(1) The Law of Self-interest. This law has since been named the Hedonistic principle—a term that was never employed by the Classical school. Every individual desires well-being, and so would be possessed of wealth. Similarly he would, if possible, avoid evil and escape effort. This is a simple psychological law. Could anything be more universal or permanent than this law, which is simply the most natural and the most rational (using the term in its Physiocratic sense) statement of the law of self-preservation? In virtue of this fundamental principle the Classical school is frequently known as the Individualist school.
But individualism need imply neither egoism nor egotism. This confusion, which is repeatedly made with a view to discrediting the Classical writers, is simply futile. No one has displayed greater vigour in protesting against this method of treating individualism than Stuart Mill. To say that a person is seeking his own good is not to imply that he desires the failure of others. Individualism does not exclude sympathy,[756] and a normal individual feels it a source of gratification whenever he can give pleasure to others.
But this did not prevent Ricardo and Malthus showing the numerous instances in which individual interests conflict, where it is necessary that one interest should be sacrificed to another. And Mill, far from denying the existence of these conflicts, has taken special pains to emphasise them. The Classical writers, together with the Optimists, reply that such contradictions are apparent only, and that beneath these appearances there is harmony; or they point out that these antinomies are due to the fact that both individualism and liberty are only imperfectly realised, and as yet not even completely understood, but that as soon as they are securely established the evils which they have momentarily created will be finally healed.[757] Liberty is like Achilles’ lance, healing the wounds it inflicts. Other individualists, such as Herbert Spencer, declare that the conflict of individual interests is not merely advantageous to the general interests of society, but is the very condition of progress, weeding out the incapable to make room for the fittest.
(2) The Law of Free Competition. Admitting that each individual is the best judge of his own interests, then it is clearly the wisest plan to let everyone choose his own path. Individualism presupposes liberty, and the Individualist school is also known as the Liberal school. This second title is more exact than the first, and is the only one which the French school will accept. It emphatically repudiates every other, whether Individualist, Orthodox, or Classical.[758]
The English school is equally decisive in its preference for “Liberalism.” The terms “Manchesterism” and “Manchesterthum” have also been employed, especially by German critics, in describing this feature of their teaching.
But the Classical school itself thought of laissez-faire neither as a dogma nor a scientific axiom. It was treated merely as a practical rule which it was wise to follow, not in every case, but wherever a better had not been discovered. Those who act upon it, in Stuart Mill’s opinion, are nearer the truth nineteen times out of twenty than those who deny it.[759] This practical Liberalism is intended to apply to every aspect of economic life, and their programme includes liberty to choose one’s employment, free competition, free trade beyond as well as within the frontiers of a single country, free banks, and a competitive rate of interest; and on the negative side it implies resistance to all State intervention wherever the necessity for it cannot be clearly demonstrated, as in the case of protective or parental legislation.
In the opinion of Classical writers, free competition was the sovereign natural law. It was sufficient for all things. It secured cheapness for the consumer, and stimulated progress generally because of the rivalry which it aroused among producers. Justice was assured for all, and equality attained, for the constant pursuit of profits merely resulted in reducing them to the level of cost of production. The Dictionnaire d’Économie politique of 1852, which may perhaps be considered as the code of Classic political economy, expressed the opinion that competition is to the industrial world what the sun is to the physical. And Stuart Mill himself, the author of Liberty, no longer distinguishing between economic and political liberty, in less poetic but equally conclusive terms states that “every restriction of competition is an evil,” but that “every extension of it is always an ultimate good.”[760] On this point he was a stern opponent of socialism, although in other respects it possessed many attractions for him. “I utterly dissent,” says he, “from the most conspicuous and vehement part of their teaching, their declamations against competition.”
But the Classical school, despite its glorification of free competition, never had any intention of justifying the present régime. The complaints urged against it on this score, like the similar charge of egoism, are based upon a misconception. On the contrary, the Classics, both new and old, complain of the imperfect character of competition. Senior had already pointed out what an enormous place monopoly still holds in the present régime. A régime of absolutely free competition is as much a dream as socialism, and it is as unjust to judge competition by the vices of the existing order as it would be to judge of collectivism by what occurred in the State arsenals.