reckon upon criticism and disapproval
checking such anti-social instincts? Public opinion, if it were once
freed from the warping influence of present-day institutions, would
possess far greater coercive force.[1349] Our present system of building
prisons, “those criminal universities,” as Kropotkin calls them, will
never check these anti-social instincts. “Liberty is still the best
remedy for the temporary excesses of liberty.”[1350] Moreover, such a
system would enjoy a superior sanction in the possible refusal of other
people to work with those who could not keep their word.[1351] “You are a
man and you have a right to live. But as you wish to live under special
conditions and leave the ranks, it is more than probable that you will
suffer for it in your daily relations with other citizens.”[1352]

But there is still a more serious objection. Were there no compulsion,
would anyone be found willing to work? The host of idlers is at the
present time vast, and without the sting of necessity it would become
still greater. Kropotkin remarks that “it is only about the sugar
plantations of the West Indies and the sugar refineries of Europe that
robbery, laziness, and very often drunkenness become quite usual with the
bees.”[1353] Is it not possible that men are just imitating the bee?

The anarchists point out that many a so-called idler to-day is simply a
madcap who will soon discover his true vocation in the free society of
the future, and will thus be gradually transformed into a useful member
of society.[1354] Moreover, does not the fact that so many people shun
work altogether prove that the present method of organising society must
be at once cruel and repugnant? The certainty of being confined in an
unhealthy workshop for ten or twelve hours every day, with mind and body
“to some unmeaning task-work given,” in return for a wage that is seldom
sufficient to keep a family in decent comfort, is hardly a prospect
that is likely to attract the worker. One of the principal aims of the
anarchist _régime_—and in this respect it resembles the Phalanstère of
Fourier—will be to make labour both attractive and productive.[1355]
Science will render the factory healthy well lighted and thoroughly
ventilated. Machinery will even come to the rescue of the housewife
and will relieve her of many a disagreeable task. Inventors, who are
generally ignorant of the unpleasant nature of many of these tasks, have
been inclined to ignore them altogether. “If a Huxley spent only five
hours in the sewers of London, rest assured that he would have found the
means of making them as sanitary as his physiological laboratory.”[1356]
Finally, and most important of all, the working day could then be
reduced to a matter of four or five hours, for there would no longer be
any idlers, and the systematic application of science would increase
production tenfold.

The wonderful expansion of production under the influence of applied
science is a favourite theme of the anarchists. Kropotkin has treated us
to some delightful illustrations of this in his _Conquest of Bread_.
He begins by pointing out the wonders already accomplished by market
gardeners living in the neighbourhood of Paris. One of these, employing
only three men working twelve to fifteen hours a day, was able, thanks
to intensive cultivation, to raise 110 tons of vegetables on one acre
of ground. Taking this as his basis, he calculates that the 3,600,000
inhabitants in the departments of the Seine and the Seine-et-Oise could
produce all the corn, milk, vegetables, and fruit which they could
possibly need in the year with fifty-eight half-days labour per man. By
parity of reasoning he arrives at the conclusion that twenty-eight to
thirty-six days’ work per annum would secure for each family a healthy,
comfortable home such as is occupied by English working men at the
present time. The same thing applies to clothing. American factories
produce on an average forty yards of cotton in ten hours. “Admitting that
a family needs two hundred yards a year at most, this would be equivalent
to fifty hours’ labour, or ten half-days of five hours each,[1357] and
that all adults save women bind themselves to work five hours a day from
the age of twenty or twenty-two to forty-five or fifty.… Such a society
could in return guarantee well-being to all its members.”[1358] Élisée
Reclus shares these hopes. It seems to him that “in the great human
family hunger is simply the result of a collective crime, and it becomes
an absurdity when we remember that the products are more than double
enough for all the needs of consumers.”[1359]

Amid such superabundant wealth, in a world thus transformed into a
land of milk and honey, distribution would not be a very difficult
problem. Nothing really could be easier. “No stint or limit to what the
community possesses in abundance, but equal sharing and dividing of those
commodities which are scarce or apt to run short.”[1360] Such was to be
the guiding principle. In practice the women and children, the aged and
the infirm, were to come first and the robust men last, for such even is
the etiquette of the soup kitchen, which has become a feature of some
recent strikes. As to the laws of value which are supposed to determine
the present distribution of wealth, and which the economists fondly
believe to be necessary and immutable, the anarchists regard them as
being no concern of theirs. The futility of such doctrines is a source of
some amusement to them.[1361]


IV: REVOLUTION

But how is the beautiful dream to be realised? The way thither, from the
miserable wilderness wherein we now dwell to the Promised Land of which
they have given us a glimpse, lies through Revolution—so the anarchist
tells us.

A theory of revolution forms a necessary part of the anarchist doctrine.
In the mind of the public it is too often thought to be the only message
which the anarchists have to give. We must content ourselves with a very
brief reference to it, for the non-economic ideas of anarchism have
already detained us sufficiently long.

Proudhon is soon out of the running. We have already had occasion to
refer to his disapproval of violence and revolution. It seemed to him
that the anarchic ideal was for ever impossible apart from a change of
heart and a reawakening of conscience. But his successors were somewhat
less patient. To their minds revolution seemed an unavoidable necessity
from which escape was impossible. Even if we could imagine all the
privileged individuals of to-day agreeing among themselves on the night
of some fourth of August to yield up every privilege which they possess
and to enter the ranks of the proletariat of their own free will, such a
deed would hardly be desirable. The people, says Reclus, with their usual
generosity, would simply let them do as they liked, but would say to
their former masters, “Keep your privileges.” “It is not because justice
should not be done, but things ought to find a natural equilibrium. The
oppressed should rise in their own strength, the despoiled seize their
own again, and the slaves regain their own liberty. Such things can only
really be attained as the result of a bitter struggle.”[1362]

It is not that Bakunin, Kropotkin, or their disciples revel in bloodshed
or welcome outbreaks of violence. Bloodshed, although inevitably and
inseparably connected with revolution, is none the less regrettable,
and should always be confined within the narrowest limits. “Bloody
revolutions are occasionally necessary because of the crass stupidity
of mankind; but they are always an evil, an immense evil, and a great
misfortune; not only because of their victims, but also because of
the pure and perfect character of the aims in view of which they are
carried out.”[1363] “The question,” says Kropotkin,[1364] “is not how
to avoid revolutions, but how to secure the best results by checking
civil war as far as possible, by reducing the number of victims, and by
restraining the more dangerous passions.” To do this we must rely upon
people’s instincts, who, far from being sanguinary, “are really too kind
at heart not to be very soon disgusted with cruelty.”[1365] The attack
must be directed not against men but against their position, and the
aim must be not individuals but their status. Hence Bakunin lays great
stress upon setting fire to the national archives, and to papers of all
kinds relating to title in property, upon the immediate suppression
of all law courts and police, upon the disbanding of the army, and
the instant confiscation of all instruments of production—factories,
mines, etc. Kropotkin in the _Conquest of Bread_ gives us a picture of
an insurgent commune laying hold of houses and occupying them, seizing
drapers’ establishments and taking whatever they need, confiscating the
land, cultivating it, and distributing its products. If revolutionists
only proceeded in this fashion, never respecting the rights of property
at all (which was the great mistake made by the Commune in its dealing
with the Bank of France during the rising of 1871), the revolution would
soon be over and society would speedily reorganise itself on a new and
indestructible basis and with a minimum of bloodshed.

But the tone is not always equally pacific. Bakunin during at least one
period of his life preached a savage and merciless revolution against
privilege of every kind. At that time, indeed, he might justly have
passed as the inventor of the active propaganda which, strenuously
pursued for many years by a few exasperated fanatics, had the effect
of rousing public opinion everywhere against anarchism. “We understand
revolution,” someone has remarked, “in the sense of an upheaval of what
we call the worst passions, and we can imagine its resulting in the
destruction of what we to-day term public order.” “Brigandage,” it is
remarked elsewhere, “is an honourable method of political propaganda
in Russia, where the brigand is a hero, a defender and saviour of the
people.”[1366] In a kind of proclamation entitled _The Principles of
Revolution_, which, as some writers point out, ought not to be attributed
to Bakunin, but which at any rate appears to give a fair representation
of his ideas at this period of his life, we meet with the following
words: “The present generation should blindly and indiscriminately
destroy all that at present exists, with this single thought in mind—to
destroy as much and as quickly as possible.”[1367] The means advocated
are of a most varied description: “Poison, the dagger, and the sword …
revolution makes them all equally sacred. The whole field is free for
action.”[1368] Bakunin had always shown a good deal of sympathy for
the _rôle_ of the conspirator. In the _Statutes of the International
Brotherhood_, which prescribed the rules of conduct for a kind of
revolutionary association created by Bakunin in 1864, are some passages
advocating violence which are as bloodcurdling as anything contained in
Netchaieff’s famous _Revolutionary Catechism_. It is difficult to find
lines more full of violent revolutionary exasperation than that passage
of the _Statutes of the International Socialist Alliance_ which forms the
real programme of the anarchists. Since it also seems to us to give a
fairly faithful expression of Bakunin’s thoughts on the matter, it will
afford a fitting close to our exposition.

“We want a universal revolution that will shake the social and political,
the economic and philosophical basis of society, so that of the present
order, which is founded upon property, exploitation, dominion, and
authority, and supported either by religion or philosophy, by _bourgeois_
economics or by revolutionary Jacobinism, there may not be left, either
in Europe or anywhere else, a single stone standing. The workers’
prayer for peace we would answer by demanding the freedom of all the
oppressed and the death of everyone who lords it over them, exploiters
and guardians of every kind. Every State and every Church would be
destroyed, together with all their various institutions, their religious,
political, judicial, and financial regulations; the police system, all
university regulations, all social and economic rules whatsoever, so
that the millions of poor human beings who are now being cheated and
gagged, tormented and exploited, delivered from the cruellest of official
directors and officious curates, from all collective and individual
tyranny, would for once be able to breathe freely.”[1369]

A discussion of anarchist doctrine lies beyond our province. Moreover,
such sweeping generalisations disarm all criticism. Their theories are
too often the outbursts of passionate feeling and scarcely need refuting.
Let us, then, try to discover the kind of influence they have had.

We are not going to speak of the criminal outrages which unfortunately
have resulted from their teaching. Untutored minds already exasperated by
want found themselves incapable of resisting the temptations to violence
in face of such doctrines. Such deeds, or active propaganda as they call
it, can have no manner of justification, but find an explanation in the
extreme fanaticism of the authors. It is not very easy to attribute such
violence to a social doctrine which, according to the circumstances,
may on the one hand be considered as the philosophy of outrage and
violence, and on the other as an ideal expression of human fraternity and
individual progress.

The influence of which we would speak is the influence which anarchy
has had upon the working classes in general. Undoubtedly it has led
to a revival of individualism and has begotten a reaction against the
centralising socialism of Marx. Its success has been especially great
among the Latin nations and in Austria, where it seemed for a time as
if it would supplant socialism altogether. Very marked progress has
also been made in France, Italy, and Spain. Is it because individuality
is stronger in those countries than elsewhere? We think not. The
fact is that wherever liberty has only recently been achieved, order
and discipline, even when freely accepted, seem little better than
intolerable signs of slavery.

An anarchist party came into being between 1880 and 1895. But since
1895 it seems to have declined. This does not mean that the influence
of anarchism has been on the wane, but simply that it has changed its
character. In France especially many of the older anarchists have
joined the Trade Union movement, and have occasionally managed to get
the control of affairs into their own hands, and under their influence
the trade unions have tried to get rid of the socialist yoke. The
Confédération générale du Travail has for its motto two words that are
always coupled together in anarchist literature, namely, “Welfare and
liberty.” It has also advocated “direct action”—that is, action which is
of a definitely revolutionary character and in defiance of public order.
Finally, it betrays the same impatience with merely political action, and
would have the workers concentrate upon the economic struggle.

The prophets of revolutionary syndicalism deny any alliance with anarchy.
But, despite their protests, it would be a comparatively easy matter to
point to numerous analogies in the writings of Bakunin and Kropotkin.
Moreover, they admit that Proudhon, as well as Marx, has contributed
something to the syndicalist doctrine; and we have already noted the
intimate connection which exists between Proudhon and the anarchists.

The first resemblance consists in their advocacy of violence as a method
of regenerating and purifying social life. “It is to violence,” writes
M. Sorel, “that socialism owes those great moral victories that have
brought salvation to the modern world.”[1370] The anarchists in a similar
fashion liken revolution to the storm that clears the threatening sky
of summer, making the air once more pure and calm. Kropotkin longs for
a revolution because it would not merely renew the economic order, but
would also “stir up society both morally and intellectually, shake it out
of its lethargy, and revive its morals. The vile and narrow passion of
the moment would be swept aside by the strong breath of a nobler passion,
a greater enthusiasm, and a more generous devotion.”[1371]

In the second place, moral considerations, which find no place in the
social philosophy of Marx, are duly recognised by Sorel and by the
anarchist authors. Bakunin, Kropotkin, and Proudhon especially demand a
due respect for human worth as the condition of every man’s liberty. They
also proclaim the sovereignty of reason as the only power that can make
men really free. M. Sorel, after showing how the new school may be easily
distinguished from official socialism by the greater stress which it lays
upon the perfection of morals, proceeds to add that on this point he is
entirely at one with the anarchists.[1372]

Finally, their social and political ideals are the same. In both
cases the demand is for the abolition of personal property and the
extinction of the State. “The syndicalist hates the State just as much
as the anarchist. He sees in the State nothing but an unproductive
parasite borne upon the shoulder of the producer and living upon his
substance.”[1373] And Sorel regards socialism as a tool in the hands of
the workers which will some day enable them to get rid of the State and
abolish the rights of private property.[1374] “Free producers working
in a factory where there will be no masters”[1375]—such is the ideal of
syndicalism, according to Sorel. There is also the same hostility shown
towards democracy as at present constituted and its alliance with the
State.

But despite many resemblances the two conceptions are really quite
distinct. The hope of anarchy is that spontaneous action and universal
liberty will somehow regenerate society. Syndicalism builds its faith
upon a particular institution, the trade union, which it regards as the
most effective instrument of class war. On this basis there would be
set up an ideal society of producers founded upon labour, from which
intellectualism would be banished. Anarchy, on the other hand, contents
itself with a vision of a kind of natural society, which the syndicalist
thinks both illusory and dangerous.

It has not been altogether useless, perhaps, to note the striking
analogy that exists between these two currents of thought which have had
such a profound influence upon the working-class movement during the
last fifteen years, and which have resulted in a remarkable revival of
individualism.




CONCLUSION


Can a history of economic doctrines really be said to have a conclusion?

It is obviously impossible to regard the history of any science as
complete so long as that science itself is not definitely constituted.
This applies to all sciences alike, even to the more advanced—physics,
chemistry, and mathematics, for example, all of which are continuously
undergoing some modification, abandoning in the course of their progress
certain conceptions that were formerly regarded as useful, but which now
appear antiquated, and adopting others which, if not entirely new, are
at least more comprehensive and more fruitful. And not only is this true
of individual sciences, but it is equally true of the very conception
of science itself. Progress in the sciences involves a modification of
our ideas concerning science. The savant, to-day as of yore, is engaged
in the pursuit of truth, but the conception of scientific truth at the
beginning of the twentieth century is not what it was at the beginning
of the nineteenth, and everything points to still further modifications
of that conception in the future. It is scarcely to be expected that
political economy, a young science hardly out of its swaddling-clothes,
will prove itself less mutable than the sciences already mentioned. All
that the historian is permitted to do is to point to the distance already
traversed, without pretending to be able to guess the character of the
road that still remains to be covered. His object must be to appreciate
the nature of the tasks that now await the economist, and for this his
study of the efforts put forth in the past, to which the preceding
chapters bear record, should prove of some assistance.

A simple analogy will perhaps help us to gauge the kind of impression
left upon us by a study of a century and a half of economic ideas.
Imagine ourselves looking at a fan spread out in front of us. At the
handle the separate radii are so closely packed together that they appear
to form a single block. But as the eye travels towards the circumference
the branches gradually separate from one another until they finally
assume quite divergent positions. But their separation is not complete,
and the more they are spread out the easier it is to detect the presence
of the tissue that forms a common bond between the various sections
of the fan and constitutes the basis of a new unity which is quite as
powerful, if not perhaps more so, than the unity which results from their
superposition at the base.

So it was with the Physiocrats, and still more with Adam Smith, whose
theory of political economy was a doctrine of such beautiful simplicity
that the human mind could grasp it at a single glance. But as time went
on and the science progressed it was realised that the unity which
characterised it at first was more apparent than real. The contradictory
theories which Smith had seemed able to reconcile gave rise to new
currents of thought, which tended to drift farther and farther apart as
they assumed a greater degree of independence. Conflicting theories of
distribution and of value began to take the field, and quarrels arose
over the relative merits of the abstract and the historical method, or
the claims of society and the rights of the individual. With a view
to self-defence, each of these schools took its own path, which it
followed with varied fortune, including not a few setbacks. Each of them
also surrounded itself with a network of observations and inductions,
thus bringing into the common fund a wealth of new truths and useful
conclusions. All this has resulted in the gradual formation, around each
great current of economic thought, of a thick enveloping layer of great
resistance and of increasing extent, which constitutes a kind of common
scientific matrix uniting them together, and underneath which may still
be detected the salient features of the great systems. What strikes us
now is not the multiplicity of branches which go to make up the fan,
but the presence of the common tissue in which, especially towards
the circumference, the different radii seem to lose themselves and to
disappear altogether. In other words, the sum total of acquired truths is
the only legacy left us by the various systems of the past, and this is
the only thing that interests us to-day.

Hence one result of so much discussion and polemical warfare has been
the discovery of some common ground upon which all economists, whatever
their social and political aspirations, can meet. This common ground is
the domain of economic science—a science that is concerned, not with
the presentation of what ought to be, but with the explanation and the
thorough understanding of what actually exists. The superiority of a
theory is measured solely by its explanatory power. It matters little
whether its author be Interventionist or Liberal, Protectionist or Free
Trader, Socialist or Individualist—everyone must necessarily bow before
an exact observation or a scientific explanation.

But while these divergent schools tend to be lost in the unity of a more
fully comprehended science, we see the emergence of other divisions, less
scientific perhaps, but much more fertile so far as the progress of the
science itself is concerned. It seems as if a new kind of fan arrangement
were making its appearance underneath the old.

This is obviously the case with regard to method, for example, where
the separation between pure and descriptive economics, or between
the theoretical systematisation and the mere observation of concrete
phenomena, is becoming very pronounced. Both kinds of research are
equally necessary, and demand different mental qualities which are very
seldom found combined in the same person. Economic science, however,
cannot afford to dispense either with theory or observation. The desire
to seize hold of the chain of economic phenomena and to unravel its
secret connections is as strong as ever it was. On the other hand, in
view of the transformation and the daily modifications which industry
everywhere seems to be undergoing, it is useless to imagine that we can
dispense with the task of observing and describing these. The two methods
are developing and progressing together, and the violent quarrels as to
their respective merits appear to be definitely laid at rest.

Accordingly what we find is a segmentation of economic science into
a number of distinct sciences, each of which tends to become more or
less autonomous. Such separation does not necessarily imply a conflict
of opinion, but is simply the outcome of division of labour. At the
outset of its career the whole of political economy was included within
the compass of one or two volumes, and all those facts and theories
of which an economist was supposed to have special knowledge were,
according to Say and his disciples, easily grouped under the three
heads of Production, Consumption, and Distribution. But since then
the science has been broken up into a number of distinct branches.
The term “physics,” which was formerly employed as a name for one of
the exact sciences, is just now little better than a collective name
used to designate a number of special sciences, such as electricity,
optics, etc., each of which might claim the lifelong devotion of the
student. Similarly “political economy” has just become a vague but
useful term to denote a number of studies which often differ widely from
one another. The theory of prices and the theory of distribution have
undergone such modifications as entitle them to be regarded as separate
studies. Social economics has carved out a domain of its own and is now
leading a separate existence, the theory of population has assumed the
dimensions of a special science known as demography, and the theory of
taxation is now known as the science of finance. Statistics, occupying
the borderland of these various sciences, has its own peculiar method
of procedure. Descriptions of the commercial and industrial mechanism of
banks and exchanges, the classification of the forms of industry and the
study of its transformations are related to political economy much as
zoology, descriptive botany, and morphology are related to the science
of natural history. And although a different name must not always be
taken as evidence of a different science, there is little doubt about the
existence of the separate sciences already enumerated. The difficulty
rather is to grasp the connection between them and to realise the nature
of that fundamental unity which binds them all together.

But there still remains a wide region over the whole of which divergences
exist and conflicts continue, and where, moreover, they will probably
never cease. This is the realm of _social_ and _political_ economics.

Despite the gradual rise of a consensus of scientific opinion among
economists, the divergences concerning the object that should be pursued
and the means employed to achieve that end are as pronounced as ever.
Each of the chief doctrines of which we have given an exposition in
the course of this work has its body of representatives. Liberals,
Communists, Interventionists, State and Christian Socialists continue
to preach their differing ideals and to advocate different methods of
procedure. On the question of the science itself, however, they are all
united. The arguments upon which they base their contentions are largely
borrowed from sources other than scientific. Moral and religious beliefs,
political or social convictions, individual preference or sentiment,
personal experience or interest—these are among the considerations
determining the orientation of each. The earlier half of the nineteenth
century witnessed the science of political economy making common cause
with one particular doctrine, namely, Liberalism. The alliance proved
most unfortunate. The time when economic doctrines were expected to lend
support to some given policy is for ever gone by. But the lesson has not
been lost, and everybody realises that nothing could be more dangerous
for the development of the science than to link its teaching to the
tenets of some particular school. At the same time the science might
conceivably furnish valuable information to the politician by enabling
him to foresee the results of such and such a measure; and it is to be
hoped that such predictions, all too uncertain as yet, may, accordingly,
become more precise in the future.

We cannot, then, suppose that the various currents of opinion to-day
known as Liberalism, Socialism, Solidarism, Syndicalism, and Anarchism
are likely to disappear in the immediate future. They may be given other
names, perhaps, but they will always continue to exist in some form or
other, simply because they correspond to some profound tendency in human
nature or to certain permanent collective interests which alternately
sway mankind.

We cannot pretend to regret this. Uniformity of belief is an illusory
ideal, and from a purely practical point of view we should be sorry to
see the day when there will be no conflict of opinion even about those
causes or those methods which we hold most dear.

We may sum up our conclusions as follows: From a scientific standpoint
unity is likely to become more pronounced and collaboration much more
general than in the past, thanks to the adoption of more scientific
methods.

In the domain of practice the variety of economic ideals and the conflict
between them is likely to continue.

Such, it seems to us, will be the spectacle presented by the political
economy of the future.

Thus the impression obtained from a perusal of this history of economic
doctrines is, if not somewhat melancholy, at least sufficient to
justify a certain degree of humility. So many doctrines that we thought
definitely established have disappeared altogether, and so many that we
thought completely overthrown have been rehabilitated. Those that die do
not seem altogether dead, somehow, and those that are revived are not
quite the same.

What the science and its teachers need most of all is full and complete
liberty—liberty to follow whatever method suits them best and to
accept whatever theory attracts them most; liberty to choose their own
ideals and to formulate their own systems—for systems and ideals, by
bringing sentiment into play, may occasionally prove very stimulating
even to scientific research. Nothing could be more harmful than the
dogmatism which the science has only recently escaped. In this matter,
unfortunately, no school and no country is entirely above criticism.

Sismondi used to complain that Liberalism, after it had achieved its
triumph, had attempted to convert political economy into a system of
orthodoxy. But Liberalism is not the only doctrine against which a
similar charge might be brought. It is only a few years since Schmoller,
the chief of the German Historical school, in an address delivered as
Rector of Berlin University, declared that neither Marxians nor the
disciples of Smith could in future be regarded as accredited teachers
of the science. Does the German Historical school really wish to revive
that ostracism from which it was itself one of the first to suffer?
Neither can we, as Frenchmen, pride ourselves upon having been less
exclusive. The indifference or even the actual hostility with which the
Historical school was for a long time treated does very little credit to
us. Moreover, that same intolerance of which “_bourgeois_ economics” was
so justly accused, is it not to be met with in an equally extravagant
fashion in the socialism of to-day? The ultra-dogmatism of the Liberal
school can be easily paralleled from the history of Marxism and the
frantic efforts made by some socialists to prevent other Marxians making
a breach in the doctrine. If there is one lesson more than another that
emerges from a study of the history of economic doctrines it is the
necessity for a more critical spirit and a more watchful attitude, always
ready to test any new truths that present themselves, to extend a hearty
welcome to every fresh observation or new experience, thus enabling the
science to enlarge its scope and gain a deeper significance without
sacrificing any of its essential tenets.




FOOTNOTES


[1] See an article by M. Deschamps in the _Réforme sociale_ of October 1,
1902, on the value of this kind of teaching.

[2] In an article on the teaching of the history of economic doctrines
(_Revue de l’Enseignement_, March 15, 1900) M. Deschamps declares that
it is unpardonable that we should be unable to make better use of the
marvellous economic teachings of which both ancient and mediæval history
are full, but he adds that “as far as the history of the science is
concerned there is no need to go farther back than the Physiocrats.”

[3] In the new edition of M. Espinas’s work an entire volume is devoted
to the study of economic doctrines in ancient and mediæval times.

[4] “What useful purpose can be served by the study of absurd opinions
and doctrines that have long ago been exploded, and deserved to be? It
is mere useless pedantry to attempt to revive them. The more perfect a
science becomes the shorter becomes its history. Alembert truly remarks
that the more light we have on any subject the less need is there to
occupy ourselves with the false or doubtful opinions to which it may have
given rise. Our duty with regard to errors is not to revive them, but
simply to forget them.” (_Traité pratique_, vol. ii, p. 540.)

[5] _Wealth of Nations_, vol. i, p. 351.

[6] Quesnay’s first economic articles, written for the _Grande
Encyclopédie_, were on _Les Grains_ and _Les Fermiers_.

[7] Professor Hector Denis, speaking of the Physiocratic doctrine,
remarks that its imperfections are easily demonstrated, but that we
seldom recognise its incomparable greatness.

[8] “The genuine economists are easily depicted. In Dr. Quesnay they
have a common master; a common doctrine in the _Philosophie rurale_ and
the _Analyse économique_. Their classical literature is summed up in
the generic term Physiocracy. In the _Tableau économique_ they possess
a formula with technical terms as precise as old Chinese characters.”
This definition of the Physiocrats, given by one of themselves, the
Abbé Baudeau (_Éphémérides_, April 1776)—writing, we may be sure, in no
malicious spirit—shows us that the school possessed not a little of the
dogmatism of the Chinee.

[9] The first not only in chronological order but the chief recognised
by all was Dr. Quesnay (1694-1774), the physician of Louis XV and of
Mme. de Pompadour. He had already published numerous works on medicine,
especially the _Essai physique sur l’Économie animale_ (1736) before
turning his attention to economic questions and more especially to
problems of “rural economy.” His first contributions, the essays on _Les
Grains_ and _Les Fermiers_, which appeared in the _Grande Encyclopédie_
in 1756 and 1757, were followed by his famous _Tableau économique_ in
1758, when he was sixty-four years of age, and in 1760 by his _Maximes
générales du Gouvernement économique d’un Royaume agricole_, which is
merely a development of the preceding work.

His writings were not numerous, but his influence, like that of Socrates,
disseminated as it was by his disciples, became very considerable.

The best edition of his works is that published by Professor Oncken
of Berne, _Œuvres économiques et philosophiques de F. Quesnay_ (Paris
and Frankfort, 1888). Our quotations from the founders are taken from
_Collections des Principaux Économistes_, published by Daire.

The Marquis de Mirabeau, father of the great orator of the Revolution, a
man of a fiery temperament like his son, published at about the same date
as the production of the _Tableau_ his _L’Ami des Hommes_. This book,
which created a great sensation, does not strictly belong to Physiocratic
literature, for it ignores the fundamental doctrine of the school. _La
Théorie de l’Impôt_ (1760) and _La Philosophie rurale_ (1763), on the
other hand, owe their inspiration to Physiocracy.

Mercier de la Rivière, a parliamentary advocate, published _L’Ordre
natural et essentiel des Sociétés politiques_ in 1767. Dupont de
Nemours refers to this as a “sublime work,” and though it does not,
perhaps, deserve that epithet it contains, nevertheless, the code of the
Physiocratic doctrine.

Dupont de Nemours, as he is called after his native town published about
the same time, 1768, when he was only twenty-nine, a book entitled
_Physiocratie, ou Constitution essentielle du Gouvernement le plus
avantageux au Genre humain_. To him we owe the term from which the school
took its name—Physiocracy, which signifies “the rule of nature.” But the
designation “Physiocrats” was unfortunate and was almost immediately
abandoned for “Économistes.” Quesnay and his disciples were the first
“Économistes.” It was only much later, when the name “Economist” became
generic and useless as a distinctive mark for a special school, that
writers made a practice of reverting to the older term “Physiocrat.”

An enthusiastic disciple of Quesnay, Dupont’s _rôle_ was chiefly that of
a propagandist of Physiocratic doctrines, and he made little original
contribution to the science. At an early date, moreover, the great
political events in which he took an active part proved a distraction. He
survived all his colleagues, and was the only one of them who lived long
enough to witness the Revolution, in which he played a prominent part.
He successively became a deputy in the Tiers État, a president of the
Constituent Assembly, and later on, under the Directoire, President du
Conseil des Anciens. He even assisted in the restoration of the Empire,
and political economy was first honoured at the hands of the Institut
when he became a member of that body.

In 1777 Le Trosne, an advocate at the Court of Orleans, published a book
entitled _De l’Intérêt social, par rapport à la Valuer, à la Circulation,
à l’Industrie et au Commerce_, which is perhaps the best or at least the
most strictly economic of all. Mention must also be made of the Abbé
Baudeau, who has no less than eighty volumes to his credit, chiefly
dealing with the corn trade, but whose principal work is _L’Introduction
à la Philosophie économique_ (1771); and of the Abbé Roubaud, afterwards
Margrave of Baden, who had the advantage of being not merely a writer but
a prince, and who carried out some Physiocratic experiments in some of
the villages of his small principality.

We have not yet mentioned the most illustrious member of the school, both
in respect of his talent and his position, namely, Turgot (1727-81).
His name is generally coupled with that of the Physiocrats, and this
classification is sufficiently justified by the similarity of their
ideas. Still, as we shall see, in many respects he stands by himself,
and bears a close resemblance to Adam Smith. Moreover, he commenced
writing before the Physiocrats. His essay on paper money dates from 1748,
when he was only twenty-one years of age, but his most important work,
_Réflexions sur la Formation et la Distribution des Richesses_, belongs
to 1766. As the Intendant of Limoges and again as a minister of Louis XVI
he possessed the necessary authority to enable him to realise his ideas
of economic liberty, which he did by his famous edicts abolishing taxes
upon corn passing from one province to another, and by the abolition of
the rights of wardenship and privilege.

Unlike the other Physiocrats, who swore only by Dr. Quesnay, Turgot owed
a great deal to a prominent business man, Vincent de Gournay, who at a
later date became the Intendant of Commerce. Gournay died in 1759, at
the early age of forty-seven. Of Gournay we know next to nothing beyond
what Turgot says of him in his eulogy (See Schelle, _Vincent de Gournay_,
1897).

_Bibliography._ Books dealing with the Physiocratic system, both in
French and other languages, are fairly numerous. A very detailed
account of these may be found in M. Weulersse’s work, _Le Mouvement
physiocratique en France de 1756 à 1770_, published in 1910, which also
contains a very complete exposition of the Physiocratic doctrine. In
English there is a succinct account of the system in Higgs’ _Physiocrats_
(1897).

[10] Especially in the celebrated pamphlet, _L’Homme aux Quarante Écus_.

[11] J. J. Rousseau, the author of the _Contrat Social_ (1762), was a
contemporary of the Physiocrats, but he never became a member of the
school. Mirabeau’s attempt to win his allegiance proved a failure.
The “natural order” and the “social contract” seem incompatible, for
the natural and spontaneous can never be the subject of contract. One
might even be tempted to think that Rousseau’s celebrated theory was
formulated in opposition to Physiocracy, unless we remembered that the
social contract theory is much older than Rousseau’s work. Traces of
the same idea may be found in many writings, especially those inspired
by Calvinism. To Rousseau the social question seemed to be a kind of
mathematical problem, and any proposed solution must satisfy certain
complicated conditions, which are formulated thus: “To find a form of
association which protects with the whole common force the person and
property of each associate, and in virtue of which everyone, while
uniting himself to all, obeys only himself and remains as free as
before.” Nothing could well be further from the Physiocratic view. Their
belief was that there was nothing to find and nothing to create. The
“natural order” was self-evident.

It is true that Rousseau was an equally enthusiastic believer in a
natural order, in the voice of nature, and in the native kindness of
mankind. “The eternal laws of nature and order have a real existence.
For the wise they serve as positive laws, and they are engraved on the
innermost tablets of the heart by both conscience and reason.” (_Émile_,
Book V.) The language is identical with that of the Physiocrats. But
there is this great difference. Rousseau thought that the state of
nature had been denaturalised by social and especially by political
institutions, including, of course, private property; and his chief
desire was to give back to the people the equivalent of what they had
lost. The “social contract” is just an attempt to secure this. The
Physiocrats, on the other hand, regarded the institution of private
property as the perfect bloom of the “natural order.” Its beauty
has perhaps suffered at the hands of turbulent Governments, but let
Governments be removed and the “natural order” will at once resume its
usual course.

There is also this other prime difference. The Physiocrats regarded
interest and duty as one and the same thing, for by following his own
interest the individual is also furthering the good of everybody else.
To Rousseau they seemed antagonistic: the former must be overcome by
the latter. “Personal interest is always in inverse ratio to duty, and
becomes greater the narrower the association, and the less sacred.”
(_Contrat Social_, ii, chap. 3.) In other words, family ties and
co-operative associations are stronger than patriotism.

[12] “There is a natural society whose existence is prior to every other
human association.… These self-evident principles, which might form the
foundation of a perfect constitution, are also self-revealing. They are
evident not only to the well-informed student, but also to the simple
savage as he issues from the lap of nature.” (Dupont, vol. i, p. 341.)
Some Physiocrats even seem inclined to the belief that this “natural
order” has actually existed in the past and that men lost it through
their own remissness. Dupont de Nemours mournfully asks: “How have the
people fallen from that state of felicity in which they lived in those
far-off, happy days? How is it that they failed to appreciate the natural
order?” But even when interpreted in this fashion it had no resemblance
to a savage state. It must rather be identified with the Golden Age of
the ancients or the Eden of Holy Scripture. It is a lost Paradise which
we must seek to regain.

The view is not peculiar to the Physiocrats, but it is interesting to
note how unfamiliar they were with the modern idea of evolutionary
progress.

[13] Mercier de la Rivière, vol. ii, p. 615. “Natural right is
indeterminate in a state of nature [note the paradox]. The right only
appears when justice and labour have been established.” (Quesnay, p. 43.)

[14] “By entering society and making conventions for their mutual
advantage men increase the scope of natural right without incurring any
restriction of their liberties, for this is just the state of things that
enlightened reason would have chosen.” (Quesnay, pp. 43, 44.)

[15] Pursuing this same idea, Dupont writes as follows: “It is thirteen
years since a man of exceptional genius, well versed in profound
disquisition, and already known for his success in an art where complete
mastery only comes with careful observation and complete submission to
the laws of nature, predicted that natural laws extended far beyond
the bounds hitherto assigned to them. If nature gives to the bee, the
ant, or the beaver the power of submitting by common consent and for
their own interest to a good, stable, and equable form of government,
it can hardly refuse man the power of raising himself to the enjoyment
of the same advantages. Convinced of the importance of this view, and
of the important consequences that might follow from it, he applied his
whole intellectual strength to an investigation of the physical laws
which govern society.” Elsewhere he adds: “The natural order is merely
the physical constitution which God Himself has given the universe.”
(Introduction to Quesnay’s works, p. 21.)

Hector Denis in his _Histoire des Doctrines_ expresses the belief that
the most characteristic feature of the Physiocratic system is the
emphasis laid upon a naturalistic conception of society. He illustrates
this by means of diagrams showing the identity of the circulation of
wealth and the circulation of the blood.

[16] “Its laws are irrevocable, pertaining as they do to the essence of
matter and the soul of humanity. They are just the expression of the will
of God.… All our interests, all our wishes, are focused at one point,
making for harmony and universal happiness. We must regard this as the
work of a kind Providence, which desires that the earth should be peopled
by happy human beings.” (Mercier de la Rivière, vol. i, p. 390; vol. ii,
p. 638.)

[17] “There is a natural judge of all ordinances, even of the
sovereign’s. This judge, which recognises no exceptions, is just the
evidence of their conformity with or opposition to natural laws.”
(Dupont, vol. i, p. 746.)

[18] Dupont, introduction to Quesnay’s works, vol. i, pp. 19 and 26.

[19] Baudeau, vol. i, p. 820.

[20] Letter to Mdlle. Lespinasse (1770).

[21] See some remarks on the _Tableau économique_ on p. 18.

[22] Baudeau, _Éphémérides du Citoyen_.

[23] “The laws of the natural order do not in any way restrain the
liberty of mankind, for the great advantage which they possess is that
they make for greater liberty.” (Quesnay, _Droit Naturel_, p. 55.) And
Mercier de la Rivière says (vol. ii, p. 617): “The institution of private
property and of liberty would secure perfect order without the help of
any other law.”

[24] _Dialogues sur les Artisans._

[25] Mercier de la Rivière, vol. ii, p. 617.

[26] The origin of the famous formula is uncertain. Several of the
Physiocrats, especially Mirabeau and Mercier de la Rivière, assign it to
Vincent de Gournay, but Turgot, the friend and biographer of Vincent de
Gournay, attributes it, under a slightly different form, _laissez-nous
faire_, to Le Gendre, a merchant who was a contemporary of Colbert.
Oncken thinks that the credit must go to the Marquis d’Argenson, who
employed the term in his _Mémoires_ as early as the year 1736. The
formula itself is quite commonplace. It only became important when it
was adopted as the motto of a famous school of thinkers, so that this
kind of research has no great interest. For a discussion of this trivial
question, see the work of M. Schelle, _Vincent de Gournay_ (1897), and
especially Oncken’s _Die Maxime Laissez-faire et Laissez-passer_ (Berne,
1886).

[27] “The prosperity of mankind is bound up with a maximum net product.”
(Dupont de Nemours, _Origine d’une Science nouvelle_, p. 346.)

[28] “Labour applied anywhere except to land is absolutely sterile, for
man is not a creator.” (Le Trosne, p. 942.)

“This physical truth that the earth is the source of all commodities
is so very evident that none of us can doubt it.” (Le Trosne, _Intérêt
social_.)

“The produce of the soil may be divided into two parts … what remains
over is free and disposable, a pure gift given to the cultivator in
addition to the return for his outlay and the wages of his labour.”
(Turgot, _Réflexions_.)

“Raw material is transformed into beautiful and useful objects through
the diligence of the artisan, but before his task begins it is necessary
that others should supply the raw material and provide the necessary
sustenance. When their part is completed others should recompense them
and pay them for their trouble. The cultivators, on the other hand,
produce their own raw material, whether for use or for consumption, as
well as everything that is consumed by others. This is just where the
difference between a productive and a sterile class comes in.” (Baudeau,
_Correspondance avec M. Graslin_.)

[29] “A weaver buys food and clothing, giving 150 francs for them,
together with a quantity of flax, for which he gives 50 francs. The cloth
will be sold for 200 francs, a sum that will cover all expenditure.”
(Mercier de la Rivière, vol. ii, p. 598.) “Industry merely superimposes
value, but does not create any which did not previously exist.” (_Ibid._)

[30] Baudeau, _Éphém._ ix (1770). One feels that the Physiocrats go too
far when they say that “the merchant who sells goods may occasionally
prove as useful as the philanthropist who gives them, because want puts
a price upon the service of the one just as it does upon the charity of
the other.” (_Du Marchand de Grains_, in the _Journal de l’Agriculture,
du Commerce, et des Finances_, December 1773, quoted in a thesis on
the corn trade by M. Curmond, 1900.) We must insist upon the fact that
“unproductive” or “sterile” did not by any means signify “useless.”
They saw clearly enough that the labour of the weaver who makes linen
out of flax or cloth out of wool is at any rate as useful as that of
the cultivator who produced the wool and the flax, or rather that the
latter’s toil would be perfectly useless without the industry of the
former. They also realised that although we may say that agricultural
labour is more useful than that of the weaver or the mason, especially
when the land is used for raising corn, one cannot say as much when that
same land is employed in producing roses, or mulberry trees for rearing
silkworms.

[31] Le Trosne, p. 945.

[32] “It seems necessary as well as simple and natural to distinguish the
men who pay others and draw their wealth directly from nature, from the
paid men, who can only obtain it as a reward for useful and agreeable
services which they have rendered to the former class.” (Dupont, vol. i,
p. 142.)

[33] It is rather strange that Turgot should have added this
qualification, because he was more favourable to industry and less
devoted to agriculture than the rest of the Physiocrats.

[34] “I must have a man to make my clothes, just as I must have a doctor
whose advice I may ask concerning my health, or a lawyer concerning my
affairs, or a servant to work instead of me.” (Le Trosne, p. 949.)

[35] On this point see M. Pervinquière, _Contribution à l’Étude de la
Productivité dans la Physiocratie_. The indifference of the Physiocrats
to mines shows a want of scientific spirit, for even from their own point
of view the question was one of prime importance. No commodity could
be produced without raw material, and wealth is simply a collection of
commodities. Raw material is furnished by the mine as well as by the
soil. In the history of mankind iron has played as important a part as
corn. Agriculture itself is an extractive industry, where the miner—the
agriculturist—uses plants instead of drills, and in both cases the
product is exhaustible.

[36] Le Trosne, p. 942.

“Land owes its fertility to the might of the Creator, and out of His
blessing flow its inexhaustible riches. This power is already there, and
man simply makes use of it.” (Le Trosne, _Intérêt social_, chap. 1, § 2.)

[37] Quesnay, p. 325.

[38] _Geschichte der National Oekonomie_, Part I, _Die Zeit vor Adam
Smith_.

M. Méline’s book, _Le Retour à la Terre_, though Protectionist in tone,
is wholly imbued with the Physiocratic spirit.

[39] _Essai physique sur l’Économie animale_ (1747).

[40] “There have been since the world began three great inventions which
have principally given stability to political societies, independent of
many other inventions which have enriched and advanced them. The first
is the invention of writing, which alone gives human nature the power
of transmitting without alteration its laws, its contracts, its annals,
and its discoveries. The second is the invention of money, which binds
together all the relations between civilised societies. The third is
the Economical Table, the result of the other two, which completes them
both by perfecting their object; the great discovery of our age, but
of which our posterity will reap the benefit.” (Mirabeau, quoted in
_Wealth of Nations_, Book IV, chap. 9.) Baudeau is no less enthusiastic.
“These figures,” he writes, “are borrowed with the consent and upon the
advice of the great master whose genius first begat the sublime idea of
this _Tableau_. The _Tableau_ gives us such a clear idea of the premier
position of the science that all Europe is bound to accept its teaching,
to the eternal glory of the invention and the everlasting happiness of
mankind.” (P. 867.)

The first edition of the _Tableau_, of which only a few copies were
printed, is missing altogether, but a proof of that edition, corrected by
Quesnay himself, was recently discovered in the Bibliothèque Nationale in
Paris by Professor Stephen Bauer, of the University of Bâle. A facsimile
was published by the British Economic Association in 1894.

[41] “The discovery of the circulation of wealth in economic societies
occupies in the history of the science the same position as is occupied
by the discovery of the circulation of the blood in the history of
biology.”

[42] Quesnay’s table consists of a number of columns placed in
juxtaposition with a number of zigzag lines which cross from one column
to another. If he had been living now he would almost certainly have
used the graphic method, which would have simplified matters very
considerably, and it is somewhat strange that no one has attempted this
with his _Tableau_. Hector Denis has compared his tables with those of
the anatomist and traced a parallel between the links of the economical
world and the plexus of veins and arteries in the human body.

His explanation of the _Tableau_ by means of mathematical tables gives
him a claim to be considered a pioneer of the Mathematical school. Full
justice has been done to him in this respect. An article by Bauer in
the _Quarterly Journal of Economics_, 1890, recognises his claim, and
there is another by Oncken in the _Economic Journal_ for June 1896,
entitled _The Physiocrats as Founders of the Mathematical School_. His
contemporary Le Trosne is even more emphatic on the point: “Economic
science, being a study of measurable objects, is an exact science, and
its conclusions may be mathematically tested. What the science lacked
was a convenient formula which might be applied to test its general
conclusions. Such a formula we now have in the _Tableau économique_.”
(_De l’Ordre social_, viii, p. 218.)

[43] Turgot, although he is not speaking of the _Tableau_ itself in this
case, sums it up admirably in the following: “What the labourers get from
the land in addition to what is sufficient to supply their own needs
constitutes the only wages fund [note the phrase], which all the other
members of society can draw upon in return for their labour. The other
members of society, when they buy the commodities which the labourer has
produced, simply give him the bare equivalent of what it has cost the
labourer to produce them.” (Turgot, vol. i, p. 10.) For a more detailed
account see Baudeau, _Explication du Tableau économique_.

[44] “This movement of commerce from one class to another, and the
conditions which give rise to it, are not mere hypotheses. A little
reflection will show that they are faithfully copied from nature.”
(Quesnay, p. 60.)

[45] They imagined that it was actually so. “On the one hand, we see
the productive class living on a series of payments, which are given in
return for its labour, and always bearing a close relation to the outlay
upon its upkeep. On the other, there is nothing but consumption and
annihilation of goods, but no production.” (Quesnay, p. 60.)

[46] “It is impossible not to recognise the right of property as a divine
institution, for it has been ordained that this should be the indirect
means of perpetuating the work of creation.” (La Rivière, p. 618.) “The
order of society presupposes the existence of a third class in society,
namely, the proprietors who make preparation for the work of cultivation
and who dispense the net product.” (Quesnay, p. 181.)

[47] “Immediately below the landed proprietors come the productive
classes, whose labour is the only source of their income, but who cannot
exercise that labour unless the landlord has already incurred some outlay
in the way of ground expenses.” (Baudeau, p. 691.)

[48] The Physiocrats never mention the agricultural workers, and one
might almost think that there were none. Their solicitude for the
agriculturists does not extend beyond the farmers and _métayers_. M.
Weulersse has referred to their system, not without some justification,
as an essentially capitalistic one.

[49] “We may call them the nobility, as well as the propertied class.
Nobility in this sense, far from being illusory, is a very useful
institution in the history of civilised nations.” (Baudeau, p. 670.)

[50] “In the third line—they generally occupy the first rank—we have the
landed proprietors who prepare the soil, build houses, make plantations
and enclosures at their own expense or who pay for those outlays by
buying property already developed. This revenue, they might argue,
belongs to us because of the wisdom and forethought we have exercised in
preparing the land, in undertaking to keep it in repair, and to improve
it still further.” (Baudeau, _Philosophie économique_, p. 757.) “The
foremost and most essential agent of production must be that man who
makes it possible. But who is this agent but the landed proprietor, whose
claims to his prerogatives are based upon the need for his productive
services?” (Mercier de la Rivière, pp. 466-467.)

“It is this expenditure that makes the claim of proprietors real and
their existence just and necessary. Until such expenditure is incurred
the right of property is merely an exclusive right to make the soil
capable of bearing fruit.” (Baudeau, p. 851.) In other words, so long as
the proprietor has not incurred some expenditure the right of property is
simply reduced to occupation.

The Physiocrats distinguished three kinds of _avances_:

1. The annual expenditure (_avances annuelles_) incurred in connection
with the actual work of cultivation, which recurs every year, such as the
cost of seed and manure, cost of maintaining labourers, etc. The annual
harvest ought to repay all this, which to-day would be called circulating
capital.

2. The “original” outlay (_avances primitives_) involved in buying
cattle and implements which render service for a number of years, and
for which the proprietor does not expect to be recompensed in a single
year. The return is spread out over a number of years. Here we have the
distinction between fixed and circulating capital, and the idea of the
gradual redemption of the former as against the total repayment of the
latter at one single use. It did not escape the Physiocrats’ notice that
an intelligent increase of the fixed might gradually reduce the annual
expenditure. Such ideas were quite novel. But they immediately took
their place as definite contributions to the science. They are no longer
confined to agriculture, however, but apply equally to all branches of
production.

3. The _avances foncières_ are the expenses which are undertaken with a
view to preparing the land for cultivation. (The adjective “primitive”
would have been better applied here.)

The first two kinds of expenditure are incumbent upon the agriculturist
and entitle him to a remuneration sufficient to cover his expenses.

The third is incumbent upon the proprietor and constitutes his claim to a
share of the funds. “Before you can set up a farm where agriculture may
be steadily practised year in and year out what must be done? A block of
buildings and a farmhouse must be built, roads made and plantations set,
the soil must be prepared, the stones cleared, trees cut down and roots
removed; drains must also be cut and shelters prepared. These are the
_avances foncières_, the work that is incumbent upon proprietors, and the
true basis of their claim to the privileges of proprietorship.” (Baudeau,
_Éphémérides_, May 1776. A reply to Condillac.)

[51] “Without that sense of security which property gives, the land would
still be uncultivated.” (Quesnay, _Maximes_, iv.) “Everything would be
lost if this fount of wealth were not as well assured as the person of
the individual.” (Dupont, vol. i. p. 26.)

[52] Mercier de la Rivière, vol. i, p. 242.

[53] _Maximes_, iv.

[54] Pp. 615, 617.

[55] It is necessary to make a note here of one of the many differences
between Turgot and the Physiocrats. Turgot seems much less firmly
convinced of the social utility of landed property and of the legitimacy
of the right of property. He thinks that its origin is simply due to
occupation. This weakens the Physiocratic case very considerably. “The
earth is peopled and cultivation extends. The best lands will in time
all be occupied. For the last comers there will only be the unfertile
lands rejected by the first. In the end every piece of land will have
its owner, and those who possess none will have no other resource than
to exchange the labour of their arm for the superfluous corn of the
proprietor.” (Vol. i, p. 12.) We are here not very far from the Ricardian
theory.

[56] Baudeau, p. 378.

[57] “A proprietor who keeps up the _avances foncières_ without fail is
performing the noblest service that anyone can perform on this earth.”
(Baudeau.)

[58] “The rich have the control of the fund from which the workers are
paid, but they are doing a great injustice if they appropriate it.”
(Quesnay, vol. i, p. 193.)

[59] Pp. 835, 839. And Mercier de la Rivière writes in terms not less
severe; “He is responsible under pain of annihilation for the products of
society, and no part of the produce which goes to support the cultivator
should wittingly be employed otherwise.” The history of Ireland is an
interesting commentary on these words.

But let us always remember that when the Physiocrats speak of the rights
of the cultivator they think only of the farmer and _métayer_ and never
of the paid agriculturist. They are content to demand merely a decent
existence for the latter. Were they put too much at ease they would
perhaps leave off working. See Weulersse, vol. ii, p. 729. He seems a
little unjust, and quotes some words of Quesnay, who protests against
the belief that “the poor must be kept poor if they are not to become
indolent.”

[60] One is perhaps surprised to find that freedom of work—in other
words, the abolition of corporations—is not included in their list,
especially since the credit for the downfall of those institutions is
usually given to the Physiocrats. Their writings contain only very
occasional reference to this topic, because industrial labour is regarded
as sterile, and reform touching its organisation concerned them but
little. They did, however, protest against the rule that confined the
right to engage in a trade to those who had received an express privilege
from the Crown. They considered that “to an honest soul this was the most
odious maxim which the spirit of domination and rapacity ever invented.”
(Baudeau, in _Éphémérides_, 1768, vol. iv.) Turgot’s famous _Edict_ of
January 1776, abolishing the rights of corporations and establishing
liberty for all, is, with good reason, attributed to Physiocratic
influence.

[61] “Exchange is a contract of equality, equal value being given in
exchange for equal value. Consequently it is not a means of increasing
wealth, for one gives as much as the other receives, but it is a means of
satisfying wants and of varying enjoyment.” (Le Trosne, pp. 903, 904.)
But what does this satisfying of wants and variation of enjoyment signify
if it does not mean increased wealth?

[62] Mercier de la Rivière, p. 545.

[63] P. 548.

[64] “The settlement of international indebtedness by payment of money is
a mere _pis aller_ of foreign trade, adopted by those nations which are
unable to give commodities in return for commodities according to custom.
And foreign trade itself is a mere _pis aller_ adopted by those nations
whose home trade is insufficient to enable them to make the best use of
their own productions. It is very strange that anyone should have laid
such stress upon a mere _pis aller_ of commerce.” (Quesnay’s _Dialogues_,
p. 175.)

[65] “After all merchants are only traffickers, and the trafficker is
just a person who employs his ability in appropriating a part of other
people’s wealth.” (Mercier de la Rivière, p. 551.) “Merchants’ gains are
not a species of profit.” (Quesnay, p. 151.)

[66] _Ordre Naturel_, p. 538.

[67] Enforcing sales in open market and in limited quantities only,
keeping corn beyond two years, etc. Corn was to be supplied to consumers
in the first place, then to bakers, and finally to merchants, etc.

[68] “Let entire freedom of commerce be maintained, for the surest, the
exactest, the most profitable regulator both of home and of foreign
trade for the nation as well as for the State is perfect freedom of
competition.” (Quesnay’s _Maximes_, xxv.) “We must tell them that free
trade is in accordance with the order and with the demands of justice,
and everything that conforms to the order bears its own reward.” (Le
Trosne, p. 586.)

[69] _Dialogues_, p. 153. The dearth of plenty, as they paradoxically
put it, stimulates production, and Boisguillebert, in an equal paradox,
remarks that “Low price gives rise to want.” In the _Maximes_, p. 98,
Quesnay contents himself by saying that free trade in corn makes the
price more equal. “It is clear,” he adds, “that, leaving aside the
question of foreign debt, equal prices will increase the revenue yielded
by the land, which will again result in extended cultivation, which will
provide a guarantee against those dearths that decimate population.”

Mercier de la Rivière writes in a similar vein. “A good constant average
price ensures abundance, but without freedom we have neither a good price
nor plenty.” (P. 570.)

Turgot in his _Lettres sur le Commerce des Grains_ develops the argument
at great length and tries to give a mathematical demonstration of it.
There was no need for this. It is a commonplace of psychology that a
steady price of 20 is preferable to alternative prices of 35 and 5 francs
respectively, although the average in both cases is the same.

[70] It is worth noting that the nature of American competition was
clearly foreseen by Quesnay—one of the most remarkable instances
of scientific prevision on record. In his article on corn in the
_Encyclopédie_ he says that he views the fertility of the American
colonies with apprehension and dreads the growth of agriculture in the
New World, but the fear is provisionally dismissed because the corn is
inferior in quality to that of France and is damaged in transit. (See our
remarks concerning the Physiocratic connection with modern Protectionist
theories.)

[71] It must not be forgotten that the Protectionist system aided the
development of industry and retarded that of agriculture by its policy of
encouraging the exportation of manufactured products and its restrictions
on the exportation of agricultural products and raw materials with a
view to securing cheap labour and a plentiful supply of raw materials
for the manufacturing industries. The Protectionists were not concerned
to prevent the exportation of corn. Both Colbertism and Mercantilism
sacrificed the cultivator by preventing the exportation of corn and
by allowing of its importation, while doing the exact opposite for
manufactured products.

[72] “Upon final analysis do you find that you have gained anything by
your policy of always selling to foreigners without ever buying from
them? Have you gained any money by the process? But you cannot retain it.
It has passed through your hands without being of the least use. The more
it increases the more does its value diminish, while the value of other
things increases proportionally.” (Mercier de la Rivière, pp. 580-583.)

[73] Turgot, _Œuvres_, vol. i, p. 181. “If you succeed in keeping back
foreign merchants by means of your protective tariffs they will not bring
you those goods which you need, thus causing those impositions which
were designed for others to retaliate upon your own head.” (Quesnay,
_Dialogues_.)

[74] _Dialogues_, pp. 254, 274.

[75] _Ibid._, p. 237.

[76] _Ibid._, p. 22. He proposed a highly complicated system imposing
moderate duties both upon the importation and exportation of corn—a 5 per
cent. _ad valorem_ duty in the one case and a 10 per cent. in the other.

[77] Turgot was the author of a work on this subject, entitled _Mémoire
sur les Prêts d’Argent_ (1769).

[78] _Réflexions sur la Formation des Richesses_, §§ lix, lxi, lxxiv.

[79] “Remove all useless, unjust, contradictory, and absurd laws, and
there will not be much legislative machinery left after that.” (Baudeau,
p. 817.) “It is not a question of procuring immense riches, but simply
a question of letting people alone, a problem that hardly requires a
moment’s thought.” So wrote Boisguillebert sixty years before.

[80] Quesnay, _Maximes_, vol. i, p. 390. Mercier de la Rivière writes in
much the same style; “The positive laws that are already in existence are
merely expressions of such natural rights.” (Vol. ii, p. 61.) It sounds
like a preamble to the Declaration of the Rights of Man.

[81] “The Physiocrats had the most absolute contempt for political
liberty.” (Esmein, _La Science politique des Physiocrates_, address at
the opening session of the Congress of Learned Societies, Paris, 1906.)

“The Greek republics never became acquainted with the laws of the order.
Those restless, usurping, tyrannical tribes never ceased to drench the
plains with human blood, to cover with ruins and to reduce to waste
the most fertile and the best situated soil in the then known world.”
(Baudeau, p. 800.)

“It is evident that a democratic sovereign—_i.e._ the whole
people—cannot itself exercise its authority, and must be content to
name representatives. These representatives are merely agents, whose
functions are naturally transitory, and such temporary agents cannot
always be in complete harmony with every interest within the nation. This
is not the kind of administration contemplated by the Physiocrats. The
sovereignty of the natural order is neither elective nor aristocratic.
Only in the case of hereditary monarchy can all interests, both personal
and individual, present and future, be clearly linked with those of the
nation, by their co-partnership in all the net products of the territory
submitted to their care.” (Dupont, vol. i, pp. 359-360.)

This sounds very much like a eulogy of the House of Hohenzollern,
delivered by William II.

Very curious also are Dupont’s criticisms of the parliamentary _régime_.
In his letter to J. B. Say (p. 414) he notes “its tendency to corruption
and canker,” which had not then manifested itself in the United States
of America. These letters, though very interesting, hardly belong to a
history of economic doctrines.

[82] “It is only when the people are ingenuous that we find real despots,
because then the sovereign can do whatever he wills.” (Dupont, p. 364.)

[83] Quesnay, _Maximes_, i. The Physiocrats were in favour of a national
assembly, but would give it no legislative power. It was to be just
a council of State concerned chiefly with public works and with the
apportionment of the burden of taxation. See M. Esmein’s _mémoire_ on
the proposed National Assembly of the Physiocrats (_Comptes rendus de
l’Académie des Sciences Morales et Politiques_, 1904).

[84] “The personal despotism will only be the legal despotism of an
obvious and essential order. In legal despotism the obviousness of a law
demands obedience before the monarch enjoins it. Euclid is a veritable
despot, and the geometrical truths that he enunciates are really despotic
laws. The legal and personal despotism of the legislator are one and
the same. Together they are irresistible.” (Mercier de la Rivière, pp.
460-471.) This despotism is really not unlike that of Comte, who remarks
that there is no question of liberty of conscience in geometry.

[85] “On the contrary,” says Quesnay in a letter to Mirabeau, “this
despotism is a sufficient guarantee against the abuse of power.”

[86] “That is an abominable absurdity,” says Baudeau, “for on this
reckoning a mere majority vote would be sufficient to justify parricide.”

Is it necessary to point out that this is exactly the reverse of the view
held by interventionists and socialists of these later times, who think
that the mission of the State is to redress the grievances caused by
natural laws?

[87] “This single supreme will which exercises supreme power is not,
strictly speaking, a human will at all. It is just the voice of
nature—the will of God. The Chinese are the only people whose philosophy
seems to have got hold of this supreme truth, and they regard their
emperor as the eldest son of God.” (Baudeau, p. 798.)

[88] Some writers—for example, Pantaleoni in his introduction to Arthur
Labriola’s book, _Le Dottrine economiche di Quesnay_—seem to think that
the Physiocratic criticism proved fatal to feudal society, just as the
socialistic criticism of the present time is undermining the _bourgeois_
society. Politically this is true enough, for the Physiocrats advocated
the establishment of a single supreme monarch with undivided authority.
Economically it is incorrect, for their conception even of sovereignty
and taxation is impregnated with feudal ideas.

[89] Dupont, _Discours en tête des Œuvres de Quesnay_, vol. i, p. 35.

[90] _Ibid._ p. 22.

[91] Turgot, who is less inclined to favour agriculture, thinks that
certain royal privileges must be granted before manufacturers can compete
with agriculture (_Œuvres_, vol. i, p. 360).

[92] “One has come to regard the various nations as drawn up against one
another in a perpetual state of war. This unfortunate prejudice is almost
sacred, and is regarded as a patriotic virtue.” (Baudeau, p. 808.)

The three errors usually committed by States, and the three that led
to the downfall of Greece, Baudeau thought, were arbitrary use of
legislative authority, oppressive taxation, and aggressive patriotism (p.
801).

[93] “Before a harvest can be reaped not only must the cultivators incur
the usual outlay upon stock, etc., and the proprietors upon clearing the
land, but the public authority must also incur some expense, which might
be designated _avances souveraines_.” (Baudeau, p. 758.)

[94] “The Government ought to be less concerned with the task of saving
than with the duty of spending upon those operations that are necessary
for the prosperity of the realm. This heavy expenditure will cease when
the country has become wealthy.” (Quesnay, _Maximes_, xxvi.)

“It is a narrow and churlish English idea which decrees that an annual
sum should be annually voted to the Government, and that Parliament
should reserve to itself the right of refusing this tax. Such a procedure
is a travesty of democracy.” (Dupont, in a letter to J. B. Say.)

[95] “The amount of the tax as compared with the amount of the net
product should be such that the position of the landed proprietor shall
be the best possible and the state of being a landowner preferable to any
other state in society.” (Dupont, p. 356.)

[96] If we compare this figure with the total gross revenue of France,
valued then at 5 milliard francs, it would represent a tax of 12 per
cent., which is rather heavy for a State that was supposed to be governed
by the laws of the “natural order.” The proportion which the present
French Budget bears to the total revenue of the country is 16 per cent.

The French Budget of 1781, introduced by Necker, corresponded almost
exactly with the figure given by the Physiocrats, namely, 610 millions.
Of course, we ought to add to this the ecclesiastical dues, the
seigniorial rights, and the compulsory labour of every kind, which were
to disappear under the Physiocratic _régime_.

[97] “The tax is a kind of inalienable common property. When proprietors
buy or sell land they do not buy and sell the tax. They can only dispose
of that portion of the land which really belongs to them, after deducting
the amount of the tax. This tax is no more a charge upon property than is
the right of fellow proprietors a burden upon one’s property. And so the
public revenue is not burdensome to anyone, costs nothing, and is paid
by no one. Hence, it in no way curtails the amount of property which a
person has.” (Dupont, vol. i, pp. 357, 358.)

[98] In order to give every security to proprietors the Physiocrats were
anxious that the value of the property, when once it was fixed, should
vary as little as possible. Baudeau, however, recognised the advisability
of periodical revaluations “in order that the sovereign power should
always share in both the profits and the losses of the producer.” And he
addresses this important caution to the proprietors: “Take no credit to
yourselves for the increase in the revenue of land. The thanks are really
due to the growing efficiency of the sovereign authority.” (P. 708.)

[99] “Let us observe, in passing, that the terms ‘taxation’ and ‘public
revenue’ have unfortunately become synonymous in the public mind. The
term ‘taxation’ is always unpopular. It implies a charge that is hard to
bear, and which everybody is anxious to shirk. The public revenue is the
product of the sovereign’s landed property, which is distinct from his
subjects’ property.” (Mercier de la Rivière, p. 451.)

[100] “The sovereign takes a fixed amount of the net product for his
annual income. This amount of necessity grows with every increase of
the net product and diminishes with every shrinking of the product. The
people’s interests and the sovereign’s are, consequently, necessarily
one.” (Baudeau, p. 769.)

[101] This was the basis of Voltaire’s lively satire, _L’Homme avec
Quarante Écus_. It treats of a wealthy financier who escapes taxation,
and who makes sport of the poor agriculturist who pays taxes for both,
although his income is only forty _écus_.

[102] “Such a reduction of the necessary expenditure must result in
diminished production, because there can be no harvest without some
amount of preliminary expense. You may check your expenditure, but it
will mean diminishing your harvest—a decrease in the one means an equal
decrease of the other. Such a fatal blow to the growth of population
would, in the long run, injure the landed proprietor and the sovereign.”
(Dupont de Nemours, p. 353.)

“A fall in the expenditure means a smaller harvest, which means that
less will be expended upon making preparation for the next harvest. This
cyclical movement seems a terrible thing to those who have given it some
thought.” (Mercier de la Rivière, p. 499.)

[103] “There would be something to say for this if the rich repaid
them by increased wages or additional almsgiving. But the poor give
to the rich, and so add to their misery, already sufficiently great.
The State demands from those who have nothing to give, and directs all
its penalties and exercises all its severity upon the poor.” (Turgot,
_Œuvres_, vol. i, p. 413).

“It would be better for the landed proprietors to pay it direct to the
Treasury, and thus save the cost of collection.” (Dupont de Nemours, p.
352.)

[104] “It might happen—and, indeed, it often does happen—that the
worker’s wage is only equal to what is necessary for his subsistence.”
(_Réflexions_, vi.)

It is also possible that Jesus was not formulating a general law when
He said that we have the poor always with us. Turgot likewise wished to
state the simple fact, and not to draw a general conclusion.

[105] Quesnay, _Second Problème économique_, p. 134. The argument which
follows is rather curious. He does not seem to think that a fall in wages
even below the minimum would result in the death of many people, but
simply that it would result in emigration to other countries, and that as
a consequence of such emigration the diminished supply at home would soon
lead to higher wages being paid—a fairly optimistic conclusion for the
period.

[106] Baudeau (p. 770) points out the error of confusing the gross
revenue with the net revenue. Allowance should be made for the cost of
collecting the revenue, etc.

[107] “If unfortunately it be true that three-tenths of the annual
product is not sufficient to cover the ordinary expenditure, there is
only one natural and reasonable conclusion to be drawn from this, namely,
curtail the expenditure.” (Dupont de Nemours, p. 775.)

“The tax must never be assessed in accordance with individual caprice.
The amount is determined by the natural order.” (Dupont, _Sur l’Origin
d’un Science nouvelle_.) Neither should the State, in their opinion,
exceed the limit, because it would mean having recourse to borrowing,
which would simply mean increased deferred taxation.

[108] See M. Garçon’s instructive brochure, _Un Prince allemand
physiocrate_, for a _résumé_ of the Margrave’s correspondence.

[109] We find the word in one of Dupont’s letters to Say, but that is
much later.

[110] Henry George dedicated his volume entitled _Protection or Free
Trade_ to them because he considered that they were his masters. But his
tribute loses its point somewhat when we remember that he admits that he
had never read them.

[111] Listen to Mercier de la Rivière: “We must admire the way in which
one man becomes an instrument for the happiness of others, and the
manner in which this happiness seems to communicate itself to the whole.
Speaking literally, of course I do not know whether there will not be a
few unhappy people even in this State, but their numbers will be so few
and the happy ones will be so numerous that we need not be much concerned
about helping them. All our interests and wills will be linked to the
interest and will of the sovereign, forming for our common good a harmony
which can only be regarded as the work of a kind Providence that wills
that the land shall be full of happy men.” This enchanting picture only
applies to future society, when the “natural order” will be established.
The optimism of the Physiocrats is very much like the anarchists’.

[112] Very little seems to have been known about Cantillon for more
than a century after his death. But, like all the rediscovered founders
of the science, he has received considerable attention for some years
past. His influence upon the Physiocrats has perhaps been exaggerated.
Mirabeau’s earliest book, _L’Ami des Hommes_, which appeared just twelve
months after Cantillon’s work, is undoubtedly inspired by Cantillon.
No discussion of his work is included in the text because it was felt
that it might interfere with the plan of the work as already mapped out.
There are several articles in various reviews which deal with Cantillon’s
work, the earliest being that contributed by Stanley Jevons to the
_Contemporary Review_ in 1881.

[113] _Valeurs et Monnaies_, which dates from 1769, and again in his
_Réflexions_. Quesnay’s conception of value may be gleaned from his
article entitled _Hommes_, which remained unpublished for a long time,
and has only recently appeared in the _Revue d’Histoire des Doctrines
économiques et sociales_, vol. i, No. 1.

[114] He dilates at considerable length on the distinction between
estimative value (what would now be called subjective value) and
appreciative (or social) value. The first depends upon the amount of time
and trouble we are willing to sacrifice in order to acquire it. In this
connection the notion of labour-value appears. As to appreciative value,
it differs from the preceding only in being an “average estimative value.”

[115] Turgot, though a disciple of Quesnay, remained outside the
Physiocratic school. He always referred to them contemptuously as “the
sect.”

[116] “I am so struck with this notion that I think it must serve as the
basis of this whole treatise.” (Chap. 1.)

[117] _Le Commerce et le Gouvernement_, p. 15.

[118] _Ibid._, Part I, chap. 1.

[119] “It is not correct to say that the exchanged values are equal; on
the contrary, each party seeks to give a smaller value in exchange for a
larger one. The process proves advantageous to both; hence, doubtless,
the origin of the idea that the values must be equal. But one ought to
have come to the conclusion that if each gains both must have given less
and obtained more.” (_Op. cit._, pp. 55, 86.) Compare this with the
quotation from de Trosne, p. 27, and note its psychological superiority.

[120] _Op. cit._, Part I, chap. 9.

[121] “Even where the land is covered with products there is no
additional material beyond what there was formerly. They have just been
given a new form, and wealth consists merely of such transformations.”

[122] _Op. cit._, Part I, chap. 29.

[123] In a recent study of the wage bargain we find M. Chatelain giving
expression to similar ideas, though apparently knowing nothing of
Condillac’s work.

[124] _Op. cit._, chap. xv, par. 8.

[125] See Turgot, _Mémoire sur les Prêts d’Argent_, p. 122: “In every
bargain involving the taking of interest a certain sum of money is given
now in exchange for a somewhat larger sum to be paid at some future date;
difference of time as well as of place makes a real difference to the
value of money.” Further on he adds (p. 127): “The difference is familiar
to everyone, and the well-known proverb ‘A bird in the hand is worth two
in the bush’ is simply a popular way of expressing it.”

[126] The life of Adam Smith presents nothing remarkable. It is easily
summed up in the story of his travels, his professional activities,
and the records of his friendships, and among these his intimacy with
Hume the philosopher has become classical. He was born at Kirkcaldy,
in Scotland, on June 5, 1723. From 1737 to 1740 he studied at the
University of Glasgow under Francis Hutcheson, the philosopher, to whom
he became much attached. From 1740 to 1746 he continued his studies at
Oxford, where he seems to have worked steadily, chiefly by himself. The
intellectual state of the university was at that time extremely low, and
a number of the professors never delivered any lectures at all. Returning
to Scotland, he gave two free courses of lectures at Edinburgh, one on
English literature and the other on political economy, in the course of
which he defended the principles of commercial liberty. In 1751 he became
Professor of Logic at Glasgow, at that time one of the best universities
in Europe. Towards the end of the year he was appointed to the chair of
Moral Philosophy, which included the four divisions of Natural Theology,
Ethics, Jurisprudence, and Politics within its curriculum. In 1759 he
published his _Theory of Moral Sentiments_, which speedily brought him
a great reputation. In 1764, when forty years of age, he quitted the
professorial chair at Glasgow University and accompanied the young
Duke of Buccleuch, son-in-law of Charles Townshend, the celebrated
statesman, on his travels abroad. With the young nobility of this period
foreign travel frequently took the place of a university training, on
account of the disrepute into which the latter had fallen. Smith was
given a pension of £300 a year for the rest of his life, so that the
mere material advantage was considerably in excess of his earnings as a
professor. The years 1764-66 were spent in this way. A year and a half
was passed at Toulouse, two months at Geneva, where he met Voltaire,
and another ten months at Paris. While in Paris he became acquainted
with the Physiocrats, particularly with Turgot and the Encyclopædists.
It was at Toulouse that he began his _Wealth of Nations_. Returning to
Scotland in 1767, he went to live with his mother, with the sole object
of devoting himself to this work. By 1773 the book was nearly complete.
But Smith moved to London, and the work did not appear till 1776. By this
achievement Smith crowned the great celebrity which he already enjoyed.
In January 1778 Smith was appointed Commissioner of Customs at Edinburgh,
a distinguished position which he held until his death in 1790.

All that we know of Smith’s character shows him to have been a
man of tender feelings and of great refinement of character. His
absent-mindedness has become proverbial. In politics his sympathies
were with the Whigs. In religion he associated himself with the deists,
a school that was greatly in vogue towards the end of the eighteenth
century, and of which Voltaire, who was much admired by Smith, was the
most celebrated representative.

For a long time the only life of Smith which we possessed was the memoir
written by Dugald Stewart, _Account of the Life and Writings of Adam
Smith_, and read by him in 1793 before the Royal Society of Edinburgh.
It appeared in the _Transactions_ of the society for 1794, and was
published in volume form in 1811 along with other biographies, under the
title of _Biographical Memoirs of Adam Smith, Robertson, etc._, by Dugald
Stewart. To-day we are more fortunate. John Rae in his charming _Life of
Adam Smith_ (London, 1895) has succeeded in bringing to light all that
we can know of Smith and his circle. To him we are indebted for most of
the details we have given. In 1894 James Bonar published a catalogue of
Smith’s library, containing about 2300 volumes, and comprising about
two-thirds of his whole library. A still more important contribution to
the study of Smith’s ideas has been made by Dr. Edwin Cannan, who in 1896
published _Lectures on Justice, Police, Revenue, and Arms, delivered in
Glasgow by Adam Smith, from Notes taken by a Student in 1763_ (Oxford).
This represents the course of lectures on political economy delivered by
Smith while professor at Glasgow. A manuscript copy of the notes taken in
this course by a student, probably in 1763, was accidentally discovered
by a London solicitor in 1876. These notes were in 1895 forwarded to Dr.
Cannan for publication. They are especially precious in helping us to
understand Smith’s ideas before his stay in France and his meeting with
the Physiocrats. Of the numerous editions of the _Wealth of Nations_
which have hitherto been published, the more important are those of
Buchanan, McCulloch, Thorold Rogers, and Nicholson. The latest critical
edition is that of Dr. Cannan, published in 1904 by Methuen, containing
very valuable notes. This is the edition we have used.

[127] _Wealth of Nations_, vol. ii, p. 275.

[128] On this point see Schatz’s _Individualisme économique et social_
(Paris, 1908).

[129] Chap. iv of sec. ii of the 7th part of the _Theory of Moral
Sentiments_ is entitled _Of Systems of License_.

[130] Oncken’s edition, p. 331.

[131] The theory that there are three factors of production, which has
since become a commonplace of economics, is not to be found in Smith.
Indirectly, however, it was he who originated the idea by distinguishing
in his treatment of distribution between the various sources of revenue.
The distinction once made, it was quite natural to consider each source
as a factor of production; and this is just what J. B. Say did in his
_Treatise_ (2nd ed., chaps. iv and v). Cf. Cannan’s _History of the
Theories of Production and Distribution_, p. 40 (1894).

[132] _Wealth of Nations_, Book I, chap. 1; Cannan, vol. i, pp. 13-14.

[133] “In almost every other race of animals each individual, when it is
grown up to maturity, is entirely independent, and in its natural state
has occasion for the assistance of no other living creature.” (_Wealth of
Nations_, Book I, chap. 2; Cannan, vol. i, p. 16.)

[134] _Wealth of Nations_, Book I, chap. 1; Cannan, vol. i, p. 6.

[135] _Ibid._, Book V, chap, 1, par. iii, art. 2; vol. ii, p. 267.

[136] “For a very small expence the public can facilitate, can encourage,
and can even impose upon almost the whole body of the people, the
necessity of acquiring those most essential parts of education.” (_Wealth
of Nations_, Book V, chap. 1, part iii, art. 2; Cannan, vol. ii, p. 270.)

[137] _Ibid._, Book I, chap. 3; vol. i, p. 19.

[138] “As the accumulation of stock must, in the nature of things, be
previous to the division of labour, so labour can be more and more
subdivided in proportion only as stock is previously more and more
accumulated.” (_Ibid._, Book II, Introd.; vol. i, p. 259.) It is true
that in another passage he speaks of the quantity of stock which can be
employed in any branch of business depending very much upon that of the
labour which can be employed in it (Book I, chap. 10, part ii; vol. i, p.
137). But this observation remains isolated, while the former represents
his true teaching.

[139] Cf. Cannan’s penetrating criticism of this idea of Smith’s in
_Theories of Production and Distribution_, pp. 80-83.

[140] This is the first of the four celebrated maxims enunciated by Smith
in his theory of taxation. Here are the other three: “(ii) The tax which
each individual is bound to pay ought to be certain and not arbitrary.
The time of payment, the manner of payment, the quantity to be paid,
ought all to be clear and plain to the contributor, and to every other
person. (iii) Every tax ought to be levied at the time, or in the manner,
in which it is most likely to be convenient for the contributor to pay
it. (iv) Every tax ought to be so contrived as both to take out and to
keep out of the pockets of the people as little as possible, over and
above what it brings into the public treasury of the State.” (_Wealth of
Nations_, Book V, chap. 2, part ii; Cannan, vol. ii, pp. 310-311.)

[141] This rule of payment according to ability did not prevent his
pronouncing in another paragraph in favour of progressive taxation. This
is an instance of a want of logic frequently evidenced in his writings.
Speaking of taxes upon rent, he remarks that they weigh more heavily
upon rich than upon poor, because the former in proportion to their
income spend more upon house rent than the latter. But “it is not very
unreasonable that the rich should contribute to the public expence, not
only in proportion to their revenue, but something more than in that
proportion.” (_Ibid._, Book V, chap. 2, part ii, art. 1; vol. ii, p. 327.)

[142] _Ibid._, Book II, chap. 3; vol. i, p. 314.

[143] “Farmers and country labourers, indeed, over and above the stock
which maintains and employs them, reproduce annually a neat produce, a
free rent to the landlord. As a marriage which affords three children is
certainly more productive than one which affords only two; so the labour
of farmers and country labourers is certainly more productive than that
of merchants, artificers, and manufacturers. The superior produce of the
one class, however, does not render the other barren or unproductive.”
(_Wealth of Nations_, Book IV, chap. 9; Cannan, vol. ii, p. 173.)

[144] _Ibid._, Book IV, chap. 9; vol. ii, p. 176.

[145] _Ibid._, Book II, chap. 5; vol. i, p. 344.

[146] _Wealth of Nations_, Book II, chap. 5; Cannan, vol. i, p. 344. Note
that here as elsewhere Smith entertains more than one opinion. In other
passages in the book he regards rent as a monopoly price “that enters
into the composition of the price of commodities in a different way from
wages and profit. High or low wages and profit, are the causes of high
or low price; high or low rent is the effect of it. It is because high
or low wages and profit must be paid, in order to bring a particular
commodity to market, that its price is high or low. But it is because its
price is high or low; a great deal more, or very little more, or no more,
than what is sufficient to pay those wages and profit, that it affords a
high rent, or a low rent, or no rent at all.” (_Ibid._, Book I, chap. 11;
vol. i, p. 147.)

It is impossible to reconcile these statements. In the one case rent is
regarded as a constituent element of price, in the other it is the effect
of price.

In the first edition this contradiction was still more evident. In
that edition rent, along with profit and wages, was treated as a third
determinant of value. (See Cannan’s edition, vol. i, p. 51, note 7.)
The paragraph was deleted from the second edition, and rent was treated
merely as a component part of the price. This modification was perhaps
the outcome of a letter written by Hume to Smith on April 1, 1776, after
he had read the _Wealth of Nations_ for the first time. “I cannot think,”
says Hume, “that the rent of farms makes any part of the price of the
produce, but that the price is determined altogether by the quantity and
the demand.” (Quoted by Rae in his _Life of Adam Smith_, p. 286.) The
celebrated controversy as to whether rent enters into prices is not a
thing of yesterday. Its origin dates from the birth of political economy
itself, and it will probably only die with it.

[147] His error is partly due to the fact that he failed to distinguish
between the profits of the _entrepreneur_ and the interest of the
capitalist. Both with Smith and with his successors the word “profit”
signified a twofold revenue, and this was perfectly correct so long
as the _entrepreneur_ was also a capitalist. The word “interest” was
reserved for the income of that person who lent capital but who did
not himself produce anything. The revenue “derived from stock, by the
person who manages or employs it, is called profit. That derived from it
by the person who does not employ it himself, but lends it to another,
is called the interest or the use of money.” (_Ibid._, Book I, chap.
6; vol. i, p. 54.) J. B. Say was the first to give us a definite idea
of the _entrepreneur_. Had Smith realised more clearly the functions
of the _entrepreneur_ he would probably have perceived: (1) That the
_entrepreneur_, in addition to paying interest on his capital, frequently
has to pay rent for the use of the soil; (2) that profit strictly so
called includes an element analogous to rent. According to Smith, profit
was simply payment for risks undergone or for work undertaken.

[148] James Watt in 1756 had set up his workshop within the precincts
of the University of Glasgow, for which he manufactured mathematical
instruments. The corporation had refused him permission to set it up in
the town—a striking illustration of the narrowness and inflexibility of
“the corporative _régime_.”

[149] A combination of Hargreave’s spinning jenny and Arkwright’s water
frame.

[150] Marx speaks of Smith as the economist who is the very epitome of
the manufacturing period. (_Das Kapital_, vol. i, p. 313, note.)

[151] See Mantoux’ work, _La Révolution industrielle au XVIIIe Siècle_,
p. 75 (Paris, 1905). “We are mistaken,” says he, “if we think that
manufacture was the dominant feature of the period preceding the factory
system. Logically it may be the necessary antecedent, but historically
its claim to priority is weak, although it left its indelible marks upon
industry. The appearance of industry at the time of the Renaissance is an
event of the greatest importance and significance, but it only played a
part of secondary importance for a century or two.”

[152] Rae’s _Life of Adam Smith_, p. 89.

[153] _Wealth of Nations_, Book I, chap. 11; Cannan, vol. i. p. 250.

[154] _Wealth of Nations_, Book I, chap. 8; Cannan, vol. i, p. 80.

[155] _Ibid._, Book I, chap. 9, in fine; vol. i, p. 100.

[156] _Ibid._, Book I, chap. 10, part ii; vol. i, p. 143.

[157] _Ibid._, Book I, chap. 10, part ii; vol. i, p. 128. The whole
passage contains a curious eulogy of proprietors and farmers.

[158] _Wealth of Nations_, Book IV, chap. 2; Cannan, vol. i, p. 427.

[159] For the connection between Smith’s system and the philosophy of
his time see W. Hasbach, _Die allgemeinen philosophischen Grundlagen der
von F. Quesnai und A. Smith begründeten politischen Oekonomie_ (Leipzig,
1890).

[160] _Wealth of Nations_, Book I, chap. 2; Cannan, vol. i, p. 15.

[161] The whole passage, almost word for word, may be found in Smith’s
course of lectures at Glasgow, and the whole is taken from Mandeville’s
_Fable des Abeilles_.

[162] _Wealth of Nations_, Book I, chap. 4; Cannan, vol. i, p. 24.

[163] For a long time economists were quite content with Smith’s theory
of capital. Like other portions of his work, it readily became classic,
and subsequent writers simply repeated it. To-day, however, this success
hardly seems to have been warranted. “It can scarcely be denied,”
writes Cannan, “that Smith left the whole subject of capital in the
most unsatisfactory state.” (_Theories of Production and Distribution_,
p. 89.) If this remark needs any justification we have it in the many
discussions which have taken place on this subject during the last
fifty years, and which are not yet at an end. Some of the most original
works of recent years, Böhm-Bawerk’s _Positive Theory of Capital_, for
example, are entirely taken up with this topic. In England, America,
and Italy the best-known economists, Cannan, Fisher, and Pareto, have
recently revived the ancient notions, and the discussions which have
followed are sufficient evidence that Smith had by no means exhausted the
subject. If we carefully read Book II of the _Wealth of Nations_, which
is entirely devoted to this topic, what do we find? We have a distinction
drawn between fixed and circulating capital borrowed from practical
affairs, but possessing no great scientific value; the very doubtful
identification of national capital with the sum of private capitals; a
very unsatisfactory attempt at differentiating between the notions of
capital and revenue; the affirmation that saving involves consumption, a
paradox repeated _ad nauseam_ down to the days of Mill; the commonplace
statement that capital increases as saving grows; and, finally, the
proposition that “capital limits industry.”

[164] _Wealth of Nations_, Book II, chap. 3; Cannan, vol. i, p. 325. “The
annual produce of the land and labour of any nation can be increased in
its value by no other means, but by increasing either the number of its
productive labourers, or the productive powers of those labourers who
had before been employed. The number of its productive labourers, it is
evident, can never be much increased, but in consequence of an increase
of capital, or of the funds destined for maintaining them. The productive
powers of the same number of labourers cannot be increased, but in
consequence either of some addition and improvement to those machines
and instruments which facilitate and abridge labour; or of a more proper
division and distribution of employment. In either case an additional
capital is almost always required.”

[165] _Ibid._, Book IV, chap. 2; vol. i, p. 423.

[166] “The general industry of the society never can exceed what the
capital of the society can employ.” (_Ibid._, Book IV, chap. 2; vol. i,
p. 419.) John Stuart Mill was the first to employ the formula in its
condensed form, “Industry is limited by capital.”

[167] We have spoken of the controversies as threadbare, for every
economist is by this time persuaded that, assuming the necessity for the
co-operation of capital, land, and labour in production, it is quite
clear that the amount of produce raised must depend upon the amount of
each of these factors employed, and not upon the amount of any one of
them.

Smith had anticipated the arguments advanced by such socialists as
Rodbertus and Lassalle, who regard saving rather than labour as the
source of capital. “Parsimony, and not industry, is the immediate cause
of the increase of capital. Industry, indeed, provides the subject which
parsimony accumulates. But whatever industry might acquire, if parsimony
did not save and store up, the capital would never be the greater.”
(_Wealth of Nations_, Book II, chap. 3; Cannan, vol. i, p. 320.)

[168] _Ibid._, Book II, chap. 3; vol. i, pp. 323, 324, 325.

[169] _Wealth of Nations_, Book I, chap. 7; Cannan, vol. i, p. 58. “The
market price of every particular commodity is regulated by the proportion
between the quantity which is actually brought to market, and the demand
of those who are willing to pay the natural price of the commodity, or
the whole value of the rent, labour, and profit, which must be paid
in order to bring it thither. Such people may be called the effectual
demanders, and their demand the effectual demand; since it may be
sufficient to effectuate the bringing of the commodity to market. It is
different from the absolute demand. A very poor man may be said in some
sense to have a demand for a coach and six; he might like to have it;
but his demand is not an effectual demand, as the commodity can never be
brought to market in order to satisfy it.”

[170] For Smith oppression meant the tyranny either of producers or
consumers. When profits are above the normal rate “it is a proof that
something is either bought cheaper or sold dearer than it ought to be,
and that some particular class of citizens is more or less oppressed
either by paying more or by getting less than what is suitable to that
equality which ought to take place, and which naturally does take place
among all the different classes of them.” (_Ibid._, Book IV, chap. 7,
part iii; vol. ii, p. 128.)

The correspondence between selling price and the cost of production
seemed to Smith to be of the very essence of justice. Complete
correspondence would realise the ideal of the just price.

[171] _Wealth of Nations_, Book I, chap. 4; Cannan, vol. i, p. 30. The
passage is well known. “The word ‘value,’ it is to be observed, has
two different meanings, and sometimes expresses the utility of some
particular object, and sometimes the power of purchasing other goods
which the possession of that object conveys. The one may be called
‘value in use,’ the other ‘value in exchange.’ The things which have the
greatest value in use have frequently little or no value in exchange;
and, on the contrary, those which have the greatest value in exchange
have frequently little or no value in use. Nothing is more useful than
water: but it will purchase scarce anything; scarce anything can be had
in exchange for it. A diamond, on the contrary, has scarce any value in
use; but a very great quantity of other goods may frequently be had in
exchange for it.”

[172] The statement has been qualified because in the passage referred
to Smith seems to define utility in the vulgar sense (_i.e._ utility as
contrasted with mere agreeableness). This want of exactness was corrected
by Ricardo, and is the subject of a searching criticism by Mill. The
following passage from his _Lectures on Justice_ may serve to throw some
light upon the definition: “There is no demand for a thing of little
use; it is not a rational object of desire.” Smith could not conceive
the possibility of a demand or even a desire for a commodity which was
useless from a rational point of view. But this is evidently a great
mistake.

[173] The radical separation of the two ideas was perhaps more a matter
of expression than of reasoning, for in his _Lectures on Justice_, p.
176, value in use, coupled with the purchasing power possessed by those
who desired the commodity, was regarded as one of the elements which
determined the demand for it and fixed its market price. The whole
discussion of the theory of value by Smith is very unsatisfactory.

[174] We ought perhaps to have said that he had to choose between three
possible definitions, for in the _Lectures on Justice_ we find a third
definition of “natural price” (p. 176).

[175] _Wealth of Nations_, Book I, chap. 7; Cannan, vol. i, p. 58.

[176] _Ibid._, Book I, chap. 5; vol. i, p. 33.

[177] Pareto in his recent article _L’Économie et la Sociologie au point
de vue scientifique_ (_Rivista di Scienza_, 1907, No. 2) expresses
himself as follows: “Underneath the actual prices quoted on the
exchanges, prices varying according to the exigencies of time and place
and dependent upon an infinite number of circumstances, is there nothing
which has any constancy or is in any degree less variable? This is the
problem that political economy must solve.”

[178] _Wealth of Nations_, Book I, chap. 5; Cannan, vol. i, p. 32.
In this passage Smith seems to imply that the value of an object is
determined, not by the amount of labour which it cost to produce it,
but by the amount of labour which can be bought in exchange for it.
Fundamentally the two ideas are one, for objects of equal value only
can be exchanged, so that the amount of labour anyone can buy with any
given object is equal to the amount of labour which that object cost to
produce. “Goods,” says Smith, “contain the value of a certain quantity of
labour, which we exchange for what is supposed at the time to contain the
value of an equal quantity.”

[179] _Ibid._, Book I, chap. 5; vol. i, p. 33.

[180] _Ibid._, Book I, chap. 6; vol. i, p. 50.

[181] _Wealth of Nations_, Book I, chap. 7; Cannan, vol. i, p. 57.

[182] _Ibid._, chap. 6; vol. i, p. 51. Here, for example, is a passage in
which, as Böhm-Bawerk forcibly remarks (_Kapital und Kapitalzins_, 2nd
ed., 1900, p. 84), the two conceptions are found in juxtaposition without
any attempt at reconciliation: “In this state of things [where labour
and capital have already been appropriated] the whole produce of labour
does not always belong to the labourer. He must in most cases share it
with the owner of the stock which employs him. Neither is the quantity
of labour commonly employed in acquiring or producing any commodity,
the only circumstance which can regulate the quantity which it ought
commonly to purchase, command, or exchange for. An additional quantity,
it is evident, must be due for the profits of the stock which advanced
the wages and furnished the materials of that labour.” At the beginning
of the passage the workman shared the produce of his labour and profits
constituted a deduction from the value created by labour alone; at the
end of the paragraph profits issue from a supplementary value which is an
addition to the value already given it by labour. Other passages where
the two conceptions come into contact are also cited by Böhm-Bawerk.
Interest and rent are also occasionally taken as evidence that the
workman is being exploited, and this entitles Smith to be regarded as the
father of socialism. More than one passage in his work seems to point to
this conclusion. “In other countries, rent and profit eat up wages, and
the two superior orders of people oppress the inferior one.” (Book IV,
chap. 7, part ii; vol. ii, p. 67.) Concerning property he writes: “Civil
government, so far as it is instituted for the security of property, is
in reality instituted for the defence of the rich against the poor, or of
those who have some property against those who have none at all.” (Book
V, chap. 1, part ii; vol. ii, p. 207.) And finally there is the famous
passage from the sixth chapter: “As soon as the land of any country has
all become private property, the landlords, like all other men, love
to reap where they never sowed, and demand a rent even for its natural
produce.… He [the workman] must then pay for the licence to gather them;
and must give up to the landlord a portion of what his labour either
collects or produces. This portion, or, what comes to the same thing, the
price of this portion, constitutes the rent of land, and in the price of
the greater part of commodities makes a third component part.” (Book I,
chap. 6; vol. i, p. 51.) Dr. Cannan in his _History of the Theories of
Production and Distribution_ goes the length of declaring that the theory
of spoliation is the only one in Smith’s work. It is to Smith that we owe
that idea so frequently expressed by socialists, namely, that the workman
in modern society never really obtains the produce of his toil.

[183] Cf. _supra_, p. 64, note 2.

[184] _Wealth of Nations_, Book I, chap. 7; Cannan, vol. i, p. 59.

[185] Smith only gives at most seven or eight lines to monopoly price.
He simply states that “the price of monopoly is upon every occasion the
highest which can be got.” (_Ibid._, Book I, chap. 7; vol. i, p. 63.)
To-day the theory of monopoly prices is one of the most important in the
whole of economics.

[186] _Wealth of Nations_, Book I, chap. 8; Cannan, vol. i, pp. 81-82.

[187] “That wealth consists in money, or in gold and silver, is a popular
notion which naturally arises from the double function of money, as
the instrument of commerce, and as the measure of value.” (_Wealth of
Nations_, Book IV, chap. 1; Cannan, vol. i, p. 396.) The whole chapter is
an attempt to get rid of this prejudice.

[188] _Ibid._, Book IV, chap. 1; vol. i, p. 416; also Book II, chap. 2;
vol. i, p. 274. “Though the weekly or yearly revenue of all the different
inhabitants of any country, in the same manner, may be, and in reality
frequently is, paid to them in money, their real riches, however, the
real weekly or yearly revenue of all of them taken together, must always
be great or small in proportion to the quantity of consumable goods which
they can all of them purchase with this money. The whole revenue of all
of them taken together is evidently not equal to both the money and the
consumable goods; but only to one or other of those two values, to the
latter more properly than to the former.”

[189] We meet with this expression several times: in Book I, chap. 11,
part iii (vol. i, pp. 4 and 240), and in Book II, chap. 3 (vol. i, pp.
315, 323).

[190] An expression that is met with three times—in chap. 2 of Book II
(vol. i, pp. 272, 275, 279).

[191] _Wealth of Nations_, Book II, chap. 2; Cannan, vol. i, p. 275.

[192] All these questions so obscurely treated in Smith’s work are
handled with admirable lucidity in Irving Fisher’s _Nature of Capital and
Income_ (New York, 1907). Revenue is entirely stripped of that material
suggestion which was always associated with it in Smith’s work, and is
looked upon as a continual flow of services, whilst capital as a whole is
regarded as total wealth existing at one particular moment and from which
these services flow out.

[193] _Wealth of Nations_, Book II, chap. 2; Cannan, vol. i, p. 304.

[194] _Ibid._, Book IV, chap. 1; vol. i, pp. 402, 406.

[195] _Ibid._, Book II, chap. 3; vol. i, p. 322.

[196] Hume’s treatment of the quantity theory of money in his essays on
_Money_ and _The Balance of Trade_ is much clearer than Smith’s.

[197] _Wealth of Nations_, Book II, chap. 2; Cannan, vol. i, p. 285.

[198] For instance, a high rate of exchange immediately readjusts the
commercial indebtedness of nations. (_Ibid._, Book IV, chap. 1; vol. i,
p. 400.) Elsewhere he points out that the advantages enjoyed by Europe
from the possession of colonies were not exactly sought by her. The
search for colonies, their discovery and exploitation, all this was
undertaken without any preconceived plan, and in spite of the disastrous
regulations imposed by European Governments. (_Ibid._, Book IV, chap. 7,
part ii; vol. ii, pp. 90, 91.)

[199] _Wealth of Nations_, Book IV, chap. 5; Cannan, vol. i, p. 324; Book
II, chap. 9; vol. ii, p. 43; Book IV, chap. 9; vol. ii, p. 172.

[200] “It is thus that the private interests and passions of individuals
naturally dispose them to turn their stock towards the employments
which in ordinary cases are most advantageous to the society.” The word
“passion” was not inserted by chance. It occurs no less than three times
on the same page. (_Ibid._, Book IV, chap. 7, part iii; vol. ii, p. 129.)

[201] _Ibid._, Book III, chap. 4; vol. i, pp. 389, 390.

[202] _Ibid._, Book II, chap. 1, in fine; vol. i, p. 267.

[203] _Wealth of Nations_, Book II, chap. 4, beginning of chapter;
Cannan, vol. i, p. 332.

[204] _Ibid._, Book II, chap. 2; vol. i, p. 278.

[205] _Ibid._, Book IV, chap. 2; vol. i, p. 421. After having just said:
“By pursuing his own interest, he frequently promotes that of the society
more effectually than when he really intends to promote it.”

[206] _Ibid._, Book IV, chap. 5; vol. ii, p. 43.

[207] _Wealth of Nations_, Book IV, chap. 9; Cannan, vol. ii, p. 172.

[208] “The great object of the political œconomy of every country, is to
increase the riches and power of that country.” (_Wealth of Nations_,
Book II, chap. 5; Cannan, vol. i, p. 351.) The expression “the political
economy of every country,” which Smith frequently employed, might be used
in answer to writers such as Knies, who speak of the Universalism or
Internationalism of Smith.

[209] _Ibid._, Book IV, chap. 1; vol. i, p. 421.

[210] _Wealth of Nations_, Book I, chap. 8; Cannan, vol. i, p. 68. The
masters possess the advantage in discussion (1) because they can combine
much more easily; (2) because, thanks to their superior funds, they can
afford to wait while “many workmen could not subsist a week, few could
subsist a month, and scarce any a year without employment.”

[211] Cf. _supra_, p. 78.

[212] _Ibid._, Book IV, chap. 7, part ii, the beginning; vol. ii, p. 67.

[213] Say, speaking of the working classes, remarks: “Are we quite
certain that the workman obtains that share of wealth which is exactly
proportioned to the amount which he has contributed to production?”
(_Treatise_, 6th ed., p. 116.)

[214] _Wealth of Nations_, Book IV, chap. 9, in fine; Cannan, vol. ii, p.
184.

[215] _Ibid._, Book V, chap. 2, part i; vol. ii, p. 304. He makes
exception only of the post-office, “perhaps the only mercantile project
which has been successfully managed by, I believe, every sort of
government.” (P. 303.)

[216] _Ibid._, Book II, chap. 3; vol. i, p. 328.

[217] _Ibid._, Book V, chap. 2, part ii, art. 1; vol. ii, p. 318.

[218] _Ibid._, Book V, chap. 3; vol. ii, p. 413.

[219] _Wealth of Nations_, Book V, chap. 2, part ii; Cannan, vol. ii, p.
308.

[220] Cf. particularly Burgin, _Les Communaux et la Révolution
française_, in _Nouvelle Revue historique de Droit_, Nov.-Dec. 1908.

[221] _Wealth of Nations_, Book V, chap. 1, part iii, art. 2; Cannan,
vol. ii, p. 250.

[222] _Ibid._, Book IV, chap. 9; vol. ii, p. 185.

[223] _Ibid._, Book I, chap. 10, part ii; vol. i, p. 130.

[224] _Wealth of Nations_, Book V, chap. 1, part iii, art. 1; Cannan,
vol. ii, p. 233.

[225] _Ibid._, Book V, chap. 1, part iii, art. 1; vol. ii, p. 246.

[226] _Ibid._, Book II, chap. 4, in fine. It is probable that his
conversion to belief in absolute liberty took place later as the result
of his perusal of Bentham’s _Defence of Usury_, published in 1787,
advocating the right of taking interest. This seems to have been the case
if we can credit the report of a conversation which Smith had with one of
Bentham’s friends, mentioned in a letter written to Bentham by another of
his friends—George Wilson. Cf. John Rae, _Life of Adam Smith_, p. 423.

[227] _Wealth of Nations_, Book II, chap. 2; Cannan, vol. i, p. 307.

[228] _Wealth of Nations_, Book II, chap. 2; Cannan, vol. i, p. 307. He
continues: “The obligation of building party walls in order to prevent
the communication of fire, is a violation of natural liberty, exactly
of the same kind with the regulations of the banking trade which are
here proposed.” This passage proves that Smith was in favour of public
regulations which would further the material security of the citizens.
Elsewhere he shows his partiality for adopting hygienic precautions
against the spread of contagious diseases (Book V, chap. 1, part iii;
vol. ii, p. 272).

[229] Cf. Mantoux, _op. cit._, pp. 65-66. This work gives most
interesting details bearing upon all the points mentioned here. Internal
restrictions are criticised by Smith in the second part of chap. 10 of
Book I.

[230] “Each of those different branches of trade, however, is not only
advantageous, but necessary and unavoidable, when the course of things,
without any constraint or violence, naturally introduces it,” says he,
after giving an exposition of the respective advantages of the various
forms of economic activity. (_Wealth of Nations_, Book II, chap. 5;
Cannan, vol. i, p. 352.)

[231] _Wealth of Nations_, Book IV, chap. 2; Cannan, vol. i, p. 419.

[232] _Ibid._, Book IV, chap. 1; vol. i, p. 422.

[233] _Ibid._, Book IV, chap. 3, part ii; vol. i, pp. 457-458.

[234] _Principles of Political Economy_, Book III, chap. 17.

[235] _Wealth of Nations_, Book IV, chap. 8; Cannan, vol. ii, p. 159.

[236] It is true that in Book IV, chap. 3, part 2, he declares: “In
every country it always is and must be the interest of the great body of
the people to buy whatever they want of those who sell it cheapest. The
proposition is so very manifest, that it seems ridiculous to take any
pains to prove it.” (Cannan, vol. i, p. 458.)

[237] Speaking of duties on corn, he writes: “To prohibit by a perpetual
law the importation of foreign corn and cattle, is in reality to enact,
that the population and industry of the country shall at no time exceed
what the true produce of its own soil can maintain.” (_Ibid._, Book
IV, chap. 2; vol. i, p. 427.) He always views the question from the
standpoint of increased population and labour, and not from that of the
consumer.

[238] _Ibid._, Book II, chap. 5. Cf. Book IV, chap. 1.

[239] _Wealth of Nations_, Book IV, chap. 2, in fine; Cannan, vol. i, p.
435.

[240] The “Navigation Laws” is a generic term for a number of laws, the
most famous of them dating from the time of Cromwell. Their immediate
object was the destruction of the Dutch fleet, and English commerce was
organised with a view to securing this. There is no doubt but that they
contributed very considerably to the development of English maritime
power.

[241] _Ibid._, Book IV, chap. 2; vol. i, p. 429.

[242] But “when there is no probability that any such repeal can be
procured it seems a bad method of compensating the injury done to certain
classes of our people, to do another injury ourselves, not only to those
classes, but to almost all the other classes of them.” (_Ibid._, Book IV,
chap. 2; vol. i, p. 433.)

[243] The discussion of these various cases is to be found towards the
end of chap. 2 of Book IV.

[244] This system is expounded in Book V, chap 2, part ii, art. 5.

[245] In the preface to his translation, 1821 ed., p. lxix.

[246] Rae, _Life of Smith_, p. 103. The author of this famous phrase is
not known.

[247] J. B. Say, _Traité_, 1st ed., p. 240.

[248] Mantoux, _La Révolution industrielle_, p. 83. M. Halévy gives
expression to a similar idea in his _La Jeunesse de Bentham_, p. 193
(Paris, 1901).

[249] So called in honour of the leading English representative, Lord
Eden.

[250] In 1778, 1784, 1786, 1789.

[251] 1791, 1793, 1796.

[252] Professor Kraus, writing in 1796, declared that no book published
since the days of the New Testament would effect so many welcome changes
when it became thoroughly known (J. Rae, p. 360). By the beginning of
the nineteenth century its influence had become predominant. All the
Prussian statesmen who aided Stein in the preparation and execution of
those important reforms that gave birth to modern Prussia were thoroughly
versed in Smith’s doctrines, and the Prussian tariff of 1821 is the first
European tariff in which they are deliberately applied. (Cf. Roscher,
_Geschichte der Nationalökonomik in Deutschland_.)

[253] In his introduction to the _Traité_, 1st ed. (The phrase was
deleted in the 6th ed.)

[254] J. B. Say, _Traité_, 1st ed., introduction, p. xxxiii.

[255] He was born at Lyons on January 5, 1767. After a visit to England
he entered the employment of an assurance company, and took part as
a volunteer in the campaign of 1792. From 1794 to 1800 he edited a
review entitled _Décade philosophique, littéraire et politique, par une
Société de Républicains_. He was nominated a member of the Tribunate in
1799. After the publication of his _Traité_, the First Consul, having
failed to obtain a promise that the financial proposals outlined in the
first edition would be eliminated in the second, dismissed him from the
Tribunate, offering him the post of director of the _Droits réunis_ as
compensation. Say, who disapproved of the new _régime_, refused, and
set up a cotton factory at Auchy-les-Hesdins in the Pas-de-Calais. He
realised his capital in 1813, returned to Paris, and in 1814 published a
second edition of his treatise. In 1816 he delivered a course of lectures
on political economy at the Athénée, probably the first course given
in France. These lectures were published in 1817 in his _Catéchisme
d’Économie politique_. In 1819 the Restoration Government appointed him
to give a course on “Industrial Economy” (the term “Political Economy”
was too terrible). In 1831 he was made Professor of Political Economy in
the Collège de France. He died in 1832. His _Cours complet d’Économie
politique_ was published, in six volumes, in 1828-29.

[256] Cf. a letter to Louis Say in 1827 (_Œuvres diverses_, p. 545).

[257] Garnier’s translation of Adam Smith, 1802, vol. v, p. 283.

[258] _Traité_, 1803 ed., p. 39.

[259] _Ibid._, p. 21. Later on he employs the more comprehensive term
“natural agents.”

[260] _Traité_, 1803 ed., Book I, chaps. 42 and 43. By “industry” Say
understands every kind of labour. Cf. 6th ed., pp. 70 _et seq._

[261] Malthus still appeared hostile to the doctrine of immaterial
products, but Lauderdale, Tooke, McCulloch, and Senior accepted it, and
it seemed definitely fixed when Stuart Mill confined the word “product”
to material products only. For Tooke’s view see his letter to J. B. Say
in the _Œuvres diverses_ of the latter.

[262] _Traité_, Book I, chap. 2. Is it not strange that Say should
have failed to apply this idea to commerce? He regards the latter
as productive because it creates exchangeable values. Nevertheless
he criticises Condillac for having said that mere exchange of goods
increases wealth because it increases the utility of objects. This is
because Say is perpetually mixing up utility and exchange value, a
confusion that leads him into many serious mistakes.

[263] _Traité_, 6th ed., p. 6. The word “laws” does not appear in the
first edition. Say merely speaks of general principles. It is found for
the first time in the edition of 1814: “General facts or, if one wishes
to call principles by that name, general laws” (p. xxix).

[264] Correspondence with Malthus, in _Œuvres diverses_, p. 466.

[265] _Traité_, Introd., 1st ed., p. ix; 6th ed., p. 13.

[266] _Ibid._, 1st ed., Book I, p. 404.

[267] There is no need for exaggeration, however, and no need to regard
Say as totally indifferent to suffering and misery. He declares,
_e.g._, that “for many homes both in town and country life is one long
privation,” and that thrift in general “implies, not the curtailment of
useless commodities, such as expediency and humanity would welcome, but a
diminution of the real needs of life, which is a standing condemnation of
the economic system of many Governments.” (_Traité_, 1st ed., vol. i, pp.
97-98; 6th ed., p. 116.)

[268] _Traité_, 6th ed., p. 403.

[269] _Ibid._, 1st ed., vol. i, p. 48.

[270] _Ibid._, 5th ed., vol. i, p. 67.

[271] Critical examination of McCulloch’s treatise (1825), in _Œuvres
diverses_, pp. 274-275.

[272] _Traité_, 6th ed., p. 349.

[273] “Rent,” he says, “doubtless is partly interest on capital buried
in the soil, for there are few properties which do not owe something to
improvements made in them. But their total value is seldom due to this
alone. It might be if the land were fertile but lacked the necessary
facilities for cultivation. But this is never the case in civilised
countries.” (Critical examination of McCulloch’s treatise (1825), in
_Œuvres diverses_, p. 277.)

[274] _Traité_, 1st ed., p. 154.

[275] “The theory of heat and of weight and the study of the inclined
plane have placed the whole of nature at the disposal of mankind. In the
same way the theory of exchange and of markets will change the whole
policy of the world.” (_Ibid._, 6th ed., p. 51.)

[276] _Traité_, 1st ed., vol. ii, p. 175.

[277] _Ibid._, p. 179.

[278] _Ibid._, p. 178.

[279] “One kind of product would seldom be more plentiful than another
and goods would seldom be too many if everyone were given complete
freedom.” Too much stress has possibly been laid on the phrase “Certain
products are superabundant just because others are wanting,” and it
has been taken as implying that even partial over-production is an
impossibility. A note inserted on the next page helps to clear up the
matter and to prevent misunderstanding. “The argument of the chapter,”
says he, “is not that partial over-production is impossible, but merely
that the production of one thing creates the demand for another.” He
certainly seems unfaithful to his own position in the letters he wrote
to Malthus, in which he tries to defend his own point of view by saying
that “production implies producing goods that are demanded,” and that
consequently if there is any excessive production it is not the fault
of production as such and cannot be regarded as _over-production_. In
greater conformity with his own views and much nearer the truth is
his reply to an article by Sismondi published in 1824 in the _Revue
encyclopédique_ under the title _Sur la Balance des Consommations avec
les Productions_ (_Œuvres diverses_, p. 250). His statements vary from
one edition to another, and anything more unstable than Say’s views
on this question would be difficult to imagine. The formula “Products
exchange for products” is so general that it includes everything, but
means nothing at all; for what is money, after all, if it is not a
product?

[280] Letters to Malthus (_Œuvres diverses_, p. 466).

[281] Malthus, _Principles of Political Economy_, Book II, chap. 1, sect.
9.

[282] _Sur la Balance des Consommations avec les Productions_, p. 252.

[283] _Ibid._, p. 251.

[284] Dühring, _Kritische Geschichte der Nationalökonomie und des
Sozialismus_, 2nd ed., 1875, p. 165. For the other side of the question
one may profitably peruse the interesting study of Say contributed by M.
Allix to the _Revue d’Économie politique_, 1910 (pp. 303-341), and the
_Revue d’Histoire des Doctrines_, 1911, p. 321.

[285] Stanley Jevons (_Theory of Political Economy_, 3rd ed., 1888)
has recognised in too absolute a fashion, perhaps, the superiority of
the French economists over Ricardo. “The true doctrine may be more
or less clearly traced through the writings of a succession of great
French economists, from Condillac, Baudeau, and Le Trosne, through
J. B. Say, Destutt de Tracy, Storch, and others, down to Bastiat and
Courcelle-Seneuil. The conclusion to which I am ever more clearly coming
is that the only hope of attaining a true system of economics is to fling
aside, once and for ever, the mazy and preposterous assumptions of the
Ricardian School.” (Preface, p. xlix.)

[286] “The people must comprehend that they are themselves the cause of
their own poverty.” (Malthus, p. 458.) Doubtless this is the reason why
M. Halévy, among others, in his book _Le Radicalisme philosophique_,
remarks that Ricardo, Malthus, and their disciples were regarded as
the exponents of optimism and quietism. But in what sense were they
optimists? Of course they believed that the existing economic order is
the best possible, and that it would be impossible to change it for
a better. That may be. But we prefer to think of them as “contented
pessimists.”

[287] “Every reader of candour must acknowledge that the practical design
uppermost in the mind of the writer, with whatever want of judgment it
may have been executed, is to improve the condition and increase the
happiness of the lower classes of society.” It is with this declaration
that Malthus brings his book on population to a close.

[288] Miss Edgeworth, a contemporary of Ricardo, states in her letters
that political economy was so much the fashion that distinguished ladies
before engaging a governess for their children inquired about her
competence to teach political economy.

[289] _Conversations on Political Economy_, by Mrs. Marcet (1816).
_Illustrations of Political Economy_, by Miss Martineau (9 vols.,
containing thirty stories, 1832-34).

[290] Thomas Robert Malthus was born in 1766. His father, a country
gentleman, was a man of learning and a friend of most of the philosophers
of his time, especially Hume, and, it also seems, J. J. Rousseau. He was
the youngest son of the family, and was intended for the Church and given
an excellent education. After leaving Cambridge he took a living in the
country, but in 1807 was appointed professor at a college founded by the
East India Company at Haileybury, in Hertfordshire, where he remained
until his death in 1834. He married when thirty-nine years of age, and
had three sons and a daughter.

Malthus was a young unmarried clergyman living in a small country parish
when, at the age of thirty-two, he in 1798 published anonymously his
famous _Essay on the Principle of Population as it affects the Future
Improvement of Society_. His critics were legion. In order to devote more
study to the subject, he took a three years’ tour (1799-1802) on the
Continent—avoiding France, because France at this period was anything but
inviting to an Englishman. In 1803 he published—under his own name this
time—a second edition, much modified and amplified, and with a slightly
different title: _An Essay on the Principle of Population, or a View of
its Past and Present Effects on Human Happiness_. Four other editions
were published during his lifetime.

We must not forget his other works, although they were all eclipsed by
his earliest effort. These were: The _Principles of Political Economy
considered with a View to their Practical Application_ (1820); _A Series
of Short Studies dealing with the Corn Laws_ (1814-15); _On Rent_ (1815);
_The Poor Law_ (1817); and finally his _Definitions in Political Economy_
(1827).

[291] See Stangeland, _Pre-Malthusian Doctrines_ (New York, 1904).

[292] Godwin, _Political Justice_, Book VIII, chap. 7 (reprinted, London,
1890).

[293] “Man doubtless will never become immortal, but it is possible that
the span of human life may be indefinitely prolonged.”

[294] Chap. 8 is entitled “The Error of Thinking that the Danger
resulting from Population is Remote.” “There are few States in which
there is not a constant effort in the population to increase beyond the
means of subsistence. This constant effort as constantly tends to subject
the lower classes of society to distress, and to prevent any great
permanent amelioration of their condition.” (P. 10.)

[295] If two children were the normal issue of every marriage,
population would evidently diminish, for all the children will not reach
the marriageable age. Of those that do all will not become parents.
Experience seems to show that with a birth-rate of less than three per
family population does not increase, or if it does grow at all it is
almost imperceptibly. This is the case in France, where on an average
there are 2·70 births to every marriage.

To justify multiplying by two, Malthus regards a family of six as being a
normal one. Of the six, two will die before attaining marriageable age,
or will remain celibates, so that we are left with four, who will in turn
become parents, and so we have the series 2, 4, etc.

[296] The statement that population doubles every twenty-five years might
appear to be confirmed by the growth of population in the United States.
It is curious to find that the population there during the nineteenth
century conforms exactly to Malthus’s formula. In 1800 it was 5 millions.
Doubling four times (4 periods of 25 years = 100) gives us a population
of 80 millions, which is actually the figure for 1905, five years after
the end of the century. But of course this is pure chance, the increase
resulting from immigration rather than a rising birth-rate.

[297] It was in this connection that Malthus penned those famous words
which have been so frequently brought up against him, although they were
omitted from a later edition. “A man who is born into a world already
possessed, if he cannot get subsistence from his parents on whom he has a
just demand, and if the society do not want his labour, has no claim of
_right_ to the smallest portion of food, and, in fact, has no business
to be where he is. At Nature’s mighty feast there is no vacant cover for
him. She tells him to be gone.…” On the other hand, let us remember his
services in reorganising public assistance in England in 1832.

[298] “The effect of anything like a promiscuous intercourse which
prevents the birth of children is evidently to weaken the best affections
of the heart and in a very marked manner to degrade the female character.
And any other intercourse would, without improper arts, bring as many
children into the society as marriage, with a much greater probability of
their becoming a burden to it.” (P. 450.)

[299] “These considerations show that the nature of chastity is not, as
some have supposed, a forced produce of artificial society; but that
it has the most real and solid foundation in nature and reason; being
apparently the only virtuous means of avoiding the vice and misery which
result so often from the principle of population.” (P. 450.)

He also notes that this virtue has usually been especially commended to
women, but that “there is no reason for supposing that the violation
of the laws of chastity are not equally dishonourable for both sexes.”
Malthus evidently believed in one moral law for both sexes.

Consequently whenever the reverend gentleman is reproached with
encouraging blasphemy, a point upon which he is particularly
sensitive—for example, when it is pointed out that God’s injunction
to man was to increase and multiply—he has no difficulty in showing
that if procreation is the will of Providence, chastity is dictated by
Christianity, and that the glorious work of chastity is to aid Providence
in keeping even the balance of life.

[300] “Of the other branch of the preventive check, which comes under the
head of vice, though its effect appears to have been very considerable,
yet upon the whole its operation seems to have been inferior to the
positive checks.” (P. 140.)

“I have said what I conceive to be strictly true, that it is our duty
to defer marriage till we can feed our children; and that it is also
our duty not to indulge ourselves in vicious gratifications; but I have
never said that I expected either, much less both, of these duties to be
completely fulfilled. In this and a number of other cases, it may happen
that the violation of one of two duties will enable a man to perform the
other with greater facility.… The moralist is still bound to inculcate
the practice of both duties, and each individual must be left to act as
his conscience shall dictate.” (P. 560.)

[301] “I should be extremely sorry to say anything which could either
directly or remotely be construed unfavourably to the cause of virtue;
but I certainly cannot think that the vices which relate to the sex
are the only vices which are to be considered in a moral question.”
(P. 462.) Malthus omits to mention the particular vice which he has in
mind. “I have not the slightest hesitation in saying that the prudential
check [note the word—no longer “moral restraint”] to marriage is better
than premature mortality.” (P. 560.) We are far removed from the first
edition, where there is no mention of a third alternative between
chastity and vice.

[302] “Abject poverty is a state the most unfavourable to chastity that
can well be conceived.… There is a degree of squalid poverty in which if
a girl was brought up I should say that her being really modest at twenty
was an absolute miracle.” (P. 464.) And elsewhere he writes: “I maintain
that the diminution of the vice which results from poverty would afford a
sufficient compensation for any other evil that might follow.”

[303] These figures only give the values expressed in money by
capitalising them at the market rate of interest, which gives a rather
fictitious result. It does not warrant the belief that an American
citizen of to-day, however much his consumption may have increased, is
any better off than his ancestors.

[304] These differ, again, from the desire for marriage, which is
influenced by other considerations. French people marry in order to have
a home, but a desire for a home and a desire for love or for children are
very different things.

[305] “By a son a man obtains victory over all people; by a son’s son he
enjoys immortality; and afterwards by the son of that grandson he reaches
the solar abode.” “The son delivers his father from hell.” “A son of a
Brahmin if he performs virtuous acts redeems from sin his ten ancestors.”
(P. 105.)

This is Manu’s law, which Malthus quotes in support of his contention.
But he failed to see that as soon as one begins to doubt Manu’s teaching
the argument is the other way. One of the reasons why sterility was
considered a dishonour by Jewish women was that each of them secretly
hoped that she might become the mother of the promised Messiah. But when
the Jews ceased to hope for the Deliverer that was to come, then the
incentive to childbirth was gone.

[306] Neo-Malthusianism dates from the publication of Dr. Drysdale’s
book, _Elements of Social Science_, in 1854, but the Malthusian League
came into existence only in 1877. During the last few years the movement
seems to have taken hold everywhere, especially in France, where we would
least have expected it.

[307] He categorically declares that “we must suppose the general
prevalence of such prudential habits among the poor as would prevent
them from marrying when the actual price of labour joined to what they
might have saved in their single state would not give them the prospect
of being able to support a wife and five or six children without
assistance.” (P. 536.) Marriage seems prohibited to every worker whose
wages are not enough to keep eight persons, which practically would mean
that no workman could marry.

[308] “I have been accused of proposing a law to prohibit the poor from
marrying. This is not true.… I am, indeed, most decidedly of opinion that
any positive law to limit the age of marriage would be both unjust and
immoral.” (P. 357.)

[309] It is worth while recalling the passage to which we have already
incidentally drawn attention: “The poor are themselves the cause of their
own poverty.” (P. 458.)

[310] His views concerning charity are exceedingly interesting, and are
directly connected with his theory of population. This was the practical
question about which he was most concerned, and his influence in this
direction has been very considerable. He showed himself an uncompromising
opponent of the English Poor Law as it then existed. Speaking of the
famous 43rd of Elizabeth, he declares that one of its clauses is “as
arrogant and as absurd as if it had enacted that two ears of wheat
should in future grow where one only had grown before. Canute, when he
commanded the waves not to wet his princely foot, did not in reality
assume a greater power over the laws of nature.” Since public assistance
cannot create wealth, it cannot either keep alive a single pauper. “It
may at first appear strange, but I believe it is true, that I cannot by
means of money raise the condition of a poor man … without proportionally
depressing others in the same class.” But it may be pointed out that
although charity cannot beget wealth it does transfer a certain portion
of wealth from the pockets of the rich to fill the mouths of the hungry
poor. The consumption of the one is increased just as much as the other’s
is decreased.

Not only does he condemn charity in the way of almsgiving, but also the
practice of giving work for charity’s sake. He admits an exception in the
case of education, of which everybody can partake without making anyone
else the poorer. Such arguments would seem to imply the prohibition
of all charity, whether public or private, and as a matter of fact he
demands the gradual abolition of the Poor Laws and of every kind of
systematic assistance which offers to the poor any kind of help upon
which they can always reckon. But he recognises the “good results of
private charity, discriminately and occasionally exercised.” Though he
failed to remove the Poor Laws, the effect of his teaching is clearly
seen in the Poor Law Amendment Act of 1834.

Malthus’s doctrine is just the reverse of the social teaching on the
question in France at the present time. There you have an attempt to
substitute solidarity for Christian charity. That means that the poor
should be able to demand assistance, not as a gift, but as a right, and
that the place of individual or private charity should be taken by a
public institution with a view to giving effect to this. His teaching
concerning the preventive obstacle has been so thoroughly taken to heart
that there is not much fear of legal assistance resulting in a growth of
population.

[311] It is not proved, however, that such were Malthus’s views. Private
property, at least peasant proprietorship, acts as a stimulus to
population. And it is very curious to think that he should have taken
his illustration from France, where the multiplication of small farms is
considered one of the causes of the falling birth-rate. “At all times
the number of small farmers and proprietors in France was great, and
though such a state of things is by no means favourable to the clear
surplus produce or disposable wealth of a nation, yet sometimes it is
not unfavourable to the absolute produce, and it has always a strong
tendency to encourage population.” And again: “Even in France, with all
her advantages of situation and climate, the tendency of population is so
great and the want of foresight among the lower classes so remarkable.…”
Godwin and Young express similar opinions. The latter is quoted by
Malthus: “The predominant evil of the kingdom is the having so great a
population that she can neither employ nor feed it.” (P. 509.)

Marriage, Malthus thought, had a restraining influence upon population.
He admits that the simplest and most natural obstacle is to oblige every
father to rear his own children. He also admits that the shame which the
mother of a bastard and her child have to endure is a matter of social
necessity. He does not approve of forcing the man who has betrayed a
woman to marry, but he declares that seduction ought to be seriously
punished. This is the view commonly adopted to-day, but it was very novel
then.

[312] There are some sociologists who, like Malthus, would seek an
explanation both of depopulation and of over-population in biological
causes. Fourier and Doubleday, for example, are among the number.
Doubleday, who wrote forty years before Malthus, believed that fecundity
varied inversely with subsistence, and that this acted as a kind of
natural check upon the growth of population. There are others, again,
who think that reproductive capacity varies inversely with intellectual
activity. Both explanations seem to suggest a kind of opposition between
the development of the individual and the progress of the race which
is very suggestive. But their views have not gained many adherents. If
they are ever proved, which is not very likely, the prospect is not
an attractive one. It would mean that those nations and classes who
have risen to a position of ease through their superior culture would
disappear, while the poorer, uncultured masses would continue to increase.

[313] David Ricardo was descended from a Jewish family originally
domiciled in Holland. He was born in 1772 in London, where his father
had settled as a stockbroker. He entered business at an early age, and
soon became thoroughly conversant with the intricacies of banking and
exchange. On the occasion of his marriage he changed his religion, and
thus incurred the displeasure of his family. Setting up as a broker on
his own account, he was not long in amassing a huge fortune, estimated at
about £2,000,000—an enormous sum for those days.

Naturally enough, his earliest interest in economics centred round
banking questions. The French wars had caused a depreciation in the
value of the bank-note, and this aroused the interest not only of the
specialists, but also of the public. His first essay, published in 1810,
when he was thirty-eight years of age, was entitled _The High Price of
Bullion a Proof of the Depreciation of Bank-notes_. It was soon followed
by other studies dealing with banks and with the credit system. But
these short polemical efforts gave scarcely any indication of the great
attention which he was bestowing upon the principles of the science. His
interest was primarily personal, for it appears that he had no intention
of publishing anything on the subject. In 1817, however, the results
were seen in a volume entitled _The Principles of Political Economy_.
Ricardo the business man could hardly have guessed that it would shake
the capitalistic edifice to its very foundations.

In 1819 he was elected a member of the House of Commons, but he was as
indifferent a speaker as he was a writer. He was always listened to,
however, with the greatest respect. “I have twice attempted to speak,”
he writes, “but I proceeded in the most embarrassed manner: and I have
no hope of conquering the alarm with which I am assailed the moment I
hear the sound of my own voice.” In 1821 he founded the Political Economy
Club, the earliest of those numerous societies for the study of economic
subjects which have since been established in every country. In 1822 he
published a work on _Protection to Agriculture_. The following year he
died, at the comparatively early age of fifty-one.

Since his death all his writings have been carefully collected, and
his correspondence with the chief economists of his day, with Malthus,
McCulloch, and Say, published. The correspondence is extremely important
for an understanding of his doctrines.

[314] Letter to McCulloch, July 13, 1820, quoted by H. Denis, vol. ii, p.
171.

[315] In his correspondence with McCulloch, under date December 18, 1819,
he writes: “I am not satisfied with the explanation which I have given
of the principles which regulate value. I wish a more able pen would
undertake it.”

In a letter to Malthus written on August 15, 1820, speaking of his own
theory of value and of McCulloch’s, he despairingly adds: “Both of us
have failed.” See Halévy, _Le Radicalisme philosophique_, and Hector
Denis, _op. cit._

[316] Smith had likened industry to a household with two children—wages
and profits; agriculture to a household with three—wages, profits, and
rent.

[317] _An Inquiry into the Nature and Progress of Rent_ (1815).

[318] It is necessary to remember, however, that the old theory survived
and appears here under the very name of Ricardo, for he was unsuccessful
in freeing himself altogether from its influence. He defines rent as
“that portion of the produce of the earth which is paid to the landlord
for the use of the original and indestructible powers of the soil.” He
continually refers to these powers of the soil, which are described as
“natural,” “primitive,” “indestructible,” _i.e._ as independent of all
labour.

[319] “Nothing is more common than to hear of the advantages which the
land possesses over every other source of useful produce on account of
the surplus which it yields in the form of rent. Yet when land is most
abundant, when most productive and most fertile, it yields no rent, and
it is only when its powers decay … that rent appears.” (_Principles_, ed.
Gonner, p. 52.)

[320] “The labour of Nature is paid, not because she does much, but
because she does little. In proportion as she becomes niggardly in her
gifts she exacts a greater price for her work.” (_Ibid._, p. 53, note.)

“The comparative scarcity of the most fertile lands is the cause of
rent.” (_Ibid._, p. 395.)

Adam Smith had already offered this as an explanation in the case of the
products of the mine, but he failed to see that arable land is really
nothing but a sort of mine.

[321] To-day we simply say that it is determined by increased demand.
But this is quite contrary to Ricardo’s views, for in his opinion it is
labour and not demand that creates value.

[322] “The value of corn is regulated by the quantity of labour bestowed
on its production on that quality of land [or with that portion of
capital] which pays no rent.” (_Principles_, ed. Gonner, p. 51.)

[323] The illustration as given by Ricardo is somewhat more complicated.

[324] “When land of an inferior quality is taken into cultivation the
exchangeable value of raw produce will rise because more labour is
required to produce it.” (_Ibid._, p. 49.)

[325] See Cannan’s delightful volume _The Theories of Production and
Distribution_, p. 150, where the average decennial price works out as
follows:

              s.  d.

  1770-1779   45   0
  1780-1789   45   9
  1790-1799   55  11
  1800-1809   82   2
  1810-1813  106   2

[326] The number of Enclosure Acts which Parliament, acting with the
sanction of public opinion, passed during the latter part of the
eighteenth and the beginning of the nineteenth centuries increased very
rapidly. Between 1700 and 1845 no fewer than 3835 such Acts were passed,
involving the enclosure of 7,622,664 acres, most of it common land. Not
until 1845 do we find a change either in the attitude of public opinion
or in the action of Parliament.

[327] It is not quite clear whether the high price of corn is due to the
cultivation of new lands or whether this high price is the cause of the
cultivation of new lands. The second interpretation appears to us to be
the most natural, but it involves the abandonment of the Ricardian theory.

[328] Some critics, _e.g._ Fontenay, Bastiat’s disciple, suggested that
land No. 4 might very well become No. 1, if, instead of being employed
in the cultivation of corn, an intelligent husbandman were to put it to
viticulture or rose-growing. But this is to beg the question. The law
of rent implies products of the same kind, for it is this identity of
quality that enables them to be sold at the same price. If bad corn-land
could become good rose-growing ground, then of course it would take its
place among rose-growing areas, yielding rent as soon as less fertile
lands were employed for the same purpose.

[329] Turgot, _Observations sur un Mémoire de M. de Saint-Péravy_
(_Œuvres_, vol. i, p. 420). “It can never be imagined that a doubling
of expenditure would result in doubling the product.… It is more
than probable that by gradually increasing the expenditure up to the
point where nothing would be gained on the return, such items would
successively become less fruitful. The earth’s fertility resembles a
spring that is being pressed downwards by the addition of successive
weights. If the weight is small and the spring not very flexible, the
first attempts will leave no results. But when the weight is enough to
overcome the first resistance then it will give to the pressure. After
yielding a certain amount it will again begin to resist the extra force
put upon it, and weights that formerly would have caused a depression of
an inch or more will now scarcely move it by a hair’s breadth. And so the
effect of additional weights will gradually diminish.

“The comparison is not very exact, but it is near enough to enable us to
understand that when the earth is producing nearly all it can, a great
deal of expense is necessary to obtain very little more produce.”

Turgot, with his usual perspicacity, has noted a fact which the Classical
writers generally failed to perceive, namely, that at the beginning of
the process of cultivation there may be a period when the return shows no
signs of diminishing.

[330] We must note the fact that the law of diminishing returns was
already implied in the second of the famous progressions given by
Malthus, for an arithmetical progression that shows an increase of one
every twenty-five years implies an addition slower than the growth of
the series itself, _i.e._ slower than the movement of time. Let us take
land that yields one; in twenty-five years it will yield two, an increase
of 100 per cent. But this is only the first step. At the end of another
twenty-five years it will yield three, the increase being always one. But
the increase from two to three means an increase of only 50 per cent.,
from three to four of only 33 per cent., and so on to 25 per cent. and 20
per cent. When the hundredth place has been reached, the increase will
only be 1 per cent., and it will continue to fall farther, only more
slowly.

[331] Ricardo gives a slightly different explanation. “If with a capital
of £1000 a tenant obtains 100 quarters of wheat from his land, and by
the employment of a second capital of £1000 he obtains a further return
of eighty-five, his landlord would have the power at the expiration of
his lease of obliging him to pay fifteen quarters, or an equivalent
value for additional rent, for there cannot be two rates of profit.”
(_Principles_, ed. Gonner, p. 48.) He means to say that if profits fall
because new capital is less productive than old, rent must necessarily
appear, because by definition rent is what remains of the produce after
deducting profits and wages. This explanation closely resembles that one
given by West in his _Application of Capital to Land_, published in 1815,
and Ricardo was not above acknowledging his indebtedness to West.

[332] Shortly afterwards a German landowner published a book dealing
with just that side of the problem of rent which had been neglected by
Ricardo, namely, the influence of distance from a market upon cultivation
and the price of products. We are referring to Thünen, who in his book
_Der Isolerte Staat_ (vol. i, 1826) draws a picture of a town surrounded
by a belt of land, and shows how cultivation will be distributed in
concentric zones around that centre, and how the kind of cultivation
adopted will be a function of the distance.

[333] But the honour of discovering this law, which is so important for
an understanding of exchange value, does not belong entirely to Ricardo.
Forty years before a humble Scotch farmer named Anderson had observed
the phenomenon and given a very satisfactory analysis of it in his book
_Observations on the Means of Exciting a Spirit of National Industry_
(1777). “Now as the expense of cultivating the least fertile soil is as
great or greater than that of the most fertile field, it necessarily
follows that if an equal quantity of corn, the produce of each field, can
be sold at the same price, the profit on cultivating the most fertile
soil must be much greater than that of cultivating the other, and as
this continues to decrease as the sterility increases, it must at length
happen that the expense of cultivating some of the inferior soils will
equal the values of the whole produce.” (Quoted by Jevons, _Theory of
Political Economy_, p. 229.) Anderson’s name was forgotten until quite
recently, when it attracted a certain amount of attention among the
pioneers of Ricardo. Ricardo himself does not seem to be aware of his
existence; at least he never quotes him. The only two writers mentioned
by Ricardo are Malthus and West.

[334] “In speaking, however, of labour as being the foundation of
all value, and the relative quantity of labour as almost exclusively
determining the relative value of commodities, I must not be supposed to
be inattentive to the different qualities of labour.” (_Principles_, ed.
Gonner, p. 15.)

[335] Hume had already pointed out the objection to this view. Cf. p. 64,
footnote.

[336] “If fixed capital be not of a durable nature it will require a
great quantity of labour annually to keep it in its original state of
efficiency, but the labour so bestowed may be considered as really
expended on the commodity manufactured, which must bear a value in
proportion to such labour.” (_Principles_, ed. Gonner, p. 32.)

[337] In a note on Section VI, chap. 1, he adds: “Malthus appears to
think that it is a part of my doctrine that the cost and value of a
thing should be the same—it is, if he means by cost, cost of production
including profits.” (_Ibid._, p. 39.)

[338] Still we must note that Ricardo and Karl Marx, like everyone who
has tried to base a theory of value upon labour, tacitly assume the
operation of the law of demand and supply in order that their theories
may fit in with the facts.

[339] But how was it that he never realised that land at least in any
given country, and indeed for that matter over the whole world, is simply
a kind of wealth “of which no labour could increase the quantity”?

[340] “The dealings between the landlord and the public are not like
dealings in trade, whereby both the seller and the buyer may equally be
said to gain, but the loss is wholly on one side and the gain wholly on
the other.” (_Principles_, ed. Gonner, p. 322.) And so when a proprietor
sells corn to a consumer it is not of the nature of an ordinary bargain
where both parties gain something. The consumer gets nothing in return
for what he gives, _i.e._ for what he gives over and above what it has
cost to produce the corn. To get nothing in return for something given is
the kind of transaction that generally goes by the name of theft.

Ricardo soon finds a reply to the comfortable doctrine of Smith, that the
interests of the landlords are nowhere opposed to those of the rest of
the community. “The interest of the landlord is always opposed to that
of the consumer and manufacturer. Corn can be permanently at an advanced
price only because additional labour is necessary to produce it, because
its cost of production is increased. It is therefore for the interest of
the landlord that the cost attending the production of corn should be
increased. This, however, is not the interest of the consumer.… Neither
is it the interest of the manufacturer that corn should be at a high
price, for the high price of corn will occasion high wages, but will not
raise the price of his commodity.” (_Ibid._, p. 322.)

[341] “Wealth increases most rapidly in those countries where the
disposable land is most fertile, where importation is least restricted,
and where, through agricultural improvements, productions can be
multiplied without any increase in the proportional quantity of labour,
and where consequently the progress of rent is slow.” (_Principles_, ed.
Gonner, p. 54.) The contrast between fertile lands, free exchange, and
the development of agricultural science on the one hand, and the growth
of rent on the other, is very strikingly brought out in this paragraph.

[342] “Rent does not and cannot enter in the least degree as a component
part of its price.” (_Ibid._, p. 55.) And he adds: “The clearly
understanding of this principle is, I am persuaded, of the utmost
importance to the science of political economy.” It is true that Smith,
writing long before this time, had declared that the “high rate of rent
is the effect of price,” but he does not seem to have attached any great
importance to the remark.

[343] Ricardo wisely admits the possibility of confiscating this rent by
means of taxation, the reason for this being that “a tax on rent would
affect rent only, it would fall wholly on landlords and could not be
shifted to any class of consumers.” (_Principles_, ed. Gonner, p. 154.)
And the argument which he advances in proof of this, namely, that the
tax could not be shifted, seems to indicate that this particular kind
of revenue is not quite as intangible as that of some other classes in
society. But his advocacy is somewhat restrained, for, as he points out,
it would be unjust to put all the burden of taxation upon the shoulders
of one class of the community. Rent is often the property of people
who, after years of toil, have invested their earnings in land. The
original injustice, if any, would thus be got rid of in the process of
selling the land. This might be a sufficient reason for indemnifying the
expropriated, but it is not enough to condemn expropriation altogether.

[344] “Malthus and Ricardo have both proved false prophets and mistaken
apostles. The much-vaunted Ricardian law is a pure myth.” (Article by M.
de Foville on _Les Variations de la Valeur du Sol en Angleterre au XIXe
Siècle_, in _L’Économiste français_, March 21, 1908.)

[345] Mr. Robert Thompson, in a paper read before the Royal Statistical
Society on December 17, 1907, has shown how the average rent per acre,
valued at 11s. 2d. in 1801-5, reached the figure of 20s. in 1841-45, and
despite the abolition of protection continued to rise up to 1872-77,
when it reached a maximum of 29s. 4d. It then continued to fall until it
reached the present amount of 20s. The present figure is double what it
was in Ricardo’s time, but considerable deductions are necessary in view
of the improvements made in the character of the soil. Thompson, after
making these deductions, puts the amount at 15s. 5d., leaving just 4s.
7d. for rent pure and simple. The 11s. for rent at the beginning of the
century covered something besides economic rent. Considerable deductions
are again necessary, but the amount of capital employed in agriculture
was much less then.

One seems justified in saying that in England and even in France and
other Protective countries the land has lost both in revenue and value
during the last quarter of the nineteenth century almost all that it
had gained from the time of Ricardo up till then. But is the recoil
sufficient to justify Foville’s description of Ricardo’s vaunted law as
a pure myth? We think not. It has the experience of seventy-five years
behind it and of twenty-five years against it, that is all. Anyone who
would predict a further fall in rent would certainly be running the risk
of becoming a false prophet.

[346] “The condition of the labourer will generally decline, and that of
the landlord will always be improved.” (_Principles_, ed. Gonner, p. 79.)

[347] “It generally happens, indeed, that when a stimulus has been given
to population an effect is produced beyond what the case requires.…
The increased wages are not always immediately expended on food, but
are first made to contribute to the other enjoyments of the labourer.
His improved condition, however, induces and enables him to marry.”
(_Principles_, ed. Gonner, p. 95.)

[348] “Every suggestion which does not tend to the reduction in number of
the working people is useless, to say the least of it. All legislative
interference must be pernicious.” (Quoted by Graham Wallas, _Life of
Francis Place_. Place was the author of a book on population which
appeared in 1822.)

[349] This is a fundamental distinction upon which Ricardo is always
insisting. The greater or smaller quantity of labour employed in the
production of corn bears no necessary relation to the worker’s wages.
The one is merely a question of production, the other of distribution.
The one is the task, the other the reward. But some might ask if the
Ricardian theory of value does not state that the value of the product is
determined by the quantity of labour necessary for its production, that
this value will be subsequently divided between capitalist and worker,
and that the greater this quantity the greater will be the share of
each. Labour’s share may increase, but not the labourer’s, for we must
not forget that when the price of corn goes up from 10s. to 20s. it is
because the cultivation of poorer lands requires twice the number of
labourers demanded by the better kind of land. Besides, it would be a
strange thing to pay a man more as the work becomes less remunerative.
All that one could hope for would be that the workers under the new
conditions might be able to retain their old standard of life—that is,
might be able to purchase the same quantity of bread despite the rise in
price.

[350] “Thus, then, I have endeavoured to show that a rise of wages would
invariably lower profits.”

“Thus in every case … profits are lowered … by a rise of wages.”

On the inexactness of the term “high rate of profits” as a synonym for a
proportionally larger share of the produce see note, p. 162.

[351] Ricardo does not deny this. Indeed, he lays stress upon the fact
that he is arguing on the assumption that the value produced remains the
same. “I have therefore made no allowance for the increasing price of the
other necessaries, besides food of the labourer; an increase which would
be the consequence of the increased value of the raw materials from which
they are made, and which would of course further increase wages and lower
profits.”

[352] But this only means a rise in the nominal or money wage. It does
not mean that the worker gets more corn; he only gets the same amount as
before, because the price of corn has gone up and it makes no difference
whether the man is paid in money or in kind.

[353] “For as soon as wages should be equal to the whole receipts of the
farmer, there must be an end of accumulation: for no capital can then
yield any profit whatever, and no additional labour can be demanded,
and consequently population will have reached its highest point.”
(_Principles_, ed. Gonner, p. 67.)

[354] When speaking of a reduction of capital’s share Ricardo frequently
employs the phrase “a lowering of the rate of profits,” or “a fall in
the rate of profits.” A fall in the rate is not necessarily synonymous
with a reduction of capital’s share, however. The rate of profit simply
implies a certain proportion between revenue and capital—5 per cent.,
for example; there is no suggestion of comparison between the quantities
drawn by capitalist and workers respectively. Doubtless we must admit
that when the rate of profit is diminished, _ceteris paribus_, the part
drawn by capital relatively to labour’s share also diminishes, but it is
clear that if the quantity of capital employed in any industry were to be
doubled, or the product halved, capital, even at the rate of 3 instead
of 5 per cent., would be drawing a more considerable share and leaving
labour with less. Bastiat, as we shall have to note, made the same
mistake.

[355] In a letter to Malthus, December 18, 1814, he admits with a sigh of
regret that even if a belt of fertile land were added to this island of
ours profits would still keep up. Free Trade has added the illimitable
zone of fertile land which Ricardo dreamed of, with the result that both
profits and rents have fallen.

In his essay _On Protection to Agriculture_ (1822) he shows how
Protection, by forcing the cultivation of less fertile lands at home,
raises the price of corn and increases rents; and his demand was not for
free importation, but for a reduction of the duty to 10s. a quarter.

[356] See _An Inquiry into the Nature and Progress of Rent_.

[357] Cf. this unexpected remark to which H. Denis has recently drawn
attention: “It is evidently impossible for any Government to let
things just take their natural course.” (Malthus, introduction to the
_Principles_.)

[358] “Gold and silver having been chosen for the general medium of
circulation, they are by the competition of commerce distributed in such
proportions among the different countries of the world as to accommodate
themselves to the natural traffic which would take place if no such
metals existed and the trade between countries were purely a trade of
barter.”

[359] Ricardo also points out that “if, which is a much stronger case,
we agreed to pay a subsidy to a foreign Power, money would not be
exported whilst there were any goods which could more cheaply discharge
the payment.” (McCulloch’s edition, p. 269.) As a matter of fact, the
European Powers who were leagued against Napoleon were subsidised in
this fashion, the exports exceeding the imports by many millions. The
indemnity of 5 milliards of francs paid by France to Germany affords
another illustration of the same truth.

[360] Ricardo’s works, McCulloch’s edition, p. 287.

[361] Ricardo’s works, McCulloch’s edition, p. 404.

[362] _Ibid._, p. 349.

[363] S. and B. Webb, _History of Trade Unionism_, p. 54.

[364] In 1835 Andrew Ure (_Philosophy of Manufactures_, p. 481) reckoned
that in the manufacture of cotton, wool, linen, and silk in England there
were employed 4800 boys and 5308 girls below 11 years of age, 67,000
boys and 89,000 girls between 11 and 18 years of age, and 88,000 men and
102,000 women above 18 years; a total of 159,000 boys and men against
196,000 girls and women.

[365] J. B. Say, _De l’Angleterre et des Anglais_, in _Œuvres_, vol. iv,
p. 213.

[366] Villermé’s report in _Mémoires de l’Académie des Sciences morales_,
vol. ii, p. 414, note. Villermé’s observations were made in 1835 and
1836, although his celebrated work, _Tableau de l’État physique et moral
des Ouvriers_, was not published till 1840. This book is a reproduction
of his report to the Academy.

[367] _Enquête sur l’Industrie du Coton_, 1829, p. 87. Evidence of
Messrs. Witz and Son, manufacturers.

[368] Vide _Bulletin de la Société_, etc., 1828, p. 326-329.

[369] _Cf._ Rist, _Durée du Travail dans l’Industrie française de 1820 à
1870_, in the _Revue d’Économie politique_, 1897, pp. 371 _et seq._

[370] Sismondi was a native of Geneva. His family was originally Italian,
but took refuge in France in the sixteenth century, and migrated to
Geneva after the Revocation of the Edict of Nantes. Here Sismondi was
born in 1773. He is even better known for his two great works _L’Histoire
des Républiques italiennes_ and _L’Histoire des Français_ than for his
economic studies. He was a frequent guest of Mme. de Staël at the Château
Coppet, and among the other visitors whom he met there was Robert Owen.
He died in 1842.

[371] _Nouveaux Principes_, vol. ii, p. xxii. Our quotations are taken
from the second edition, published in 1827.

[372] _Ibid._, p. iv.

[373] Two volumes, Paris, 1837 and 1838.

[374] _Nouveaux Principes_, vol. ii, pp. 50-51. “Adam Smith’s doctrine is
also ours, but the practical conclusion which we draw from the doctrine
borrowed from him frequently appears to us to be diametrically opposed to
his.”

[375] _Ibid._, p. 56. “Adam Smith recognised the fact that the science
of government was largely experimental, that its real foundation lay
in the history of various peoples, and that it is only by a judicious
observation of facts that we can deduce the general principles. His
immortal work is, indeed, the outcome of a philosophic study of the
history of mankind.” _Cf._ also vol. i, pp. 47, 389.

[376] _Nouveaux Principes_, vol. ii, p. 268. _Cf._ also pp. 388, 389.

[377] _Ibid._, p. 56. In several other passages he takes Ricardo to task
(vol. i, pp. 257, 300, 336, 366, 423; vol. ii, pp. 184, 190, 218, 329).

[378] _Ibid._, p. 86.

[379] _Études sur Économie politique_, preface, p. v. Already in his
first work, _La Richesse commerciale_, he had declared: “Political
economy is based upon the study of man or of men. We must know human
nature, the character and destiny of nations in different places and at
different times. We must consult historians, question travellers, etc.…
The philosophy of history … the study of travels, etc., are parallel
studies.”

[380] _Nouveaux Principes_, vol. i, p. 257.

[381] Sismondi’s awkwardness in the manipulation of abstract reasoning is
clearly visible in a host of other passages, especially in the vagueness
of his definitions. Labour in one place is defined as the source of all
revenues (_ibid._, vol. i, p. 85); elsewhere, as the workers’ revenue
as contrasted with interest and rent (vol. i, pp. 96, 101, 110, 113,
114; vol. ii, p. 257, etc.). He never distinguishes between national and
private capital, and wages are sometimes treated as capital, sometimes
as revenue (p. 379). He constantly uses such vague terms as “rich”
and “poor” to designate capitalist and worker (vol. ii, chap. 5). In
his explanation of how the rate of interest is fixed he says that the
strength of the lenders of capital just balances the strength of the
borrowers, and, as in all other markets, they hit upon a proportional
mean (vol. ii, p. 36). In a similar fashion he is constantly confusing
revenue in kind with money revenue.

[382] “Last year’s revenue pays for the production of this.” (_Ibid._,
vol. i, p. 120.) Farther on he adds: “After all, what we do is to
exchange the total product of this year against the total product of
the preceding one” (p. 121). Sismondi attached great importance to the
distinction between the national revenue and the annual product. “The
confusion of the annual revenue with the annual product casts a thick
veil over the whole science. On the other hand, all becomes clear and
facts fall in with the theory as soon as one is separated from the
other.” (_Ibid._, pp. 366-367.) It is he himself, on the contrary, who
creates the confusion.

[383] McCulloch criticised Sismondi in an article in the _Edinburgh
Review_ of October 1819. For J. B. Say see pp. 115-117.

With regard to Ricardo, Sismondi relates that in the very year of his
death he had two or three conversations with him on this subject at
Geneva. In the end he seems to have accepted Ricardo’s point of view,
but not without several reservations. “We arrive then at Ricardo’s
conclusion and find that when circulation is complete (and having nowhere
been arrested) production does give rise to consumption”; but he adds:
“This involves making an abstraction of time and place, and of all those
obstacles which might arrest this circulation.”

Sismondi defended his point of view against his three critics in two
articles reprinted at the end of the second edition of the _Nouveaux
Principes_.

[384] “The accumulation of wealth _in abstracto_ is not the aim of
government, but the participation by all its citizens in the pleasures of
life which the wealth represents. Wealth and population in the abstract
are no indication of a country’s prosperity: they must in some way be
related to one another before being employed as the basis of comparison.”
(_Nouveaux Principes_, vol i, p. 9.)

[385] _Nouveaux Principes_, vol. ii, p. 250. Elsewhere he adds: “Should
the Government ever propose to further the interests of one class at the
expense of another that class should certainly be the workers.” (_Ibid._,
vol. i, p. 372.)

[386] _Cours complet_, vol. ii, p. 551.

[387] _Nouveaux Principes_, vol. i, p. 333.

[388] _Ibid._, p. 336.

[389] _Nouveaux Principes_, vol. i, pp. 220-221.

[390] The unanimity is not quite absolute, however. Ricardo in the third
edition of his _Principles_ added a chapter on machinery in which he
admitted that he was mistaken in the belief that machines after a short
period always proved favourable to the interests of the workers. He
recognised that the worker might suffer, for though the machine increases
the net product of industry it frequently diminishes the total product.
He seemed to think that this might happen frequently, but in reality it
is quite exceptional.

[391] We may here recall the celebrated winch argument. Suppose, says
Sismondi, that England succeeded in tilling her fields and doing all the
work of her towns by means of steam power, so that her total products
and revenue remain the same as they are to-day, though her population is
only equal to that of the republic of Geneva. Is she to be regarded as
being richer and more prosperous? Ricardo would reply in the affirmative.
Wealth is everything, men nothing. Really, then, a single king, dwelling
alone on the island, by merely turning a winch might conceivably
automatically perform all the work done in England to-day. One can only
reply to this argument by saying that long before arriving at this state
the community itself would have devised some machinery for distributing
the product between all its members. To suppose that a portion of the
population dies of hunger through want of employment while the other
part continues to manufacture the same quantity of goods as before is
sufficiently contradictory. But at bottom, disregarding the paradoxical
form given it by Sismondi, the question set by him is insoluble. What
is the best equilibrium between production and population? Are we to
prefer a population rapidly increasing in numbers, but making no advance
in wealth, to a population which is stationary or even decreasing, but
rapidly advancing in wealth? Everyone is free to choose for himself.
Science gives us no criterion.

[392] “We have said elsewhere, but think it essential to repeat it, that
it is not the perfection of machinery that is the real calamity, but
the unjust distribution of the goods produced. The more we are able to
increase the quantity of goods produced with a given quantity of labour,
the more ought we to increase our comforts or our leisure. Were the
worker his own master, after accomplishing in two hours with a machine
a task which formerly took him twelve he would then desist from toil,
unless he had some new need or were able to make use of a larger amount
of products. It is our present organisation and the workman’s servitude
that has forced him to work not less but more hours, at the same wage,
and this despite the fact that machinery has increased his productive
powers.” (_Nouveaux Principes_, vol. ii, p. 318.) In this passage we
have Sismondi’s real opinion on the subject of machinery most clearly
expressed.

[393] _Wealth of Nations_, Book II, chap. 2, in fine.

[394] _Nouveaux Principes_, vol. i, p. 92.

[395] _Études sur l’Économie politique_, vol. i, p. 35.

[396] _Ibid._, pp. 274-275.

[397] _Nouveaux Principes_, vol. i, p. 103.

[398] On this point we must dissociate ourselves from the interpretation
placed upon the passage by M. Aftalion in his otherwise excellent
monograph, _L’Œuvre économique de Simonde de Sismondi_ (Paris, 1899),
as well as from the view expressed by M. Denis (_Histoire des Systèmes
économiques_, vol. ii, p. 306). But Sismondi’s text appears to us to
leave no room for doubt. “As against land we might combine the other
two sources of wealth, life which enables a man to work and capital
which employs him. These two powers when united possess an expansive
characteristic, so that the labour which a worker puts in his work one
year will be greater than that put in the preceding year—upon the product
of which the worker will have supported himself. It is because of this
surplus value [_mieux value_], which increases as the arts and sciences
are progressively applied to industry, that society obtains a constant
increment of wealth.” (_Nouveaux Principes_, vol. i, p. 103.)

[399] _Nouveaux Principes_, vol. i, pp. 111-112. Cf. also p. 87: “Wealth,
however, co-operates with labour. And its possessor withholds from
the worker the part which the worker has produced beyond his cost of
maintenance—as compensation for the help which he has given him.” It is
true that this proportion is a considerable one. “The _entrepreneur_ is
bound to leave to the worker just enough to keep him alive, reserving for
himself all that the worker has produced over and above this.” (P. 103.)
But this is not a matter of necessity—a deduction from the laws of value,
as it is with Marx.

[400] “The poor man, by his labour and his respect for the property of
others, acquires a right to his home, to warm, proper clothing, to ample
nourishment sufficiently varied to maintain health and strength.… Only
when all these things have been secured to the poor as the fruit of their
labour does the claim of the rich come in. What is superfluous, after
supplying the needs of everyone, that should constitute the revenue of
opulence.” (_Études sur l’Économie politique_, vol. i, p. 273.) Here we
see quite clearly the sense in which Sismondi uses the term “spoliation.”

[401] _Nouveaux Principes_, vol. i, p. 407. Cf. also pp. 200, 201.

[402] “Everyone’s interest if checked by everybody else’s would in
reality represent the common interest. But when everyone is seeking his
own interest at the expense of others as well as developing his own
means, it does not always happen that he is opposed by equally powerful
forces. The strong thus find it their interest to seize and the weak to
acquiesce, for the least evil as well as the greatest good is a part of
the aim of human policy.” (_Ibid._, p. 407.) Cf. also _infra_, p. 188,
note 1.

[403] “There is one fundamental change which is still possible in
society, amid this universal struggle created by competition, and that is
the introduction of the proletariat into the ranks of human beings—the
proletariat, whose name, borrowed from the Romans, is so old, but who is
himself so new.” (_Études sur l’Économie politique_, vol. i, p. 34.)

[404] _Revue mensuelle d’Économie politique_, 1834, vol. ii, p. 124.

[405] _Nouveaux Principes_, vol. ii, p. 434.

[406] _Études sur l’Économic politique_, introd., pp. 39 _et seq._

[407] “That everyone understands his own interest better than any
Government ever can is a maxim that has been considerably emphasised by
economists. But they have too lightly affirmed that the interest of each
to avoid the greatest evil coincides with the general interest. It is to
the interest of the man who wishes to impoverish his neighbour to rob
him, and it may be the latter’s interest to let him do it provided he can
escape with his life.

“But it is not in the interest of society that the one should exercise
the force and that the other should yield. The interest of the day
labourer undoubtedly is that the wages for a day of ten hours should be
sufficient for his upkeep and the upbringing of his children. It is also
the interest of society. But the interest of the unemployed is to find
bread at any price. He will work fourteen hours a day, will send his
children to work in a factory at ten years of age, will jeopardise his
own health and life and the very existence of his own class in order to
escape the pressure of present need.” (_Nouveaux Principes_, vol. i, pp.
200-201.)

[408] _Ibid._, p. 201.

[409] “Population will then regulate itself simply in accordance with
the revenue. Where it exceeds this proportion it is always just because
the fathers are deceived as to what they believe to be their revenue, or
rather because they are deceived by society.” (_Ibid._, p. 254.) “The
more the poor is deprived of all right of property the greater is the
danger of its mistaking its revenue and contributing to the growth of
a population which, because it does not correspond to the demand for
labour, will never find sufficient means of subsistence.” (_Ibid._, p.
264.)

[410] _Ibid._, p. 286.

[411] We note that Sismondi does not accept Malthus’s theory of
population. He never admits that population depends upon the means
of subsistence; he holds that it varies according to the will of the
proprietor, who stimulates or retards it according to his demand, but
who is interested in its limitation in order to secure for himself the
maximum net product. “Population has never reached the limits of possible
subsistence, and probably it never will. But all those who desire the
subsistence have neither the means nor the right to extract it from the
soil. Those, on the contrary, to whom the laws give the monopoly of the
land have no interest in obtaining from it all the subsistence it might
produce. In all countries proprietors are opposed, and must be opposed,
to any system of cultivation which would tend merely to multiply the
means of subsistence while not increasing the revenue. Long before being
arrested by the impossibility of finding a country which produced more
subsistence population would be checked by the impossibility of finding
the people to buy those means or to work and bring them into being.”
(_Nouveaux Principes_, vol. ii, pp. 269-270.)

[412] _Ibid._, pp. 263, 264.

[413] _Nouveaux Principes_, vol. i, p. 153.

[414] _Ibid._, p. 235. This problem of the net and gross produce occupied
Sismondi’s attention for a long time. We find a suggestion of it in his
first work, _Le Tableau de l’Agriculture toscane_ (Geneva, 1801), and
though he does not definitely take the side of the gross produce, he
shows some leanings that way. “Why is the gain of a single rich farmer
considered more profitable for a State than the miserable earnings of
several thousand workers and peasants?” The book, however, is a treatise
on practical agriculture, and includes only a few economic dicta. It is
here that we have his beautiful description of his farm at Val Chiuso (p.
219).

[415] It is true that Sismondi wished to get rid of the practice of
producing corn for a market, so as to free the nation’s food from the
fluctuations of that market. Neither is he over-enthusiastic in his
praise of the gross produce. He recognises that the gradual growth of
the gross produce might, in its way, be the consequence of a state
of suffering if population were to progress too rapidly (_Nouveaux
Principes_, vol. i, p. 153). This shows what a hesitating mind we are
dealing with.

[416] _Ibid._, p. 368.

[417] _Nouveaux Principes_, vol. i, p. 361.

[418] Elsewhere he remarks: “The petty merchants, the small
manufacturers, disappear, and a great _entrepreneur_ replaces hundreds
of them whose total wealth was never equal to his. Taken altogether,
however, they consumed more than he does. His costly luxury gives much
less encouragement to industry than the honest ease of the hundred homes
which it has replaced.” (_Ibid._, p. 327). The theory is more than
doubtful. What we want to know is whether the demand will remain the
same in amount, not whether there will be no change in its character—a
contingency that need not result in a general crisis, but simply in a
passing inconvenience.

[419] Sismondi applies the same principles to a consideration of a fall
in the rate of interest as he does to the growth of production or the
increase of machinery. “An increase of capital is desirable only when its
employment can be increased at the same time. But whenever the rate of
interest is lowered it is a certain sign that the employment of capital
has proportionally diminished as compared with the amount available;
and this fall in the rate, which is always advantageous to some people,
is disadvantageous to others—some will have to be content with smaller
incomes and others with none at all.” (_Nouveaux Principes_, vol. i, p.
393.)

[420] Compare the Saint-Simonian review, _Le Producteur_, vol. iv, pp.
887-888.

[421] _Nouveaux Lundis_, vol. vi, p. 81.

[422] _Études sur l’Économie politique_, vol. i, pp. 60, 61.

[423] _Nouveaux Principes_, vol. i, p. 341; vol. ii, p. 459.

[424] _Ibid._, vol. ii, pp. 415, 435. See also _Études_, vol. i, p. 25.

[425] _Nouveaux Principes_, vol. ii, pp. 365, 366.

[426] _Ibid._, p. 451.

[427] _Ibid._, p. 338.

[428] _Nouveaux Principes_, vol. ii, p. 661.

[429] _Ibid._, p. 364.

[430] See section I of present chapter.

[431] Knies, strangely enough, classes him with the socialists.

[432] A. Blanqui, in his _Histoire de l’Économie politique en Europe_
(1837), considers him a writer of the modern school, which he describes
as follows: “Writers of this school are no longer willing to treat
production as a pure abstraction apart from its influence upon the
workers. To produce wealth is not enough; it must be equitably
distributed.” (Introd., 3rd ed., p. xxi.)

[433] Droz (1773-1850) published in 1829 his _Économie politique, ou
Principes de la Science des Richesses_. It is in this work that we find
the famous phrase, “Certain economists seem to think that products are
not made for men, but that men are made for the products.”

[434] Paris, 1841, two volumes. Buret died in 1842, when thirty-two years
of age.

[435] It was not intended that any reference should be made in this
volume to the doctrine of socialism before the opening of the nineteenth
century, but the question whether the French Revolution of 1789 was
socialist in character or simply middle-class, as the socialists of
to-day would put it, has been so frequently discussed that we cannot
ignore it altogether.

There is no doubt that the leaders of the Revolution—including Marat
even, who is wrongly regarded as a supporter of that agrarian law which
he condemned as fatal and erroneous—always showed unfailing respect for
the institution of private property. The confiscation of the property
of the Church and of the _émigré_ nobles was a political and not an
economic measure, and in that respect is fairly comparable with the
historic confiscation of the property of Jews, Templars, Huguenots,
and Irish, which in no case was inspired by merely socialist motives.
The confiscation of endowments—of goods belonging to legal persons—was
regarded as a means of defending individual or real property against the
encroachments of merely fictitious persons and the tyranny of the dead
hand. When it came to the abolition of feudal rights great care was taken
to distinguish the tenant’s rights of sovereignty, which were about to
be abolished, from his proprietary rights, which deserved the respect of
everyone who recognised the legitimacy of compensation. In practice the
distinction proved of little importance. Scores of people were ruined
during those unfortunate months—some through mere misfortune, others
because of the muddle over the issue of assignats, and others, again,
because of the confiscation of rents; but the intention to respect the
rights of property remains indisputable still. It would seem that in this
matter the revolutionary leaders had come under the influence of the
Physiocrats, whose cult of property has already engaged our attention.
And how easy it would be to imagine a Physiocrat penning Article 17
of the Declaration of the Rights of Man when it speaks of property as
an inviolable, sacred right! But, on the other hand, it is true that
Rousseau in his article _Économie politique_ speaks of the rights of
property as the most sacred of the citizen’s rights.

It was not only on the question of property that the revolutionists of
1789 showed themselves anti-socialist. They were also anti-socialist
in the sense that they paid no attention to class war and ignored the
antagonism that exists between capitalists and workers. All were to be
treated as citizens and brothers, all were equal and alike.

However, those who claim the most intimate connection with the spirit of
the Revolution remain undismayed by such considerations. They endeavour
to show that the Revolution was not quite so conservative nor so
completely individualistic as is generally supposed, and after diligent
search they claim to have discovered certain decrees bearing unmistakable
traces of socialism. But a much more general practice is to plead
extenuating circumstances. “Are we to demand that the social problems
which appeared fifty years afterwards, when industry had revolutionised
the relations of capital and labour, should have been solved at the end
of the eighteenth century? It would have been worse than useless for the
men of 1789 and 1793 to try to regulate such things in advance.” (Aulard,
Address to Students, April 21, 1893. Cf. his _Histoire politique de la
Révolution_, chap. 8, paragraph entitled “_Le Socialisme_.”)

We must not lose sight of the communist plot hatched by François Babeuf
during the period of the Revolution. But in this case, at any rate, the
exception proves the rule, for, despite the fact that Babeuf had assumed
the suggestive name of Gaius Gracchus, he found little sympathy among
the men of the Convention, even in La Montagne, and he was condemned and
executed by order of the Directory. Babeuf’s plot is interesting, if only
as an anticipatory protest of revolutionary socialism against _bourgeois_
revolution. Cf. Aulard, _loc. cit._, p. 627.

[436] Not to speak of celebrated Utopians like Plato, More, and
Campanella, a number of writers who have been minutely studied by
Lichtenberger undertook to supply such criticism in the eighteenth
century. Morelly, Mably, Brissot, and Meslier the _curé_ in France,
and Godwin in England, attacked the institution of property with
becoming vigour. Babeuf, who in 1797 suffered death for his attempt
to establish a community of equals, has left us a summary of their
theories. But the Saint-Simonians owe them nothing in the way of
inspiration. Eighteenth-century socialism was essentially equalitarian.
What aroused the anger of the eighteenth-century writers most of all was
the inequality of pleasure and of well-being, for which they held the
institution of private property responsible. “If men have the same needs
and the same faculties they ought to be given the same material and the
same intellectual opportunities,” says the _Manifeste des Égaux_. But the
Saint-Simonians recognise neither equality of needs nor of faculties,
and they are particularly anxious not to be classed along with the
Babeuvistes—the champions of the agrarian law. Their socialism, which is
founded upon the right to the whole produce of labour and would apportion
wages according to capacity, aims neither at equality nor uniformity.

The Saint-Simonians seem to have remained in ignorance of the socialist
theories of their contemporaries, the French Fourier and the English
Thompson and Owen. Fourier’s work only became known to Enfantin after his
own economic doctrine had been formulated. Saint-Simon and Bazard appear
never to have read him. It is probable that Enfantin only became aware
of Fourier’s writings after 1829, and when he did he interested himself
merely in those that dealt with free love and the theory of passions. As
Bourgin put it: “If Fourier did anything at all, he has rather hastened
the decomposition of Saint-Simonism.” (Henry Bourgin, _Fourier_, p. 419;
Paris, 1905.)

The English socialists are never as much as mentioned. The Ricardian
doctrine of labour-value, which is the basis of Thompson’s theory and
of Owen’s, and later still of that of Marx, seems never to have become
known to them. “Questions of value, price, and production, which demand
no fundamental knowledge either of the composition or the organisation
of society,” are treated as so many details (_Le Producteur_, vol. iv,
p. 388). Their doctrine is primarily social, containing only occasional
allusions to political economy. Enfantin is careful to distinguish
between Quesnay and his school and Smith or Say. The Physiocrats gave
a social character to their doctrine, which the economists wrongfully
neglected to develop. Aug. Comte, in the fourth volume of the _Cours de
Philosophie_, has criticised political economy in almost identical terms,
which affords an additional proof of his indebtedness to Saint-Simonism.

[437] Cf. especially Dumas, _Psychologie de deux Messies positivistes,
Saint-Simon et A. Comte_ (Paris, 1905), and for biographical details
Weill, _Saint-Simon et son Œuvre_ (1894).

[438] Weill, _Saint-Simon et son Œuvre_, p. 15.

[439] In 1814 _De la Réorganisation de la Société européenne_, by
Saint-Simon and A. Thierry, his pupil; 1817-18, _Industrie_, in 4 vols.
(the 3rd vol. and the first book of the 4th vol. are the work of A.
Comte); 1819, _La Politique_; 1821, _Le Système industriel_; 1823-24, _Le
Catéchisme des Industriels_ (the third book, by A. Comte, bears the title
_Système de Politique positive_); 1825, _Le Nouveau Christianisme_. Our
quotations from Saint-Simon are taken from the _Œuvres de Saint-Simon et
d’Enfantin_, published by members of the committee instituted by Enfantin
for carrying out the master’s last wishes (Paris, Dentu, 1865), and from
the _Œuvres choisies de Saint-Simon_, published in 3 vols. by Lemonnier
of Brussels (1859).

[440] _L’Organisateur_, Part I, 1819, pp. 10-20. This passage was
republished by Olinde Rodrigues in 1832 under the title of _Une Parabole
politique_ in a volume of miscellaneous writings by Saint-Simon, with the
result that Saint-Simon was prosecuted before the Cour d’Assises. He was
acquitted, however.

[441] “With the enfranchisement of the communes we shall witness the
middle classes at last in enjoyment of their liberty, setting up as a
political power. The essence of that power will consist in freedom from
being imposed upon by others without consent. Gradually it will become
richer and stronger, at the same time growing in political importance and
improving its social position in every respect, with the result that the
other classes, which may be called the theological or feudal classes,
will dwindle in estimation as well as in their real importance. Whence I
conclude that the industrial classes must continue to gain ground, and
finally to include the whole of society. Such seems to be the trend of
things—the direction in which we are moving.” (_Lettres à un Américain,
Œuvres_, vol. ii, p. 166.)

[442] “Industry is the basis of liberty. Industry can only expand and
grow strong with the growth of liberty. Were this doctrine, so old in
fact but so new to many people, once fully grasped instead of those
fictitious dreams of antiquity, we should have heard the last of such
sanguinary phrases as ‘equality or death.’” (_Œuvres_, vol. ii, pp.
210-211.)

[443] “Lawyers and metaphysicians are wont to take appearance for
reality, the name for the thing.” (_Syst. indust., Œuvres_, vol. v., p.
12.)

[444] “Parliamentary government must be regarded as an indispensable step
in the direction of industrialism.” (_Œuvres_, vol. iii, p. 22.) “It is
absolutely necessary if the transition from the essentially arbitrary
_régime_ which has existed hitherto is to be replaced by the ideal
liberal _régime_ which is bound to come into being by and by.” (_Ibid._
p. 21.)

[445] Writing in 1803 in his _Lettres d’un Habitant de Genève_, he uses
the following words: “Everyone will be obliged to do some work. The
duty of employing one’s personal ability in furthering the interests of
humanity is an obligation that rests upon the shoulders of everyone.”
(_Œuvres_, vol. i, p. 55.)

[446] “I find it essential to give to the term ‘labour’ the widest
latitude possible. The civil servant, the scientist, the artist, the
manufacturer, and the agriculturist are all working as certainly as the
labourer who tills the ground or the porter who shoulders his burden.”
(Introduction to _Travaux scientifiques, Œuvres choisies_, vol. i, p.
221.)

[447] The national or industrial party includes the following classes:

1. All who till the land, as well as any who direct their operations.

2. All artisans, manufacturers, and merchants, all carriers by land or
by sea, as well as everyone whose labour serves directly or indirectly
for the production or the utilisation of commodities; all savants who
have consecrated their talents to the study of the positive sciences, all
artists and liberal advocates; “the small number of priests who preach
a healthy morality; and, finally, all citizens who willingly employ
either their talents or their means in freeing producers from the unjust
supremacy exercised over them by idle consumers.”

“In the anti-national party figure the nobles who labour for the
restoration of the old _régime_, all priests who make morality consist of
blind obedience to the decrees of Pope or clergy, owners of real estates,
noblemen who do nothing, judges who exercise arbitrary jurisdiction, as
well as soldiers who support them—in a word, everyone who is opposed to
the establishment of the system that is most favourable to economy or
liberty.” (_Le Parti national_, in _Le Politique, Œuvres_, vol. iii, pp.
202-204.)

[448] _Syst. indust., Œuvres_, vol. vi, p. 17, note.

[449] _Syst. indust., Œuvres_, vol. vi, pp. 91-92.

[450] _Œuvres_, vol. iii, pp. 35-36.

[451] On this point see Halévy’s article in the _Revue du Mois_ for
December 1907, _Les Idées économiques de Saint-Simon_, and Allix, article
mentioned _supra_, p. 117.

[452] In the following passage the opposition is very marked: “One must
recognise that nearly all Government measures which have presumed to
influence social prosperity have simply proved harmful. Hence people
have come to the conclusion that the best way in which a Government can
further the well-being of society is by letting it alone. But this method
of looking at the question, however just it may seem when we consider
it in relation to the present political system, is evidently false
when it is adopted as a general principle. The impression will remain,
however, until we succeed in establishing another political order.”
(_L’Organisateur, Œuvres_, vol. iv, p. 201.)

Later on the Saint-Simonians abandoned this idea and demanded
Governmental control of all social relations. “Far from admitting that
the directive control of Government in social matters ought to be
restricted, we believe that it ought to be extended until it includes
every kind of social activity. Moreover, we believe that it should always
be exercised, for society to us seems a veritable hierarchy.” (_Doctrine
de Saint-Simon, Exposition, Deuxième Année_, p. 108; Paris, 1830.)

[453] “Under the old _régime_ men were considered inferior to things,”
according to a brochure entitled _Des Bourbons et des Stuarts_ (1822;
_Œuvres choisies_, vol. ii, p. 447). “The object of the new system
will be to extend man’s hold over things.” (_Œuvres_, vol. iv, p. 81.)
“In the present state of education what the nation wants is not more
government, but more cheap administration.” (_Syst. indust., Œuvres_,
vol. v, p. 181.) Engels, in his book written in reply to Eugen Dühring,
makes use of identical terms in speaking of the socialist _régime_.
“When the administration of things and the direction of the processes of
production take the place of the governing of persons the State will not
merely be abolished: it will be dead.” (_Philosophie, Économie politique,
Socialisme_, French translation by Laskine, p. 361; Paris, 1911.)

[454] _Lettres à un Américain, Œuvres_, vol. ii, p. 189.

[455] _Des Bourbons et des Stuarts, Œuvres choisies_, vol. ii, pp.
437-438.

[456] _L’Organisateur, Œuvres choisies_, vol. iv, pp. 86 and 150-151.

[457] _Lettres à un Américain, Œuvres_, vol. ii, p. 188.

[458] This is not the only plan of government proposed by Saint-Simon,
although it is the one most characteristic of him. It is to be found in
_L’Organisateur_ immediately after the Parable. We have to remember that
Saint-Simon was very hostile to a Government of savants. Power was to be
placed in the hands of the industrial leaders—the savants were simply
to advise. “Should we ever have the misfortune to establish a political
order in which administration was entrusted to savants we should soon
witness the corruption of the scientists, who would readily adopt the
vices of the clergy and become astute, despotic quibblers.” (_Syst.
indust., Œuvres_, vol. v, p. 161.)

[459] _Syst. indust., Œuvres_, vol. vi, p. 96.

[460] F. Engels, _Herrn Eugen Dührings Umwälzung der Wissenschaft_, 4th
ed., p. 277. French translation, Paris, 1911, p. 334. The whole of this
chapter in Engels’ book is from the pen of Karl Marx.

[461] French translation under the title _L’État socialiste_, Paris, 1906.

[462] This is the full text: “The object of socialism is to set up a
new system of society based upon the workshop as a model. The rights
of the society will be the customary rights of the factory. Not only
will socialism stand to benefit by the existence of the industrial
system which has been built up by capital and science upon the basis
of technical development, but it will gain even more from that spirit
of co-operation which has long been a feature of factory life, drawing
out the best energy and the best skill of the workman.” Earlier in
the same volume he writes: “Everything will proceed in an orderly,
economical fashion, just like a factory.” (G. Sorel, _Le Syndicalisme
révolutionnaire_, in _Le Mouvement socialiste_, November 1 and 15, 1905.)

[463] Saint-Simon often quotes Say and Smith with distinct approval. But
he charges Say with the separation of politics from economics instead of
merging the former in the latter, and with inability to realise to the
full extent what he “dimly saw, as it were, in spite of himself, namely,
that political economy is the one true foundation of politics.” (_Lettres
à un Américain, Œuvres_, vol. ii, p. 185.)

[464] Saint-Simon is classed among the socialists for two reasons: (1)
the interest he takes in the condition of the poor; (2) his opinions
concerning the necessity for reforming the institution of private
property. But none of the texts that are generally quoted seem to have
the significance that is occasionally given them. With regard to the
first point, a celebrated passage from the _Nouveau Christianisme_ is
the one usually quoted: “Society should be organised in such a fashion
as to secure the greatest advantage for the greatest number. The object
of all its labours and activities should be the promptest, completest
amelioration possible of the moral and physical condition of the most
numerous class.” (_Œuvres_, vol. vii, pp. 108-109.) Already in his
_Système industriel_ Saint-Simon had said that the direct object which he
had in view was to better the lot of that class that had no other means
of existence than the labour of its own right arm. (_Ibid._, vol. vi, p.
81.) But is this not just the old Benthamite formula—the greatest good
of the greatest number? Besides, how does Saint-Simon propose to secure
all this? By giving the workers more power? Not at all. “The problem of
social organisation must be solved for the people. The people themselves
are passive and listless and must be discounted in any consideration of
the question. The best way is to entrust public administration to the
care of the industrial chiefs, who will always directly attempt to give
the widest possible scope to their undertakings, with the result that
their efforts in this direction will lead to the maximum expansion of the
amount of work executed by the mass of the people.” (_Ibid._, vol. vi,
pp. 82-83.) A Liberal economist would hardly have expressed it otherwise.

As to the question of private property, Saint-Simon certainly regarded
its transformation as at least possible. This is seen in a number of
passages. “Property should be reconstituted and established upon a
foundation that might prove more favourable for production,” says he
in _L’Organisateur_. (_Ibid._, vol. iv, p. 59.) Elsewhere, in a letter
written to the editor of the _Journal général de la France_, he mentions
the fact that he is occupied with the development of the following
ideas: (1) That the law establishing the right of private property is
the most important of all, seeing that it is the basis of our social
edifice; (2) the institution of private property ought to be constituted
in such a fashion that the possessors may be stimulated to make the best
possible use of it. (_Ibid._, vol. iii, pp. 43-44.) In his _Lettres à
un Américain_ he gives the following résumé of the principles which
underlie the work of J. B. Say (an incidental proof of his attachment
to the Liberal economists): “The production of useful objects is the
only positive, reasonable aim which political societies can propose for
themselves, and consequently the principle of respect for production
and producers is a much more fruitful one than the other principle of
respect for property and proprietors.” (_Œuvres_, vol. ii, pp. 186-187.)
But all that this seems to us to imply is that the utility of property
constitutes its legality and that it should be organised with a view
to social utility. Admitting that he did conceive of the necessity of
a reform of property, it does not appear that he intended this to mean
anything beyond a reform of landed property. We have already seen how he
regarded capital as a kind of social outlay which demanded remuneration.
The following passage bears eloquent testimony to his respect for
movable property: “Wealth, generally speaking, affords a proof of the
manufacturers’ ability even where that wealth is derived from inherited
fortune, whereas in the other classes of society it is apparently true to
say that the richer are inferior in capacity to those who have received
less education but have a smaller fortune. This is a truth that must play
an important part in positive politics.” (_Syst. indust., Œuvres_, vol.
v, p. 49, note.)

[465] The exact title is _Doctrine de Saint-Simon, Exposition, Première
Année_, 1829. Our quotations are taken from the second edition (Paris,
1830). One ought to mention, in addition to these, the articles
contributed by Enfantin to _Le Globe_ and republished under the title of
_Économie politique et Politique_, in one volume (2nd ed., 1832). But
none of these articles is as interesting as the _Doctrine_, and they only
reproduce the ideas already discussed by Enfantin in his articles in _Le
Producteur_.

[466] Despite the fact that the oral exposition of the doctrine was the
work of Bazard and was prepared for the press by his disciples—Hippolyte
Carnot among others—most of the economic ideas contained in it must be
attributed to Enfantin. Enfantin also was responsible for the majority of
the economic articles that appeared in _Le Producteur_. But the doctrine
set forth in _Le Producteur_ differs considerably from that expounded in
the _Exposition_. Interest and rent are subjected to severe criticism
as tributes paid to idleness by industry. Inheritance, on the other
hand, though treated with scant sympathy, is not condemned. A lowering
of the rate of interest would, Enfantin thinks, help to enfranchise the
workers, and a sound credit system would solve the greatest of modern
problems—that is, it would reconcile workers and idlers, “whose interests
will never again be confused with the general interest, inasmuch as the
possession of the fruits of past labour will no longer constitute a claim
to the enjoyment of the benefits of labour in the present or future.”
(_Le Producteur_, vol. ii, p. 124.) These ideas are more fully developed
in the _Exposition_.

[467] _Doctrine de Saint-Simon_, p. 182.

[468] _Ibid._, p. 190.

[469] _Ibid._, p. 93.

[470] Sismondi’s term was rather “spoliation.” See _supra_, p. 185.

[471] “The mass of workers are to-day exploited by those people
whose property they use. Captains of industry in their dealings with
proprietors have to submit to a similar kind of treatment, only to a
much less degree. But they occasionally share in the privilege of the
exploiters, for the full burden of exploitation falls upon the working
classes—that is, upon the vast majority of mankind.” (_Doctrine de
Saint-Simon_, p. 176.)

[472] “It is our belief that profits diminish while wages increase; but
the term ‘wages’ as we use it includes the profits that accrue to the
_entrepreneur_, whose earnings we regard as the price of his labour.”
(_Le Producteur_, vol. i, p. 245. The article is by Enfantin.)

[473] We might sum up the different senses of the word “exploitation” as
used by Sismondi, the Saint-Simonians, and Marx respectively as follows:

(1) Sismondi thinks that the worker is exploited whenever he is not paid
a wage sufficient to enable him to lead a decent existence. Unearned
income seems quite legitimate, however.

(2) Exploitation exists, in the opinion of the Saint-Simonians, whenever
a part of the material produce raised by labour is devoted to the
remuneration of proprietors through the operation of ordinary social
factors.

(3) Marx speaks of exploitation whenever a portion of the produce of
labour is devoted to the remuneration of capital either through the
existence of social institutions or the operation of the laws of exchange.

[474] See p. 25.

[475] _Doctrine_, p. 191.

[476] See p. 79, note.

[477] _Doctrine_, pp. 191-192.

[478] The Saint-Simonians never make use of the term, but they describe
the doctrine admirably.

[479] “We may provisionally speak of this system as a general system of
banking, ignoring for the time being the somewhat narrow interpretation
usually placed upon that word. In the first place, the system would
comprise a central bank, which would directly represent the Government.
This bank would be the depository for every kind of wealth, of all
funds for productive purposes and all instruments of labour—in a word,
it would include everything that is to-day comprised within the term
‘private property.’ Depending upon this central bank would be other banks
of a secondary character, which would be, as it were, a prolongation
of the former and would supply it with the means of coming into touch
with the principal localities, informing the central institution as to
their particular needs and their productive ability. Within the area
circumscribed for these banks would be other banks of a more specialised
character still, covering a less extensive field and including within
their ambit the tenderer branches of the industrial tree. All wants would
be finally focused in the central bank and all effort would radiate from
it.” (_Doctrine_, pp. 206-207.) The idea is probably Enfantin’s, for
there is an exposition of the same idea in _Le Producteur_, vol. iii, p.
385.

[480] _Doctrine_, p. 210, note. Elsewhere (p. 330): “We are weary of
every political principle that does not aim directly at putting the
destiny of the people in the hands of the most able and devoted among
them.”

[481] “We come back with real joy to this great virtue, so frequently
misconceived, not to say misrepresented, at the present time—that virtue
which is so easy and so delightful in persons who have a common aim which
they want to attain, but which is so painful and revolting when combined
with egoism. This virtue of obedience is one to which our thoughts return
ever with love,” (_Ibid._, p. 330.)

[482] The formula in the third edition of the _Doctrine_ is a little
different. “Each one,” it runs there, “ought to be endowed according to
his merits and rewarded according to his work.” We know that the first
part of the formula refers to the distribution of capital, _i.e._ to the
instruments of labour, while the second refers to individual incomes. The
word “classed” was substituted for “endowed” in the second edition.

[483] Published as an appendix to the second edition of the _Doctrine de
Saint-Simon, Exposition, Première Année_, 1829.

[484] In his small volume _Le Collectivisme_ (Paris, 1900).

[485] Littré has disputed Comte’s indebtedness to Saint-Simon in his
_Auguste Comte et le Positivisme_. Saint-Simon, however, in his preface
to _Système industriel_ remarks that in political matters the jurists
form a connecting link between feudal government on the one hand and
industrial government on the other, just as the metaphysicians are
intermediate between the theological and the scientific _régimes_. In a
note which he adds he states his position still more clearly (_Œuvres_,
vol. v, p. 9). It is true that the _Système industriel_ dates from 1821,
and is consequently subsequent to the beginning of the friendly relations
between Comte and Saint-Simon. But textual evidence, however precise,
cannot decide the question of the reciprocal influence which these two
Messiahs exercised upon one another. A similar idea had already found
expression in Turgot’s work.

[486] P. 179.

[487] “Another mistake that is also very general is to speak of property
as if it were an institution with a fixed, unchangeable form, while as
a matter of fact it has assumed various aspects and is still capable of
further modification as yet undreamt of.” (Laveleye, _De la Propriété
et de ses Formes primitives_, 1st ed., 1874, p. 381.) Stuart Mill, in a
letter addressed to Laveleye on November 17, 1872, congratulated him on
the demonstration he had given of this. (_Ibid._, preface, p. xiii.)

[488] Note this argument, which has so frequently been employed by
Liberal economists, and which we shall come across in Bastiat’s work. The
Saint-Simonians are constantly running with the hare as well as hunting
with the hounds.

[489] _Doctrine_, p. 182. The historical argument of which we have just
given a short summary is developed in the _Doctrine_, pp. 179-193. It is
open to a still more fundamental criticism, inasmuch as it does not seem
to be historically accurate.

[490] Saint-Simon, _Mémoire introductif sur sa Contestation avec M. de
Redern_ (1812) (_Œuvres_, vol. i, p. 122).

[491] _Doctrine_, p. 144.

[492] The philosophy of history might be said to consist of attempts to
show that history is made up of alternating periods of organic growth and
destructive criticism. The former periods are marked by unity of thought
and aim, of feeling and action in society; the latter by a conflict of
ideas and sentiments, by political and social instability. The former
periods are essentially religious, the latter selfish. Reform and
revolution are the modern manifestations of the critical nature of the
period in which we live. Saint-Simonism would lead us into a definitely
organic epoch. Historical evolution seems to point to a religious and
universal association.

[493] _Doctrine_, p. 119.

[494] _Ibid._, p. 121. “Man is not without some intuitive knowledge of
his destiny, but when science has proved the correctness of his surmises
and demonstrated the accuracy of his forecasts, when it has assured him
of the legitimacy of his desires, he will move on with all the greater
assurance and calmness towards a future that is no longer unknown to
him. Thus will he become a free, intelligent agent working out his own
destiny, which he himself cannot change, but which he may considerably
expedite by his own efforts.”

[495] This is developed at great length in the seventh lecture,
_Doctrine_, pp. 211 _et seq._

[496] “Politics,” says Saint-Simon, “have their roots in morality, and
a people’s institutions are just the expression of their thoughts.”
(_Œuvres_, vol. iii, p. 31.) “Philosophy,” he remarks elsewhere, “is
responsible for the creation of all the more important political
institutions. No other power would have the strength necessary to check
the action of those that have already become antiquated or to set up
others more in conformity with a new doctrine.” (_Syst. indust._,
_Œuvres_, vol. v, p. 167.) He further insists upon the part which
philanthropists may play in the creation of a new society. “One truth,”
he writes, “that has been established in the course of human progress is
this: a disinterested desire for the general well-being of the community
is a more effective instrument of political improvement than the
conscious self-regarding action of the classes for which these changes
will prove most beneficial. In a word, experience seems to show that
those who should naturally be most interested in the establishment of a
new order of things are not those who show the greatest desire to bring
it about.” (_Œuvres_, vol. vi, p. 120.) It would be difficult to imagine
a neater refutation of Marxian ideas, especially the contention that the
emancipation of the workers can only come from the workers themselves.

[497] Cf. on these points Weill, _L’École Saint-Simonienne_ (1896), and
Charléty, _Histoire du Saint-Simonisme_ (1896).

[498] “The object of credit,” says Enfantin (_Économie politique et
Politique_, p. 53), “in a society where one set of people possess the
instruments of production but lack capacity or desire to employ them, and
where another have the desire to work but are without the means, is to
help the passage of these instruments from the former’s possession into
the hands of the latter.” No better definition was ever given.

[499] _Doctrine_, p. 226. Cf. p. 223 for an eloquent passage denouncing
Ricardo and Malthus, who, as the result of their “profound researches
into the question of rent,” undertake to defend the institution of
private property.

[500] The article is entitled _De la Classe ouvrière_, and may be found
in vol. iv of _Le Producteur_. See particularly pp. 308 _et seq._

[501] Engels, _Herrn Eugen Dührings Umwälzung der Wissenschaft_, p. 277.

[502] “The majority of economists, and especially Say, whose work we
have just reviewed, regard property as a fixed factor whose origin
and progress is no concern of theirs, but whose social utility alone
concerns them. The conception of a distinctively social order is more
foreign still to the English writers.” (_Doctrine_, pp. 221 and 223.) No
exception is made in favour of Sismondi or Turgot.

[503] _Le Producteur_, vol. iii, p. 385.

[504] In the preface to _Économie politique et Politique_, Enfantin again
writes: “All questions of political economy should be linked together
by a common principle, and in order to judge of the social utility of
a measure or idea in economics it is absolutely necessary to consider
whether this idea or measure is directly advantageous to the workers or
whether it indirectly contributes to the amelioration of their lot by
discrediting idleness.” It is a pleasure to be able to concur in the
opinion expressed by M. Halévy in his article on Saint-Simon (_Revue du
Mois_ for December 1907), in which he maintains that this idea is the
distinctive trait of Saint-Simon’s socialism. We have already called
attention to another feature that seems to us equally important, namely,
the suggested substitution of industrial administration for political
government.

[505] It is impossible not to make a special mention of Anton Menger’s
excellent little book. _Das Recht auf den vollen Arbeitsertrag_ (1886)
(the English translation, with an excellent introduction by Professor
Foxwell, is unfortunately out of print). It is indispensable in any
history of socialism. We must also mention, with deep acknowledgments,
Pareto’s _Les Systèmes socialistes_ (Paris, 1902, 2 vols.)—the most
originally critical work yet published on this subject, though not
always the most impartial—and Bourguin’s _Les Systèmes socialistes et
l’Évolution économique_ (Paris, 1906), as containing the most scientific
criticism of the economic theories of socialism.

[506] “Association, which is destined to put an end to antagonism, has
not yet found its true form. Hitherto it has consisted of separate
groups which have been at war with one another. Accordingly antagonism
has not yet become extinct, but it certainly will as soon as association
has become universal.” (_Doctrine de Saint-Simon, Exposition, Première
Année_, p. 177.)

[507] In Owen’s paper, the _Economist_, for August 11, 1821, we meet
with the following words: “The secret is out!… The object sought to be
obtained is not _equality_ in rank or possessions, is not _community of
goods_, but full, complete, unrestrained co-operation on the part of
all the members for every purpose of social life.” Fourier writes in a
similar strain: “Association holds the secret of the union of interests.”
(_Assoc. domestique_, vol. i, p. 133.) Elsewhere he writes: “To-day, Good
Friday, I discovered the secret of association.”

[508] On the relations of socialism to the French Revolution see the
preceding chapter on Saint-Simon (p. 199, note).

[509] The Declaration of the Rights of Man speaks of liberty, property,
resistance to oppression, but there is not a word about the right of
association. Trade association, one of the oldest and most democratic
forms of association, was proscribed by the famous decree of Le Chapelier
(1791), and severe penalties were imposed upon associations of more
than twenty persons by the Penal Code of 1810. These prohibitions were
gradually removed in the course of the nineteenth century. Friendly
societies were the first to be set free, then followed trade unions, but
these laws were not definitely repealed until July 1, 1901.

[510] “It is obvious that the present _régime_ of free competition which
is supposed to be necessary in the interests of our stupid political
economy, and which is further intended to keep monopoly in check, must
result in the growth of monopoly in almost every branch of industry.”
(Victor Considérant, _Principes de Socialisme_.)

[511] Fourier’s first book, _Les Quatre Mouvements_, was published in
1808, and his last, _La Fausse Industrie_, in 1836. Owen’s earliest work,
_A New View of Society; or Essays on the Formation of Human Character_,
was published in 1813, and his last work, _The Human Race governed
without Punishment_, in 1858.

[512] “According to details supplied by journalists, Owen’s
establishments seem to have at least three serious drawbacks which must
inevitably destroy the whole enterprise—the numbers are excessive,
equality is one of his ideals, and there is no reference to agriculture.”
(_Unité universelle_, vol ii, p. 35)

[513] Despite the fact that Chartism was essentially a working-class
movement, controlled by the Working Men’s Association, its demands were
exclusively political, the chief of them being universal suffrage.

[514] It is quite possible that Owen regarded the term as his own
invention, but we now know that it had been previously employed by
Pierre Leroux, the French socialist. The publication of Owen’s _What is
Socialism?_ in 1841, however, is the earliest instance of the term being
employed as the title of a book.

Owen lived an extremely active life, and died in 1857 at the advanced age
of eighty-seven. Of Welsh artisan descent, he began life as an apprentice
in a cotton factory, setting up as a master spinner on his own account
with a capital of £100, which he had borrowed from his father. His rise
was very rapid, and at the age of thirty he found himself co-proprietor
and director of the New Lanark Mills. It was then that he first made a
name for himself by his technical improvements and his model dwellings
for his workmen. It was at this period that his ideas on education
also took shape. By and by it became the fashion to make a pilgrimage
to view the factory at New Lanark, and among the visitors were several
very distinguished people. His correspondents also included more than
one royal personage. Among these we may specially mention the King of
Prussia, who sought his advice on the question of education, and the King
of Holland, who consulted him on the question of charity.

The crisis of 1815 revealed to Owen the serious defects in the economic
order, and this marks the beginning of the second period of his life,
when he dabbled in communal experiments. In 1825 he founded the colony of
New Harmony in Indiana, and the same year witnessed the establishment of
another colony at Orbiston, in Scotland. But these lasted only for a few
years. In 1832 we have the National Equitable Labour Exchange, which was
not much more successful.

Owen, sixty-three years of age, and thoroughly disappointed with his
experiments, but as convinced as ever of the truth of his doctrines,
entered now upon the third period of his life, which, as it happened,
was to be a fairly long one. This period was to be devoted wholly to
propagating the gospel of the New Moral World—_The New Moral World_
being the title of his chief work and of the newspaper which he first
published towards the end of 1834. He took an active part in the Trade
Union movement, but does not seem to have been much interested in the
co-operative experiments which were started by the Rochdale Pioneers in
1844, although curiously enough this is his chief claim to fame.

Owen was in no sense a _littérateur_, being essentially a man of affairs,
and we are not surprised to find that the number of books which he has
left behind him is small. But he was an indefatigable lecturer, and wrote
a good deal for the press. We must confess, however, that it is not
easy, as we read his addresses and articles to-day, to account for the
wonderful contemporary success which they had.

There is an excellent French work by Dolléans dealing with his life
and doctrines (1907). The best English life, that of Podmore, is
unfortunately out of print.

[515] To his fellow-employers who complained of his almost revolutionary
proposals Owen made reply as follows—and his words are quite as true
now as they were then: “Experience must have taught you the difference
between an efficiently equipped factory with its machinery always clean
and in good working order and one in which the machinery is filthy and
out of repair and working only with the greatest amount of friction.
Now if the care which you bestow upon machinery can give you such
excellent results, may you not expect equally good results from care
spent upon human beings, with their infinitely superior structure? Is
it not quite natural to conclude that these infinitely more delicate
and complex mechanisms will also increase in force and efficiency and
will be really much more economical if they are kept in good working
condition and treated with a certain measure of kindness? Such kindness
would do much to remove the mental friction and irritation which always
results whenever the nourishment is insufficient to keep the body in full
productive efficiency, as well as to arrest deterioration and to prevent
premature death.”

[516] Education is given a very prominent place in Owen’s system, and
once we accept his philosophy we realise what an important place it was
really bound to have. Education was to make men, just as boots and caps
are made. Were it not altogether foreign to our purpose it would be
interesting to compare his educational ideals with those of Rousseau as
outlined in _Émile_.

[517] “The idea of responsibility is one of the absurdest, and has done a
great deal of harm.” (_Catechism of the New Moral World_, 1838.)

[518] On the other hand, Owen had great influence with the working
classes, and this he attributed to the fact that, “freed from all
religious prejudice, he was able to look upon men and human nature in
general with infinite charity, and in that light men no longer seemed
responsible for their actions.” (Quoted by Dolléans.)

[519] Like most of the economists and socialists of that time, Owen was
very much impressed with the crisis of 1815.

[520] On the other hand, there is this objection:

Whenever profit forms a part of cost of production it is impossible to
distinguish it from interest. In that case it is true that even perfect
competition would not do away with profit, since it will only reduce the
price to the level of cost of production. In that case profit cannot be
said to be either unjust or parasitic, for the product is sold exactly
for what it cost.

When profit does not enter into cost of production there is no
possibility of confusing it with interest. It is simply the difference
between the sale price and the cost of replacing the article. In this it
is certainly parasitic, and would disappear under a _régime_ of perfect
competition, which must to some extent destroy the monopoly upon which
such profit rests.

But the distinction between profit and interest was not known in Owen’s
time, and Owen would have said that they are both one, and that if
profit occasionally claims a share in the cost of production with a view
to defying competition it has no right to any such refuge, for cost of
production should consist of nothing but the value of labour and the wear
and tear of capital. Accordingly it ought to be got rid of altogether.

[521] “Metallic money is the cause of a great deal of crime, injustice,
and want, and it is one of the contributory causes which tend to destroy
character and to make life into a pandemonium.

“The secret of profit is to buy cheap and to sell dear in the name of an
artificial conception of wealth which neither expands as wealth grows nor
contracts as it diminishes.”

[522] This contradiction did not escape Owen. But we must not forget that
he regarded this merely as a compromise, and that he looked forward to
a time when the establishment of a communistic association with a new
environment would lead to a complete solution of the problem. He began in
the New Harmony colony by making _pro rata_ payment for the work done,
but the object was to arrive gradually at a state of complete equality
where no distinction was to be made between the service rendered or the
labour given—with the result that the colony was extinct in six months.

[523] The Labour Exchange, which was opened in September 1832, at first
enjoyed a slight measure of success. There were 840 members, and they
even went the length of establishing a few branches. Among the chief
causes of the failure of the scheme the following may be enumerated:

(_a_) The associates, being themselves allowed to state the value of
their products, naturally exaggerated, and it became necessary to relieve
them of a task which depended entirely upon their honour, and to place
the valuation in the hands of experts. But these experts, who were not
at all versed in Owen’s philosophy, valued the goods in money in the
ordinary way, and then expressed those values in labour notes at the rate
of 6_d._ for every hour’s work. It could hardly have been done on any
other plan. But it was none the less true that Owen’s system was in this
way inverted, for instead of the labour standard determining the selling
value of the product, the money value of the product determined the value
of the labour.

(_b_) As soon as the society began to attract members who were not quite
as conscientious as those who first joined it, the Exchange was flooded
with goods that were really unsaleable. But for the notes received in
exchange for these the authorities would be forced to give goods which
possessed a real value, that is, goods which had been honestly marked,
and which commanded a good price, with the result that in the long run
there would be nothing left in the depot except worthless products. In
short, the Exchange would be reduced to buying goods which cost more than
they were worth, and selling goods that really cost less than they were
worth.

Since the notes were not in any way registered, any one, whether a
member of the society or not, could buy and sell them in the ordinary
way and make a handsome profit out of the transaction. Three hundred
London tradesmen did this by offering to take labour notes in payment
for merchandise. They soon emptied the Exchange, and when they saw that
nothing valuable was left they stopped taking the notes, and the trick
was done.

M. Denis very aptly points out that the Exchange was really of not much
use to the wage-earner, who was not even allowed to own what he had
produced. There is some doubt after all as to whether the system would
prove quite successful in abolishing the wage-earners.

[524] This does not imply that consumers’ associations, when they are
better organised and federated, with large central depots at their
command, will not take up this project once again—that is, will not
try to dispense with money in their commercial transactions. They will
certainly keep an eye on that problem.

[525] That was Holyoake’s view (_History of Co-operation_, vol. i, p.
215). But, according to a passage quoted by Dolléans, Owen contemplated
making an appeal to the co-operative societies to come to the rescue of
his National Labour Exchange.

[526] To the workers he wrote: “Would you like to enjoy yourselves the
whole products of your labour? You have nothing more to do than simply to
_alter the direction of your labour_. Instead of working for you know not
whom, _work for each other_.” (Quoted by Foxwell in his introduction to
Anton Menger’s _The Right to the Whole Produce of Labour_.)

[527] See the lecture on _Les Prophéties de Fourier_ in Gide’s
_Co-opération_.

[528] It is hardly necessary, however, to credit him with a greater
amount of eccentricity than he actually possessed, and I seize this
opportunity of refuting once more a story told by more than one eminent
economist, attributing to him the statement that the members of the
Phalanstère would all be endowed with a tail with an eye at the end of
it. The caricaturists of the period—“Cham,” for example—represent them
in that fashion. The legend doubtless grew out of the following passage
from his works, which is fantastic enough, as everybody will admit. After
pointing out that the inhabitants of other planets have several limbs
which we do not possess, he proceeds: “There is one limb especially
which we have not, and which possesses the following very useful
characteristics. It acts as a support against falling, it is a powerful
means of defence, a superb ornament of gigantic force and wonderful
dexterity, and gives a finish as well as lending support to every bodily
movement.” (_Fausse Industrie_, vol. ii, p. 5.)

[529] _Nouveau Monde industriel_, p. 473.

[530] Letter dated January 23, 1831, quoted by Pellarin, _Vie de Fourier_
(Paris, 1850).

[531] _Nouveau Monde industriel_, p. 26. For further details see _Œuvres
choisies de Fourier_, with introduction by Charles Gide, and Hubert
Bourgin’s big volume on Fourier.

[532] It is necessary to point out that Fourier’s suggestions for a
solution of the domestic servant problem are really not quite so definite
as we have given the reader to understand in the text. They are mixed up
with a number of other ideas of a more or less fantastic description, but
very suggestive nevertheless. This is especially true of the suggestion
to transform domestic service by making it mutually gratuitous—an idea
that is worth thinking about.

[533] We were thinking especially of associations like that of the
painters under the leadership of M. Buisson, where distribution is as
follows: labour, 50 per cent., capital 27 per cent., administration 12
per cent.

[534] _Association domestique_, vol. i, p. 466.

[535] _Ibid._, p. 466. Note that Fourier says that this only applies to
civilised societies. For those who live in the future Harmony city there
will be other and more powerful motives.

[536] _Unité universelle_, vol. iii, p. 517.

[537] _Ibid._, p. 457.

[538] The system of integral association proposed by Fourier, including
both co-operative production and co-operative distribution, will be
better understood if we look at the facts of the present situation.

On the one hand we have co-operative associations of producers who are
not particularly anxious that their products should be distributed
among themselves; they simply produce the goods with a view to selling
them and making a profit out of the transaction. On the other hand,
the distributing societies simply aim at giving their members certain
advantages, such as cheaper goods, but they make no attempt to produce
the goods which they need.

In countries where co-operative societies are properly organised, as they
are in England, for example, many of these societies have undertaken to
produce at least a part of what they consume, and some of them have even
acquired small estates for the purpose; but only a small proportion of
the employees are members of the societies, with the result that their
position is not very different from that of other working men. One
understands the difficulty of grouping people in this way. But if the
associations are to live it is absolutely necessary that they should
produce what they require under conditions that are more favourable than
those of ordinary producers; in a word, that they should be able to
create a kind of new economic environment.

Even in the colonies one does not find many instances of vigorous
associations of this kind.

[539] Co-partnership as outlined by M. Briand is to-day an item in the
programme of the Radical Democratic party. See _Les Actions du Travail_,
by M. Antonelli.

[540] M. Faguet, _Revue des Deux Mondes_, August 1, 1896.

[541] “Industrialism is the latest scientific illusion.” (_Quatre
Mouvements_, p. 28.) We must also draw attention to his suggestion for
co-operative banks, where agriculturists could bring their harvest and
obtain money in exchange for it—a rough model of the agricultural credit
banks. But he only regarded this as a step towards the Phalanstère.

[542] The kinds of labour which Fourier selects as examples are always
connected with fruit-growing—cherry orchards, pear orchards, etc. Fruit
and flowers have a very important place in his writings. He seems to have
anticipated the fruit-growing rancher of California.

Without stopping to examine some of the more solid reasons—which
unfortunately are buried beneath a great deal of rubbish—why
fruit-growing should take the place of agriculture, we must just recall
the curious fact that he was always emphasising the superiority of sugar
and preserves over bread, and pointed to the “divine instinct” by which
children are enabled to discover this. The suggestion was ridiculed at
the time, but is to-day confirmed by some of the most eminent doctors and
teachers of hygiene.

[543] It is interesting to contrast this view with Bücher’s, who thinks
that the evolution of industry simply increases its irksomeness. A
conception of regressive or spiral evolution might reconcile the two
views.

[544] Let us not forget his _Petites Hordes_, which consisted of groups
of boys who undertook the sweeping of public paths, the surveillance of
public gardens, and the protection of animals. The idea was very much
ridiculed at the time, but a number of similar organisations, each with
its badge and banner, were recently instituted by Colonel Waring in the
city of New York.

[545] “My theory is that every passion given by nature should be allowed
the fullest scope. That is the key to my whole system. Society requires
the full exercise of all the faculties given us by God.”

[546] _Quatre Mouvements_, p. 194.

[547] See, for example, such works as Zola’s _Travail_, and Barrè’s
_L’Ennemi des Lois_; and as an example of the general change in the tone
of the economists we may refer to Paul Leroy-Beaulieu’s latest writings,
in which he speaks of Fourier as a “genial thinker.”

[548] It is no part of our task to relate the story of the several
colonies founded either by disciples of Fourier or of Owen. Experiments
of this kind were fairly general in the United States between 1841 and
1844, when no less than forty colonies were founded. Brook Farm, which
is the best known of these, included among its members some of the most
eminent Americans—Channing and Hawthorne, for example—but none of the
settlements lasted very long.

Similar attempts have been made in France at a still more recent period.
The one at Condé-sur-Vesgres, near Rambouillet, where a few faithful
disciples of Fourier have come together, is still flourishing.

[549] Founded in 1859, it only became a co-partnership in 1888, the year
of Godin’s death.

[550] As a matter of fact it first appeared as an article in the _Revue
du Progrès_ in 1839.

[551] Buonarotti was the author of _La Conspiration pour l’Égalité, dite
de Babeuf_, published in 1828. Little notice was taken of the volume by
the public, but it was much discussed in democratic circles.

[552] _Organisation du Travail_, 5th ed. (1848). p. 77.

[553] We refer to it as the commonest type because in the previous
section we have shown that other co-operative societies exist, such as Le
Travail, for example, which claims to be modelled upon Fourier’s scheme,
especially in the matter of borrowed capital. But the usual type is
affiliated to the Chambre consultative des Associations de Production.
Article II of its regulations reads as follows: “No one will be allowed
to become a subscriber who is not a worker in some branch of production
or other.” See the volume published by the Office du Travail in 1898,
_Les Associations Ouvrières de Production_.

[554] In the _Journal des Sciences morales et politiques_, December 17,
1831. Only one association—the goldsmiths’, in 1834—was founded as the
result of this article.

[555] Quoted by Festy, _Le Mouvement ouvrier au Début de la Monarchie de
Juillet_, p. 88 (Paris, 1908).

[556] Buchez’s proposals for the reform of the “great industry” were of
an entirely different character.

[557] François Vidal, _De la Répartition des Richesses_ (1846).

[558] “The emancipation of the working classes is a very complicated
business. It is bound up with so many other questions and involves such
profound changes of habit. So numerous are the various interests upon
which an apparent though perhaps not a real attack is contemplated, that
it would be sheer folly to imagine that it could ever be accomplished by
a series of efforts tentatively undertaken and partially isolated. The
whole power of the State will be required if it is to succeed. What the
proletarian lacks is capital, and the duty of the State is to see that he
gets it. Were I to define the State I should prefer to think of it as the
poor man’s bank.” (_Organisation du Travail_, p. 14.)

[559] “The illusive conception of an abstract right has had a great
hold upon the public ever since 1789. But it is nothing better than a
metaphysical abstraction, which can afford but little consolation to
a people who have been robbed of a definite security that was really
theirs. The ‘rights of man,’ proclaimed with pomp and defined with
minuteness in many a charter, has simply served as a cloak to hide the
injustice of individualism and the barbarous treatment meted out to
the poor under its ægis. Because of this practice of defining liberty
as a right, men have got into the habit of calling people free even
though they are the slaves of hunger and of ignorance and the sport of
every chance. Let us say once for all that liberty consists, not in the
abstract right given to a man, but in the power given him to exercise and
develop his faculties.” (_Organisation du Travail_, p. 19.)

[560] Cf. pp. 186 _et seq._

[561] “Your want of faith in association,” he wrote to the National
Assembly of 1848, “will force you to expose civilisation to a terribly
agonising death.”

[562] _L’Humanité_ (1840). It would be wrong to conclude, however,
that this desire for secularising charity meant that Leroux was
anti-religious. On the contrary, he admits his indebtedness for the
conception of solidarity to the dictum of St. Paul, “We are all members
of one body.”

[563] “I was the first to employ the term ‘socialism.’ It was a neologism
then, but a very necessary term. I invented the word as an antithesis
to ‘individualism.’” (_Grève de Samarez_, p. 288.) As a matter of
fact, as far back as 1834 he had contributed an article entitled _De
l’Individualisme et du Socialisme_ to the _Revue encyclopédique_. The
same word occurs in the same review in an article entitled _Discours sur
la Situation actuelle de l’Esprit humain_, written two years before. See
his complete works, vol. i, pp. 121, 161, 378. For a further account of
Leroux see M. F. Thomas’s _Pierre Leroux_ (1905), a somewhat dull but
highly imaginative production.

[564] For Cabet’s life and the story of Icaria see Prudhommeaux’s two
volumes, _Étienne Cabet_ and _Histoire de la Communauté icarienne_.

[565] “The communists will never gain much success until they have
learned to reform themselves. Let them preach by example and by the
exercise of social virtues, and they will soon convert their adversaries.”

[566] Protection was attacked by Sismondi in _Nouv. Princ._, Book
IV, chap. 11. He considered it a fruitful source of over-production,
and uttered his condemnation of the absurd desire of nations for
self-sufficiency. Saint-Simon considered Protection to be the outcome
of international hatred (_Œuvres_, vol. iii, p. 36), and commended
the economists who had shown that “mankind had but one aim and that
its interests were common, and consequently that each individual in
his social connection must be viewed as one of a company of workers”
(_Lettres à un Americaine, Œuvres_, vol. ii, pp. 186-187). The
Saint-Simonians never touched upon the question directly, but it is quite
clear that Protective rights were to have no place in the universal
association of which they dreamt. According to Fourier, there was to be
the completest liberty in the circulation of goods among the Phalanstères
all the world over. (_Cf._ Bourgin, _Fourier_, pp. 326-329; Paris, 1905.)

[567] We refer to two of them only: Augustin Cournot and Louis Say of
Nantes. The former, in his _Recherches sur les Principes mathématiques de
la Théorie des Richesses_ (1838), a work that is celebrated to-day but
which passed unnoticed at the time of its publication, has criticised
the theory of Free Trade. But the reputation which he subsequently
achieved was not based upon this part of the book. Louis Say (1774-1840)
was a brother of J. B. Say. He published a number of works, now quite
forgotten, in which he criticised several doctrines upheld by his
brother, whose displeasure he thus incurred. We refer to his last work,
_Études sur la Richesse des Nations et Réfutation des principales
Erreurs en Économie politique_ (1836), for this is the work to which
List alludes. It is probable that Louis Say’s name would have remained
in oblivion but for List. Richelot, in his translation of List (second
edition, p. 477), quotes some of the more important passages of Say’s
book.

[568] The union of England and Scotland dates from 1707. Compare the
passage in Adam Smith, Book V, chap. 2, part ii, art. 4; Cannan’s
edition, vol. ii, p. 384.

[569] List, _Werke_, ed. Häusser, vol. ii, p. 17. The seventh edition
of the _National System_, which was published in 1883 by M. Eheberg,
contains an excellent historical and critical introduction. Our
quotations are from the English translation by Lloyd, published in 1885,
republished, with introduction by Professor Shield Nicholson, in 1909.

[570] Petition presented to a meeting of the German princes at Vienna in
1820 (_Werke_, vol. ii, p. 27).

[571] Baden, Nassau, and Frankfort joined in 1835 and 1836. But there
still remained outside Mecklenburg and the Free Towns of the Hanse,
Hanover, Brunswick, and Oldenburg.

[572] List’s expression “exchangeable value” merely signifies the mass of
present advantages—the material profit existing at the moment. It is not
a very happy phrase, and it would be a great mistake to take it literally
or to attach great importance to it. In his _Letters to Ingersoll_, p.
186, he gives expression to the same idea by saying that Smith’s school
had in view “the exchange of one material good for another,” and that
its concern was chiefly with “such exchanged goods rather than with
productive forces.” We note that List never speaks of Ricardo, but only
of Smith and Say, whose works alone he seems to have read.

[573] “In the Italian and the Hanseatic cities, in Holland and England,
in France and America, we find the powers of production and consequently
the wealth of individuals growing in proportion to the liberties enjoyed,
to the degree of perfection of political and social institutions, while
these, on the other hand, derive material and stimulus for their further
improvement from the increase of the material wealth and the productive
power of individuals.” (_National System_, p. 87.)

[574] He defines “political or national economy” as “that which,
emanating from the idea and nature of the nation, teaches how a given
_nation_, in the present state of the world and its own special national
relations, can maintain and improve its economical condition.” (_Ibid._,
p. 99.)

[575] It was the example of England that gave List the idea, but the
whole conception is based upon a historical error. England possessed a
navy, had founded colonies and developed her international trade long
before she became a manufacturing nation. Since the time of List various
categories of national development have been proposed. Hildebrand speaks
of periods of natural economy, of money economy, and of credit economy
(_Jahrbücher für National Oekonomie_, vol. ii, pp. 1-24). Bücher proposed
the periods of domestic economy, of town economy, and of national economy
as a substitute (_Die Entstehung der Volkswirtschaft_, 3rd ed., p. 108).
Sombart, in his turn, has very justly criticised this classification in
his book _Der moderne Kapitalismus_ (vol. i, p. 51; Leipzig, 1902). But
would that which he proposes himself be much better?

No one, we believe, has as yet remarked that List borrowed this
enumeration of the different economic states, almost word for word, from
Adam Smith. In chap. 5 of Book II, speaking of the various employments
of capital, Smith clearly distinguished between three stages of
evolution—the agricultural state, the agricultural-manufacturing, and the
agricultural-manufacturing-commercial. Smith considered that this last
stage was the most desirable, but in his opinion its realisation must
depend upon the natural course of things.

[576] The term “normal” is one of the vaguest and most equivocal we have
in political economy. It would be well if we were rid of it altogether.
What controversies have not raged around the ideas of a normal wage or a
normal price! One of the chief merits of the Mathematical school lies in
the success with which it has effected the substitution of the idea of an
equilibrium price. The idea of a normal nation is about as vague as that
of a normal wage, and it is curious that our author describes as normal a
whole collection of characteristics which, according to his own account,
were at the moment when he wrote only realised by one nation, namely,
England.

[577] P. 292. The idea of national power is, moreover, not completely
lost sight of by Smith, as is proved by the following passages: “The
riches and, so far as power depends upon riches, the power of every
country must always be in proportion to the value of its annual produce.…
But the great object of the political economy of every country is to
increase the riches and power of that country.” (_Wealth of Nations_,
Book II, chap. 5; Cannan’s edition, vol. i, p. 351.)

[578] On the question of the industrial vocation of the temperate zone
and the agricultural vocation of the torrid compare _National System_,
Book II, chap. 4.

[579] “The German nation will at once obtain what it is now in need of,
namely, fisheries and naval power, maritime commerce and colonies.”
(_National System_, p. 143.) List has no difficulty in allying his
patriotic idealism with the practical side of his nature.

[580] List deliberately distinguishes between exchange values and
productive forces; but the distinction is by no means a happy one. For a
policy which aims at encouraging productive forces has no other way of
demonstrating its superiority than by showing an increase of exchange
value. The two notions are not opposed to one another, and in reckoning
a nation’s wealth we must take some account of its present state as well
as of its future resources. In his _Letters to Ingersoll_ (_cf._ Letter
IV, referred to above) he distinguishes between “natural and intellectual
capital” on the one hand and “material productive capital” on the other
(Adam Smith’s idea of capital). “The productive powers of the nation
depend not only upon the latter, but also and chiefly upon the former.”

[581] _National System_, p. 117.

[582] Unjustly as we think, for on more than one occasion Smith did take
account of moral forces. He dated the prosperity of English agriculture
from the time when farmers were freed from their long servitude and
became henceforth independent of the proprietors. He remarks that
towns attain prosperity quicker than the country, because a regular
government is earlier established there. “The best effect which commerce
and manufactures have is the gradual introduction and establishment of
order and good government, and with them the liberty and security of
individuals among the inhabitants of the country. This, though it has
been the least observed, is by far the most important of their effects.
Mr. Hume is the only writer who so far as I know has hitherto taken
notice of it.” (Book III, chap. 4; Cannan, vol i, p. 383.) Speaking of
the American colonies, Smith (Cannan, vol. ii, p. 73) makes the remark
that although their fertility is inferior to the Spanish, Portuguese, and
the French colonies, “the political institutions of the English colonies
have been more favourable to the improvement and cultivation of this
land than those of any of the other three nations.” How could List have
forgotten the celebrated passage in which Smith attributes the prosperity
of Great Britain largely to its legal system, which guarantees to each
individual the fruits of his toil and which must be reckoned among
the definitive achievements of the Revolution of 1688? “That security
which the laws in Great Britain give to every man that he shall enjoy
the fruits of his own labour is alone sufficient to make any country
flourish, notwithstanding these and twenty other absurd regulations of
commerce; and this security was perfected much about the same time that
the bounty was established.” (Book IV, chap. 5; Cannan, vol. ii, pp.
42-43.)

[583] _National System_, chap. 17, beginning.

[584] Compare chapters 7 and 15, where he treats of the manufacturing
industry in its relation to each of the great economic forces of the
country.

[585] _Ibid._, p. 87.

[586] _National System_, p. 150.

[587] “It may in general be assumed that where any technical industry
cannot be established by means of an original protection of 40 to 60
per cent., and cannot continue to maintain itself under a continued
protection of 20 to 30 per cent., the fundamental conditions of
manufacturing power are lacking.” (_Ibid._, p. 251.)

[588] “Solely in nations of the latter kind, namely, those which
possess all the necessary mental and material conditions and means for
establishing a manufacturing power of their own and of thereby attaining
the highest degree of civilisation and development of material prosperity
and political power, but which are retarded in their progress by the
competition of a foreign manufacturing Power which is already farther
advanced than their own—only in such nations are commercial restrictions
justified for the purpose of establishing and protecting their own
manufacturing power.” (_Ibid._, p. 144.)

[589] _Ibid._, p. 240.

[590] “Everyone knows,” says he (quoted by Hirst, pp. 231 _et seq._),
“that the cost of production of a manufactured good depends very largely
upon the quantity produced—that is, upon the operation of the law of
increasing returns. This law exercises considerable influence upon the
rise and fall of manufacturing power.… An English manufacturer producing
for the home market has a regular sale of 10,000 yards at 6 dollars
a yard.… His expenses being thus guaranteed by his sales in the home
market, the cost of producing a further quantity of 10,000 yards for the
foreign market will be considerably reduced and would yield him a profit
even were he to sell for 3 or 4 dollars a yard. And even though he should
not be making any profit just then, he can feel pretty confident about
the future when he has ruined the foreign producer and driven him out
of the field altogether.” List thinks that this shows how impossible it
is for manufacturers in a new country without any measure of protection
to compete with other countries whose industry is better established.
But this is one of the arguments that has been most frequently used by
British manufacturers in recent years in demanding protection against
American competition. We would like to know what List would have thought
of this.

[591] _National System_, p. 144, and the whole of chap. 16 of Book II.
He considered that “it would be a further error if France, after her
manufacturing power has become sufficiently strong and established,
were not willing to revert gradually to a more moderate system of
Protection and by permitting a limited amount of competition incite her
manufacturers to emulation.” (_Ibid._, p. 249.)

[592] _Ibid._, p. 253, and especially p. 162, etc., where with a
sudden change of front he declares himself in favour of Free Trade in
agriculture, and employs the arguments which Free Traders had applied to
all products. Compare again p. 230, where he declares that agriculture
“by the very nature of things is sufficiently well protected against
foreign competition.”

[593] The authors were unable to find a copy of Hamilton’s works in
France, but according to Bastable (_Commerce of Nations_, 6th ed.,
London, 1912, pp. 120, 121) the principal arguments deduced by the report
to prove the advantages of industry are that it permits of greater
division of labour, prevents unemployment, supplies a more regular market
than the foreign, and encourages immigration.

[594] It is very probable that List had read the work of another
American Protectionist, Daniel Raymond, whose _Thoughts on Political
Economy_ appeared in 1820 and ran into four editions (cf. _Daniel
Raymond_, by Charles Patrick Neill, Baltimore, 1897). This seems to be
the opinion of the majority of writers who during the last few years
have especially concerned themselves with the study of List’s opinions
(Miss Hirst, in her _Life of Friedrich List_, and M. Curt Kohler in his
book _Problematisches zu Friedrich List_, Leipzig, 1909). But to regard
Raymond as his only inspirer, as is done by Rambaud in his _Histoire des
Doctrines_, seems to us mere exaggeration. Apart from the facts that
Raymond’s ideas are not particularly original and that List had lived
some years in America in a Protectionist environment, List never quotes
him at all. On the other hand, he frequently and enthusiastically refers
to both Dupin and Chaptal in his _Letters to Ingersoll_. The expression
“productive forces” was probably borrowed from Baron Dupin’s _Situation
progressive des Forces de la France_ (Paris, 1827), which opens with the
following words: “This forms an introduction to a work entitled _The
Productive and Commercial Forces of France_. By _productive forces_ I
mean the combined forces of men, animals, and nature applied to the
work of agriculture, of industry, or of commerce.” Again, the idea of
protecting infant industries is very neatly put by Chaptal. On p. xlvi of
the introduction to his _De l’Industrie français_ (published in 1819) we
meet with the following words: “It does not require much reflection to be
convinced of the fact that something more than mere desire is needed to
overcome the natural obstacles in the way of the development of industry.
Everywhere we feel that ‘infant industries’ cannot struggle against older
establishments cemented by time, supported by much capital, freed from
worry and carried on by a number of trained, skilled workmen, without
having recourse to prohibition in order to overcome the competition of
foreign industries.”

It is certain that List, during his first stay in France, had read these
two authors, and had there found a confirmation of his own Protectionist
ideas. It is not less certain, from a letter written by him in April
1825 (quoted by Miss Hirst, p. 33), that he was converted before going
to America, but that he expected to find some new arguments there which
would strengthen him in his opposition to Smith. Marx’s assertion made in
his _Theorien über den Mehrwerth_, vol. i, p. 339 (published by Kautsky,
Stuttgart, 1905), that List’s principal source of inspiration was
Ferrier (_Du Gouvernement considéré dans ses Rapports avec le Commerce_,
Paris, 1805) has not the slightest foundation. Neither has the attempt
to credit Adam Müller with being the real author of the conception of
a national system of political economy. List, we know, was acquainted
with Müller, a Catholic writer who wished for the restoration of the
feudal system. But to be a German writer in the Germany of the nineteenth
century was quite enough to imbue one with the idea of nationality.
Moreover, Protectionists’ arguments are extremely limited in number, so
that they do not differ very much from one epoch to another, and it is a
comparatively easy task to find some precursors of Friedrich List.

[595] Published in a volume entitled _Outlines of a New System of
Political Economy, in a Series of Letters addressed by F. List to Charles
Ingersoll_ (Philadelphia, 1827). This publication did not find a place in
the collected edition published by Häusser, but the whole of it has been
incorporated in the interesting _Life of Friedrich List_ by Margaret E.
Hirst (London, 1909).

[596] This was the consideration that influenced him in adopting a
Protectionist attitude, although hitherto he had regarded himself as a
disciple of Smith and Say. (_Letters to Ingersoll_, p. 173.)

[597] _National System_, preface, p. 54.

[598] The _Zollvereinsblatt_, which was published by him towards the end
of 1843.

[599] _National System_, p. 230. We do not by any means imply that the
Germany of List’s day was in greater need of Protection than the Germany
of to-day. Indeed, if we accept Chaptal’s view, we may well deny this,
for, writing in 1819, he said that Saxony occupied a place in the front
rank of European nations in the matter of industry. Speaking of Prussia,
he declared that the industry of Aix-la-Chapelle alone was enough to
establish the fame of any nation (_De l’Industrie française_, vol. i,
p. 75). We must also recall the fact that the basis of the present
prosperity of Germany was laid under a _régime_ of much greater freedom.

[600] “Neither is it at all necessary that all branches of industry
should be protected in the same degree. Only the most important branches
require special protection, for the working of which much outlay of
capital in building and management, much machinery and therefore
much technical knowledge, skill, and experience, and many workmen
are required, and whose products belong to the category of the first
necessaries of life and consequently are of the greatest importance as
regards their total value as well as regards national independence (as,
for example, cotton, woollen, and linen manufactures, etc.). If these
main branches are suitably protected and developed, all other less
important branches of manufacture will rise up around them under a less
degree of protection.” (_National System_, p. 145.)

[601] On Carey see _infra_, Book III.

[602] Carey, _Principles of Social Science_.

[603] Carey, _Principles of Social Science_.

[604] _National System_, Book II, chap. 3.

[605] _Principles of Political Economy_, Book V, chap. 10, § 1.

[606] “Of all the things required for the purposes of man, the one that
least bears transportation, and is, yet, of all the most important, is
manure. The soil can continue to produce on the condition, only, of
restoring to it the elements of which its crop had been composed. That
being complied with, the supply of food increases, and men are enabled
to come nearer together and combine their efforts—developing their
individual faculties, and thus increasing their wealth; and yet this
condition of improvement, essential as it is, has been overlooked by all
economists.” (_Principles of Social Science_, vol. i, pp. 273-274.)

[607] _Principles of Political Economy_, Book V, chap. 10, § 1.

[608] On this point see Jenks, _Henry C. Carey als Nationalökonom_, chap.
1 (Jena, 1885).

[609] Compare the long passage in the _Principles_, Book V, chap.
10, § 1, which begins: “The only case in which on mere principles of
political economy protecting duties can be defensible is when they are
imposed temporarily (especially in a young and rising nation) in hopes
of naturalising a foreign industry, in itself perfectly suitable to the
circumstances of the country. The superiority of one country over another
in a branch of production often varies only from having begun it sooner.”
Stuart Mill, however, does not refer to List, and one wonders whether the
paragraph owes anything to his influence.

[610] We must make an exception of M. Cauwès, whose Protectionism, on
the contrary, is a quite logical adaptation of List’s idea, viz. the
superiority of nations possessing a complex economy. This is the only
scientific system of Protection that we are to-day acquainted with. But
it must be confessed that the majority of writers are very far removed
from Cauwès’ point of view. Compare his _Cours d’ Économie politique_,
3rd ed., vol. iii.

[611] Such, _e.g._, are the economists who are always speaking of a
“commercial deficit,” _i.e._ of an unfavourable balance of commerce.
Despite the frequent refutations which have been given of it, it is still
frequently quoted as an axiomatic truth. List criticised the school for
its complete indifference to the balance of imports and exports. But he
did not favour the Mercantilist theory of the balance of trade; on the
contrary, he regarded that as definitely condemned (p. 218). He regarded
the question from a special point of view, that of monetary equilibrium.
When a nation, says he, imports much, but does not export a corresponding
amount of goods, it may be forced to furnish payment in gold, and a
drainage of gold might give rise to a financial crisis. The indifference
of the school with regard to this question of the quantity of money
is very much exaggerated (Book II, chap. 13). The policy of the great
central banks of to-day aims at easing those tensions in the money market
which appear as the result of over-importation, and in this matter they
have proved themselves much superior to any system of Protection.

[612] Some writers go even farther. Patten (_Economic Foundations of
Protection_) longs to see a national type established peculiar to each
country, as the result of forcing the inhabitants to be nourished and
clothed according to the natural resources of the country in which they
live. We should, as a consequence of this, have an American type quite
superior to any European type. “Then,” says he, “we should be able to
exercise a preponderant influence upon the fate of other nations and
could force them to renounce their present economic methods and adopt a
more highly developed social State.” Until then no foreign goods are to
enter the country. Here, as is very frequently the case, Protectionism is
confounded with nationalism or imperialism.

[613] “A merely agricultural State is an infinitely less perfect
institution than an agricultural-manufacturing State. The former is
always more or less economically and politically dependent on those
foreign nations which take from it agricultural products in exchange
for manufactured goods. It cannot determine for itself how much it
will produce: it must wait and see how much others will buy from it.”
(_National System_, p. 145.)

[614] “A nation which has already attained manufacturing supremacy can
only protect its own manufactures and merchants against retrogression
and indolence by the free importation of means of subsistence and raw
materials, and by the competition of foreign manufactured goods.”
(_National System_, p. 153.) Hence the appeal to England in the name
of this theory to abolish her tariffs, but to gracefully allow France,
Germany, and the United States to continue theirs.

[615] See M. Pareto’s _Economia Politica_ (Milan, 1906) for a
demonstration that international exchange is not necessarily advantageous
for both parties (chap. 9, § 45).

[616] But the line is sometimes difficult to follow. Latterly statesmen
have been concerned not so much with the exportation of goods as with
the migration of capital. Ought the Minister for Foreign Affairs to veto
the raising of a loan in the home market on behalf of a foreign Power or
an alien company? To what extent ought bankers and capitalists to accept
his advice? Such are some of the questions that for some years past have
been repeatedly asked in France, England, and Germany. And it seems in
almost every case that political economy has had to bow before political
necessity, and not _vice versa_.

[617] It is very remarkable that List’s greatest admirer, Dühring, in
his _Kritische Geschichte der Nationalökonomie und des Sozialismus_ (2nd
ed., p. 362), insists on the fact that Protection is not an essential
element, but a mere temporary form of the principle of national economic
solidarity, which is List’s fundamental conception, and which must
survive all forms of Protection. Dühring is the only real successor
of List and Carey. He has developed their ideas with a great deal of
ability and has shown himself a really scientific thinker. But what he
chiefly admires in both writers is not their Protection, but their effort
to lay hold of the material and moral forces which lie below the mere
fact of exchange, and upon which a nation’s prosperity really depends.
His _Kursus der National- und Sozial-oekonomie_ (Berlin, 1873) is very
interesting reading.

[618] Except the Saint-Simonians nobody seems to have conceived of the
State’s responsibility for a nation’s productive forces. List refers to
them sympathetically, especially to those who, like Michel Chevalier,
“sought to discover the connection of these doctrines with those of
the premier schools, and to make their ideas compatible with existing
circumstances” (_National System_, p. 287). But List differs from them in
his love of individual liberty and in the importance which he attaches
to moral, political, and intellectual liberty as elements of productive
efficiency.

[619] _Philosophie du Progrès, Œuvres_, vol. xx, p. 19: “Growth is
essential to thought, and truth or reality whether in nature or in
human affairs is essentially historical, at one time advancing, at
another receding, evolving slowly, but always undergoing some change.”
In his _Contradictions économiques_ he defines social science as “the
systematised study of society, not merely as it was in the past or
will be in the future, but as it is in the present in all its manifold
appearances, for only by looking at the whole of its activities can we
hope to discover intelligence and order.” (Vol. i, p. 43.) “If we apply
this conception to the organisation of labour we cannot agree with the
economists when they say that it is already completely organised, or with
the socialists when they declare that it must be organised, but simply
that it is gradually organising itself; that is, that the process of
organisation has gone on since time immemorial and is still going on, and
that it will continue to go on. Science should always be on the look-out
for the results that have already been achieved or are on the point of
realisation.” (Vol. i, p. 45.)

[620] A vigorous exposition of his other ideas is given in Bouglé’s _La
Sociologie de Proudhon_ (Paris, 1911).

[621] The following are Proudhon’s principal works: 1840, _Qu’est-ce
que la Propriété?_ (studies in ethics and politics); 1846, _Système des
Contradictions économiques_ (the “philosophy of destitution”); 1848,
_Organisation du Crédit et de la Circulation et Solution du Problème
social_; 1848, _Résumé de la Question sociale, Banque d’Échange_; 1849,
_Les Confessions d’un Révolutionnaire_; 1850, _Intérêt et Principal_ (a
discussion between M. Bastiat and M. Proudhon); 1858, _De la Justice
dans la Révolution et dans l’Église_ (three volumes); 1861, _La Guerre
et la Paix_; 1865, _De la Capacité politique des Classes ouvrières_. Our
quotations are taken from the _Œuvres complètes_, published in twenty-six
volumes by Lacroix (1867-70).

[622] “Do you happen to know, madam, what my father was? Well, he was
just an honest brewer whom you could never persuade to make money by
selling above cost price. Such gains, he thought, were immoral. ‘My
beer,’ he would always remark, ‘costs me so much, including my salary.
I cannot sell it for more.’ What was the result? My dear father always
lived in poverty and died a poor man, leaving poor children behind him.”
(Letter to Madame d’Agoult, _Correspondance_, vol. ii, p. 239.)

[623] It has been said that Proudhon borrowed this formula from Brissot
de Warville, the author of a work entitled _Recherches philosophiques
sur le Droit de Propriété et sur le Vol, considérés dans la Nature et
dans la Société_. It was first published in 1780, and reappeared with
some modifications in vol. vi, pp. 261 _et seq._, of his _Bibliothèque
philosophique du Législateur_ (1782). But this is a mistake. Proudhon
declares that the work was unknown to him (_Justice_, vol. i, p. 301);
and, moreover, the formula is not there at all. Brissot’s point of view
is entirely different from Proudhon’s. The former believes that in a
state of nature the right of property is simply the outcome of want, and
disappears when that want is satisfied; that man, and even animals and
plants, has a right to everything that can satisfy his wants, but that
the right disappears with the satisfaction of the want. Consequently
theft perpetrated under the pressure of want simply means a return to
nature. The rich are really the thieves, because they refuse to the
culprit the lawful satisfaction of his needs. The result is a plea for
a more lenient treatment of thieves. But Brissot is very careful not to
attack civil property, which is indispensable for the growth of wealth
and the expansion of commerce, although it has no foundation in a natural
right (p. 333). There is no mention of unearned income. Proudhon, on the
other hand, never even discusses the question as to whether property is
based upon want or not. He would certainly have referred to this if he
had read Brissot.

[624] _Contradictions_, vol. i, pp. 219, 221.

[625] _Résumé de la Question sociale_, p. 29. We meet with the same idea
in other passages. “Property under the influence of division of labour
has become a mere link in the chain of circulation, and the proprietor
himself a kind of toll-gatherer who demands a toll from every commodity
that passes his way. Property is the real thief.” (_Banque d’Échange_, p.
166.) We must also remember that Proudhon did not consider that taking
interest was always illegal. In the controversy with Bastiat he admits
that it was necessary in the past, but that he has found a way of getting
rid of it altogether.

[626] We must distinguish between this and Marx’s doctrine. Marx believed
that all value is the product of labour. Proudhon refuses to admit this.
He thinks that value should in some way correspond to the quantity of
labour, but that this is not the case in present-day society. Marx was
quite aware of the fact that Proudhon did not share his views (see
_Misère de la Philosophie_). Proudhon follows Rodbertus, who taught that
the products only and not their values are provided by labour.

[627] _Propriété, 1er Mémoire_, pp. 131-132. It is true that Proudhon
adds that without land and capital labour would be unproductive. But he
soon forgets his qualifications when he proceeds to draw conclusions,
especially when he comes to give an exposition of the Exchange Bank,
where we meet with the following sentence: “Society is built up as
follows: All the raw material required is gratuitously supplied by
nature, so that in the economic world every product is really begot
of labour, and capital must be considered unproductive.” Elsewhere he
writes: “To work is not necessarily to produce anything.” (_Solution du
Problème social_, Œuvres, vol. vi, pp. 361 _et seq._, and p. 187.)

[628] _Propriété, 1er Mémoire_, p. 133.

[629] L. von Stein, _Geschichte der sozialen Bewegung in Frankreich_,
vol. iii, p. 362 (Leipzig, 1850). A remarkable piece of work altogether.

[630] It is true that Proudhon’s attack is entirely directed against the
ethics of private property. He shows how every justification that is
usually offered, such as right of occupation, natural right, or labour,
cannot justify the institution as it is to-day. Private property as we
know it is confined to the few, whereas on these principles it ought
to be widely diffused. Criticism of this kind is not very difficult,
perhaps, but it does nothing to weaken the arguments of those who would
justify property on the grounds of social utility. The criticism of the
Saint-Simonians, who approach it from the point of view of utility and
productiveness rather than from the ethical standpoint, seems to be
much more profound. This is why we have regarded them as the critics of
private property.

[631] “This is the fundamental idea of my first _Mémoire_.” (Quoted by
Sainte-Beuve, _P. J. Proudhon_, p. 90.) Later on he complains that the
suggestion was never even discussed.

[632] _Propriété, 1er Mémoire_, p. 94.

[633] _Ibid._, p. 91.

[634] Blanqui’s letter dated May 1, 1841, in reply to a communication
from Proudhon concerning the second _Mémoire_ on property.

[635] Cf. Sainte-Beuve, _P. J. Proudhon_, pp. 202, 203; and see on this
point Proudhon’s amusing letters to Guillaumin (_Correspondance_, vol.
ii).

[636] _Propriété, 1er Mémoire_, p. 203.

[637] An article in _Le Peuple_, in 1848. Proudhon’s attacks are more
especially directed against Fourier. Fourier’s was at this time the only
socialist school that had any influence, and this was largely due to the
active propaganda of Victor Considérant. See _Contradictions_, vol. ii,
p. 297, and _Propriété, 1er Mémoire_, pp. 153 _et seq._

[638] _Contradictions_, vol. ii, p. 285. For the attack on Cabet,
Louis Blanc, and the communists see the whole of chap. 12 of the
_Contradictions_. Louis Blanc “has poisoned the working classes with his
ridiculous formulæ” (_Idée générale de la Révolution_, p. 108). Louis
Blanc himself is summed up as follows: “He seriously thought that he was
the bee of the Revolution, but he turned out to be only a grasshopper.”
(_Ibid._)

[639] “I believe that I am the first person possessed of a full knowledge
of the phenomena in question who has dared to uphold the doctrine that
instead of restraining economic forces whose strength has been so much
exaggerated we ought to try to balance them against one another in
accordance with the little known and less perfectly understood principle
that contraries, far from being mutually destructive, support one another
just because of their contrary nature.” (_Justice_, vol. i, pp. 265-266.)
The same idea also finds expression on pp. 302-303. Elsewhere he remarks
that what society is in search of is a way of balancing the natural
forces that are contained within itself (_Révolution démontrée par le
Coup d’État_, p. 43).

[640] “Division of labour, collective force, competition, exchange,
credit, property, and even liberty—these are the true economic forces,
the raw materials of all wealth, which, without actually making men
the slaves of one another, give entire freedom to the producer, ease
his toil, arouse his enthusiasm, and double his produce by creating
a real solidarity which is not based upon personal considerations,
but which binds men together with ties stronger than any which
sympathetic combination or voluntary contract can supply.” (_Idée
générale de la Révolution au XIXe Siècle_, p. 95.) The economic forces
are somewhat differently enumerated in chap. 13 of _La Capacité des
Classes ouvrières_. Association and mutuality are mentioned; but while
recognising the prestige of the word “association,” especially among
working men, Proudhon concludes that the only real association is
mutuality—not in the sense of a mutual aid society, which he thinks is
altogether too narrow.

[641] It is true that Fourier was not a communist. Proudhon shows that on
the one hand his Phalanstère would abolish interest, while it would give
a special remuneration to talent on the other, simply because “talent
is a product of society rather than a gift of nature.” (_Propriété, 1er
Mémoire_, p. 156.)

[642] Proudhon’s opposition to the principle of association is very
remarkable. He refers to it more than once, but especially in the _Idée
générale de la Révolution_. “Can association be regarded as an economic
force? For my own part I distinctly say, No. By itself it is sterile,
even if it does not check production, because of the limits it puts upon
the liberty of the worker.” (P. 89.) “Association means that everyone
is responsible for someone else, and the least counts as much as the
greatest, the youngest as the oldest. It gets rid of inequality, with the
result that there is general awkwardness and incapacity.” (_Ibid._)

[643] _La Révolution démontrée par le Coup d’État_, pp. 53, 54.
Elsewhere: “When you speak of organising labour it seems as if you would
put out the eyes of liberty.” (_Organisation du Crédit et de l’Échange,
Œuvres_, vol. vi, p. 91.)

[644] _Programme révolutionnaire._ To the electors of the Seine, in the
_Représentant du Peuple_. (_Œuvres_, vol. xvii, pp. 45, 46.)

[645] “I should like everybody to have some property. We are anxious
that they should have property in order to avoid paying interest,
because exorbitant interest is the one obstacle to the universal use of
property.” (_Le Peuple_, September 2, 1849.)

[646] _Propriété, 1er Mémoire_, p. 204.

[647] _Contradictions_, vol. ii, p. 203.

[648] _Organisation du Credit et de la Circulation_, p. 131. Elsewhere:
“To adopt Hegelian phraseology, the community is the first term in social
development—the thesis; property the contradictory term—the antithesis.
The third term—the synthesis—must be found before the solution can be
considered complete.” (_Propriété, 1er Mémoire_, p. 202.) That term
will be possession pure and simple—the right of property with no claim
to unearned income. “Get rid of property, but retain the right of
possession, and this very simple change of principle will result in an
alteration of the laws, the method of government, and the character of a
nation’s economic institutions. Evil of every kind will be entirely swept
away.” Proudhon employed Hegelian terminology as early as 1840, four
years before Karl Grün’s visit to Paris. For Proudhon’s relation to Grün
see Sainte-Beuve’s _P. J. Proudhon_.

[649] _Justice dans la Révolution_, vol. i, pp. 182-183.

[650] _Ibid._, p. 269. “It is easy to show how the principle of mutual
respect is logically convertible with the principle of reciprocal
service. If men are equal in the eyes of justice they must also have a
common necessity, and whoever would place his brothers in a position of
inferiority, against which it is the chief duty of society to fight, is
not acting justly.”

[651] This idea of mutual service is further developed, especially in
_Organisation du Crédit et de la Circulation_ (_Œuvres_, vol. vi, pp.
92-93), and in _Idée générale_, p. 97.

[652] That is how the problem is put in the preface to the first
_Mémoire_.

[653] _Contradictions_, vol. ii, p. 414.

[654] _Le Droit au Travail et le Droit de Propriété_, pp. 4, 5, 58 (1848).

[655] Every historian is agreed on this point, which Louis Blanc has
dealt with at great length in his _Histoire de la Révolution de 1848_
(chap. 11). The testimony of contemporaries, especially Lamartine in
his _Histoire de la Révolution de 1848_ (vol. ii, p. 120), is also very
significant. “These national workshops were placed under the direction of
men who belonged to the anti-socialist party, whose one aim was to spoil
the experiment, but who managed to keep the sectaries of the Luxembourg
and the rebels of the clubs apart until the meeting of the National
Assembly. Paris was disgusted with the quantity and the character of the
work accomplished, but it little thought that these men had on more than
one occasion defended and protected the city. Far from being in the pay
of Louis Blanc, as some people seem to think, they were entirely at the
beck and call of his opponents.” É. Thomas in his _Histoire des Ateliers
nationaux_ (pp. 146-147) relates how Marie sent for him on May 23 and
secretly asked him whether the men in the workshops could be relied upon.
“Try to get them strongly attached to you. Spare no expense. If there is
any need we shall give you plenty of money.” Upon Thomas asking what was
the purpose of all this, Marie replied: “It is all in the interest of
public safety. Make sure of the men. The day is not far distant when we
shall need them in the streets.”

[656] These addresses were afterwards published in a volume entitled _Le
Droit au Travail_.

[657] Louis Blanc, _Histoire de la Révolution de 1848_, vol. ii, p. 135.

[658] See the addresses in his _La Révolution de Février au Luxembourg_
(Paris, 1849).

[659] _Moniteur_, April 27, May 2, 3, and 6, 1848. The dismissal of the
commission meant an interruption of the _Exposé général_, but Vidal in
his work _Vivre en travaillant! Projets, Voires, et Moyens de Réformes
sociales_ (1848) continued the exposition. It contains a plan for
agricultural credit, a State land purchase scheme in order to get rid of
rent, a proposal for buying up railways and mines and for erecting cheap
dwellings. It affords an interesting example of State Socialism in 1848
which seems to have struck many people then as being very amusing.

[660] _Cf. supra_, p. 297, note 3.

[661] _Cf. supra_, “The Associative Socialists.”

[662] “I need hardly say that this measure of fiscal reform [namely, the
abolition of private property] must be carried out without any violence
or robbery. There must be no spoliation, but ample compensation must be
given.” (_Résumé de la Question sociale_, p. 27.)

[663] _Solution du Problème social_ (_Œuvres_, vol. vi, p. 32).

[664] _Œuvres_, vol. xviii, pp. 6-7. See also the letter dated February
25, 1848 (_Correspondance_, vol. ii, p. 280): “France will certainly
accomplish it, whether it remains a republic or not. It might even be
carried out by the present decadent Government, at a trifling cost.” This
thought did not prevent his taking a hand in the Revolution.

[665] In a pamphlet entitled _Organisation du Crédit et de la
Circulation_, and dated March 31, 1848, he expounds the principle of the
scheme and indicates some of its general features. The scheme is dealt
with in a number of articles contributed to _Le Représentant du Peuple_
for April, afterwards published in book form by Darimon, under the title
of _Résumé de la Question sociale_. The plan differs slightly from the
statutes of the People’s Bank as they appear in vol. vi of the _Œuvres_,
but the guiding principle is much the same. A further exposition was
given in _Le Peuple_ in February and March 1849, just when the Bank was
being founded. There is still another account contained in the volume
entitled _Intérêt et Principal: Discussion entre M. Proudhon and M.
Bastiat sur l’Intérêt du Capitaux_ (Paris, 1880). This controversy was
carried on in the columns of _La Voix du Peuple_ from October 1849 to
October 1850. Proudhon frequently refers to the same idea in his other
works, notably in _Justice dans la Révolution_, vol. i, pp. 289 _et
seq_., and in _Idée générale_, pp. 197 _et seq_.

[666] See _Solution du Problème social_, pp. 178, 179.

[667] _Intérêt et Principal_, p. 112.

[668] “Money is simply a supplementary kind of capital, a medium of
exchange or a credit instrument. If this is the case what claim has it to
payment? To think of remunerating money for the service which it gives!”
(_Ibid._, p. 113.)

[669] Cf. _Résumé de la Question sociale_, p. 39.

[670] Moreover, the advances will take the form of discount. The
_entrepreneur_ who has some scheme which he wishes to carry out “will in
the first place collect orders, and on the strength of those orders get
hold of some producer or dealer who has such raw material or services
at his disposal. Having obtained the goods, he pays for them by means
of promissory notes, which the bank, after taking due precaution, will
convert into circulation notes.” The consumer is really a sleeping
partner in the business, and between him and the _entrepreneur_ there is
no need for the intervention of money at all. (_Organisation du Crédit,
Œuvres_, vol. vi, p. 123.) Discount was the fundamental characteristic
of the bank, and no criticism is directed against this feature of its
operations.

[671] “How to resolve the _bourgeoisie_ and the proletariat into the
middle class, the class which lives upon its income and that which draws
a salary into a class which has neither revenue nor wages, but lives by
inventing and producing valuable commodities to exchange them for others.
The middle class is the most active class in society, and is truly
representative of a country’s activity. This was the problem in February
1848.” (_Révolution démontrée par le Coup d’État_, p. 135.)

[672] “Reciprocity means a guarantee on the part of those who exchange
commodities to sell at cost price.” (_Idée générale de la Révolution_,
pp. 97-98.)

[673] “The very existence of the State implies antagonism or war as the
essential or inevitable condition of humanity, a condition that calls
for the intervention of a coercive force which shall put an end to the
struggle continually waging between the weak and the strong.” (_Voix du
Peuple_, December 3, 1849; _Œuvres_, vol. xix, p. 23.) “When economic
development has resulted in the transformation of society even despite
itself, then the weak and the strong will alike disappear. There will
only be workers; and industrial solidarity, and a guarantee that their
products will be sold, will tend to make them equal both in capacity and
wealth.” (_Ibid._, p. 18.)

[674] “Consequently we consider ourselves anarchists and we have
proclaimed the fact more than once. Anarchy is suitable for an adult
society just as hierarchy is for a primitive one. Human society has
progressed gradually from hierarchy to anarchy.” (_Œuvres_, vol. xix,
p. 9.) A little later, in _Idée générale de la Révolution_, he states
that the aim of the Revolution was “to build up a property constitution
and to dissolve or otherwise cause the disappearance of the political
or government system by reducing or simplifying, by decentralising and
suppressing the whole machinery of the State.” This idea was borrowed
from Saint-Simon, and Proudhon has acknowledged the debt in his _Idée
générale_. This conception of industrial society rendering government
useless or reducing it to harmless proportions is a development, though
perhaps somewhat extravagant, of the economic Liberalism of J. B. Say.
The first edition of the _Mémoire sur la Propriété_ contains an admission
of anarchical tendencies. “What are you, then? I am an anarchist.—I
understand your doubts on this question. You think that I am against the
Government.—That is not so. You asked for my confession of faith. Having
duly pondered over it, and although a lover of order, I have come to the
conclusion that I am in the fullest sense of the word an anarchist.”

[675] “The whole problem of circulation is how to make the exchange
note universally acceptable, how to secure that it shall always
be exchangeable for goods and services and convertible at sight.”
(_Organisation du Crédit, Œuvres_, vol. vi, pp. 113, 114.)

[676] _Organisation du Crédit._

[677] Proudhon always maintained that his reform merely consisted in
transforming a credit sale into a cash one. But he might as well have
said that black was white. Far from giving mutual benefit, the borrower
will be the one who will gain most advantage. Elsewhere he says that to
give credit is merely to exchange. This is true enough, but discount is
employed just to equalise different credit transactions.

[678] In the _Idée générale de la Révolution au XIXe Siècle_, p. 198:
“The citizens of France have a right to demand and if need be to join
together for the establishment of bakehouses, butchers’ shops, etc.,
which will sell them bread and meat and other articles of consumption
of good quality at a reasonable price, taking the place of the present
chaotic method, where short weight, poor quality, and an exorbitant
price seem to be the order. For a similar reason they have the right to
establish a bank, with the amount of capital which they think fit, in
order to get the cash which they need for their transactions as cheaply
as possible.”

[679] “Association avoids the waste of the retail system. M. Rossi
recommends it to those small householders who cannot afford to buy
wholesale. But this kind of association is wrong in principle. Give the
producer, by helping him to exchange his products, an opportunity of
supplying them with provisions at wholesale prices, or, what comes to the
same thing, organise the retail trade so as to leave only just the same
advantage as in the case of the wholesale transaction, and ‘association’
will be unnecessary.” (_Idée générale de la Révolution_, p. 92.)

[680] This system was criticised by Marx in his _Misère de la
Philosophie_, published in 1847 (Giard and Brière’s edition, 1896, pp.
92 _et seq._). A more recent and more complete exposition is given in
Foxwell’s introduction to Anton Menger’s _The Right to the Whole Produce
of Labour_, pp. lxv, etc.

[681] Mazel gave an exposition of his scheme in a series of pamphlets
written in very bombastic language, but only of very slight interest
to the economist. Another bank known as Bonnard’s Bank was established
at Marseilles in 1838, and afterwards at Paris. The ideas are somewhat
similar, but much more practical. Both branches are still in active
operation. Proudhon refers to this bank in his _Capacité politique des
Classes ouvrières_. Courcelle-Seneuil gives a very eulogistic account of
it in his _Traité des Banques_, and in an article in the _Journal des
Économistes_ for April 1853. The _modus operandi_ is explained in three
brochures, which may be seen in the Bibliothèque Nationale. One of these
is entitled _Liste des Articles disponibles à la Banque_; the other two
describe the mechanism of the bank. Darimon, one of Proudhon’s disciples,
in his work _De la Réforme des Banques_ (Paris, Guillaumin, 1856), gives
an account of a large number of similar institutions which were founded
during this period. Several systems of the kind have also been discussed
by M. Aucuy in his _Systèmes socialistes_ _d’Échange_ (Paris, 1907). But
we cannot accept his interpretation of various points.

Bonnard’s Bank differs from the others in this way. The client of the
bank, instead of bringing it some commodity or other which may or may not
be sold by the bank, gets from the bank some commodity which he himself
requires, promising to supply the bank with a commodity of his own
production whenever the bank requires it. The bank charges a commission
on every transaction. Its one aim is to bring buyer and seller together,
and the notes are simply bills, payable according to the conditions
written on them. But they cannot be regarded as substitutes for bank
bills. Cf. _Banque d’Échange de Marseille, C. Bonnard et Cie., fondée par
Acte du 10 Janvier_, 1849 (Marseilles, 1849).

[682] “I repudiate Mazel’s system root and branch,” he declares in an
article contributed to _Le Peuple_ of December 1848 (_Œuvres_, vol. xvii,
p. 221). He also adds that when he wrote first he had no acquaintance of
any kind with Mazel. “It was M. Mazel who on his own initiative revealed
his scheme to me and gave me the idea.” In one of his projects, published
on May 10, 1848, Proudhon seems inclined to adopt this idea, just for a
moment at any rate. Article 17 seems to hint at this. “The notes will
always be exchangeable at the bank and at the offices of members, but
only against goods and services, and in the same way commodities and
services can always be exchanged for notes.” (_Résumé de la Question
sociale_, p. 41.) This article justifies the interpretation which
Courcelle-Seneuil puts on it, in his _Traité des Operations de Banque_
(9th ed., 1899, p. 470), and which Ott accepts in his _Traité d’Économie
sociale_ (1851), which, moreover, contains a profound analysis and some
subtle criticism of Proudhon’s idea. But we think that this article was
simply an oversight on Proudhon’s part; for beyond a formal refutation of
Mazel’s idea there is no reference to it in any of his other works, not
even in the scheme of the People’s Bank. Moreover, it seems to contradict
the statement that the notes would be issued against commodities which
had been actually sold and delivered, as well as other articles of the
scheme—_e.g._ Article 30, dealing with buying and selling. It also
conflicts with the idea that the discounting of goods is the prime and
essential operation of the bank. In our opinion, Diehl in his book on
Proudhon (_P. J. Proudhon, Seine Lehre u. seine Leben_, vol. ii, p. 183)
is wrong in thinking that the Exchange Bank would issue notes against all
kinds of goods without taking the trouble to discover whether they had
been sold or not.

[683] _Annales de l’Institut Solvay_, vol. i, p. 19.

[684] _Ibid._, p. 25.

[685] Cf. _Principes d’Orientation sociale_, a _résumé_ of Solvay’s
studies in productivism and accounting (Brussels, 1904).

[686] Although Solvay’s scheme seems very different from Proudhon’s,
it possesses features that received the highest commendation from
the Luxembourg Commission. In _L’Exposé général de la Commission de
Gouvernement pour les Travailleurs_, which appeared in _Le Moniteur_
of May 6, 1848, we read: “When in the future association has become
complete, there will be no need for notes even. Every transaction will be
carried on by balancing the accounts. Book-keepers will take the place of
collecting clerks. Money, both paper and metallic, is largely superfluous
even in present-day society.” The author then proceeds to outline a
scheme of clearing-houses.

[687] A hit at Proudhon’s _Philosophie de la Misère_, which was the
sub-title of his _Contradictions économiques_.

[688] In a letter written to Karl Marx on May 17, 1846 (_Correspondance_,
vol. ii, p. 199), _à propos_ the expression “at the moment of striking,”
which Marx had employed, Proudhon takes the opportunity of declaring
that he is opposed to all kinds of revolution. “You are perhaps still
of opinion that no reform is possible without some kind of struggle or
revolution, as it used to be called, but which is nothing more or less
than a shock to society. That opinion I shared for a long time. I was
always willing to discuss it, to explain it, and to defend it. But in
my later studies I have completely changed my opinion. I think that it
is not in the least necessary, and that consequently we ought not to
consider revolution as a means of social reform. Revolution means an
appeal to force, which is clearly in contradiction to every project of
reform. I prefer to put the question in a different fashion, namely, How
can we arrange the economic activities of society in such a fashion that
the wealth which is at present lost to society may be retained for its
use?” And in the _Confessions d’un Révolutionnaire_, p. 61: “A revolution
is an explosion of organic forces, an evolution spreading from the heart
of society through all its members. It can only be justified if it be
spontaneous, peaceful, and gradual. It would be as tyrannous to try to
suppress it as to bring it about through violence.” See M. Bourguin’s
article on Proudhon and Karl Marx in the _Revue d’Économie politique_,
1893.

[689] On this point see Puech, _Proudhon et l’Internationale_ (Paris,
1907); preface by M. Andler.

[690] This fact is recognised even by German socialists themselves. “The
people who gave socialism to the world even in its earlier forms have
immortalised themselves,” says Karl Grün, when speaking of France just
about the time that our chapter refers to. (Quoted by Puech, _loc. cit._,
p. 57.)

[691] “So many things have we attempted! How is it that liberty, the
easiest of all, has never been given a trial?” (Bastiat, _Harmonies_,
chap. 4, p. 125.)

[692] One of the sections of Dunoyer’s _La Liberté du Travail_ is
entitled: “Of the True Means of remedying the Evils from which the
Workers suffer, by extending the Sphere of Competition.” (Book IV, chap.
10, § 18.)

“As a matter of fact,” says Dunoyer elsewhere, “this competition which
seems such an element of discord is really the one solid bond which links
together all the various sections of the social body.”

[693] “Whenever the State undertakes to supply the wants of the
individual, the individual himself loses his right of free choice and
becomes less progressive and less human; and by and by all his fellow
citizens are infected with a similar moral indifference.” (Bastiat,
_Harmonies_, chap. 17, p. 545.)

[694] Dunoyer says: “You may search the literature of association as
much as you like, but you will never come across a single intelligent
discussion of an equitable means of distribution.” (_Liberté du Travail_,
vol. ii, p. 397.) Further, he asserts that association has damaged social
even more than individual morality, because nothing will be considered
lawful unless done by society as a whole. It is true that in this case he
was speaking chiefly of corporative association, but the condemnation has
a wider import.

[695] On the occasion of the international gathering of economists at
the Paris Exposition in July 1900, Levasseur, one of the most moderate
members of the Liberal school, said: “There is no need to draw any
distinction between us. Liberal economists ought not to be divided in
this way. There may be different opinions on the question of applying
our principles, but we are all united on this question of liberty. A man
becomes wealthy, successful, or powerful all the sooner if he is free.
The more liberty we have, the greater the stimulus to labour and thought
and to the production of wealth.” (_Journal des Économistes_, August 15,
1900.)

[696] “It is a good thing to have a number of inferior places in society
to which families that conduct themselves badly are liable to fall, and
from which they can rise only by dint of good behaviour. Want is just
such a hell.” (Dunoyer, _La Liberté du Travail_, p. 409.)

[697] See the discussion of the political doctrine of the Physiocrats,
pp. 33 _et seq._

[698] Editions of the same work appeared between 1825 and 1830; but
the volume was much smaller and had a different title. Dunoyer will
again engage our attention towards the end of this chapter. Cf. Villey,
_L’Œuvre économique de Dunoyer_ (Paris, 1899).

[699] Henry Charles Carey was born at Philadelphia in 1793, and died
in 1879. Up to the age of forty-two he followed the profession of a
publisher, retiring in 1835 to devote himself to economic studies. The
three volumes of his _Principles of Political Economy_ were issued in
1837, 1838, and 1840 respectively. In 1848 appeared _The Past, the
Present, and the Future_, which contains his theory of rent. In 1850 his
_Harmony of Interests, Agricultural, Manufacturing, and Commercial_, was
published, and in 1858-59 his _Principles of Social Science_.

These dates possess some importance. At the time of the publication
of the _Harmonies_ in 1850 Carey wrote a letter to the _Journal des
Économistes_ accusing Bastiat of plagiarism. Bastiat, who was already
on the point of death, wrote to the same paper to defend himself. He
admitted that he had read Carey’s first book, and excuses himself for
not making any reference to it on the ground that Carey had said so many
uncomplimentary things about the French that he hesitated to recommend
his work. Several foreign economists have since made the assertion
that Bastiat merely copied Carey, but this is a gross exaggeration.
Coincidence is a common feature in literary and scientific history.
We have quite a recent instance in the simultaneous appearance of the
utility theory in England and France.

[700] Frédéric Bastiat, born in 1801 near Bayonne, belonged to a family
of fairly wealthy merchants, and he himself became in turn a merchant,
a farmer in the Landes district, a justice of the peace, a councillor,
and finally a deputy in the Constituent Assembly of 1848. He made little
impression in the Assembly; but he scarcely had time to become known
there before his health gave way. He died at Rome in 1850, at the age of
forty-nine.

Brief as was Bastiat’s life, his literary career was shorter still. It
lasted just six years. His first article appeared in the _Journal des
Économistes_ in 1844. His one book, appropriately called _Les Harmonies
économiques_, written in 1849, remains a fragment. In the meantime he
published his _Petits Pamphlets_ and his _Sophismes_, which were aimed
at Protection and socialism. He was very anxious to organise a French
Free Trade League on the lines of that which won such triumphs in England
under the guidance of Cobden, but he did not succeed.

His life was that of the publicist rather than the scholar. He was not a
bookworm, although he had read Say before he was nineteen, and Franklin’s
_Poor Richard’s Almanac_ soon afterwards. He was very enthusiastic
about the merits of Franklin’s works, and Franklin’s influence upon
his writings, even upon his personal appearance and behaviour, is very
marked. “With his long hair, his small cap, his long frock-coat, and his
large umbrella, he seemed for all the world like a rustic on a visit to
town.” (Molinari in the _Journal des Économistes_, February 1851.)

These biographical details should not be lost sight of, especially by
those who accuse him of lacking scientific culture and of being more of a
journalist than an economist.

Despite the fact that he has been severely judged by foreign economists,
he is still very popular in France. His wit is a little coarse, his
irony somewhat blunt, and his discourses are perhaps too superficial,
but his moderation, his good sense, and his lucidity leave an indelible
impression on the mind. And we are by no means certain that the
_Harmonies_ and the _Pamphlets_ are not still the best books that a young
student of political economy can possibly read. Moreover, we shall find
by and by that the purely scientific part of his work is by no means
negligible.

[701] On this question of who benefits by international trade see our
discussion of Mill’s treatment of the problem (pp. 364-365).

[702] _Harmonies_, p. 21. Our quotations are taken from the tenth edition
of the _Œuvres complètes_.

[703] “Economic phenomena are not without their efficient cause and their
Providential aim.” (_Harmonies_, last page.)

“Looking at this harmony, the economist can join with the astronomer and
the physiologist and say: _Digitus Dei est hic_.” (_Ibid._, chap. 10, p.
39.)

“If everyone would only look after his own affairs, God would look after
everybody’s.” (_Ibid._, chap. 8, p. 290.)

[704] Auguste Comte, _Cours de Philosophie positive_, vol. iv, p. 202.

[705] The liturgy of the Reformed Church reads as follows: “We
acknowledge and confess our manifold sins.” See our chapter on _Doctrines
that owe their Inspiration to Christianity_.

[706] _Harmonies_, chap. 5, p. 140.

[707] “I have attempted to show that value is based not so much upon the
amount of labour which a thing has cost the person who made it, as upon
the amount of labour it saves the persons who obtain it. [He ought to
have acknowledged his indebtedness to Carey in this matter.] Hence I have
adopted the term ‘service,’ which implies both ideas.” (_Ibid._, chap. 9,
p. 341.)

[708] _Ibid._, chap. 5, p. 145.

[709] _Harmonies_, chap. 5, p. 193.

“Socialists and economists, champions of equality and fraternity, I
challenge you, however numerous you may be, to raise even a shadow of
objection to the legitimacy of mutual service voluntarily rendered,
and consequently against the institution of private property as I have
defined it. With regard to both these considerations, men can only
possess values, and values merely represent equal services freely secured
and freely given.” (_Ibid._, chap. 8, pp. 265, 268.)

Had the limits of this work permitted us to speak of the Italian
economists we should have had to refer to Ferrara, professor at Turin
from 1849 to 1858, whose theory of value and economic harmony link him
to his contemporaries Carey and Bastiat. The whole economic edifice,
according to Ferrara, was built upon cost of production. The value of a
commodity is not measured by the amount of labour which it really has
cost to produce, but by the amount of labour that would be required to
produce another similar commodity, or, if the commodity in question be
absolutely limited in quantity, such as is the case with an old work of
art, by the labour necessary to produce a new one that would satisfy the
same need equally well—an application of the principle of substitution
which had not been formulated when Ferrara wrote. The progress of
industry gradually reduces the cost of labour and dispenses with human
effort; hence harmony.

Everything, including the earth and its products, even capital, are
subject to this same law, and a gradual diminution of rent and a lowering
of the rate of interest are thus assured.

Ferrara’s principal writings consist of prefaces to Italian translations
of the works of the chief economists. They were published in a collection
known as _Biblioteca dell’ Economista_ (Turin, 1850-70, 26 vols.).

[710] _Harmonies_, chap. 7, p. 236. The controversy between Bastiat and
Proudhon in 1849 concerning the legitimacy of interest was published
under the title of _Gratuité du Crédit_, but the argument is scarcely
worth examining here. Bastiat’s argument is based upon the supposition
that the person who lends money performs some service or other, and that
the service, whenever given, should be paid for; in other words, he
maintains that capital is productive. A plane means more planks produced,
and it is only just that the owner of the plane should get some of
them. Proudhon replies that he does not deny the legitimacy of interest
under present conditions, but that interest itself is just a historical
category—to use a phrase that only became current after Proudhon’s
time—and that it will be quite unnecessary under the new _régime_. The
Exchange Bank was to be the parent of the new order. The two combatants
never really come to blows. They keep on arguing about nothing. The
result is that this discussion is very trying and brings little honour to
either.

[711] “The relative importance of any service must vary with the
circumstances. This will depend upon its utility, and the number of
people who are willing to give the amount of labour, of ability or
training necessary to produce it, as well as the amount of labour which
it will save us.” (_Harmonies_, chap. 5, p. 146.)

[712] Bastiat himself was obliged to recognise this. “I have not taken
the trouble to ask whether all these services are real and proper or
whether men are not sometimes paid for services which they never give.
The world is full of such injustices.” (_Ibid._, chap. 5, p. 157.)

But if the world is full of people who are paid for services which they
have never given or for merely imaginary and improper work, what is
the use of speaking of value and property as if they were founded upon
service rendered?

See Gide’s article on _La Notion de la Valeur dans Bastiat_, in the
_Revue d’Économie politique_, 1887.

[713] J. B. Say had already employed the term “service” without giving it
any normative significance, simply using it to distinguish between wealth
which consists of acts and wealth which consists of material products.

[714] _Social Possibilities of Economic Chivalry_, in _Economic Journal_,
March 1907.

[715] “And I also declare that you have not intercepted any of the gifts
of God. It is true that you received them free out of nature’s hand. But
it is equally true that you have handed them on freely, reserving nothing
for yourself. Fear not, but live in peace and freedom from every qualm.”
(_Harmonies_, chap. 8, p. 257.)

“Coal is free for everyone. There is neither paradox nor exaggeration
in that. It is as free as the water of the brook, if we only take the
trouble to get it, or pay others for getting it for us.” (_Ibid._, chap.
10.) Bastiat would not regard the shareholders’ dividends as payments for
the trouble which the shareholders have taken in getting the coal. The
dividends simply pay for the trouble taken to save the money which made
the exploitation possible.

Say spoke of free natural agents. What he meant to refer to was such
natural commodities as air and water, which are at the disposal of
everyone.

[716] _Harmonies_, chap. 8, p. 256.

[717] _Ibid._, chap. 5, p. 142.

[718] Bastiat does not seem to have studied rent. The chapter of the
_Harmonies_ on this subject was never completed. Fontenay, one of his
disciples, wrote a brilliant book called _Du Revenu foncier_ (1854),
which is almost forgotten to-day. He attempted to show:

(1) That Ricardian or differential rent would not exist were all the land
equally fertile and suitably cultivated.

(2) That it is incorrect to speak of the rent of natural fertility, as
Adam Smith and the Physiocrats did, if all utility (and not merely value)
is the product of human labour. A fish, a grape, a grain of wheat, a fat
ox, all of them have been created by human industry. Nature is for ever
incapable of doing this. This is quite true if we say nature alone, but
it is equally true of labour taken by itself.

[719] Carey, _Principles of Social Science_.

[720] Even in Algeria, for example, where Carey’s theory was at first
true, now that the fertile plain of the Mitidja has been cultivated
by two generations of colonists it is certain that there is only
second-class land available.

[721] “Wealth consists of the right to command the services of nature,
which are always free.” (Carey, _Principles of Social Science_, vol. i,
chap. 13.)

“As man’s power over nature grows, his power over his fellow-men seems to
dwindle and equality becomes possible.” (_Ibid._, vol. iii, p. 122.)

Compare, for example, the relative equality of comfort enjoyed by those
who travel by rail irrespective of class distinctions (which are only
to be found in some countries) with the former method of travelling by
post-chaise.

[722] “Capitalists and workers, don’t look at one another with an air of
defiance and vengeance.” (_Harmonies_, p. 252.)

[723] A lowering of the rate of interest from 5 to 3 per cent. means that
what formerly cost £60 and yielded 3 per cent. will now cost £100. There
is no decrease of the revenue and there is an increase in the capital. It
is quite a good bargain. A lowering of the rate of interest will simply
reduce the amount of capital in those instances where the borrower can
effect a conversion to his own advantage.

[724] This truth is so obvious that Rodbertus, as we shall see by and by,
took the opposite point of view and attempted to argue on the strength of
the “iron law” that capital’s share is always increasing, while labour’s
is decreasing. This thesis seems to have no better foundation than the
other. See an article by Rist entitled _Deux Sophismes économiques_, in
the _Revue d’Économie politique_ for March 1905.

Bastiat’s thesis may also be seen in Carey. The Liberal school has
clearly adopted it. See Paul Leroy-Beaulieu’s _Répartition der Richesses_.

[725] See Gide’s _Political Economy_, p. 599 (English translation), and
Colson’s _Political Economy_, vol. iii, p. 366. According to Colson,
capital’s share has quadrupled since 1820, while labour’s has only
increased in the proportion of 1:3½.

[726] “Just as the earth is the great reservoir of electricity, so the
public or the consumer is the one source of any gain or loss which
the producer makes or suffers. Everything comes back to the consumer.
Consequently every important question must be studied from the consumer’s
point of view if we want to get hold of its general and permanent
results.” (_Harmonies_, chap. 11, p. 414.)

[727] See one of Bastiat’s best known pamphlets, _La Vitre cassée_.

[728] _Harmonies_, chap. 6, p. 419.

[729] Quoted by his friend Paillottet in his preface to the _Œuvres
complètes_.

[730] _E.g._ Yves Guyot in the _Journal des Économistes_ for 1904 _et
passim_. See p. 326.

[731] The word is not his invention. That honour is claimed by Pierre
Leroux. See p. 235.

[732] _Harmonies_, chap. 21, p. 624.

“There is not a man living whose character has not been determined by a
thousand factors entirely beyond his control.” (_Ibid._, p. 623.)

“All profit by the progress of the one, and the one by the progress of
the many.” (_Ibid._, chap. 11, p. 411.)

[733] “Solidarity implies a kind of collective responsibility. And so
solidarity as well as responsibility is a force that makes for progress.
It is a system that is admirably calculated to check evil and to advance
the good.” (_Ibid._, chap. 21, pp. 622-626.)

[734] “Workers must understand that these collective funds [pension
funds] must be voluntarily contributed by those who are to have a share
in them. It would be quite unjust, as well as anti-social, to raise them
by means of taxation—that is, by force—from the classes who have no share
in the benefits.” (_Harmonies_, chap. 14, p. 471.)

“A peasant marries late in the hope of having a small family, and we
force him to rear other people’s children. He has to contribute towards
the rearing of bastards.” (_Ibid._, chap. 20, pp. 617, 618.)

Speaking of sharing in the benefits, he remarks: “That is really not
worth talking about.” (_Ibid._, chap. 14, p. 457.)

[735] “Organisms in nature have their rank and degree of perfection
determined by the number of organs which they possess and the amount of
difference which exists between each of them.” (_Social Science_, vol.
iii, p. 461.)

“Life has been defined as an exchange of mutual obligations, but if there
were no difference between the various objects how could the exchange
take place?” (_Ibid._, vol. i, pp. 54-55.)

“The more perfectly co-ordinated the whole is, the better developed will
be each of its parts.” (_Ibid._, vol. iii, p. 462.)

[736] Charles Dunoyer was Bastiat’s senior. The first edition of _De la
Liberté du Travail_, to which we have already referred, dates from 1825,
and the last edition from 1845. He took an active part in opposing the
Restoration Government, but he became prefect and subsequently Conseiller
d’État under Louis Philippe.

[737] Molinari, a modern French economist, holds similar views.

[738] If a person died intestate he was in favour of equal division of
wealth. The arguments which he employed are very interesting, especially
those directed against the upholders of primogeniture. They thought that
by depriving the younger sons of their inheritance they became more
industrious and thoughtful. Dunoyer replies by asking whether it would
not be an advantage to deny the right of succession to the eldest son
as well, “for it is obviously unfair that he should be deprived of that
kind of training which is so profitable to his younger brothers.” Dunoyer
forgot that it would have gone ill with his arguments if the socialists
had taken him at his word.

[739] “Labour is the only source of productive power. Capital is a human
creation, and land is simply a form of capital.” (_De la Liberté du
Travail_, Book VI.)

[740] Say had already recognised the claims of immaterial wealth
alongside of material, and he had employed the term “services” in
describing them. In this way he considered that the professor, the doctor
and the actor had claims to be regarded as producers. Dunoyer, while
accepting his conclusion, criticises his way of putting it. He recognises
no distinction between material and immaterial wealth. There is nothing
but utility. “It is true that taste, education, etc., are immaterial,
but so is everything that man produces.” But he is entirely wrong when
he says that a good teacher is a producer of enlightened men and a
doctor a producer of healthy persons. We are at a loss to explain why at
one moment he refuses to recognise the material element in production,
while at another he grossly exaggerates the material results of purely
intellectual labour.

[741] “Labour and exchange belong to two categories of facts which are
absolutely distinct in their nature. Labour implies production. Commerce
and exchange imply nothing of the kind.” (_De la Liberté du Travail_, p.
599.)

[742] Seligman in the _Economic Journal_ for 1903, pp. 335-511, devotes
two very interesting articles to such writers under the title of _Some
Neglected British Economists_. One is astonished to find how many there
are and the originality which they show, and to learn that several of the
more important modern theories are simply rediscoveries.

[743] Mrs. Marcet’s _Conversations_ belong to 1817, Miss Martineau’s
_Illustrations_ to 1832. The latter had a wonderful vogue.

[744] Quoted by Seager in a lecture on economics at Columbia University
in 1908.

[745] We have already referred to McCulloch and James Mill, two of
Ricardo’s immediate disciples. We must just add the names of Torrens and
Gibbon Wakefield. Wakefield was the author of a book which had a great
reputation at one time, but which was simply an attempt to apply the
Ricardian principles to the practice of colonisation.

[746] Nassau Senior during a part of his life was Professor of Political
Economy at Oxford. The Oxford chair, created in 1825, was the first chair
of economics to be established in England. His writings, which treat of
various subjects, belong to the period 1827-52. The bulk of his doctrine
is contained in his _Political Economy_, contributed to the _Encyclopædia
Britannica_ in 1836 and afterwards published separately. This small
volume may be regarded as the earliest manual of political economy.

[747] The four principles were: (i) the Hedonistic Principle; (ii) the
Principle of Population; (iii) the Law of Increasing Returns in Industry;
(iv) the Law of Diminishing Returns in Agriculture.

[748] “But a considerable part of the produce of every country is the
recompense of no sacrifice whatever; is received by those who neither
labour nor put by, but merely hold out their hands to accept the
offerings of the rest of the community.” (_Political Economy_, p. 89.) He
takes the income of a successful doctor as an illustration, and divides
it up as follows (_ibid._, p. 189):

  Wages or payment for labour          £40
  Profit or payment for abstinence    £960
  Rent                               £3000

See _Senior’s Theory of Monopoly_, by Richard Ely (American Economic
Association, 1899).

[749] This confusion between rent and the income of inherited wealth does
little honour to Senior, for the two facts belong to entirely different
categories. Rent is a purely economic phenomenon, resulting from the
necessary conditions of exchange. It owes nothing to social organisation,
not even to the institution of private property. Inheritance, on the
other hand, is a purely juridical phenomenon, the product of civil law.
Even if inheritance were abolished it would make no difference to the
existence and growth of rent, whether obtained from the soil or from
some other source; whereas under the hypothetical _régime_ of perfectly
free competition, although rent would no longer be known, inheritance,
together with all its privileges, might still continue to exist. Senior
evidently understands by the term “rent” any kind of income that is not
obtained by personal effort. But this is clearly a perversion of the
original meaning.

[750] Rau’s treatise on political economy belongs to the years 1826-37,
and von Thünen’s _Der Isolirte Staat_ appeared in 1826.

[751] Pellegrino Rossi, who became a naturalised Frenchman in 1833, was
an Italian by birth. He succeeded Say as professor at the Collège de
France. He afterwards became Lecturer on Constitutional Law, and his
name is commemorated in one of the annual prizes. He eventually entered
the diplomatic service, and was attached to the Papal See during the
pontificate of Pius IX. He was assassinated at Rome in 1848.

[752] John Stuart Mill, born in 1806, was the son of James Mill the
economist of whom we have already spoken. The system of education which
his father planned for him can only be described as extraordinary.
Practised on anyone else it would have been fatal. At the age of ten
he was already well versed in universal history and in the literatures
of Greece and Rome. At thirteen he had a fair grasp of science and
philosophy, and had written a history of Rome. By the time he was
fourteen he knew all the political economy that there was to know then.
In 1829, then a young man of twenty-three, he published his first essays
on political economy. In 1843 appeared his well-known _System of Logic_,
which immediately established his fame. In 1848 he issued the admirable
_Principles of Political Economy_. Mill was in the service of the East
India Company up to the time when it lost its charter in 1858. From
1865 to 1868 he was a member of the House of Commons. After the death
of his wife, who collaborated with him in the production of several of
his works, especially _Liberty_ (1859), being unwilling to quit the
spot where she lay buried, he spent the last years of his life, except
those taken up by his Parliamentary work, at Avignon. His autobiography
contains a precious account of his life and of his gradual conversion to
socialistic views.

[753] _Principles_, Book II, chap. 1, § 3.

[754] _Ibid._, Book IV, chap. 7, § 7.

[755] Dupont de Nemours, writing very much in the spirit of the Classical
school, had already given an excellent definition of natural law. “By
natural law we are to understand those essential conditions that regulate
all things in accordance with the design laid down by the Author of
Nature. They are the ‘essential conditions’ to which men must submit if
they would obtain all the benefits which the natural order offers them.”
(Introduction to Quesnay’s works, p. 21.)

[756] Adam Smith, let us remember, also wrote a book on the _Theory
of Moral Sentiments_ (see Book I, chap. 2), and Stuart Mill writes as
follows: “In the golden rule of Jesus of Nazareth we read the complete
spirit of the ethics of utility. To do as you would be done by and to
love your neighbour as yourself constitute the ideal perfection of
utilitarian morality.” (_Utilitarianism_, chap. 2.)

[757] This is how Mill views it: “It is only in a very imperfect state
of the world’s arrangements that anyone can best serve the happiness of
others by the absolute sacrifice of his own.” (_Utilitarianism_, chap.
2.) But it is scarcely necessary to add, seeing that the two propositions
are necessarily complementary, that one of the best ways of securing
happiness is to sacrifice one’s self in the cause of others. All that is
required is a little patience. “Education and opinion will so use that
power as to establish in the mind of every individual an indissoluble
association between his happiness and the good of the whole.” Interpreted
in this way, individualism is closely akin even to the most transcendent
form of solidarity.

[758] One is sometimes asked to state the differences between the
Classical, the Individualist, the Liberal, and the Optimist schools.
The question does not seem to us to be a very important one, but we may
answer it in this way:

(_a_) The Individualist school, according to the worst interpretation put
upon it, thinks that egoism is the only possible system of ethics and
that each for himself is the sole principle of action. But, naturally
enough, everyone is anxious to avoid the taunt of selfishness, and the
existence of such economic ties as exchange and division of labour
make egoism impossible as an ethical system. According to the broadest
interpretation of the term, individualism implies the recognition of
individual welfare as the sole aim of every activity, whether individual
or social, economic or political. But this does not take us very far, for
every socialist and individualist would accept this interpretation. We
seldom speak of the welfare of society _per se_ as an entity possessed
of conscious feeling. This definition is much too wide. It includes
solidarity and association, State intervention and labour legislation,
provided the aim be to protect the individual against certain dangers.
Self-sacrifice is not excluded, for what can strengthen individualism
like self-sacrifice? This is the interpretation which Schatz puts
upon it in his _L’Individualisme économique et social_. But the term
“individualist” is too indefinite and we must avoid it whenever we can.

(_b_) The so-called Liberal school uses the term in a much more definite
fashion. The individual is to be not merely the sole end of economic
action, but he is also to be the sole agent of the economic movement,
because no one else can understand his true interests or realise them
in a better way. Interpreted in this fashion, it means letting the
individual alone and removing every external intervention, whether by the
State or the master.

According to the one definition, individualism is a creed which everyone
can adopt; according to the other it is open to very serious objections.
Experience shows that the individual, whether as consumer buying
injurious, costly, or useless commodities, or as worker working for
wages that ruin his health and lower his children’s vitality, is a poor
judge of his own interest, and is helpless to defend himself, even where
science and hygiene are on his side.

(_c_) If we push this interpretation a stage farther and admit not only
that each individual is best qualified to speak for himself, but also
that the social interest is simply the sum of the individual interests,
all of which converge in a harmonious whole, then the Liberal school
becomes the Optimistic. In France it has the tradition of a generation
behind it, and an attempt has been made to revive it in certain recent
works; still it may now be regarded as somewhat antiquated.

(_d_) When we speak of the Classical school we mean those who have
remained faithful to the principles enunciated by the earlier masters
of economic science. An effort has been made to improve, to develop,
and even to correct the older theories, but no attempt has been made to
change their essential aspects. Individualistic and liberal by tradition,
this school has never been optimistic. It lays no claim to finality of
doctrine or to the universality of its aim, but simply confines itself to
pure science.

[759] _Auguste Comte and Positivism._

[760] _Principles_, Book IV, chap. 7, par. 7 (Ashley’s ed., p. 793). See
the recent work of Molinari, or _La Morale de la Concurrence_, by Yves
Guyot.

[761] “It is in vain to say that all mouths which the increase of mankind
calls into existence bring with them hands. The new mouths require
as much food as the old ones and the hands do not produce as much.”
(_Principles_, Book I, chap. 11, § 2.)

[762] “It is seldom by the choice of the wife that families are too
numerous; on her devolves (along with all the physical suffering and
at least a full share of the privations) the whole of the intolerable
domestic drudgery resulting from the excess.” (_Principles_, Book II,
chap. 13, § 2.)

[763] “While a man who is intemperate in drink, is discountenanced and
despised by all who profess to be moral people, it is one of the chief
grounds made use of in appeals to the benevolent that the applicant
has a large family and is unable to maintain them.” (_Ibid._, Book II,
chap. 13, § 1.) “Little improvement can be expected in morality, until
the producing large families is regarded with the same feelings as
drunkenness or any other physical excess. But while the aristocracy and
clergy are foremost to set the example of this kind of incontinence what
can be expected of the poor?” (_Ibid._, Ashley’s ed., p. 375, note.)

He complains that the Christian religion inculcates the belief that God
in His wisdom and care blesses a numerous family.

[764] “The laws which in many countries on the Continent forbid marriage
unless the parties can show that they have the means of supporting a
family, do not exceed the legitimate powers of the State. They are not
objectionable as violations of liberty.” (_Liberty_, chap. 5.)

On the other hand he thought that a law which limited the number of
public-houses involved a violation of liberty because it meant treating
the workers as children. (_Ibid._, chap. 5.)

[765] “The rise or the fall continues until the demand and supply are
again equal to one another: and the value which a commodity will bring
in any market is no other than the value which in that market gives a
demand just sufficient to carry off the existing or expected supply.”
(_Principles_, Book III, chap. 2, § 4.)

Cournot in his criticisms of the law of demand and supply had anticipated
Mill. But it is very probable that Mill was not acquainted with the
_Recherches_.

[766] _Principles_, Book III, chap. 3, § 1.

[767] _Ibid._, Book III, chap. 1, § 1.

[768] “Wages depend, then, on the proportion between the number of the
labouring population and the capital or other funds devoted to the
purchase of labour, and cannot under the rule of competition be affected
by anything else.” (_Ibid._, Book II, chap. 11, parts 1 and 3.)

[769] Saving with a view to augmenting the wages fund is only possible
for the rich, and Mill is as insistent upon their doing it as he is upon
the workers refraining from marriage. He also tries to impress upon the
workers the importance of saving, but his way of showing its advantages
is often laborious and obscure.

[770] Stuart Mill admitted that trade unions might modify the relations
between demand and supply, forgetting for the moment that this meant a
contradiction of the Classical theory.

The unions might limit the number of available men. He feared that this
would result in high wages for the small number of organised labourers
and in low wages for the others. They might check the birth-rate, their
members becoming accustomed to such a degree of comfort and well-being as
would raise their standard of life. He was always a strict Malthusian.

[771] See the quarterlies of Harvard and Columbia. It was an American,
however, Francis Walker, in his _Wages Question_ (1876), who did more
than anyone to destroy the old wage fund theory.

[772] “The cost value of a thing means the cost value of the most costly
portion of it.” (_Principles_, Book III, chap. 6, § 1, prop. 7.)

“The extra gains which any producer or dealer obtains through superior
talents for business or superior business arrangements are very much of
a similar kind. If all his competitors had the same advantages, and used
them, the benefit would be transferred to their customers through the
diminished value of the article: he only retains it for himself because
he is able to bring his commodity to market at a lower cost while its
value is determined by a higher.” (_Ibid._, Book III, chap. 5, § 4.)

Senior had already emphasised one important difference between
agricultural and industrial production, namely that whilst the law of
diminishing returns operates in the former case, the law of increasing
returns is operative in the second. In other words, the cost of
production diminishes as the quantity produced increases. The result is,
as Mill points out elsewhere, that the industrial employer is anxious to
reduce the sale price in order to produce more and to recoup himself for
a reduction in price by a reduced cost of production.

[773] Ricardo, moreover, gives an exposition of the advantages of
international trade in terms that Bastiat might have adopted. “Under a
system of perfectly free commerce each country naturally devotes its
capital and labour to such employments as are most beneficial to each.
This pursuit of individual advantage is admirably connected with the
universal good of the whole. By stimulating industry, by rewarding
ingenuity, and by using most efficaciously the peculiar powers bestowed
by nature, it distributes labour most effectively and most economically:
while by increasing the general mass of productions it diffuses
general benefit and binds together, by one common tie of interest and
intercourse, the universal society of nations throughout the civilised
world. It is this principle which determines that wine shall be made in
France and Portugal, that corn shall be grown in America and Poland,
and that hardware and other goods shall be manufactured in England.”
(Ricardo, _Works_, p. 75.)

[774] The following apparent paradox may be deduced from Ricardo’s
theory. A country is wise in importing not only those commodities which
it can only produce at a disadvantage as compared with its rivals, but
also those goods in which it has a distinct advantage in the matter of
production, though not so great as the advantage enjoyed in some other
case. Under those circumstances it is better that it should produce that
product in the making of which it has the greater advantage and exchange
it for some other product in which it has less.

“Two men can both make shoes and hats, and one is superior to the
other in both employments; but in making hats, he can only exceed his
competitor by one-fifth, or 20 per cent., and in making shoes he can
excel him by one-third, or 33 per cent. Will it not be for the interest
of both, that the superior man should employ himself exclusively in
making shoes, and the inferior man in making hats.” (Ricardo, _Works_, p.
77, note.)

And so England might find it advantageous to exchange her coal for French
cloths, although she may be able to produce those cloths cheaper herself.

[775] “The value of a thing in any place depends on the cost of its
acquisition in that place; which in the case of an imported article means
the cost of production of the thing which is exported to pay for it.”
(_Principles_, Book III, chap. 18, § 1.)

[776] Mill first treated of the theory in his _Unsettled Questions of
Political Economy_. A more complicated but more precise exposition is
given in the _Principles_ Book III, chap. 18, § 7. The whole process of
reasoning, based as it is upon the hypothetical conduct of two persons,
is purely abstract, and is of very little practical use. What is really
important is to know the relation between the advantages gained by either
side. It is true that on the whole imports and exports balance one
another, thanks to the operation of money, but that is another question.

[777] “It still appears, that the countries which carry on their foreign
trade on the most advantageous terms are those whose commodities are
most in demand by foreign countries, and which have themselves the least
demand for foreign commodities, from which, among other consequences, it
follows that the richest countries, _ceteris paribus_, gain the least
by a given amount of foreign commerce, since, having a greater demand
for commodities generally they are likely to have a greater demand for
foreign commodities and thus modify the terms of interchange to their
own disadvantage.” (_Principles_, Book III, chap. 18, § 8.) Note the
phrase “a given amount of foreign commerce.” That is, although the rate
of interchange is less advantageous for the rich country than it is for
the poor, still, since the former exchanges much more than the latter
it gains more on the whole transaction. Mill states this expressly
elsewhere. The rich and the poor country are like the wholesale house and
the little shop. The former gains very little on each article sold, but
gains much on the whole turnover.

[778] _Ibid._, Book V, chap. 10, § 1.

[779] An even more important concession to the Protectionist view is
his admission that the duties are not always borne by the home consumer
in the form of higher prices, but that they are sometimes paid by the
foreigner.

[780] _Principles_, Book V, chap. 10, § 1. The duty would check the
demand of the importing country, and according to Mill’s own formula it
ought to modify the exchange equation in its favour.

[781] _Histoire des Doctrines économiques_, p. 338.

[782] Mill was for many years resident in France, and died at Avignon.
An article written by him in defence of the Revolution of 1848 has been
translated into French and published in book form by M. Sadi Carnot.

[783] _Principles_, p. 210.

[784] _Representative Government_, chap. 3.

[785] “The laws and conditions of the production of wealth partake of the
character of physical truths. There is nothing optional or arbitrary in
them.… It is not so with the distribution of wealth. This is a matter of
human institution solely. The things once there, mankind, individually
or collectively, can do with them as they like.” (_Principles_, Book
II, chap. 1, § 1.) Karl Marx, a little later than this, claimed that
distribution is wholly determined by production.

[786] See Chatelain’s introduction to Rodbertus’s _Kapital_.

[787] See _Autobiography_, p. 133 (“Popular” edition).

[788] “If the improvement which even triumphant military despotism has
only retarded, not stopped, shall continue its course there can be
little doubt that the status of hired labourers will gradually tend to
confine itself to the description of workpeople whose low moral qualities
render them unfit for anything more independent, and that the relation
of masters and workpeople will be gradually superseded by partnership
in one of two forms: in some cases, association of the labourers with
the capitalist; in others, and perhaps finally in all, association of
labourers among themselves.” (_Principles_, Book IV, chap. 7, § 4.)

“In this or some such mode, the existing accumulations of capital might
honestly and by a kind of spontaneous process become in the end the
joint property of all who participate in their productive employment—a
transformation which, thus effected, would be the nearest approach to
social justice and the most beneficial ordering of industrial affairs for
the universal good which it is possible at present to foresee.” (_Ibid._,
Book IV, chap. 7, § 6.)

[789] The co-operative movement probably suggested this idea to him. He
several times expresses the opinion that middlemen’s profits exceed those
of the capitalists, and that the working class would gain more by the
removal of the former than they would by the extinction of the latter.

[790] But Young remained a champion of _grande culture_, while Mill was a
complete convert to peasant proprietorship. But peasant proprietorship is
proposed simply as a step towards association.

“The opinion expressed in a former part of this treatise respecting
small landed properties and peasant proprietors may have made the reader
anticipate that a wide diffusion of property in land is the resource
on which I rely for exempting at least the agricultural labourers from
exclusive dependence on labour for hire. Such, however, is not my
opinion. I indeed deem that form of agricultural economy to be most
groundlessly cried down, and to be greatly preferable in its aggregate
effects on human happiness to hired labour in any form in which it exists
at present. But the aim of improvement should be not solely to place
human beings in a condition in which they will be able to do without one
another, but to enable them to work with or for one another in relations
not involving dependence.” (_Principles_, Book IV, chap. 7, § 4.)

Mill was not the only one who looked to peasant proprietorship partly
to solve the social problem. Not to mention Sismondi, who was very
much taken up with the idea, we have Thornton in England in his _Plea
for Peasant Proprietors_ (1848) and Hippolyte Passy in France in his
excellent little volume _Des Systèmes de Culture_ (1852) strongly
advocating it. The Classical economists for the most part took the
opposite point of view, especially Lavergne in his _Essai sur l’Économie
rurale de l’Angleterre_.

[791] “Were I framing a code of laws according to what seems to me best
in itself, without regard to existing opinions and sentiments, I should
prefer to restrict, not what anyone might bequeath, but what anyone
should be permitted to acquire by bequest or inheritance. Each person
should have power to dispose by will of his or her whole property; but
not to lavish it in enriching some one individual beyond a certain
maximum.” (_Principles_, Book II, chap. 2, § 4.)

It is hardly necessary to say that this limitation of the right of
inheritance is a purely personal opinion of Mill, and that it is rejected
along with his other solutions by most individualists. It is not quite
correct to say then, as Schatz has said in his _Individualism_, that
Stuart Mill is “the very incarnation of the individualistic spirit.” He
was really a somewhat sceptical disciple of the school, and his frequent
change of opinion was very embarrassing!

[792] _Principles_, Book II, chap. 6, § 2.

[793] “There is at every time and place some particular rate of profit,
which is the lowest that will induce the people of that country and time
to accumulate savings.… But though the minimum rate of profit is thus
liable to vary, and though to specify exactly what it is would at any
given time be impossible, such a minimum always exists; and whether it
be high or low, when once it is reached no further increase of capital
can for the present take place. The country has then attained what is
known to political economists under the name of the Stationary State.”
(_Ibid._, Book IV, chap. 4, § 3.)

Mill indicates the causes that contribute to a fall in the rate of
profits as well as the causes that arrest that fall, such as the progress
of production and the destruction of wealth by wars and crises.

It may be worth while pointing out that the word profit as employed
by the English economists, and especially by Mill, has not the same
meaning as it has with the French writers. French economists since the
time of Say have employed the term profit to denote the earnings of
the _entrepreneur_, the capitalist’s income being designated interest.
The English economists do not distinguish between the work of the
_entrepreneur_ and that of the capitalist, and the term profit covers
them both. The result is that the French Hedonistic economists can say
that under a _régime_ of absolutely free competition profit would fall
to zero, while the English economists cannot accept their thesis because
profits include interest, which will always remain as the reward of
waiting.

The French point of view is more generally adopted to-day.

[794] In a letter to Gustave d’Eichthal, recently published, speaking of
Auguste Comte, he writes as follows: “How ridiculous to think that this
law of civilisation requires as its correlative constant progress! Why
not admit that as humanity advances in certain respects it degenerates in
others?”

[795] On the question of co-operation as a method of social reform,
Cairnes, who simply refers to it as a possible alternative, may have owed
something to Mill.

[796] _Essays_, p. 281.

[797] Since 1830 there have only been four professors.—J. B. Say, Rossi,
Michel Chevalier, and Chevalier’s son-in-law, M. Paul Leroy-Beaulieu. The
history of the chair is a fair summary of the history of French economics.

[798] His most curious book, perhaps, was _De la Baisse probable de l’Or_,
a title that caused a good deal of amusement during the latter half of the
nineteenth century, but which proved somewhat of a prophecy after all.

[799] Joseph Garnier, who must not be confused with Germain Garnier, the
translator of Smith’s works, published the first edition of his _Éléments
d’Économie politique_ in 1845. From 1848 up to his death in 1881 he was
chief editor of the _Journal des Économistes_.

[800] G. Schmoller, _Zur Litteraturgeschichte der Staats- und
Sozialwissenschaften_ (Leipzig, 1888). The expression will be found in
his study of Roscher.

[801] A. Toynbee, _The Industrial Revolution_.

[802] It is curious that the Historians never refer to Sismondi as
one of the pioneers of historical study. Roscher and Hildebrand never
mention him at all, and Knies only thinks of him as a socialist (cf. _Die
Nationalökonomie vom historischen Standpunkt_, 2nd ed., p. 322).

[803] Even List did not escape criticism at their hands. Hildebrand
thinks that he was infected with the atomic views of Adam Smith and never
showed himself sufficiently conscious of the ethical nature of society.
“List seems to think that the entire subordination of private interest to
public utility is dictated by custom, and even by private interest when
properly understood, but he never regards it as a public duty rising out
of the very nature of society itself.” (Hildebrand, _Die Nationalökonomie
der Gegenwart und Zukunft_, p. 73.) Note the ethical standpoint of the
school.

[804] See, among others, Max Weber’s articles in Schmoller’s _Jahrbuch_
for 1903, p. 1881, and 1905, p. 1323. The methodological errors of
Roscher, Knies, and Hildebrand get their due meed of criticism.

[805] _Grundriss_, preface.

[806] Knies is of the same opinion. He remarks that Roscher’s work
simply means “a completion of historiography rather than a correction
of political economy.” (_Die Nationalökonomie vom geschichtlichen
Standpunkte_, p. 35.)

[807] _Grundriss_, preface, pp. iv-v.

[808] _Untersuchungen über die Methode der Sozialwissenschaften und der
Politischen Oekonomie insbesondere._ (Leipzig, 1883.)

[809] Schmoller, _loc. cit._ For further information concerning the
Cameralists see _Geschichte der Nationalökonomie_, by M. Oncken. Menger
and Schmoller also connect Roscher with Heeren, Gervinus, and the other
historians of Göttingen who during the first quarter of the nineteenth
century tried to found a science of politics upon a general study of
history. Roscher had studied history under them, and his aim is in every
respect similar to theirs.

[810] In the introduction, p. v, he declares that the object of his work
is “to open a way for an essentially historical standpoint in political
economy and to transform the science of political economy into a body of
doctrines dealing with the economic development of nations.”

[811] Even Roscher had ventured to say that they partook of a
mathematical nature. This is how he expresses his views as against those
of Hildebrand on the real aim of political economy in the _Jahrbücher
für Nationalökonomie und Statistik_, vol. i, p. 145: “Economic science
need not attempt to find the unchangeable, identical laws amid the
multiplicity of economic phenomena. Its task is to show how humanity has
progressed despite all the transformations of economic life, and how this
economic life has contributed to the perfection of mankind. Its task is
to follow the economic evolution of nations as well as of humanity as a
whole, and to discover the bases of the present economic civilisation as
well as of the problems that now await solution.”

[812] The exact title of the first edition was _Die Politische Oekonomie
vom Standpunkte der geschichtlichen Methode_. A second edition appeared
in 1883 with a slightly different title. Our quotations are taken from
the second edition.

[813] Schmoller, _Grundriss der Volkswirtschaftslehre_, vol. i, p. 107
(1904).

[814] _Ibid._, vol. i, p. 108.

[815] _Ibid._, vol. ii, p. 653.

[816] All historians, however, are not equally sceptical. Ashley in his
preface to _English Economic History and Theory_ writes as follows: “Just
as the history of society, in spite of apparent retrogressions, reveals
an orderly development, so there has been an orderly development in the
history of what men have thought, and therefore in what they have thought
concerning the economic side of life.” And Ingram, in his _History of
Political Economy_, points out that “As we have more than once indicated,
an essential part of the idea of life is that of development—in other
words, of ordered change. And that such a development takes place in the
constitution and working of society in all its elements is a fact which
cannot be doubted.… That there exist between the several social elements
such relations as make the change of one element involve or determine
the change of another is equally plain; and why the name of natural
laws should be denied to such constant relations of coexistence and
succession it is not easy to see. These laws being universal admit of the
construction of an abstract theory of economic development.” (P. 205.)

[817] Schmoller thinks that the science in the present stage of
development, while it cannot be prevented from attempting a philosophy
of history, is much better employed in building up simple scientific
hypotheses with a view to gauging the future course of development than
in getting hold of “absolute truths.”

[818] Marshall, _Principles_, Appendix A.

[819] Its influence has been noted by Toynbee in his article on _Ricardo
and the Old Political Economy_. “It was the labour question, unsolved
by that removal of restrictions which was all deductive political
economy had to offer, that revived the method of observation. Political
economy was transformed by the working classes.” Elsewhere he adds:
“The Historical method is often deemed conservative, because it traces
the gradual and stately growth of our venerable institutions; but
it may exercise a precisely opposite influence by showing the gross
injustice which was blindly perpetrated during this growth.” (_Industrial
Revolution_, p. 58.)

[820] The first edition appeared in 1857.

[821] We would specially mention Levasseur’s excellent work, _Histoire
des Classes ouvrières en France_ (first edition, 1867).

[822] More especially we must mention the group of workers associated
with M. Durkheim and the _Anné sociologique_. But it would be a great
mistake to confuse the two methods, the Historical and the Sociological.
See Simiand, _Méthode historique et Science sociale_, in the _Revue de
Synthèse historique_, 1903. See also _La Méthode positive en Science
économique_ (Paris, 1912), which contains a study of the methodological
problems presented by political economy.

[823] There is one aspect of the critical work of the German school
with which we have not dealt in this book—namely, the criticism of
_laissez-faire_. Some of the members, _e.g._ Hildebrand, have insisted
on the ethical criterion, but none of them share in the optimism of
either Smith or Bastiat. The emphasis laid upon relativity made this
quite impossible. But all the more eminent writers have remained
faithful to the Liberal teaching of the founders. See Hildebrand’s
confession of faith at the beginning of vol. i of the _Jahrbücher für
Nationalökonomie_, 1863, vol. i, p. 3. And although some of them, _e.g._
Brentano and Schmoller, seem to be connected with the new current of
ideas that gave rise to State Socialism, the association was quite
accidental. They never considered it an organic part of their teaching,
and they made no very original contribution to that part of the study.
Their connection with economics must always depend upon the light which
they have thrown upon the question of method.

[824] Cf. Schmoller’s account of Menger’s work published in the
_Jahrbuch_ in 1884. The article appears also in the volume entitled _Zur
Litteraturgeschichte der Staats- und Sozialwissenschaften_ (1888).

[825] Cf. Menger, _loc. cit._, pp. 130 _et seq._ Marshall’s ironical
remark is very apposite here: “German economists have done good service
by insisting on this class of consideration, but they seem to be mistaken
in supposing that it was overlooked by the older English economists.”
(_Principles_, Book I, chap. 6, note.)

[826] Knies, _loc. cit._, pp. 24-25. Ashley gives an unmistakable
expression to the same opinion in his _History_. “Political economy is
not a body of absolutely true doctrines, revealed to the world at the
end of the last and the beginning of the present century, but a number
of more or less valuable theories and generalisations.… Modern economic
theories, therefore, are not universally true; they are true neither for
the past, when the conditions they postulate did not exist, nor for the
future, when, unless society becomes stationary, the conditions will have
changed.” (Preface.)

[827] See Karl Pearson, _The Grammar of Science_.

[828] Marshall, _Principles_, 4th ed., Book I, chap. 6, § 6.

What we say about the mathematical method does not imply any criticism of
the Mathematical method in political economy. To establish mathematical
relations between economic phenomena, as Walras and his school did, and
to deduce economic conclusions from general mathematical theories are two
different things.

[829] Knies employs the differences there set up in order to deny
that economic laws have even the character of national laws. The new
Historical school does not go quite so far, as we shall see presently.

[830] Chap. 4, “Of the Logic of the Moral Sciences.”

[831] _Principles_, Book I, chap. 6, § 6.

[832] Walras, _Economie politique pure_.

[833] Some authors would not admit complete assimilation; e.g. Wagner
(_Grundlegung_, vol. i, p. 335).

[834] Schmoller especially insists on this point.

[835] Knies, _op. cit._, p. 23.

[836] A. Wagner, _Grundlegung_, § 67.

[837] Vol. ii, p. 502.

[838] _Logic_, vol. ii, p. 497.

[839] _Principles_, Book I, chap. 5, § 9.

[840] Marshall, _Principles_, Book I, chap. 5, § 7.

[841] _Zur Litteraturgeschichte_, p. 279.

[842] _Untersuchungen über die Methode_, p. 279.

[843] The English economists, even the most eminent, are often mistaken,
says Wagner (_Grundlegung_, chap. 4, § 4), but their errors are not to
be imputed to their method so much as to the use they make of it. And
Menger, who so energetically undertook the defence of deduction, further
undertakes to renew the Classical theories. Economic theory, says he, as
constituted by the English Classical school, has not succeeded in giving
us a satisfactory science of economic laws (Menger, _loc. cit._, p. 15).

[844] Cf. Menger, _loc. cit._, p. 79: “The student of pure mechanics does
not deny the existence of air or friction, any more than the student of
pure mathematics denies the existence of real bodies, of surfaces, and
lines, or the student of pure chemistry denies the influence of physical
forces or the physicist the presence of chemical factors in actual
phenomena, although each of these sciences only considers one side of
the real world, making an abstraction of every other aspect of it. Nor
does the economist pretend that men are only moved by egoism or that they
are infallible and omniscient because they envisage social life from the
point of view of the free play of individual interest uninfluenced by
other considerations, by sin or ignorance.” Wagner and Marshall take the
same view.

[845] So great is the respect for psychology among the deductive writers
of to-day that it has been suggested that the Austrian school should be
known as the Psychological school. We can say that they have done much
more in this direction than the Historical school.

[846] _Manuale di Economia politica_, p. 24 (Milan, 1906).

[847] _Principles_, 4th ed., Book I, chap. 3.

[848] _Handwörterbuch der Staatswissenschaften._ In his _Grundriss_ we
read: “The writers who figure as representatives of inductive research
in recent German economics are not opposed to the practice of deduction
as such, but they do believe that it is too often based upon superficial
and insufficient principles and that other principles derived from a more
exact observation of facts might very well be substituted for these.”
Everyone would subscribe to this view.

[849] _Die Entstehung der Volkswirtschaft_, Dr. Wickett’s translation.

[850] “National life, like every other form of existence, forms a whole
of which the different parts are very intimately connected. Complete
understanding even of a single aspect of it requires a careful study
of the whole. Language, religion, arts and sciences, law, politics and
economics must all be laid under tribute.” (Roscher, _Principles_.) Cf.
also Hildebrand, _Die Nationalökonomie der Gegenwart und Zukunft_, p. 29.
This is also Knies’s thought.

[851] _Die Nationalökonomie der Gegenwart und Zukunft_, p. 29.

[852] _Principles_, Book I, chap. 4, § 1. “History,” says Wagner
(_Grundlegung_, § 83), “may well affirm the existence of causal or
conditional relations, but it can never prove it.”

[853] History may, as a matter of fact, become explanatory, but only in a
particular sense. In other words, although it cannot discover the general
laws regulating phenomena, it may show what special circumstances (whose
general laws are already supposed to be known) have given rise to some
event equally specialised in character. But every honest historian has
to admit that such explanations are definitely personal and subjective
in character. For a recent examination of these ideas from the pen of
a historian see the profound yet charming introduction contributed by
Meyer to the second edition of his _Geschichte des Alterthums_. Cf. also
Simiand, pp. 14-16.

[854] Cf. Marshall, _Principles_, Book I, chap. 6, § 4, and especially
Menger, _Untersuchungen_, pp. 15-17: “We may be said to have historical
knowledge of a particular phenomenon when we have traced its individual
genesis, _i.e._ when we have succeeded in representing to ourselves the
concrete circumstances among which it came into being, with their proper
qualifications, etc. We may be said to have a theoretical knowledge
of some concrete phenomenon when we are enabled to envisage it as a
particular instance of a certain law or regularity of sequence or
coexistence, _i.e._ when we are able to give an account of the _raison
d’être_ and the nature of its existence as an exemplification of some
general law.”

[855] A full exposition of this idea is given in his _Grundriss_, but
Knies, in the name of the conception of a unique evolution, contests the
view.

[856] This is what M. Renouvier thinks of this conception: “If we proceed
to ask another question in addition to the difficult one already asked
and inquire as to the circumstances under which different nations have
advanced or declined in the path of goodness and of truth and transmitted
their triumphs or their defeats to the next generations, and if we
support ourselves in the quest by the belief that we already have some
knowledge of a scientific law and consequently of the aim of human
society (this kind of knowledge generally begins with formulating such
aims), we shall find ourselves in the position of a religious prophet
who, not merely content with an inspired version of the truth, and of the
destiny of mankind, proceeds to expound to his auditors the necessity
under which both preacher and auditors are compelled to believe and to
act in accordance with what will undoubtedly come to pass. Philosophical
and religious imagination seeks in external observation the elements of
a confidence which it can no longer place in itself. History becomes
a kind of inspiring divinity. But although the object of the illusion
is different its nature is still the same, for the new deity is as
little effective as were the ancient ones in the opinion of those who
have no faith in it, and it only inspires those who already believe.”
(_Introduction à la Philosophie analytique de l’Histoire_, 2nd ed.,
vol. i, p. 121.) Bergson’s philosophy also contests the possibility of
guessing what the future may be like from the character of the present.
See especially _Creative Evolution_.

[857] _Grundlegung_, p. 342.

[858] Cf. Ingram, _History of Political Economy_, and Denis, _Histoire
des Systèmes_.

[859] A. Comte, _Cours_, vol. iv, p. 198.

[860] _Cours_, vol. iv, p. 328.

[861] It is interesting to learn the views of historians on this point.
Meyer thinks that the object of history is not to discover the general
laws of development, but to describe and explain particular concrete
events as they succeed one another. Such descriptions can only be made
in accordance with the rules of historical criticism, but explanation is
only possible with the aid of analogy. “It is only by the use of analogy
that the historian can explain past events, especially where there are
psychological motives that require analysis. The explanation thus given
will necessarily be of a subjective character, and from its very nature
somewhat problematic.” Cf. Ed. Meyer, _Geschichte des Alterthums_,
Introduction, 2nd ed. §§ 112 _et seq._ There does not seem to be any
connection between this method and that of Aug. Comte. One becomes
still more convinced of this after reading Langlois and Seignobos’s
_Introduction aux Études historiques_ or G. Monod’s study in historical
method in _De la Méthode dans les Sciences_ (Paris, 1909), or, finally,
the numerous articles dealing with this question of method which have
appeared in the _Revue de Synthèse historique_.

[862] _Theory of Political Economy_, preface to the second edition, 1879.

[863] Schmoller’s _Jahrbuch_ contains descriptive studies of present-day
commercial and industrial undertakings which are veritable models.

[864] _The Present Position of Political Economy_, in the _Economic
Journal_, 1907, p. 481.

[865] We have not the necessary space in this volume to refer to the
history of statistics. This science, though independent of political
economy, is, however, such a powerful auxiliary that its progress has to
some extent been parallel with the growth of economics. During the last
twenty years the methods of interpreting statistics (we are speaking
merely of observation) have been very considerably improved. The logical
problems involved have been studied with much care, and the application
of mathematics to these problems has proved very fruitful. No student
of the social sciences can afford to neglect such mathematical theories
as those of combination, correlation, degree of error, etc. The history
of statistics, which contains many eminent names, from Quetelet to Karl
Pearson, would certainly deserve a chapter in a book dealing with method,
although there would be some risk of giving it too statistical a bias. We
must rest content with referring the reader to Udny Yule’s _Introduction
to the Theory of Statistics_, which constitutes what is perhaps the
best recent introduction to the discussion concerning the method to be
employed in this social science, and forms an indispensable complement to
the study of the problems examined in this chapter.

[866] Dupont-White makes the remark somewhere that the State, strictly
speaking, has only existed since 1789. It appears, then, that a State
which is not constitutional, democratic, and liberal has none of the
virtues of the true State. Such exclusion, although permissible in the
publicist, is indefensible in the theorist or historian.

[867] “The distinctive character of the State merely consists in this
necessity to have recourse to force, which also helps to indicate the
extent and the proper limits of its action. Government is only possible
through the intervention of force, and its action is only legitimate when
the intervention of force can be shown to be justifiable.” (_Harmonies_,
10th ed., pp. 552-553.)

[868] _Wealth of Nations_, Book IV, chap. 9; Cannan’s ed., vol. ii, p.
185.

[869] _Harmonies_, 10th ed., p. 556.

[870] Hermann, _Staatswirtschaftliche Untersuchungen_, 1st ed., pp. 12-18.

[871] A similar idea is contained in _Liberty_, where it is stated that
“trade is a social act,” that the conduct of every merchant “comes
within the jurisdiction of society,” and that “as the principle of
individual liberty is not involved in the doctrine of Free Trade, so
neither is it in most of the questions which arise respecting the limits
of that doctrine; as, for example, what amount of public control is
admissible for the prevention of fraud by adulteration; how far sanitary
precautions, or arrangements to protect workpeople employed in dangerous
occupations, should be enforced on employers.… But that they [people] may
be legitimately controlled for these ends is in principle undeniable.”
(Chap. 5.)

[872] Michel Chevalier, Introductory Lectures, No. 10, in _Cours_, vol.
i, p. 221.

[873] _Cours_, vol. i, pp. 211, 214; vol. ii, pp. 38, 115.

[874] Pareto, _Cours d’Économie politique_, vol. ii, § 656 (1897).

[875] _Principes_, p. 422.

[876] _Ibid._, pp. 444, 462, 521.

[877] Stuart Mill has tried to do so in a formula that is not very
illuminating: “To individuality should belong the part of life in which
it is chiefly the individual that is interested; to society, the part
which chiefly interests society.” (_Liberty_, chap. 4.)

[878] Republished in his _Études d’Économie sociale_, 1896. See a brief
_résumé_ in our chapter on Rent.

[879] For a general account of Lassalle’s life, and especially his
relations with Bismarck, see Hermann Oncken, _Lassalle_ (Stuttgart, 1904).

[880] There has been no dispute concerning the French origin of
Rodbertus’s ideas since the evidence was sifted by Menger in his
_Das Recht auf den vollen Arbeitsertrag_ (1st ed., 1886). But
Menger only mentions two sources of inspiration, Proudhon and the
Saint-Simonians. The text will sufficiently indicate his indebtedness
to the Saint-Simonians, but we think that Sismondi might well have
been substituted for Proudhon. The only Proudhonian doctrine that is
discoverable in Rodbertus is the theory concerning the constitution of
value. But in the second of the _Soziale Briefe_ (_Schriften_, vol.
ii, p. 46, note) he states definitely that the idea was not a borrowed
one, and that he himself was the first to formulate it, although he
omits to state in what connection. He may be referring to a passage in
his _Forderungen_, where the idea is quite clearly expressed. Speaking
of Ricardo’s theory of value, he says: “That theory comes to grief on
a single issue, namely, in regarding a thing as existing when it only
exists in the mind, and treating a thing as a reality when it only
becomes real in the future.” (_Schriften_, vol. iii, p. 120.) It is
clearly pointed out that the task of the future is to determine what
value is. The _Forderungen_, where all the master ideas of Rodbertus may
be studied, was published in 1837, nine years before the _Contradictions
économiques_ was published by Proudhon, who made his first reference to
the question in that work.

[881] _Zur Erkenntniss unserer staatswirtschaftlichen Zustände_ (New
Brandenburg, 1842). The work was to consist of three parts, only the
first of which was published, and that has not been reissued since.

[882] The first three _Soziale Briefe_, as well as the _Forderungen_,
have been republished in _Schriften von Dr. Karl Rodbertus-Jagetsow_
(Berlin, 1899, 3 vols.). This is the edition we quote. The fourth
_Brief_, entitled _Das Kapital_, was written in 1852, but was not
published until after Rodbertus’s death. It was translated into French
in 1904 by M. Chatelain, and published by Messrs. Giard and Brière.
Our references in the succeeding pages are to this edition. Two other
articles written by Rodbertus have been published, one by R. Meyer under
the title _Briefe u. Sozialpolitische Aufsätze_ (Berlin, 1882), the other
by Moritz Wirth under the title of _Kleine Schriften_ (Berlin, 1890). For
a complete bibliography of Rodbertus’s work see Andler’s _Le Socialisme
d’État en Allemagne_ (Paris, 1897). Professor Gonner has written an
illuminating study of his political philosophy.

[883] In his introduction to the _Briefe von Lassalle an Rodbertus_, p. 8
(Berlin, 1878).

[884] On the other hand, as Menger shows, the sources of Marx’s theory
are English rather than French—another point of difference between the
two socialists.

[885] He was for a short time Minister of Public Worship. Appointed on
July 4, he resigned at the end of a fortnight because his colleagues
refused to recognise quite as fully as he wished the rights of the
Parliament of Frankfort.

[886] A characteristic sign of this evolution is the substitution
throughout the second edition of the _Sociale Briefe_ of the word
_Staatswille_ (“the will of the State”) for the word _Volkswille_ (“the
people’s will”). This second edition, comprising the second and third
letters, was published by him in 1875 under the title _Zur Beleuchtung
der sozialen Frage_.

[887] Letter to R. Meyer, November 29, 1871. This point of view is
developed at length in his “Open Letter to the Committee of the
Association of German Workmen at Leipzig,” April 10, 1863, published by
Moritz Wirth in the _Kleine Schriften_.

[888] Letter to R. Meyer, March 12, 1872. Cf. the letters of January 23
and February 3, 1871.

[889] _Ibid._, November 30, 1871. In 1874 he proposes to offer himself as
a socialist candidate for the Reichstag, but recognises that the State
must first of all be strengthened on the military side as well as on the
religious.

[890] _Ibid._, October 17, 1872.

[891] _Ibid._, January 6, 1873.

[892] _Ibid._, March 10, 1872, and _Physiokratie u. Anthropokratie_, in
_Briefe u. Sozialpolitische Aufsätze_, pp. 521, 522.

[893] He protests vigorously against the title of _Katheder Sozialist_
in a letter of August 26, 1872. A vigorous criticism of the Socialism of
the Chair, written in a private letter of Rodbertus, is quoted at length
by Rudolf Meyer in his _Emancipationskampf des 4ten Standes_, pp. 60-63
(Berlin, 1874).

[894] “Communion or community of labour would be a better term than
division of labour” (_Kapital_, p. 74); and in another connection:
“The only real division of labour is territorial division of labour”
(_ibid._). Elsewhere (p. 87) he warns his readers against confusing the
terms “social” and “national.” Adopting the Saint-Simonian philosophy
of history, he declares history to be a process of unification which
brings gradually widening circles into closer unity with one another
(_Zur Geschichte der römischen Tributsteuer_, in the _Jahrbücher für
Nationalökonomie u. Statistik_, 1865, vol. v, p. 2). “The course of
history is just the expansion of communism.” (_Kapital_, p. 85, note.)

[895] _Physiokratie u. Anthropokratie_, in _Briefe u. Sozialpolitische
Aufsätze_, p. 519.

[896] _Schriften_, vol. iii, p. 216.

[897] “In a social State of this description people produce, not with a
view to satisfying the needs of labour, but the needs of possession; in
other words, they produce for those who possess.” (_Kapital_, p. 161. Cf.
also p. 51.)

[898] “Provided we knew the time that a person could afford to devote to
the work of production, we could easily determine the quantity that would
be sufficient to satisfy the needs of everybody.” (_Kapital_, p. 109.)

[899] _Ibid._, p. 108.

[900] _Kapital_, p. 143.

[901] The question of the net and gross product was one of the
outstanding problems of this period. Vidal (_Répartition des Richesses_,
p. 219, Paris, 1846) and Ott (_Traité d’Économie sociale_, p. 95, 1851)
lay stress upon it. Since then Cournot, Dühring, and more recently
Effertz and Landry, have handled the problem anew. But each of them when
he comes to define the word “productivity” defines it in his own fashion,
so that they do not really discuss the same question. Rodbertus, as we
shall have occasion to point out in the text, uses the word in a very
vague fashion indeed, but still it is the basis of his whole discussion.
It seems to us that under a _régime_ of division of labour rentability
should be the one criterion. But it would be a mistake to imagine that
when dwindling profits make a change in the methods of production
imperative, that change will be welcomed with equal enthusiasm by
everybody, by both master and worker alike.

[902] He is dealing merely with individual wants. Rentability is not the
only guide. Many collective wants must be satisfied, but the process is
not always a profitable one. The problem is to determine which are those
wants. Rodbertus is speaking of private wants; he has taken good care to
leave the public needs aside, so that his argument applies only to the
former.

[903] _Kapital_, pp. 164-166.

[904] Rodbertus further adds that a portion of everybody’s income should
be expended in supplying such public needs. (_Kapital_, pp. 132-133.)

[905] _Kapital_, pp. 150-160.

[906] Cf. _Zur Erkenntniss_, pp. 7-10: “Every economic good costs labour
and only labour.” In the third of the _Soziale Briefe_ he expresses this
idea in a slightly different form: “All economic goods are the product of
labour” (_Schriften_, vol. ii, pp. 105-106). Developing the same thought,
he declares that this formula means: (1) that “only those goods which
have involved labour should figure in the category of economic goods”;
(2) that, “economically speaking, goods are regarded, not as the product
of nature or of any other force, but simply as the product of labour”;
(3) that “goods economically considered are just the product of labour,
carried out by means of the material operations which are necessary for
production.” The work of industrial direction and its remuneration are
regarded in the same light. Cf. _Schriften_, vol. ii, p. 219.

[907] On this point see Rist’s _Le Capital provient-il uniquement du
Travail?_ in the _Revue d’Économie politique_, February 1906.

[908] Rodbertus expressly declares that to say that goods are the product
of labour is not to imply that the value of the product is always equal
to what it cost in the way of labour, or, in other words, that the labour
spent on it does not always measure its value (_Schriften_, vol. ii, pp.
104, 105). A similar statement is made in the _Forderungen_ (1837). In
the _Zur Erkenntniss_ (1842) (pp. 129-131) he gives some of the reasons
why he thinks that the value of a product is not equal to the labour
it has cost: (1) There is the necessity for equalising the gains of
capital; (2) the price of a unit of any commodity is fixed by the price
of the unit which costs most to reproduce. In the second of the _Soziale
Briefe_ he repeats the statement that the labour value theory is nothing
better than an ideal (_Kapital_, Appendix, p. 279). In a letter written
to R. Meyer on January 7, 1872, he affirms the demonstration which he
had already given, “that goods do not and cannot exchange merely in
proportion to the quantity of labour which has been absorbed by them
simply because of the existence of capital”; and he adds the significant
words: “a demonstration that might in case of need be employed against
Marx.”

[909] “The coincidence between the value of the products and the quantity
of labour involved in their production is simply the most ambitious ideal
that economics has ever formulated.” (Second _Sozial Brief_.)

[910] Occasionally Rodbertus admits for the sake of hypothesis or
demonstration that prices do coincide with the labour cost; but his
essential theory has no need of any such hypothesis, and it really plays
quite an auxiliary or subordinate _rôle_. It is in the course of his
exposition of the theory concerning the distribution of unearned income
between landed proprietors and capitalists (quite an erroneous theory,
by the way) that he is driven to admit that “the exchange value of each
completed product, as well as of each portion of the product, is equal to
its labour value.” (Third _Sozial Brief, Schriften_, vol. ii, p. 101.)

[911] _Kapital_, p. 105.

[912] “Whenever exchange is allowed to take its own course in the matter
of distributing the national dividend, certain circumstances connected
with the development of society and with the growing productivity of
social labour cause the wages of the working classes to diminish so as
to constitute a decreasing fraction of the national product.” (Second
_Sozial Brief, Schriften_, vol. ii, p. 37.)

[913] _Kapital_, p. 153.

[914] The idea that _entrepreneurs_ base their production upon the
demand of the higher classes is a somewhat novel one, but it is quite
definitely stated by Rodbertus. “The classes can only influence the
market in proportion to the quantity of the social product which is
given them. But the _entrepreneurs_ must determine the quantities which
they will produce, according to the size of their demands.” (_Kapital_,
pp. 51-52. Cf. also pp. 170-171.) It is quite obvious, on the contrary,
that the _entrepreneurs_ base their production solely upon the demand
for the particular goods which they manufacture, and that they are quite
indifferent to the share which goes to the higher classes.

[915] _Kapital_, p. 53.

[916] We shall soon be convinced of the similarity that exists between
the two theories if we read the passage in the article on _Balance des
Consommations avec les Productions_, published by Sismondi as an appendix
to the second edition of the _Nouveaux Principes_, vol. ii, p. 430.
Rodbertus agrees with Sismondi that equilibrium will be re-established in
the long run, but that in the meantime a crisis may have to intervene.
(_Kapital_, p. 171, note; cf. p. 190, _supra_.)

[917] Such, as we have already seen, is Colson’s conclusion (_Cours_,
vol. iii, p. 366), and such is the verdict of M. Chatelain after studying
the United States census returns. According to Chatelain (_Questions
pratiques de Législation ouvrière_, June and July, 1908), the American
metal-workers’ share in the product fell from 71 to 68 per cent. between
the years 1890 and 1905, while capital’s share increased from 28 to 32
per cent. The men’s wages during the same period rose from 551 dollars
to 626, while the rate of interest fell from 9 to 8 per cent. Despite
this diminution in labour’s share of the total product it is impossible
to say whether the remuneration of labour in general is moving upward or
downward, for the working classes do not depend solely upon the wages of
their labour. Some of them have a little capital—a very small amount,
perhaps, but there is no reason for thinking that it will not grow in
future.

It is quite clear that this complicated question must be carefully
defined. Three different factors must be distinguished: (1) The
individual’s wage; (2) labour’s share in the product; (3) the income of
the working class. On this problem see Edwin Cannan’s article in the
_Quarterly Journal of Economics_, 1905, and his statements in his _Theory
of Production and Distribution_, 1776-1848.

[918] _Kapital_, p. 176.

[919] _Ibid._, p. 187.

[920] “And so I believe that just as history is nothing but a series
of compromises, the first problem that awaits economic science at the
present moment is that of effecting some kind of a working compromise
between labour, capital, and property.” (_Kapital_, p. 187.) In a letter
written on September 18, 1873, to R. Meyer, he declares that the great
problem “is to help us to pass by a peaceful evolution from our present
system, which is based upon private property in land and capital, to
that superior social order which must succeed it in the natural course
of history, which will be based upon desert and the mere ownership of
income, and which is already showing itself in various aspects of social
life, as if it were already on the point of coming into operation.”

[921] Cf. _Kapital_, pp. 109 _et seq._, and especially his article _Der
Normalarbeitstag_, which appeared in 1871 and was republished in _Briefe
u. Sozialpolitische Aufsätze_, p. 552 _et seq._ The idea of determining
value in the way Rodbertus intended was criticised by Marx in his _Misère
de la Philosophie_, _à propos_ of Proudhon’s attempt in 1847. The
socialisation of production involves the socialisation of exchange as
well. This is another point upon which Marx and Rodbertus differ.

[922] Cf. _Kapital_, p. 188, note.

[923] _Zur Geschichte der römischen Tributsteuer_, in _Jahrbücher für
Nationalökonomie u. Statistik_, vol. viii, pp. 446-447, note.

[924] “Extreme socialism,” says Wagner, “is simply an exaggeration of
that partial socialism which has long been a feature of the economic
and social evolution of all nations, especially the most civilised.”
(_Grundlegung_, 3rd ed., p. 756.)

[925] George Meredith in his _Tragic Comedians_ weaves his story round
this tragic adventure, giving us an admirable study of Lassalle’s
psychology. Cf. also _Lassalle_, by Georges Brandes, and Oncken’s
_Lassalle_ (Stuttgart, 1904).

[926] _Théorie systématique des Droits acquis_, vol. i, p. 274, note
(Paris, 1904).

[927] _Briefe von Lassalle an Rodbertus_, p. 46 (Berlin, 1878).

[928] _Ibid._, p. 44.

[929] _Freilich darf man das dem Mob heut noch nicht sagen._ (_Ibid._, p.
46.)

[930] “No workman will ever forget that property whenever legally
acquired is absolutely inviolable and just,” says he in an address
delivered to the workers of Berlin on April 12, 1862, and published under
the title of _Arbeiterprogramm_ (_Schriften_, vol. i, p. 197). Elsewhere
he defends himself against the charge of inciting the proletariat by
claiming that his agitation was of a purely democratic character, and
intended to facilitate the fusion of classes (_ibid._, vol. ii, pp.
126-127). (Our quotations are taken from Pfau’s edition. We were unable
to obtain the latest and by far the best edition of Lassalle’s works,
published by Bernstein.)

[931] Wagner’s introduction to _Briefe von Lassalle an Rodbertus_, p.
5. Lassalle has himself defined this somewhat Machiavellian attitude
in a letter written to Marx in 1859, in which he speaks of a drama
which he had just written dealing with Franz von Sickingen. “It looks
like the triumph of superior realistic ability when the leader of a
rebellion takes account of the limited means at his disposal and attempts
to hide from other men the real object which he has in view. But the
success achieved by deceiving the ruling classes in this way puts him in
possession of new forces which enable him to employ this partial triumph
for carrying out his real object.” (_Aus dem litterarischen Nachlass
von K. Marx, F. Engels, und Lassalle_, vol. iv, p. 133; published by F.
Mehring, Stuttgart, 1902.)

[932] _Schriften_, vol. ii, p. 99. This address has been published under
the title of _Arbeiterlesebuch_. This is just the attitude of which Marx
disapproved. In a letter written to Schweitzer on October 13, 1868,
quoted by Mehring (_Aus dem litterarischen Nachlass_, etc., vol. iv, p.
362), he expresses himself as follows: “He is too liable to be influenced
by the immediate circumstances of the moment. He exaggerates the trivial
difference between himself and a nonentity like Schulze-Delitzsch, until
the issue between them, governmental intervention as against private
initiative, becomes the central point of his agitation.”

[933] _Schriften_, vol. i, p. 213.

[934] See, among others, the chapter entitled _Hegel et la Théorie de
l’État_, in Lévy-Brühl’s _L’Allemagne depuis Liebnitz_, especially p. 398
(Paris, 1890). The State, according to Hegel, is an expression of the
spirit realising itself in the conscience of the world, while nature is
an expression of the same spirit without the conscience, an _alter ego_—a
spirit in bondage. God moving in the world has made the State possible.
Its foundation is in the might of reason realising itself in will. It
is necessary to think of it not merely as a given State or a particular
institution, but of its essence or idea as a real manifestation of the
mind of God. Every State, of whatever kind it may be, partakes of this
divine essence. For full information concerning the philosophical origin
of State Socialism see Andler’s _Le Socialisme d’État en Allemagne_
(1897).

[935] Fichte issued a very curious work in 1800 entitled _Der
geschlossene Handelsstaat_, published in vol. iii of his complete works
(Berlin, 1845), and containing ideas with many points of resemblance to
those of State Socialism. Fichte thought that the State should not merely
guarantee to every citizen his property, but should first of all rear its
citizens, let them build their property, and then defend it. In order to
do this everyone should be given the necessary means of livelihood, for
the one aim of all human activity is to live, and everyone here has an
equal right to live (p. 402)—a declaration of the right of existence.
Until all are so provided for no luxuries should be allowed. No one
should decorate his house until he feels certain that everyone has a
house, and everyone should be comfortably and warmly clad before anyone
is elegantly dressed (p. 400). “Nor is it enough to say that I can afford
to pay for it, for it is unjust that one individual should be able to
buy luxuries while his fellow citizens have not enough to procure the
necessaries of life. The money with which the former purchases his
luxuries would in a rational State not be his at all.” Adopting this as
his guiding principle, Fichte proposes to organise a State in which the
members of every profession, agriculturists, artisans, merchants, etc.,
would make a collective contract with one another, in which they would
promise not to encroach upon one another’s labour, but would guarantee
to everyone a sufficient number of the goods which each has made for
his own use. The State would also undertake to see that the number of
persons in every profession was neither too few nor too many. It would
also fix the price of goods. Lastly, in view of the fact that foreign
trade would naturally upset the equilibrium established by the contract
which guaranteed security of existence to each individual, the commercial
State would have to be entirely hemmed in by tariff walls. The whole work
is original and interesting. A. Menger, who gives a brief _résumé_ of
it in his second chapter of _The Right to the Whole Produce of Labour_,
thinks that Fichte was influenced by what he saw of the Convention during
the Reign of Terror, by the issue of assignats, and perhaps by Babeuf.
Fichte, on the other hand, takes care to point out that his commercial
State is not realisable as such, but that a book like his is not less
useful in view of the general hints which it affords a statesman.

[936] It is remarkable that the majority of the commercial and financial
measures introduced in Germany between 1866 and 1875, such as a uniform
system of weights and measures, the reform of the monetary system, banks,
the tariffs, etc., were directly inspired by the principles of economic
Liberalism.

[937] A copy of the text translated into French appeared in the _Revue
d’Économie politique_, 1892. The translation was the work of our
regretted colleague Saint-Marc.

[938] In addition to Wagner we might mention Albert Schaeffle, who has
shown considerable literary activity, but who is more of a sociologist
than an economist. His great work, _Bau und Leben des sozialen Körpers_
(1875-78), contains an organic and biological theory of society, but his
best known book is the _Quintessenz des Sozialismus_.

[939] Wagner’s principal works, which contain an exposition both of
the ideas and programme of State Socialism, are _Grundlegung_ (1st ed.
1876), translated into French in 1900 under the title _Fondements de
l’Économie politique_; _Finanzwissenschaft_; his article _Staat_ in the
_Handwörterbuch der Staatswissenschaften_; and especially two articles
entitled _Finanzwissenschaft_ and _Staatssozialismus_, published in the
_Zeitschrift für die gesammte Staatswissenschaft_, 1887, pp. 37-122,
675-746. One might profitably consult two addresses, the one of March 29,
1895, _Sozialismus, Sozialdemokratie, Katheder u. Staatssozialismus_, the
other of April 21, 1892, _Das neue sozialdemokratische Programm_.

[940] It is a curious fact that Wagner’s definition of the province
and functions of the State is not very different from Smith’s, though
differing considerably from Bastiat’s. “As a general rule,” says he,
“the State should take charge of those operations which are intended
to satisfy the wants of the citizens, but which private enterprise or
voluntary associations acting for the community either cannot undertake
or cannot perform as well or as cheaply.” (_Grundlegung_, 3rd ed., 1893,
1st part, p. 916.)

[941] “Liberalism only recognises one task which the State can perform,
namely, the production of security.” (Quoted by Schönberg, _Handbuch
der politischen Oekonomie_, 3rd ed., vol. i, p. 61. The quotation
is taken from Rentzsch’s dictionary, articles on _Freihandel_ and
_Handelsfreiheit_.)

[942] “Kultur und Wohlfahrtzweck” (Wagner, _Grundlegung_, p. 885.)

[943] Wagner, _Grundlegung_, 3rd ed., pp. 811 _et seq._; 839 _et seq._
The State Socialists have a habit of wrongfully using the two expressions
“free competition” and “economic liberty” as if they were synonymous
terms. See _Grundlegung_, p. 97.

[944] Dupont-White, _L’Individu et l’État_, 5th ed., p. 9.

[945] _Ibid._, p. 267.

[946] Preface to Stuart Mill’s _Liberty_.

[947] Wagner, _Grundlegung_, 3rd ed., pp. 892 _et seq._

[948] _Finanzwissenschaft und Staatssozialismus_, p. 106.

[949] See _supra_, p. 430.

[950] Dupont-White, _Capital et Travail_, p. 353 (1847); _L’Individu et
L’État_, p. 81.

[951] _L’Individu et l’État_, p. 65.

[952] _Ibid._, pp. 163, 164.

[953] “No means has as yet been suggested which will help to delimit the
functions of the State from those of the individual. But that is not a
consideration of any great moment, for we can always arrange matters so
as to make them balance roughly when it comes to a particular case.”
(_L’Individu et l’État_, pp. 298 and 301.) Elsewhere (in his preface to
Mill’s _Liberty_) he gives it as his opinion that such a delimitation is
impossible, and that when we are speaking of the State and the individual
we are speaking of two distinct powers, such as life and law (p. vii).
Law has to follow in the footsteps of life, reproving its excesses and
correcting its faults (p. xiii).

[954] Wagner, _Grundlegung_, p. 887.

[955] State enterprise is to be recommended wherever possible, “not
only for specific reasons which make the State ownership of certain
industries highly desirable, but also for reasons of social policy,
such as the advisability of helping industry to pass from a _régime_ of
individual ownership to that of communal control.” (_Finanzwissenschaft
und Staatssozialismus_, p. 115.)

[956] Dupont-White’s individualism is as unimpeachable as Wagner’s,
which proves that an individualist need not always be a Liberal. “The
author of _Liberty_,” says he in his preface to Mill’s _Liberty_, p.
lxxxix, “has a keen sympathy for individualism, which I share to the
full, though without any misgivings as to the future destiny of this
unalterable element. Individualism is life. In that sense individualism
is imperishable.”

[957] Cf., for example, Schmoller’s open letter to von Treitschke
(1874-75), translated in his _Politique sociale et Économie politique_
(Paris, 1902). To the objection that the civil list of European monarchs
is condemned in principle Schmoller replies that he is “speaking of the
average man,” but that “the Hohenzollerns, when considered in this light,
have no more than they deserve” (p. 92). We suspect that this argument
will not carry much weight outside Germany.

[958] Wagner recognises the arbitrary nature of his suggestions.
Theoretically, he says, this method of procedure is quite legitimate,
but practically it is not so simple, “for the object, in short, is to
employ the principles of equity and of social utility, which are by no
means difficult to formulate, and to transmute those principles into
legislative enactments, so as to put a check upon the arbitrary and
excessive accumulation of wealth in the hands of a few individuals, such
as is the case under a régime of free competition.” (_Finanzwissenschaft
und Staatssozialismus_, p. 719.)

[959] P. 398.

[960] _Finanzwissenschaft und Staatssozialismus_, p. 718.

[961] The imperial message of November 17, 1881, announcing the
celebrated series of Insurance Acts admits the necessity for a more
marked policy of State intervention: “To lay hold of the ways and means
whereby the working classes may best be helped is by no means an easy
task, but it is one of the highest which a moral and Christian community
can set its heart upon.” Bismarck, in his speech of May 9, 1884, said:
“I unhesitatingly recognise the rights of labour, and so long as I
occupy this place I shall uphold them. In so doing I base my plea, not
upon socialism, but upon the Prussian Landrecht.” Section 2 of Art. XIX
of the second part of the Prussian Landrecht (February 5, 1794) reads
as follows: “To such as have neither the means nor the opportunity of
earning their own livelihood or that of their family, work shall be
given, adapted to their strength and capacity.” Despite its general tone,
it did not contemplate giving relief.

[962] Speech delivered on March 18, 1889, quoted by Brodnitz, _Bismarcks
Nationalökonomische Ansichten_, p. 141 (Jena, 1902).

[963] The well-known German economist Professor Lexis has unfortunately
not been mentioned in this chapter, for the Göttingen professor has
the misfortune of being neither a State Socialist nor a member of the
Historical school. His works, dealing with various topics—money, the
population theory, and general economic theory—are scattered through a
number of reviews and other publications, especially the _Jahrbücher
für Nationalökonomie und Statistik_, Schönberg’s _Handbuch_, and the
great _Handwörterbuch der Staatswissenschaften_. His writings are
distinguished not only by a definitely scientific method of treatment,
but also by a remarkable clearness of thought. While appearing to
continue the tradition of the Classical school, he takes care to reject
the optimistic conclusions which are too often regarded as an inseparable
element of that tradition. In 1900 Lexis gave us a general _résumé_
of his teaching in the _Allgemeine Volkswirtschaftslehre_, where he
treats of the economic world as concerned merely with the circulation
of goods. In addition to an interesting theory of crises, upon which
we cannot dwell just now, the most original part of the work consists
of a theory concerning the method of distributing the social product
between workers and capitalists. Lexis thinks that all material goods are
produced by labour and measurable in terms of labour. The problem then
is to determine where the capitalist gets his income. The capitalist’s
profit is not the result of exploitation, as Marx thought, but is simply
what is added to the sale price—a sum corresponding to the capitalist’s
interest is added to the sum representing the workmen’s wages. Profit
originates in the sphere of circulation. But how will this increased sale
price benefit the capitalists, seeing that under existing conditions
the workers can only buy the equivalent of the products which they have
already helped to produce? We need to remember, however, that they
produce for the capitalist as well as for themselves, and with the money
thus obtained the working classes are enabled to buy whatever they
need at market prices, _i.e._ at a price that includes interest, which
constitutes the capitalist’s profit. Whenever the capitalists themselves
purchase goods made by themselves they are reciprocally benefiting one
another. Their class position is not modified by such procedure, for
each _entrepreneur_ simply draws profits in proportion to his capital.
And so we avoid the most serious objection which can be raised to Marx’s
theory. This explanation of the surplus value received by the capitalists
is at least very ingenious. Lexis has been mostly influenced by Marx and
Rodbertus, and has attempted a fusion of their more vigorous conceptions.
Despite the objections that might be raised to it, the work is certainly
one of the most original of recent years.

[964] Karl Marx, generally spoken of as a Jew, was born on May 5,
1818, of Jewish parents who had been converted to Protestantism. Born
of a respectable _bourgeois_ family and wedded to the daughter of a
German baron, few would have predicted for him the career of a militant
socialist. Such was to be his lot, however. In 1843, at the age of
twenty-five, the authorities having suppressed a newspaper which he
was conducting, he fled to Paris, and thence to Brussels. Returning to
Germany during the Revolution of 1848, in which he took an active part,
he was again expelled, and this time took refuge in London (1849). Here
he spent the rest of his life (about thirty years), leaving for France
a short time before his death in 1883. He died at London on March 14 in
that year.

Although Marx was one of the founders and directors of the famous
association known as the “International,” which was the terror of
every European Government between 1863 and 1872, he was not a mere
revolutionary like his rival Bakunin, nor was he a famous tribune of
the people like Lassalle. He was essentially a student, an affectionate
father, like Proudhon, an indefatigable traveller, and a man of great
intellectual culture.

The best known of his works, which is frequently quoted but seldom read,
is _Das Kapital_, of which the first volume—the only one published during
his lifetime—appeared in 1867. The other two volumes were issued after
his death, in 1885 and 1894, through the efforts of his collaborator
Engels.

This book has exercised a great influence upon nineteenth-century
thought, and probably no work, with the exception of the Bible and the
Pandects, has given rise to such a host of commentators and apologists.
Marx’s other writings, though much less frequently quoted, are also
exceedingly important, especially _La Misère de la Philosophie_,
published in 1847 in answer to Proudhon’s _Les Contradictions
Économiques_; _Zur Kritik der politischen Oekonomie_ (1859); and
particularly the _Communist Manifesto_, published in January 1848. The
_Manifesto_ is merely a pamphlet, and at first it attracted scarcely
any attention, but Labriola goes so far as to say—not without some
exaggeration, perhaps—that “the date of its publication marks the
beginning of a new era” (_Essai sur la Conception matérialiste de
l’Histoire_, p. 81). At any rate, it is the breviary of modern socialism.
There is scarcely a single one of its phrases, each of which stings like
a dart, that has not been invoked a thousand times. The _Programme of the
Communist Manifesto_ is included in Ensor’s _Modern Socialism_.

It is a much-debated question as to whether Karl Marx was influenced
by French socialists, and if so to what extent. On the question of his
indebtedness to Pecqueur and Proudhon see Bourguin’s article in _La
Revue d’Économie politique_, 1892, on _Des Rapports entre Proudhon et K.
Marx_. Proudhon’s work, at any rate, was known to him, for one of his
books was a refutation of the doctrines of the _petit bourgeois_, as he
called him. Certain analogies between the works of these two writers to
which we shall have to call attention will help us to appreciate the
extent to which Marx is indebted to Proudhon. But, as Anton Menger has
pointed out, we must seek Marx’s antecedents among English socialists,
in the works of writers like Thompson especially. Nor must we forget his
friend and collaborator Friedrich Engels, who for the sake of his master
has been content to remain in the background. Engels collaborated in the
publication of the famous _Manifesto_ in 1848, and it was he who piously
collected and edited Karl Marx’s posthumous work. It is difficult to know
exactly what part he played in the development of Marx’s ideas, but it is
highly probable that it was considerable.

[965] Marx calls attention to the fact that even Aristotle was puzzled
by this common element which exchanged objects seemed to possess, and by
the fact that exchange appeared to make them of equal value. We say that
5 beds = 1 house. “What is that equal something, that common substance,
which admits of the value of the beds being expressed by a house? Such
a thing, in truth, cannot exist, says Aristotle. And why not? Compared
with the beds the house does represent something equal to them, in so
far as it represents what is really equal, both in the beds and the
house. And that is—human labour.” (_Kapital_, p. 29; Moore and Aveling’s
translation—to which the Translator is indebted for the succeeding
quotations also.)

“If we make abstraction from its use-value we make abstraction at the
same time from the material elements and shapes that make the product
a use-value.… Its existence as a material thing is put out of sight.
Neither can it any longer be regarded as the product of the labour of
the joiner, the mason, the spinner, or of any other definite kind of
productive labour … there is nothing left but what is common to them all;
all are reduced to one and the same sort of labour—human labour in the
abstract.” (_Ibid._, p. 5.)

[966] “The capitalist epoch is therefore characterized by this, that
labour-power takes in the eyes of the labourer himself the form of
a commodity which is his property; his labour consequently becomes
wage-labour.… Given the individual, the production of labour-power
consists in his reproduction of himself or his maintenance. For his
maintenance he requires a given quantity of the means of subsistence.
Therefore the labour-time requisite for the production of labour-power
reduces itself to that necessary for the production of those means of
subsistence: in other words, the value of labour-power is the value of
the means of subsistence necessary for the maintenance of the labourer.”
(_Kapital_, p. 149.)

[967] This demonstration implies that the wages drawn by the worker is
necessarily only just equal to the value of the means of his subsistence.
It is the old classic law of Turgot and Ricardo over again, which
Lassalle, Marx’s contemporary and rival, graphically called the “brazen
law of wages.” We are simply given a more scientific demonstration of it,
that is all.

The demonstration is based upon a postulate which ought first to have
been proved, namely, that the quantity of labour necessary to keep the
worker alive is always less than the quantity which he provides for his
master. But what is there to prove that a man who works ten hours a
day does not require all those ten hours to produce sufficient for his
upkeep? Is there some natural law that supports this contention? Marx
simply regards it as an axiom and attempts no proof. Everyone would
admit it to be true in a general way—as a kind of empirical law. For
were it true that man’s labour was wholly absorbed by the necessaries of
life there would be no increase of numbers, no saving of capital, and
civilisation, which is the product of leisure, would never have been
possible.

What we have here is the Physiocratic “net product” once again, with this
difference, that instead of being confined to agricultural labour it is
now regarded as an attribute of labour of every kind.

[968] See p. 184 for what is said of Sismondi and his conception of
“increment value.”

[969] It is necessary to point out that this proportion, which gives
half the value to hand labour, leaving 100 per cent. surplus value, is
put forward merely for the sake of illustration. Some Marxians, however,
among whom is Jules Guesde, claim that this is actually the proportion
in practice. Marx himself would probably have been more moderate in his
estimate, because in one part of his thesis he accepts the statement of
English manufacturers who declared that it was just the last hour that
gave them their profits.

[970] The development of machinery, according to the Marxian theory,
tends to reduce the cost of living, and consequently the price of labour,
by producing cheaper clothes, furniture, etc., and to a lesser extent
cheaper food.

By parity of reasoning ought it not to reduce the price of goods produced
by the wage-earner and so lower the surplus value? We must be careful,
however, not to confuse a reduction in the price of each unit with a
reduction in the total value of the articles produced by machinery. A
yard of cloth produced by a modern loom has not the same value as a
yard produced by an old hand-loom. But the value of the total quantity
produced each day must be equal to the value produced by hand, provided
the same number of hours have been spent upon its production.

[971] Marx points out that there are other ways of increasing the amount
of work done and of adding to the surplus value, such as the speeding
up of labour. Speeding up does not increase the value of the goods,
because the value depends upon the time spent upon them, and not upon
the intensity of the effort put forth, but it does lower the cost of
production.

[972] “Our friend Money-bags … must buy his commodities at their value,
must sell them at their value, and yet at the end of the process must
withdraw more value from circulation than he threw into it at starting.…
These are the conditions of the problem. _Hic Rhodus! hic salta!_”
(_Kapital_, p. 145.) Cf. p. 215, where something is said about the
different phases through which the idea of exploitation has passed.

Although Marx never says that the worker is actually robbed by the
capitalist, but simply that the capitalist profits by circumstances
which he is powerless to change, that has not prevented him treating the
capitalist somewhat harshly and unjustly even, judging from his own point
of view. He speaks of the capitalist as “a vampire which thrives upon the
blood of others and becomes stouter and broader the more blood it gets.”
He might have added that no blame could be attached to the vampire,
seeing that it only obeyed the tendencies of its nature.

[973] “By turning his money into commodities that serve as the material
elements of a new product, and as factors in the labour process by
incorporating living labour with their dead substance, the capitalist
at the same time converts value—_i.e._ past, materialized, and dead
labour—into capital, into value big with value, a live monster that is
fruitful and multiplies.” (_Ibid._, p. 176.)

[974] A potter working with his hands makes a vase in ten hours; each
vase, then, costs ten hours’ labour. The same potter decides to make a
wheel—a species of fixed capital. Setting up the wheel was a hundred
hours’ task. If he still continues to produce only one vase _per diem_,
which is a perfectly absurd proposition, for he would never have gone to
the trouble of making the wheel if it did not mean some advantage to him,
the value of each vase will now be 10 hours + 100 hours divided by _x_,
which is the number of vases he would have produced had he not wasted his
time making a wheel.

[975] Take two industries, A and B, each employing a capital of £1000.
In A the amount of fixed capital is £100 and circulating £900. In B the
fixed = £900 and the circulating £100. Admitting that surplus value is at
the rate of 100 per cent., as in the example chosen just now, the total
surplus value in A will be £900, equal to a profit of 90 per cent. on a
capital of £1000. B, on the other hand, will only make £100 profit, which
is equal to 10 per cent.

[976] This explanation only appears in the later volumes, which were
published after his death.

It is true that Marx had drawn attention to the contradiction in the
first volume, but no explanation was forthcoming until the later volumes
appeared. Having stated that the greater quantity of surplus value is
the direct result of the greater proportion of circulating capital
employed, he proceeds: “This law clearly contradicts all experience based
on appearance. Everyone knows that a cotton-spinner who, reckoning the
percentage on the whole of his applied capital, employs much constant
and little variable capital, does not, on account of this, pocket less
profit or surplus value than a baker who relatively sets in motion much
variable and little constant capital. For the solution of this apparent
contradiction many intermediate terms are as yet wanted, as from the
standpoint of elementary algebra many intermediate terms are wanted to
demonstrate that 0/0 may represent an actual magnitude.… Vulgar economy,
which, indeed, has really learnt nothing, here, as everywhere, sticks to
appearance in opposition to the law which regulates and explains them.”
(_Kapital_, p. 274.)

It is probable that Marx was not very well satisfied with his
explanation, which may account for his reluctance to publish it during
his lifetime.

[977] In the example just given suppose A and B represent the total
industry of the country: the whole national industry will be made up of
£900 + £100 circulating capital and £100 + £900 fixed—£2000 altogether.
If the surplus value be at the rate of 100 per cent. of the circulating
capital, the total capital value will be £900 + £100 = £1000 on a capital
of £2000, or a percentage of 50.

[978] Taking the example given on p. 427, the mean of £900 + £100 = £500,
and industry A, instead of 90 per cent., will draw only 50 per cent.
profit, while industry B, instead of drawing only 10 per cent., will draw
50 per cent.

[979] We have indifferently employed the terms “profit” and “surplus
value” simply because the former is a much more familiar word. But we
must warn the reader against thinking that the two terms are synonymous.
The surplus value is all that part of the value of the produce which is
over and above the expenses of labour involved in its production—that
enormous slice which becomes the property of every class in society
except the workers, not merely the employers, but merchants, landlords,
etc.; while profit is that part of the surplus value which the employers
of labour keep for their own use. The rate of profit also is something
quite different from the percentage of surplus value, as we shall see
later.

We must call attention once more to the different interpretations which
have been given of the term “profit.” Marx and the English economists
take the word to comprise the whole revenue of capital under a _régime_
of free competition, no distinction being drawn between profit properly
so called and interest. To-day we understand by profit the income drawn
by the _entrepreneur_—as distinct from the capitalist—as the result of
certain favourable circumstances, notably imperfect competition.

It would be absurd to speak of a law of equality of profit, seeing that
profit, as we have defined it, is, like rent, a differential revenue.

[980] We are fully aware of the fact that our method of approach must
appear absurd from the Marxian standpoint, because it lays Marx open to
the charge of starting with a preconceived idea, much after the style of
economists like Bastiat, for example. Such a method, it is contended, is
utterly unscientific and unworthy of a great mind like Marx’s.

However great he may have been, we cannot help thinking that, in common
with most scientists, he discovered just what he was looking for, and it
would be difficult to prove that Marx was not a socialist long before he
began the writing of _Kapital_, even long before he had constructed a
system at all.

Our object in stating the conclusion first of all is to help the reader
to an understanding of the argument, but it is quite open to anyone who
thinks differently to say that Marx had not the least idea where the
analysis would lead him.

[981] The general use of the term “collectivism” is largely due to Marx.
While “collectivism” occurs almost on every page of the _Manifesto_, the
term “communism,” on the other hand, is never once employed.

James Guillaume, in the preface to the second volume of Bakunin’s
works, p. xxxvi, gives the following account of the origin of the word
“collectivism”: “At the fourth General Congress of the International,
held at Bâle in 1869, almost every delegate voted in favour of collective
property. But there were two distinct opinions cherished by the delegates
present. The German-Swiss, the English, and the German delegates were
really State communists. The Spanish, Belgian, French-Swiss, and most
of the French delegates were federal or anarchist communists who took
the name of collectivists. Bakunin belonged to the second group, and
to this group also belonged the Belgian Paepe and the French Varlin.”
Bakunin always spoke of himself as a collectivist and not a communist,
and in this respect he differs from Marx. The habit of thinking that all
anarchists are communists is largely due to Kropotkin.

[982] “We think we can perceive a change in the physiognomy of our
_dramatis personæ_. He who before was the money-owner now strides in
front as capitalist; the possessor of labour-power follows as his
labourer. The one with an air of importance, smirking, intent on
business; the other timid and holding back, like one who is bringing his
own hide to market and has nothing to expect but—a hiding.” (_Kapital_,
p. 155.)

[983] _Manifesto_, § 1.

[984] One of the chief objects of the trusts is the avoidance of
over-production, but that does not mean less unemployment; on the
contrary, a part of their policy consists in closing down certain
establishments which appear to be unnecessary.

[985] See the _Manifesto_ for an eloquent statement of this.

[986] Labriola.

[987] _Kapital_, p. 647.

[988] _Manifesto_, § 1.

[989] Engels in his preface to the _Manifesto_ admits that one of
its objects was “to announce the inevitable and imminent downfall of
_bourgeois_ property.”

Nowadays, however, it is more usual to characterise the aim of
collectivism as an attempt to abolish the wage-earning class—abolition
of property being simply a step towards that. This is how Labriola
writes in his _Essai sur la Conception matérialiste_ (2nd ed., p. 62):
“The proletariat must learn to concentrate upon one thing, namely, the
abolition of the wage-earner.”

It is well to remember that such is also the aim of the Associationists,
the co-operators, and the Radical Socialists. They proceed, however,
from the opposite point of view, and would multiply property rather than
abolish it, thinking that the latter process would merely universalise
the wage-earner.

[990] “Communism deprives no man of the power to appropriate the products
of society. All that it does is to deprive him of the power to subjugate
the labour of others by means of such appropriation.” (_Manifesto_, § 2.)

[991] To say that Karl Marx was the leader of a great socialist school
is hardly the way to describe him, for it is necessary that we should
remember that the vast majority of those who consider themselves
socialists are more or less his disciples. The other socialist schools,
the anarchists, the Fabians, the Collinsists, and the followers of Henry
George, cut a very poor figure beside his.

The bulk of his adherents is drawn either from Germany or Russia,
England being the country which has done least to swell the ranks of
his followers. In France the pure doctrine has been vigorously preached
since 1878 by MM. Jules Guesde and Lafargue—the latter of whom is Marx’s
son-in-law. But a great many French socialists, though collectivists in
name, refuse their adhesion to the Marxian doctrine in all its rigidity.
They have accepted three of his main principles—the socialisation of
the means of production, class war, and internationalism—but reject his
theory of value and his materialistic conception of history. Moreover,
they show no desire to break with the French socialist tradition, which
was pre-eminently idealistic. Benoît Malon, the founder of the _Revue
socialiste_ (1885), was one of the earliest representatives of French
collectivism, and among his successors may be reckoned M. George Renard
and Fournière.

[992] Labriola, _Essai sur la Conception matérialiste de l’Histoire_, p.
24. The Saint-Simonians had already made a similar claim. It is hardly
fair to class them among the Utopians, and some Marxians are quite ready
to admit their claim to priority in this matter.

[993] Georges Sorel, one of Marx’s disciples, writing in no derogatory
spirit, we may be certain, expresses himself as follows: “Our experience
of the Marxian theory of value convinces us of the importance which
obscurity of style may lend to a doctrine”—a remark that is applicable to
other writers besides Marx.

[994] See Sorel’s article, _Les Polémiques pour l’Interprétation du
Marxisme_, in the _Revue internationale de Sociologie_, 1900, p. 248.
There is no such thing as a theory of value—in the accepted sense of the
term in Marx. What we have is a theory of economic equilibrium which
would only be true of a very rudimentary kind of society. It is assumed,
for example, that all industries are equally easy or difficult, that
all the workers are of one type, that ten men working for one hour will
produce the same amount of wealth no matter what task they are engaged
upon. It is this equality that enables comparison to be made between one
commodity and another, and this constitutes their value. We are simply
treated to an abstraction which shows that with the exercise of a little
ingenuity it is at least possible to reconcile the theory of time-value
and the theory of market price.

[995] _Conception matérialiste_, p. 91. Sorel says: “Marxism is really
much more akin to the Manchester doctrine than to the Utopian. We must
never forget this.” (_La Décomposition du Marxisme_, p. 44.)

[996] “The _bourgeoisie_, historically, has played a most revolutionary
part.… The _bourgeoisie_ cannot exist without constantly revolutionising
the instruments of production, and thereby the relations of production,
and with them the whole relations of society.… All fixed, fast-frozen
relations, with their train of ancient and venerable prejudices and
opinions, are swept away, all new-formed ones become antiquated before
they can ossify, all that is solid melts into air, all that is holy is
profaned.” (_Manifesto_, § 1.)

Besides, the Marxians themselves have tried to prove that capital is
actively undermining its own existence, which is surely the _ne plus
ultra_ of the revolutionary temperament.

[997] “The result is that capital has managed to solve problems which
the Utopians tackled in vain. It has also given rise to conditions which
permit of an entrance into a new form of society. Thus socialism will not
need to invent new machinery or to get people accustomed to them,” etc.
(Sorel, _loc. cit._, p. 41.)

[998] “The economists regard the feudal institutions as artificial,
the _bourgeois_ as natural. The existing economic ties, in their
opinion, are elemental laws that must always bind society.… They have
had some history, that is all we can really say.” (Marx, _Misère de la
Philosophie_, pp. 167-168.)

[999] _Manifesto_, § 2.

[1000] Whenever they change their method of production men also change
their whole social outlook. “The hand-mill gave us the servile State; the
steam-mill is the parent of the industrial, capitalist State.” (_Misère
de la Philosophie_, 2nd ed., p. 156.) This oft-repeated phrase contains
a picturesque antithesis rather than a scientific formula of historical
materialism. In his preface to his _Kritik der politischen Oekonomie_
Marx expresses himself with much more moderation. The following is the
most important passage of that celebrated page (p. 5):

“In the course of their efforts at production men enter into certain
definite and necessary relations which may be wholly independent of
their own individual preferences—such industrial ties being, of course,
correlative to the state of their productive forces. Taken together, all
these links constitute the economic structure of society. In other words,
it supplies a basis upon which the legal and political superstructure is
raised, and corresponding to it are certain social forms which depend
upon the public conscience. The method of producing commodities, speaking
generally, fixes the social, political, and intellectual _processus_
of life. A man’s conscience has less to do with determining his manner
of life than has his manner of life with determining the state of his
conscience.”

The word “fixes,” even when qualified by “speaking generally,” seems a
little pronounced, and Marxism has substituted the term “explained,”
which is somewhat nearer the mark. Labriola says that “it merely
represents an attempt to explain historical facts in the light of the
economic substructure.” (_Conception matérialiste_, p. 120.)

This materialistic conception is developed in a very paradoxical fashion
in Loria’s _La Constitution sociale_. He shows how all history and
every war, whether of Guelph or of Ghibelline, the Reformation and the
French Revolution, and even the death of Christ upon Calvary, rest upon
an economic basis. In Loria’s opinion, however, this basal fact is not
industrialism, but the various types of land systems. See the chapter on
Rent.

It would not be correct to regard Marxism as a mere expression of
fatalism or out-and-out determinism. The Marxian pretends to be, and
as a matter of fact he really is, a great believer in will-power. Once
the workers see where their interests really lie he would have them
move towards that goal with irresistible strength. It is not always
even necessary to define the end quite clearly before beginning to
move. “Everything that has happened in history has, of course, been the
work of man, but only very rarely has it been the result of deliberate
choice and well-considered planning on his part.” (Labriola, _Conception
matérialiste_, p. 133.) Elsewhere: “The successive creation of different
social environments means the development of man himself.” (_Ibid._, pp.
131-132.)

It would be beyond the scope of this work to enter into a metaphysical
discussion of these theories, however much one would like to.

[1001] See the works of MM. Jaurès, _Études socialistes_; George Renard,
_Le Régime socialiste_; Fournière, _L’Individu, l’Association, et l’État_.

[1002] Labriola, _op. cit._ Vandervelde (_L’Idéalisme Marxiste_, in _La
Revue socialiste_, February 1904) says that “upon final analysis it will
be found that Marx’s whole argument rests upon a moral basis, which is
that justice requires that every man should get all that he produces.”

M. Landry, in a book of lectures delivered by different authors entitled
_Études sur la Philosophie morale au XIXe Siècle_ (p. 164), is of an
entirely different opinion. He thinks that Marx’s moral basis is simply
potentiality. In other words, everything that has been created in the
ordinary course of economic development is moral, everything that has
been destroyed is immoral.

[1003] Hence the alliance of the Marxians with what appears to be a
directly opposite philosophy—that of William James and Bergson (see Guy
Grand, _La Philosophie syndicaliste_).

[1004] _Manifesto._ It is impossible to do away with the intellectuals
altogether, but they may be reduced to the rank of mere wage-earners.
“The Marxians always regarded revolution as the special privilege of
the producers, by whom, of course, they understood the manual workers,
who, accustomed as they are to nothing but the factory _régime_, would
force the intellectuals also to supply some of the more ordinary wants of
life.” (Sorel, _Décomposition du Marxisme_, p. 51.)

[1005] _Manifesto_, § 2. It is necessary that we should be reminded of
the fact that the Saint-Simonians had already emphasised the antagonism
by speaking, not of rich and poor, but of idlers and workers. The
differentiation, that is to say, was economic. The Marxian distinction
is quite different, for the Saint-Simonians included within the category
workers, bankers, and employers, for example, who are excluded by the
Marxians. In some cases the Saint-Simonians thought they had even better
claims to inclusion than the ordinary worker.

[1006] The first of these means, namely, the acquiring of public works
by the State, is spoken of as unified socialism in France, whereas the
second, which relies upon direct action without the assistance of any
political organisation, is known as syndicalism and is represented by the
Confédération générale du Travail (see p. 480).

[1007] Marx, _Misère de la Philosophie_. “What does the word ‘revolt’
imply? Simply disobedience to law. But what are these laws that govern
our lives? They are just the products of _bourgeois_ society and of the
institutions which they are supposed to defend. Revolution will simply
mean replacing these laws by others which will have an entirely different
kind of justification.”

[1008] “It is the worst side of things that begets movement and makes
history by begetting strife.” (_Ibid._, 2nd ed., p. 173.)

[1009] Preface to _Kapital_, p. xix.

[1010] For the evolution of Marxism see Sombart’s lively volume
_Sozialismus und soziale Bewegung im 19 Jahrhundert_ (6th ed., 1908), and
also Georges Sorel, _La Décomposition du Marxisme_ (1908).

[1011] Labriola, _Socialisme et Philosophie_, p. 29. Others declare more
unmistakably still that “these obscure formulæ [the writer is thinking
of surplus labour] lead to equivocation and must be banished from the
science altogether.” (Sorel, _Revue internationale de Sociologie_, 1900,
p. 270.)

[1012] M. Sorel says of the revolutionary movement that everything
connected with it is very improbable. (_Décomposition du Marxisme_.)

[1013] The Italian syndicalist Arthur Labriola (_Revue socialiste_, 1899,
vol. i, p. 674) writes as follows: “While we Marxians are trying to
repatch the master’s cloak political economy is making some headway every
day. If we compare Marx’s _Kapital_ with Marshall’s _Principles_—chapter
by chapter, that is to say—we shall find that problems which required
a few hundred pages in the _Kapital_ are solved in a few lines by
Marshall.” B. Croce (_Materialismo storico ed Economia marxistica_, 1900,
p. 105) writes thus: “I am strongly in favour of economic construction
along Hedonistic lines. But that does not satisfy the natural desire for
a sociological treatment of profits, and such treatment is impossible
unless we make use of the comparative considerations suggested by Marx.”
Lastly, Sorel, in _Saggi di Critica del Marxismo_ (1903, p. 13) says:
“It is necessary to give up the attempt to transform socialism into a
science.”

[1014] Especially in that passage to which Bernstein calls attention:
“According to the law of value not merely must one devote the socially
necessary amount of time to the production of each commodity, but each
group of commodities must have such extra effort spent upon it as the
nature of the commodity or the character of the demand requires. The
first condition of value is utility or the satisfaction of some social
need—that is, value in use raised to such a degree of potentiality as
shall determine the proportion of total social labour to each of the
various kinds of production.” (_Kapital_, vol. iii.)

Bernstein adds: “This admission makes it impossible to treat the themes
of Gossen, of Jevons, and of Böhm-Bawerk as so many insignificant
irrelevancies.” (_Die Voraussetzungen des Sozialismus._)

[1015] “The surplus-value theory may be true or it may be false, but
that will make no difference to the existence of surplus labour. Surplus
labour is a fact of experience, demonstrable by observation, and requires
no deductive proof.” (Bernstein, _loc. cit._, p. 42.) That Marx did not
treat it with quite the same indifference is evident from the fact that
the whole theory is developed, not incidentally in the course of the
work, but at the very opening of the book.

[1016] In the book already quoted, which was published in 1899.

[1017] Sorel, _Les Polémiques pour l’Interprétation du Marxisme_, in the
_Revue internationale de Sociologie_, 1900.

[1018] Sorel, _Décomposition du Marxisme_, p. 33.

[1019] _Socialisme et Social-démocratie_, p. 234. We have recently
been told that syndicalism is just a literal application of Bergson’s
philosophy.

[1020] This point of view is very neatly expressed in an article of
M. Berth’s (_Mouvement socialiste_, May 1908, p. 393): “From a purely
negative or critical point of view we agree with Bernstein rather than
the orthodox Kautsky. But what does Bernstein propose to substitute for
the revolutionary ideal—impracticable as it was—of the German Social
Democratic party? The alternative offered is a simple democratic,
reformist evolution, a political or economic development which would
just be a pale imitation of the _bourgeois_ Liberal _régime_, which it
is hoped would result in the emancipation of the workers by getting
rid of _bourgeois_ Liberalism altogether. The complete democratisation
of politics and economics would, it is hoped, effect the necessary
improvement. On this point we syndicalists must definitely part company
with Bernstein and his _confrères_, for what we want is not a mere
evolution, but a revolutionary creation of new social forms.”

[1021] “An organisation of producers who will be able to manage their
own affairs without having recourse to the superior knowledge which the
typical _bourgeois_ in supposed to possess.” (Sorel, _Décomposition du
Marxisme_, pp. 60-61.)

[1022] “Revolutionary syndicalism is the great educative force which
contemporary society has at its disposal to prepare it for the tasks
which await it.” (Sorel, _Réflexions sur la Violence_, p. 244; 1909.)

“In the general ruin of institutions something new and powerful will
remain intact. This will be what is generally known as the proletarian
soul, which it is hoped will survive the general reassessment of moral
values, but that will depend on the energy displayed by the workers
in resisting the corruption of the _bourgeoisie_ and in meeting their
advances with the most unmistakable hostility.” (_Ibid._, p. 253.)

It is altogether a different point of view from that of the consumer,
the shareholder, or the “literary idler,” who are only interested in the
success of buyers’ social leagues, or in consumers’ societies. Cf. p. 342.

[1023] This incessant struggle is what Sorel has named violence, which he
thinks is peculiarly healthy. “I have shown,” says he, “that proletarian
violence has an entirely different significance from that usually
attributed to it by politicians and amateur students of society.” It is
incorrect, however, to say that he is in favour of sabotage. “Sabotage,”
says Sorel, “belongs to the old _régime_, but does nothing to set the
worker in the way of emancipation.” (_Mouvement socialiste_, 1905,
November 1 and 15.)

One cannot fail to see the antagonism which exists in France between the
Socialistes Unifiés (which is largely recruited from the old Marxian
party) and the syndicalists, who condemn both universal suffrage and
parliamentary action.

[1024] “One no longer thinks of drawing up a scheme which shall determine
the way in which people in the future are to seek their own well-being.
The problem now is how to complete the revolutionary education of the
proletarian.” (Sorel, _Décomposition du Marxisme_, introduction, p. 37.)

[1025] This group is represented by the review called _Le Mouvement
socialiste_, which is controlled by M. Lagardelle. Sorel has withdrawn
from the group and is now leading a campaign in favour of Catholic
nationalism.

The recent literature of syndicalism is very extensive. We have already
mentioned M. Guy Grand’s _La Philosophie Syndicaliste_.

[1026] _Réflexions sur la Violence_, p. xxxv. We must note, however, that
M. Sorel protests against any confusion being made between the myth as
he understands it and Utopian socialism. The myth is obviously superior
in the fact that it cannot be refuted, seeing that it is merely the
expression of a conviction. See pp. xxv and 218 of the same work.

[1027] We need only recall the doctrine of usury and the legislation on
the question—all of it the outcome of Canonist teaching.

[1028] A Catholic professor—long since forgotten—of the name of de
Coux wrote as follows in a book entitled _Essai d’Economie politique_,
published in 1832: “The practical application of Catholicism would result
in the finest system of social economy that the world has ever seen.”

[1029] “Catholicism alone has the necessary cohesion and power to
withstand socialism, which has been erected upon the ruins of the Liberal
system.” (Comte de Mun, _La Question sociale au XIXe Siècle_, 1900.)

“There is no need to think of the Church as a kind of gendarme in cassock
flinging itself against the people in the interest of capital. Rather it
should be understood that it is working in the interests and solely for
the defence of the weak.” (Comte de Mun, _Discours_, April 1893.)

[1030] The Social Christians somewhere make the remark that even if
the orthodox account of creation is destined to disappear before the
onslaughts of the evolutionary theory and Adam makes way for the gorilla,
the problem would merely be intensified, for it would still be necessary
to get rid of the “old man.” “We live,” says Brunetière, “in the strength
of the victories won over the more primitive instincts of our nature”
(_Revue des Deux Mondes_, May 1, 1895).

Kidd in his _Social Evolution_, a work which attracted great attention
when it was first published in 1894, attempts to apply the Darwinian
theory to Christianity. He accepts the Darwinian hypothesis that the
struggle for existence and natural selection constitute the mainsprings
of progress. But the struggle may demand, or the selection involve, the
sacrifice of individual to collective interest, and the only force which
can inspire such sacrifice is religion.

[1031] It was no Christian Socialist, but Auguste Comte, the founder of
Positivism, who wrote: “The original equality of men is not a doctrine
founded simply upon the observation of social facts. It was only clearly
affirmed for the first time by Christianity.” (_Traité de Politique_,
vol. i, p. 407.)

[1032] Frédéric Le Play (1806-82) was a mining engineer, and was educated
at the École Polytechnique. He subsequently became a professor at
the École des Mines and a Counseiller d’État. In 1855 he published a
collection of monographs dealing with working-class families under the
title of _Les Ouvriers européens_, in one volume (the second edition,
which appeared in 1877, consisted of six volumes). In 1864 he published
an exposition of his social creed in _La Réforme sociale_, a book that
Montalembert declared to be “the most original, the most courageous, the
most useful, and altogether the most powerful book of the century.” It
hardly deserves such extravagant praise, perhaps, but it is true that
many of its more pessimistic prophecies concerning the future of France
have been very curiously verified.

In 1856 Le Play founded La Société d’Économie sociale, which since 1881
has been responsible for the publication of _La Réforme sociale_. He
organised the Universal Exhibition in 1867, and was one of the first to
arrange exhibitions of social work. For a _résumé_ of his life and work
see _Frédéric Le Play d’après lui-même_, by Auburtin (Paris, 1906).

[1033] _Programme des Unions de la Paix sociale_, chap. 1.

[1034] “The gravest and most dangerous error of all, and one that has
been the parent of all our revolutions, is the false principle which the
innovators of 1789 would put into practice and which affirms the original
perfection of mankind. It also encourages the belief that a society
composed of ‘natural’ men would enjoy peace and happiness without any
effort at all, and that these desiderata are just the spontaneous outcome
of every free society.”

[1035] “It is the great misfortune of France that the family should be
immersed in the commune, the commune in the department, the department in
the State.” (_La Réforme sociale_, vol. iii, Book VII.)

[1036] “It [the patriarchal _régime_] in all matters relating to economic
action or to social life shows greater attachment to the past than
concern for the future. Obedience is the keynote rather than initiation.
The family group tends to arrest the enterprise which would characterise
the action of the more independent members of the family in a somewhat
freer atmosphere.” (_La Réforme sociale_, Book III.)

[1037] “In short, I have never met with a social organisation which to
the same extent vitiates the laws both of nature and morality.”

[1038] Le Play, who had some influence over Napoleon III, tried to
get him to consent to some such modification of the Civil Code. But
the Emperor, though favourably inclined, and despot as he was, dared
not alienate public sympathy in the matter. And really fathers seldom
exercise the full authority which the law gives them even now. The evil,
then, if it is an evil, is deeper than Le Play imagined, and seems to be
moral rather than legal.

[1039] “Human societies should aim not so much at the creation of wealth
as such, but rather at increasing the well-being of mankind. Well-being
includes daily bread, but it does not exclude social peace.” (Claudio
Jannet in a lecture on _Les Quatre Écoles d’Économie sociale_.)

[1040] We must remember that these were the orthodox views then.
Villermé, writing in 1840 in his celebrated _Tableau de l’État moral et
physique des Ouvriers_, thought it was the employers really who could
best improve the circumstances and character of the workers.

[1041] We get some idea of the importance which he attributed to the
permanence of engagements when we realise that he contemplated the
abolition of slavery with a measure of regret. (_La Réforme sociale._)

[1042] _Principles_, Book IV, chap. 7.

[1043] “Among the panaceas advocated in our time none has been more
criticised than ‘association.’ From a practical point of view these
societies seem to present none of the advantages ordinarily associated
either with complete independence or with a well-managed business
concern.”

[1044] “I have frequently posted as much as 1000 kilometres in order to
consult some eminent landowner living on the confines of Europe.” (Letter
to M. de Ribbes, October 3, 1867.)

[1045] “This method is based upon a careful observation of each fact and
its past history. Nothing is left to the imagination, the presupposition,
or the prejudices of the observer. It is essentially scientific and
exact.” (_La Réforme en Europe._)

[1046] These monographs appeared first of all, as we have seen, in his
great work on the European workmen in 1855. The work has been carried on
by his disciples and the results incorporated in the _Ouvriers des Deux
Mondes_, which already numbers above a hundred volumes. They have also
employed the method in writing monographs on industries and communes, etc.

The method requires supplementing by reference to statistics of
population and wages, which can only be supplied, of course, by
Governments.

[1047] “The comparison of receipts and expenditure should help to
discover any oversight, just as the weight of a chemical substance both
before and after an experiment helps to determine the nature of the
chemical reaction.” (Bureau, _L’Œuvre d’Henri de Tourville_.)

[1048] With a good deal of candour he admits offering a reward to anyone
who could show him a single happy family except under conditions of this
kind. “But,” he adds, “all my efforts proved fruitless.” (_Les Ouvriers
européens_, vol. iv, introduction.)

[1049] When Le Play teaches us that the essential condition of society
implies

  A double foundation—the Decalogue and paternal authority,
  A twofold link—religion and sovereignty, and
  Three kinds of material—the community, private property, and employers,

we cannot help thinking that the so-called method of observation has a
very pronounced trait of dogmatism in its constitution.

[1050] “The principal object to aim at here is the limitation of the
ecclesiastical _personnel_ with a view to keeping them all fully
employed,” as he adds later on. He had the same antipathy to religious
congregations as he had to other forms of association.

[1051] “No social phenomenon can ever be explained if it is taken out of
its own setting. All social science is based upon this law.” (Demolins,
_La Classification sociale_.)

[1052] The similarity noted here has given rise to emphatic protests on
the part of certain members of this school. There is no need to take
offence at the epithet, however, provided we are careful to distinguish
it from philosophic materialism and recognise that it does not
necessarily exclude idealism.

[1053] This branch of the school, of which Tourville and Demolins were
the earliest leaders, has given us several excellent books. Demolins’ own
work on the superiority of the Anglo-Saxons caused quite a stir. Then
there is M. de Rousiers’ book on producers’ industrial unions, and P. du
Maroussem’s. We would also specially mention Paul Bureau’s _Le Contrat de
Travail_ (1902), _La Participation aux Bénéfices_, and _La Crise morale
des Temps nouveaux_. Bureau’s work is characterised by precise impartial
analysis of facts combined with great moral fervour.

[1054] Huet was a professor at Ghent, which accounts for his being
considered a Belgian, just as Walras is generally considered a Swiss.

[1055] He was the first to emphasise the importance of borrowers
combining. Only in this way can the poor hope to offer some real
security. “How is it that the worker cannot borrow? Simply because he
has no security to offer except just his work in the future. That future
guarantee can only become real and certain by means of combination. Union
eliminates the uncertainty which hitherto made the security worthless and
the loan impossible.” (_La Question du Travail_, p. 25.)

“The problem is to outline a state of society where working men will work
only for themselves and not for others; where none will reap but has
already sown, and where each will enjoy the fruits of his own labour.”
(_Ibid._)

[1056] “Christianity and revolution as far as humanity is concerned
have identical aims, and the one is the natural outcome of the other.”
(Buchez, _Traité de la Politique_, vol. ii, p. 504.)

[1057] Moufang’s principal writings were published in 1864 under the
title of _Le Question ouvrière et le Christianisme_. He could never
make up his mind as between the corporative and the co-operative ideal,
however. The latter was very much to the front just then, not only in
France, but also with the English Christian Socialists and with the
German socialist Lassalle. This was before the co-operative movement was
eclipsed by trade unionism.

Hitze, however, shows none of his master’s hesitation, but emphatically
declares that “the solution of the social question is essentially and
exclusively bound up with a reorganisation of trades and professions. We
must have the mediæval _régime_ of corporations re-established—a _régime_
which offers a better solution of the social problem than any which
existed either before or after. Of course times have changed, and certain
features of the mediæval _régime_ would need modification. But some such
corporative _régime_ conceived in a more democratic spirit must form the
economic basis.” (_Capital and Labour._)

[1058] “We must direct all our private initiative and concentrate
public attention upon this one reform—the corporative reorganisation of
society.” (_Programme de l’Œuvre des Cercles ouvriers_, April 1894.)

Co-operative association is dismissed altogether. The Social Catholics
have especially little sympathy with the small retail co-operative
stores, because they threaten the existence of the small merchant and
the small artisan—types of individuals that are dear to the heart of the
Catholics. On the other hand, it shows itself very favourably inclined
towards co-operative credit, because of the possibility of assisting the
classes already referred to—the shopkeeper and the small merchant.

[1059] In 1894 the Congress of Catholic Circles which met at Rheims
declared that, “without minimising the difficulties which stand in the
way of extending the mixed _syndicats_, the formation of such _syndicats_
must be our chief aim.” In 1904 Father Rutten, one of the leaders of
the Belgian Catholic Syndical movement, in a report on the syndicalist
movement writes as follows: “We do not despair of the mixed _syndicat_,
which in theory we certainly think is nearest perfection. But we must
not blind ourselves to facts, and whether we will or no we have to admit
that at the present moment the mixed _syndicat_ in ninety industries out
of every hundred seems quite Utopian.” (Quoted by Dechesne, _Syndicats
Ouvriers belges_, p. 76; 1906.)

[1060] Such is the programme as outlined especially in Austria, which is
one of the countries where Social Catholicism seems fairly powerful. As
a matter of fact, the corporative _régime_ has never quite disappeared
there, and for some years now attempts have been made to revive it in the
smaller crafts. The new corporation would take the form of a centralised
organisation, whose regulations would be obligatory upon all the members
of the craft.

[1061] “The commune has always been organised. Is there any reason why
the trade should not be? In both cases special relations are established,
special needs arise, there are frequent conflicts and occasional harmony
between the different interests. But all of them are nevertheless
intimately bound together, and the links connecting them must be
co-ordinated on some regular plan if every one is to be safe, and free
to follow his own bent.” (Henri Lorin, _Principes de l’Organisation
professionnelle_, in _L’Association catholique_, July 15, 1892.)

To this it might be replied that the majority generally makes the law for
the commune, but that in the case of a free corporation it is often the
minority that rules. To which it might be retorted that the so-called
majority is often not better than a minority of the electors, and a very
small minority indeed of the whole inhabitants—who of course include
women, who generally have no votes. Moreover, as soon as the rules of the
_syndicat_ became really obligatory the majority if not the whole of the
workers in the trade would be found within the union.

[1062] Father Antoine writes as follows in his _Cours d’Économie
sociale_, p. 154; “The social question can never be completely solved
until we have a complete revival of Christian morals.” Still more
categorical is the declaration of M. Léon Harmel in _L’Association
catholique_ for December 1889: “We can see only one remedy, and that is
that the authority of the Pope should be recognised all the world over,
and his ruling accepted by all people.”

The annual study reunions which go by the name of _les Semaines
sociales_, and which afford one of the best manifestations of the kind
of activities which Social Christianity gives rise to everywhere, are
not so exclusive. Economic questions of all kinds are discussed, but the
programme is not strictly Catholic at all, and the basis is wide enough
to include everyone who is a professed Christian.

[1063] “The corporations which would be set up under the ægis of
religion would aim at making all their members contented with their lot,
patient in toil and disposed to lead a tranquil, happy life” (_sua sorte
contentos, operumque patientes et ad quietam ac tranquillam vitam agendam
inducant_). (Encyclical of Leo XII, December 28, 1878, called the _Quod
Apostolici_. See _History of Corporations_, by M. Martin Saint-Leon.)

[1064] “The corporation is simply the model of the Church. Just as for
the Church all the faithful are equal in the sight of God, so here. But
equality ends there. For the rest it is a hierarchy.” (Ségur-Lamoignon,
_L’Association catholique_, July 13, 1894.)

[1065] The Ligue sociale d’Acheteurs, founded in Paris in 1900, is of
Social Catholic inspiration.

[1066] “More important even than free will, whether of masters or of men,
is that higher and more ancient law of natural justice which demands that
wages should always be sufficient to enable the worker to lead a sober
and honest life. But lest the public authority in this case, as in some
other analogous cases, such as the question of the length of the working
day, should unwisely intervene, and in view of the great variety of
circumstances, it is better that the solution should be left in the hands
of the corporations or the unions.” (Encyclical, _Rerum Novarum_, 1891.)

[1067] The Social Catholics wherever found are usually Protectionists,
the reason being that they think their “corporative _régime_ could never
be kept going without some protection against foreign competition,” and
also because most of their adherents are drawn from the ranks of the
agricultural unions. (_Programme de l’Œuvre des Cercles ouvriers_, Art.
7.)

[1068] “The so-called productivity of capital, which constitutes
the greatest iniquity of profit-making society, and which is from
an economical point of view the final cause of social suffering, is
nothing better than a word invented to hide the real fact, namely,
the appropriation of the fruits of labour by those who possess the
instruments of labour.” (Loesewitz, _Législation du Travail_, in
_L’Association catholique_, 1886.)

[1069] Extract from a report of a meeting of the Sillon, November 1907:

“MARC SANGNIER. The social transformation which we desire to see,
comrades, will aim, not at absorbing the individual, but rather at
developing him. We want the factories, the mines, and the industries in
the possession, not of the State, but of groups of workers.

“AN INTERRUPTER. That is socialism.

“MARC SANGNIER. You can call it socialism if you like. It makes no
difference to me. But it is not the socialism of the socialists, of the
centralising socialists. We don’t want to set the proletarians free from
the control of the masters to put them under the immediate control of
one great master, the State; we want the proletarians themselves, acting
collectively, to become their own masters.”

[1070] Milcent, in _L’Association catholique_, 1897, vol. ii, p. 58.
There is a Catholic Social school which is Liberal and individualist in
its tendencies, and which is represented by such writers as the late
Charles Périn, professor at Louvain, author of _La Richesse_ and _La
Socialisme chrétien_, and by M. Rambaud, author of _Cours d’Histoire des
Doctrines_. Nor ought we to forget their connection with the development
of agricultural credit banks of the Raiffeisen type which have been
established in Germany, France, and Italy—although their inception in
Italy is largely the work of a Jew named Wollemborg.

[1071] Such, for example, is the opinion of Nitti in his book on Catholic
Socialism, and because of that rather unsatisfactory reason he only
devotes a few pages to it.

[1072] There are several historical considerations that may with
advantage be kept in mind in dealing with this subject, such as, for
example, the notable fact that while the Catholic Church has always
been opposed to usury, it was Calvin and Calvinists like Saumaise and
the ancient jurist Dumoulin who first justified the practice of taking
interest.

[1073] _The Christian Socialist_ was preceded by another paper called
_Politics for the People_, founded in 1848, which may be taken as the
birthday of the movement. In any case the date is significant in view of
the contemporary revolution in France.

It is only just to note that Channing, the American pastor, who died in
1842, was one of the pioneers. His writings on social questions are still
read.

Those who wish for more information either on the history or on the other
aspects of Social Christianity should consult the _New Encyclopædia of
Social Reform_, published in America.

[1074] The following year Charles Kingsley preached a sermon in London
which caused such a sensation that the vicar of the parish felt bound to
protest against its tone even during the service. In the course of the
sermon Kingsley remarked that any social system which enabled capital to
become the possession of a few, which robbed the masses of the land which
they and their ancestors had cultivated from time immemorial, and reduced
them to the condition of serfs working for daily wage or for charity, was
contrary to the spirit of the Kingdom of God, as revealed in Christ. The
sermon was afterwards published under the title of _The Church’s Message
to the Workers_.

[1075] Maurice declared that everyone who is a Christian must also be
a socialist. But the significance of the word “socialist” has changed
somewhat since then. According to Maurice, “The motto of the socialist is
co-operation; of the anti-socialist, competition.”

[1076] “There is no doubt about association being the form which
industrial government will take in future, and I have no doubt as to its
success, but a preliminary training extending possibly over a couple of
generations is necessary before the worker has the requisite ability or
moral strength to make use of it.” (Kingsley in 1856.)

And this is how State intervention appealed to him: “The devil is always
ready to urge us to change law and government, heaven and earth even, but
takes good care never to suggest that we might change ourselves.”

[1077] The official organ of the Christian Social Union, which is
definitely connected with the Church of England, is the _Economic
Review_, published at Oxford—not to be confused with the _Economic
Journal_, which is published in London by the Royal Economic Society.

[1078] E. Gounelle, _Le Mouvement des Fraternités_.

[1079] Mr. Josiah Strong, director of the Institute of Social Service
at New York, is the publisher of a review called _The Gospel of the
Kingdom_, which has for its programme “the study of economic facts in the
light of the Gospel,” and in which he maintains that “if the world is
ever to be Christianised industry must be Christianised first of all.”
On the question of unemployment, for example, he refers us to Matthew
xx, 6, and on the still more vexed question of the closed or open shop
we are referred to 1 Corinthians xii, 16, 26. We must also mention
Rauschenbusch’s eloquent book, _Christianity and the Social Crisis_.

The well-known economist Professor Richard T. Ely is another of
the leaders of this movement. Nor must we omit Herron, who caused
some sensation by declaring that it is necessary to go well beyond
collectivism, which he thinks altogether too conservative and
reactionary. He adds that Karl Marx is a crusted Tory compared with
Jesus, “for any one who accepts private property in any form whatsoever,
even in matters of consumption, must reject Christ.”

[1080] At a conference held at Geneva in 1891. At this conference M.
Stöcker defined his programme as follows: “We do not believe that we
can do anything without the State, but we also believe in the spirit of
association. We have told the masters that their duty is to make some
sacrifice for the sake of solving the question in a way that will be
agreeable to their men. We have also told the workers that they must work
hard, economically, and conscientiously, even if they never obtain a
better situation.”

[1081] He was formally repudiated by the Emperor in 1896 in a telegram
addressed to a powerful employer, Baron Stumm.

[1082] Goehre is the author of a work entitled _Three Months in a
Workshop_. The book has been a great success and has produced a crop of
imitations.

[1083] Kutter’s book _Sie Mussen_ caused quite a flutter. The author
attempts to show that the socialists are to-day the real disciples of
Christ, but have been disowned by the Church.

[1084] For the past twenty years M. de Boyve, the leader of the
co-operative movement in France, has been the president, which confirms
us in the suspicion that the two schools had a common parentage, both
really springing from the École de Nîmes. Periodical congresses are held
in connection with it, and it also has a review called _Le Christianisme
Social_.

[1085] Pastor Tomy Fallot, the initiator of this movement, indicates
the path that should be followed thus: “The essential thing is to get a
rough outline of that perfect type which is known as co-operation. Just
now it seems the only thing that contains a prophecy of better times.”
(_L’Action Bonne._) Compare this with Maurice’s formula.

“We are Social Christians because we are solidarists. In our search for
solidarity we have found the Messiah and His Kingdom. Solidarity is the
layman’s term, the Kingdom of God the theologian’s, but the two are the
same.” (Gounelle, _L’Avant-Garde_,1907.)

[1086] This group found its earliest recruits among the young pastors
who ministered in the great industrial towns (M. Wilfred Monod at Rouen
and M. Gounelle at Roubaix, for example), and thus found itself in close
touch with poverty, suffering, and discontent. But several laymen have
also joined it, among them being a son of the economist who was regarded
as the _doyen_ of the Liberal school—Frédéric Passy.

The Christian Socialist group publishes a journal of its own, entitled
_L’Espoir du Monde_.

[1087] “‘For I could wish that myself were accursed from Christ for my
brethren,’ writes St. Paul; in other words, ‘I do not want to be saved
alone, and I shall be completely saved only when humanity as a whole has
been saved.’ And so the evangelical doctrine would subordinate the full
realisation of my personal salvation to the salvation of others.” (W.
Monod, _La Notion apostolique du Salut_.)

[1088] Or, as he epitomises it elsewhere, “It is useless to speak of
giving ourselves until we are certain that we own ourselves.”

[1089] Ruskin himself did not think that his doctrines were only of
slight importance. The introduction to _Munera Pulveris_ (1862) contains
the following words: “The following pages contain, I believe, the first
accurate analysis of the laws of Political Economy which has been
published in England.”

See also the preface to _Unto This Last_, which has for its sub-title
“Four Essays on the First Principles of Political Economy.”

[1090] There are a great number of novels dealing with social questions.
For the English novels bearing on this topic see M. Cazamian, _Le Roman
social_.

[1091] So much was this the case with Ruskin that Mme. Brunhes has
published a book called _Ruskin et la Bible_, and Tolstoy on his side has
an edition of the Gospels to his credit which is said to be much nearer
the original than the ordinary version of the canon.

[1092] See _Fors Clavigera_, _passim_. Tolstoy writes in a similar
strain. Money is just a conventional sign giving the right or the
possibility of claiming the service of others. But although money is
all-powerful in the matter of exploiting the worker it is quite useless
when it comes to a question of furthering his well-being. There is a
curious development of this thesis in Tolstoy’s _What is to be Done?_

[1093] “All this has come of the spreading of that thrice accursed,
thrice impious doctrine of the modern economist, that ‘To do the best
for yourself, is finally to do the best for others.’ Friends, our great
Master said not so.” (Ruskin, _Crown of Wild Olive_, Lecture II).

[1094] Especially in that celebrated passage: “It [Political Economy]
sounds with Philosophico-Politice-Economic plummet the deep dark sea of
troubles, and having taught us rightly what an infinite sea of troubles
it is sums up with the practical inference and use of consolation that
nothing whatever can be done in it by man, who has simply to sit still
and look wistfully to ‘time and general laws,’ and thereupon without so
much as recommending suicide coldly takes its leave of us.” (_Chartism._)

[1095] “If thou ask again … What is to be done? allow me to reply: By
thee, for the present, almost nothing.… Thou shalt descend into thy inner
man, and see if there be any traces of a _soul_ there; till then there
can be nothing done!… Then shall we discern, not one thing, but, in
clearer or dimmer sequence, a whole endless host of things that can be
done. _Do_ the first of these.” (_Past and Present._ Book I. chap. 4.)

[1096] See particularly _Fors Clavigera_.

[1097] “Why, the four-footed worker has already got all that this
two-handed one is clamouring for, and you say it is impossible.”
(Carlyle, _Past and Present_, chap. 3; and see also _Chartism_, chap. 4.)

[1098] This was the ideal which he had in mind in founding the Guild
of St. George. See an article by Professor Marshall, _The Social
Possibilities of Economic Chivalry_, in the _Economic Journal_, March
1907. There is no reference to Ruskin in it, however.

[1099] When the Christian Socialists in 1854 organised a course of
lectures for working men in London Ruskin volunteered to give a few
addresses, not on social economics or on history, but on drawing.

[1100] One naturally thinks first of such industrial villages as
Bournville and Port Sunlight. But in 1903 an entirely new city of this
kind was begun at Letchworth, Herts. The idea has recently undergone a
considerable development by a society that owes its inspiration to Ruskin.

[1101] _Story of a Horse_, in his _First Stories_ (1861).

[1102] See a book entitled _Labour_, which consists of the meditations of
a _muzhik_ called Bondareff upon those words of Genesis, “In the sweat of
thy face shalt thou eat bread,” followed by a long commentary by Tolstoy.

[1103] “Pleasure and pain are undoubtedly the ultimate objects of the
calculus of economics. To satisfy our wants to the utmost with the least
effort, to procure the greatest amount of what is desirable at the
expense of the least that is undesirable, in other words, _to maximise
pleasure_, is the problem of economics.” (Stanley Jevons, _Theory of
Political Economy_, p. 40.)

[1104] “The errors of the Classical school are, so to speak, the ordinary
diseases of the childhood of every science.” (Böhm-Bawerk, _The Austrian
Economists_, in _Annals of the American Academy of Political and Social
Science_, January 1891.)

[1105] _Recherches sur les Principes mathématiques de la Théorie des
Richesses._

[1106] Let P = value of product and _x_, _y_, _z_ represent wages,
interest, and rent respectively, then _x_ + _y_ + _z_ = P, which is
insoluble.

Nor does it seem much more hopeful when written out thus:

  _x_ = P - (_y_ + _z_)
  _y_ = P - (_x_ + _z_)
  _z_ = P - (_x_ + _y_)

[1107] “The theory of economic equilibrium is quite distinct from the
theory of final utility, although the public are apt to confuse them and
to think that they are both the same.” (Vilfredo Pareto, _L’Economie
pure_, 1902.)

[1108] The name varies a little with different authors and in different
countries. “The final degree of utility” is the term used by Jevons,
“marginal utility” by the Americans, “the intensity of the last satisfied
want” by Walras. Walras also speaks of it as “scarcity,” using the term
in a purely subjective fashion to denote insufficiency for present need.
This very plethora of terms suggests a certain haziness of conception.
The term “marginal” seems clearer than the term “final,” although in some
cases it may be impossible to oust the latter.

It appears that the first suggestion of final utility in the sense in
which it is employed by the Psychological school is due to a French
engineer of the name of Dupuit. He threw out the suggestion in two
memoirs entitled _La Mesure de l’Utilité des Travaux publics_ (1844)
and _L’Utilité des Voies de Communication_ (1849), both of which were
published in the _Annales des Ponts et Chaussées_, although their real
importance was not realised until a long time afterwards. Gossen also,
whose book is referred to on p. 529, was one of the earliest to discover
it.

In its present form it was first expounded by Stanley Jevons in his
_Theory of Political Economy_, and by Karl Menger in his _Grundsätze der
Volkswirtschaftlehre_ (1871). Walras’s conception of scarcity, which
is just a parallel idea, was made public about the same time (1874).
Finally Clark, the American economist, in his _Philosophy of Value_,
which is of a somewhat later date (1881), seems to have arrived at a
similar conclusion by an entirely different method—a remarkable example
of simultaneous discoveries, which are by no means rare in the history of
thought.

Despite its cosmopolitan origin, the school is generally spoken of as
the Austrian school, because its most eminent representatives have for
the most part been Austrians. Among these we may mention Karl Menger,
already referred to, Professor Sax (_Das Wesen und die Aufgabe der
Nationalökonomie_, 1884), Wieser (_Der natürliche Werth_, 1889), and of
course Böhm-Bawerk (author of _Grundzüge der Theorie des wirtschaftlichen
Güterwerths_, in _Jahrbücher für Nationalökonomie_, 1886, and the
well-known book on capital and interest).

Lately, however, the doctrine seems to have changed its nationality and
become wholly American. The American professors J. B. Clark, Patten,
Irving Fisher, Carver, Fetter, etc., are assiduous students of marginal
utility, applying the conception not only to problems of capital and
interest, but also to the question of distribution.

[1109] To escape the confusion which would result from employing the same
term in two such very different senses—a confusion that is inevitable
however one may try to avoid it—Pareto has substituted the word
“ophelimity,” and Gide in his _Principles_ (1883) “desirability.”

[1110] “The idea of final utility is the ‘open sesame,’ the key to the
most complicated phenomena of economic life, affording a solution of its
most difficult problems.” (Böhm-Bawerk, _The Austrian Economists_, in
_Annals of the American Academy of Political and Social Science_, 1891.)

[1111] Condillac had already drawn attention to this fact (see p. 48),
and Buffon had noted it even before that. “The poor man’s coin which goes
to pay for the necessaries of life and the last coin that goes to fill
the financier’s purse are in the opinion of the mathematician two units
of the same order, but to the moralist the one is worth a louis, the
other not a cent.” (_Essai d’Arithmétique morale._)

The connection between quantity and demand is best expressed by means of
a curve either of utility or of demand (see p. 532). Along the horizontal
line let the figures 1, 2, 3, 4 denote the quantities consumed, and from
each of these points draw a vertical line to denote the intensity of
demand for each of these quantities. The height of the ordinate decreases
more or less rapidly as the quantity increases, until at last it falls to
zero.

[1112] It is in cases of this kind that figures become handy. If we take
two curves, an ascending one to represent the utility of each handful
of salt parted with, and a descending one to represent the utility
of each handful of rice acquired, the two curves must necessarily
intersect, seeing that one is just the inverse of the other. The point
of intersection marks the place where the utilities of the two exchanged
handfuls are exactly equal.

We must be careful not to confuse matters, however. It is not suggested
that the final utilities in the case of the two co-exchangers are equal.
There is no common measure by which the desires of different persons can
be compared, and no bridge from one to the other. What is implied is
that the final utility of both commodities for the _same person_ are the
same. The balance lies between two preferences of the same individual.
The actual market exchange is just the resultant of all these virtual
exchanges.

The Austrian school in its explanation makes use of a hypothesis
known as the double limit, which does not seem to be absolutely
indispensable, seeing that other economists of the same school—Walras,
for example—appear to get on well enough without it. They seem to think
of buyers and sellers drawn up in two rows facing one another. Every one
of the sellers attributes to the object which he possesses and which he
wants to sell a certain utility different from his neighbour’s. Each
buyer in the same way attributes to that object which he desires to buy
a degree of utility which is different from that which his neighbour
puts upon it. The first exchange, which will probably have the effect of
fixing the price for all the other buyers and sellers, will take place
between the buyer who attributes the greatest utility to the commodity
he has to sell, and who is therefore least compelled to sell, and the
buyer who attributes the least utility to the commodity he wishes to
buy and who is therefore least tempted to buy. At first sight it seems
impossible that the party as a whole should be bound by the action of
the two individuals who show the least inclination to come to terms. It
would be more natural to expect the first move to take place between the
seller who is forced to sell and because of his urgency is content with
a price of 10_s._ per bushel, say, and the buyer who feels the strongest
desire to buy and who rather than go without would be willing to give
30_s._ for it. But upon consideration it will be found that the price is
indeterminate just because these two are ready to treat at any price.
The most impatient individual will surely wait to see what terms the
least pressed will be able to make, and it is only natural that those who
are nearest one another should be the first to come together. These two
co-exchangists who control the market are known as the “limiting couple.”

[1113] It was Stanley Jevons who gave it this expressive name. It is
meant to imply that if two objects which fulfil very different needs,
perhaps, can be interchanged, they cannot have very different values.

[1114] The law of substitution applies not merely to different objects
which satisfy the same need, but also to objects which supply different
needs, provided those needs are to any extent interchangeable—to tea as a
substitute for wines, to coffee as a substitute for both, to travel as a
substitute for the life of a country gentleman.

[1115] “The enjoyment derived from the least enjoyable unit is what we
understand by final utility.” (Böhm-Bawerk, _The Austrian Economists_,
in the _Annals of the American Academy of Political and Social Science_,
1891.)

[1116] The new school deduces a very curious conclusion from this law
of indifference. Although there is only one price for all corn buyers,
say, the final utility of the corn for each individual is by no means
the same. Let us assume that the price is 20_s._, but one of the buyers,
rather than go without, would possibly have given 25_s._ for it, and
others might have been willing to give 24_s._, 23_s._, 22_s._, etc.
Every one of those who _ex hypothesi_ only pay 20_s._ gains a surplus
which Professor Marshall has called consumer’s rent (_Principles_,
Book III, chap. 6). He has given it that name in order to facilitate
comparison with producer’s rent, which had gained notoriety long before
the Hedonistic school arose. Both are due to similar causes, namely, the
existence of differential advantages which give rise to a substantial
margin between the selling price and the cost of production.

Really, however, the similarity is simply a matter of words, because
consumer’s rent is purely subjective, whereas producer’s rent is a
marketable commodity. It would be better to say simply that in many cases
of exchange it is not correct to argue that because the prices are equal
the satisfaction given to different persons is necessarily equal.

[1117] It is scarcely necessary to point out that if workers are not
really interchangeable on account of their different capacities the law
can no longer be said to hold good, since it always presupposes free
competition, whereas in this case we have a personal monopoly.

[1118] It is not quite the same when the capital is fixed, for the law of
substitution is no longer applicable in that case, and the incomes are
very different.

[1119] It must not be supposed that in applying the term “school” to
these writers we wish to suggest that they have a common programme. All
we mean is that they make use of the same method.

It is generally recognised to-day that the school dates from the
appearance of Cournot’s _Recherches sur les Principes mathématiques de
la Théorie des Richesses_ (1838). Cournot, who was a school inspector,
died in 1877, leaving behind him several philosophical works which are
now considered to be of some importance. The story of his economic work
affords an illustration of the kind of misfortune which awaits a person
who is in advance of his age. For several years not a single copy of the
book was sold. In 1863 the author tried to overcome the indifference of
the public by recasting the work and omitting the algebraical formulæ.
This time the book was called _Principes de la Théorie des Richesses_. In
1876 he published it again in a still more elementary form, and under the
title of _Revue sommaire des Doctrines économiques_, but with the same
result. It was only shortly before his death that attention was drawn
to the merits of the work in a glowing tribute which was paid to him by
Stanley Jevons.

Gossen’s book, _Entwickelung der Gesetze des menschlichen Verkehrs_,
which appeared much later (1853), was equally unfortunate. The author
remained an obscure civil servant all his life. His book, of which
there is still a copy in the British Museum—the only one in existence
possibly—was accidentally discovered by Professor Adamson, and Stanley
Jevons was again the first to recognise its merits. A brief _résumé_ of
the work will be found in our chapter on Rent.

Stanley Jevons (died 1882) belongs both to the Mathematical and to
the Final Utility school. His charming book, _The Theory of Political
Economy_, dates from 1871.

Léon Walras, who is persistently spoken of as a Swiss economist just
because he happened to spend the greater part of his life at the
University of Lausanne, also known as the School of Lausanne, was in
reality a Frenchman. His _Éléments d’Économie politique pure_, of
which the first part appeared in 1874, contains a full exposition of
Mathematical economics.

To-day the Mathematical method can claim representatives in every
country: Marshall and Edgeworth in England, Launhardt, Auspitz, and
Lieben in Germany, Vilfredo Pareto and Barone in Italy, Irving Fisher
in the United States, and Bortkevitch in Russia. France, however, the
country of Cournot and Walras, has no Mathematical economists, unless we
mention Aupetit whose work, _Théorie de la Monnaie_, although dealing
with a special subject, contains a general introduction.

[1120] _Des Différences d’Opinion entre Économistes_ (Geneva, 1897),
inserted in _Scritti varii di Economia_, pp. 1-48 (1904).

[1121] Value itself, the pivot of Classical economics, is simply a link
in exchange with the new school, and thus it loses all its subjectivity;
and since it is not a thing at all, but merely an expression, it would
be ridiculous to struggle to find its cause, foundation, or nature,
as the older writers did. This is why Jevons proposed to banish the
word altogether and to employ the term “ratio of exchange” instead.
And Aupetit insists that “the expression ‘value’ is to-day devoid of
content … and seems doomed to disappear from the scientific vocabulary
altogether. There is no great harm in omitting this parasitical element
as we have done, and in treating economic equilibrium as an entity
without ever employing the term ‘value.’” (_Théorie de la Monnaie_, p.
85.)

[1122] If demand be represented by _d_ and price by _p_, then _d_ =
_f_(_p_); _i.e._ demand is a function of price.

[1123] Dupuit, the engineer, was the first to make use of a demand
curve. Cournot, who refers to it as the law of sale, gives an admirable
illustration of its operation in the case of bottles of medicinal
waters of wonderful curative power. At a very low price the demand and
consequently the sale would be very great, though not infinite because
of the limit which exists for each want. At a very high price it would
be _nil_. Between the two extremes would be several intermediate curves.
We cannot deal with all the ingenious deductions which Cournot makes
concerning monopoly and the greater or lesser discord between monopoly
and the general interest.

[1124] The demand curve is generally concave, and this characteristic
form is just the geometrical expression of the well-known fact that when
prices are low enough to be accessible to everybody the sales increase
rapidly, because lean purses being much more numerous than fat ones a
slight lowering of the level of prices will bring the commodity within
the reach of a fresh stratum of people. It may take different forms,
however. For some products, such as common salt, a considerable fall
in the price will not result in a large increase in the sales. In the
case of diamonds a great fall in price may cause a falling off in demand
because they have become too cheap. The supply curve, on the other hand,
is generally convex, because the supply, which only enters upon the scene
at a certain point, is very sensible to price movements, going up rapidly
with a slight increase in price. Its upward trend is soon arrested,
however, because production cannot keep up the pace. It is even possible
that the supply may fall off at the next point, for the simple reason
that there is no more of the commodity available.

[1125] Below on the same diagram is traced a demand and a supply curve.

[Illustration]

The figures along the horizontal line denote price, along the vertical
the quantity demanded. In the given figure when price is 1, quantity
demanded is VI, and with the price at 7 the quantity demanded falls to
zero.

The dotted curve represents the supply. When price is 1, supply is _nil_.
When price is 10, supply mounts up to IV. Exchange obviously must take
place just where demand and supply are equal, _i.e._ at _b_, which marks
the point of intersection of the two lines, when the amount demanded is
equal to the quantity offered and the price is 5.

The vertical lines are called ordinates, and 0 X the axis of the
ordinates. Distances along 0 X are called abscissæ. Each point on the
curve simply marks the intersection of these, of the ordinates and
the abscissæ. This is true of the point _a_, for example, where the
perpendicular denotes the price (1) and the other line the number of
units sold, in this case VI.

Though in the diagram we have considered the ordinates to represent price
and the abscissæ quantities, the reverse notation would work equally well.

[1126] Mathematical economics also studies other forms of equilibrium
which are much more complicated and not quite so important perhaps,
relating as they do to conditions of unstable equilibrium.

[1127] Note Pareto’s terms of appreciation (_Économie pure_, 1902, p.
11): “Walras was the first to show the importance of these equations,
especially in the case of free competition. This capital discovery
entitles him to all the praise that we can give him. The science has
developed a good deal since then, and will undoubtedly develop still
more in the future, but that will not take away from the importance of
Walras’s discovery. Astronomy has progressed very considerably since
Newton published his _Principia_, but far from detracting from the merits
of the earlier work it has rather enhanced its reputation.”

[1128] If this is to be taken as literally true, we have this curious
result: the _entrepreneur_, receiving for the products which he sells
just exactly what he paid for producing them, makes no profit at all.

Both Walras and Pareto fully admit the paradoxical nature of the
statement. Of course it is understood that it can only happen under
a _régime_ of perfectly free competition, care being also taken to
distinguish between profits and interest, a thing that is never done,
apparently, by English economists, who treat both interest and profit as
constituent elements of cost of production.

But this is not so wonderful as it seems at first sight. It simply
means a return to the well-known formula that under a _régime_ of
free competition selling price must necessarily coincide with cost of
production.

This does not prevent our recognising the existence of actual profits.
Profits are to be regarded as the result of incessant oscillations of a
system round some fixed point with which it never has the good fortune
actually to coincide. According to this conception they are but the
waves of the sea. But the existence of waves is no reason for denying a
mean level of the ocean or for not taking that mean level as a basis for
measuring other heights. Some day, perhaps, equilibrium will become a
fact, and profits will vanish. But if that day ever does dawn either upon
the physical or the economic world, all activity will suddenly cease, and
the world itself will come to a standstill.

[1129] A full exposition of Walras’s system involves the supposition
not only of two but of three markets interwoven together. On the actual
market where goods are exchanged the quantity of these commodities
depends upon the quantity of productive services, land, capital, and
labour, and the quantity of these productive services, at least the
quantity of capital, depends to a certain extent upon the creation of
new capital, which in turn depends upon the amount of saving. The third
market, then, is that of capitalisation. Since the new capital can only
be paid for out of savings, _i.e._ out of that part of the revenue which
has been employed in other ways than in buying consumable commodities,
the price of capital must be such as to equal the quantity saved and the
quantity of new capital demanded. If saving exceeds the demand the price
will fall, etc.

To say that the price of capital has gone up is to say that the rate of
interest or the reward of saving has fallen. But a fall in the rate of
interest will check saving. The result will be a change of equilibrium,
the price of new capital will fall, the rate of interest will go up, etc.

Briefly, then, the total maximum utilities on the one hand and the price
on the other, these are the two conditions determining equilibrium in the
economic world, no matter whether it be products or services or capital.
“The same thing is true of gravity in the physical world, which varies
directly with the mass and inversely with the square of the distance.
Such is the twofold condition which determines the movement of the
celestial bodies.… In both cases the whole science may be represented by
a formula consisting of only two lines. Such a formula will include a
great number of facts.” (Walras, _Économie politique pure_, p. 306.)

[1130] Professor Edgeworth employs a similar comparison, speaking of
the economic man as a charioteer and of social science as consisting of
a chariot and some such charioteer (_Mathematical Psychics_, p. 15).
“‘Mécanique Sociale’ may one day take her place along with ‘Mécanique
Céleste,’ throned each upon the double-sided height of one maximum
principle, the supreme pinnacle of moral as of physical science.”
(_Ibid._, p. 12.)

Pareto regards political economy as a study of the balance between
desires and the obstacles which stand in the way of their satisfaction.

[1131] During the last few years we have had, of course, M. Colson’s
great book on political economy, which contains a mathematical treatment
of demand and supply, M. Landry’s exposition of the Austrian theory in
his _Manuel d’Économique_, and M. Antonelli giving a special course on
Walras’s system at the Collège libre des Sciences sociales. We have
already referred to Aupetit’s book on money. We must also mention the
translations of the _Manual of Political Economy_ of Vilfredo Pareto and
of Jevons’s _Theory of Political Economy_.

[1132] M. Paul Leroy-Beaulieu is particularly severe upon the
Mathematical method. “It is a pure delusion and a hollow mockery. It
has no scientific foundation and is of no practical use. It is as much
a gamble as the scramble for prizes at the table at Monte Carlo.… The
so-called curve of utility or demand is of no earthly use, for if the
price of wine goes up the consumption of beer or cider will increase,
that is all.” (_Traité d’Économie politique_, vol. i, p. 85; vol. iii, p.
62.)

This last criticism is somewhat unexpected, for we have already seen that
the Hedonists are very far indeed from ignoring the law of substitution.
If they did not actually discover it they immensely amplified it. And it
is very probable that if there had been a contradiction between their
doctrines and this law it would not have escaped them. Moreover, we note
that beer and cider have their demand curves: cannot wine have one as
well? Having to pass from one to the other does undoubtedly complicate
matters, and the Mathematical economist frequently finds himself obliged
to juggle not with one but with two or three balls. But this is just the
kind of difficulty which is amenable to mathematical treatment—nay, even,
perhaps, demands it. The connection between the values of complementary
or supplementary goods is one of the problems that has been most
thoroughly investigated by the Hedonists. See Pantaleoni, _Economia pura_.

A criticism of Mathematical economics may be found in an article by M.
Simiand entitled _La Méthode positive en Science économique_ (_Revue
de Métaphysique et de Morale_, November 1908), and a good reply in _La
Méthode mathématique en Économie politique_, by M. Bouvier.

[1133] Walras put it well when he wrote as follows: “We have never tried
to analyse the motives of free human beings. We have simply tried to give
a mathematical expression of the result.” (_Éléments d’Économie politique
pure_, p. 232.)

[1134] “We do not know exactly what it is that binds the function and the
variable together, or the intensity of the satisfied need to the quantity
already consumed. But for every item on the one side we feel certain that
there must be a corresponding item on the other.” (Aupetit, _Théorie de
la Monnaie_, p. 42.)

[1135] For a vigorous refutation of this criticism see two articles by
Rist entitled _Économie optimiste_ and _Économie scientifique_ in the
_Revue de Métaphysique et de Morale_ for July 1904 and September 1907.

[1136] Or he will argue, perhaps, that the market would have been much
more favourable to Esau if Jacob had had more pottage than he could
easily have disposed of—a case where even monopoly might offer some
advantage to the buyer.

[1137] “For purposes of demonstration,” says Pareto, “we have assumed
the existence of private property. But to assume on the strength of the
conclusion which we have established that a _régime_ of private property
gives the maximum of well-being would clearly be to beg the question.”

[1138] This doctrine is not accepted even by all the Hedonists. Walras
especially is very critical in the fourth edition of his _Économie pure_.
M. A. Landez in his _Intérêt du Capital_ (1904) and Irving Fisher in _The
Rate of Interest_ (1907) have tried if not to demolish it at least to
correct it by giving a more subtle analysis of the motives determining
a preference for a future income as compared with a present one. This
time-preference, of course, varies according to the fortune of each and
other circumstances.

[1139] We have already remarked on this in the case of M. Böhm-Bawerk.
This is another respect in which the Hedonists have shown themselves
faithful to the Classical tradition. The necessity for separating the art
from the science of political economy, pure economics from applied, was
especially emphasised by Courcelle-Seneuil and Cherbuliez. Pareto put it
well when he said that the maximum of ophelimity can be put in the shape
of an equation, but the maximum of justice can not.

[1140] This system, according to Walras, would possess another advantage
in that it would facilitate the establishment of free trade, which is
an ideal of the science. The chief difficulties would thus be avoided,
such as unequal import duties and unequal degree of fertility. “Free
trade has always involved the absence of duties, and the nationalisation
of land would further result in the free movement of capital and labour
to whatever place might prove most advantageous to them.” (_La Paix par
la Justice sociale et par le Libre-Échange_, in _Questions pratiques de
Législation ouvrière_, September-October 1907.)

[1141] The same is true of American economists, where the use of the
Hedonistic method is by no means confined to one school. Professor Clark
employs it, and he is rather inclined to set up an apology for the
present economic order and to trust to the efficacy of free competition.
But Professor Patten also makes use of it, and he is an interventionist
of the extreme type.

[1142] Economics will become a science when it can say that “what was
just now nothing better than an intuition can now be fully proved.”
(Walras, _Économie politique pure_, p. 427.)

[1143] “It is necessary to apply the law of the variation of intensity of
need to each separate individual in relation to each one of his needs.”
(Aupetit, _La Monnaie_, p. 93.)

[1144] It is only those Hedonists who claim to be able to establish an
exact science that make use of the mathematical and abstract method to
the total exclusion of the historical and biological method. Professor
Marshall expressly declares himself in favour of the biological method,
and would advocate employing diagrams and curves as little as possible
(_Economic Journal_, March 1898, p. 50).

[1145] Pareto, _Giornali degli Economisti_, September 1901.

[1146] Böhm-Bawerk, _the Austrian Economists_, _loc. cit._ On the other
hand, one of the disciples of this school, M. Landry, writes: “To-day
the Austrian school is somewhat played out” (_L’École économique_, in
_Rivista di Scienza_, 1907). At the end of thirty years!—not a very long
life.

[1147] Marshall, _Distribution and Exchange_, in _Economic Journal_,
March 1898.

[1148] Our figures are taken from the well-informed pamphlet of M.
Einaudi, _La Municipalisation du Sol dans les Grandes Villes_ (Girard et
Brière, 1898), reprinted from _Devenir social_.

[1149] P. Leroy-Beaulieu, _L’Art de placer et gérer sa Fortune_, p. 34.

[1150] Marshall, _Principles_, preface to the first edition.

[1151] There is a good account of the evolution of which we have given
a brief _résumé_ in a work published as far back as 1868, entitled
_Versuch einer Kritischen Dogmengeschichte der Grundrente_, by Edward
Berens (Leipzig), but especially in _La Théorie de la Rente et son
Extension récente_, by Paul Frézouls (Montpellier, 1908), and in the
very interesting articles of Herr Schumpeter, _Das Rentenprinzip in der
Verteilungslehre_, which appeared in Schmoller’s _Jahrbuch_ in 1907, pp.
31 and 591.

[1152] Ricardo’s _Principles_, chap. 3, “On the Rent of Mines.” Cf.
Stuart Mill, _Principles_, Book III, chap. 5, § 3.

[1153] Stuart Mill, _loc. cit._

[1154] This fact was noted by Hermann even as far back as 1832 in his
very remarkable _Staatswirtschaftliche Untersuchungen_ (Munich, 1832),
p. 166: “A phenomenon that is exactly analogous to rent becomes manifest
whenever a country employs imported machinery the multiplication of
which is difficult, possibly because the producing country discourages
such exportation. [Such was the case with English machinery at the
time Hermann wrote.] … Suppose now that the price of the commodity
manufactured with the aid of such machinery goes up. If the country
under consideration can only manufacture with machinery that is more
expensive but less efficient because of its defective character, the cost
of production will still be higher than if the best [foreign] machinery
were employed. The result is that the proprietors of the latter retain
such advantages as the rise in price had secured them.” Mangoldt (in
_Die Lehre vom Unternehmergewinn_, Leipzig, 1855) expresses his view
in a somewhat similar fashion: “Rent shows itself clearest and on the
largest scale in the case of agricultural land, but it is equally evident
wherever the difficulty of multiplying capital prevails or where it can
only be replaced by other capital of a more expensive character or a less
productive yield.” Ricardo himself possibly had the rent of capital in
mind when he said: “The exchangeable value of all commodities, whether
they be manufactured or the produce of the mines or the produce of
land, is always regulated, not by the less quantity of labour that ill
suffice for their production under circumstances highly favourable, and
exclusively enjoyed by those who have peculiar facilities of production,
but by the greater quantity of labour necessarily bestowed on their
production by those who have no such facilities, by those who contrive
to produce them under the most unfavourable circumstances—meaning by
the most unfavourable circumstances the most unfavourable under which
the quantity of produce required renders it necessary to carry on the
production.” (_Principles_, p. 37.) English writers, however, seldom
speak of the rent of capital. Rent with them always signifies income
due, not to the intervention of man, but to the natural resources of
production.

[1155] _Principles_, Book III, chap. 5, § 4.

[1156] “But as it is clearly a surplus, the labour having been previously
paid for by average wages, and that surplus the spontaneous gift of
nature, we have thought it most convenient to term it rent.” (Quoted by
Cannan, _Production and Distribution_, p. 198.)

[1157] In an article entitled _The Source of Business Profit_.

[1158] Walker is one of the first of the English-speaking economists
to make this distinction and to employ the term “profit” in a narrow
sense, distinguishing it from interest on the one hand and wages on the
other. He even went so far as to subtract the wages of superintendence
and direction because this work of supervision could be delegated to
others (_Wages Question_, 2nd ed., 1891, pp. 230, etc.), while the
special function performed by the _entrepreneur_, namely, the adaptation
of supply to demand, requires special remuneration, which he proposes
to call profit. It is a little odd that a writer who seemed completely
isolated should be shown, after all, to share the views of other
economists. Walker declares that save his own father, Amasa Walker,
he knew of no economist who had distinguished between capitalist and
_entrepreneur_. But J. B. Say had already made the same distinction,
which had been adopted by all Continental economists even as far back as
the beginning of the nineteenth century.

[1159] This is how Walker summarises his duties: “To furnish also
technical skill, commercial knowledge, and powers of administration; to
assume responsibilities and provide against contingencies; to shape and
direct production, and to organise and control the industrial machinery.”
(_The Wages Question_, p. 245.)

[1160] Walker, _Quarterly Journal of Economics_, April 1887, p. 278.

[1161] Hermann, _Untersuchungen_, p. 206; for J. B. Say cf. _supra_, p.
113.

[1162] Pantaleoni (_Economia pura_, Part III, chap. 4) seems to be the
only economist who accepts Walker’s theory without any reservation.

[1163] For his criticism of Walker see the _Quarterly Journal of
Economics_, 1887, p. 479, and the _Principles_, 4th edition, p. 705,
note. In conformity with English tradition, Marshall includes within
profits any interest upon such capital as the _entrepreneur_ possesses.

[1164] Pantaleoni makes the same distinction: “Profits,” says he, “may
be the result of superior ability acquired either by assiduous study or
prolonged preparation. In that case we are dealing, not with a kind of
rent, but with a species of profit which may be very remunerative but
which is nevertheless amenable to a very different law from that which
generally regulates the investment of capital.” (_Economia pura_, Part
III, chap. 4.) On the other hand, Pantaleoni refuses to recognise the
existence of an element of insurance against risk as an item in profits,
because, as he points out, if the premium has been carefully reckoned up
and compared with the risk, “it ought on an average to be equal to it at
the end of a certain number of years, so that the net rent would become
equal to zero.” (_Ibid._)

[1165] _Cf. Distribution of Wealth_ (1899) and _Essentials of Economic
Theory_ (1908).

[1166] Moreover, the _entrepreneur_ may find himself forced to yield a
part of this composite rent either to the landlord or to the capitalist
from whom he has borrowed his capital or to the workers by whose superior
ability he has benefited. The difficult question of determining what
proportion ought to be given in this way is discussed by Marshall in his
_Principles_, Book V, chap. 10, § 4; Book VI, chap. 8, § 9.

[1167] Walker might answer by saying that the dividend is simply the
interest upon the capital. But we can hardly bring ourselves to believe
this.

[1168] This word “acquired” is not quite in conformity with the pure
theory of rent, for if these advantages are acquired the remuneration
thus received should be considered merely as interest upon capital spent.

[1169] Stuart Mill, _Principles_, Book III, chap. 5, § 4.

[1170] “Wages and profits represent the universal elements in production,
while rent may be taken to represent the differential and peculiar: any
difference in favour of certain producers, or in favour of production
in certain circumstances, being the source of a gain, which, though
not called rent unless paid periodically by one person to another, is
governed by laws entirely the same with it.” (_Ibid._, Book III, chap. 5,
§ 4.)

[1171] “Rent, it should be remembered, is the difference between the
produce obtained by equal portions of labour and capital employed on land
of the same or different qualities.” (Ricardo, _Principles_, chap. 9.)

[1172] _Principles_, Book II, chap. 16, § 2.

[1173] Ricardo had already made use of the following argument: “Suppose
that the demand is for a million of quarters of corn, and that they
are the produce of the land actually in cultivation. Now, suppose the
fertility of all the land to be so diminished that the very same lands
will yield only 900,000 quarters. The demand being for a million of
quarters, the price of corn would rise, and recourse must necessarily
be had to land of an inferior quality sooner than if the superior land
had continued to produce a million of quarters.” (_Principles_, chap.
32, p. 246.) Towards the end of his life Ricardo seems to have been more
favourably inclined to a conception of rent somewhat closer akin to J. B.
Say’s. Compare the curious quotations given in Frézouls, _op. cit._, p.
21.

[1174] “A commodity may no doubt, in some contingencies, yield a rent
even under the most disadvantageous circumstances of its production; but
only when it is, for the time, in the condition of those commodities
which are absolutely limited in supply, and is therefore selling at a
scarcity value—which never is, nor has been, nor can be a permanent
condition of any of the great rent-yielding commodities.” (_Principles_,
Book III, chap. 5, § 4.) For the position with regard to mines see the
same chapter, § 3.

[1175] In this case Stuart Mill seems to compare rent to a monopoly
revenue: “A thing which is limited in quantity, even though its
possessors do not act in concert, is still a monopolised article.”
(_Ibid._, Book II, chap. 16, § 2.) The expression, though adopted by
several other writers, is not quite accurate. In the case of a monopoly
the owners fix the quantity which they will produce beforehand with a
view to getting a maximum of profit. But this cannot apply to landowners.
At any rate, if there is any monopoly it must be an incomplete one.

[1176] Stuart Mill, _Principles_, Book III, chap. 5, § 1.

[1177] Such was the argument employed by J. B. Say in the course of a
controversy with Ricardo. “It is perfectly obvious that if the needs
of society raise the price of corn to such a level as to permit of the
cultivation of inferior lands which yield nothing beyond wages for
the workmen and profits on the capital, then that demand on the part
of society, coupled with the price which it can afford to pay for the
corn, allows of a profit on the most fertile or best situated lands.”
(_Traité_, 6th edition, p. 410.) Continuing, he remarks: “David Ricardo
in the same chapter clearly shows that the profit from land is not the
cause but the effect of the demand for corn, and the reasons which he
adduces in support of this view may be turned against him to prove that
other items in cost of production, notably the wages of labour, are not
the cause but the effect of the current price of goods.” Ricardo himself
seemed on the point of being converted to this view. See p. 554, note 2.

[1178] The theory of economic equilibrium enables us to give a still
better demonstration of the general nature of this theory of rent. On
this point we may refer to Pareto’s _Cours_ and Sensi’s _La Teoria della
Rendita_ (Rome, 1912).

[1179] Cf. _supra_, p. 555, note 2.

[1180] Hermann, _Staatswirtschaftliche Untersuchungen_, Part V: _Vom
Gewinn_. Even in the preface he declares that the doctrine of the rent of
land must be regarded as a particular instance in the exposition of the
law governing the returns from fixed capital in general.

[1181] Mangoldt, _Die Lehre vom Unternehmergewinn_ (Leipzig, 1855), pp.
109 _et seq._

[1182] _Die nationalökonomische Theorie der ausschliessenden
Absatzverhältnisse_ (Tübingen)—a work in which he attempts a
justification of rents in general and of the rent of land in particular.
Rent he regards as the reward offered to anyone who knows how to utilise
either his personal capacity or his capital or land in a way that is
particularly advantageous to society. It supplies an allurement that acts
as the source of all progress and of all economic activity, a sort of
natural right of ownership which society spontaneously confers upon those
individuals who know how to serve society, and which competition causes
to disappear at the opportune moment. The rent of land can be justified
on this ground wherever legislation has not made an abuse of it. This new
claim on behalf of rent is very interesting, and those who regard rent as
exclusively unearned increment may ponder over this new characteristic of
unearned incomes.

[1183] P. 148.

[1184] “The sum paid for the use of land differs in no material respect
from the sum paid for the use of other kinds of capital—a machine, for
example. Although the land or the machine has to be returned to its
rightful owner in the same condition as it was received, one ought to
pay something just because such capitals are economically scarce; in
other words, the amount existing at any one time or place is not greater
than the demand. What differentiates land from machinery is that savings
might easily be employed in turning out new machinery, but cannot very
well increase the quantity of land in existence, or at any rate cannot
transform existing soils in a manner that is profitable.” (Pareto, _Cours
d’Économie politique_, vol. ii, § 759.) Marshall makes use of analogous
terms: “If the supply of any factor of production is limited, and
incapable of much increase by man’s effort in any given period of time,
then the income to be derived from it is to be regarded as of the nature
of rent rather than profits in inquiries as to the action of economic
causes during that period; although for longer periods it may rightly
be regarded as profits which are required to cover part of the expenses
of production and which therefore directly enter into those expenses.”
(_Principles_, 1st ed., Book VI, chap. 3, § 1.)

[1185] _Ibid._, Book VI, chap. 3, § 7.

[1186] Did space permit, this would be the place to refer to the latest
glorification of the doctrine of rent, which is to be found in Clark’s
_Distribution of Wealth_, published in 1899. In that work, upon the
strength of which the author enjoys a well-deserved reputation, revenues
of various kinds are successively treated as rents. Imagine a fixed
amount of capital applied along with successive doses of labour: each
new dose of labour will produce less than the preceding one, while the
production of the last dose regulates the remuneration of all the rest.
But the product of the preceding doses is greater than that of the last,
and a surplus value will be produced which will represent the product
of capital and which will be exactly analogous to rent. Or suppose, on
the other hand, that the quantity of labour is fixed and applied along
with successive doses of capital; the productivity of the latter will
in this case go on decreasing, and since the revenue of each dose will
be proportionate to its productivity, any surplus left over will be of
the nature of rent due to labour. There are other ingenious discussions
which cannot be referred to in a note of this kind. But in our opinion
the theory of economic equilibrium affords a simpler explanation of
distribution, and the kind of optimism to which Clark’s theory gives
rise seems hardly justified. His attempt to combine the idea of marginal
productivity with the law of diminishing returns is a further proof of
the persistent influence exerted by Ricardian ideas upon English-speaking
economists.

[1187] Proudhon, _Qu’est-ce que la Propriété_, p. 74.

[1188] Pollock, _The Land Laws_, p. 12.

[1189] _Agrarian Justice opposed to Agrarian Law and Agrarian Monopoly._

[1190] _The Theory of Human Progression and Natural Probability of a
Reign of Justice._ For further information concerning Spence, Ogilvie,
Dove, Paine, etc., see Escarra’s _Nationalisation du Sol et Socialisme_
(Paris, 1904). We have drawn upon his book for the views here put
forward, the works of these writers not being easily accessible.

[1191] _Justice_, p. 92.

[1192] “The land is the original heritage of the whole human race,” says
Mill in his _Dissertations and Discussions_. In the _Principles_, Book
II, chap. 2, § 5, he expresses his views thus: “The essential principle
of property being to assure to all persons what they have produced
by their labour and accumulated by their abstinence, this principle
cannot apply to what is not the produce of labour, the raw material of
the earth.” Walras, in his _Théorie de la Propriété_, in the _Études
d’Économie sociale_, p. 218, says that the land by a kind of natural
right is the property of the State. Henry George, in _Progress and
Poverty_, Book VII, chap. 1, maintains that “the equal right of all men
to the use of the land is as clear as their equal right to breathe the
air—it is a right proclaimed by the fact of their existence.”

[1193] _Principles_, Book V, chap. 2, § 5.

[1194] “This continual increase arising from the circumstances of the
community and from nothing in which the landholders themselves have
any peculiar share, does seem a fund no less peculiarly fitted for
appropriation to the purposes of the State than the whole of the rent
in a country where land has never been appropriated.” (_Elements of
Political Economy_, chap. 4, § 5.)

[1195] _Cf. supra_, chapter on Saint-Simon.

[1196] _Principles_, Book V, chap. 2, § 5. Cf. also chap. 3, §§ 2 and 6.
For the programme of the League see _Dissertations and Discussions_, vol.
iv.

[1197] Mill thought it impossible to distinguish in individual cases
between the surplus value which is due to general circumstances and the
surplus that results from the expenditure undertaken by the proprietor.
Hence his conclusion that a general tax was the most equitable method of
procedure with a view to effecting confiscation.

[1198] _Dissertations and Discussions_, vol. iv, p. 256.

[1199] _Progress and Poverty_ was not his first effort, however. In 1871
_Our Land and Land Policy_ had appeared, and in 1874 _The Land Question_.
Later still he published _Protection or Free Trade_ (1886), in which he
puts forward a strong case for Free Trade, and in 1891 _An Open Letter to
Pope Leo XIII_ on the condition of the workers.

[1200] Clark in his _Distribution of Wealth_ states that the method by
which he tries to determine the exact productivity of each factor of
production is one that he borrowed from Henry George.

[1201] “Twenty men working together will, where nature is niggardly,
produce more than twenty times the wealth that one man can produce where
nature is most bountiful.” _Cf._ also the whole of Book II, which is a
disproof of the Malthusian theory.

[1202] “Labour and capital are but different forms of the same
thing—human exertion. Capital is produced by labour; it is, in fact,
but labour impressed upon matter.… The use of capital in production
is, therefore, but a mode of labour.… Hence the principle that, under
circumstances which permit free competition, operates to bring wages to a
common standard and profits to a substantial equality—the principle that
men will seek to gratify their desires with the least exertion—operates
to establish and maintain this equilibrium between wages and interest.…
And this relation fixed, it is evident that interest and wages must
rise and fall together, and that interest cannot be increased without
increasing wages, nor wages be lowered without depressing interest.”
(_Progress and Poverty_, Book III, chap. 5.) It is hardly necessary to
point out how very much simplified this doctrine concerning the relation
between wages and interest really is.

[1203] A _résumé_ of this theory of distribution, whose very simplicity
must make it suspect, may be found in Book V, chap. 2: “In every
direction, the direct tendency of advancing civilisation is to increase
the power of human labour to satisfy human desires—to extirpate poverty
and to banish want and the fear of want.… But labour cannot reap the
benefits which advancing civilisation thus brings, because they are
intercepted. Land being necessary to labour, and being reduced to private
ownership, every increase in the productive power of labour but increases
rent—the price that labour must pay for the opportunity to utilise its
power; and thus all the advantages gained by the march of progress go to
the owners of land, and wages do not increase.” George, however, does not
claim that real wages have fallen because technical improvements enable
production to be carried on where it was formerly impossible. At most
this will only enable capital and labour to preserve their old scale of
remuneration; it will not give them any share in the progress that has
been made, so that, relatively speaking, it is true to say that wages and
interest have both fallen in comparison with rent. “When I say that wages
fall as rent rises, I do not mean that the quantity of wealth obtained
by labourers as wages is necessarily less, but that the proportion
which it bears to the whole produce is necessarily less. The proportion
may diminish while the quantity remains the same, or even increases.”
(Book VI, chap. 6. Cf. also Book IV, chap. 3.) George, like Ricardo and
a good many socialists, confuses two different problems, namely, the
price of productive services and the proportional distribution of the
product between the different agents of production (Book V). He adds,
however, that scientific discovery, by pushing the margin of cultivation
back to that point where the law of diminishing returns is more than
counterbalanced by increased productive efficiency, may even sometimes
reduce the worker’s real wages, and so impair his position not only
relatively, but also absolutely. (Book IV, chap. 4.)

[1204] _Ibid._, Book V, chap. 2.

[1205] That portion of their revenue which represented the capital sunk
in the land would still be the property of the landowners.

[1206] Mill points out that the answer to this objection is that the
right of selling the land at a price which depends upon two contrary
conditions (gain or loss) establishes a kind of equilibrium. The State
would not lose anything by this, for a fall in value in one place,
unless it be accompanied by a general want of prosperity, implies a
corresponding increase somewhere else, of which the State will get the
benefit. (_Dissertations and Discussions_, vol. iv.)

[1207] M. Einaudi, however, in his excellent _Studi sugli effetti
delle imposte_, p. 125 (Turin, 1902), remarks that this principle of
indemnifying losses leads directly to a State guarantee of values—the
expediency of which is at least problematic. He makes the further
observation that the compensation would often be paid to a person other
than the one who paid the tax when it was levied—the property in the
meantime having changed hands.

[1208] For the distinction between the legality of movable and immovable
property see Mill, _Principles_, Book II, chap. 2, § 1, and Henry George,
_Progress and Poverty_, Book VII, chap. 1. “The institution of private
property,” says Mill in the above passage, “when limited to its essential
elements, consists in the recognition, in each person, of a right to the
exclusive disposal of what he or she have produced by their own efforts,
or received either by gift or by fair agreement without force or fraud
from those who produced it.” Such a definition at least implies that
landed property is illegal. A house is distinguished from the land upon
which it is built; whereas the former is legally held the latter is not.

[1209] Mill, _Dissertations and Discussions_, vol. iv, p. 298.

[1210] Especially in England, where various schemes have been propounded
and investigated by Royal Commissions in the course of the last ten
years. Such schemes are discussed in a very thorough fashion in Einaudi’s
book already mentioned, and in an article entitled _Recent Schemes for
Rating Urban Land Values_ contributed by Edgeworth to the _Economic
Journal_ in 1906.

[1211] Article 30 of the Act of September 16, 1807, runs as follows: “If
as the result of the improvements already mentioned in this Act—through
the making of new roads or the laying out of new squares, through the
construction of quays or other public works—any private property acquires
a notable increase in value, such property shall be made to pay an
indemnity which may be equal to half the value of the advantage which
has thus accrued to it.” The principle was rarely applied, however.
M. Berthélemy (_Traité élémentaire de Droit administratif_, 1908, p.
624) states that he can only find twenty occasions on which the law was
brought into operation in the whole course of the nineteenth century.

[1212] Professor Seligman (_Essays in Taxation_, 5th ed., p. 341) quotes
an English law of 1672 relating to the widening of certain streets in
Westminster in which the principle is neatly stated. But when it was
proposed to apply it to certain public works undertaken in London in 1890
it was energetically opposed. It was admitted afresh in the Tower Bridge
Act of 1895. A similar system is frequently adopted in America under the
name of “special assessment” or “betterment.”

[1213] No notice whatever was taken of it then, and even in the second
edition of the great _Handwörterbuch der Staatswissenschaften_, published
in 1900, no mention is made of Gossen’s name, although the third edition
of that work has made ample reparation. The book was reprinted in 1889.
On the relation between the ideas of Gossen and those of Jevons and
Walras see Walras’s interesting article, _Un Économiste inconnu, Hermann
Henri Gossen_, published in the _Journal des Économistes_ in 1885 and
reproduced in his _Études d’Économie sociale_, pp. 351 _et seq._

[1214] _Entwickelung der Gesetze_, p. 250.

[1215] Gossen sees other advantages that would follow such reform. He
enumerates them thus: (1) The confiscation of rent would reduce the
possibility of living without working, and this would increase the
industrial activity of the class under consideration. (2) The legal
transference of property would be greatly simplified. (3) Producers would
be exempted from buying land and from keeping capital for this purpose.
(4) Rent would take the place of taxation to a very considerable extent,
and would free the collection of it from every trace of vexation or
injustice. (_Ibid._, p. 273.)

[1216] Cf. the fragment entitled _Méthode de Conciliation ou de
Synthèse_, in the _Études d’Économie sociale_. Henry George in his
preface to _Progress and Poverty_ writes thus: “What I have done in this
book … is to unite the truth perceived by the school of Smith and Ricardo
to the truth perceived by the school of Proudhon and Lassalle; to show
that _laissez-faire_ (in its full, true meaning) opens the way to a
realisation of the noble dream of socialism.”

[1217] _Études d’Économie sociale_, p. 239.

[1218] See the charming sixth lesson of the _Théorie générale de la
Société_ in the _Études d’Économie sociale_.

[1219] “In order to justify a measure involving a slight diminution
in the rent of landed proprietors, it is hardly necessary to invoke
the fact that rents have a faculty of growing continuously without the
co-operation of the proprietor. We need scarcely point out that this
increase in rent over a certain period cannot enter into the price of
land simply because it cannot be calculated. Consequently, when a buyer
buys under the system of guarantee afforded by the State he has at the
same time undoubtedly bought a claim to all the variations of rent which
may ensue.… Even if the landed proprietor is indemnified by being paid a
perpetual rent equal to the rent of his land at the time of confiscation,
as is done to-day in the case of compulsory purchase, the injustice will
not be as great as it otherwise would be, but it will not be removed
altogether.” (Gossen, _Entwickelung der Gesetze_, pp. 257-258.)

[1220] Gossen gives reasons for thinking that the State, owing to its
superior position as compared with individuals, might offer better terms
to the proprietors than ordinary buyers could—among others, that the
State can borrow cheaply and could consequently offer a better price.

[1221] A similar idea underlies Gide’s proposal in an article contributed
to the _Journal des Économistes_ for July 1883. “The State would offer to
buy the land and pay for it on the basis of ninety-nine years’ purchase.
There is reason to think that hardly a buyer would be found who would
refuse such an offer coupled with a slight compensation, for ninety-nine
years is the equivalent of perpetuity as far as the individual is
concerned. There would be nothing mean about such a price; really it
would be more of a gift to the proprietor.”

[1222] Walras, _Études d’Économie sociale_, p. 368. A mathematical
discussion of the theory is contained in the _Théorie mathématique du
Prix des Terres_. The same argument expressed in ordinary language may be
found in the article entitled _Un Économiste inconnu_ (_Études d’Économie
sociale_, pp. 365 _et seq._), and it is still more simply summed up in
the _Problème fiscal_, pp. 446-449.

[1223] “The same considerations would apply in the case of mines,
railways, monopolies of every kind, natural and otherwise, where the
principle of free competition is in operation or where any surplus value
exists.” (_Études d’Économie sociale_, p. 347, note. Cf. also pp. 237 _et
seq._)

[1224] Cf. Escarra, _loc. cit._, p. 224. See also Laveleye, _Le
Socialisme contemporain_, 8th ed., Appendix I.

[1225] Métin, _Le Socialisme en Angleterre_, p. 179 (1897).

[1226] “The possession of a piece of land frees the workman from
dependence upon the masters, which is one cause of poverty. The worker
who possesses land is free. He has always something he can turn his hand
to when out of work.” Elsewhere: “If a certain quantity of land is given
to the workers their wages will surely rise, for no one will work for
another unless he can get more than he gets when working for himself.”
(Quoted by Escarra, p. 224, note.) The same idea occurs in Henry George,
but not as a part of the general argument.

[1227] If we had not decided against the inclusion of the Italian
economists, this would have been the place to devote a few words to the
writings of Achille Loria. No one excels him as a writer on political
economy. An elaborate superstructure of great economic, political,
social, and even religious significance has been built upon the
foundation of free land, which at least denotes a powerful imagination. A
_résumé_ of this thesis is contained in _La Terra ed il Sistema sociale_,
translated for the _Revue d’Économie politique_ in 1892. We cannot
examine Loria’s system here. Suffice it to say that in his _Costituzione
economica odierna_ (1900) he demands that the law should recognise each
man’s right to the land: either to a unit of land (_i.e._ a quantity of
land such as would enable a man to live and set up as an independent
producer) or, failing that, to a fraction of such a unit.

Such is the theoretical solution, but the practical suggestion is
somewhat milder, a kind of territorial wage being suggested. Every master
would be obliged to give to his workmen, in addition to a minimum wage, a
certain amount of land at the end of a given number of years. If during
that period the workman has been employed by several masters, each master
should contribute in proportion to the length of time he has been in his
service.

At the end of a certain period every worker would thus become a
proprietor. These would thus be in the same position as their primitive
ancestors were as far as natural economy is concerned, and would be able
to join with the older proprietors in a kind of association of capital
and labour on a footing of absolute equality, which Signor Loria thought
would be a most fruitful type of organisation. During the intervening
years a certain amount of pressure would have to be put upon the
proprietors.

[1228] The Social Democratic Federation was founded by Hyndman in 1881.
See Métin, _Le Socialisme en Angleterre_, chap. 6 (1897).

[1229] Bernard Shaw, _The Fabian Society, what it has done and how it has
done it_ (1892; Fabian Tract, No. 41).

[1230] _Report on Fabian Policy_ (Fabian Tract, No. 70).

[1231] “For it was at this period that we contracted the invaluable habit
of freely laughing at ourselves which has always distinguished us, and
which has saved us from becoming hampered by the gushing enthusiasts who
mistake their own emotions for public movements.” (Bernard Shaw, _loc.
cit._)

[1232] _Report on Fabian Policy._

[1233] Socialism, as understood by the Fabian Society, means the
organisation and conduct of the necessary industries of the country,
and the appropriation of all forms of economic rent of land and capital
by the nation as a whole, through the most suitable public authorities,
municipal, provincial, or central. The socialism advocated by the Fabian
Society is State socialism exclusively (the term is used to distinguish
it from anarchist socialism). On the other hand, it “steadfastly
discountenances all schemes for securing to any person, or any group of
persons, the entire product of their labour. It recognises that wealth
is social in its origin and must be social in its distribution, since
the evolution of industry has made it impossible to distinguish the
particular contribution that each person makes to the common product, or
to ascertain its value.” (_Report on Fabian Policy._)

[1234] _Ibid._

[1235] In addition to the _Fabian Essays_, the principal publications
containing an exposition of Fabian ideas are the Fabian Tracts, a
collection containing a great number of pamphlets on various subjects;
_The History of Trade Unionism_, by Mr. and Mrs. Webb; _Industrial
Democracy_, particularly chaps. 1 and 2 of the third part, by the same
authors; and, finally, _Problems of Modern Industry_ (1898), a collection
of lectures and articles, also by Mr. and Mrs. Webb.

[1236] Mr. and Mrs. Webb in their _History of Trade Unionism_ reject
“that confident sciolism and prejudice which has led generations of
socialists to borrow from Adam Smith and the ‘classic’ economists the
erroneous theory that labour is by itself the creator of value without
going on to master that impregnable and more difficult law of economic
rent which is the very corner-stone of collectivist economy.”

[1237] “The interest with which we are concerned must clearly be
a definable quantity of produce.” (_The National Dividend and its
Distribution_, in _Problems of Modern Industry_, p. 227. We are indebted
to this article for the exposition which we have given of the Fabian
doctrine.)

[1238] An exposition of the same theory is given in Tract No. 15,
_English Progress towards Social Democracy_: “The individuals or classes
who possess social power have at all times, consciously or unconsciously,
made use of that power in such a way as to leave to the great majority
of their fellows practically nothing beyond the means of subsistence
according to the current local standard. The additional product,
determined by the relative differences in productive efficiency of the
different sites, soils, capitals, and forms of skill above the margin of
cultivation, has gone to those exercising control over these valuable
but scarce productive factors. This struggle to secure the surplus or
‘economic rent’ is the key to the confused history of European progress,
and an underlying, unconscious motive of all revolutions.” Cf. also _The
Difficulties of Individualism_, in _Problems of Modern Industry_, pp.
237-239.

[1239] Bernard Shaw in his _Economic Basis of Socialism_, published in
the _Fabian Essays_, makes a very neat distinction between interest
properly so called and economic rent.

[1240] _Fabian Essays_, p. 35.

[1241] _Socialism True and False_ (Tract No. 51).

[1242] _What Socialism is_ (Tract No. 13).

[1243] In his preface to Kurella’s German book, _Sozialismus in England_
(1898), he mentions the fact that the English working class is divided
into a number of corporations who are either jealous of or misunderstand
one another, but have not what we may properly call a class consciousness
(p. 10).

[1244] _Report on Fabian Policy_, p. 7.

[1245] _Fabian Essays_, pp. 47-49.

[1246] _Ibid._, p. 31.

[1247] Sidney Webb, _The Difficulties of Individualism_, in _Problems
of Modern Industry_, p. 231. Also in the _Fabian Essays_, p. 35, he
declares: “Socialists as well as individualists realise that important
organic changes can only be (1) democratic …; (2) gradual …; (3) not
regarded as immoral by the mass of the people; and (4) in this country,
at any rate, constitutional and peaceful.”

[1248] B. Potter (Mrs. Sidney Webb), _The Co-operative Movement_, p. 16.

[1249] Etymologically “solidarity” is a corruption of _solidum_, which
was employed by the Roman jurists to signify the obligation incurred by
debtors who were each held responsible for the whole amount of a debt.
One would naturally expect the French derivative to be _solidité_, which
was the term used by the jurists under the old _régime_, especially by
Pothier. _Solidarité_ was substituted for it by the editors of the Civil
Code.

[1250] We should never come to an end if we began to quote passages in
which the merits of solidarity are set forth. We must content ourselves
with the following, chosen at random:

M. Millerand, at the time Minister of Commerce, in a speech delivered at
the opening of the Exposition Universelle in 1900, said: “Science teaches
men the true secret of material greatness and of social morality; and all
its teaching, in a word, points to solidarity.”

M. Deherme, the founder of the People’s University movement, says: “The
folly of solidarity should be the source of our inspiration, just as the
martyrs of old were inspired by the folly of the Cross. The thing that
wants doing is to organise democracy.” (_La Co-operation des Idées_, June
16, 1900.)

[1251] “For as we have many members in one body, and all members have not
the same office; so we, being many, are one body in Christ, and every one
members one of another.” (Romans xii, 4 and 5.)

“As in physical organisms the unity is made up of separate limbs, so
among reasoning things the reason is distributed among individuals
constituted for unity of co-operation.” (Marcus Aurelius, vii, 13;
Rendall’s translation.)

[1252] _Discours sur l’Esprit positif._ In the _Cours de Philosophie_ he
frankly pays it this well-deserved compliment: “It is a truly capital
idea, and thoroughly modern too.”

[1253] Social biology dates from the publication of Professor Schäffle’s
great work _Bau und Leben des sozialen Körpers_ (1875-78); possibly
from the publication of Rodbertus’s work—at any rate, Rodbertus accuses
Schäffle of plagiarism. See also Spencer’s _Principles of Sociology_.
Aristotle had already ventured to say that “an animal is just like a
well-ordered city,” a proposition that might well be inverted.

[1254] There are still a few adherents left. See M. Worms’s book,
_Organisme et Société_, and Lilienfeld’s _Pathologie sociale_.

Herbert Spencer, who was the pioneer of the analogy, had abandoned it;
and Auguste Comte, the godfather of sociology, took good care to put
sociologists on their guard against the method, which he considered
irrational.

[1255] “The enormous development of steam communication and the spread of
the telegraph over the whole globe have caused modern industry to develop
from a gigantic starfish, any of whose members might be destroyed without
affecting the rest, into a μέγα ζῶον which is convulsed in agony by a
slight injury in one part.” (Nicholson, _Effects of Machinery on Wages_,
p. 117.)

[1256] It was in 1889, if we mistake not, that the term “solidarity” was
proposed as the title of a new economic school in a lecture entitled
_L’École nouvelle_. This lecture was published, along with others, in a
small volume entitled _Quatre Écoles d’Économie sociale_ (1890, Geneva)
(_L’École libérale_, by Frédéric Passy; _L’École catholique_, by Claudio
Jannet; _L’École socialiste_ by M. Stiegler; and _L’École nouvelle_, by
M. Gide). The characteristics of the various schools are summed up as
follows: The one is the school of liberty, the other of authority, while
the third is the school of equality. Gide then proceeds: “Were I asked
to define what I understand by the New School in a single word, I should
call it the Solidarity School. Unlike liberty, equality, and fraternity,
solidarity is not a very high-sounding word, nor is it a mere ideal.
It is just a fact, one of the best-established facts of history and
experience, and the most important discovery of our time, and this fact
of solidarity is becoming better established every day.”

It would have been better, perhaps, to have spoken of a new movement
rather than of a new school, seeing the variety of schools, some of
them actually opposed to one another, such as the school of Biological
Naturalism and the Christian school, the Anarchist school and the State
Socialist school, that have adopted solidarity as a part of their creed.

[1257] M. Léon Bourgeois’s _La Solidarité_ appeared originally as a
series of articles contributed to the _Nouvelle Revue_ in 1896. These
were published in book form in the following year. The different aspects
of the question have been dealt with in a series of lectures delivered
by various authors at the École des Hautes Études sociales under the
presidency of M. Bourgeois himself, and published in a volume entitled
_Essai d’une Philosophie de la Solidarité_ (1902). An association for
the propagation of the new ideas was founded in 1895 under the name of
La Société d’Éducation sociale. An International Congress was called
together on the occasion of the 1900 Exposition, but since then the signs
of activity have been few.

French books and articles dealing with the subject are plentiful enough.
We can only mention _La Solidarité sociale et ses Nouvelles Formules_,
by M. d’Eichthal (1903); the annual report of L’Académie des Sciences
morales et politiques for 1903; M. Bouglé’s book _Le Solidarisme_ (1907);
and Fleurant’s _La Solidarité_ (1907). There is hardly a manual for
teachers published which does not contain a chapter devoted to this
question.

[1258] “The fact that such a thing as natural solidarity exists should
not be taken to imply that it must necessarily be just. Justice can never
be realised unless the laws of solidarity are first observed; but once
these have been established, their effects must be modified to make them
conform to the requirements of justice. The actual and the ideal should
never be confused; they are the direct contraries of one another. But it
is absolutely necessary that the first should be established before we
can realise the moral necessity for the other.” (Bourgeois, _Philosophie
de la Solidarité_, pp. 13, 17.)

[1259] “There are some debts which are hardly noticed at all, but
which ought to be paid all the same.” (Bourgeois, _Philosophie de la
Solidarité_, p. 60.) “There is a real claim where we thought there was
only a moral obligation, and a debt where we thought there was only a
sacrifice.” As the Gospel says: “Unto whomsoever much is given, of him
shall be much required.” (Luke xii, 48.) “So that ye come behind in no
gift.” (1 Corinthians i, 7.)

[1260] “No man is free as long as he is in debt. He becomes free the
moment he pays off that debt. The doctrine of solidarity is just the
corrective of the theories of private property and individual liberty.”
(Bourgeois, _op. cit._, p. 45.)

[1261] M. Bourgeois also points out that just as our ancestors were
indebted to us, so are we indebted to those that shall come after us. But
that is a different thing, and the theory does not seem very sound on
this point. It is strange to think that creditors long since dead should
transfer the debt which was owing to them to the credit of generations
yet unborn!

[1262] Bourgeois, _op. cit._, p. 94.

[1263] Even the texts of the Civil Code seem to point to some such
theory. Article 1370, in addition to the cases of quasi-contract and
quasi-misdemeanour of which it speaks, also mentions “law” as a general
cause of obligation.

[1264] “Wherever it is impossible to fix definitely the value of the
personal effort put forth by a single individual, as in the case of a
quasi-contract—that is, whenever it is impossible to determine the value
of the debt on the one hand or the credit on the other—_the best plan
is to pool those risks and advantages_. This would mean that none would
know who is really bearing the risk or who is reaping the advantages, the
risks being shared by everybody and the advantages being thrown open to
everyone.” (_Ibid._, p. 81.)

The end of the quotation apparently contradicts the statement we
have italicised, in which he speaks of pooling risks and advantages.
With regard to the latter, it is enough, apparently, to secure equal
opportunity. It is not very obvious why the principle should be so
rigidly enforced in the one case and so reluctantly in the other. If the
principle of solidarity holds me responsible for the degradation of the
drunkard in the one case, is there any reason why I should not be allowed
to share in the good fortune of the lucky speculator in another? Is it
because the logical application of this principle would directly lead to
communism?

[1265] One should add that the word “quasi-contract” is not so frequently
used by M. Bourgeois as it is by his disciples. As in many another
instance, the disciples have outdone the master. In his _Philosophie de
la Solidarité_ he scarcely uses the term at all, but seems to prefer to
speak of mutualisation.

[1266] Such seems to be the ideal of Guyau, the philosopher, in his
charming volume, _Esquisse d’une Morale sans Obligation ni Sanction_.

[1267] “The only thing that justice demands is the payment of debt;
beyond that we have no right to impose any obligation whatsoever.”
(Bourgeois, _op. cit._, pp. 45 and 56.)

[1268] “Thanks to this fact, rivals need not seek to eliminate one
another, but may well be content to exist side by side. Specialisation
is undertaken, our author thinks, not with the idea of producing more,
as the economists seem to teach, but merely with a view to enabling us
to exist under the new conditions of life which await us.” (_Division du
Travail._)

[1269] “Every brook that flows, every lamp that burns, every word spoken,
every gesture made, betokens a movement in the direction of the greater
uniformity of the universe.” (Lalande, _La Dissolution_.)

[1270] This is the sense in which solidarity has been understood by the
Lausanne philosopher Charles Secrétan, in his book _La Civilisation et
la Croyance_, and the same point of view has been adopted by M. Alfred
Fouillée. “Solidarity,” writes Fouillée, “has all the practical value of
an ideal force. The recognition of the profound identity which pervades
humanity and the adoption of an ideal of perfect unity as the supreme
object of rational desire must assume the form of a duty in the eyes of
every human being. We should anticipate the unity of the human race,
which is as yet far from being realised, and which will never be perfect
perhaps, by acting as if we were already one.” (_Revue des Deux Mondes_,
July 15, 1901.)

[1271] Auguste Comte, in his usual authoritative manner, declared that
solidarity rests upon the fact that men can represent one another, and
consequently may be held responsible for one another.

[1272] See a collection of addresses by various authors published under
the title of _Les Applications sociales de la Solidarité_ (1904).

[1273] These laws of public assistance are among the most remarkable
practical manifestations of the solidarist movement. They are quite a
new feature in French public life, and until their appearance relief,
whether given by the State, the department, or the commune, was purely
optional (except in a few isolated cases, such as in that of waifs and
strays). To mention only the principal ones in France, the law of July
15, 1893, made relief in the form of medical attendance for all destitute
invalids obligatory upon the communes. The law of July 14, 1905, extended
a similar benefit to all invalids and to all persons over seventy years
of age in the form of pensions varying in amount from 60 to 240 francs
per annum (360 in Paris). Finally, the law of April 5, 1910, secures a
pension to all workmen at the age of sixty, the charge being divided
between the State, the employers, and the workmen themselves. It is a
kind of payment made by the members of the present generation to the
survivors of a past one. This relief is clearly of the nature of a social
debt, and justifies us in treating it as the outcome of a quasi-contract,
for on the one hand it constitutes an obligation fixed by law on the
part of the commune, the department, or the State, as the case may be—an
obligation which they cannot escape—and on the other hand a right on the
part of the beneficiary, as in the case of a creditor in an action for
the recovery of debt.

[1274] A very curious application of this national solidarity has come to
light quite recently. Formerly the French Government would only sanction
foreign loans if the borrowing country promised to apply some part of its
funds to French industry. That meant linking the _rentier_ and the French
manufacturers by a forced kind of solidarity, the first being unwilling
to lend money unless that money in some way returned to the second person
for goods purchased. This is just where the claim of the workers, who
justly demand a minimum wage, comes in.

[1275] The doctrine of quasi-contract might lead to the one conclusion as
well as to the other. M. Bourgeois himself seems to incline rather in the
direction of associationism. “The Radical party has a social doctrine, a
doctrine that might be summed up in one word—association.” (Preface to M.
Buisson’s _La Politique radicale_.)

[1276] “The Apotheosis of Solidarity,” printed in large type, recently
appeared as a headline in one of the French morning papers. The reference
was to a banquet of 30,000 mutualists.

[1277] Mutualists are so taken up with the idea of solidarity that they
indignantly protest if any of their number happens to make use of the
term “beneficence” or “charity.” “Everyone has a right to demand his
own,” they say: that is clearly Bourgeois’s thesis. On the other hand,
their journal, _L’Avenir de la Mutualité_, for February 1909 claims
that societies for mutual help have a right to organise tombolas and
lotteries, and they base their care upon the law of May 21, 1836, which
reserves the right of lottery to “efforts of an entirely charitable
character.” In order to defend its claim, _L’Avenir de la Mutualité_ does
not hesitate to affirm that the societies for mutual help “recognise the
existence of an element of benevolence which is not exactly mutual and
which is rightly connected with the superior modern principle of social
solidarity, but which none the less justifies the application of the law
of 1836.”

[1278] “Solidarity is just an empty word if it is not supported by
special organisms which can render it effective. This is why workmen’s
associations have deemed it necessary to establish what they call
‘guarantism.’…

“The most unmistakable manifestation of solidarity consists in the
employment of a part of the wealth produced by labour in order to repair
the poverty caused by the deficient organisation of labour, which leaves
the worker and his family liable to the acutest suffering whenever
illness, old age, or misfortune crosses their paths.” (Programme on the
cover of a journal known as _L’Association ouvrière_, the organ of the
producers’ associations.)

[1279] This co-operatist programme is generally known in France as that
of the École de Nîmes. Really it is a development of the suggestions
thrown out by the Rochdale Pioneers in 1844. M. Bourgeois, who gives it
a place in his _Systèmes socialistes_, considers that it is a little
indefinite. It seems to us, on the other hand, to be about as precise as
any of the other socialist systems that attempt to envisage the future;
and it has this advantage, that its prophecies are already in process of
realisation in a fashion that is most unmistakable. See a brief _résumé_
of the programme in a lecture by Gide on the occasion of the centenary
of the French Revolution, published in the volume entitled _Co-opération
(Des Transformations que la Co-opération est appelée à réaliser dans
l’Ordre économique)_.

The task of reorganising society belongs, not to the producers, but to
the consumers, for while the former are inspired by the co-operative
spirit, the latter are imbued with enthusiasm for the general well-being.
Consumers have only to unite and all their wants are satisfied just in
the way they desire, for they can either buy directly from the producers
all that they need, or they can, when they have become sufficiently
rich and powerful, produce for themselves in their own factories and on
their own lands. This would mean the abolition of all profits, those of
middlemen and manufacturers alike. The societies would retain only as
much as would be necessary for the further extension of the movement,
returning all the rest to the consumers in proportion to the amount of
their purchases. We have already had occasion to note how this idea of
the abolition of profits had haunted John Stuart Mill, and how it seemed
linked with an entirely new phase of social evolution, to which he gave
the name of the “stationary State.” We have also witnessed the Hedonists’
arrival at exactly the same conclusion, though along a directly opposite
path, namely, that of absolutely free competition.

We must not lose sight of the fact that this revolution is accomplished
without affecting the foundations of the social order—property,
inheritance, interest, etc.—and without having recourse to any measure
of expropriation save such as naturally results from the free play of
present economic laws. Co-operators have no desire to interfere with
accumulated capital, their aim being merely to form new capital which
shall render the old useless. If existing capital is merely accumulated
profits made out of labour, why should not labour itself make a profit,
and this time keep it for its own use?

Complaints have been made that a system of this kind, even if it were
realised, would not result in the abolition of the wage-earner, seeing
that the workers would still be employed, the only difference being that
their employer would be a society instead of an individual. The reply is
that a person who works for a society of which he himself is a member is
very near to being his own master.

Moreover, has anyone a right to raise this objection? The upholder of
the present economic order certainly has not when we remember that he
considers the wage contract to be the definite type of pure contract.
Neither are the collectivists entitled to make it, for under their system
everybody would be a civil servant. Hence the only persons who are
really justified in making this criticism are those who believe that the
future will see an increase in the number of independent proprietors.
The reply that we would make to them is this: The only hope of seeing
this realised—which is also the ideal of some co-operators—is to set up
producers’ associations under the control and protection of consumers’
societies. In fact, a _régime_ of federated co-operative societies is
not incompatible with the maintenance of a certain amount of autonomous
production, thanks to various considerations which need not be detailed
here.

[1280] In France this rule of solidarity has as yet only been adopted by
a Catholic group of credit societies known as the Union Durand. It may
be practised by a few other societies there, but it is quite obviously
the exception, whereas in some German societies and in Italian and Swiss
associations the rule is always followed—another proof that although
the idea is French in origin we must look elsewhere for practical
applications.

[1281] _La Propriété sociale et la Démocratie._

[1282] The result is that masters are nowadays held responsible whenever
a workman meets with an accident, or falls ill even. They are also liable
to damages whenever they pay off their men. Owners of urban property are
no longer allowed to build according to their fancy, and any property
set up in contravention of the sanitary regulations is immediately
demolished. Further progress along these lines would lead to juridical
socialism. See _Les Transformations du Droit civil_, by M. Charmont, and
_Le Droit social et le Droit individuel_, by M. Duguit.

[1283] Anton Menger, of Vienna, is the protagonist of this view. See his
book, _Das bürgerliche Recht und die besitzlosen Volksklassen_ (1890).
Another of his works, _Das Recht auf den vollen Arbeitsertrag_, which has
been translated into English and contains a valuable preface by Professor
Foxwell Menger, maintains that at the basis of the economic order are
three fundamental rights which may be compared with the political demands
put forward in the Declaration of the Rights of Man. These rights are:
(1) the right to the whole produce of labour, (2) the right to work, (3)
the right to exist—all of which claims were put forward by Considérant,
Louis Blanc, and Proudhon, the French socialists of 1848.

See also Lassalle’s book, _Das System der erworbenen Rechte_. Mention
should also be made of M. Emmanuel Lévy de Lyon, who has published
several articles of this kind, especially the pamphlet entitled _Capital
et Travail_.

[1284] “The producer is concerned about the well-being of his clients
at every moment. His sympathies are wide enough to include the whole of
humanity. The merchant and the transport agent are always on the look-out
for what will prove most advantageous to those for whom they are working,
as well as for new clients—that is, for more persons to whom they can be
of service.” These words, which might have been written by Bastiat, are
taken from a small yet curious volume published by M. Yves Guyot, and
entitled _La Morale de la Concurrence_.

[1285] “Solidarity serves as a pretext for those people who want to enjoy
the fruits of the labour of others without taking a part in such labours
themselves, and for politicians who want to win adherents to their cause;
it is just a new name for an unhealthy kind of egoism.” (Vilfredo Pareto,
_Le Péril socialiste_, in the _Journal des Économistes_, May 15, 1900.)

“The solidarist theories would simply greatly increase the number
and incapacity of the unemployable.” (Demolins, _La Supériorité des
Anglo-Saxons_.)

[1286] “The distinctive feature of evolution seems to be the growing
tendency among organisms to attain to a position of independence by
acquiring a certain degree of specialised skill.” (De Launay, _L’Histoire
de la Terre_.) The crystal’s action, says de Launay, in grouping itself
in the form of a polyhedron is an expression of independence as well as
a means of defence. The crystal is simply the earliest individual to
break away from its environment. The animal form in the ocean depths
that carries in its own body the essentials of a new environment marks a
second step.

[1287] “The primitive era was an age of solidarity. Crime was no
individual thing then, and that the innocent should suffer for the sake
of the guilty seemed a part of the order of things. It is only in an age
of reflection that such dogmas appear absurd.” (Renan, _Avenir de la
Science_, p. 307.)

[1288] Anti-kissing leagues, inspired not by any puritan motives, but
arising solely out of fear of bacilli, have been formed in the United
States. One must not be surprised if a league against hand-shaking is
established next; although this would be rather a curious result of a
doctrine of solidarity that is always represented by the device of two
hands clasped in one another!

In Paul Bureau’s book _La Crise morale des Temps nouveaux_ there is a
lengthy, lively criticism of solidarism from the moral standpoint.

[1289] This is how we find it appraised in _Le Mouvement socialiste_:
“The development of solidarism is one of the most disquieting features
of the present time. It affords a proof as well as being a cause of a
considerable slackening of energy.” (Issue for July 1907; Paul Olivier in
a review of Bouglé’s book on solidarism.)

[1290] Association, even when the object in view is purely mercenary, has
a moral value superior to exchange:

(1) Inasmuch as it always implies, in addition to money payment, a
certain sacrifice of time and trouble, perhaps even of independence. It
involves something more than the obligation to attend meetings and to
conform to rules.

(2) It implies something more than a mere act of exchange which is
completed in an instant and at one stroke. It implies the indefinite
collaboration of the parties concerned.

[1291] The solidarist _régime_ must be distinguished from the exchange
_régime_ on the one hand and from charity on the other. Exchange implies
giving something with a view to obtaining the exact equivalent. Charity,
on the other hand, implies giving without expecting any return; hence
it involves a sacrifice. Solidarity also implies a sacrifice: every
appeal on behalf of solidarity is based upon the consciousness of a
certain amount of sacrifice, but a sacrifice that is not entirely
disinterested—it is the sacrifice of a part of the individual self in
order to gain an equal share in the collective being.

[1292] See his article on Government in the _Dictionnaire_ of Coquelin
and Guillaumin.

[1293] _Œuvres_, vol. i, p. 59 (_Fédéralisme, Socialisme, et
Antithéologisme_).

[1294] Adler in his article _Anarchismus_ in the _Handwörterbuch der
Staatswissenschaften_, and in his _Geschichte des Sozialismus und
Kommunismus_ (1899), shows the indebtedness of the anarchist ideal to
Greek philosophy.

[1295] The work was republished in 1882 and again in 1893, and translated
into French in 1902. There are also a few translations from the writings
of Smith and Say from his pen. A very interesting account of his life, to
which we must acknowledge our indebtedness for some of the information
given here, is to be found in J.H. Mackay’s _Max Stirner, sein Leben und
sein Werk_ (Berlin, 1898). Stirner’s real name was Kaspar Schmidt. Born
in 1806 at Bayreuth, in Bavaria, he died at Berlin in extreme poverty
and wretchedness in 1856. For an account of the “left Hegelian school”
and of Stirner himself see the very interesting articles of Saint-René
Taillandier published in the _Revue des Deux Mondes_, 1842-50.

[1296] Some may perhaps wonder why Nietzsche is not included, especially
as he was a successor of Stirner’s. But Nietzsche’s interests were always
exclusively philosophical and ethical. Stirner’s work, on the other hand,
is mainly social and political. We have already pointed out that even
Stirner’s book has only a rather remote connection with economics, and a
detailed study of it would be more in keeping with a history of political
ideas. Nietzsche’s work would lead us still farther afield, and would
force us to examine every individualistic doctrine as it cropped up.

[1297] _Der Einzige und sein Eigenthum_ (ed. Reklam), p. 164.

[1298] _Ibid._, p. 225.

[1299] “This man has a body, and so has this man, and that man, right
through society, so that you have a _collection of bodies_ and not one
_collective body_. Society has several bodies at its disposal, but has
no body of its own. Just like the parallel notion of a nation, this
corporate body is a mere phantom—an idea with no corporeal existence.”
(_Ibid._, p. 135.) To make the possession of a body the test of reality
is surely gross materialism. At this rate, law, custom, and language
would have to be considered unreal. A historical fact such as a battle or
a revolution has no body, but its _real_ consequences are often palpable
enough.

[1300] _Der Einzige und sein Eigenthum_, p. 222.

[1301] _Ibid._, p. 223.

[1302] _Ibid._, p. 164.

[1303] In a pamphlet called _Les Nouveaux Aspects du Socialisme_ (Paris,
1908), written by a syndicalist of the name of Berth, syndicalism and
anarchism are contrasted, Proudhon’s emphasis upon the reality of society
being adopted as the crucial test. Unfortunately, however, Berth confines
his examination to Stirner’s system. Had he applied the test to Bakunin
or Kropotkin he would have discovered that the emphasis laid by them upon
the reality of society constitutes the most original feature in their
theory. We are thus driven to the exactly opposite conclusion, and feel
bound to admit—M. Berth notwithstanding—that anarchism and syndicalism
in many respects closely resemble one another. Jean Grave, however, as
we shall see later, seems more favourably inclined towards the naïve
individualism of Stirner.

[1304] See Bakunin’s _Life_, written by his friend James Guillaume,
included in the two-volume edition of his works; or the notice
of him prefaced by Dragomanov to his volume _Michail Bakunin’s
sozial-politischer Briefwechsel mit Herzen und Ogareff_ (Stuttgart,
1895). A fairly full biography—not yet published—has been written by
Nettlau, and a copy of the MS. may be seen in the Bibliothèque Nationale
at Paris. See also M. Lagardelle’s article on Bakunin in the _Revue
politique et parlementaire_ (1909). Bakunin’s works have been published
in French in four volumes, the first of which was issued in 1895, and the
other three in 1907, 1908, and 1909 respectively (Paris, Stork). Some of
his writings, however, are not included among these, _e.g._ the _Statutes
of the International Alliance for Social Democracy_.

[1305] “I returned from that journey with very definite sociological
theories in my mind which I have ever since cherished, and I have
done everything I can to give them a more clear and a more concrete
expression.” Kropotkin’s principal works are: _Paroles d’un Revolté_
(1884); _In Russian and French Prisons_ (1887); _La Conquéte du Pain_
(1888; Engl. trans. 1906); _The State, its Part in History_ (1898);
_Fields, Factories, and Workshops_ (1899); _Memoirs of a Revolutionist_
(1900); _Mutual Aid_ (1902). He has also published a large number of
pamphlets, among them _L’Anarchie: sa Philosophie, son Idéal_ (1896).
Our quotations are taken from Eltzbacher’s _Der Anarchismus_, a work
that consists almost entirely of quotations from the various anarchist
authors, grouped under a few headings. [The references are to the French
translation, 1902.—Tr.] These writers, and Kropotkin among them, have
readily recognised the impartiality of the work.

[1306] Cf. _L’Évolution, la Révolution, et l’Idéal anarchique_, by Élisée
Reclus (Paris, 1898), and _La Société future_, by Jean Grave (1895).

[1307] On the present position of anarchist ideas in France see R. de
Marmande, _Les Forces révolutionnaires en France_, in the _Grande Revue_,
August 10, 1911.

[1308] _L’Évolution, la Révolution, et l’Idéal anarchique_, p. 88; and
he adds: “Our ideal implies the fullest and most absolute liberty of
expression of opinion on all matters whatsoever. It further involves
complete freedom to follow one’s own inclinations or to do as one likes”
(p. 143), with this single proviso: “that the individual is thereby
developing a healthy moral life” (p. 141).

[1309] Extract from _Carnets_, published in the _Figaro_, January 16,
1909.

[1310] _Œuvres_, vol. i, p. 281.

[1311] Jean Grave, _La Société future_, p. 157. Cf. also p. 199: “No
individual must accept any restriction that will check his development,
nor must he submit to the yoke of authority under any pretence
whatsoever.”

[1312] _Justice dans la Révolution_, vol. i, p. 185.

[1313] Bakunin, _Œuvres_, vol. i, p. 105.

[1314] Quoted by Eltzbacher, _loc. cit._, p. 199.

[1315] Bakunin, _Œuvres_, vol. i, p. 281. “I can be really free when
those around me, both men and women, are also free. The liberty of
others, far from limiting or negating my own, is, on the contrary, its
necessary condition and guarantee.”

[1316] _Ibid._, vol. i, p. 277.

[1317] The idea of respecting man’s humanity is vigorously criticised by
Stirner. Proudhon is expressly mentioned as the chief representative of
that view. The principle was also regarded with some favour by Feuerbach,
who wanted to substitute emphasis upon the human in man for the stress
generally laid upon the divine in his nature.

[1318] Proudhon is the model here. “To be governed,” says he (_Idée
générale de la Révolution_) “is to have every deed of ours, every action
and movement, noted, registered, reviewed, docketed, measured, filed,
assessed, guaranteed, licensed, authorised, recommended, prohibited,
checked, reformed, redressed, corrected; under pretence of public policy,
to be taxed, dragooned, imprisoned, exploited, cajoled, forced, cheated,
robbed; at the least sign of resistance or complaint to be repressed,
convicted, vilified, vexed, hunted, mauled, murdered, stripped,
garrotted, imprisoned, shot, slaughtered, judged, condemned, deported,
sacrificed, sold, betrayed, and finally mocked, flouted, outraged and
dishonoured. That is government, such its justification and morality.”

[1319] Bakunin, _Œuvres_, vol. i, pp. 143, 227, 151.

[1320] _Ibid._, vol. i, p. 228.

[1321] _Ibid._, vol. i, p. 176; vol. iii, p. 53.

[1322] _L’Évolution, la Révolution, et l’Idéal anarchiste_, p. 164.

[1323] Bakunin, _Œuvres_, vol. i, p. 280.

[1324] _Wealth of Nations_, vol. ii, p. 207. Cf. _supra_, p. 79,
footnote. Adam Smith, it is true, did write that “civil government, so
far as it is instituted for the security of property,” etc.; but that
does not imply that the great economist regarded this as the only object
of government, although it certainly is one of its chief aims.

[1325] “The million and one laws that govern humanity naturally fall into
one or other of three categories: laws for the protection of property,
of government, or of individuals. If we take these three divisions and
analyse them we are inevitably forced to realise how futile and even
injurious all legislation is.” (_Memoirs of a Revolutionist_, p. 236.)

[1326] “Society itself is every day creating beings imbued with
anti-social feelings and incapable of leading honest, industrious lives.”
(Kropotkin, quoted by Eltzbacher, _loc. cit._, p. 221.) “Seeing that
the organisation of society is always and everywhere the one cause of
all the crimes committed by men, its conduct in punishing criminals is
clearly absurd or obviously insincere. Every punishment implies guilt,
but the criminals in this case are never guilty. We deny the so-called
right of society to bestow punishment in this arbitrary fashion. A
human being is simply the unwilling product of the natural or social
environment in which he was born and reared and under whose influence
he still remains. The three great causes of human immorality are
inequality, whether political, economic, or social; ignorance, which is
its natural result; and slavery, its inevitable consequence.” (Bakunin,
_Programme de l’Alliance internationale de la Démocratie socialiste_, in
_Sozial-politischer Briefwechsel_, pp. 332-333.)

“Property and want are the great incentives to crime. But if defective
society organisation is the cause of crime, an improvement in
organisation should cause a disappearance of crime.” (Jean Grave, _La
Société future_, pp. 137-138.)

[1327] “Is it necessary,” asks Bakunin, “to repeat the arguments of
socialism, which are still unanswerable and which no _bourgeois_
economist has ever attempted to disprove? What are we to make of
property and capital as they exist at the present moment? In both cases
it practically means a right or a power guaranteed and protected by
society to live without working; and since property and capital produce
absolutely nothing unless fertilised by labour, it means power and the
right to live upon the labour of others and to exploit the labour of
those who have neither property nor capital and are compelled to sell
their productive force to the fortunate owner of the one or other of
these.” Cf. Kropotkin’s _Conquest of Bread_, p. 56: “Multiply examples,
choose them where you will, consider the origin of all fortunes, large
or small, whether arising out of commerce, finance, manufactures, or the
land. Everywhere you will find that the wealth of the wealthy springs
from the poverty of the poor.” In this sentence he sums up a long
demonstration which he gives in proof of this contention.

[1328] Bakunin, _Œuvres_, vol. i, p. 324.

[1329] _Idée générale de la Révolution_, p. 119.

[1330] “Law is simply an instrument invented for the maintenance of
exploitation and the domination of the idle rich over the toiling masses.
Its sole mission is the perpetuation of exploitation.” (Kropotkin,
_Memoirs of a Revolutionist_, p. 235.)

[1331] Bakunin, _Programme de l’Alliance_, in _Sozial-politischer
Briefwechsel_, p. 339.

[1332] Kropotkin, _Conquest of Bread_, pp. 61-62.

[1333] “The anarchists want to see free unions established, resting
upon mutual affection and based upon respect for one’s self and for the
dignity of others. And in that sense, in their desire to show respect and
affection for all the members of the association, they are inimical to
the family,” (Élisée Reclus, _loc. cit._, pp. 145-146.)

[1334] _Der Einzige_, p. 229.

[1335] Cf. _Idée générale de la Révolution_, p. 281, and p. 342:
“Revolution follows revelation. Reason aided by experience reveals to us
the nature of the laws which govern society as well as nature, and which
in both cases are simply the laws of necessity. They are neither made by
man nor imposed by his authority. They have only been discovered step by
step, which is a proof of their independent existence. By obeying them a
man becomes just and noble. Violation of them constitutes injustice and
sin. I can suggest no other motive for human actions.”

[1336] Bakunin, _Œuvres_, vol. iii, p. 51.

[1337] Bakunin, _Œuvres_, vol. iii, p. 55.

[1338] “In general we may say that man’s general life is almost entirely
governed by what we call good sense.” (_Ibid._, vol. iii, p. 50.)

[1339] _Ibid._, vol. iii, p. 51.

[1340] _La Société future_, p. 303.

[1341] Bakunin, _Œuvres_, vol. i, pp. 286, 298, 277.

[1342] Bakunin on his death-bed confessed to his friend Reichel that “all
his philosophy had been built upon a false foundation. All was vitiated
because he had begun by taking man as an individual, whereas he is
really a member of a collective whole” (quoted by Guillaume, _Œuvres_,
preface to vol. ii, p. 60). In his _Philosophie du Progrès_ (_Œuvres_,
vol. xx, pp. 36-38) Proudhon writes as follows: “All that reason knows
and maintains is that the individual, like an idea, is really a group.
All existence is in groups, and whatever forms a group also forms a
unit, and consequently becomes perceptible and is then said to exist. In
accordance with this general conception of being, I think it possible
to prove the existence of positive reality and up to a certain point to
demonstrate the laws of the social being or of the humanitarian group,
and to establish a proof of the existence of an individuality superior to
collective man and still quite other and different from his individual
self.” The same idea frequently comes up in different connections,
_e.g._, in the _Petit Catéchisme politique_ at the end of vol. i of _La
Justice dans la Révolution_, and in _Idée générale de la Révolution_.

Kropotkin thinks that man has always lived in society of one kind or
another. “As far back as we can go in the palæo-ethnology of mankind, we
find men living in societies, in tribes similar to those of the highest
mammals.” (_Mutual Aid_, p. 80). “Man did not create society; society is
older than man.” (_The State, its Historic Rôle_, p. 6; London, 1898.)
Jean Grave, on the other hand, thinks that “the individual was prior
to society. Destroy the individual, and there will be nothing left of
society. Let the association be dissolved and the individuals scattered,
they will fare badly and will possibly return to savagery, their
faculties will decay and not progress, but still they will continue to
exist.” (_La Societé future_, pp. 160-162.) Grave’s view is essentially
his own and does not square with those of either Kropotkin, Bakunin, or
Proudhon, the real founders of anarchy. It is, moreover, quite obvious
that their theories are really much nearer the truth, for it is as
impossible to conceive of society without the individual as it is to
conceive of the individual without society. The individual, as Bakunin
emphatically declares, is a fiction, or an abstraction, as Walras would
say. Many people find it difficult to accept this doctrine. But it
seems the only one that tallies with the facts, whether of nature or of
history. We can no more imagine the individual without society than we
can a fish without water. Deprived of water, it is not only less of a
fish, but it is no longer a fish at all—except a dead one.

[1343] Bastiat speaks of this error of confusing government and society
as being the worst that has ever befallen the science. The State problem
he defines as follows: “How to inscribe within the great circle which we
call society that other circle called government.” Dunoyer in so many
words expresses the same idea.

[1344] _Memoirs of a Revolutionist_, p. 414. Cf. also _Paroles d’une
Révolté_, p. 221.

[1345] This idea finds frequent expression both with Reclus and
Kropotkin. “The fact that we have instituted, regulated, codified, and
encompassed with constraints and penalties, with gendarmes and jailers,
the larger part of our more or less incoherent collection of political,
religious, moral and social conceptions of to-day in order to enforce
them upon the citizens of to-morrow is in itself sufficiently absurd,
and it is bound to have contradictory results. Life, which is always
improving and renewing itself, can never submit to regulations which
have been drawn up in some period now past.” (Reclus, _loc. cit._, pp.
108-9.) “Anarchist society,” writes Kropotkin, “is one to which any
pre-established, crystallised form of law will always be repugnant.
It is also one which looks for harmony, which can only be temporary
and fugitive perhaps, in the equilibrium between the mass of different
forces and influences of every kind which pursue their course without the
slightest deflection, and which because they are quite untrammelled beget
reaction and arouse those activities which are favourable to them when
they move in the direction of progress.” (_L’Anarchie_, pp. 17, 18.)

[1346] _Memoirs of a Revolutionist._

[1347] Proudhon had already set the problem as follows: “Can we find a
method of transacting business that will unite divergent interests and
identify individuals with the general well-being, replace the inequality
of nature by equality of education, and remove all political and economic
contradictions; when each individual will be at once both producer and
consumer, citizen and sovereign, ruler and ruled; when liberty will
always expand without involving any counter-loss; when the well being of
each will grow indefinitely without involving any damage to the property,
the labour, or the revenue of any of his fellow-citizens, or of the
State itself, without weakening the interests he has in common with his
fellow-men, without alienating their good opinion or destroying their
affection for him?” (_Idée générale_, p. 145.) Says Jean Grave: “Were
society established on natural bases, individual and general interests
would never conflict.” (_Société future_, p. 156.)

[1348] _La Société future_, p. 16. “We cannot disguise the fact,”
says Kropotkin, “that if complete liberty of thought and action
were once given to the individual we should see some exaggerations,
possibly extravagant exaggerations, of our principles.” (_Memoirs of a
Revolutionist_, p. 413.)

[1349] “The only great and all-powerful authority at once rational
and natural that we can respect is the public spirit of a collective
society founded upon equality and solidarity, upon liberty and respect
for the human qualities of all its members. It will be a thousand times
more powerful than all your authorities, whether divine, theological,
metaphysical, political, or juridical, whether instituted by Church or by
State; more powerful than all your criminal codes, all your jailers and
hangmen.” (Bakunin, _Œuvres_, vol. iii, p. 79.)

[1350] _Memoirs of a Revolutionist_, p. 414. This is also one of the
favourite doctrines of the Liberals.

[1351] Kropotkin, _Conquest of Bread_, p. 206.

[1352] Grave, _op. cit._, p. 297. Proudhon is even more severe. “By
making a contract you become a member of the fraternity of free men.
In case of infringement, either on their side or on yours, you are
responsible to one another, and the responsibility might even involve
excommunication and death.” (_Idée générale_, p. 343.)

[1353] Kropotkin, _Mutual Aid_, p. 17.

[1354] “In our opinion, and speaking strictly, there is no such thing
as a really idle person. There are a few individuals, perhaps, who have
not developed as they might have done and whose activity has never found
a proper outlet under existing conditions. In a society where everyone
would be allowed to choose his own sphere of work the idlest people would
be found doing something.” (J. Grave, _La Société future_, pp. 277-278.)
Kropotkin writes in the same strain (_Conquest of Bread_, chapter on
_Objections_).

[1355] Kropotkin, _Memoirs of a Revolutionist_, p. 414; _Conquest of
Bread_, p. 156. The anarchists show no desire to expand the Phalanstère,
but prefer the family life.

[1356] _Conquest of Bread_, p. 204.

[1357] _Conquest of Bread_, p. 130.

[1358] _Ibid._, p. 133.

[1359] Élisée Reclus, _L’Évolution_, etc., pp. 136-137.

[1360] _Conquest of Bread_, p. 83.

[1361] Cf. Grave, _La Société future_, ch. 14, _La Valeur_. The
anarchists frequently complain that their ideas are generally mutilated
by the economists. To read this chapter is to realise the amount of
intelligence which they display when interpreting their adversaries’
doctrines!

[1362] _L’Évolution_, p. 154. Kropotkin says: “Those who wish the
triumph of justice, who really want to put the new ideas into practice,
understand the necessity for a terrible revolution which would sweep
away this canker and revive the degenerate hearts with its invigorating
rush, bringing back habits of devotion, of self-negation, and of heroism,
without which society becomes vile, degraded, and rotten.” (_Paroles d’un
Révolté,_ p. 280.)

[1363] Bakunin, in _Sozial-politischer_, p. 297.

[1364] _Memoirs of a Revolutionist_, p. 297.

[1365] Kropotkin, quoted by Eltzbacher, p. 236. “Revolution, once it
becomes socialistic, will cease to be sanguinary and cruel. The people
are not cruel. It is the privileged classes that are cruel. People are
ordinarily kind and humane, and will suffer long rather than cause others
any suffering.” (Bakunin, _Œuvres_, vol. iii, pp. 184-185.) The same idea
runs through Sorel’s _Réflexions sur la Violence_.

[1366] Bakunin, _Sozial-politischer_, pp. 335 and 353.

[1367] _Sozial-politischer_, p. 361. The proclamation was addressed to
Young Russia just after the Tsar Alexander II had accepted the challenge
of Liberalism by emancipating the serfs. But he immediately proceeded to
revive the cruel system of espionage and repression carried out by his
father Nicholas I, and so roused the indignation of the more advanced
leaders, who thought that they had in him a hero who would open the
golden gates of liberty. Bakunin at the time was under the influence
of an unscrupulous fanatic of the name of Netchaieff, whose savage and
revolting passion for the execution of criminal deeds in the name of
revolution had completely captivated him. Later on he vigorously reproved
such acts, and declared that they ought to be suppressed.

[1368] _Ibid._

[1369] Bakunin, _Sozial-politischer_, p. 332.

[1370] _Réflexions sur la Violence_, p. 253.

[1371] _Paroles d’un Révolté_, pp. 17-18.

[1372] _Réflexions sur la Violence_, p. 218.

[1373] Berth, _Les Nouveaux Aspects du Socialisme_, p. 3.

[1374] _Réflexions sur la Violence_, introduction.

[1375] _Ibid._, p. 237.




INDEX

In the longer paragraphs a number standing alone, and separated by a
semicolon from the preceding sentence, indicates a reference of smaller
importance. Such numbers are, of course, not connected with the sentence
preceding them.


  “Abbots’ Party,” 508

  Ability, rent of, 549-552, 582, 583

  “Abstinence,” 350

  “Abuse of rights,” 606

  Act of Union of 1707, Adam Smith on, 266

  Act of Union of 1800, 104

  Adamson, Professor, 529 _n._

  Adler, G., 615 _n._

  Aftalion, A., 184 _n._

  Agneta Park, 255

  Agoult, Mme. d’, 292 _n._

  Agriculture, the sole source of the “net product,” 12, 14;
    the Physiocratic influence upon the conception of, 17;
    the inherent distinction between industry and, 17-18;
    workers in, ignored by the Physiocrats, 22 _n._;
    Condillac on, 49 _n._;
    viewed by Quesnay as the source of all wealth, 56;
    Smith and the superior productivity of, 64, 90, 112;
    Smith’s admiration for, 67-68;
    Buchanan on, 143;
    the future of, 155-157;
    List and Protection and, 276 _and n._;
    Carey and Protection and, 283

  Agriculturist, the, predominant importance of, in the Physiocratic
      hierarchy of classes, 61

  Aix-la-Chapelle, 281 _n._

  Alexander II, Tsar, 639 _n._

  Algeria, 339 _n._

  Allgemeiner deutscher Arbeiterverein, 432

  Allix, M., 117 _n._, 207 _n._

  _Alton Locke_, 504

  America—_see_ United States

  Anarchism, vii, xv;
    the development of, 516;
    a fusion of Liberal and socialist doctrines, 614;
    and the State, 615, 623-624, 625, 626, 627;
    Proudhon the father of, 615;
    indebtedness of, to Greek philosophy, 615 _n._;
    philosophical and literary anarchism, 615, 619;
    Stirner and the cult of the individual, 615-619;
    and syndicalism, 619 _n._;
    Bakunin, 619-620;
    Kropotkin, 621-622;
    the principles of social and political anarchism, 622-629;
    and the individual, 622-623;
    and humanity, 623;
    and government, 624-627;
    and property, 626-627;
    and marriage, 627;
    and free contract, 627-628;
    and reason and science, 628-629, 641;
    the anarchist conception of society, 629-636;
    criticism of the social ideal, 634-636;
    and revolution, 637-640, 641;
    its influence, 640-642;
    and individualism and socialism, 640;
    and syndicalism, 641;
    the moral element in the doctrine, 641

  Anarchists, and the cult of the “noble savage,” 7

  Anarchy, Proudhon and, 311 _n._

  Anderson, J., 148 _n._-149 _n._

  Andler, C., 321 _n._, 416 _n._, 435 _n._

  Antoine, Father, 499 _n._

  Antonelli, É., 251 _n._, 537 _n._

  Argenson, Marquis d’, 11 _n._

  Aristotle, 401;
    on value, 451 _n._; 590 _n._

  Arkwright, R., 65

  Ashley, W. J., v, vi, xi, 385 _n._, 387, 391 _n._, 406

  Association, 231, 233;
    Robert Owen and, 237;
    Blanc and, 256, 257, 260, 263;
    Buchez and, 258;
    Leroux and, 263;
    Cabet and, 263-264;
    Proudhon and, 297 _and nn._, 315 _n._; 300;
    the French Liberal school and, 325;
    Stuart Mill and, 370;
    Le Play and, 491 _n._;
    the Christian Socialists and, 504-506, 507 _n._;
    Kingsley on, 505 _n._;
    solidarity and, 602, 613-614;
    and exchange, 613 _n._

  Associative socialists, 227, 231-235;
    and the Physiocrats, 232-233;
    and competition, 233-234;
    Blanc and, 263

  Auburtin, F., 487 _n._

  Aucuy, M., 316 _n._

  Aulard, F., 200 _n._

  Aupetit, J. J., 529 _n._, 530 _n._, 537 _n._, 539 _n._, 543 _n._

  Auspitz, Herr, 529 _n._

  Austria, and the Zollverein, 268;
    Social Catholicism in, 499 _n._;
    anarchism in, 640

  Austrian school, xv, 48, 397 _n._, 521, 522 _n._, 541, 544 _and n._, 581

  _Avances foncières_, 22, 23 _n._, 25

  _Avances souveraines_, 38 _n._

  Avenel, M. d’, 546


  Babeuf, F., 200 _and nn._, 256, 436 _n._

  “Back to the land,” in Fourier’s system, 251-252;
    Tolstoy and, 513

  Baden, 268 _n._

  Baden, the Margrave of (Abbé Roubaud), and the Physiocrats, 4 _n._, 5;
      the Physiocratic experiment of, 44

  Bakunin, M., 449 _n._, 459 _n._, 615, 616, 619-620, 621, 622, 623, 624,
      626 _and nn._, 627, 628, 630, 631 _n._, 634 _n._, 637-640, 641

  “Balance of trade” theory, Mercier de la Rivière on, 31;
    David Hume and, 53;
    Adam Smith and, 98;
    Ricardo and, 163-165; 285;
    List and, 285 _n._

  Bank Act, English, of 1822, 166;
    of 1844, 166

  Bank of Amsterdam, 85

  Bank, Bonnard’s, 316 _n._-317 _n._

  Bank of England, 166

  Bank of Exchange—_see_ Exchange Bank

  Bank of France, 305, 311, 312, 314, 638

  Bank-notes, Adam Smith and, 85, 96;
    Ricardo and, 165-167;
    and Proudhon’s exchange notes, 311-312

  Banks, Adam Smith and, 85, 96;
    Ricardo and, 138, 139 _n._, 163, 167;
    in the Saint-Simonians’ system, 218-219 _and n._, 226;
    Fourier’s co-operative, 251 _n._;
    influence on crises in the money market, 285 _n._;
    Count Mollien and, 314;
    the Raiffeisen agricultural credit banks, 503 _n._

  Barone, Signor M., 529 _n._

  Barrès, A. M., 254 _n._

  Bastiat, F., xv, 92, 93, 115, 117, 118 _n._, 146 _n._, 156, 160,
      163 _n._, 223 _n._, 277 _n._;
    and the Classical school, 322;
    and Protection, 323, 328 _n._, 329; 324;
    and liberty, 324 _n._;
    and State intervention, 325 _n._, 408-409;
    and the Liberal school, 327;
    Carey and, 327-328;
    his career, 328 _n._;
    and socialism, 328 _n._, 329;
    criticism of, 329;
    estimate of his work, 329 _and n._;
    and individualism, 330;
    his theory of universal harmony, 330-346;
    and the Providential order, 331;
    his theory of service-value, 332-335;
    and Proudhon, 333 _n._-334 _n._;
    his law of free utility, 335-337;
    and the proprietor, 336;
    and rent, 337-340, 425, 545, 546;
    and the relation of profits to wages, 340-342, 427;
    on the subordination of producer to consumer, 342-343;
    and solidarity, 344-345; 363 _n._;
    and international exchange, 365;
    and Optimism, 377;
    and the State, 438 _n._, 439; 459 _n._, 516, 572, 589;
    his fable, _The Blind and the Paralytic_, 608; 617, 624;
    and government and society, 631 _n._

  Baudeau, the Abbé, on the Physiocrats, 3 _n._;
    a member of the Physiocratic school, 4 _n._;
    on the “natural order,” 10;
    on the productivity of agriculture, 13 _n._;
    on industry and commerce, 13;
    on the _Tableau économique_, 18 _n._, 20 _n._;
    on the dependence of the productive classes on the landed proprietors,
      22 _n._;
    on the landed proprietors as nobility, 22 _n._;
    and the origin and justification of private property, 22;
    on the _avances foncières_, 23 _n._, 25 _n._;
    on the duties of landed proprietors, 25;
    on the regard to be paid to the peasants, 26;
    on useless laws, 33 _n._;
    on the Greek states, 34 _n._;
    on the sovereignty of the people, 36 _n._;
    on the supreme will, 36 _n._;
    on education, 37;
    on international antagonism, 37 _n._;
    on the three errors of States, 37 _n._-38 _n._;
    on _avances souveraines_, 38 _n._;
    on the revenue from land, 40 _n._;
    on the sovereign, 41 _n._;
    on the gross and net revenue, 43 _n._; 118 _n._

  Bauer, Bruno, 616

  Bauer, Professor S., 19 _nn._

  Bavaria, Tariff Union between Würtemberg and, 268

  Bazard, St. A., 201 _n._, 211, 212, 213

  Bebel, F. A., 437

  Bentham, J., 96 _n._, 586

  Béranger, J. P. de, 331

  Berens, E., 547 _n._

  Bergson, H., 403 _n._

  Bernstein, E., 473, 474 _n._, 475 _and n._, 479, 480 _n._

  Berth, É., 479 _n._, 619 _n._, 642 _n._

  Berthélemy, H., 569 _n._

  Biological method, 544 _n._

  Biological Naturalism, the school of, 593 _n._

  Bismarck, Prince, and Lassalle, 414; 436;
    and State Socialism, 445

  Blanc, Louis, 169, 198, 227, 235;
    quality of his work, 255-256;
    and competition, 256-257, 260;
    and association, 257-261, 263;
    and interest, 259-260;
    a pioneer of State Socialism, 261, 262, 414;
    and State intervention, 262, 414; 290;
    Proudhon and, 296 _n._; 300;
    and the Revolution of 1848, 300-306;
    Lassalle and, 434; 599, 607 _n._

  Blanqui, A., 197, 295

  _Blind and the Paralytic, The_, Bastiat’s fable, 608

  Block, M., 375

  Böhm-Bawerk, E. von, on capital, 71 _n._;
    on Adam Smith’s conception of the determinant of value, 78 _n._-79
      _n._; 150;
    and Bastiat, 329; 474 _n._, 516;
    on the Classical school, 518 _n._;
    on wages, 520; 522 _n._;
    on final utility, 523 _n._;
    his theory of interest, 530, 540; 541 _n._, 583

  Boisguillebert, P., 29 _n._, 33 _n._, 54

  _Bon prix_, the, 15-16, 29, 45

  Bonar, J., 52 _n._, 121

  Bonnard’s Bank, 316 _n._-317 _n._

  Booth, C., 388

  Bortkevitch, V., 529 _n._

  Bouglé, C., 594 _n._

  Bourgeois, L., 593-599, 603 _nn._, 605 _n._

  Bourgin, H., 201 _n._, 246 _n._, 265 _n._

  Bourguin, M., 231 _n._, 320 _n._, 449 _n._

  Bournville, 255, 513 _n._

  Bouvier, M., 538 _n._

  Boyve, M. de, 508 _n._

  Brandes, G., 432 _n._

  Brants, V., xi

  Braun, K., 368

  Bray, J. F., 315, 316

  “Brazen law of wages,” the, 361, 426, 433, 453 _n._, 541

  Brentano, L., 386, 389 _n._

  Briand, M., 251 _n._

  Bright, John, 366

  Brissot de Warville, J. P., 200 _n._, 292 _n._

  Brodnitz, Herr, 445 _n._

  Brook Farm, 255 _n._

  Brunetière, F., 485 _n._

  Brunhes, Mme., 510 _n._

  Brunswick, 268 _n._

  Buccleuch, Duke of, and Adam Smith, 51 _n._

  Buchanan, J., 52 _n._, 143

  Bücher, K., 252 _n._, 271 _n._, 386, 397

  Bucher, L., 414

  Buchez, P., 258, 259, 306, 496 _and n._, 505

  Buffon, the Comte de, 121, 523 _n._

  Buisson, M., 249 _n._, 603 _n._

  Buonarotti, F., 256 _and n._

  Bureau, P., 493 _n._, 495 _n._

  Buret, A. E., 197

  Burgin, M., 95 _n._


  Cabet, É., 233, 235, 246, 263-264, 290, 296 _n._, 297

  Cairnes, J. E., 329, 374-375, 387

  Calvin, John, 503 _n._

  Cameralists, 110, 383

  Campanella, T., 200 _n._, 246

  Cannan, Dr. E., v, 52 _n._, 56 _n._, 71 _n._, 79 _n._, 145 _and n._,
      427 _n._, 549 _n._

  Canonists, the, 110

  Cantillon, R., 46

  Capital, Adam Smith and, 56, 71-73, 89-91;
    Ricardo and the identification of, with labour, 149-150;
    the law of the concentration of, 187;
    Saint-Simon and, 206, 214;
    the Saint-Simonians and, 214;
    Proudhon and, 293, 308-309, 310, 313-314;
    Bastiat and, 340-342;
    Colson and, 342 _n._;
    Dunoyer on, 347 _n._;
    Senior and, 350;
    Marx and, 455-465;
    Marx’s law of the concentration of, 459-465, 475-476;
    the socialist’s conception of, 459-460;
    the Marxian school and, 467 _n._;
    the productivity theory of, 502;
    final utility and, 528;
    the rent of, 548-549 _n._, 558 _n._;
    the rent of fixed, 556, 583;
    Henry George on the relation of labour to, 564-565;
    co-operators and, 605 _n._

  Capitalism, Marx and, 461-462

  Carey, H. C., and trade, 28;
    and rent, 115, 338-340, 425, 545, 546; 156, 278;
    and Protection, 282-284;
    and Free Trade, 282-283;
    and List, 284; 289 _n._;
    and the Optimistic school, 327;
    and Bastiat, 327-328, 340;
    and the Ricardian theory of value, 332; 333 _n._;
    and Bastiat’s profits theory, 342 _n._;
    and solidarity, 345;
    his population theory, 346; 549, 572

  Carey, M., 278

  Carlyle, T., 196, 511, 512 _n._

  Carnot, H., 212, 213 _n._

  Carnot, S., 367 _n._

  Carrel, A., 212

  Cartwright, E., 65

  Carver, J. N., 522 _n._

  Catherine, Empress of Russia, and the Physiocrats, 5;
    and Mercier de la Rivière, 34

  Catholic Church, Roman, 485

  Catholic Socialism, 495

  Catholicism, and the economic order, 483 _n._, 484 _n._;
    Social Catholicism, 495-503

  Cauwès, P., 285 _n._

  Cazamian, L., 510 _n._

  Chambre consultative des Associations de Production, 257 _n._

  Channing, W. E., 255 _n._, 504 _n._

  Chapelier, Le, decree of, 233 _n._

  Chaptal, J. A., 112, 277 _n._, 278 _n._, 281 _n._

  Charity, solidarism distinguished from, 614 _n._

  Charléty, S., 226 _n._

  Charmont, M., 607 _n._

  Charter of 1814, 205

  Chartist movement, the, 235

  Chatelain, M., 50 _n._, 369 _n._, 415 _n._, 427 _n._

  Cherbuliez, A. É., 376, 541 _n._

  Chevalier, M., 212, 213, 226, 289 _n._, 366, 375, 411-412, 444

  Child, Sir J., 54

  Chrematistic school, 178-179

  Christian Social Union, 506 _n._

  Christian Socialism (Social Protestantism), xv, 378, 495, 503-509;
    origin of the movement, 503-504;
    and association, 504-506;
    and moral reform, 505, 509;
    and private property, 506;
    the movement in America, 506;
    in Germany and in Switzerland, 507;
    in France, 508;
    and solidarity, 508;
    and individualism, 509

  Christian Socialists, 111, 196, 370, 483;
    and socialism, 483-485;
    and Classical Liberalism, 484;
    and the “natural order,” 484;
    and Marx’s collectivism, 485;
    and State Socialism, 485;
    their doctrines, and their influence, 486;
    and economic theory, 515

  Christianity, economic doctrines inspired by, 483-514

  Christliche Gewerkvereine, 501

  Civitas Solis, 246

  Clark, J. B., 522 _n._, 527, 542 _n._, 552, 564 _n._

  “Class war,” 465 _n._, 471, 478, 479, 481-482

  Classical school, doctrine of, xv;
    the Physiocratic doctrine and, 10;
    List and, 169;
    and the critical school, 170;
    Sismondi and, 174, 177, 179, 195-196;
    and machinery, 180, 182;
    and over-production, 181;
    resemblance of doctrines of, to those of Marx, 181;
    and competition, 182;
    and the beneficence of the spontaneous economic forces, 230;
    and Free Trade, 264;
    List and, 289, 290;
    severance of, into English and French schools, 322;
    apogee and decline of, 348-376;
    Senior and, 349-350;
    spread of the doctrines of, 351-352;
    Stuart Mill and, 352, 353, 354, 368, 374;
    and natural laws, 354-366;
    called the Individualist school, 355;
    and individualism, 355-356;
    and liberty, 356;
    definition of, 356 _n._, 357 _n._;
    and _laissez-faire_, 357;
    and international exchange, 363;
    doctrines of, in the middle of the nineteenth century, 366-367;
    and peasant proprietorship, 371 _n._;
    decline of the Classical doctrine, 378;
    Roscher and Hildebrand and, 383-385;
    Knies and, 384;
    the Historical school’s criticism of, 385, 389-398, 517;
    and self-interest, 393-394;
    and the deductive method, 395-396; 407;
    Hermann and, 410-411;
    and distribution, 422;
    State Socialism and, 438;
    and Marxism, 467, 472;
    Carlyle and, 511;
    the Hedonists and, 518-521, 539, 541 _n._, 544;
    and rent, 520, 547;
    and price, 520;
    and value, 530 _n._, 558

  Clavières, É., 107

  Cobden, R., 280, 323, 328 _n._, 360, 366, 375

  Colbert, J. B., 11 _n._, 280

  Colbertian system, Physiocracy antagonistic to, 29;
    and agriculture and industry, 30 _n._; 97, 178

  Colins, Baron, 155, 560

  Collectivism, xv;
    the Saint-Simonians and, 201, 202, 211, 218-221, 231;
    of Marx, 250, 459 _n._, 485;
    development of, 378;
    origin of the term, 459 _n._;
    and property, 464 _and n._;
    and Christian Socialism, 509;
    the working-class ideal, 516, 579;
    the Fabian, 581;
    Kropotkin and, 627

  Collinsists, 465 _n._

  Colson, L. C., 342 _n._, 427 _n._, 537 _n._

  Combination Laws, 361

  Commerce, regarded as unproductive by the Physiocrats, 13

  Communism, Sismondi and, 194;
    Marx and, 221, 459 _n._, 464;
    Cabet and, 264;
    Proudhon and, 298, 300;
    Bastiat and, 337;
    Stuart Mill and, 353, 367;
    Ruskin and, 513;
    Tolstoy and, 513;
    Kropotkin and, 627

  Communists, the, Proudhon and, 296 _and n._

  Competition, Sismondi and, 182-184, 186, 193 _n._, 198;
    Adam Smith and, 182;
    the Associationists and, 233-234;
    Robert Owen and, 240;
    Blanc and, 256-257, 260;
    Ollivier on, 325;
    Stuart Mill on, 353, 358;
    free, the Classical school and, 358, 544;
    Cairnes and, 375;
    the State Socialists and, 440;
    F. D. Maurice and, 504 _n._;
    free, the Hedonists and, 518, 541-542, 605 _n._;
    free, Walras and, 541-542; 543

  Composite rent, 552

  _Comptabilisme sociale_, 242

  Comte, A., 36 _n._, 201 _n._, 203 _and n._, 211;
    and Saint-Simon, 222;
    and the spontaneity of the “natural order,” 331; 335, 352, 367,
      374 _n._;
    and the Historical method, 404-405;
    and the equality of men, 486 _n._;
    and solidarity, 589, 601 _n._;
    and the sociological analogy, 590 _n._; 595

  Comte, C., 207

  Condé-sur-Vesgres, Fourier colony at, 255 _n._

  Condillac, É. B. de, xiii, 46, 47, 48-50, 74, 75, 109 _and n._, 117,
      118 _n._, 523 _n._

  Condorcet, M. C., 122, 224

  Confédération général du Travail, 480, 502, 640

  Congress of Catholic Circles, 498 _n._

  Considérant, V., 234 _n._, 255, 264, 296 _n._, 301, 303, 304, 599,
      607 _n._

  Consumer, Bastiat and the subordination of producer to, 342-343

  Consumer’s rent, 527 _n._

  Consumers and social reorganisation, 605 _n._

  Consumption, the Psychological school and, 526-527;
    the Mathematical school and, 530

  Continental Blockade, the, 266, 279

  Cooper, W., 244

  Co-operation, Fourier and Owen and, 234, 257;
    in Fourier’s Phalanstère, 246-252, 257;
    Blanc and, 257-263, 306;
    Buchez and, 258;
    Proudhon and, 315;
    Stuart Mill and, 353, 370;
    the Social Catholics and, 496-500;
    F. D. Maurice and, 504 _n._;
    the Christian Socialists and, 505, 506;
    Tomy Fallot and, 508 _n._;
    solidarity and, 588, 604;
    the École de Nîmes and, 605 _n._;
    co-operators and capital, 605 _n._

  Co-operative societies, beginnings of, 243;
    Robert Owen and, 243-244, 504;
    character of, 250 _n._, 504-505

  Co-partnership, 251 _n._

  Corn, high price of, in England, in the early nineteenth century, 145-146

  Corn Laws, English, Sismondi and, 175; 269, 277, 280, 354, 361, 366

  Corporative associations, the Social Catholics and, 496-500, 501 _and n._

  Cossa, L., xi, 367, 376

  Cost of production theory, Adam Smith’s, 78-79, 80

  Courcelle-Seneuil, J. G., 118 _n._, 316 _n._, 317 _n._, 375, 541 _n._

  Cournot, A., x, 265 _n._, 349, 360 _n._, 412-413, 420 _n._, 444, 519,
      520, 529 _n._, 531 _nn._

  Coux, de, 483 _n._

  Credit, Enfantin on, 213 _n._, 226 _n._;
    the Saint-Simonians and, 226;
    Proudhon and, 313 _n._, 314

  Crémieux, H. J., 303

  Crises, J. B. Say and, 115-117;
    industrial, in England, 172;
    Sismondi and, 173, 190-192, 426;
    Robert Owen and, 239;
    Rodbertus and, 426;
    Marx and, 462-463, 478-479;
    Henry George and, 566

  Croce, B., 474 _n._

  Crompton, S., 65

  Cunningham, W., v, vi, 387

  Curmond, M., 13 _n._


  Darimon, A., 316 _n._

  Darwin, Charles, his debt to Malthus, 121;
    the French Liberal school and his doctrine of the survival of the
      fittest, 326;
    Kidd and the Darwinian theory, 485 _n._;
    Kropotkin and, 621

  Dechesne, M., 498 _n._

  Declaration of the Rights of Man, 233

  Deductive method, the, 387, 395-398

  Deherme, G., 587 _n._

  Demand and supply, Adam Smith and, 73-74, 80-85, 89;
    the law of, of the Classical school, 359-360;
    the Hedonists and, 519-520

  Demand, price and, 519-520

  Demography, 121, 645

  Demolins, E., 494 _and n._, 495, 608 _n._

  Denis, Professor H., xi;
    on Physiocracy, 2 _n._, 8 _n._;
    on the _Tableau économique_, 19 _and n._; 140 _n._, 141 _n._,
      164 _n._, 184 _n._, 404

  Denis, M., 242 _n._

  Descartes, 629

  Deschamps, M., x _n._, xi _n._

  Despotism, the Physiocrats and, 35-37

  Destutt de Tracy, 118 _n._

  _Dictionnaire d’Économie politique_, 354, 358

  Diehl, K., 317 _n._

  Differential rents, 546-558

  Discount, in Proudhon’s Exchange Bank scheme, 310 _n._, 313;
    normal, 312

  Distribution, the Physiocrats and, 18, 21, 113, 114;
    Adam Smith and, 55, 80, 93, 113, 114, 228;
    J. B. Say and, 93, 113-114, 228;
    Ricardo and, 114, 139-140, 162-163, 228;
    Sismondi and, 177-178, 185, 186, 198;
    the Saint-Simonians and, 229;
    Fourier and, 245;
    Vidal and, 259;
    Stuart Mill and, 368, 369;
    Rodbertus and, 421-429, 430-431;
    State Socialism and, 443-444;
    the Hedonists and, 527, 529-530, 541;
    Henry George and, 565 _n._-566 _n._;
    Mr. and Mrs. Webb and, 583;
    the anarchists and, 636;
    development of the theory, 645

  Distributive societies, 604

  Dolléans, É., 236 _n._, 239 _n._, 244 _n._

  Dollfus, J. H., 490

  Doubleday, T., 137 _n._

  Dove, P. E., 560 _and n._

  Dragomanov, M. P., 619 _n._

  Drôme, M. de la, 303

  Droz, N., 197 _and n._

  Drysdale, Dr., 134 _n._

  Dubois, J. B., xi

  Duguit, L., 607 _n._

  Dühring, E., 117, 208 _n._, 289 _n._, 420 _n._

  Dumas, G., 202 _n._

  Dumont, M., 137

  Dumoulin, C., 503 _n._

  Dumping, 275

  Dunoyer, C., 207, 325 _n._, 326 _n._, 327, 346-348 _and n._, 363, 439,
      614-615, 631 _n._

  Dupin, C., 277

  Dupont de Nemours, P. S., on Quesnay’s “rural economy,” 2;
    as a member of the Physiocratic school, 3 _n._-4 _n._;
    originator of the term “Physiocracy,” 4 _n._;
    his definition of Physiocracy, 5;
    on natural society, 6 _n._;
    on the “natural order,” 7 _n._, 8 _n._, 9 _n._;
    on the “net product,” 12 _n._;
    on the productive and non-productive classes, 14 _n._;
    on the need for the security of property, 24 _n._;
    on representation in the State, and on the parliamentary _régime_,
      34 _n._;
    on despotism, 35 _n._;
    on the duty of the sovereign, 37;
    on taxation, 38 _n._, 40 _n._;
    on the landowner, 39 _and n._;
    on the relation of expenditure to production, 41 _n._-42 _n._;
    on regulating national expenditure, 44 _n._;
    on the amount of the tax, 44 _n._;
    and “proportionality,” 45 _n._;
    on natural law, 354 _n._

  Dupont-White, C., 221, 304;
    on the State, 408 _n._, 409, 440, 441;
    on the State and the individual, 440;
    and individualism, 443 _n._;
    and distribution, 443-444

  Dupuit, A. J., 521 _n._, 531 _n._

  Durand Union, 606 _n._

  Durkheim, É., 61, 388 _n._;
    and solidarity, 599-600

  Duverger, 213


  East India Company, 96

  École de Nîmes, 605 _n._

  “Economic chivalry,” 335

  Economic equilibrium, theory of, 474, 521 _n._, 555 _n._, 558 _n._

  Economic forces, Proudhon and, 296-297, 315

  “Economic law,” 69, 70

  Economic liberty, Adam Smith and, 93-98;
    the consummation of, 326-327

  “Economic rent,” 582 _n._, 583 _n._

  Economics, Senior and, 349-350;
    Stuart Mill’s influence upon, 367;
    theory of the universality of the laws of, 390;
    relativity of the laws of, 390-395;
    the deductive method in, 395-398;
    the Historical school and, 398-407;
    the varied scope of, 399;
    environment a principal factor in, 400;
    the place of history in, 400-407;
    and statistics, 407 _n._;
    as a science, 543 _n._, 644;
    the separation between pure and descriptive, 645

  Economics, pure, 392-393, 515, 517, 541 _and n._, 645

  _Economie sociale_, 178

  “Economistes,” 4 _n._

  Eden, Lord, 105 _n._

  Eden, Treaty of, 105, 269

  Edgeworth, Maria, 119 _n._

  Edgeworth, Professor, 529 _n._, 536 _n._

  Education, Adam Smith on compulsory, 60, 96;
    Robert Owen and, 238 _n._;
    Fourier and, 253

  Effertz, O., 420 _n._

  Eheberg, K. T., 266 _n._

  Eichthal, G. d’, 374, 594 _n._

  Einaudi, L., 546 _n._, 567

  Eisenach, Congress of, 354, 417, 436, 437, 438

  Eltzbacher, P., 621 _n._, 625 _n._, 638 _n._

  Ely, R. T., 351 _n._, 507 _n._

  Enclosure Acts, in England, 145

  Enfantin, B. P., 201 _n._, 203 _n._, 211, 212 _and n._, 213, 216 _n._,
      226 _and n._, 229, 230 _n._, 231

  Engels, F., 208 _n._, 209, 228, 449 _n._, 450 _n._, 464 _n._, 616

  Ensor, R. C., 449 _n._

  _Entrepreneur_, the, J. B. Say and, 65 _n._, 113-114;
    Sismondi and, 183;
    the Saint-Simonians and, 215, 216;
    French and English economists’ conception of the income of, 373 _n._,
      550;
    and production, 426;
    in Walras’s system, 533-534;
    and Walker’s conception of profit, 550;
    distinguished from the capitalist, 550 _and n._;
    a “captain of industry,” 550

  Environment, Robert Owen and, 238, 239;
    Fourier and, 247;
    the Associationists and, 259;
    Le Play and, 494

  Equalitarians, 200

  Equilibrium, the Mathematical school and, 533-536, 539

  Erfurt, Congress of, 507

  “Ergonomy,” 375

  Escarra, É., 560 _n._, 577 _nn._

  Esmein, A., 34 _n._, 35 _n._

  Espinas, A., xi

  Etiology, Robert Owen regarded as the father of, 238

  Evolution, and solidarity, 609

  Exchange, the Physiocratic view of, 27, 46, 49, 114;
    Condillac on, 50;
    Proudhon and, 299-300, 309-314;
    Dunoyer and, 348;
    Marx and, 450;
    the final utility theory and, 523-524, 525, 526;
    the Mathematical school and, 528-530;
    and solidarity, 607, 613-614;
    and association, 613 _n._

  Exchange Bank, Proudhon’s, 242, 243, 291, 293 _n._, 308-320, 334 _n._,
      627

  Exchange banks, 316

  Exchange notes, Proudhon’s, 309-314, 316, 317 _n._

  Exchange value, profit dependent on, 90

  “Exploitation,” the Saint-Simonians and, 214, 215, 216;
    Sismondi and, 215, 216;
    Marx and, 215, 216;
    Bakunin and, 626;
    Kropotkin and, 627 _n._


  Fabian socialists, 221, 465 _n._, 475, 579-587

  Fabian Society, vii, 579-581

  _Fable of the Bees, The_, 54, 70 _n._

  Factory legislation, beginnings of, in England, 171;
    Act of 1819, 171, 237

  Faguet, M., 251 _n._

  Fallot, Pastor Tomy, 508 _and n._, 509

  Familistère, 255

  Faucher, J., 616

  February Revolution—_see_ Revolution of 1848

  Ferrara, F., 333 _n._

  Ferrier, F., 278 _n._

  Festy, O., 258 _n._

  Fetter, Professor F. A., 522 _n._

  Feuerbach, L. A., 616, 623 _n._

  Fichte, J. G., 435-436 _n._

  Final utility theory, 474, 521-528, 539, 583

  Finance, the science of, 645

  Fiscal reform, and solidarity, 602

  Fisher, Irving, 71 _n._, 522 _n._, 529 _n._, 541 _n._, 583

  Fix, T., 197

  Fleurant, M., 594 _n._

  Fontenay, R. de, 146 _n._, 156, 338 _n._

  Fouillée, A., 560, 600 _n._, 606

  Fourier, C., 137 _n._, 169, 194;
    and the Saint-Simonians, 201 _n._; 231;
    on association, 232 _n._; 233;
    and Robert Owen, 234-235, 245;
    his work and ideas, 245-246;
    his Phalanstère, 246-251, 257;
    “Back to the land,” 251-252;
    and the attractiveness of labour, 252-253;
    and education, 253;
    and the sex question, 253-254;
    and anti-militarism, 254;
    his influence and following, 254-255;
    Stuart Mill on Fourierism, 255;
    and interest, 259; 261, 264;
    and Free Trade, 265 _n._; 290;
    Proudhon and, 296, 297 _n._; 300;
    and “the right to work,” 301; 323, 378, 465, 470, 486, 544, 589;
    and guarantism, 599, 604;
    claimed as an anarchist, 615

  Fournière, E., 465 _n._, 469 _n._

  Foville, M. de, 156 _nn._

  Foxwell, Professor, 231 _n._, 244 _n._, 316 _n._, 607 _n._

  France, population in, 125, 136 _n._, 137;
    economic unity of, achieved, 266;
    and tariffs, 269, 280;
    List on Protection and, 276 _n._;
    the classic land of socialism, 323;
    Protection in, 323;
    the Classical doctrines in, 352;
    Stuart Mill on the growth of population in, 359;
    Christian Socialism in, 508;
    anarchism and, 640

  Frankfort, 268 _n._

  Franklin, B., 329;
    Bastiat and, 329 _n._

  Free contract, the anarchists and, 627-628

  “Free credit,” 307, 319, 320

  Free Trade, the Physiocrats and, 17, 29-31, 98, 153;
    the Physiocrats the founders of, 29;
    Adam Smith and, 98-102, 153;
    J. B. Say and, 115;
    Ricardo and, 153, 154, 163;
    the theory in the middle of the nineteenth century, 264-265;
    Fourier and, 265 _n._;
    Cournot and, 265 _n._;
    and agriculture, List on, 276;
    Carey and, 282-283;
    List and, 287-288; 298;
    follows the interest of the consumer, 343;
    Dunoyer and, 347;
    Stuart Mill and, 365, 411 _n._;
    and the Corn Laws, 366;
    Prince Smith and, 376

  Free utility theory, Bastiat’s, 335-340

  Frézouls, P., 547 _n._, 554 _n._

  Froebel, F., a disciple of Fourier, 253


  Galiani, the Abbé, his criticism of the Physiocratic doctrine, 32; 46, 47

  _Garantisme_, Fourier’s, 254.
    _See_ Guarantism

  Garçon, M., 44 _n._

  Garden cities, 251, 513

  Garnier, G., 103, 106, 108, 115, 295, 379 _n._

  Garnier, J., 379

  Gendre, F. Le, 11 _n._

  George, Henry, and the Physiocrats, 45 _n._;
    and rent, 141, 565-568, 575;
    and land nationalisation, 141, 155, 577 _n._; 376, 465 _n._, 506;
    and man’s right to the land, 561;
    his career and his works, 563-564; 569, 573;
    and _laissez-faire_, 573 _n._

  Germany, political and economic condition of, in the nineteenth century,
      265, 266;
    tariffs in, 266, 280, 281;
    the movement for economic unity in, 267-268;
    List and the claim of, to Holland and Denmark, 272;
    the English Corn Laws and, 276-277;
    and Protection, 281 _n._, 289;
    the Classical doctrines in, 352;
    State Socialism in, 445-446;
    Christian Socialism in, 507

  Gervinus, G. G., 383 _n._

  Gibbon, E., 105

  Gide, C., 245 _n._, 246 _n._, 334 _n._, 342 _n._, 522 _n._, 576 _n._,
      592 _n._, 605 _n._

  Godin, A., 255

  Godwin, Wm., 122, 131, 136 _n._, 200 _and n._, 579, 615

  Goehre, Pastor, 507

  Goethe, 400

  “Good price”—_see_ _Bon prix_

  Gossen, H. H., 155, 349, 474 _n._, 522 _n._, 529 _n._;
    and land nationalisation, 571-577;
    and the confiscation of rent, 574-575

  Gounelle, E., 506 _n._, 508 _nn._, 509

  Gournay, V. de, 4 _n._;
    and the origin of the term _laissez-faire_, 11 _n._

  Gouth, Pastor, 508

  Government, in Saint-Simon’s system, 207-209;
    Adam Smith on, 217, 625;
    Proudhon and, 310-311, 624 _n._;
    Chevalier and, 412;
    the State Socialists and, 439-440, 441;
    the anarchists and, 624-627;
    and society, 631;
    and the social instinct, 632

  Grand, G., 482 _n._

  Grave, J., 615, 619 _n._, 622, 626 _n._, 628, 629, 630, 631 _n._,
      633 _n._, 634, 635 _n._, 636 _n._

  Great Britain, growth of wealth and population in, 131

  Grün, K., 298 _n._, 323 _n._

  Guarantism, 599, 604.
    _See_ _Garantisme_

  Guesde, J., 453 _n._, 465 _n._

  Guillaume, J., 459 _n._, 619 _n._, 631 _n._

  Guillaumin, U. G., 295

  Gustavus III, of Sweden, and the Physiocrats, 5

  Guyau, J. M., 598 _n._

  Guyot, Y., 343 _n._, 358 _n._, 608 _n._


  Halévy, É., 104 _n._, 119 _n._, 141 _n._, 207 _n._, 230 _n._

  Hall, C., 579

  Hamilton, A., 277

  Hanover, 268 _n._

  Hardie, J. Keir, 506

  Hargreaves, J., 65

  Harmel, L., 499 _n._

  Harmony, Bastiat’s doctrine of, 330-346

  Harmony, Fourier’s ideal city, 249 _and n._, 254

  Hasbach, W., 69 _n._

  Hawthorne, N., 255 _n._

  Hedonism, xv, 10;
    Adam Smith’s Optimism distinct from that of, 93; 355;
    Ruskin and Tolstoy and, 510;
    definition of, 518

  Hedonistic school, and free competition, 91, 240, 373 _n._, 518, 543,
      605 _n._; 335, 395, 407;
    its doctrines, 518-544;
    and the Classical school, 518-521, 539, 541 _n._, 544;
    and wages, 520-521, 541;
    and interest and rent, 520-521;
    France and, 529, 537;
    criticism of its doctrines, 537-544;
    and distribution, 541

  Heeren, A. H. L., 383 _n._

  Hegel, 435 _and n._, 619

  “Hegelian school, left,” 616 _n._

  Hegelian terminology, Proudhon and, 298 _n._

  Held, A., 386

  Heredity, and solidarity, 588

  Hermann, F., 410-411, 548 _n._, 551, 556

  Herron, G. D., 507 _n._

  Hesse-Darmstadt, Tariff Union between Prussia and, 268

  Higgs, H., 5 _n._

  Hildebrand, Bruno, 196, 271 _n._, 380 _n._, 381 _n._, 383-384, 385,
      389 _and n._, 390, 394, 400 _and n._, 404, 405

  Hirst, Miss M. E., 275 _n._, 277 _n._, 278 _nn._

  Historical school, vi-vii, xv, 111;
    and political economy, 175, 222;
    Sismondi and, 196;
    List and, 287; 368, 374, 377;
    origin and development of, 379, 380-388;
    the newer school, 385-386;
    influence of, in England, and in France, 387-388;
    critical ideas of, 388-398;
    the positive ideas of, 398-407;
    A. Comte and, 404-405;
    and Le Play’s school, 493-494;
    and economic theory, 515;
    and the Classical school, 517; 648

  History, the consideration of economic reforms based upon, 221, 222;
    the philosophy of, in economics, 221, 224;
    the place of, in economics, 400-403

  Hitze, the Abbé, 496

  Hobbes, T., 630

  Holyoake, G. J., 244 _n._

  _Homo œconomicus_, Adam Smith and, 86; 399;
    Carlyle and, 511;
    the Hedonists and, 518, 543

  Howarth, C., 244

  Huet, F., 495, 560

  Hughes, T., 504

  Humanity, in the anarchist doctrine, 623

  Hume, David, Adam Smith and, 50 _n._, 53, 64 _n._, 105, 106, 273 _n._;
    and money, 85; 120 _n._, 149 _n._, 165

  Huskisson, W., 265, 267

  Hutcheson, F., 50 _n._, 53

  Hyndman, H. M., 579 _n._


  Ibsen, H., 511

  Icaria, Cabet’s ideal State, 246, 263, 264 _n._

  Identity of interests, Adam Smith and, 185, 410;
    Sismondi and, 185-186, 410, 413;
    Malthus and Ricardo and, 410;
    Hermann and, 410-411;
    Stuart Mill and, 411;
    Cournot and, 413

  _Immortale Dei_, Encyclical, 501

  _Impôt unique_, 45, 61, 567

  Indirect and direct taxation, the Physiocrats and, 44-45

  Individual, the State and, 442-443;
    Walras on the State and, 573-574;
    in philosophical anarchism, 615;
    Stirner and the cult of the, 617-619, 622-623;
    Proudhon and the anarchists and, 622-623, 630;
    and society, the anarchists and, 629-631;
    Bakunin on, 630, 631 _n._;
    Jean Grave and, 631 _n._

  Individualism, xi, 263;
    List and, 270;
    the Classical school and, 322, 355, 356;
    Bastiat and, 330;
    Stuart Mill and, 355, 356 _and n._;
    Ricardo and Malthus and, 355;
    Herbert Spencer and, 356;
    and solidarity, 356 _n._;
    and liberty, 356;
    the Liberal school and, 357 _n._;
    Dupont-White and, 443 _n._;
    Wagner and, 443 _n._;
    Christian Socialism and, 509;
    modern development of, 516;
    anarchism and, 640, 642;
    syndicalism and, 642

  Individualist school, 355;
    known also as the Liberal school, 356;
    definition of, 356 _n._;
    and inheritance, 372 _n._

  Individuality, solidarity and, 612-613

  Induction, 395, 397-398

  Industrial and Provident Societies Acts of 1852-62, 505

  Industrial Revolution, 65, 104, 111

  Industrialism, of Saint-Simon, 202-211, 224;
    Fourier and, 251

  Industry, regarded as sterile by the Physiocrats, 13;
    the inherent distinction between agriculture and, 17-18;
    the Physiocrats’ erroneous view of, 46;
    Sismondi and, 194;
    Saint-Simon and, 204, 205 _and n._, 206;
    List and, 274, 286, 287

  Ingersoll, C., 278

  Ingram, J. K., v, xi, 385 _n._, 404

  Inheritance, the Saint-Simonians and 217-218, 223, 224;
    the State to be sole inheritor of property, 223;
    the French Revolution and, 223;
    the Phalanstère and, 246;
    Dunoyer and, 347 _n._;
    Senior and, 351 _and n._, 372;
    Stuart Mill and, 372

  Institutional Church, 506

  Interest, the Physiocrats and, 32-33;
    Condillac and, 50;
    Adam Smith and, 65 _n._, 92, 96;
    Bentham and, 96 _n._;
    Sismondi and, 176 _n._, 192-193 _n._;
    Marx and, 184-185;
    the Saint-Simonians and, 213 _n._, 214;
    downward trend of the rate of, 223;
    Robert Owen and, 240 _n._;
    Blanc and, 259-260;
    Fourier and, 259;
    Proudhon’s Exchange Bank and, 298 _n._, 308-310, 312, 313, 314, 319;
    Solway’s scheme and, 319;
    the People’s Bank and, 319;
    Bastiat and Proudhon’s controversy as to the legitimacy of,
      333 _n._-334 _n._;
    Bastiat and, 340-342;
    Senior and, 350;
    the term as used by the French economists, 373 _n._;
    final utility and, 528;
    Böhm-Bawerk and, 530, 540;
    and wages, Henry George on, 565;
    the proposed confiscation of, 568;
    “the remuneration of sacrifice,” 568;
    the Fabian school and the confiscation of, 582

  Interests, the spontaneous harmony of, 633.
    _See_ Identity of Interests

  International trade, Adam Smith and, 98-100;
    Stuart Mill and, 98-100;
    Ricardo and, 98, 138, 163, 363 _and n._-364 _and n._;
    List and, 290;
    Bastiat and, 330;
    Dunoyer and, 363

  International Working Men’s Association (the “International”), 321,
      449 _n._, 620

  Internationalism, Marx’s, 465 _n._

  Interventionism, 407

  Interventionists, Sismondi the first of the, 192, 196; 601

  Ireland, 104

  “Iron law,” the, 42, 342 _n._

  Italy, xii;
    anarchism and, 640


  Janet, P., 254

  Jannet, C., 490 _n._, 592 _n._

  Jaurès, J., 469 _n._

  “Jeunes Abbés, Les,” 502

  Jevons, Stanley, 46 _n._, 48, 75, 78, 117;
    on the Ricardian school, 118 _n._;
    and the law of indifference, 148, 525 _n._;
    his economic method, 380; 406, 474 _n._;
    on the purpose of economics, 518 _n._;
    and the final utility theory, 521 _n._, 522 _n._;
    and Cournot, 529 _n._;
    a member of the Mathematical school, 529 _n._;
    and value, 530 _n._; 537 _n._, 541, 572 _n._, 581

  Joint-stock companies, Marxism and, 463, 476

  Joint-stock principle, 248

  Joseph II, Emperor of Austria, and the Physiocrats, 5

  “Juridical socialism,” 606, 607 _n._

  Jurisprudence, solidarity and, 606-607

  Justice, Proudhon on, 298-299


  _Kapital_, Marx’s, 354, 386, 449 _n._;
    Labriola on, 467

  Kautsky, K., 480 _n._

  Ketteler, Monseigneur von, 496

  Kidd, B., 485 _n._

  King, G., 54

  Kingsley, C., 504 _and n._, 505 _n._

  Knies, K., 89, 196 _and n._, 380 _n._, 381 _n._, 382 _n._, 384-385, 389,
      390-391, 392, 393, 400 _n._, 402, 403 _n._, 404, 405

  Kohler, C., 277 _n._

  Kraus, Professor, 106 _n._

  Kropotkin, Prince, 459 _n._, 615, 616, 619 _and n._, 621-622, 623, 625,
      627 _and n._, 628, 630, 631 _n._, 632, 633, 634 _and n._, 635, 636,
      637-638, 641

  Kurella, Herr, 584 _n._

  Kutter, Pastor, 507


  Labour, regarded by Adam Smith as the true source of wealth, 56-57;
    regarded as the measure of value, 77, 149;
    regarded by Marx as the cause of value, 77, 151 _n._, 184-185;
    regarded by Ricardo as the cause and measure of value, 140, 144 _n._,
      149, 201 _n._, 332;
    Ricardo and the territorial division of, 164;
    Sismondi and, 176 _n._;
    Saint-Simon on, 206 _n._;
    Fourier and the attractiveness of, 252-253;
    Proudhon on the organisation of, 291 _n._;
    Proudhon and the productiveness of, 293 _and nn._;
    regarded by Bastiat as the determinant of value, 332;
    Carey on, as the measure of value, 332;
    and value, Ferrara and, 333 _n._;
    Dunoyer on, 347-348 _and n._;
    Rodbertus and, 423;
    Marx’s theory of surplus labour, 450-459;
    rent of, 558 _n._;
    Henry George and the relation of capital to, 564-565

  Labour, division of, Adam Smith and, 56-62, 91;
    the outcome of personal interest, 70-71;
    dependent upon capital, 90;
    Ricardo and the territorial division of labour, 164;
    Tolstoy and, 514;
    solidarity and, 607

  Labour notes, Robert Owen’s, 315, 316

  Labour-value theory, Marx’s, 474-475, 581

  Labriola, A., 36 _n._, 449 _n._, 462 _n._, 464 _n._, 465 _and n._, 467,
      469 _n._, 470 _n._, 473 _n._, 474 _n._

  Lacordaire, J., 262

  Lafargue, P., 465 _n._

  Lafayette, G., 267

  Lagardelle, H., 482 _n._, 619 _n._

  _Laissez-faire_, in the Physiocratic doctrine, 11;
    the origin of the formula, 11 _n._; 170, 173, 197;
    List and, 277;
    the Classical school and, 322, 357, 390;
    the right interpretation of, 324;
    Stuart Mill and, 357;
    Cairnes and, 374;
    the Christian schools and, 377;
    the Historical school and, 389;
    Adam Smith and, 408, 410;
    Carlyle and, 511;
    the Hedonists and, 541;
    Henry George and 573 _n._

  Lalande, A., 600 _n._

  Lamartine, A., 302 _n._, 303

  Lammenais, the Abbé de, 496

  Land, the Physiocratic conception of, as an agent in production, 12;
    and rent, in Ricardo’s view, 143-149;
    nationalisation of, 155, 570-578;
    the Saint-Simonians and, 214;
    Carey’s theory of the order of cultivation of rich and poor land,
      338-339;
    growth in value of, 546;
    a gift of nature, 559;
    confiscation of, 559-562;
    and the theory of rent, 561

  Land Tenure Reform Association, 562

  Landez, A., 540 _n._

  Landowners, the Physiocrats’ esteem for, 39-40

  Landrecht, the Prussian, 445

  Landry, A., 420 _n._, 470 _n._, 537 _n._, 544 _n._

  Langlois, C. V., 405 _n._

  Laskine, M., 208 _n._

  Lassalle, F., 73 _n._, 159, 261, 294, 329, 376;
    and the “brazen law,” 321, 426;
    and State Socialism, 414;
    and Rodbertus, 414-415, 416, 417;
    and Bismarck, 414;
    his career, 432;
    his political and economic programme, 433-435;
    and Marx, 433 _n._, 434 _n._;
    and State intervention, 434-435; 436, 437, 449 _n._, 453 _n._,
      496 _n._, 607 _n._

  Lauderdale, Earl of, 109 _n._

  Launay, M. de, 609 _n._

  Launhardt, Herr, 529 _n._

  Laveleye, É. de, 222, 376, 577 _n._

  Lavergne, L. G. de, 371 _n._

  Lavoisier, A. L., 15, 125

  Law, Kropotkin on, 627 _n._, 632 _n._;
    Reclus on, 632 _n._

  Law of capillarity, 137

  Law of concentration of capital, Marx’s, 450, 475-476

  Law of demand and supply, 359-360

  Law of diminishing returns, 118, 126, 146-147, 148, 153, 157, 340, 341,
      373, 558 _and n._

  Law of free competition, 356-358

  Law of indifference, 148, 525, 527 _n._

  Law of international exchange, 362-366

  Law of population, Malthus’s, 120, 121-137;
    of the Classical school, 358-359, 373

  Law of rent, 362

  Law of sale, Cournot’s, 531 _n._

  Law of self-interest, 355-356

  Law of substitution, 525, 526, 528, 537 _n._

  Law of variation of intensity of need, 543 _n._

  Law of wages, 360-362

  Lazare, B., 620

  Ledru-Rollin, A. A., 303

  Legrand, D., 486

  Leo XII, Pope, 500 _n._

  Leo XIII, Pope, 501

  Leopold, Grand Duke, of Tuscany, and the Physiocrats, 5

  Leroux, P., 235 _and n._, 263, 344 _n._, 589

  Leroy-Beaulieu, P., 137, 254 _n._, 342 _n._, 375 _n._;
    and the Mathematical method, 537 _n._; 546

  Leslie, Cliffe, 196, 387

  Lesseps, F. de, 212

  Letchworth, 513 _n._

  Levasseur, É., 326 _n._, 388 _n._

  Lévy de Lyon, E., 607 _n._

  Lévy-Brühl, L., 435 _n._

  Lexis, Professor, 448 _n._

  Liberal individualists, and co-operation, 343

  Liberal Optimists, 322-348

  Liberal school, xv;
    the Physiocratic doctrine and, 46;
    Adam Smith a member of, 53;
    beginnings of, 54;
    and Adam Smith’s theory of value, 75; 205;
    Saint-Simon and, 210 _n._;
    the Associationists and, 231; 233;
    severance of, into French and English sections, 322;
    and Protection and socialism, 323, 326, 354;
    and Optimism, 324-326;
    and liberty, 324, 325-326;
    origin of the name, 324;
    and association, 325;
    and Darwin’s doctrine of the survival of the fittest, 326;
    and the Physiocrats, 327;
    Bastiat and, 327;
    and Bastiat’s theory of profits, 342 _n._;
    synonymous with the Individualist school, 356;
    definition of, 356 _n._, 357 _n._;
    and the repeal of the Corn Laws, 366;
    Le Play and, 486-487;
    and solidarity, 607-608; 629;
    and government and society, 631; 648

  Liberal Socialism, 573

  Liberalism, economic, vii, xv, 170;
    Sismondi and, 173, 185; 209; 311 _n._;
    the Classical school and, 322;
    and Optimism, 377;
    the reaction against, 377-378;
    effect of Bismarck’s policy upon, 436;
    and measures of social reform in Germany, 436 _n._;
    growth of, in Germany, 439;
    State Socialism and, 447;
    the Christian schools and, 484; 493;
    modern revival of, 516; 586;
    political economy and, 646, 647

  Liberalism of Adam Smith, 207;
    of the Liberal school, 326

  Liberalism, political, the Saint-Simonians and, 211

  Liberty, the French Revolution and, 104;
    Blanc on, 262;
    Sismondi on, 262 _n._;
    Proudhon and, 293, 297, 315;
    the French Liberal school and, 324, 325-327;
    Dunoyer and, 327;
    Stuart Mill and, 353, 358, 413;
    and the natural laws, 355;
    the Classical school and, 356;
    and State intervention, 413;
    Cournot and, 413;
    the State Socialists and, 440;
    the anarchists and, 622-623, 624, 629;
    Kropotkin on liberty as the corrective for the excesses of liberty, 634

  Liberty, individual, the Physiocratic doctrine and, 10 _n._, 11;
    Proudhon and, 315;
    Ricardo and Malthus and, 410;
    Stuart Mill and, 411 _n._;
    Rodbertus and, 429

  Lichtenberger, A., 200 _n._

  Lieben, R., 529 _n._

  Liebknecht, W., 437

  Lilienfeld, von, 590 _n._

  List, F., 111;
    and the Classical school, 169, 289, 290;
    his _National System_, and Protection, 265, 268;
    and the German tariffs, 266, 267-268;
    and nationality, 270-272;
    and productive power, 270;
    and Germany’s claim to Holland and Denmark, 272;
    and Adam Smith and his school, 273;
    and manufactures, 273-274;
    and agriculture, 274, 276-277;
    his Protectionism, 275-276, 281-282;
    origin of his Protectionist ideas, 277-280;
    his influence, 280-287;
    and history, 282, 381;
    and Carey, 282-284;
    and Stuart Mill, 284-285;
    his originality, 287-289;
    and the Historical school, 287, 360 _n._;
    and free exchange, 287-288;
    and the individual and the nation, 288, 411;
    and the duty of Governments, 288;
    and economic reforms in Germany, 288-289;
    his aim and achievement, 290; 323, 378;
    his economic method, 380;
    the Historical school and, 380 _n._; 439

  Littré, M., 222 _n._

  Lloyd, S., 266 _n._

  Locke, J., 559

  Loesewitz, J., 502

  Longe, F. D., 361

  Loria, A., 469 _n._;
    and land nationalisation, 578 _n._

  Lorin, H., 499 _n._

  Louis Bonaparte, 320

  Louis Philippe, 301

  Ludlow, J. M. F., 504, 505

  Luxembourg Commission, the, 302, 304-306, 319 _n._


  Mably, the Abbé de, 200 _and n._

  McCulloch, J. R., 52 _n._, 109 _n._, 139 _n._, 140 _n._, 141 _n._, 150,
      168, 175, 177, 349 _n._, 379

  Mackay, J. H., 615 _n._

  McVickar, J., 349

  Machinery, Adam Smith and, 112;
    J. B. Say on, 112;
    Sismondi and, 180-182;
    the Classical school and, 180-182;
    Ricardo and, 180 _n._, 181

  Maitland, F. W., vi

  Malon, Benoît, 465 _n._

  Malthus, T. R., xiv, 108, 109 _n._, 110, 116 _and n._, 117;
    one of the Pessimists, vi, 119-120, 192;
    regarded as an Optimist, 119 _n._;
    his career, 120 _n._;
    his law of population, 120, 121-137, 157, 345;
    and moral restraint, 127-129;
    and the Neo-Malthusians, 134;
    on charity, 135 _n._-136 _n._;
    correspondence with Ricardo, 139 _n._, 141 _n._;
    and rent, 142, 152, 164;
    and the law of diminishing returns, 146-147 _and n._; 149 _n._,
      150 _n._, 155, 156 _n._;
    and wages and population, 158-159, 189; 163 _n._;
    and Protection, 164;
    Sismondi and, 175;
    Sismondi and the theory of population of, 189 _n._;
    the Saint-Simonians and, 227; 264, 322, 324, 326, 348, 353;
    and individualism, 355; 358, 359, 371;
    and the identity of public and private interests, 410; 416, 564

  Malthusian League, the, 134 _n._

  Manchester school, xi, 436, 437, 438, 539

  “Manchesterism,” 357, 447

  “Manchesterthum,” 357, 438

  Mandeville, B. de, 54, 70 _n._

  Mangoldt, H. von, 548 _n._, 551, 556

  _Manifesto, Communist_, 449 _n._, 450 _n._

  Mantoux, P., 66 _n._, 97 _n._, 103, 104

  Manu, the laws of, Malthus and, 132 _n._

  Manufactures, List on, 273-274, 276 _and n._

  Marat, J. P., 199 _n._

  Marcet, Mrs., 119 _n._, 349

  Marcus Aurelius, 588

  “Marginal utility,” 521 _n._, 539

  Marie, A. T., 301, 302 _n._

  Markets, Say’s theory of, 115

  Marmande, R. de, 622 _n._

  Maroussem, P. du, 495 _n._

  Marrast, A., 303

  Marriage, effect of, upon population, 136 _n._;
    the anarchists and, 627

  Marshall, Professor A., 329 _n._, 335, 386, 390 _n._, 391, 392, 394,
      396, 397 _n._, 401, 402 _n._;
    compared with Marx, 474 _n._; 513 _n._, 516, 527 _n._, 529 _n._, 531,
      544 _nn._, 546 _n._, 551 _n._, 552;
    and rent, 557 _and n._; 581

  Martineau, Miss, 119 _n._, 349

  Marx, Karl, x;
    on Adam Smith, 66 _n._;
    his labour-value theory, 77, 151 _n._, 184-185, 201 _n._, 216,
      293 _n._, 474-475, 581;
    intellectually a scion of the Ricardian family, 120;
    his theory of surplus value and Ricardo’s theory, 140;
    resemblance of doctrines of, to those of the Classical school, 181;
    similarities between Sismondi and, 184;
    his theory of surplus value, 184, 198, 228, 294;
    and profit and interest, 185, 216;
    debt to Sismondi, 198; 209 _n._;
    and “exploitation,” 215, 216;
    his system and communism, 221;
    his system compared with the Saint-Simonians’, 225; 227;
    and List, 278 _n._;
    and his “Utopian” predecessors, 301;
    and Bray’s scheme, 315 _n._;
    and Proudhon, 320-321;
    and distribution, 368 _n._; 386;
    his socialism, 416, 433, 449-450, 470;
    the object of his system, 423;
    and the “brazen law,” 426; 429;
    and Rodbertus, 429 _n._;
    Lassalle and, 433 _n._, 434 _n._; 437, 448 _n._;
    his career, his works and influence, 449 _n._-450 _n._;
    his theory of surplus labour and surplus value, 450-459, 474-475;
    and capital, 455-458;
    his law of concentration of capital, 459-465, 475-476;
    the Marxian school, 465-473;
    his following, 465 _n._;
    and Ricardo, 466;
    his obscurity of style, 466;
    and value, 466 _and n._, 474;
    on production, 468 _n._-469 _n._;
    the French socialists and, 469;
    quality of his economic theories, 473;
    compared with Marshall, 474 _n._;
    and syndicalism, 480-481, 641; 483;
    the Christian schools and his collectivism, 485;
    Herron on, 507 _n._; 579;
    the Fabians and his theories, 583-584, 586;
    and the anarchists, 616;
    influenced by Hegel, 619;
    and Bakunin, 620;
    anarchy and his socialism, 640

  Marxian school, characteristics of, 465-472;
    and production, 468; 515;
    beginnings of, 579;
    and Marx’s theory of value, 583; 647, 648

  Marxism, vii, xv, 447, 449-483;
    and the Classical school, 467, 472;
    Sorel on, 467 _n._;
    and capitalism, 467;
    a working-class socialism, 470-471, 480;
    the evolution of, 473 _n._;
    and syndicalism, 479-483;
    its contempt for intellectualism, 480;
    traced in the doctrines of Le Play’s school, 495;
    the Fabians and, 583-584, 586;
    the rupture with anarchism, 620

  Mathematical school, the, x;
    Quesnay a pioneer of, 19 _n._;
    and the abstract method, 138; 335;
    and the Mathematical method, 392 _n._, 537 _n._, 538-539;
    and the Psychological school, 521;
    principal adherents of, 528 _n._;
    doctrines of, 528-537;
    and exchange, 528-530;
    and distribution, 529-530;
    and consumption, 530;
    and value, 530 _n._;
    and production, 536;
    and free competition, 543;
    influence of, 544;
    and solidarity, 613

  Maurice, F. D., 504 _and n._, 505, 508 _n._

  Mazel, F., 316, 317

  Mecklenburg, 268 _n._

  Mehring, F., 434 _n._

  Méline, M., 17 _n._

  Melouga family, 489, 493

  Menenius Agrippa, 588

  Menger, A., 209, 212, 231 _n._, 316 _n._;
    and the origin of Rodbertus’s ideas, 415 _n._;
    and Marx, 416 _n._, 450 _n._;
    and Fichte, 436 _n._;
    and private and public rights, 607 _n._

  Menger, K., 76, 380;
    and the historical method 382, 383 _n._, 402 _n._;
    and the Historical school, 389, 390, 395, 517;
    and the deductive method, 396 _nn._;
    and the final utility theory, 522 _n._;
    and the theory of rent, 557

  _Mercanti di tenute_, 190

  Mercantilism, the “net product” theory and, 17;
    influence of Physiocratic ideas upon, 27;
    Physiocracy antagonistic to, 29;
    and agriculture and industry, 30 _n._;
    Adam Smith and, 83, 97, 98, 100, 101, 169;
    List and, 279

  Mercantilist school, 1;
    and the increase of wealth, 17;
    their view of the State, 27;
    Adam Smith’s _Wealth of Nations_ and, 83;
    and money, 83, 314;
    List and, 280, 285 _n._

  Meredith, George, 432 _n._

  Meslier, the Curé, 200 _n._

  Method, the relative importance of, 397, 645

  Métin, A., 577 _n._, 579 _n._

  Meyer, Ed., 402 _n._, 405 _n._

  Meyer, R., 416 _and n._, 417 _nn._, 423 _n._, 428 _n._

  _Mieux value_, 184

  Milcent, M., 502 _n._

  Mill, James, and rent, 155, 168, 562;
    and land nationalisation, 155, 168;
    a disciple of Ricardo, 168, 349 _n._; 352 _n._

  Mill, John Stuart, xv;
    and productive and unproductive works, 62;
    “industry is limited by capital,” 72 _n._;
    and Adam Smith’s conception of utility, 75 _n._;
    and international trade, 98, 100, 330 _n._;
    and “products,” 109 _n._; 138;
    and Ricardo’s theory of rent, 141;
    and the stationary state, 162, 373-374, 605 _n._; 222 _n._;
    on Saint-Simonism and Fourierism, 255; 280;
    and Protection, 283, 284-285, 365;
    and List, 285 _n._;
    and the Classical school, 322, 352-353, 368; 349;
    his career and works, 352 _n._, 353;
    and socialism, 352 _n._, 353, 358, 367, 368;
    and communism, 353, 367;
    and competition, 353, 358;
    and co-operation, 353;
    and individualism, 355, 356 _and n._;
    and _laissez-faire_, 357;
    and the law of population, 358-359;
    and the law of demand and supply, 359-360, 519;
    and value, 360;
    and the law of wages, 360-362;
    and trade unionism, 360, 362 _n._;
    and Malthus, 362 _n._;
    and rent, 362, 370-372, 548, 551, 553, 554-555;
    and international exchange, 364-365;
    and Free Trade, 365, 411 _n._;
    influence upon economics, 367;
    French influence upon, 367, 579;
    and natural law, 368;
    his programme of social reform, 369-374;
    and wages, 369-370;
    and association, 370, 505;
    and inheritance, 372;
    his successors, 374-376; 377, 379;
    and relativity, 392;
    and self-interest, 394, 411; 404;
    and the identity of general and personal interests, 411;
    and State intervention, 411, 413;
    and individual liberty, 411 _n._, 413;
    Chevalier and, 411;
    and the State and the individual, 442, 443, 444;
    on Le Play’s theory of the salvation of the working-classes by the
      upper, 491;
    on the rent of ability, 549;
    and man’s right to the land, 561;
    and the confiscation of rent, 562-563, 566, 567, 568, 569, 570-571,
      575; 564;
    and private property, 568 _n._;
    and the abolition of profit, 605 _n._

  Millerand, A., 587 _n._

  Mines and the “net product,” 14

  Mirabeau, Marquis de, one of the Physiocrats, 3 _n._;
    and Rousseau and Physiocracy, 6 _n._;
    and the origin of the term _laissez-faire_, 11 _n._;
    on the _Tableau économique_, 18 _n._;
    and interest, 32-33;
    Cantillon’s influence upon, 46 _n._;
    on population, 121

  Molinari, M. de, 248, 329 _n._, 358 _n._

  Mollien, the Comte, 314

  Money, Adam Smith and, 71, 82-85, 89, 106, 115;
    the Physiocrats and, 115;
    Ricardo and the quantity theory of, 164-165;
    Ricardo and paper money, 165-167;
    Robert Owen and, 240-241, 243;
    Proudhon and, 308-310, 313, 316;
    Solvay’s scheme, 318-319;
    the Classical school and, 360;
    Ruskin and Tolstoy and, 510

  Monod, W., 508 _n._, 509 _n._

  Monopoly, x;
    Adam Smith and, 95, 96;
    Stuart Mill and, 554 _n._;
    and the rent of land, 554 _n._

  Monopoly price, Adam Smith on, 81 _n._

  Montagne, La, 200 _n._

  Montalembert, the Comte de, 487 _n._

  Montchrétien, A. de, 1

  Montesquieu, C. de S., 121

  More, Sir Thomas, 200 _and n._, 246

  Morellet, the Abbé, 46

  Morelly, 200 _and n._

  Morris, Wm., 251

  Moufang, Canon, 496

  Mulhouse, the Industrial Society of, 172

  Müller, Adam, 278 _n._

  Mun, the Comte de, 484 _n._, 497, 502

  Mutual aid, the anarchists and, 629-636

  Mutual credit, 314, 315;
    solidarity and, 606

  Mutualists, and solidarity, 602, 603-604

  Mutuality, Proudhon and, 297 _n._, 299, 300


  Napoleon I, 107

  Napoleon III, 280, 323, 366, 375, 490 _n._

  Nassau, 268 _n._

  National Equitable Labour Exchange, 236 _n._, 241-242, 244 _n._

  National workshops of the 1848 Revolution, 301-303

  Nationalisation of the land, 570-578

  Nationality, List and, 270-272

  Natural laws, 354-366, 368, 385 _n._;
    the anarchists and, 628, 629

  “Natural order,” the, xiv, 5-12;
    meaning of the term, 5-8;
    the Physiocrats’ conception of, 8, 9-10, 109;
    Turgot on the universality and immutability of, 10;
    and the old _régime_, 10;
    the aim of, 10-11;
    and the right of private property and individual liberty, 10 _n._, 11;
    comprehensiveness of, 12;
    the bon prix and, 15;
    property the “foundation-stone” of, 21;
    and trade, 29;
    the conception of, constitutes the foundation of political economy, 46;
    Adam Smith and, 109;
    Ricardo’s theory of rent and, 152;
    the French Classical school and, 322, 323;
    the Christian schools and, 484

  “Naturalism,” Adam Smith’s, 68-88

  Naumann, Pastor, 507

  Navigation Laws, 101 _n._

  Neale, Vansittart, 504

  Necessity, the laws of, Kropotkin on, 628 _n._

  Necker, J., and free trade in corn, 32; 157

  “Negative rent,” 558

  Neill, C. P., 277 _n._

  Neo-Classical school, 10, 397

  Neo-Malthusians, 130, 134

  Neo-Marxism, 473-483;
    and the labour-value theory, 474;
    and surplus labour and surplus value, 475;
    and syndicalism, 479-483

  “Net product,” the, 12-18;
    agriculture the sole source of, 12, 14;
    mines doubtful yielders of, 14 _and n._;
    disappears when prices are low, 15;
    the illusion of, 16;
    rent and, 16;
    value of the theory of, 17;
    and Mercantilism, 17;
    non-existent, 24;
    interest a symbol of, 32;
    taxation should be drawn from, 38-40, 41;
    adaptation of, to the _impôt unique_, 43; 453 _n._

  Netchaieff, 639 _and n._

  Nettlau, M., 619 _n._

  New Harmony, Owen’s colony, 236 _n._, 241 _n._, 246, 257

  New Moral World. 236 _n._

  Nicholas I, Tsar, 639 _n._

  Nicholson, Professor J. S., 52 _n._, 266 _n._, 592 _n._

  Nietzsche, 511, 616 _and n._

  Nitti, F. S., 503 _n._

  “Noble savage,” the cult of the, 7

  “Normal,” the term, 271

  North, Dudley, 54

  North, Lord, 105


  Oberlin, Pastor, 486

  Office du Travail, 257 _n._

  Ogilvie, W., 560 _and n._

  Oldenburg, 268 _n._

  Olivier, P., 611 _n._

  Ollivier, E., 324

  Oncken, H., 11 _n._, 17, 19 _n._, 30, 383 _n._, 414 _n._, 432 _n._

  Ophelimity, 75, 91, 99, 522 _n._, 541 _n._, 572

  Optimism, xv;
    Adam Smith’s, 68-69, 88-93;
    the French Liberal school and, 324-327;
    Bastiat and, 327, 377;
    Carey and, 327, 493

  Optimist school, definition of, 356 _n._, 357 _n._

  Optimists, the, 118, 322-348, 354, 356, 368, 438

  Orbiston, Robert Owen’s colony at, 236 _n._

  Organic sociologists, the Physiocrats the forerunners of, 7

  “Organisation of labour,” 300, 303-305, 319

  Orthodox school, 169, 176, 326

  Ott, A., 317 _n._, 420 _n._

  Over-production, J. B. Say and, 115-117; 171;
    Sismondi and, 176, 178-182;
    the Classical school and, 181;
    Marx and, 461

  Owen, Robert, 169, 171;
    Sismondi and, 173 _n._, 184, 194; 201 _n._;
    and association, 232 _n._, 233;
    and Fourier, 234-235, 245;
    and the Chartist movement, 235;
    and socialism, 235;
    his career, 235 _n._;
    his industrial reforms, 236-237;
    and association, 237;
    and the social _milieu_, 237-239;
    and profit, 239-244;
    and money, 240-241;
    and the National Equitable Labour Exchange 241-242;
    and co-operative societies, 243-244, 504;
    founded no school, 244; 246, 255, 261, 264, 290, 293, 315, 316, 323,
      370, 378, 470, 579


  Paepe, C. de, 459 _n._

  Paillottet, P., 343 _n._

  Paine, Tom, 560 _and n._

  Pantaleoni, M., 36 _n._, 530, 538 _n._, 542, 551 _nn._

  Parable, Saint-Simon’s, 204-205

  Pareto, V., 71 _n._;
    on prices, 76 _n._-77 _n._; 99, 231 _n._;
    and Free Trade, 288 _n._;
    on method, 397;
    and maximum utility and maximum ophelimity, 412; 421, 448, 516,
      521 _n._, 522 _n._, 529 _n._, 533 _n._, 534 _n._, 536 _and n._,
      537 _n._, 540 _n._, 541 _n._;
    and the Hedonists, 542; 544 _n._, 555 _n._;
    and the relative duration of rents, 557;
    and negative rent, 558;
    on solidarity, 608 _n._

  Passy, F., 509 _n._, 592 _n._

  Passy, H., 371 _n._

  Patten, Professor, 285 _n._, 522 _n._, 542 _n._

  Pearson, K., 407 _n._

  Peasant proprietorship, 371-372

  Pecqueur, C., 304-305, 449 _n._

  Peel, Sir Robert, 280, 366

  Pellarin, C., 245 _n._

  People’s Bank, 308 _n._, 317 _n._, 319-320

  Péreire, E. and I., 212, 226

  Périn, C., 502 _n._

  Personal interest—_see_ Self-interest

  Pervinquière, M., 14

  Pessimism, the French Liberal school and, 324

  Pessimists, the, 118-120;
    and rent, 118;
    and the law of diminishing returns, 118;
    Mill and, 372

  Petty, W., 54

  Pflüger, Pastor, 507

  Phalange, 248-250

  Phalanstère, 245 _n._, 246-252, 255, 257, 297 _n._, 604, 635

  Physiocracy, 4 _n._;
    a popular craze, 5;
    Adam Smith and, 63;
    J. B. Say and, 108-109

  Physiocrats, the, xi _n._, 1-50;
    and the conception of political economy, 2;
    the first school of economists, 3;
    the Abbé Baudeau on, 3 _n._;
    bibliography of the system, 4 _n._-5 _n._;
    and the “natural order,” 5-12;
    Rousseau and, 6 _n._;
    and the civilised state as opposed to a state of nature, 7;
    forerunners of the organic sociologists, 7;
    their conception of the “natural order,” and man’s duty with regard
      to it, 8, 9-10, 87-88;
    and the rights of private property and individual liberty, 10 _n._, 11;
    and the “net product,” 12-18, 141;
    and land as an agent in production, 12;
    on industry and commerce, 12-13;
    and the “sterile classes,” 14, 21;
    and mines and the “net product,” 14 _and n._;
    and agricultural and industrial production, 15;
    their influence upon practical politics, 17;
    and the circulation of wealth, 18-26;
    their regard for private property, 21-26, 199 _n._-200 _n._, 217;
    and the duties incumbent upon landed proprietors, 25-26;
    and the abolition of corporations, 26 _n._-27 _n._;
    and trade, 27-33;
    and Mercantilism, 27, 29, 169, 314;
    the founders of Free Trade, 29;
    and reciprocity, 31;
    Galiani’s criticism of, 32;
    and the question of interest, 32-33;
    and the functions of the State, 33-37;
    and legislation, 33-34;
    and political liberty, 34 _n._;
    and the sovereign authority, 35-37, 41;
    and education, 37;
    and internationalism, 37;
    and taxation, 38-45;
    and the fiscal system of the French Revolution, 44, 104;
    _résumé_ of their doctrine, 45-50;
    Adam Smith and, 51 _n._, 55, 56, 62, 63, 64, 65, 69, 80, 88, 93, 98,
      100; 89, 97;
    J. B. Say and, 108-109;
    Germain Garnier and, 108;
    and money, 115;
    and population, 122; and rent, 142;
    and Free Trade, 98, 153, 163;
    and the natural identity of individual and general interests,
      185; 201 _n._;
    the Associationists and, 232-233; 322, 323;
    and their successors, 327; 331, 338 _n._, 347, 348, 354, 371, 572,
      629, 644

  Pitt, William, 104, 105

  Place, F., 159 _n._

  Plato, 200 _and n._

  Play, F. Le, 137, 196, 238, 304;
    his school, 486-495;
    his career, 486 _n._-487 _n._;
    his family system, 488-493;
    and the State, 488;
    his method, 492;
    and the Historical school, 493-494;
    the division in his school, 494-495; 497, 502

  “Plutology,” 375

  Podmore, F., 236 _n._

  Political economy, origin of the term, 1;
    Quesnay and his school the virtual founders of the science, 2;
    Adam Smith as founder of, 50-51, 103;
    the scope of, in Adam Smith’s system, 55-56;
    Quesnay’s conception of, 88;
    Adam Smith’s conception of, 88, 89, 110;
    J. B. Say’s influence upon, 107, 111;
    influence of Malthus and Ricardo upon, 108;
    the Physiocrats and, 109;
    J. B. Say’s conception of, 110-111;
    Say’s treatment of, 117, 175;
    a fashionable craze, 119 _n._, 349;
    Ricardo and, 138, 139 _n._, 175;
    the new, the attack upon, 169;
    Sismondi and, 173-178, 184, 196, 198, 380;
    the Historical school and, 175, 222, 380, 381;
    the Classical school and, 177;
    A. Comte and, 201 _n._;
    Saint-Simon on, 209 _n._;
    List and, 270, 380-381;
    and politics, 288;
    significance of the advent of, 327;
    McVickar on, 349;
    Senior and, 350;
    Stuart Mill and, 353;
    not a “dismal science,” 354;
    the reaction against Liberalism, 377;
    development of the abstract method in, 379-380;
    the socialists and, 381;
    Roscher and, 383-384;
    Hildebrand and, 383-384;
    Knies and, 384-385;
    the newer Historical school and, 386;
    Toynbee and, 386 _n._;
    development of, in France, 388;
    influence of the Historical method upon, 388;
    Menger and, 389;
    Ashley and, 391 _n._;
    and sociology, 404;
    Ruskin and, 510 _n._;
    Carlyle on, 511 _and n._;
    modern claims for, 517;
    Pareto and, 536 _n._;
    recognised as independent of parties and ideals, 583;
    development and future of, 643-648;
    simplicity of Adam Smith’s system, 644;
    divergency of objects and methods among economists, 646-647;
    Liberalism and, 646, 647

  Political Economy Club, 139 _n._

  Pollock, Sir F., 559

  Poor Law, English, Malthus and, 135 _n._, 136 _n._;
    Sismondi and, 195

  Population, Adam Smith’s supply and demand theory applied to, 82,
      89, 188;
    dependent upon capital, 90;
    Malthus’s law of, 120, 121-137, 142, 157, 345;
    the “repressive checks,” 126-127;
    the “preventive checks,” 127-129, 137;
    the reproductive capacity and intellectual activity, 137 _n._-138 _n._;
    Sismondi on the regulation of, by revenue, 188;
    wages and, 189;
    Sismondi and Malthus’s theory, 189 _n._;
    Carey’s theory of, 346;
    development of the theory of, 645

  Port Sunlight, 255, 513 _n._

  Positivism, Saint-Simon the father of, 203; 213

  Pothier, R. J., 587 _n._

  Potter, B. (Mrs. Sidney Webb), 587 _n._

  Price, demand and supply and, 519-520;
    cost of production and, 520;
    and rent, 520

  Prices, Adam Smith’s theory of, 74-81;
    Walras and, 114;
    the recent theory of, 515;
    development of the theory of, 645

  _Principles of Revolution, The_, 639

  Producer, subordination of, to consumer, 342-343

  Producer’s rent, 527 _n._

  Producers, and social reorganisation, 605 _n._

  Producers’ associations, 604

  Production, the accretion of value is, 16;
    labour as the cause of, 24;
    the Physiocratic conception of, 46, 49;
    the three factors of, 56 _n._;
    Adam Smith and, 80, 419;
    adaptation of supply to demand the basis of our theory of, 82;
    J. B. Say and, 109;
    Sismondi and, 177, 178-182, 193, 419;
    the Classical school and, 177;
    net and gross, Sismondi and, 189-190;
    the Christian Socialists and, 196;
    the Saint-Simonians and, 199, 226-227;
    Dunoyer and, 347-348;
    Senior on agricultural and industrial production, 362 _n._;
    Stuart Mill and, 368-369;
    Rodbertus and, 419-421, 430;
    State Socialism and, 444;
    Marx on, 468 _n._-469 _n._;
    cost of, and value, 520, 526;
    cost of, and price, 520, 534 _n._;
    the Hedonists and, 533;
    the expansion of, under the influence of applied science, 635-636

  Productive power, List and, 270, 272-274

  Productivity theory of capital, 502, 583;
    of wages, 527-528

  Profit, Adam Smith on the relation of, to rent, 64 _n._;
    Adam Smith’s conception of, 65 _n._, 80, 114;
    Smith on high profits, 67, 74 _n._;
    dependent on exchange value, 90;
    Ricardo and, 114, 160-163, 373;
    the Pessimists and, 118;
    Marx and, 185, 457-458 _and n._;
    Robert Owen and the abolition of, 239-243;
    Bastiat and the relation of, to wages, 340-342, 550-551;
    Stuart Mill and, 373 _n._;
    the term as understood by English and French economists, 373 _n._;
    the Classical school and, 520;
    Walras and, 534 _n._-535 _n._;
    rent and, 545;
    Walker and, 550-551;
    Pantaleoni on, 551 _n._;
    Stuart Mill and the abolition of, 605 _n._

  Profit-sharing, the Saint-Simonians and, 227

  Property, private, the Physiocratic doctrine and, 10 _n._, 11, 21, 24-25;
    respect for, during the French Revolution, 25;
    Turgot’s views upon, 25;
    Ricardo’s theory of rent and, 154, 558-559;
    Sismondi and, 198;
    the Saint-Simonians and, 199-201, 213-225, 294 _n._;
    considered from the point of view of ethics, 200;
    Saint-Simon and, 210;
    exploitation and, 215;
    Fourier’s Phalanstère and, 248-249;
    the Radical Socialists and, 251;
    Proudhon and, 290-300, 315;
    Brissot and, 292 _n._;
    Bastiat and, 337;
    Marx and, 463-464;
    the Christian Socialists and, 506;
    Tolstoy and, 513;
    the Hedonists and, 540 _n._;
    considered to be unjust, 559;
    Stuart Mill and, 568 _n._;
    Gossen and, 572-573;
    solidarity and, 606-607;
    the anarchists and, 626-627, 641;
    syndicalism and, 641;
    socialism and, 642

  Proprietor, the, in Ricardo’s, Proudhon’s, and Bastiat’s view, 336

  Protection, the probable attitude of the Physiocrats to, 17;
    influence of, on agriculture and on industry, 30 _n._;
    Adam Smith’s criticism of, 98-99;
    Ricardo and, 163 _n._;
    Malthus and, 164;
    Sismondi and, 264 _n._-265 _n._;
    Saint-Simon and, 265 _n._;
    the Saint-Simonians and, 265 _n._;
    List and, 265, 268-290;
    and agriculture, List on, 276 _and n._;
    in the United States, 279;
    in Germany, 279, 280, 281;
    in France, 280, 281, 323, 354;
    Carey and, 282-284;
    Dühring and, 289 _n._;
    in England, 323, 354;
    Bastiat and, 329-330;
    follows the interest of the producer, 343;
    the Liberal school and, 354;
    Stuart Mill and, 365;
    the Social Catholics and, 501 _n._;
    and solidarity, 602

  Proudhon, J. J., 169;
    and government, 209, 310, 311, 624 _n._, 627;
    his Exchange Bank, 242, 291, 293 _n._, 308-319;
    and private property, 290-300;
    his works, 291 _n._-292 _n._;
    his career and his character, 291-292;
    and interest, 293 _n._;
    and labour, 293;
    and socialism, 296-300;
    and Fourier, 296, 297 _n._;
    and the communists and communism, 296, 297, 298, 299, 300;
    and the economic forces, 296-297;
    on liberty, 297, 315;
    and association, 297 _and n._;
    on justice, 298-299;
    and exchange, 299-300;
    and the Revolution of 1848, 300-308;
    and “the right to work,” 301;
    and money, 308-310, 313-314;
    and co-operation, 315;
    and solidarity, 317;
    and the People’s Bank, 319-320;
    influence after 1848, 320-321;
    Marx and, 320-321, 449 _n._ 462;
    new interest in his ideas, 321; 323, 329;
    and Bastiat, 333 _n._-334 _n._, 343;
    and the proprietor, 336; 378, 415 _n._, 429 _n._, 450, 486;
    on land, 559;
    and the confiscation of land, 560; 607 _n._, 613;
    the and anarchists, 615, 641; 616, 619 _and n._;
    and Bakunin, 620; 622;
    and the individual, 622-623;
    and the idea of humanity, 623;
    and reason, 628;
    and society, 630, 631 _n._;
    on the harmony of individual and general interests, 633 _n._; 634;
    and revolution, 637;
    and syndicalism, 641

  Providential order, Bastiat and, 331

  Prudhommeaux, M., 264 _n._

  Prussia, the tariff of 1821 of, and Adam Smith’s doctrines, 106 _n._;
    tariffs in, in the early nineteenth century, 266;
    and the Zollverein, 268;
    industry in, 281 _n._

  Psychological school, the, 397 _n._, 521-528

  Puech, M., 321 _n._, 323 _n._

  “Pure” school, the, 353, 392


  Quantity theory of money, 360

  Quasi-contract theory, 595-599, 603 _n._, 606

  Quesnay, F., 2-5;
    virtually the founder of political economy, 2;
    his works, 3 _n._;
    on natural right, 7 _nn._;
    and the analogy between social and animal economy, 7;
    and the “natural order,” 9, 10 _and n._;
    and the “net product,” 15;
    his theory of the circulation of wealth, and the _Tableau économique_,
      18-20;
    on the productive and sterile classes, 21 _n._;
    on the landed proprietors, 21 _n._;
    on the security residing in property, 24 _n._;
    on the safety of property as the basis of economic order, 25;
    on the poor, 26 _n._;
    on foreign trade, 28;
    on Free Trade, 29 _nn._;
    on the “good price,” 29;
    on American competition, 30 _n._;
    on Protection, 31 _n._;
    and interest, 33;
    on laws, 34;
    on the sovereign authority, 35;
    on despotism, 36 _n._;
    on education, 37;
    on Government expenditure, 38 _n._;
    and the “iron law,” 42-43;
    and wages, 43 _n._;
    and value, 47 _n._; 54;
    and Adam Smith, 55;
    and agriculture as the source of all wealth, 56;
    his conception of political economy, 88;
    Adam Smith’s criticism of his theory, 88; 201 _n._, 232, 298

  Quetelet, L., 407 _n._

  _Quod Apostolici_, Encyclical, 500 _n._


  Radical party, English, 372

  Radical-Socialist party, 592, 601

  Rae, J., 52 _n._, 64 _n._, 66 _n._, 96 _n._, 103 _n._, 106 _n._

  Ragaz, Professor, 507

  Raiffeisen, F. W., 496, 503 _n._

  Rambaud, J., xi, 277 _n._, 503 _n._

  Rau, K. H., 352, 379

  Rauschenbusch, W., 507 _n._

  Raymond, D., 277 _n._

  Reason, the anarchists and, 628, 641

  Reciprocity, Mercier de la Rivière on, 31;
    Proudhon on, 310 _n._

  Reclus, É., 615, 619, 622, 624, 627 _n._, 628, 632 _n._, 636, 637

  Reichel, 631 _n._

  Reid, T., 560

  Religion, Robert Owen and, 238-239

  Renard, G., 465 _n._, 469 _n._

  Renouvier, C. B., 403 _n._, 560

  Rent, the theory of, xv;
    Ricardo’s conception of the nature of, 16, 114;
    and the “net product,” 17;
    Adam Smith and, 64, 80, 92;
    relation of wages and profit to, 64 _n._;
    J. B. Say and, 114-115, 556;
    the Pessimists and, 118;
    Ricardo’s theory of, 138, 140-157, 164, 335, 338, 339, 370, 545-546,
      547, 548 _and n._, 552-553, 544 _n._, 555 _n._, 558-559, 561,
      581-583, 587;
    differential rent, 142, 546-558;
    Malthus and, 142, 152, 164;
    James Mill and, 155, 562;
    the Saint-Simonians and, 213 _n._, 214, 562;
    Carey and, 327, 338-340, 425, 545, 546;
    Bastiat and, 335-338, 340, 425, 545, 546;
    Fontenay and, 338 _n._;
    Senior and, 350-351, 362;
    the Classical school and, 362, 520, 547;
    Stuart Mill and, 362, 370-372, 548, 554, 555, 562-563, 566, 567-568,
      569;
    Rodbertus and, 424, 425;
    modern economists and, 516;
    and price, 520;
    an “unearned increment,” 545;
    growth in, 546;
    of land, 546-548, 554-555, 556-557;
    of capital, 548-549 _n._; 558 _n._, 583;
    of ability, 549, 551, 582, 583;
    Walker’s theory, 549-552;
    and profit, 550-552;
    and the Classical theory of distribution, 553;
    a consequence of the laws of value, 555;
    of land, a species of the income of fixed capital, 556;
    a scarcity price, 556;
    Schäffle and, 556-557;
    K. Menger and, 557;
    relative permanence of rents, 557;
    negative rent, 558;
    J. B. Clark and, 558 _n._;
    and private property, 558-559;
    man’s right to the land and the theory of rent, 561;
    of land, spontaneous character of, 561;
    the confiscation of, 562-570;
    Henry George and, 563-568, 569;
    the relation of wages to the increase in, 566 _and n._;
    Gossen and Walras and the confiscation of, 574-575;
    Sidney Webb and Ricardo’s theory of, 581-583;
    interest regarded as, 582;
    “economic rent,” 582 _n._, 583 _n._;
    the Fabian doctrine and Ricardo’s theory of, 587

  _Rerum Novarum_, Encyclical, 501 _n._

  Revolution, Proudhon on, 320 _n._;
    Marxism and, 471-472;
    Neo-Marxism and, 481-482;
    Buchez on Christianity and, 496;
    the anarchists and, 637-640, 641

  Revolution, French, the Physiocratic system and, 44, 104;
    socialism and, 199 _n._;
    the leaders of, and private property, 199 _n._-200 _n._; 205, 214, 223

  Revolution, the Industrial, 65, 104, 111

  Revolution of 1848, Blanc and, 256;
    Proudhon and, 300-308, 311 _n._;
    and socialism, 300; 436-437

  _Revolutionary Catechism_, Netchaieff’s, 639

  Reybaud, M., 300-301, 306, 354

  Ribbes, M. de, 492 _n._

  Ricardo, D., x, xiv;
    against the idea that nature is the only source of value, 16;
    his conception of what rent is, 16;
    and Adam Smith’s reference to utility, 75 _n._;
    and international trade, 98, 99, 100, 163-164, 363 _and n._-364 _and
      n._;
    influence on political economy, 108, 138, 175;
    and distribution, 114, 139-140;
    and wages and profits, 114, 157-163, 373;
    and crises, 117, 177, 192;
    compared with J. B. Say, 118;
    regarded as an Optimist, 119 _n._;
    one of the Pessimists, vi, 119-120, 192;
    his place in economics, his work and literary style, 138-139;
    his career, 139 _n._;
    his theory of rent, 138, 140, 141-157, 164, 335, 338, 339, 370,
      545-546, 547-548 _and n._, 552-553, 554 _n._, 555 _n._, 558-559, 576;
    his theory of value, 138, 140-141, 149-151, 240;
    and labour and value, 140, 144 _n._, 332;
    and the law of diminishing returns, 146-147, 373, 576;
    and the balance of trade theory and the quantity theory of money,
      164-165;
    and paper money, 165, 168;
    Sismondi and, 174-175, 177 _and n._, 380;
    and machinery, 180 _n._, 181 _and n._;
    and wages and population, 189;
    the Saint-Simonians and, 227; 228;
    and property, 228; 264;
    List and, 269; 287, 322, 324;
    and the proprietor, 336; 348, 349;
    and the income of capital, 350; 353;
    and individualism, 355; 362, 371, 379, 386 _n._, 390;
    and the identity of public and private interests, 410;
    Rodbertus on his theory of value, 415 _n._; 416, 453 _n._;
    the Marxian school and, 466;
    his method, 466;
    man’s right to the land, and his theory of rent, 561; 564, 566 _n._;
    Sidney Webb and his theory of rent, 581-583;
    the Fabian doctrine and his theory of rent, 587

  Richelot, H., 265 _n._

  “Right to exist, the,” 607 _n._

  “Right to the whole produce of labour, the,” 607 _n._

  “Right to work, the,” 300, 301, 303, 319, 599, 607 _n._

  Rist, C., 172, 342 _n._, 423 _n._, 539 _n._

  Rivière, Mercier de la, one of the Physiocrats, 3 _n._, 5;
    on the social order, 7;
    on the “natural order,” 8 _n._-9 _n._, 9, 10 _n._, 11;
    and the origin of the term _laissez-faire_, 11 _n._;
    on the creation of value, 13 _and n._;
    on property as a “divine” institution, 21;
    on the landed proprietor, 23 _n._;
    on property as the parent of social institutions, 25;
    on the regard to be paid to the peasants, 26 _n._;
    on the fallacy that wealth grows from foreign trade, 28;
    on freedom of trade, 29 _n._-30 _n._;
    on the balance of trade theory, 31;
    on reciprocity, 31;
    on laws, 34 _n._;
    and Catherine the Great, 34;
    on despotism, 35 _n._;
    on taxation, 40 _n._;
    on the relation of expenditure to production, 42 _n._;
    on the felicity following on the establishment of the “natural order,”
      46 _n._; 232

  Rochdale Pioneers, 263 _n._, 243, 244, 605

  Rodbertus, J. K., 73 _n._;
    and Sismondi, 198;
    and the products of labour, 293 _n._; 294, 316;
    on the relative returns of capital and labour, 341 _n._-342 _n._; 369;
    and State Socialism, 414-415, 428, 431;
    and Lassalle, 414-415, 416, 417, 433, 434;
    French origin of his ideas, 415, 416, 423;
    his works, 415 _n._-416 _n._;
    his political and economic views, 416-417;
    his social theory, 417-432, 590;
    and the State, 261, 418, 429-430, 441;
    and production, 419-421, 423, 430;
    and the utilisation of the means of production, 421;
    and distribution, 421-428, 430-431;
    and labour’s share of the national product, 425-426, 427;
    and the “brazen law,” 426;
    his theory of crises, 426-427;
    and the regulation of national production and distribution, 427-429;
    and the State and economic functions, 430-431;
    the State Socialists and his doctrine, 430; 437, 443, 448 _n._, 450,
      475;
    and Professor Schäffle, 590 _n._

  Rodrigues, E., 211, 212

  Rodrigues, O., 203, 204 _n._, 211

  Rogers, Thorold, 52 _n._

  Roscher, W., 106 _n._, 196, 379 _and n._, 380 _n._;
    founder of the Historical school, 381-383; 389, 400 _n._, 402

  Rossi, P., 315 _n._, 352, 375, 379

  Roubaud, the Abbé—_see_ Baden, Margrave of

  Round, J. H., vi

  Rousiers, P. de, 495 _n._

  Rousseau, J. J., 1;
    and the Physiocrats, 6 _n._;
    and the natural state compared with the social state, 7; 120 _n._;
    and private property, 200 _n._; 238 _n._, 596

  Royal Economic Society, 506 _n._

  “Rural economy,” 2, 3 _n._, 5

  Ruskin, John, 196, 251, 510 _and n._, 511-513

  Rutten, Father, 498 _n._


  Sabotage, 481 _n._

  Sadler, Michael, 67

  Saint-Leon, M., 500 _n._

  St. Paul, 588

  Saint-Simon, C. H., and Fourier, 201 _n._;
    quality of his socialism, 201-202;
    his career, 202-203;
    his works, 203 _n._;
    his earlier philosophic system, 203;
    his economic ideas, 204;
    his “Parable,” 204-205;
    on the future of the industrial classes, 205 _n._;
    on industry, 205 _n._;
    and the new industrial system, 205-211, 224;
    and socialism, 209-211;
    the Saint-Simonians and their doctrine, 211-231;
    and capital, 214;
    and A. Comte’s theory of the three estates, 222;
    and history, 224;
    on politics, 225 _n._;
    on philanthropy in social reorganisation, 225 _n._;
    Engels on, 228;
    and private property, 217; 233, 256;
    and Protection, 265 _n._; 290, 300;
    Proudhon and, 311 _n._; 318, 323, 352, 402, 404, 405;
    Rodbertus and, 418; 450, 470, 475, 486

  Saint-Simonians, the, 169, 184;
    and Sismondi, 193;
    and the equalitarians, 200 _n._-201 _n._;
    and their socialist contemporaries, 201 _n._;
    and collectivism, 201, 202, 211, 218-220;
    their doctrine, 202, 213-225;
    and governmental control, 207 _n._;
    the development of their doctrine from Saint-Simon’s, 211;
    earliest members of the school, 211;
    organisation of the school, 211-212;
    Enfantine and the downfall of the school, 212-213;
    and private property, 199-202, 213-225, 294 _n._;
    and “exploitation,” 215-216;
    and production, 217-218, 226-227;
    and inheritance, 217-218;
    and the historical method in the criticism of private property,
      221-224;
    their socialism, 225, 230 _n._;
    part played by members of the school in practical economic
      administration, 226;
    and banks and credit, 226;
    influence upon the socialists, 227;
    and distribution, 229;
    and the general and particular interest, 229-230;
    on the disadvantages of the spontaneous economic forces, 230;
    and profits and wages, 216 _n._;
    and value, 216;
    compared with the Associationists, 231;
    Fourier on, 245;
    and Protection, 265 _n._;
    and the State, 289 _n._;
    List and, 289 _n._; 293;
    Proudhon and, 296; 297;
    Stuart Mill and, 367, 372; 378, 381, 415 _and n._;
    Rodbertus and, 421, 423; 465 _n._;
    and class antagonism, 471 _n._;
    and the confiscation of rent, 562

  Saint-Simonism, 112;
    Fourier and, 201 _n._; 212, 219, 254, 255

  Sainte-Beuve, and Sismondi, 193;
    and Proudhon, 292, 295 _n._, 298 _n._

  Sand, George, 263

  Sangnier, M., 496, 502 _n._

  Sartorius, G. F., 106

  Saumaise, C., 503 _n._

  Savigny, F. K. von, 382

  Saving, Adam Smith on, 73

  Sax, Professor, 522 _n._

  Saxony, 281 _n._

  Say, J. B., xii, 34 _n._;
    and production, 56 _n._;
    and capital, 56;
    and productive and unproductive works, 62, 348 _n._;
    and the _entrepreneur_, 65 _n._, 113-114, 550 _n._; 70;
    on Adam Smith’s theory of distribution, 80;
    and distribution, 93, 113-114, 422;
    on the loss of England’s American colonies, 103-104;
    on the _Wealth of Nations_, 106;
    and Adam Smith’s doctrines, 107-117;
    his career, 107 _n._;
    and the Physiocrats, 108-109;
    and political economy, 110-111, 175, 178;
    on machinery, 112, 181;
    and rent, 114-115, 551, 554 _n._, 555 _n._, 556;
    his theory of markets, 115;
    and over-production crises, 115-117, 192;
    correspondence with Ricardo, 139 _n._; 148;
    on the poverty of the English worker, 171;
    Sismondi and, 175, 177, 178, 181;
    and the relative poverty of industrial society, 193; 201 _n._, 207;
    Saint-Simon and, 209 _n._, 210 _n._; 228;
    and property, 228; 264, 265 _n._;
    List and, 269 _n._; 279 _n._, 280, 287, 298, 311 _n._;
    and anarchy, 311 _n._; 314, 322, 328 _n._, 335 _n._, 336 _n._,
      352 _n._, 353, 375, 379, 390, 425, 615 _n._, 645

  Say, Louis, 107 _n._, 265 _n._

  “Scarcity,” 521 _n._, 522 _n._

  Schäffle, A., 438 _n._, 469, 556-557, 590 _n._

  Schatz, A., 54 _n._, 357 _n._, 372 _n._

  Schelle, M., 4 _n._, 11 _n._

  Schmidt, Kaspar—_see_ Stirner, Max

  Schmoller, G., 196, 379 _and n._, 383, 385-386, 389 _nn._, 393 _n._,
      395, 397, 400, 403, 406 _n._, 407, 438, 443 _n._, 517, 647

  Schönberg, G., 439

  School of Social Science, 494

  Schulze-Delitzsch, F. H., 376, 434 _and n._

  Schumpeter, Herr, 547 _n._

  Schuster, R., 323

  Schweitzer, Herr, 434 _n._

  Science, Bakunin and, 628-629

  Seager, Professor H. R., 349 _n._

  Secrétan, C., 560, 600 _n._

  Seebohm, F., vi

  Ségur-Lamoignon, M., 500 _n._

  Seignobos, C., 405 _n._

  Self-interest, Adam Smith on, as the mainspring of progress, 86-87, 88,
      89, 92, 95, 393; 99;
    the Classical school and, 393-394;
    Wagner and, 394;
    Stuart Mill and, 394, 404, 411

  Seligman, Professor, 349 _n._, 570 _n._

  _Semaines Sociales_, 500 _n._

  Senior, N. W., 109 _n._, 168, 349-351, 358, 362 _and n._, 371, 372, 379,
      549, 551

  Sensi, Signor, 555 _n._

  Service, in Bastiat’s theory of value, 332-335;
    place of the term in economic terminology, 335

  Service-value, Bastiat’s theory of, 332-335

  Shaftesbury, Lord, 67;
    Robert Owen and, 237;
    and Christian Socialism, 486

  Shaw, G. Bernard, 579 _n._, 580 _and n._, 583 _n._

  Sidgwick, H., 329

  Sillon, the, 502

  Simiand, M., 388 _n._, 402 _n._, 538 _n._

  Sismondi, S. de, x, 111, 116, 117, 169;
    life, 173 _n._;
    and political economy, 173, 174, 175, 178, 196, 198;
    and Adam Smith, 173, 174, 410;
    and Ricardo and J. B. Say, 174-175;
    and Malthus, 175;
    and the English Corn Laws, 175;
    and the abstract method in economics, 176 _and n._, 380;
    and production and over-production, 176-177, 178-182;
    and interest, 176 _n._; 192-193 _n._, 215;
    and distribution, 177-178, 185, 186, 198, 422, 443;
    and the Classical school, 179-182, 195-196;
    and machinery, 180-182;
    and competition, 182-184, 193 _n._, 198, 410;
    and socialism, 184-185;
    and the theory of the identity of individual and general interests,
      185-186, 410;
    and the concentration of capital, 187-189;
    on the regulation of population by the revenue, 188-189;
    and economic crises, 187, 190-192, 426;
    and net and gross production, 189-190, 420;
    his reform projects, 192-197;
    the first of the Interventionists, 192;
    influence upon writers and movements in the nineteenth century,
      195-196;
    influence upon his contemporaries, 196, 197;
    and State Socialism, 197;
    and the socialists, 196, 197-198;
    Marx’s debt to, 198;
    and private property, 198;
    and “exploitation,” 215, 216; 228 _n._, 230, 233, 256;
    on liberty, 262 _n._; 264;
    and Protection, 264 _n._-265 _n._; 289;
    Stuart Mill and, 367;
    and peasant proprietorship, 371 _n._; 377, 378, 415 _and n._;
    and production, 419, 421; 440, 450;
    and increment value, 453 _n._; 475;
    and guarantism, 599, 604;
    and Liberalism and political economy, 647

  Slavery, Le Play and, 491 _n._

  Smith, Adam, vi;
    on the object of political economy, 1;
    accredited the founder of political economy, 2, 50-51, 103;
    and Quesnay, 3, 55;
    Turgot resembles, 4 _n._, 47;
    and nature regarded as the only source of value, 16;
    on “sterile” labour, 17;
    his career, 50 _n._-52 _n._;
    his _Wealth of Nations_, 51 _et seq._, 105;
    intimate with David Hume, 50 _n._, 53;
    and the Physiocrats, 51 _n._, 55, 62-65, 69;
    his admiration for Voltaire, 52 _n._;
    and Bernard de Mandeville, 51; and Turgot, 55;
    and the _Tableau économique_, 55;
    and the division of labour, 56-68, 70-71;
    on labour as the true source of wealth, 56-57;
    and taxation, 61-62;
    on equality in the State, 62;
    and productive and unproductive workers, 62-63;
    and the superior productivity of agriculture, 63-64, 65, 67, 108, 143;
    and rent, 64, 80, 141-143;
    and industry, 65-66, 67-68;
    his sympathy for the worker, 66-67;
    on profits, 67-80, 114;
    his “naturalism,” 68-88;
    and the spontaneity of economic institutions, 69-88;
    and money, 71, 82-85, 115;
    and capital, 71-73, 89-91, 272 _n._;
    on saving, 73;
    on demand and supply, 73-85;
    his theory of prices, 74-82;
    on “value in use” and “value in exchange,” 75-77;
    on labour as the measure of value, 77-78, 149;
    and cost of production as the determinant of value, 78-79;
    his theory of wages, 80;
    and distribution, 80, 93;
    on the regulation of population to the demand, 82, 188;
    on banks, 85;
    on self-interest as the root of all economic activity, 86-87, 88, 393;
    and the _homo œconomicus_, 86;
    and the “spontaneous order,” 87-88;
    on Quesnay’s economic theory, 88;
    his “optimism,” 88-93;
    and the harmony between self-interest and the general well-being of
      society, 92, 185, 410;
    on the duty of the sovereign, 93, 94, 409;
    and economic liberty, 93-97, 315;
    on the inefficiency of State administration, 94-95;
    and Mercantilism, 98, 169, 314;
    and international trade, 97-102;
    and Protection, 98-102;
    influence of his thought, and its diffusion, 102-107;
    and Lord North, 105;
    and Pitt, 105;
    J. B. Say and, 107-118;
    on the basis and the aim of political economy, 110;
    and the _entrepreneur_, 114;
    and Malthus’s _Principles of Population_, 121;
    compared with Ricardo, 138;
    and the products of mines, 143 _n._;
    and the interests of the landlords, 153 _n._;
    and Free Trade, 153, 163, 287; 165, 166;
    Sismondi and, 173, 174, 192;
    on competition, 182;
    and high wages and population, 189; 201 _n._, 204, 207;
    Saint-Simon and, 209 _n._;
    on government, 217, 625; 228;
    and property, 228; 264;
    on the Act of Union of 1800, 266;
    List and, 269 _n._, 270, 271 _n._, 273, 278 _n._, 279 _n._, 280;
    and the three stages in economic evolution, 271 _n._;
    on national power, 271 _n._; 272;
    on moral forces, 273 _n._;
    on the prosperity of Britain as the outcome of her legal system,
      273 _n._; 322, 323, 326, 338 _n._, 355 _n._, 371, 379,
      380 _and n._, 390;
    and State intervention, 408-410;
    and _laissez-faire_, 408, 410; 416, 417, 418, 423, 438 _n._, 440, 516;
    Mr. and Mrs. Webb on his theory that labour is the cause of value,
      581 _n._; 588, 615 _n._;
    simplicity of his system, 644

  Smith, Prince, 376, 439

  “Smithianismus,” 438

  Social biology, 590 _n._

  Social Catholicism, 495-503;
    and co-operation, 496-500;
    and the emancipation of the workers by themselves, 500;
    and the State, 501;
    and Protection, 501 _n._;
    and socialism, 501;
    and the employer and the worker, 502;
    compared with Social Protestantism, 503

  Social Catholics, 494

  Social Christianity, 509

  Social contract, the, 6 _n._

  Social Democratic Federation, 579 _n._

  Social Democratic party, German, Rodbertus and, 417; 432;
    founded, 437; 480 _n._

  Social economics, 1, 181, 645

  “Social function,” 335

  “Social instinct,” the, 632;
    Kropotkin on, 632-633

  Social League of Buyers, 500 _n._

  Social Protestantism—_see_ Christian Socialism

  “Social workshops,” Blanc and, 301

  Socialism, xi;
    Adam Smith regarded as the father of, 79 _n._;
    Adam Smith a forerunner of, 92;
    Ricardo’s theory of value the starting-point of modern, 138;
    the Marxian theory of surplus value and, 140;
    and the French Revolution, 199 _n._-200 _n._;
    equalitarian, 200 _n._;
    the Saint-Simonians and, 200 _n._-201 _n._, 212, 225, 227, 230 _n._,
      231;
    Saint-Simon and, 201, 202, 209, 210 _n._;
    Saint-Simon the father of, 203;
    Robert Owen and, 235;
    origin of the term, 235 _n._, 263 _and n._;
    Wm. Thompson and, 244;
    Leroux and, 263;
    Proudhon and, 290-291, 296-299, 315;
    and the Revolution of 1848, 300-307;
    Marx and, 320, 470;
    France the classic land of, 323;
    Bastiat and, 328 _n._, 329;
    Stuart Mill and, 352 _n._, 353, 358;
    the Liberal school and, 354;
    Reybaud on, 354;
    revival of, 377;
    Marx’s _Kapital_ and, 377;
    Rodbertus and, 417;
    State Socialism and, 431;
    Lassalle and, 433;
    the Christian schools and, 483-485;
    the Social Catholics and, 500;
    the Sillon and, 502;
    the Christian Socialists and, 509;
    modern changes in, 515-516;
    in England in mid-nineteenth century, 579;
    of the Fabian Society, vii, 580 _n._-581 _n._, 584-587;
    Sidney Webb on the present realisation of, 585;
    “juridical socialism,” 606, 607 _n._;
    criticism of solidarity, 611;
    anarchism and, 640, 641;
    and violence, 641;
    and the State and private property, 642

  Socialists, favour Adam Smith’s theory of value, 75;
    Sismondi reckoned among, 184;
    Saint-Simon reckoned among, 210 _n._;
    Proudhon and, 296-297;
    and the Revolution of 1848, 300; 335;
    and State Socialism, 414;
    Rodbertus and, 417;
    and capital, 459-460;
    F. D. Maurice on the motto of the socialist, 504 _n._;
    and interest and rent, 568, 579

  Society, the reality of, 618, 619 _n._;
    Kropotkin on, 625 _n._, 630, 631 _n._;
    Bakunin on, 625 _n._-626 _n._, 630, 631 _n._;
    the anarchist conception of, 629-636;
    Proudhon and, 630, 631 _n._;
    Jean Grave and, 630, 631 _n._;
    and government, 631

  Sociological analogy, the, 590-591

  Sociology, 388, 392, 404, 590

  Solidarity, xv;
    in France, 136 _n._, 516;
    Protection and, 289 _n._, 602;
    Proudhon and, 317;
    the Liberal school and, 325;
    Bastiat and the law of, 344-345;
    origin of the term, 344 _n._, 587;
    modern conception of, 344;
    Carey and, 345;
    and individualism, 356 _n._;
    State Socialism and, 439, 592, 601, 602-603;
    Le Play’s new school and, 495;
    Gounelle on, 508 _n._;
    the Christian Socialists and, 508;
    development of the ideal, 587;
    the ancients and, 588-589;
    heredity and, 588;
    A. Comte and, 589;
    bacteriology and, 589;
    the sociological analogy and, 590-591;
    growth and universality of, 591-592;
    the Solidarity school, 592 _n._-593 _n._;
    Gide on, 593 _n._;
    a new watchword, 593;
    M. Bourgeois and, 593-594, 596, 597-599;
    and natural solidarity, 594-599;
    progress of the movement, 593-594;
    Durkheim and, 599-600;
    a movement towards universal unity, 600-601;
    practical applications of, 601-607;
    fiscal reform and, 602;
    and association, 602, 613-614;
    the syndicalists and, 603;
    the mutualists and, 603-604;
    and co-operation, 604;
    the École de Nîmes, 605 _n._;
    and the mutual credit society, 606;
    and private property, 606;
    and jurisprudence, 606;
    criticism of, 607-614;
    the Liberal school and, 607-608;
    evolution and, 609;
    and collective responsibility for misdemeanour, 610;
    the moralists and, 610-611;
    socialist criticism, 611;
    its moral influence, 611-612;
    and individuality, 612-613;
    and exchange, 613-614;
    distinguished from charity, 614 _n._;
    the anarchists and social solidarity, 630; 632

  Solidarist, or Solidarity, school, 592 _n._-593 _n._, 601

  Solvay, E., 242, 318-319

  Sombart, W., 271 _n._, 386

  Sorel, G., 209, 321, 447-448, 466 _nn._, 467 _n._, 473 _n._, 474 _n._,
      479 _nn._, 480 _n._, 481 _nn._, 482 _and nn._, 483, 515, 638 _n._,
      641, 642

  Souchon, A., xi

  Sovereign, the, Adam Smith on, 93, 94, 409

  _Sozialpolitik_, 178

  Spain, anarchism in, 640

  Spence, T., 560 _and n._

  Spencer, Herbert, xiii. 356, 376, 560, 590 _nn._

  Spontaneity of economic institutions, Adam Smith and, 68-85, 87, 88, 89

  Staël, Mme., 173 _n._

  Stangeland, C. E., 121 _n._

  Stanislaus II, King of Poland, and the Physiocrats, 5

  State, the, in the Mercantilist view, 27;
    in the Physiocratic view, 27;
    the functions of, in the Physiocratic doctrine, 33-37;
    Adam Smith on the functions of, 95;
    the sole inheritor of property, in the Saint-Simonians’ system, 223;
    Blanc and, 261, 262;
    Dupont-White and, 408 _n._, 440, 441;
    Walras and, 413;
    Rodbertus and, 418-419, 429-431;
    Hegel on, 435 _n._;
    Fichte and, 435 _n._-436 _n._;
    the Congress of Eisenach and, 437;
    Wagner and, 438 _n._, 439-440;
    the duties of, under State Socialism, 439;
    incapacity of, as an economic agent, 439;
    and the individual, 442-443;
    the Christian schools and, 484;
    Le Play and, 488;
    the Social Catholics and, 501;
    Carlyle on the Classical ideal, 511;
    the anarchists and, 615, 623-624, 625, 626, 627, 630, 641;
    syndicalism and, 641

  State intervention, xv, 407 _et seq._;
    Adam Smith and, 94-97, 408-410;
    Malthus and Ricardo and, 164;
    Sismondi and, 197, 413;
    the French Liberal school and, 325;
    Bastiat and, 325 _n._, 408-409; 377, 378;
    Stuart Mill and, 411, 413;
    Cournot and, 413;
    Lassalle and, 434-435;
    Kingsley on, 505 _n._
    _See_ State Socialism

  State Socialism, xi, xv, 197, 221, 259, 261, 262, 304-305, 346, 377,
      387, 389 _n._, 407;
    origin of, 410, 413, 438;
    not simply an economic doctrine, 414;
    Rodbertus and, 414-415, 417, 428, 431, 432;
    Lassalle and, 414, 432;
    Wagner and, 414; and socialism, 431;
    Andler and the philosophical origin of, 435 _n._;
    Fichte and, 435 _n._;
    principles and characteristics of the movement, 436-448;
    and the Classical school, 438;
    and solidarity and Lassalle, 439;
    and government and the individual, 439-443;
    and distribution, 443-444;
    and production, 444;
    Bismarck and, 445;
    in Germany, 445-446;
    influence in politics, 447;
    and economic Liberalism, 447;
    syndicalism and, 447-448;
    the Christian schools and, 485;
    and economic theory, 515;
    modern development of, 516;
    the Fabians and, 586; 592, 593 _n._;
    and solidarity, 601, 602-603

  Stationary state, Stuart Mill and, 373-374

  Statistics, the science of, and economics, 407 _n._; 645-646

  Statute of Apprentices, the, 104, 170

  _Statutes of the International Brotherhood_, 639

  _Statutes of the International Socialist Alliance_, 639

  Stein, H. F. K., 106 _n._

  Stein, L. von, 294 _n._

  “Sterile classes,” the, in the Physiocratic system, 14, 21, 24;
    Adam Smith and, 57

  Sterile labour, in the Physiocratic system, 16-17

  Stewart, Dugald, 52 _n._

  Stiegler, M., 592 _n._

  Stirner, Max (Kaspar Schmidt), 615-619, 622-623, 628, 630

  Stöker, Pastor, 507

  Storch, H. F. von, 118 _n._, 379

  Strong, J., 506 _n._

  Stumm, Baron, 507 _n._

  Sully, Duc de, 17

  Supply, price and, 519

  Surplus labour, Marx’s theory of, 450-459, 474-475

  Surplus value, Marx’s theory of, 184, 198, 228, 294, 450-459;
    Sismondi and, 184-185, 198, 475;
    decline of the theory of, 516

  Surplus values, the taxation of, 569-570

  Switzerland, Christian Socialism in, 507

  Syndicalism, 321, 447, 448, 472 _n._, 473, 479-483, 491;
    the Social Catholics and, 498 _and n._;
    the Sillon and the C.G.T. and, 502;
    and solidarity, 603;
    and anarchism, 619 _n._, 641-642;
    and the State, 641-642;
    its ideal, 642

  _Syndicat_, the, 480-481

  Synthetic socialism, 573

  Syntheticism, 573


  _Tableau économique_, 3 _n._, 5, 18-19, 20 _n._, 21, 162, 534

  Taillandier, Saint-René, 616 _n._

  Tariffs, in France, 266, 269, 280-281;
    in Germany, 266-269, 280-281;
    in the United States, 269;
    the economic nature of, 282

  Taxation, the Physiocratic theory of, 38-45;
    Adam Smith and, 61-62 _and nn._, 102;
    development of the theory of, 645

  Theory, economic, recent revival of, 515

  Thierry, A., 203, 211

  Thiers, L. A., 303

  Thomas, É., 302 _and n._

  Thomas, P. F., 263 _n._

  Thompson, R., 156 _n._

  Thompson, W., 194, 201 _n._, 244, 450 _n._

  Thornton, W. T., 361, 371 _n._

  Thünen, J. H. von, 148 _n._, 352, 558

  Tocqueville, A. C. de, 303

  Todt, Pastor, 507

  Tolstoy, Count Leo, 510, 511, 512, 513-514

  Tooke, T., 109 _n._

  Torrens, Colonel, 349 _n._

  Tourville, the Abbé de, 494, 495 _n._

  Toynbee, A., 196, 374, 379, 386 _n._, 387

  Trade, the Physiocrats and, 27-33

  Trade, Free—_see_ Free Trade

  Trade unionism, Robert Owen and, 236 _n._;
    Stuart Mill and, 361, 362 _n._;
    the Neo-Marxians and, 479;
    Le Play and, 491; 496 _n._, 504;
    Durkheim and, 600;
    the syndicalists and, 603, 642;
    the French anarchists and, 640

  Travail, Le, co-operative society, 257 _n._

  Treitschke, H. G. von, 443 _n._

  Trosne, G. F. Le, one of the Physiocrats, 4 _n._;
    on the earth as the sole productive source, 12 _n._, 13;
    and the “net product,” 14 _n._, 15 _n._;
    on the _Tableau économique_, 19;
    on exchange, 27 _n._;
    on Free Trade, 29 _n._; 49, 118 _n._

  Trusts, Ollivier on, 325

  Tucker, J., 54

  Turgot, A. R. J., one of the Physiocrats, 4 _and n._;
    on the universality and immutability of the “natural order,” 10;
    and the origin of the term _laissez-faire_, 11 _n._; 12 _n._;
    on artisans and agriculturists, 14 _and n._;
    on mines and the “net product,” 14;
    on the circulation of wealth, 18;
    and the _Tableau économique_, 20 _n._;
    and property, 25 _n._;
    on the “good price,” 30 _n._;
    on Protection, 31 _n._;
    and the edict establishing Free Trade in corn, 32;
    and interest, 33, 50 _n._;
    distinguished from the other Physiocrats, 33, 46-47;
    on industry and agriculture, 37 _n._;
    on the burdens of the poor, 42 _n._;
    and the “iron law,” 42, 157, 453 _n._;
    on value, 46-47;
    and Condillac and Galiani, 47; 50;
    acquainted with Adam Smith, 51 _n._, 55; 117;
    and the law of diminishing returns, 146-147 _n._, 340; 222 _n._,
      228 _n._, 298


  “Unearned increment,” rent is, 545;
    the confiscation of, 558-570

  United States, xii;
    increase of population in, 124 _n._;
    growth of _per capita_ wealth of the population in, 131;
    and tariffs and Protection, 269, 278-279;
    List on the economic condition of, 279;
    cultivation and rents in, 339;
    Christian Socialism in, 506

  Unity, the movement towards universal, 600

  University economists, 436

  Ure, A., 171 _n._

  Usury, the Catholic Church and, 503 _n._

  Utilitarian Radicals, 586

  Utilitarian school, 352

  Utility, social, 24, 91;
    Dunoyer and, 348 _and n._

  Utility theory, 328 _n._;
    Bastiat and, 335-338

  Utopia, More’s, 246

  Utopian socialism, 232


  Value, the accretion of, constitutes production, 16;
    nature the only source of, 16;
    the Physiocrats and, 46, 49;
    Turgot on, 46-47;
    Galiani on, 47;
    Condillac and, 48-49, 74, 75;
    Adam Smith’s theory of, 74-80, 149;
    Ricardo’s theory of, 138, 140-141, 149-151, 240, 332;
    Sismondi and, 184-185;
    Marx and, 185, 293 _n._, 466 _and n._, 474, 583;
    Marx’s theory of surplus value, 184, 450-459;
    Proudhon and, 293 _n._;
    Bastiat’s theory of service-value, 332-335, 338;
    Carey and, 332;
    Ferrara and, 333 _n._;
    in Bastiat’s utility theory, 335-338;
    the Classical law of, 360, 558;
    Rodbertus and, 415 _n._;
    Aristotle and, 451 _n._;
    determined by cost of production, 520, 526;
    definition of, 523;
    the Classical school and, 530 _n._;
    the Mathematical school and, 530 _n._;
    Aupetit and, 530 _n._

  “Value in use,” and “value in exchange,” 75-76, 451

  Value, surplus—_see_ Surplus value

  Vandervelde, É., 221, 470 _n._

  Varlin, M., 459 _n._

  _Verein für Sozialpolitik_, 437

  Vidal, F., 259, 304-305, 414, 420 _n._

  Villeneuve-Bargemont, Vicomte A. de, 197

  Villermé, L. R., 171, 491 _n._

  Villey, E., 327 _n._

  Vinet, A. R., 509

  Voltaire, and the Physiocrats, 5; 32;
    his _L’Homme avec Quarante Écus_, 41 _n._; 43;
    Adam Smith and, 51 _n._; 52 _n._


  Wage fund theory, Stuart Mill and, 361-362, 374;
    Walker and, 362 _n._, 549;
    Cairnes and, 374; 456

  Wages, the Physiocrats and, 43;
    Condillac on, 49-50;
    Adam Smith on the relation of, to rent, 64 _n._;
    Smith’s theory of, 80;
    Ricardo and, 114, 157-163;
    Sismondi and, 176 _n._;
    Stuart Mill and, 360 _n._, 369-370; 353;
    the law of, of the Classical School, 360-362;
    Cobden on, 360-361;
    the “brazen law” of, 361, 426, 433, 453 _n._, 528;
    Böhm-Bawerk and the Classical school and, 520;
    final utility and, 527-528;
    the productivity theory of, 527-528, 549-550;
    the Hedonists and, 541;
    relation of, to profit, 550-551;
    and interest, Henry George on, 565;
    relation of, to the increase in rents, 566 _and n._

  Wagner, A., 222, 393 _n._, 394, 396 _nn._, 401 _n._, 403, 414, 416,
      431 _n._, 433 _n._;
    and State Socialism, 438 _and n._, 439, 440-441, 443 _n._, 444;
    and the State and the individual, 442

  Wakefield, Gibbon, 349 _n._

  Walker, A., 550 _n._

  Walker, F., 362 _n._, 549-552

  Wallace, A. R., and land nationalisation, 561, 577

  Wallas, Graham, 159 _n._

  Walras, L., on Free Trade, 30; 75;
    J. B. Say and, 114;
    and land nationalisation, 155, 561, 571, 572 _n._, 573-577;
    and “scarcity,” 351; 521 _n._, 522 _n._; 376, 380, 392 _and n._;
    on the State, 413; 495, 529 _n._;
    his economic system, 533-536, 541-542; 537, 538 _n._, 540 _n._, 544;
    and rent and profit, 552;
    and the individual and the State, 573-574;
    and the confiscation of rent, 574-577; 631 _n._

  War of Independence, American, 103-104, 202

  Waring, Colonel, 253 _n._

  Watt, James, 65

  Wealth, the Physiocratic conception of the circulation of, 18-26;
    a material element, in the Physiocratic view, 27;
    Quesnay regards agriculture as the source of all, 56;
    Adam Smith’s view of the origin of, 56-57;
    Adam Smith on, 83;
    solely a product of the soil, in the Physiocratic view, 348

  _Wealth of Nations_, 51 _et seq._, 353

  Webb, Mr. and Mrs. Sidney, 170, 221, 387, 580, 581, 583, 584, 585, 586

  Weber, Max, 381 _n._

  Weill, G., 202 _n._, 203 _n._, 226 _n._

  Weitling, W., 323

  Wellington, Duke of, 366

  Wells, H. G., 580

  West, Sir E., 147 _n._, 149 _n._

  Weulersse, G., 5 _n._, 22 _n._, 26 _n._

  Wieser, F. von, 522 _n._

  William II, Emperor of Germany, 446, 507

  Wilson, G., 96 _n._

  Wirth, M., 416 _n._, 417 _n._

  Wollemborg, 503 _n._

  Wolowski, L., 304

  Woman question, Saint-Simonism and, 254;
    Fourier and, 254

  “Working men’s associations,” 305-306, 319

  Worms, R., 590 _n._

  Würtemberg, Tariff Union between Bavaria and, 268


  Young, A., 136 _n._, 371

  Yule, Udny, 407 _n._


  Zola, É., 254 _n._

  Zollverein, formation of the, 268; 280

  _Zollvereinsblatt_, 280 _n._, 288