Contemporary Socialism

by John Rae

The Socialists of the Chair have done themselves injustice and sown their course with embarrassing misconceptions by adopting too hastily an infelicitous name. It is more descriptive than most political nicknames, and therefore more liable to mislead. It was first used in 1872 in a pamphlet by Oppenheim, then one of the leaders of the National Liberals, to ridicule a group of young professors of political economy who had begun to show a certain undefined sympathy with the socialist agitations of Lassalle and Von Schweitzer, and to write of the wrongs of the labouring classes and the evils of the existing industrial system with a flow of emotion which was thought to befit their years better than their position. A few months later these young professors called together at Eisenach a Congress of all who shared their general attitude towards that class of questions. In opening this Congress—which was attended by almost every economist of note in Germany, and by a number of the weightiest and most distinguished Liberal politicians—Professor Schmoller employed the name "Socialists of the Chair" to describe himself and those present, without adding a single qualifying remark, just as if it had been their natural and chosen designation. The nickname was no doubt accepted so readily, partly from a desire to take the edge off the sneer it was meant to convey, but partly also from the nobler feeling which makes men stand by a truth that is out of favour. Not that they approved of the contentions of social democracy out and out, but they believed there was more basis of truth in them than persons in authority were inclined to allow, and besides that the truth they contained was of special and even pressing importance. They held, as Schmoller said, that "Social Democracy was itself a consequence of the sins of modern Liberalism." They went entirely with the Social Democrats in maintaining both that a grave social crisis had arisen, and that it had been largely brought about by an irrational devotion on the part of the Liberals to the economic doctrine of laissez-faire. But they went further with them. They believed that the salvation of modern society was to come, not indeed from the particular scheme of reconstruction advocated by the Social Democrats, but still from applications in one form or another of their fundamental principle, the principle of association. And it was for that reason—it was for the purpose of marking the value they set upon the associative principle as the chief source of healing for the existing ills of the nations—that they chose to risk misunderstanding and obloquy by accepting the nickname put upon them by their adversaries. The late Professor Held, who claims as a merit that he was the first to do so, explains very clearly what he meant by calling himself a socialist. Socialism may signify many different things, but, as he uses the word, it denotes not any definite system of opinions or any particular plan of social reform, but only a general method which may guide various systems, and may be employed more or less according to circumstances in directing many different reforms. He is a socialist because he would give much more place than obtains at present to the associative principle in the arrangements of economic life, and because he cannot share in the admiration many economists express for the purely individualistic basis on which these arrangements have come to stand. A socialist is simply the opposite of an individualist. The individualist considers that the perfection of an industrial economy consists in giving to the principles of self-interest, private property, and free competition, on which the present order of things is founded, the amplest scope they are capable of receiving, and that all existing economic evils are due, not to the operation of these principles, but only to their obstruction, and will gradually disappear when self-interest comes to be better understood, when competition is facilitated by easier inter-communication, and when the law has ceased from troubling and left industry at rest. The socialist, in Held's sense, is, on the other hand, one who rejects the comfortable theory of the natural harmony of individual interests, and instead of deploring the obstructions which embarrass the operations of the principles of competition, self-interest, and private property, thinks that it is precisely in consequence of these obstructions that industrial society contrives to exist at all. Strip these principles, he argues, of the restraints put upon them now by custom, by conscience, by public opinion, by a sense of fairness and kind feeling, and the inequalities of wealth would be immensely aggravated, and the labouring classes would be unavoidably ground to misery. Industrial society would fall into general anarchy, into a bellum omnium contra omnes, in which they that have would have more abundantly, and they that have not would lose even what they have. Held declines to join in the admiration bestowed by many scientific economists upon this state of war, in which the battle is always to the rich. He counts it neither the state of nature, nor the state of perfection, of economic society, but simply an unhappy play of selfish and opposing forces, which it ought to be one of the distinct aims of political economy to mitigate and counteract. Individualism has already had too free a course, and especially in the immediate past has enjoyed too sovereign a reign. The work of the world cannot be carried on by a fortuitous concourse of hostile atoms, moving continually in a strained state of suspended social war, and therefore, for the very safety of industrial society, we must needs now change our tack, give up our individualism, and sail in the line of the more positive and constructive tendencies of socialism. To Held's thinking accordingly, socialism and individualism are merely two contrary general principles, ideals, or methods, which may be employed to regulate the constitution of economic society, and he declares himself a socialist because he believes that society suffers at present from an excessive application of the individualistic principle, and can only be cured by an extensive employment of the socialistic one.

This is all clear enough, but it is simply giving to the word socialism another new meaning, and creating a fresh source of ambiguity. That term has already contracted definite associations which it is impossible to dispel by mere word of mouth, and which constitute a refracting medium through which the principles of the Socialists of the Chair cannot fail to be presented in a very misleading form. These writers assume a special position in two relations—first, as theoretical economists; and, second, as practical politicians or social reformers; and in both respects alike the term socialism is peculiarly inappropriate to describe their views. In regard to the first point, by adopting that name they have done what they could to "Nicodemus" themselves into a sect, whereas they might have claimed, if they chose, to be better exponents of the catholic tradition of the science than those who found fault with them. This is a claim, however, which they would be shocked indeed to think of presenting. With a natural partiality for their own opinions, they exaggerated immensely the extent and also the value of their divergence from the traditional or, as it is sometimes called, the classical economics. In the energy of their recoil from the dogmatism which had for a generation usurped an excessive sway over economic science, they were carried too far in the opposite direction, but they had in their own minds the sensation that they were carried a great deal farther than they really were. They liked to think of their historical method as constituting a new epoch, and effecting a complete revolution in political economy, but, as will subsequently appear, that method, when reduced to its real worth, amounts to no more than an application, with somewhat distincter purpose and wider reach, of the method which Smith himself followed. Of this they are in some degree conscious. Brentano, who belongs to the extreme right of the school, says that Smith would have been a Socialist of the Chair to-day if he were alive; and Samter, who belongs to the extreme left, though he is doubtful regarding Smith, has no hesitation in claiming Mill, whom he looks upon as standing more outside than inside the school of Smith. Their position is, therefore, not the new departure which many of them would fain represent it to be. They are really as natural and as legitimate a line of descent from Adam Smith as their adversaries the German Manchester Party who claimed the authority of his name. Perhaps they are even more so, for in science the true succession lies with those who carry the principles of the master to a more fruitful development, and not with those who embalm them as sacred but sterile simulacra.

But it is as practical reformers that the Socialists of the Chair suffer most injustice from their name. Since the word socialism was first used by Reybaud fifty years ago, it has always been connected with utopian or revolutionary ideas. Now the Socialists of the Chair are the very opposite of revolutionaries both by creed and practice. None of the various parties which occupy themselves with the social problem in Germany is so eminently and advisedly practical. Their very historical method, apart from anything else, makes them so. It gives them a special aversion to political and social experiments, for it requires as the first essential of any project of reform that it shall issue naturally and easily out of—or at least be harmonious with—the historical conditions of the time and place to which it is to be applied. Roscher, who may be regarded as the founder of the school, says that reformers ought to take for their model Time, whose reforms are the surest and most irresistible of all, but yet so gradual that they cannot be observed at any given moment. They make, therefore, on the whole a very sparing use of the socialistic principle they invoke. Certainly the world, in their eyes, is largely out of joint, but its restoration is to proceed gently, like Solomon's temple, without sound of hammer. Some of them of course go farther than others, but they would all still leave us rent, wages, and profits, the three main stems of individualism. They struck the idea of taxing speculative profits out of their programme, and so far from having any socialistic thought of abolishing inheritance, none of them except Von Scheel would even tax it exceptionally. Samter stands alone in urging the nationalization of the land; and Wagner stands alone in desiring the abolition of private property in ground-rents in towns; the other members cannot agree even about the expediency of nationalizing the railways. They work of set purpose for a better distribution of wealth—for what Schmoller calls a progressive equalization of the excessive and even dangerous differences of culture that exist at present—but they recoil from all suggestion of schemes of repartition, and they have no fault to find with inequality in itself. On the contrary they regard inequality as being not merely an unavoidable result of men's natural endowments, but an indispensable instrument of their progress and civilization. Schmoller explains that their political principles are those of Radical Toryism, as portrayed in Lord Beaconsfield's novels; and he means that they rest on the same active sympathy with the ripening aspirations of the labouring classes, and the same zealous confidence in the authority of the State, and in these respects are distinguished from modern Liberalism, whose governing sympathies are with the interests and ideas of the bourgeoisie, and which entertains a positive jealousy of the action of the State. The actual reforms which the Socialists of the Chair have hitherto promoted have been in the main copied from our own English legislation—our Factory Acts, our legalization of Trade Unions, our Savings Banks, our registration of Friendly Societies, our sanitary legislation, etc., etc.—measures which have been passed, with the concurrence of men of opposite shades of opinion, out of no social theory but from a plain regard to the obvious necessities of the hour. So that we have been simply Socialists of the Chair for a generation without knowing it, doing from a happy political instinct the works which they deduce out of an elaborate theory of economic politics. Part of their theory, however, is, that in practical questions they are not to go by theory, and the consequence is that while they sometimes lay down general principles in which communism might steal a shelter, they control these principles so much in their application by considerations of expediency, that the measures they end in proposing differ little from such as commend themselves to the common sense and public spirit of middle-class Englishmen.

Their general theory had been taught in Germany for twenty years before it was forced into importance by the policy it suggested and the controversies it excited in connection with the socialist movement which began in 1863. Wilhelm Roscher, the lately deceased professor of economics in Leipzig, first propounded the historical method in his "Grundriss zu Vorlesungen über die Staatswirthschaft nach geschichtlicher Methode," published in 1843, though it deserves to be noticed that in this work he spoke of the historical method as being the ordinary inductive method of scientific economists, and distinguished it from the idealistic method proceeding by deduction from preconceived ideas, which he said was the method of the socialists. He had no thought as yet of representing his method as diverging from that of his predecessors, even in detail, much less as being essentially different in principle. Then the late Bruno Hildebrand, professor of political science at Jena, in his work on the "National Economy of the Present and the Future," published in 1847, proclaimed the historical method as the harbinger and instrument of a new era in the science, but he speaks of it only as a restoration of the method of diligent observation which Adam Smith practised, but which his disciples deserted for pure abstractions. In 1853, a more elaborate defence and exposition of the historical method appeared in a work on "Political Economy from the Standpoint of the Historical Method," by Carl G. A. Knies, professor of national economics at Heidelberg. But it was never dreamt that the ideas broached in these works had spread beyond the few solitary thinkers who issued them. The Free Traders were still seen ruling everything in the high places of the land in the name of political economy, and they were everywhere apparently accepted as authorized interpreters of the mysteries of that, to the ordinary public, somewhat occult science. They preached the freedom of exchange like a religion which contained at once all they were required to believe in economic matters, and all they were required to do. There was ground for Lassalle's well-known taunt: "Get a starling, Herr Schultze, teach it to pronounce the word 'exchange,' 'exchange,' 'exchange,' and you have produced a very good modern economist." The German Manchester Party certainly gave to the principle of laissez-faire, laissez-aller, a much more unconditional and universal application than any party in this country thought of according to it. They looked on it as a kind of orthodoxy which it had come to be almost impious to challenge. It had been hallowed by the consensus of the primitive fathers of the science, and it seemed now to be confirmed beyond question experimentally by the success of the practical legislation in which it had been exemplified during the previous quarter of a century. The adherents of the new school never raised a murmur against all this up till the eventful time of the socialist agitation and the formation of the new German Empire, and the reason is very plain. On the economic questions which came up before that period, they were entirely at one with the Free Traders, and gave a hearty support to their energetic lead. They were, for example, as strenuously opposed to protective duties and to restrictions upon liberty of migration, settlement, and trading, as Manchester itself. But with the socialist agitation of 1863, a new class of economic questions came to the front—questions respecting the condition of the working classes, the relations of capital and labour, the distribution of national wealth, and the like—and on these new questions they could not join the Free Traders in saying "Hands off!" They did not believe with the Manchester school that the existing distribution of wealth was the best of all possible distributions, because it was the distribution which Nature herself produced. They thought, on the contrary, that Nature had little to do with the matter; but even if it had more, there was only too good cause for applying strong corrections by art. They said it was vain for the Manchester party to deny that a social question existed, and to maintain that the working classes were as well off as it was practical for economic arrangements to make them. They declared there was much truth in the charges which socialists were bringing against the existing order of things, and that there was a decided call upon all the powers of society, and, among others, especially upon the State, to intervene with some remedial measures. A good opportunity for concerted and successful action seemed to be afforded when the German Empire was established, and this led to the convening of the Eisenach Congress in 1872, and the organization of the Society for Social Politics in the following year.

Men of all shades of opinion were invited to that Congress, provided they agreed on two points, which were expressly mentioned in the invitation: 1st, in entertaining an earnest sense of the gravity of the social crisis which existed; and 2nd, in renouncing the principle of laissez-faire and all its works. The Congress was attended by 150 members, including many leading politicians and most of the professors of political economy at the Universities. Roscher, Knies, and Hildebrand were there, with their younger disciples Schmoller, professor at Strasburg and author of the "History of the Small Industries"; Lujo Brentano, professor at Breslau, well known in this country by his book on "English Gilds" and his larger work on "English Trade Unions"; Professors A. Wagner of Berlin and Schönberg of Tübingen. Then there were men like Max Hirsch and Duncker the publisher, both members of the Imperial Diet, and the founders of the Hirsch-Duncker Trade Unions; Dr. Engel, director of the statistical bureau at Berlin; Professor von Holtzendorff, the criminal jurist; and Professor Gneist, historian of the English Constitution, who was chosen to preside. After an opening address by Schmoller, three papers were read and amply discussed, one on Factory Legislation by Brentano, a second on trade Unions and Strikes by Schmoller, and a third on Labourers' Dwellings by Engel. This Congress first gave the German public an idea of the strength of the new movement; and the Free Trade party were completely, and somewhat bitterly, disenchanted, when they found themselves deserted, not as they fancied merely by a few effusive young men, but by almost every economist of established reputation in the country. A sharp controversy ensued. The newspapers, with scarcely an exception, attacked the Socialists of the Chair tooth and nail, and leading members of the Manchester party, such as Treitschke the historian, Bamberger the Liberal politician, and others, rushed eagerly into the fray. They were met with spirit by Schmoller, Held, Von Scheel, Brentano, and other spokesmen of the Eisenach position, and one result of the polemic is, that some of the misunderstandings which naturally enough clouded that position at the beginning have been cleared away, and it is now admitted by both sides that they are really much nearer one another than either at first supposed. The Socialists of the Chair did not confine their labours to controversial pamphlets. They published newspapers, periodicals, elaborate works of economic investigation; they held meetings, promoted trade unions, insurance societies, savings banks; they brought the hours of labour, the workmen's houses, the effects of speculation and crises, all within the sphere of legislative consideration. The moderation of their proposals of change has conciliated to a great extent their Manchester opponents. Even Oppenheim, the inventor of their nickname, laid aside his scoffing, and seconded some of their measures energetically. Indeed, their chief adversaries are now the socialists, who cannot forgive them for going one mile with them and yet refusing to go twain—for adopting their diagnosis and yet rejecting their prescription. Brentano, who is one of the most moderate, as well as one of the ablest of them, takes nearly as grave a view of the state of modern industrial society as the socialists themselves do; and he says that if the evils from which it suffers could not be removed otherwise, it would be impossible to avoid much longer a socialistic experiment. But then he maintains that they can be removed otherwise, and one of the chief motives of himself and his allies in their practical work is to put an end to socialistic agitation by curing the ills which have excited it.

The key to the position of the Socialists of the Chair lies in their historical method. This method has nothing to do with the question sometimes discussed whether the proper method of political economy is the inductive or the deductive. On that question the historical school of economists are entirely agreed with the classical school. Roscher, for example, adopts Mill's description of political economy as a concrete deductive science, whose à priori conclusions, based on laws of human nature, must be tested by experience, and says that an economic fact can be said to have received a scientific explanation only when its inductive and deductive explanations have met and agreed. He makes, indeed, two qualifying remarks. One is, that it ought to be remembered that even the deductive explanation is based on observation, on the self-observation of the person who offers it. This will be admitted by all. The other is, that every explanation is only provisional, and liable to be superseded in the course of the progress of knowledge, and of the historical growth of social and economic structure. This will also be admitted, and it is no peculiarity of political economy. There is no science whose conclusions are not modified by the advance of knowledge; and there are many sciences besides political economy whose phenomena change their type in lapse of time. Roscher's proviso, therefore, amounts to nothing more than a caution to economic investigators to build their explanations scrupulously on the facts, the whole facts, and nothing but the facts, and to be specially on their guard against applying to the circumstances of one period or nation explanations and recommendations which are only just regarding another. The same disease may have different symptoms in a child from what it has in a man, and a somewhat different type at the present day from what it had some centuries ago; and it may therefore require a quite different treatment. That is a very sound principle and a very self-evident one, and it contains the whole essence of the historical method, which, so far as it is a method of investigation at all, is simply that of other economists applied under a more dominating sense of the complexity and diversity of the phenomena which are subjected to it. There is consequently with the historical school more rigour of observation and less rigour of theory, and this peculiarity leads to practical results of considerable importance, but it has no just pretensions to assume the dignity of a new economic method, and it is made to appear much bigger than it is by looming through the scholastic distinctions in which it is usually set forth.

The historical school sometimes call their method the realistic and ethical method, to distinguish it from what they are pleased to term the idealistic, and selfish or materialistic method of the earlier economists. They are realists because they cannot agree with the majority of economists who have gone before them in believing there is one, and only one, ideal of the best economic system. There are, says Roscher, as many different ideals as there are different types of peoples, and he completely casts aside the notion, which had generally prevailed before him, that there is a single normal system of economic arrangements, which is built on the natural laws of economic life, and to which all nations may at all times with advantage conform. It is against this notion that the historical school has revolted with so much energy that they wish to make their opposition to it the flag and symbol of a schism. They deny that there are any natural laws in political economy; they deny that there is any economic solution absolutely valid, or capable of answering in one economic situation because it has answered in another. Roscher, Knies, and the older members of the school make most of the latter point; but Hildebrand, Schönberg, Schmoller, Brentano, and the younger spirits among them, direct against the former some of their keenest attacks. They declare it to be a survival from the exploded metaphysics of the much-abused Aufklärung of last century. They argue that just as the economists of that period took self-interest to be the only economic motive, because the then dominant psychology—that of the selfish or sensual school—represented it as the only real motive of human action, of which the other motives were merely modifications; so did they come to count the reciprocal action and reaction of the self-interest of different individuals to be a system of natural forces, working according to natural laws, because they found the whole intellectual air they breathed at the time filled with the idea that all error in poetry, art, ethics, and therefore also economics, had come through departing from nature, and that the true course in everything lay in giving the supremacy to the nature of things. We need not stop to discuss this historical question as to the origin of the idea; it is enough here to say that the Socialists of the Chair maintain that in economic affairs it is impossible to make any such distinction between what is natural and what is not so. Everything results from nature, and everything results from positive institution too. There is in economics either no nature at all, or there is nothing else. Human will effects or affects all; and human will is itself influenced, of course, by human nature and human condition. Roscher says that it is a mistake to speak of industry being forced into "unnatural" courses by priests or tyrants, for the priests and tyrants are part and parcel of the people themselves, deriving all their resources from the people, and in no respect Archimedeses standing outside of their own world. The action of the State in economic affairs is just as natural as the action of the farmer or the manufacturer; and the latter is as much matter of positive institution as the former. But while Roscher condemns this distinction, he does not go the length his disciples have gone, and reject the whole idea of natural law in the sphere of political economy. On the contrary, he actually makes use of the expression, "the natural laws of political economy," and asserts that, when they are once sufficiently known, all that is then needed to guide economic politics is to obtain exact and reliable statistics of the situation to which they are to be applied. Now that statement is exactly the position of the classical school on the subject. Economic politics is, of course, like all other politics, an affair of times and nations; but economic science belongs to mankind, and contains principles which may be accurately enough termed, as Roscher terms them, natural laws, and which may be applied, as he would apply them, to the improvement of particular economic situations, on condition that sufficiently complete and correct statistics are obtained beforehand of the whole actual circumstances. Economic laws are, of course, of the nature of ethical laws, and not of physical; but they are none the less on that account natural laws, and the polemic instituted by the Socialists of the Chair to expel the notion of natural law from the entire territory of political economy is unjustifiable. Phenomena which are the result of human action will always exhibit regularities while human character remains the same; and, moreover, they often exhibit undesigned regularities which, not being imposed upon them by man, must be imposed upon them by Nature. While, therefore, the Socialists of the Chair have made a certain point against the older economists by showing the futility and mischief of distinguishing between what is natural in economics and what is not, they have erred in seeking to convert that point into an argument against the validity of economic principles and the existence of economic laws. At the same time their position constitutes a wholesome protest against the tendency to exaggerate the completeness or finality of current doctrines, and gives economic investigation a beneficial direction by setting it upon a more thorough and all-sided observation of facts.

But when they complain of the earlier economists being so wedded to abstractions, the fault they chiefly mean to censure is the habit of solving practical economic problems by the unconditional application of certain abstract principles. It is the "absolutism of solutions" they condemn. They think economists were used to act like doctors who had learnt the principles of medicine by rote and applied them without the least discrimination of the peculiarities of individual constitutions. With them the individual peculiarities are everything, and the principles are too much thrown into the shade. Economic phenomena, they hold, constitute only one phase of the general life of the particular nations in which they appear. They are part and parcel of a special concrete social organism. They are influenced—they are to a great extent made what they are—by the whole ethos of the people they pertain to, by their national character, their state of culture, their habits, customs, laws. Economic problems are consequently always of necessity problems of the time, and can only be solved for the period that raises them. Their very nature alters under other skies and in other ages. They neither appear everywhere in the same shape, nor admit everywhere of the same answer. They must therefore be treated historically and empirically, and political economy is always an affair for the nation and never for the world. The historical school inveigh against the cosmopolitanism of the current economic theories, and declare warmly in favour of nationalism; according to which every nation has its own political economy just as it has its own constitution and its own character. Now here they are right in what they affirm, wrong in what they deny. They are right in affirming that economic politics is national, wrong in denying that economic science is cosmopolitan. In German the word economy denotes the concrete industrial system as well as the abstract science of industrial systems, and one therefore readily falls into the error of applying to the latter what is only true of the former. There may be general principles of engineering, though every particular project can only be successfully accomplished by a close regard to its particular conditions. In claiming a cosmopolitan validity for their principles, economists do not overlook their essential relativity. On the contrary, they describe their economic laws as being in reality nothing more than tendencies, which are not even strictly true as scientific explanations, and are never for a moment contemplated as unconditional solutions for practical situations. Moreover Roscher, in defining his task as an economist, virtually takes up the cosmopolitan standpoint and virtually rejects the national. He says a political economist has to explain what is or has been, and not to show what ought to be; he quotes the saying of Dunoyer, Je n'impose rien, je ne propose même rien, j'expose; and states that what he has to do is to unfold the anatomy and physiology of social and national economy. He is a scientific man, and not an economic politician, and naturally assumes the position of science, which is cosmopolitan, and not that of politics, which is national and even opportunist.

I pass now to a perhaps more important point, from which it will be seen that the Socialists of the Chair are far from thinking that political economy has nothing to do with what ought to be. Next to the realistic school, the name they prefer to describe themselves by is the ethical school. By this they mean two things, and some of them lay the stress on the one and some on the other. They mean, first, to repudiate the idea of self-interest being the sole economic motive or force. They do not deny it to be a leading motive in industrial transactions, and they do not, like some of the earlier socialists, aim at its extinction or replacement by a social or generous principle of action. But they maintain that the course of industry never has been and never will be left to its guidance alone. Many other social forces, national character, ideas, customs—the whole inherited ethos of the people—individual peculiarities, love of power, sense of fair dealing, public opinion, conscience, local ties, family connections, civil legislation—all exercise upon industrial affairs as real an influence as personal interest, and, furthermore, they exercise an influence of precisely the same kind. They all operate ethically, through human will, judgment, motives, and in this respect one of them has no advantage over another. It cannot be said, except in a very limited sense, that self-interest is an essential and abiding economic force and the others only accidental and passing. For while customs perish, custom remains; opinions come and go, but opinion abides; and though any particular act of the State's intervention may be abolished, State intervention itself cannot possibly be dispensed with. It is all a matter of more or less, of here or there. The State is not the intruder in industry it is represented to be. It is planted in the heart of the industrial organism from the beginning, and constitutes in fact part of the nature of things from which it is sought to distinguish it. It is not unnatural for us to wear clothes because we happen to be born naked, for Nature has given us a principle which guides us to adapt our dress to our climate and circumstances. Reason is as natural as passion, and the economists who repel the State's intrusion and think they are thus leaving industry to take its natural course, commit the same absurdity as the moralist who recommends men to live according to Nature, and explains living according to Nature to mean the gratification as much as possible of his desires, and his abandonment as much as possible of rational and, as he conceives, artificial plan. The State cannot observe an absolute neutrality if it would. Non-intervention is only a particular kind of intervention. There must be laws of property, succession, and the like, and the influence of these spreads over the whole industrial system, and affects both the character of its production and the incidence of its distribution of wealth.

But, second, by calling their method the ethical method, the historical school desire to repudiate the idea that in dealing with economic phenomena they are dealing with things which are morally indifferent, like the phenomena of physics, and that science has nothing to do with them but to explain them. They have certainly reason to complain that the operation of the laws of political economy is sometimes represented as if it were morally as neutral as the operation of the law of gravitation, and it is in this conception that they think the materialism of the dominant economic school to be practically most offensively exhibited. Economic phenomena are not morally indifferent; they are ethical in their very being, and ought to be treated as such. Take, for example, the labour contract. To treat it as a simple exchange between equals is absurd. The labourer must sell his labour or starve, and may be obliged to take such terms for it as leave him without the means of enjoying the rights which society awards him, and discharging the duties which society claims from him. Look on him as a ware, if you will, but remember he is a ware that has life, that has connections, responsibilities, expectations, domestic, social, political. To get his bread he might sell his freedom, but society will not permit him; he may sell his health, he may sell his character, for society permits that; he may go to sea in rotten ships, and be sent to work in unwholesome workshops; he may be herded in farm bothies where the commonest decencies of life cannot be observed; and he may suck the strength out of posterity by putting his children to premature toil to eke out his precarious living. Transactions which have such direct bearings on freedom, on health, on morals, on the permanent well-being of the nation, can never be morally indifferent. They are necessarily within the sphere of ends and ideals. Their ethical side is one of their most important ones, and the science that deals with them is therefore ethical. For the same reason they come within the province of the State, which is the normal guardian of the general and permanent interests, moral and economic, of the community. The State does not stand to industry like a watchman who guards from the outside property in which he has himself no personal concern. It has a positive industrial office. It is, says Schmoller, the great educational institute of the human race, and there is no sense in suspiciously seeking to reduce its action in industrial affairs to a minimum. His theory of the State is that of the Cultur-Staat, in distinction from the Polizei-Staat, and the Rechts-Staat. The State can no longer be regarded as merely an omnipotent instrument for the maintenance of tranquillity and order in the name of Heaven; nor even as a constitutional organ of the collective national authority for securing to all individuals and classes in the nation, without exception, the rights and privileges which they are legally recognised to possess; but it must be henceforth looked upon as a positive agency for the spread of universal culture within its geographical territory.