Riches and Poverty (1910)

by L. G. Chiozza Money

The flow of capital to places abroad continues to this hour. If South Africa is booming, the possessors of capital hasten to gather dividends on soil thousands of miles away, and with the interest received in this country, direct British labour to noble or ignoble ends, as may seem good in their eyes. If a foreign war is proceeding, they hasten to lend the belligerents as many millions as may be required at anything from five to eight per cent., and with the interest they give righteous or unrighteous "work" to other British sons of freedom. If a South African mine or a Japanese war loan offers apparent opportunities of quicker profits than putting fresh capital into British ironworks, or founding a new British industry, it is the end of South Africa or Japan which is served. Three per cent. gained at home, of course, is not so desirable as ten per cent. gained abroad. If, therefore, a housing scheme at home promises to yield but three per cent., while the employment of coolies in South Africa promises ten per cent., South Africa and the coolies are "developed"[40] and the housing scheme collapses. This is by no means a rhetorical flourish; it is the statement of a case not more extreme than hundreds which occur every year.

If I have dwelt upon our oversea investments (I use the possessive pronoun for the sake of simplicity of expression) it is because they illustrate in a very forcible way the misuse of British capital. But the neglect of British interests which they illustrate is small indeed when compared with the waste of income upon the pursuit of pleasure and the foundation of worthless industries at home. If the whole of our oversea investments had been made since 1860, the average amount so invested would be not more than £50,000,000 per annum. That consideration enables us to view the matter in its due perspective. The foreigner and the Colonist have gained through the profit-hunting of the few possessors of British wealth, but only to the extent indicated. The oversea investments, with all the taint of national shame which attaches to many of them, sink into insignificance when we consider the wanton waste of labour which has occurred at home. Since 1860 probably as much as £6,000,000,000 of income which should have passed into reproductive capital has been thrown away in forms of expenditure which have been to the degradation of the community. Had that £6,000,000,000 been employed in the promotion of cheap transport, in the attachment of agricultural workers to the soil, in the acquisition of land by municipalities, in the provision of healthy homes for the people, the problems which confront us to-day would be of a different order, and it would not be possible for the dire poverty of one-third of our people to be basely used as a weapon of political warfare.

And while so much of the labour which might have added to the nobility and happiness of the British people has been wasted by direction of a small fraction of their number, no small part of our employed capital is but the tool of mischief. For just as individual capital goes abroad to seek its usury without regard to principle or patriotism, so at home it engages in the most profitable enterprise known to its limited intelligence, without regard to morality or the national welfare. It is often more profitable to appeal to what is worst in human nature than to seek to supply it with things healthy and honourable. "Is there money in it?" is the only touchstone which individual capital applies to enterprise.

Obviously there must be reciprocation between the demand for luxurious articles and the capital employed in their production. The misdirection of labour which we examined in the last chapter connotes a considerable misdirection of capital. Thus the effects of luxurious expenditure are two-fold. There is dissipation of income in the payment for luxurious immaterial commodities which call for no fixed capital, and again there is the expenditure of income upon luxurious material commodities which call capital to their creation. In either case the result is waste. The menial servant is an illustration of the first process. He is divorced from production and his work lost to the nation at large. The commodity which he sells is obsequious hand-service, degrading alike to himself and the person he serves. The purchase of a motor-car is a striking example of the second process. To produce it a considerable plant is required and capital flows to a business profitable because its customers are rich persons who view low priced articles with suspicion.

A striking illustration of a combination of the two processes is afforded by a fashionable hotel and restaurant. Here we have a large amount of capital sunk in an enormous building which is sustained entirely by the expenditure of the wealthy. A host of menial servants are employed, whose lives are a denial of manhood and womanhood. In addition there are nominally useful occupations associated with the conduct of the business. It calls for the manufacture of food, of utensils, and of furniture, and a large number of tradesmen and their nominally useful assistants are regularly employed in connexion with its supplies. A hotel of 700 bedrooms directs the services of an army of people, most of whom would appear in the Census as following useful occupations. The whole concern is for the most part an organization for the waste of capital and labour, and its manifold activities are called into existence by the orders of a very limited number of unduly rich people who desire that hand-service shall be at their command at a moment's notice wherever they may be.

Even more extraordinary is the organization of entire districts in the service of wealth and luxury. Nothing can be more pitiable than the spectacle which is presented by a neighbourhood the inhabitants of which are economically dependent upon the patronage of a limited number of well-to-do residents. The local tradesmen, the local builders, the local carters, the local nurserymen, the local physician, the local boat-builders, the entire local organization, with its little capital and much labour, is under the economic over-lordship of a few persons whose patronage sustains the entire machinery. Little that is useful is produced in the district; but by a process which none of its inhabitants could explain there are imported into it commodities from all parts of the country. Parasites upon parasites, they scramble for the expenditure of the well-to-do, and often contrive to make fat livings out of them. Thus, through the initial evil, the underpayment of labour at one end of the scale, there is created at the other end a class of luxury providers who have no conception of their true position in our social system, or of their uselessness to the community at large.

There remains to consider the tremendous waste of capital which arises from (1) unnecessary competition and (2) weak or bogus company promotion.

In the game of competition frequent attempts are made to establish superfluous businesses in many branches of trade. While industry remains unorganized such waste of capital must continue, for lacking an estimate of the quantity of commodities required in any particular department, the limits of consumption can only be found by fruitless attempts to discover an unsatisfied demand. This blind application of capital, not to service, but in the hope of gain, accounts for the waste of large quantities of labour.

Turning to company promotion, it is certain that hundreds of millions of capital have been wasted in the last twenty years through the dangling of fancy baits before the possessors of unearned increment. The company promoter obtains from Somerset House the names and addresses of shareholders in such concerns as those referred to in Chapter 8, and so is enabled to send to persons who have already tasted the joys of "waiting" a prospectus promising them even larger slices of unearned increment than they already receive. So other millions derived from labour pass into channels of waste.

The waste and misdirection of capital is a far-reaching matter. Lacking capital, which simply means lacking tools, labour cannot be economically exerted, whether in agriculture, in manufacturing, or in distribution. For the use of tools we leave the great mass of our population dependent upon a comparative handful of rich persons. That dependence amounts to an economic serfdom which places the direction of the lives and labours of the people in the hands of the few. The unduly large share of the national dividend possessed by the rich produces in them grave faults of character and purpose which make them indifferent administrators of the capital without which labour is powerless. The unduly small share of the national dividend possessed by the poor is the source of a stream of moral and physical evils which, mingling with the waters of death which descend from the high levels of luxury, produces effects whose causation is only obscure as long as we neglect the study of the Error of Distribution.