Labour and the Popular Welfare

by W. H. Mallock

APPENDIX

Early in this year [1894] I published in the Fortnightly Review two articles under the title of “Fabian Economics.” These articles were not written or published until some months after the first publication of the present volume. I wrote them then, because then, for the first time, I happened to see a volume from which previously I had seen some extracts only—a volume entitled Fabian Essays, in which the doctrines of contemporary English Socialism are set forth; and my aim was to apply the general arguments embodied in Labour and the Popular Welfare to the position of the Socialists, as definitely stated by themselves. One of the Fabian Essayists—Mr. Bernard Shaw—came forward in the Fortnightly Review to attach my arguments, with what success will be shown by the subjoined reply to him, which was originally published in the same Review, under the title of “A Socialist in a Corner.” A few paragraphs which would be here superfluous are omitted.

A SOCIALIST IN A CORNER

Fortnightly Review, May 1894

Magazine controversy on complicated and serious subjects, though it can never be exhaustive, may yet be of great use, if it calls the attention of the public to the main points at issue, if it helps men to judge for themselves of the character and weight of the arguments which are capable of being employed on one side and the other; and, above all, if by elucidating the points on which opponents agree, the area of actual dispute be narrowed down and defined. For this reason it seems to me not useless to examine briefly the answer which, on behalf of a body of Socialists, Mr. Shaw has made to the criticisms which, in this Review and elsewhere, I have recently directed against the entire Socialistic position—and particularly against that position as expounded by himself and his colleagues.

Not only Mr. Shaw, but the other Fabian writers, are persons, at all events, of sufficient intelligence, sufficient knowledge, and sufficient literary skill, to render the way in which they put the case for Socialism a valuable indication of what the strength of that case is. It was for this reason that I thought Fabian Essays worth criticising; and for this reason I think Mr. Shaw’s answer worth criticising also. It is an indication not only of how Mr. Shaw can argue as an individual, but of what arguments are available in defence of the position which he occupies; and Mr. Shaw has taken trouble himself to make this view still more plausible, by the hints he gives that in the composition of his answer he has sought the advice and counsel of his faithful colleagues; so that his pages represent the wisdom of many, though presumably the wit of one.

I propose, then, to show, in as few words as possible, that Mr. Shaw has not only proved himself incapable of shaking a single one of the various arguments advanced by me, but that whilst flattering himself that, in his own phrase, he has been taking his opponent’s scalp, the scalp which he holds, and has really taken, is his own. His criticism divides itself into two main parts. One is an admission of the truth of one of the fundamental propositions on which I insisted. The second is a complete evasion of another, and the substitution for it of an ineptitude which is entirely of Mr. Shaw’s invention, and which he finds it so easy and so exciting to demolish, that he sets it up as often as he knocks it down, for the pleasure of displaying his prowess over again.

Here, then, are three propositions to be dealt with: First, the primary proposition on which I insisted, and the truth of which Mr. Shaw admits; secondly, a proposition on which Mr. Shaw declares that I insisted, but which is really an invention of his own; and thirdly, a proposition on which I did insist actually, but which Mr. Shaw never even states, much less attempts to meet. This third proposition I shall briefly state once again when I have dealt with the two others, and show how Fabian philosophy—indeed the philosophy of all Socialism—completely fails to meet it.

To begin, then, with the first. My primary object has been to exhibit the absolute falsehood of the Socialistic doctrine that all wealth is due to labour, and to replace this by a demonstration that under modern conditions of production, labour is not only not the sole producer of wealth, but does not even produce the principal part of it. The principal producing agent, I have pointed out, is what I have called Industrial Ability—or the faculty which, whilst exercised by a few, directs the labour of the many; and if this truth is once accepted, it completely cuts away from Socialism the whole of its existing foundations, and renders absolutely meaningless the whole of its popular rhetoric. For the most powerful argumentative appeal which Socialism can make to the majority is merely some amplification of the statement, which is no doubt plausible, and is advanced by Socialists as an axiom, that the exertions of the majority—or, in other words, Labour—has produced all wealth, and that therefore the majority not only ought to possess it, but will be able to possess it by the simple process of retaining it. But the moment the productive functions of industrial ability are made clear, the doctrine which seemed an axiom is reduced to an absurdity; and what might before have seemed a paradox becomes a simple and intelligible truth—the doctrine, namely, that a comparatively few persons, with certain exceptional gifts, are capable of producing more wealth than all the rest of the community; and that whoever may produce the wealth which the rich classes possess, it is at all events not produced by the multitude, and might, under changed conditions, be no longer produced at all.

Now this doctrine of Ability Mr. Shaw accepts, and completely surrenders and throws overboard the Socialistic doctrine of Labour. He does indeed endeavour to make the surrender seem less complete than it is, partly by irrelevant comments on some minor points,[61] and partly by insisting on certain qualifications which are perfectly true, and to which I have myself often elsewhere alluded, but which, as I shall show presently, are, on his own admission, of small practical importance, and do not appreciably affect the main position. For instance Mr. Shaw argues that it is not always the most able man who, in any given business, is to be found directing it. This also is no doubt true. It merely means, however, that of industrial ability the same thing may be said, which has so truly been said of Government—that it is always in, or passing into, the hands of the most powerful section of the community. Businesses conducted by men of inferior Ability are gradually superseded by businesses conducted by men of superior Ability. Men’s actual positions may be a few years behind or before their capacities, but for all practical purposes they coincide with them and the utmost that Mr. Shaw’s contention could prove would be that some members of a minority are in places which should be occupied by other members of a minority; not that the majority could take the places of either.

But I merely mention these points in passing, and waste no pains in insisting on them or pressing them home, because their practical insignificance is admitted by Mr. Shaw himself. The great body of men—of men selected at random, even if they should enjoy the advantages of superior position and education—“could not,” he says, “invent a wheelbarrow, much less a locomotive.” He amplifies this admission by quoting the case of an acquaintance of his, whose exceptional Ability secured him four thousand pounds a year, because without the assistance of that Ability his employer would have lost more than this sum. “Other men,” he proceeds, “have an eye for contracts, or what not, or are born captains of industry, in which case they go into business on their own account, and make ten, twenty, or two hundred per cent, where you or I should lose five.... All these people are rentiers of Ability.” Again he quotes with emphatic approval a passage from an American writer, whom he praises as a skilled economist; and using this passage as a text, endorses its meaning in these words of his own. “The able man, the actual organiser and employer, alone is able to find a use for mere manual deftness, or for that brute strength, and heavy bank balance, which any fool may possess.” “The capitalist and the labourer run helplessly to the able man.” “He is the only party in the transaction capable of the slightest initiative in production.”

I need not add anything to these admissions. They constitute, as I say, a complete surrender of the Socialistic doctrine of Labour, and an emphatic admission of the primary proposition I advanced as to the productive function of Ability. It is enough then to say, that so far as the question of Labour is concerned, Mr. Shaw throws over completely all the doctrines of the Gotha programme, the Erfurt programme, of Karl Marx and his disciples, of Mr. Hyndman and his Social Democrats—in fact the cardinal doctrine of Socialism as hitherto preached everywhere.

Having disposed then of the point as to which Mr. Shaw agrees with me, I will pass on to the point on which he supposes me to disagree with him; and this is the point to which he devotes the larger part of his article. Everything else is thrown in as a sort of by-play. This point is as follows. Speaking roughly, and adopting the following figures, not because I consider them accurate, but merely because they agree with Mr. Shaw’s, and are for the present purpose as good as any others, above seven hundred million pounds of the national income go to the non-labouring classes. Mr. Shaw, as I gather, would set down about two hundred million pounds of this as the earnings or profits of Ability; whilst he contends that the remainder is the product neither of Ability nor Labour, but of capital or land. It represents the assistance which land and capital give to the two other productive agents; and it goes to those who possess this land and capital, simply on account of the rights which they possess as passive owners. This sum, which Mr. Shaw estimates at about five hundred million pounds,[62] ought, he contends, still to go to the owners—in fact, it must always go to its owners; but the owners should be changed. They should be the whole nation instead of a small class.

Now Mr. Shaw says that my great mistake has relation to these five hundred million pounds. He says that, having argued rightly enough that two hundred million pounds or so are the genuine product or rent of actual and indispensable Ability, I have committed the absurd mistake of confusing with this rent of ability, the rent of land, of houses, and above all, the interest on capital. “Mr. Mallock,” he says, “is an inconsiderate amateur, who does not know the difference between profits and earnings on the one hand, and rent and interest on the other.” And he summarises my views on the subject by saying, that I “see in every railway shareholder the inventor of the locomotive or the steam-engine,” and that I gravely maintain that the three hundred thousand pounds a year which may form the income of one or two great urban landlords is produced by the exercise of some abnormal ability on their parts. This supposed doctrine of mine forms the main subject of Mr. Shaw’s attack. He is exuberantly witty on the subject. He turns the doctrine this way and that, distorting its features into all sorts of expressions, laughing afresh each time he does so. He calls me his “brother” and his “son”; he quotes nursery rhymes at me. He alludes to my own income and the income of the Duke of Westminster, and intimates a desire to know whether the Duke being, so he says, many hundred times as rich as myself, I am many hundred times as big a fool as the Duke. In fact, he has recourse to every argumentative device which his private sense of humour and his excellent taste suggest.

The immediate answer to all this is very simple—namely, that I never gave utterance to any such absurdity as Mr. Shaw attributes to me, but that, on the contrary, I have insisted with the utmost emphasis on this very distinction between profits and earnings, and rent and interest, which he assures his readers I do not even perceive. Mr. Shaw, therefore, has devoted most of his time to trampling only on a misconception of his own. This is the immediate answer to him; but there is a further answer to come, relating to the conclusions I drew from nature of rent and interest, after I had pointed out their contrast to the direct receipts of Ability. Let me show the truth of the immediate answer first.

I do not think that in my two recent articles in this Review there is a single sentence that to any clear-headed man could form an excuse for such a misconception as Mr. Shaw’s, whereas there are pages which ought to have made it impossible. Indeed, a notice in the Spectator disposes of Mr. Shaw by saying that he evades the real point raised by me, not meeting what I did say, and combating what I did not say. But, as I started with observing, magazine articles can rarely be exhaustive, and I will assume that some incompleteness or carelessness of expression on my part might have afforded, had these articles stood alone, some excuse for their critic. Mr. Shaw, however, is at pains to impress us that he has read other writings of mine on the same subject. He even remembers, after an interval of more than ten years, some letters I wrote to the St. James’s Gazette. It might, therefore, have been not unreasonable to expect that he would have referred to my recent volume, Labour and the Popular Welfare, which I expressly referred to in my two articles, and in which I said I had stated my position more fully. As an answer to Mr. Shaw I will quote from that volume now.

The first Book deals with certain statistics as to production in this country, and the growth of the national income as related to the population. In the second Book I deal with the cause of this growth. I point out that the causes of production are not three, as generally stated—viz. Land, Labour, and Capital; but four—viz. Land, Labour, Capital, and Ability; and that the fourth is the sole source of that increase in production which is the distinguishing feature of modern industrial progress. In thus treating Capital as distinct from Ability, I point out—taking a pumping-engine as an example—that capital creates a product which necessarily goes to its owner, quâ owner, whether the owner is an individual or the State. I then proceed to show that fixed capital—e.g. an engine—is the result of circulating capital fossilised; and that circulating capital is productive only in proportion as it is under the control of Ability. For this reason I said that whilst it is in process of being utilised, Capital is connected with Ability as the brain is connected with the mind, it being the material means through which Ability controls Labour; and that thus from a certain point of view the two are inseparable. I need not insist on this truth, because Mr. Shaw admits it. But Mr. Shaw will find a subsequent chapter (Book IV. chap. ii.) bearing the title, Of the Ownership of Capital as distinct from its Employment by Ability. From that chapter I quote the following passage:—

“In dealing with Capital and Ability, I first treated them separately, I then showed that, regarded as a productive agent, Capital is Ability, and must be treated as identical with it. But it is necessary, now we are dealing with distribution, to dissociate them for a moment and treat them separately once more. For even though it be admitted that Ability, working by means of Capital, produces, as it has been shown to do, nearly two-thirds of the national income,[63] and though it may be admitted further that a large portion of this product should go to the able men who are actively engaged in producing it—the men whose Ability animates and vivifies Capital—it may be argued that a portion of it, which is very large indeed, goes as a fact to men who do not exert themselves at all, or who, at any rate, do not exert themselves in the production of wealth. These men, it will be said, live not on the products of Ability, but on the interest of Capital, which they have come accidentally to possess; and it will be asked on what ground Labour is interested in forbearing to touch the possessions of those who produce nothing?... Why should it not appropriate what goes to this wholly non-productive class.”

If Mr. Shaw or his readers are still in doubt as to the extent to which his criticism of myself is wide of the mark—if he still thinks that he is fighting any mistake but his own, when he attacks me as though I confused interest with the direct earnings of Ability, let me add one passage more out of the same chapter:—

“Large profits must not be confounded with high interest. Large profits are a mixture of three things, as was pointed out by Mill, though he did not name two of them happily. He said that profits consisted of wages of superintendence, compensation for risk, and interest on Capital. If, instead of wages of superintendence we say the product of Ability, and instead of compensation for risk we say the reward of sagacity, which is itself a form of Ability, we shall have an accurate statement of the case.”

Again, two pages earlier Mr. Shaw will find this:—

“Interest is capable, under certain circumstances, of being reduced to a minimum without production being in any degree checked; and every pound which the man who employs Capital is thus relieved from paying to the man who owns it constitutes, other things being equal, a fund which may be appropriated by Labour.”

These quotations will be enough to show how the bulk of Mr. Shaw’s criticisms, which he thinks are directed against myself, are criticisms of an absurd error and confusion of thought, which I have myself done my utmost to expose, in order that I might put the real facts of the case more clearly.

Let me now briefly restate what I have actually said about these facts. Let me restate the points which Mr. Shaw hardly ventures even to glance at. I have said that Capital and Ability, as actually engaged in production, are united like mind and brain. There is, however, as I observed also, this difference. So far as this life is concerned, at all events, brain and mind are inseparable. The organ and the function cannot be divided. But in the case of Ability and Capital they can be. The mind of one man has often to borrow from another man the matter through which alone it is able to operate in production. Thus though Ability and Capital, when viewed from the standpoint of Labour, are one thing, when viewed from the standpoint of their different processes they are two; and Capital is seen to produce a part of the product, as distinguished from the Ability whose tool and organ it is. Mr. Shaw says that the capital of the country at the present time produces five hundred million pounds annually, and, for argument’s sake, I accept this figure. Thus far, then, Mr. Shaw and I agree. But what I have urged Mr. Shaw to consider, and what he does not venture even to think of, is the following question:—How did the capital of this country come into existence?

Even the soil of this country, as we know it now, is an artificial product. It did not exist in its present state two hundred years ago. Still it was there. But of the capital of the country, as it exists to-day, by far the larger part did not exist at all. Let us merely go back two generations—to the times of our own grandfathers; and we shall find that of the ten thousand million pounds at which our present capital is estimated, eight thousand million pounds have been produced during the last eighty years. That is to say, four-fifths of our capital was non-existent at a time when the grandfathers of many of us were already grown men. How, then, was this capital produced? The ordinary Socialist will say that it was produced by Labour—that it is, as (I think) Lassalle called it, “fossil Labour.” Mr. Shaw, however, judging by what we have seen of his opinions, will agree with me that though a small part of it may be fossil Labour, by far the larger part is fossil Ability. It is, in fact, savings from the growing annual wealth which has been produced during the period in question by the activity of able men. But these able men did not produce it by accident. They produced it under the stimulus of some very strong motive. What was this motive? Mr. Shaw’s Socialistic friends and predecessors have been spouting and shouting an answer to this question for the past sixty years. They have been telling us that the main motive of the employing class was “greed.” Unlike most of their statements, this is entirely true. Nor, although the sound of it is offensive, is there anything offensive in its meaning. It means that in saving capital and in producing the surplus out of which they were able to save it, the motive of the producers was the desire to live on the interest of it when it was saved; and that if it had not been for the desire, the hope, the expectation of getting this interest, the capital most certainly would never have been produced at all, or, at all events, only a very minute fraction of it.

I asked in one of my articles in this Review whether Mr. Shaw thought that a man who received ten thousand a year as the product of his exceptional ability would value this sum as much if he were forbidden by the State to invest a penny of it—if the State, in fact, were an organised conspiracy to prevent his investing it so as to make an independent provision for his family, or for himself at any moment when he might wish to stop working—as he values it now when the State is organised so as to make his investments secure? And the sole indication in the whole of Mr. Shaw’s paper that he has ever realised the existence of the question here indicated is to be found in a casual sentence, in which he says that to think that the complete confiscation of all the capital created by the two past generations, and the avowed intention on the part of the State to confiscate all the capital that is now being created by the present—to think, in other words, that the annihilation of the strongest and fiercest hope that has ever nerved exceptional men to make exceptional industrial exertion, would in the smallest degree damp the energies of any able man—“is an extremely unhistoric apprehension,” and one as to which he “doubts whether the public will take the alarm.” And having said this, he endeavours to justify himself by an appeal to history. He asks if the men who built the Pyramids did not work just as hard “though they knew that Pharaoh was at the head of an organised conspiracy to take away the Pyramids from them as soon as they were made?”

This remarkable historical reference is the sole answer Mr. Shaw attempts to make to the real point raised by me. If it is necessary seriously to answer it, let me refer Mr. Shaw to Labour and the Popular Welfare, pp. 124, 125, where his childish piece of reasoning—actually illustrated there by the example of Ancient Egypt—is anticipated and disposed of. As I there pointed out, these great buildings of the ancient world were the products not of Ability as it exists in the modern world, but of Labour; the difference between the two (so far as this point is concerned) being this:—that the labour an average man can perform is a known quantity, and wherever a dominant race enslaves an inferior one, the taskmasters of the former can coerce the latter into performing a required amount of service. But the existence of exceptional ability cannot be known or even suspected by others till the able individual voluntarily shows and exerts it. He cannot be driven; he must be induced and tempted. And not only is there no means of making him exert his talents, except by allowing these talents to secure for himself an exceptional reward; but in the absence of any such reward to fire his imagination and his passion, he will probably not be conscious of his own Ability himself. Pharaoh could flog the stupidest Israelite into laying so many bricks, but he could not have flogged Moses himself into a Brassey, a Bessemer, or an Edison.

This, however, is a point with which it is impossible to deal in a few sentences or a few pages. The great question of human motive, closely allied as it is with the question of family affection, the pleasures of social intercourse, the excitements and prizes of social rivalry, of love, of ambition, and all the philosophy of taste and manners—this great question of motive can be only touched upon here. But a few more words may be said to show the naïve ignorance of human nature and of the world betrayed by the Fabian champion.

Mr. Shaw, in order to prove how fully he understands the question of Ability, quotes the case of a friend of his, who, by his Ability, makes four thousand pounds a year. This, says Mr. Shaw, is just as it should be: but if a man, like his friend, should save one hundred thousand pounds, and desire to leave this to his son, invested for him at 3½ per cent, so that the son may receive an income whether he has any of his father’s ability or no—this, says Mr. Shaw, is what Socialism will not permit. The son must earn all he gets; and if he happens to have no exceptional ability, which may probably be the case, he will have to put up with the mere wages of manual labour. He will have to live on some eighty pounds a year instead of four thousand pounds. And Mr. Shaw says, that to introduce this arrangement into our social system will have no appreciable effect on the men who are now making, by their ability, their four thousand pounds a year. Let us suggest to him the following reflections. What good, in that case, would the four thousand pounds a year be to the father, unless he were to eat and drink nearly the whole of it himself? For it would be absurd and cruel in him to bring up his children in luxury if the moment he died they would have to become scavengers. Wealth is mainly valuable, and sought for, not for the sake of the pleasures of sense which it secures for a man’s individual nervous system, but for the sake of the entourage—of the world—which it creates around him, which it peoples with companions for him brought up and refined in a certain way, and in which alone his mere personal pleasures can be fully enjoyed. Capitalism, as Mr. Shaw truly observes, produces many personal inequalities, which without it could not exist. He fails to understand that it is precisely the prospect of producing such inequalities that constitutes the main motive that urges able men to create Capital.

More than ten years ago I published a book called Social Equality, devoted to the exposition of these truths. I cannot dwell upon them now. In that book history is appealed to, and biography is appealed to; and the special case of literary and artistic production, of which Mr. Shaw makes so much, is considered in a chapter devoted to the subject, and Mr. Shaw’s precise arguments are disposed of in anticipation. But to a great extent the true doctrine of motive is one which cannot be established by mere formal argument. It must to a great extent be left to the verdict of the jury of general common sense, the judgment of men of experience and knowledge of the world—that knowledge which, of all others, Mr. Shaw and his friends appear to be most lacking in.

It will be enough, then, to turn from Mr. Shaw himself to ordinary sensible men, especially to the men of exceptional energy, capacity, shrewdness, strong will, and productive genius—the men who are making fortunes, or who have just made them, and without whose efforts all modern industry would be paralysed, and to tell such men that the sole answer of Fabianism to my attack on the Socialistic position is summed up in the following astounding statement:—That the complete confiscation of all the invested money in this country, and all the incomes derived from it—from the many thousands a year going to the great organiser of industry to the hundred a year belonging to the small retired tradesman—would have no effect whatever on the hopes and efforts of those who are now devoting their Ability to making money to invest (see Mr. Shaw’s article). Well—Bos locutus est: there is the quintessence of Mr. Shaw’s knowledge of human nature and of the world, and though it would be interesting and instructive to analyse the error of his view, no analysis could make its absurdity seem more complete than it will seem without analysis, to every practical man.