A History of Economic Doctrines / from the time of the physiocrats to the present day

by Charles Gide; Charles Rist

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.