Principles of Political Economy

6. Protective laws for the life and health of workingmen; sanitary control of their dwellings; superintendence of mines, factories, industry, and home work by officers chosen by the workingmen; an effectual law guaranteeing the responsibility of employers. 7. Regulation of prison-work. 8. Unrestricted self-government of all banks established for the mutual assistance of workingmen. The above scheme also represents very well the character of the Socialist agitators in the United States, who are themselves chiefly foreigners, and have foreign conceptions of socialism. On this form of socialism it is interesting to have Mr. Mill’s later opinions(154) in his own words. “Among those who call themselves Socialists, two kinds of persons may be distinguished. There are, in the first place, (1) those whose plans for a new order of society, in which private property and individual competition are to be superseded and other motives to action substituted, are on the scale of a village community or township, and would be applied to an entire country by the multiplication of such self-acting units; of this character are the systems of Owen, of Fourier, and the more thoughtful and philosophic Socialists generally. The other class (2) who are more a product of the Continent than of Great Britain, and may be called the revolutionary Socialists, propose to themselves a much bolder stroke. Their scheme is the management of the whole productive resources of the country by one central authority, the general Government. And with this view some of them avow as their purpose that the working-classes, or somebody in their behalf, should take possession of all the property of the country, and administer it for the general benefit. The aim of that is to substitute the new rule for the old at a single stroke, and to exchange the amount of good realized under the present system, and its large possibilities of improvement, for a plunge without any preparation into the most extreme form of the problem of carrying on the whole round of the operations of social life without the motive power which has always hitherto worked the social machinery. It must be acknowledged that those who would play this game on the strength of their own private opinion, unconfirmed as yet by any experimental verification, must have a serene confidence in their own wisdom on the one hand, and a recklessness of people’s sufferings on the other, which Robespierre and St. Just, hitherto the typical instances of those united attributes, scarcely came up to.” § 4. Of various minor schemes, Communistic and Socialistic. [Of the schemes to be tried within a state], the two elaborate forms of non-communistic Socialism known as Saint-Simonism and Fourierism are totally free from the objections usually urged against Communism. The Saint-Simonian(155) scheme does not contemplate an equal, but an unequal division of the produce; it does not propose that all should be occupied alike, but differently, according to their vocation or capacity; the function of each being assigned, like grades in a regiment, by the choice of the directing authority, and the remuneration being by salary, proportioned to the importance, in the eyes of that authority, of the function itself, and the merits of the person who fulfills it. But to suppose that one or a few human beings, howsoever selected, could, by whatever machinery of subordinate agency, be qualified to adapt each person’s work to his capacity, and proportion each person’s remuneration to his merits, is a supposition almost too chimerical to be reasoned against.(156) The most skillfully combined, and with the greatest foresight of objections, of all the forms of Socialism is that commonly known as Fourierism.(157) This system does not contemplate the abolition of private property, nor even of inheritance: on the contrary, it avowedly takes into consideration, as an element in the distribution of the produce, capital as well as labor. It proposes that the operations of industry should be carried on by associations of about two thousand members, combining their labor on a district of about a square league in extent, under the guidance of chiefs selected by themselves (the “phalanstery”). In the distribution a certain minimum is first assigned for the subsistence of every member of the community, whether capable or not of labor. The remainder of the produce is shared in certain proportions, to be determined beforehand, among the three elements, Labor, Capital, and Talent. The capital of the community may be owned in unequal shares by different members, who would in that case receive, as in any other joint-stock company, proportional dividends. The claim of each person on the share of the produce apportioned to talent is estimated by the grade or rank which the individual occupies in the several groups of laborers to which he or she belongs, these grades being in all cases conferred by the choice of his or her companions. The remuneration, when received, would not of necessity be expended or enjoyed in common; there would be separate _ménages_ for all who preferred them, and no other community of living is contemplated than that all the members of the association should reside in the same pile of buildings; for saving of labor and expense, not only in building, but in every branch of domestic economy; and in order that, the whole buying and selling operations of the community being performed by a single agent, the enormous portion of the produce of industry now carried off by the profits of mere distributors might be reduced to the smallest amount possible. Fourierism was tried in West Virginia by American disciples, and it was advocated by Horace Greeley. A modified form appeared in the famous community at Brook Farm (near Dedham, Massachusetts), which drew there George Ripley, Margaret Fuller, and even George William Curtis and Nathaniel Hawthorne. There have been many smaller communities established in the United States, but it can not be said that they have been successful from the point of view either of numbers or material prosperity. The followers of Rapp, or the Harmonists, in Pennsylvania and Indiana; the Owenites,(158) in Indiana; the community of Zoar, in Ohio; the Inspirationists, in New York and Iowa; the Perfectionists, at Oneida and Wallingford—are all evidently suffering from the difficulties due to the absence of family life, from the increasing spirit of personal independence which carries away the younger members of the organizations,(159) and the want of that executive ability which distinguishes the successful manager in private enterprises. § 5. The Socialist objections to the present order of Society examined. “The attacks(160) on the present social order are vigorous and earnest, but open to the charge of exaggeration. “In the first place, it is unhappily true that the wages of ordinary labor, in all the countries of Europe, are wretchedly insufficient to supply the physical and moral necessities of the population in any tolerable measure. But when it is further alleged that even this insufficient remuneration has a tendency to diminish; that there is, in the words of M. Louis Blanc, _une baisse continue des salaires_; the assertion is in opposition to all accurate information, and to many notorious facts. It has yet to be proved that there is any country in the civilized world where the ordinary wages of labor, estimated either in money or in articles of consumption, are declining; while in many they are, on the whole, on the increase; and an increase which is becoming, not slower, but more rapid. There are, occasionally, branches of industry which are being gradually superseded by something else, and in those, until production accommodates itself to demand, wages are depressed. “M. Louis Blanc appears to have fallen into the same error which was at first committed by Malthus and his followers, that of supposing because population has a greater power of increase than subsistence, its pressure upon subsistence must be always growing more severe. It is a great point gained for truth when it comes to be seen that the tendency to over-population is a fact which Communism, as well as the existing order of society, would have to deal with. However this may be, experience shows that in the existing state of society the pressure of population on subsistence, which is the principal cause of low wages, though a great, is not an increasing evil; on the contrary, the progress of all that is called civilization has a tendency to diminish it, partly by the more rapid increase of the means of employing and maintaining labor, partly by the increased facilities opened to labor for transporting itself to new countries and unoccupied fields of employment, and partly by a general improvement in the intelligence and prudence of the population. It is, of course, open to discussion what form of society has the greatest power of dealing successfully with the pressure of population on subsistence, and on this question there is much to be said for Socialism; but it has no just claim to be considered as the sole means of preventing the general and growing degradation of the mass of mankind through the peculiar tendency of poverty to produce over-population. “Next, it must be observed that Socialists generally, and even the most enlightened of them, have a very imperfect and one-sided notion of the operation of competition. They see half its effects, and overlook the other half. They forget that competition is a cause of high prices and values as well as of low; that the buyers of labor and of commodities compete with one another as well as the sellers; and that, if it is competition which keeps the prices of labor and commodities as low as they are, it is competition which keeps them from falling still lower. To meet this consideration, Socialists are reduced to affirm that, when the richest competitor has got rid of all his rivals, he commands the market and can demand any price he pleases. But in the ordinary branches of industry no one rich competitor has it in his power to drive out all the smaller ones. Some businesses show a tendency to pass out of the hands of small producers or dealers into a smaller number of larger ones; but the cases in which this happens are those in which the possession of a larger capital permits the adoption of more powerful machinery, more efficient by more expensive processes, or a better organized and more economical mode of carrying on business, and this enables the large dealer legitimately and permanently to supply the commodity cheaper than can be done on the small scale; to the great advantage of the consumers, and therefore of the laboring-classes, and diminishing, _pro tanto_, that waste of the resources of the community so much complained of by Socialists, the unnecessary multiplication of mere distributors, and of the various other classes whom Fourier calls the parasites of industry. “Another point on which there is much misapprehension on the part of Socialists, as well as of trades-unionists and other partisans of labor against capital, relates to the proportion in which the produce of the country is really shared and the amount of what is actually diverted from those who produce it, to enrich other persons. When, for instance, a capitalist invests £20,000 in his business, and draws from it an income of (suppose) £2,000 a year, the common impression is as if he were the beneficial owner both of the £20,000 and of the £2,000, while the laborers own nothing but their wages. The truth, however, is that he only obtains the £2,000 on condition of applying no part of the £20,000 to his own use. He has the legal control over it, and might squander it if he chose, but if he did he would not have the £2,000 a year also. For all personal purposes they have the capital and he has but the profits, which it only yields to him on condition that the capital itself is employed in satisfying not his own wants, but those of laborers. Even of his own share a small part only belongs to him as the owner of capital. The portion of the produce which falls to capital merely as capital is measured by the interest of money, since that is all that the owner of capital obtains when he contributes to production nothing except the capital itself. “The result of our review of the various difficulties of Socialism has led us to the conclusion that the various schemes for managing the productive resources of the country by public instead of private agency have a case for a trial, and some of them may eventually establish their claims to preference over the existing order of things, but that they are at present workable only by the _élite_ of mankind, and have yet to prove their power of training mankind at large to the state of improvement which they presuppose.” § 6. Property in land different from property in Movables. It is next to be considered what is included in the idea of private property and by what considerations the application of the principle should be bounded. The institution of property, 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 exertions, or received either by gift or by fair agreement, without force or fraud, from those who produced it. The foundation of the whole is, the right of producers to what they themselves have produced. Nothing is implied in property but the right of each to his (or her) own faculties, to what he can produce by them, and to whatever he can get for them in a fair market: together with his right to give this to any other person if he chooses, and the right of that other to receive and enjoy it. It follows, therefore, that although the right of bequest, or gift after death, forms part of the idea of private property, the right of inheritance, as distinguished from bequest, does not. That the property of persons who have made no disposition of it during their lifetime should pass first to their children, and, failing them, to the nearest relations, may be a proper arrangement or not, but is no consequence of the principle of private property. I see no reason why collateral inheritance should exist at all. Mr. Bentham long ago proposed, and other high authorities have agreed in the opinion, that, if there are no heirs either in the descending or in the ascending line, the property, in case of intestacy, should escheat to the state. The parent owes to society to endeavor to make the child a good and valuable member of it, and owes to the children to provide, so far as depends on him, such education, and such appliances and means, as will enable them to start with a fair chance of achieving by their own exertions a successful life. To this every child has a claim; and I can not admit that as a child he has a claim to more. The essential principle of property being to assure to all persons what they have produced by their labor and accumulated by their abstinence, this principle can not apply to what is not the produce of labor, the raw material of the earth. If the land derived its productive power wholly from nature, and not at all from industry, or if there were any means of discriminating what is derived from each source, it not only would not be necessary, but it would be the height of injustice, to let the gift of nature be engrossed by individuals. [But] the use of the land in agriculture must indeed, for the time being, be of necessity exclusive; the same person who has plowed and sown must be permitted to reap. But though land is not the produce of industry, most of its valuable qualities are so. Labor is not only requisite for using, but almost equally so for fashioning, the instrument. Considerable labor is often required at the commencement, to clear the land for cultivation. In many cases, even when cleared, its productiveness is wholly the effect of labor and art. One of the barrenest soils in the world, composed of the material of the Goodwin Sands, the Pays de Waes in Flanders, has been so fertilized by industry as to have become one of the most productive in Europe. Cultivation also requires buildings and fences, which are wholly the produce of labor. The fruits of this industry can not be reaped in a short period. The labor and outlay are immediate, the benefit is spread over many years, perhaps over all future time. A holder will not incur this labor and outlay when strangers and not himself will be benefited by it. If he undertakes such improvements, he must have a sufficient period before him in which to profit by them; and he is in no way so sure of having always a sufficient period as when his tenure is perpetual. These are the reasons which form the justification, in an economical point of view, of property in land. It is seen that they are only valid in so far as the proprietor of land is its improver. Whenever, in any country, the proprietor, generally speaking, ceases to be the improver, political economy has nothing to say in defense of landed property, as there established. When the “sacredness of property” is talked of, it should always be remembered that any such sacredness does not belong in the same degree to landed property. No man made the land. It is the original inheritance of the whole species. Its appropriation is wholly a question of general expediency. When private property in land is not expedient, it is unjust. The reverse is the case with property in movables, and in all things the product of labor: over these, the owner’s power both of use and of exclusion should be absolute, except where positive evil to others would result from it; but, in the case of land, no exclusive right should be permitted in any individual which can not be shown to be productive of positive good. To be allowed any exclusive right at all, over a portion of the common inheritance, while there are others who have no portion, is already a privilege. No quantity of movable goods which a person can acquire by his labor prevents others from acquiring the like by the same means; but, from the very nature of the case, whoever owns land keeps others out of the enjoyment of it. When land is not intended to be cultivated, no good reason can in general be given for its being private property at all. Even in the case of cultivated land, a man whom, though only one among millions, the law permits to hold thousands of acres as his single share, is not entitled to think that all this is given to him to use and abuse, and deal with as if it concerned nobody but himself. The rents or profits which he can obtain from it are at his sole disposal; but with regard to the land, in everything which he does with it, and in everything which he abstains from doing, he is morally bound, and should, whenever the case admits, be legally compelled to make his interest and pleasure consistent with the public good. Chapter II. Of Wages. § 1. Of Competition and Custom. Political economists generally, and English political economists above others, have been accustomed to lay almost exclusive stress upon the first of [two] agencies [competition and custom]; to exaggerate the effect of competition, and to take into little account the other and conflicting principle. They are apt to express themselves as if they thought that competition actually does, in all cases, whatever it can be shown to be the tendency of competition to do. This is partly intelligible, if we consider that only through the principle of competition has political economy any pretension to the character of a science. So far as rents, profits, wages, prices, are determined by competition, laws may be assigned for them. Assume competition to be their exclusive regulator, and principles of broad generality and scientific precision may be laid down, according to which they will be regulated. The political economist justly deems this his proper business: and, as an abstract or hypothetical science, political economy can not be required to do, and indeed can not do, anything more. But it would be a great misconception of the actual course of human affairs to suppose that competition exercises in fact this unlimited sway. I am not speaking of monopolies, either natural or artificial, or of any interferences of authority with the liberty of production or exchange. Such disturbing causes have always been allowed for by political economists. I speak of cases in which there is nothing to restrain competition; no hindrance to it either in the nature of the case or in artificial obstacles; yet in which the result is not determined by competition, but by custom or usage; competition either not taking place at all, or producing its effect in quite a different manner from that which is ordinarily assumed to be natural to it. As stated by Mr. Cairnes,(161) political economy is a science just as is any recognized physical science—astronomy, chemistry, physiology. The economic “facts we find existing are the results of causes, between which and them the connection is constant and invariable. It is, then, the constant relations exhibited in economic phenomena that we have in view when we speak of the laws of the phenomena of wealth; and in the exposition of these laws consists the science of political economy.” It is to be remembered that economic laws are _tendencies_, not actual descriptions of any given conditions in this or that place. Competition, in fact, has only become in any considerable degree the governing principle of contracts, at a comparatively modern period. The further we look back into history, the more we see all transactions and engagements under the influence of fixed customs. The relations, more especially between the land-owner and the cultivator, and the payments made by the latter to the former, are, in all states of society but the most modern, determined by the usage of the country. The custom of the country is the universal rule; nobody thinks of raising or lowering rents, or of letting land, on other than the customary conditions. Competition, as a regulator of rent, has no existence. Prices, whenever there was no monopoly, came earlier under the influence of competition, and are much more universally subject to it, than rents. The wholesale trade, in the great articles of commerce, is really under the dominion of competition. But retail price, the price paid by the actual consumer, seems to feel very slowly and imperfectly the effect of competition; and, when competition does exist, it often, instead of lowering prices, merely divides the gains of the high price among a greater number of dealers. The influence of competition is making itself felt more and more through the principal branches of retail trade in the large towns. All professional remuneration is regulated by custom. The fees of physicians, surgeons, and barristers, the charges of attorneys, are nearly invariable. Not certainly for want of abundant competition in those professions, but because the competition operates by diminishing each competitor’s chance of fees, not by lowering the fees themselves. These observations must be received as a general correction to be applied whenever relevant, whether expressly mentioned or not, to the conclusions contained in the subsequent portions of this treatise. Our reasonings must, in general, proceed as if the known and natural effects of competition were actually produced by it, in all cases in which it is not restrained by some positive obstacle. Where competition, though free to exist, does not exist, or where it exists, but has its natural consequences overruled by any other agency, the conclusions will fail more or less of being applicable. To escape error, we ought, in applying the conclusions of political economy to the actual affairs of life, to consider not only what will happen supposing the maximum of competition, but how far the result will be affected if competition falls short of the maximum. § 2. The Wages-fund, and the Objections to it Considered.