The English Utilitarians, Volume 2 (of 3) / James Mill

by Leslie Stephen

Ricardo's position suggested a different line of reply. The doctrines that capital is 'accumulated labour' and that all value is in proportion to the labour fell in with the Socialist theory. If value is created by labour, ought not 'labour' to possess what it makes? The right to the whole produce of labour seemed to be a natural conclusion. Ricardo might answer that when I buy your labour, it becomes mine. I may consider myself to have acquired the rights of the real creator of the wealth, and to embody all the labourers, whose 'accumulated labour' is capital. Still, there is a difficulty. The beaver and deer case has an awkward ethical aspect. To say that they are exchanged at such a rate seems to mean that they ought to be exchanged at the rate. This again implies the principle that a man has a right to what he has caught; that is, to the whole fruits of his labour. James Mill, as we have seen, starts his political treatise by assuming this as obvious.[335] He did not consider the possible inferences; for it is certainly a daring assumption that the principle is carried out by the economic system. According to Ricardo rent is paid to men who don't labour at all. The fundholder was a weight upon all industry, and as dead a weight as the landlord. The capitalist, Ricardo's social mainspring, required at least cross-examination. He represents 'accumulated labour' in some fashion, but it is not plain that the slice which he takes out of the whole cake is proportioned accurately to his personal labour. The right and the fact which coincided in the deer and beaver period have somehow come to diverge.

Here, then, we are at a point common to the two opposing schools. Both are absolute 'individualists' in different senses. Society is built up, and all industrial relations determined, by the competition of a multitude of independent atoms, each aiming at self-preservation. Malthus's principle applies this to the great mass of mankind. Systematically worked out, it has led to Ricardo's identification of value with quantities of labour. Keeping simply to the matter of fact, it shows how a small minority have managed to get advantages in the struggle, and to raise themselves upon the shoulders of the struggling mass. Malthus shows that the resulting inequality prevents the struggle from lowering every one to starvation point. But the advantage was not obvious to the struggling mass which exemplified the struggle for existence. If equality meant not the initial facts but the permanent right, society was built upon injustice. Apply the political doctrine of rights of man to the economic right to wealth, and you have the Socialist doctrine of right to the whole produce of labour. It is true that it is exceedingly difficult to say what each man has created when he is really part of a complex machinery; but that is a problem to which Socialists could apply their ingenuity. The real answer of the political economists was that although the existing order implied great inequalities of wealth it was yet essential to industrial progress, and therefore to an improvement in the general standard of comfort. This, however, was the less evident the more they insisted upon the individual interest. The net result seemed to be that by accident or inheritance, possibly by fraud or force, a small number of persons have got a much larger share of wealth than their rivals. Ricardo may expound the science accurately; and, if so, we have to ask, What are the right ethical conclusions?

For the present, the Utilitarians seem to have considered this question as superfluous. They were content to take the existing order for granted; and the question remains how far their conclusions upon that assumption could be really satisfactory.

IV. THE CLASSICAL POLITICAL ECONOMY.

Ricardo had worked out the main outlines of the 'Classical Political Economy': the system which to his disciples appeared to be as clear, consistent, and demonstrable as Euclid; and which was denounced by their opponents as mechanical, materialistic, fatalistic, and degrading. After triumphing for a season, it has been of late years often treated with contempt, and sometimes banished to the limbo of extinct logomachies. It is condemned as 'abstract.' Of all delusions on the subject, replies a very able and severe critic,[336] there is none greater than the belief that it was 'wholly abstract and unpractical.' Its merits lay in its treatment of certain special questions of the day; while in the purely scientific questions it was hopelessly confused and inconsistent. Undoubtedly, as I have tried to point out, Malthus and Ricardo were reasoning upon the contemporary state of things. The doctrine started from observation of facts; it was too 'abstract' so far as it neglected elements in the concrete realities which were really relevant to the conclusions. One cause of confusion was the necessity of starting from the classification implied in ordinary phrases. It is exemplified by the vague use of such words as 'capital,' 'value,' 'supply and demand.' Definitions, as is often remarked,[337] come at the end of an investigation, though they are placed at the beginning of an exposition. When the primary conceptions to be used were still so shifting and contradictory as is implied in the controversies of the day, it is no wonder that the formulæ should be wanting in scientific precision. Until we have determined what is meant by 'force' we cannot have a complete science of dynamics. The economists imagined that they had reached the goal before they had got rid of ambiguities hidden in the accepted terminology. Meanwhile it will be enough if I try to consider broadly what was the nature of the body of statements which thus claimed to be an elaborated science.

Ricardo's purpose was to frame a calculus, to give a method of reasoning which will enable us to clinch our economic reasoning. We are to be sure that we have followed out the whole cycle of cause and effect. Capitalists, landowners, labourers form parts of a rounded system, implying reciprocal actions and reactions. The imposition of a tax or a tariff implies certain changes in existing relations: that change involves other changes; and to trace out the total effect, we must understand what are the ultimate conditions of equilibrium, or what are the processes by which the system will adjust itself to the new conditions. To describe, again, the play of a number of reciprocal forces, we have to find what mathematicians call an 'independent variable': some one element in the changes on which all other changes will depend. That element, roughly speaking, ultimately comes out to be 'labour.' The simplicity of the system gave an impression both of clearness and certainty, which was transferred from the reasoning to the premises. The facts seemed to be established, because they were necessary to the system. The first step to an estimate of the value of the doctrine would be to draw up a statement of the 'postulates' implied. Among them, we should have such formulæ as the single rate of profits and wages; which imply the 'transferability' of labour and capital, or the flow of either element to the best-paid employment. We should have again the Malthusian doctrine of the multiplication of labour up to a certain standard; and the fact that scarcity means dearness and plenty cheapness. These doctrines at least are taken for granted; and it may perhaps be said that they are approximations which only require qualifications, though sometimes very important qualifications, to hold good of the society actually contemplated.

They were true enough to give the really conclusive answer to many popular fallacies. The type of sophistry which Ricardo specially assailed was that which results from neglecting the necessary implications of certain changes. The arguments for the old 'mercantile theory'—for 'protection' of industry, for the poor-law, for resisting the introduction of machinery, the fear of 'gluts' and all manner of doctrines about the currency—were really exposed by the economists upon the right grounds. It was absurd to suppose that by simply expanding the currency, or by making industry less efficient, or forcing it to the least profitable employments, you were increasing the national wealth; or to overlook the demoralising effects of a right to support because you resolved only to see the immediate benefits of charity to individuals. It is true, no doubt, that in some cases there might be other arguments, and that the economists were apt to take a narrow view of the facts. Yet they decisively exploded many bad arguments, and by the right method of enforcing the necessity of tracing out the whole series of results. It was partly to their success in confuting absurd doctrines that their confidence was due; though the confidence was excessive when it was transferred to the axioms from which they professed to start. A doctrine may be true enough to expose an error, and yet not capable of yielding definite and precise conclusions. If I know that nothing can come out of nothing, I am on the way to a great scientific principle and able to confute some palpable fallacies; but I am still a very long way from understanding the principle of the 'conservation of energy.' The truth that scarcity meant dearness was apparently well known to Joseph in Egypt, and applied very skilfully for his purpose. Economists have framed a 'theory of value' which explains more precisely the way in which this is brought about. A clear statement may be valuable to psychologists; but for most purposes of political economy Joseph's knowledge is quite sufficient. It is the doctrine which is really used in practice whatever may be its ultimate justification.

The postulates, however, were taken by the economists to represent something more than approximate statements of the fact. They imply certain propositions which might be regarded as axioms. Men desire wealth and prefer their own interests. The whole theory might then be regarded as a direct deduction from the axioms. It thus seemed to have a kind of mathematical certainty. When facts failed to conform to the theory the difficulty could be met by speaking, as Malthus spoke, of 'tendencies,' or by appealing to the analogy of 'friction' in mechanics. The excuse might be perfectly valid in some cases, but it often sanctioned a serious error. It was assumed that the formula was still absolutely true of something, and that the check or friction was a really separable and accidental interference. Thus it became easy to discard, as irrelevant, objections which really applied to the principle itself, and to exaggerate the conformity between fact and theory. The economic categories are supposed to state the essential facts, and the qualifications necessary to make them accurate were apt to slip out of sight. Ricardo,[338] to mention a familiar instance, carefully points out that the 'economic rent,' which clearly represents an important economic category, is not to be confounded, as in 'popular' use, with the payments actually made, which often include much that is really profit. The distinction, however, was constantly forgotten, and the abstract formula summarily applied to the concrete fact.