And not only would socialism discourage ambition by abolishing private enterprise, but it might encourage inefficiency and shiftlessness. Every man would be guaranteed a job, every individual would be protected against want. It is even likely that a socialist state would undertake to rear and provide for the offspring of its citizens. Human experience indicates that this degree of paternalism would encourage laziness and increase irresponsibility.
It is sometimes said that under socialism men would work as eagerly for social esteem as they now work for financial gain. This would be a highly desirable condition, but unfortunately there is nothing in human experience to justify the hope that such a state of affairs will speedily be realized. The spread of altruism in the modern world is heartening, but no sensible person will shut his eyes to the fact that, for the immediate future at least, self-interest promises to be much more widespread than altruism. The love of gain may not be the highest motive in life, but it is better than none, and for a long time to come it will probably be the one which appeals most strongly to the average man. Socialists and non-socialists alike deplore the domination which self-interest exercises over human affairs. But whereas the non-socialist wisely tries to adapt a program of industrial reform to this hard fact, many socialists appear to believe that because the principle of self-interest often works out badly, they ought to act as though that principle did not exist.
158. SOCIALIST THEORY OF DISTRIBUTION UNSOUND.—Both socialists and non-socialists admit that poverty is an undesirable condition. But over the method of improving the condition of the poor the socialist and the non-socialist disagree. The defender of capitalism begins by pointing out that, under competitive conditions, the unskilled laborer is poor primarily because his labor is not highly productive. The socialist ignores this fact, and insists that the laborer shall receive a share of wealth which shall be adequate to his needs. As we shall have occasion to point out in the next chapter, this attitude of the socialist indicates a fundamental defect in his theory. Socialism pays more attention to who shall eat and how much shall be eaten, than it does to the more fundamental question of how food is to be produced, and how much can actually be produced. Laws may oblige an employer to give his workmen twice as much as they add to the value of his product, but though this will benefit the workmen while it lasts, such a practice would, if widely adopted, lead to industrial bankruptcy. [Footnote: It is assumed, in this section, that the productivity of the laborer is determined from the point of view of the employer. This is in accordance with the productivity theory which was discussed in Chapter IX.]
159. SOCIALIST THEORY OF VALUE UNSOUND.—Many of the defects of the socialist doctrine are traceable to the fact that it rests upon false assumptions. One of these false assumptions is that commodities have value in proportion as labor has been expended upon them. This labor theory of value has been discarded by every authoritative economist of modern times. As has been pointed out in Chapter VIII, value depends upon scarcity and utility. The soundness of the scarcity-utility theory, as well as the unsoundness of the labor theory, may be brought out with reference to three classes of goods.
First, there are commodities which have value in spite of the fact that no labor has been expended upon them. Virgin land, the gift of Nature, is the most important example. Articles of this class have value because they satisfy men's wants, i.e. have utility, and because they are scarce. Labor has nothing to do with their original value.
Second, there are commodities which have no value, even though much labor has been expended upon them. A building erected in a desert or in a wilderness is an example. Unwanted books, or paintings by unknown artists are other examples. Commodities in this class may represent a great expenditure of labor, and still have no value, first because they do not satisfy anyone's wants, and second because they are not scarce, i.e. there are not fewer of them than are wanted.
Third, articles may have a value which is out of proportion to the amount of labor expended upon them. The value of diamonds, old coins, and rare paintings is disproportionate to the actual amount of labor involved in their production. A sudden change in fashion may cause the value of clothing and other commodities to rise or fall, with little or no regard for the amount of labor expended upon them. In each case it is not labor that determines value, but scarcity and utility.
160. LABOR NOT THE ONLY FACTOR IN PRODUCTION.—Labor is an important factor in production, but land, capital, co÷rdination, and government are also of vital importance to any modern industrial community. The great error of the socialist is that he over-estimates the importance of the laborer, and minimizes or altogether denies the importance of the individuals with whom the laborer co÷perates in production. This error is explainable: the laborer does most of the visible and physical work of production, while the part played by the landowner, the capitalist, and the entrepreneur is less physical and often is apparently less direct. The complexity of the industrial mechanism very often prevents the laborer from appreciating the true relation existing between his own physical labor, and the apparently indirect and often non-physical efforts of those who co÷perate with him. It is in this connection that producers' co÷peration and bolshevism have performed a great service. They have demonstrated, by the out-and-out elimination of the managing employer, that the laborer alone cannot carry on modern industry. Such actual demonstrations of the value of factors of production other than labor are of far more service in correcting the viewpoint of the socialist than is any amount of theoretical argument.
161. THEORY OF CLASS STRUGGLE UNWARRANTED.—The theory of class struggle is based upon the claim that the laborer produces all wealth. But we have seen this claim to be unfounded; therefore the theory of class struggle is built upon an error. Ultimately, the theory of class struggle tends to injure the very class which seeks to gain by advocating it, for true and permanent prosperity for the laboring class (as well as for all other classes) can result only when all of the factors of production work together harmoniously. Fundamentally the quarrel between capital and labor [Footnote: The phrase "capital and labor" is loose and inaccurate, but is in common use. Used in this sense the word "capital" refers to the capitalist and employing classes, while the word "labor" refers to the workers. See Section 181, Chapter XVIII, for a fuller discussion.] is as suicidal as though the arms of a human body refused to co÷perate with the other members. There are, indeed, many antagonisms between capital and labor, but socialism seeks to foment, rather than to eliminate them. Socialism preaches social solidarity and prosperity for all, but by inciting the class struggle it makes for class hatred and a disharmony between capital and labor which decreases prosperity and threatens economic ruin.
162. HISTORY HAS DISPROVED SOCIALISM.—Karl Marx bases his theory of a future socialist state upon a number of predictions, none of which has come true. According to Marx, socialism was inevitable. He declared that the centralization of wealth in the hands of the capitalists, on the one hand, and the increasing misery of the workers on the other, would accentuate the class struggle and bring about the downfall of capitalism. As a matter of fact, laws are more and more restricting the undue concentration of wealth in the hands of a few. The middle classes, far from disappearing, as Marx predicted, are increasing in numbers and in wealth. The working classes are not becoming poorer and more miserable, but are securing a larger and larger share of the joint income of industry.