The Evolution of Modern Capitalism: A Study of Machine Production

by J. A. Hobson

It must be clearly recognised that the trouble is due to a genuine clash of individual interests in a competitive industrial society, where the frequent, large, and quite incalculable effects of improved machinery and methods of production give now to this, now to that group of competitors a temporary advantage in the struggle. It was formerly believed that this bracing competition, this free clash of individual interests, was able to strike out harmony, that the steady and intelligent pursuit by each of his own separate interest formed a sure basis of industrial order and induced the most effective and serviceable disposition of the productive powers of a community.

It now appears that this is not the case, and that the failure cannot in the main be attributed to an imperfect understanding by individuals of the means by which their several interests may be best subserved, but is due to the power vested in individuals or groups of individuals to secure for themselves advantages arising from improved methods of production without regard for the vested interests of other individuals or of society as a whole.

APPENDIX I.

ARE GOODS IN THE POSSESSION OF CONSUMERS CAPITAL?

The question whether food, clothing, etc., which are "capital" so long as they form part of the stock of a shopkeeper, are to be regarded as ceasing to be capital when they pass into the possession of consumers has seldom been definitely faced by English economists. Jevons was perhaps the first to clearly recognise the issues involved. He writes:—"I feel quite unable to adopt the opinion that the moment goods pass into the possession of the consumer they cease altogether to have the attributes of capital. This doctrine descends to us from the time of Adam Smith, and has generally received the undoubting assent of his followers. Adam Smith, although he denied the possessions of a consumer the name of capital, took care to enumerate them as part of the stock of the community." (The Theory of Political Economy, 2nd edit., p. 280.)

As a historical judgment this is very misleading. Adam Smith, chiefly impressed by the necessity of separating consumptive goods from goods used as a means of making an income—e.g., commercial capital, quite logically severed revenue from capital as a distinct species of the community's stock. His "followers," however, differed very widely, and usually expressed themselves obscurely. Generally speaking, the English economists of the first half of this century inclined to the inclusion of certain consumptive goods in the possession of labourers under capital. Ricardo, for example, thus expresses himself:—"In every society the capital which is employed in production is necessarily of limited durability. The food and clothing consumed by the labourer, the buildings in which he works, the implements with which his labour is assisted, are all of a perishable value. There is, however, a vast difference in the time for which all these different capitals will endure. A steam engine will last longer than a ship, a ship than the clothing of the labourer, and the clothing of the labourer than the food which he consumes." (Principles of Political Economy, 1817, p. 22.) The last sentence is conclusive in its inclusion under capital of goods in the possession of labourers. McCulloch again regrets Smith's exclusion of "revenue" from capital, insisting that "it is enough to entitle an article to be considered capital that it can directly contribute to the support of man or assist him in appropriating or producing commodities," and he would even go so far as to include "a horse yoked to a gentleman's coach," on the ground that it was "possessed of the capacity to assist in production." (Principles of Political Economy, Part I., chap. ii. § 3.)

Malthus does not, so far as I can ascertain, face the question. James Mill alone, among the earlier nineteenth century economists, definitely excludes labourers' consumptive goods from capital. (Principles of Political Economy, chap. i. § 2.) J.S. Mill is not equally clear in his judgment. In Bk. I., chap. iv. § 1, food "destined" for the consumption of productive labourers apparently ceases to be capital when it is already "appropriated to the consumption of productive labourers." This position, however, is not consistent with his later position regarding the unlimited character of saving, which can only be justified by regarding real wages when paid as continuing to be capital. Fawcett is vague, but he is disposed not only to include under capital food which is in the possession of consumers, but to exclude food which is in the possession of dealers. "If a man has so much wheat, it is wealth which may at any moment be employed as capital; but this wheat is not made capital by being hoarded; it becomes capital when it feeds the labourers, and it cannot feed the labourers unless it is consumed." (Manual of Political Economy, Bk. I., chap, iv., p. 29.) Among later English writers, Cairnes, like all holders of the "Wages fund" doctrine, does not clearly meet the question, "Does the food, etc., forming the real wage fund which is one part of capital, cease to be capital when it is actually paid out in wages?" He plays round the question in Leading Principles, Part II., chap. i. Bonamy Price includes consumptive goods. "It is to be remarked of all this capital, these materials, implements, and necessaries for the labourers, that they are consumed and destroyed in the process of creating wealth, some rapidly, some more slowly. Thus the very purpose of capital is to be consumed and destroyed; it is procured for that very end." (Practical Political Economy, pp. 103, 104.) Since, he adds a little later, "an article cannot be declared to be capital or not capital till the purpose it is applied to is determined," it would appear that flour in the dealer's hands is not capital, but that it only becomes capital when handed over to persons who productively consume it. Thorold Rogers appears to take the same view, holding the food of a country to be part of its capital irrespective of the consideration in whose hands it is. (Political Economy, p. 61.) Professor Sidgwick appears to regard "food" consumed by productive labourers as capital. "On this view it is only so far as the labourer's consumption is distinctly designed to increase his efficiency that it can properly be regarded as an investment of capital." (Principles of Political Economy, Bk. I., chap. v.)

General Walker apparently holds that stored food used to support productive work is capital in whosoever hands it lies. (Political Economy, 2nd edit., § 87.) He is, however, concerned with illustrations from primitive society, and possibly might hold the food ceased to be capital if paid over by one person to another as wages.

Hearn, on the contrary, definitely excludes consumptive goods. "The bullock, which when living formed part of the capital of the grazier, and when dead of the butcher, is not capital when the meat reaches the consumer." (Plutology, p. 135.)

Professor Marshall defers to the commercial usage so far as to apply the term Trade Capital to "those external things which a person uses in his trade, either holding them to be sold for money, or applying them to produce things that are to be sold for money." But turning to the individual, he insists upon speaking of the necessaries he consumes to enable him to work as "capital." "Some enjoyment is indeed derived from the consumption of the necessaries of life which are included under capital; but they are counted as capital because of the work for the future which they enable people to do, and not on account of the present pleasure which they afford." (Principles, 2nd edit., p. 125.)