On the other hand, we meet with a number of socialists who prove themselves to be more opportunistic than their comrades, and though equally hostile to private property and freedom of production, yet never hesitate to address their appeals on behalf of the workers to existing Governments.
State Socialism represents the fusion of these two currents. It surpasses the one in its faith in the wisdom of Governments, and is distinguished from the other by its greater attachment to the rights of private property; but both of them contribute some items to its programme. In the first place we must try to discover the source of these separate tendencies, and in the second place watch their amalgamation.
I: THE ECONOMISTS’ CRITICISM OF LAISSEZ-FAIRE
The doctrine of absolute laissez-faire was not long allowed to go unchallenged. From the time of Smith onward there is an uninterrupted sequence of writers—all of them by no means socialists—who ventured to attack the fundamental propositions of the great Scotsman and who attempted to show that his practical conclusions were not always borne out by the facts.
Smith based his advocacy of laissez-faire upon the supposed identification of public and private interests. He showed how competition reduced prices to the level of cost of production, how supply adapted itself to meet demand in a perfectly automatic fashion, and how capital in an equally natural way flowed into the most remunerative occupations.
This principle of identity of interests was, however, rudely shaken by the teachings of Malthus and Ricardo, although both of them remained strong adherents of the doctrine of individual liberty.
Sismondi, who was the next to intervene, laid stress upon the evils of competition, and showed how social inequality necessitated the submission of the weak to the will of the strong. His whole book was simply a refutation of Smith’s providential optimism.
In Germany even, as early as 1832, that brilliant economist Hermann was already proceeding with his critical analysis of the Classical theories; and after demonstrating how frequently individual interest comes into conflict with public welfare, and how inadequate is the contribution which it can possibly make to the general well-being, he declares his inability to subscribe to the doctrine laid down by most of Smith’s followers, namely, that individual activity moved by personal interest is sufficient to meet all the demands of national economy. Within the bounds of this national economy[870] he thinks there ought to be room for what he calls the civic spirit (Gemeinsinn) as well.
The next critic, List, bases his whole case upon the opposition between immediate interests, which guide the individual, and the permanent interests of the nation, of which the Government alone can take account.
Stuart Mill, in the famous fifth book of the Principles, refuses even to discuss the doctrine of identity of interests, believing it to be quite untenable. On the question of non-intervention he admits the validity of one economic argument only, namely, the superiority of self-interest as an economic motive. But he is quick to recognise its shortcomings and the exceptions to its universal operation—in the natural incapacity of children and of the weak-minded, the ignorance of consumers, the difficulty of achieving it, even when clearly perceived, without the help of society as a whole, as in the case of the Factory Acts. Mill also points out how this motive is frequently wanting in modern industrial organisation, where, for example, we have joint stock companies acting through the medium of a paid agency, or charitable work undertaken by an individual who has to consider, not his own interests, but those of other people. Private interest is also frequently antagonistic to public interest, as in the case of the public supply of gas or water, where the individual entrepreneur is influenced by the thought of a maximum profit rather than by considerations of general interest. In matters of that kind Stuart Mill was inclined to favour State intervention.[871]