How this situation has come about may be stated summarily in a few words: (a) The pursuit of profit tends to lower the cost of production, while it raises the price of the product. Chief among the costs of production is the payment of labour,—that is to say, wages. The result of this tendency is to depress the income of the worker and at the same time to raise his expenditure and since there is no limit fixed at either end the standard of life is in constant danger of being lowered beneath the point of reasonable subsistence. It often happens that wages show an increase over given periods of time; but it is an increase of money-wages and not of real wages; since the period of wage-increase is generally also a period of a disproportionate increase in the price of commodities. Some check has been placed upon the decrease of wages by Trade Union action; but this is offset by the partial elimination of competition in the markets through the growth of Trusts and Combines, and the consequent upward tendency of prices.
(b) This insecurity is accentuated by the fact that the maintenance of profits frequently require a check upon productivity in order to tighten the market by reducing the supply of commodities. It is estimated that in America this interference with production has kept productivity down anywhere between twenty-five and fifty per cent. below its possible maximum. This obstruction is effected by such devices as the diminution of working hours, dismissal of workmen, and periodic stoppages of work.
(c) A further element of insecurity is to be found in the circumstance that labour is itself treated as a commodity, subject to market fluctuations, its price governed by the relation of supply to demand, like any other commodity. In order to prevent an undue rise in the price of labour, the industrial system has evolved a reserve of labour, commonly called unemployment. In normal times, there is in every trade a chronic margin—varying in amount—of unemployed men; and no man knows when his turn may come to fall into the reserve. It naturally happens that the less efficient man goes first—the man least equipped to face the demoralising effects of unemployment. The result is that he degenerates into an unemployable and swells the volume of the human driftwood of our social order.
(d) Insecurity arises also from the unquestioned and unchallenged authority of the owners or representatives of the invested capital, against whose verdicts there is no appeal. The worker is at the absolute mercy of the master or the foreman; and he can usually find work only at the sacrifice of his freedom. Should he display any signs of restiveness and be dismissed, the growth of Trusts and Employers’ Associations has made it possible to deny him employment within the area over which such bodies exercise control.
This takes no account of the dehumanising and despiritualising effects of the machine industry under the conditions of the profit system. That is an aggravation of the situation which must be considered in another connection. Here we are concerned to note the failure of commerce under a profit system to provide the conditions of security of life for the mass of men. And not the least disastrous consequence of this failure is the deep social schism it has engendered. It has created the criminal antithesis of great wealth and great poverty in great cities, and the virtually open warfare between capital and labour. The investor and the employer are bent on larger dividends upon the outlay of capital; the worker is seeking a larger return upon his outlay of labour. In the struggle the worker is at a disadvantage. For while capital and labour, the producers, are fighting, the casualties of the struggle are chiefly among the consumers. But the consumers are mostly composed of the labourer and the tenement-dweller, that is to say, the working-class itself. So that the worker in the struggle is divided against himself. If he is successful in his struggle for higher wages, the advantage is lost through the increased price of commodities; for the employer pays the higher wages out of higher prices. In the issue, the worker is caught in the vicious circle of a continuous struggle against himself, which to dependence and insecurity adds an unending confusion.
No question is here raised as to the legitimacy of profit; we are concerned only to point out the consequences of a system which permits an unlimited expansion of profits; and it should be clear that the redemption of commerce and its restoration to the status of the social service it should be, are to be wrought first by imposing a limit upon profit-making.
This requires two measures:
First, the production and distribution of the necessities of life should be definitely placed outside the sphere of competition. The British Labour Party in its memorandum on reconstruction, proposes that the coal-supply shall be so organised that the ordinary householder shall be able to have his coal delivered at his door, at a uniform price all over the country and all through the year—just as he buys postage stamps. But the principle should be extended to all the essential commodities. Flour, milk, coal, meat, wool, cotton and their immediate derivatives should be withdrawn from the circle of competitive commerce, and be no more subject to the fluctuations of a market manipulated in the interest of profit-making than the water-supply is. There is no reason why the supply of these primary articles should not be so regulated as to bear a reasonably constant proportion to the demand. For those who argue that this would dislocate the customary economic processes, a two-fold answer may be returned. First, that the customary economic processes deserve to be dislocated; and second, that the only possible justification of the customary economic processes is derived from an economic theory which is no longer relevant to the facts of life. In point of actual fact, the standardisation of prices has become in recent years increasingly common—the elimination of competition by the formation of trusts and combines has had the result of fixing prices with a considerable rigidity; and during the war, it has been done on a very large scale. In neither case is it suggested by any one that it has had a deleterious effect upon commerce. In this proposal for the standardisation of prices, there is nothing new; it is simply a revival of the mediæval custom of the justum pretium—according to which buyers and sellers and market authorities together determined a price for each commodity which should be equally fair to the producer and the consumer; and a return to this practice—with such modifications as modern conditions require—is opposed only by those who still hold to the curious illusion that Adam Smith spoke the last word upon this subject.[[14]]
[14]. Revelations of after-war profiteering in Great Britain and America are creating a definite demand for standardisation of prices. And if we are to have Wages Boards, why not Prices Boards?
Second: A limit should be placed upon profits, dividends, incomes and fortunes. This may be done by taxation, inheritance duties and other devices already familiar to the managers of public finance. We should agree to make it cease to be worth anyone’s while to exploit the public, by fixing rigid bounds to the accumulation of private wealth; and this we may do with a good conscience. For all wealth is socially produced; and the society which produces it has the first claim upon it. This is a position which can be challenged only by those who still hold that the possession of property confers upon its possessors a “divine right” to take the lion’s share of the wealth produced by the industry of the whole community.