In order that men should consent to take upon themselves, unconditionally, risks which fall naturally on others, it is necessary that a species of knowledge, which I have called experimental statistics, should have made some progress; for experience alone can place them in a situation to appreciate these risks, at least [p361] approximately, and consequently to appreciate the value of the service rendered in securing them against such risks. This is the reason why the bargains and transactions of rude and ignorant nations admit no stipulations of this nature, and hence, as I have said, uncertainty exercises over such people uncontrolled power. Were a savage, grown old, and having laid up some stock of game, to take a young hunter into his service, he would not give him fixed wages, but a share in the produce of the chase. How, indeed, could either of them, from the known infer the unknown? The teachings of past experience do not permit them to insure the future beforehand.
In times of barbarism and inexperience, men, no doubt, associate, for we have demonstrated that otherwise they could not exist; but association can assume among them only that primitive and elementary form which the Socialists represent as the only one which can secure our future safety.
When two men have long worked on together, encountering equal risks, there at length comes a time when, from experience, they can estimate and appreciate the value of these risks, and one of them consents to take the entire risk upon his own shoulders, in consideration of a fixed recompense.
This arrangement is undoubtedly a step of progress, and it is shown to be so by the very fact that it has been effected freely and voluntarily by the two parties, who would not have entered into it had it not been felt to be for their mutual benefit. It is easy to see in what the benefit consists. The one party gains by obtaining the exclusive management of an undertaking of which he takes all the risks upon himself; the other by obtaining that fixity of position which is so much desired. And society at large must be benefited by having an enterprise, formerly subjected to two minds and two wills, henceforth conducted with unity of views and unity of action.
But although association is modified in this way, it by no means follows that it is dissolved. The co-operation of the two men is continued, although the mode of dividing the product of their enterprise has been changed. Association is not vitiated by an innovation voluntarily agreed to, and which satisfies all parties.
The co-operation of anterior labour and present labour is always, or almost always, required in order to realize new means of satisfaction and enjoyment. Capital and labour, in uniting in a common undertaking, are, in the first instance, forced to undertake each its share of the risk; and this continues until the value of the risk can be experimentally estimated. Then two tendencies, which are [p362] alike natural to the human heart, manifest themselves—I mean the tendencies towards unity of direction and fixity of situation. Capital then says to labour: “Experience has taught us that your eventual profit amounts, on an average, to so much. If you wish it, I will ensure you this amount, and take charge of the operation, taking upon myself the chances of profit or loss.”
Labour may possibly answer: “This proposal suits me very well. Sometimes I earned twenty pounds a year; sometimes I earn sixty. These fluctuations are very inconvenient, for they hinder me from regulating uniformly my own expenditure and that of my family. It is an advantage to me to get rid of this uncertainty, and to receive a fixed recompense of forty pounds.”
By this arrangement the terms of the contract will be changed. They will continue to unite their efforts, and to share the proceeds, and consequently the association will not be dissolved; but it will be modified in this way, that the capitalist will take all the risks with the compensation of all the extraordinary profits, whilst the labourer will be secured the advantages of fixity. Such is the origin of Wages.
The agreement may take place in the reverse way. Frequently the person who undertakes a commercial enterprise says to the capitalist: “Hitherto we have worked together, sharing the risks. Now that we are in a situation to appreciate these risks, I propose to make a fixed bargain. You have invested a thousand pounds in the undertaking, for which one year you receive twenty-five pounds, another year seventy-five. If you agree to it, I will give you fifty pounds, or 5 per cent. per annum, and free you from all risk, on condition that I have henceforth the entire management of the concern.”
The capitalist will probably answer: “Since, with great and troublesome fluctuations, I receive, on an average, only fifty pounds per annum, I should much prefer to have that sum regularly assured to me. I shall, therefore, allow my capital to remain in the concern, but I am to be exempted from all risk. My activity and intelligence will now be free to engage in some other undertaking.”