The Unsolved Riddle of Social Justice

by Stephen Leacock

But in reality this paradox of value is the most fundamental proposition in economic science. Precisely here is found the key to the operation of the economic society in which we live. The world's production is aimed at producing "values," not in producing plenty. If by some mad access of misdirected industry we produced enough and too much of everything, our whole machinery of buying and selling would break down. This indeed does happen constantly on a small scale in the familiar phenomenon of over-production. But in the organization in which we live over-production tends to check itself at once. If the world's machinery threatens to produce a too great plenty of any particular thing, then it turns itself towards producing something else of which there is not yet enough. This is done quite unconsciously without any philanthropic intent on the part of the individual producer and without any general direction in the way of a social command. The machine does it of itself. When there is enough the wheels slacken and stop. This sounds at first hearing most admirable. But let it be noted that the "enough" here in question does not mean enough to satisfy human wants. In fact it means precisely the converse. It means enough not to satisfy them, and to leave the selling price of the things made at the point of profit.

Let it be observed also that we have hitherto been speaking as if all things were produced under a monopoly. The objection might at once be raised that with competitive producers the price will also keep falling down towards cost and will not be based upon the point of maximum profit. We shall turn to this objection in a moment. But one or two other points must be considered before doing so.

In the first place in following out such an argument as the present in regard to the peculiar shortcomings of the system under which we live, it is necessary again and again to warn the reader against a hasty conclusion to the possibilities of altering and amending it. The socialist reads such criticism as the above with impatient approval. "Very well," he says, "the whole organization is wrong and works badly. Now let us abolish it altogether and make a better one." But in doing so he begs the whole question at issue. The point is, can we make a better one or must we be content with patching up the old one? Take an illustration. Scientists tell us that from the point of view of optics the human eye is a clumsy instrument poorly contrived for its work. A certain great authority once said that if he had made it he would have been ashamed of it. This may be true. But the eye unfortunately is all we have to see by. If we destroy our eyes in the hope of making better ones we may go blind. The best that we can do is to improve our sight by adding a pair of spectacles. So it is with the organization of society. Faulty though it is, it does the work after a certain fashion. We may apply to it with advantage the spectacles of social reform, but what the socialist offers us is total blindness. But of this presently.

To return to the argument. Let us consider next what wages the monopolist in the cases described above will have to pay. We take for granted that he will only pay as much as he has to. How much will this be? Clearly enough it will depend altogether on the number of available working men capable of doing the work in question and the situation in which they find themselves. It is again a case of relative "economic strength." The situation may be altogether in favor of the employer or altogether in favor of the men, or may occupy a middle ground. If the men are so numerous that there are more of them than are needed for the work, and if there is no other occupation for them they must accept a starvation wage. If they are so few in number that they can all be employed, and if they are so well organized as to act together, they can in their turn exact any wage up to the point that leaves no profit for the employer himself at all. Indeed for a short time wages might even pass this point, the monopolist employer being willing (for various reasons, all quite obvious) actually to pay more as wages than he gets as return and to carry on business at a loss for the sake of carrying it on at all. Clearly, then, wages, as Adam Smith said, "are the result of a dispute" in which either party must be pushed to the wall. The employer may have to pay so much that there is nothing or practically nothing left for himself, or so little that his workmen can just exist and no more. These are the upward and downward limits of the wages in the cases described.

It is therefore obvious that if all the industries in the world were carried on as a series of separate monopolies, there would be exactly the kind of rivalry or competition of forces represented by the consumer insisting on paying as little as possible, the producer charging the most profitable price and paying the lowest wage that he could, and the wage earner demanding the highest wage that he could get. The equilibrium would be an unstable one. It would be constantly displaced and shifted by the movement of all sorts of social forces—by changes of fashion, by abundance or scarcity of crops, by alterations in the technique of industry and by the cohesion or the slackening of the organization of any group of workers. But the balanced forces once displaced would be seen constantly to come to an equilibrium at a new point.

All this has been said of industry under monopoly. But it will be seen to apply in its essentials to what we call competitive industry. Here indeed certain new features come in. Not one employer but many produce each kind of article. And, as far as each employer can see by looking at his own horizon, what he does is merely to produce as much as he can sell at a price that pays him. Since all the other employers are doing this, there will be, under competition, a constant tendency to cut the prices down to the lowest that is consistent with what the employer has to pay as wages and interest. This point, which was called by the orthodox economists the "cost," is not in any true and fundamental sense of the words the "cost" at all. It is merely a limit represented by what the other parties to the bargain are able to exact. The whole situation is in a condition of unstable equilibrium in which the conflicting forces represented by the interests of the various parties pull in different directions. The employers in any one line of industry and all their wage earners and salaried assistants have one and the same interest as against the consumer. They want the selling price to be as high as possible. But the employers are against one another as wanting, each of them, to make as many sales as possible, and each and all the employers are against the wage earners in wanting to pay as low wages as possible. If all the employers unite, the situation turns to a monopoly, and the price paid by the consumer is settled on the monopoly basis already described. The employers can then dispute it out with their working men as to how much wages shall be. If the employers are not united, then at each and every moment they are in conflict both with the consumer and with their wage earners. Thus the whole scene of industry represents a vast and unending conflict, a fermentation in which the moving bubbles crowd for space, expanding and breaking one against the other. There is no point of rest. There is no real fixed "cost" acting as a basis. Anything that any one person or group of persons—worker or master, landlord or capitalist—is able to exact owing to the existing conditions of demand or supply, becomes a "cost" from the point of view of all the others. There is nothing in this "cost" which proportions to it the quantity of labor, or of time, or of skill or of any other measure physical or psychological of the effort involved. And there is nothing whatever in it which proportions to it social justice. It is the war of each against all. Its only mitigation is that it is carried on under the set of rules represented by the state and the law.

The tendencies involved may be best illustrated by taking one or two extreme or exaggerated examples, not meant as facts but only to make clear the nature of social and industrial forces among which we live.

What, for example, will be the absolute maximum to which wages in general could be forced? Conceivably and in the purest and thinnest of theory, they could include the whole product of the labor of society with just such a small fraction left over for the employers, the owners of capital and the owners of land to induce them to continue acting as part of the machine. That is to say, if all the laborers all over the world, to the last one, were united under a single control they could force the other economic classes of society to something approaching a starvation living. In practice this is nonsense. In theory it is an excellent starting point for thought.

And how short could the hours of the universal united workers be made? As short as ever they liked: An hour a day: ten minutes, anything they like; but of course with the proviso that the shorter the hours the less the total of things produced to be divided. It is true that up to a certain point shortening the hours of labor actually increases the total product. A ten-hour day, speaking in general terms and leaving out individual exceptions, is probably more productive than a day of twelve. It may very well be that an eight-hour day will prove, presently if not immediately, to be more productive than one of ten. But somewhere the limit is reached and gross production falls. The supply of things in general gets shorter. But note that this itself would not matter much, if somehow and in some way not yet found, the shortening of the production of goods cut out the luxuries and superfluities first. Mankind at large might well trade leisure for luxuries. The shortening of hours with the corresponding changes in the direction of production is really the central problem in social reform. I propose to return to it in the concluding chapter of these papers, but for the present it is only noted in connection with the general scheme of industrial relations.

Now let us ask to what extent any particular section or part of industrial society can succeed in forcing up wages or prices as against the others. In pure theory they may do this almost to any extent, provided that the thing concerned is a necessity and is without a substitute and provided that their organization is complete and unbreakable. If all the people concerned in producing coal, masters and men, owners of mines and operators of machinery, could stand out for their price, there is no limit, short of putting all the rest of the world on starvation rations, to what they might get. In practice and in reality a thousand things intervene—the impossibility of such complete unity, the organization of the other parties, the existing of national divisions among industrial society, sentiment, decency, fear. The proposition is only "pure theory." But its use as such is to dispose of any such idea as that there is a natural price of coal or of anything else.