It seems impossible, therefore, to expect from co-operation a final solution of the labor problem, such as John Stuart Mill, for instance, hoped for. Where successful, it has succeeded in distributing profits among a larger number of persons than would otherwise have received them. Its educative and moral effects, moreover, in the appeals which it makes to higher motives and to character, are of the highest value. But as an industrial system of enterprise it cannot supplant the present system as long as the manager of industry is needed. Today he performs a useful social service and profits are his pay therefor. If he is to be eliminated, society must first be raised to a higher plane of efficiency, intelligence, and morality. But just because it makes these high demands upon the members of
the laboring class, attempts at co-operation should receive all reasonable encouragement.
XIII. PROBLEMS OF DISTRIBUTION.
So far we have discussed for the most part those economic problems that center round the production of wealth, such as the use of natural resources, large-scale production, trusts and monopolies, labor organizations, unemployment, industrial education and co-operation. Now we shall consider briefly a few of the problems that are connected with the distribution of wealth. Professor Blockmar[38] says that the three great problems of economic society are: “First, how to create the largest amount of utilities or wealth; second, how justly to divide this amount; and third, how to make the product minister to the permanent rather than to the transient well-being of society.” The first problem we have already discussed; the second forms the subject of the present section; while the third will be taken up in the next section. Within the last century the center of interest in the practical application of economic principles has decidedly shifted from production to distribution. The earlier writers in economics, as shown in the mercantile lists of the seventeenth and eighteenth centuries, even Adam Smith, were chiefly interested in methods of increasing a nation’s wealth. With the introduction of the factory system and the opening up of vast natural resources by improvements in mining and transportation, the production of wealth has enormously increased, and now the question of the method of its distribution or division is felt to be more pressing.
Under the term distribution two different processes are included, which should be distinguished before going further. The first is called functional distribution, and concerns the distribution of the product of industry or the income of society, among the different factors of production.
That is to say, land, labor, capital and managerial ability have contributed in varying degrees to the production of a certain amount of current wealth, and the problem of functional distribution is to ascertain how the net product resulting from these joint efforts is divided. How much goes to rent, how much to wages, how much to interest and how much to profits? The second kind of distribution is the division of the wealth of society among individuals or families; this is personal distribution, and raises the question of poverty and great wealth. In discussing these problems, however, we must remember that wealth production and distribution takes place in modern society under conditions imposed by the social order in which we live; these were defined as competition, private property and personal liberty. If any modifications of the processes of distribution were desired, it would undoubtedly be necessary to alter these fundamental institutions.
John Stuart Mill held that production was governed by natural laws, which could be ascertained and stated, but that distribution was artificial and hence that it was not possible to discover constant and certain laws governing it. Beginning mainly with Mill, the ethical question has been more and more asked as to what share each factor in production ought to get, not merely what he does receive. “Hence the question is rising more and more as to what should be the basis of division, and many proposals have been made. It is proposed that laborers combine to get a larger share. Hence we have trade unions, Knights of Labor, etc. It is proposed that capitalists and landlords give a larger proportion of the produce to the laborers than they are able to secure by mere private struggle. Hence we have proposals for profit-sharing and various charities. It is proposed that laborers combine to be their own capitalists and landlords; hence we have all sorts of co-operative and communistic experiments. It is asserted that the wealthy classes have so much power in their hands
that private co-operation cannot succeed in competing against them, and hence it is proposed that all the people, through government (municipal, state, and national), secure all the means of production (capital and land, so far at least as land is used for production), and operate them collectively for the equitable good of all, the people thus being their own employers, capitalists, and landlords. Hence we have municipalism, nationalism, socialism. It is claimed that capitalists and landlords have been able to secure, and are today able to maintain, their large share in distribution, only through the favoritism of the Government. Hence we have proposals for free trade, the single tax,... the extreme proposals of the very great minimizing of the state in individualism, or the abolition of the Government in anarchism.”[39] In view of this very imperfect list it is not too much to say that most of the economic problems that are stirring society today are connected with the distribution of wealth.
The first question that suggests itself in the discussion of functional distribution is as to whether it is actually governed by natural law, so-called. It is observable that the amounts which go to rent, to wages, to interest, and to profits are regularly quite constant. What determines this? The socialists contend that natural distribution is the only just method and insist that the state should regulate this just distribution; they are not clear, however, as to what this natural method is. Henry George uses the same phrase when he says, “the just distribution of wealth is manifestly a natural distribution of wealth, and this is that which gives to him who makes it and secures to him who saves it.” All such statements beg the question for they all turn on the use of the word natural. Many modern economists are inclined to assert that the question of distribution is not an ethical one, not a question of what ought
to be but of what is. Thus Professor Tetter says[40] : “Distribution in economics is the seasoned explanation of the way in which the total product of a society is divided among its members. It is a logical question and not an ethical one.” And Professor Clark writes, “There is, in short, a deep-acting natural law at work amid the confusing struggles of the labor market.” It will not be possible, in the brief limits of this section, to take up all the theories as to the way in which this distribution is effected among the claimants to a share of the product, but a few of the more important practical results may be stated. We shall take up the four different factors in turn.