A Critical Examination of Socialism

by W. H. Mallock

There is no question here of whether, under these conditions, a person like Mr. Shaw might not feel himself constrained on some ground or other to surrender his copyright at some period prior to his own demise. The one point here insisted on is that he could not renounce it on the ground that the wealth protected by it was no longer produced by himself. If he is entitled to the royalties resulting from the performance of his play at any time, on the ground that every man has a right to the products of his own exertions, his right to the royalties resulting from its ten-thousandth performance is, on this ground, as good as his right to the royalties resulting from the first. The royalties on a play, in short, show how certain forms of effort, though not all, continue to yield a product for an indefinite period, though the original effort itself may be never again repeated; and herein these royalties are typical of modern interest generally. They do not, however, constitute in themselves more than a small part of it. We will therefore turn to interest of other kinds, the details of whose genesis are indeed widely different, but which consist similarly of a constant repetition of values, without any corresponding repetition of the effort in which the series originated.

Those which we will consider first are the products of organic nature, which have been dwelt upon by a well-known writer as showing us the ultimate source of industrial interest generally, and also at the same time its natural and essential justice. It may be a surprise to some to learn who this writer is. He is Henry George, who is best known to the public as the advocate of a measure of confiscation so crude and so arbitrary, that even socialists have condemned it as impracticable without serious modifications. Henry George, however, although he outdid most socialists in his attack on private wealth of one particular kind—that is to say, the rent of land—was equally vehement in his defence of the interest of industrial capital. Socialists say—and the aphorism is constantly repeated—"A man can get an income only by working or stealing; there is no third way." In answer to this, it was pointed out by George that one kind of wealth, at all events—and we may add that here we have wealth in its oldest form—consists of possessions yielding a natural increase, which has been neither made by the possessors, nor yet stolen by them from anybody else. That is to say, it consists of flocks and herds. A shepherd or herdsman starts with a single pair of animals, from which parents there arises a large progeny. This living increment has not been produced by the man, but it is still more obvious that it has not been produced by his neighbours, and it therefore belongs in justice to the man who owns the parents. George pointed out also that whole classes of possessions besides are, for by far the larger part of their value, equally independent either of corresponding work or of theft. Among such possessions are wines, whose quality improves with time, and which, if sold to-day, may be worth tenpence a bottle, but which four years hence may be worth perhaps half-a-crown. In all such cases—this was George's contention—we have some possession originally small to start with, which year by year is increased in amount or at least in value, not by the efforts of the possessor, but by the secret operations of nature. Here, he argued, we have capital in its typical form; and interest is the gift of nature to the man by whom the capital is owned.

George, however, is constrained to supplement this proposition by another. Though he assumes that of the products which are, in the modern world, actually paid as interest by the borrower of capital to the owners of it, the larger part consists of gifts of unaided nature, he admits that they are not the whole. He admits that a part of it is paid for the use of machinery. Now, such interest, he says, has a definitely different origin, and cannot intrinsically be justified in the same way; and if all wealth consisted of such commodities as are due to the efforts of man, and to the man-made machinery which assists him, all interest would be really, as it is said to be by some, indefensible. But, he continues, since interest on capital such as machinery is not the whole of the interest paid in the modern world, but is only a minor part of it, and since in the modern world all forms of capital are interchangeable, the laws which govern us in our dealings with the lesser quantity must necessarily be assimilated to those which govern us in our dealings with the greater. If a ram and a sheep are capital which yields just interest, because their wool and their progeny are increments due to nature, and if a ram and a sheep are exchangeable for some kind of machine, the possession of the one must be placed on a par with the possession of the other. The machine must be treated, though it is not so in strictness, as if it were prolific in the same sense as the beasts are; and a part of what it is used to produce must be paid by the user to the owner of it.

Now, both these arguments—that which deals with the fact of natural increase, and that which deals with the assimilation of all such possessions as are interchangeable—are in principle sound. The first, indeed, touches the very root of the whole matter; but the first is exaggerated in his statement of it, and unduly limited in his application, and the second is wholly unnecessary for proving what he desires to prove. The first is exaggerated in his statement of it because, as a matter of fact, the kind of capital whose interest is described by him as the gift of nature is not the major, it is only a minor part of the capital yielding interest under the conditions which obtain to-day. A part far larger is capital in the form of machinery; and if the distinction which George draws between the two is a true one, the case of the flocks and herds should be assimilated to that of the machines, not the case of the machines to that of the flocks and herds. Interest should be denied to both kinds of capital because machines are not naturally prolific, instead of being conceded to both because flocks and herds are so. We shall find, however, that the distinction which George seeks to establish is illusory, that both kinds of capital yield interest in the same way, and that his justification of it in the one case is equally applicable to it in the other.

His attempt to distinguish between the two takes the form of a criticism of Bastiat, according to whom the typical source of interest is the added productivity which a given amount of human effort acquires by the use of certain lendable implements. As a type of such implements or machines, Bastiat takes a plane. The maker of a plane lends this plane to another man, who is thus enabled to finish off in a week four more planks than he could have done had he used an adze. If, at the end of the week, the borrower does nothing more than return the plane in good repair to the lender, the borrower gains by the transaction; but the maker and lender not only gains nothing, he loses. For a week he loses his implement which he otherwise might have used himself, and the extra planks which, by the use of it, he could have produced just as easily as his fellow. Such an arrangement would be obviously and absurdly unjust. Justice demands—and practice here follows justice—that he get at the end of the week, not only his own plane back again, but two of the extra planks due to its use besides. A plane, in short—such is Bastiat's meaning, though he does not put it in this precise way—is a possession which is fruitful no less than a sheep and a ram are, or a wine which adds to its value by the mere process of being kept, and it, therefore, yields interest for a virtually similar reason. George, however, seeks to dispose of Bastiat's argument thus: If the maker of the plane lends it, he says, instead of himself using it, and the borrower borrows a plane, instead of himself making one, such an arrangement is simply due to the fact that both parties for the moment happen to find it convenient. For, George observes, it is no part of Bastiat's contention that the plane is due to the exertion of any faculties possessed by the maker only. Either man could make it, just as either man could use it. Why, then, should A pay a tribute to B for the use of something which, to-morrow, if not to-day, he could make for himself without paying anything to anybody?

Now, if Bastiat's plane is to be taken as signifying a plane only, the criticism of George is just. But what George forgets is that, if the plane means a plane only—an implement which any man could make just as well as the lender—interest on planes, besides being morally indefensible, would as a matter of fact never be paid at all. Bastiat's plane, however, stands for a kind of capital, the borrowing of which and the paying of interest on which, form one of the most constant features of the modern industrial world; and he evidently assumes, even if he does not say so, that for all this borrowing and paying there is some constant and sufficient reason. Now, the only reason can be—and George's own criticism implies this—that in order to produce the machine-capital borrowed certain faculties are needed which are not possessed by the borrowers; and though this may not be true of a simple hand-plane itself, it is emphatically true of the elaborate modern machinery of which Bastiat merely uses his hand-plane as a symbol. In order to produce such implements of production as these, the exertion of faculties is required which are altogether exceptional, such as high scientific knowledge, invention, and many others. Let invention—the most obvious of these—here do duty for all, and let us consider, for example, the mechanism of a modern cotton mill, or of a boot factory, or a Hoe printing press, or a plant for electric lighting. All these would be impossible if it had not been for inventive faculties as rare in their way as those of a playwright like Mr. Shaw.

No one will deny that when a play like "Man and Superman" first acquires a vogue which renders its performance profitable, the royalties paid to the author are values which he has himself created, not indeed by his faculties used directly, but by his faculties embodied in a work which he has accomplished once for all in the past, and which has thenceforward become a secondary and indefinitely enduring self; and if this is true of the royalties resulting from its first profitable performance, it would be equally true of those resulting from the last, even though this should take place on the eve of the Day of Judgment. With productive machinery the case is just the same. If Mr. Shaw, instead of writing "Man and Superman," had been the sole inventor of the steam-engine, and the only man capable of inventing it, every one will admit that he would, by this one inventive effort, have personally co-operated for a time with all users of steam-power, and been part-producer of the increment in which its use resulted. And if this would have been true of his invention when it was only two years old, it would be equally true now. He would still be co-operating with the users of every steam-engine in the world to-day, and adding to their products something which they could not have produced alone.

Here, then, we see that in one respect at all events the two kinds of capital, which George attempts to contrast, yield interest for a precisely similar reason. Both consist of a productive power or agency which is external to the borrower himself; and it makes no difference to him whether the auxiliary power borrowed inheres in living tissue, or in a mechanism of brass or iron.

But the resemblance between these two forms of capital, and the identity of the reasons why both of them bear interest, do not end here. I quoted in a former chapter an observation of Mr. Sidney Webb's, which he himself applies in a very foolish way, but which is obviously true in itself, and in the present connection is pertinent. Some men he admits are incomparably more productive than others, because they happen to be born with a special kind of ability. But what is this ability itself? It is simply the result, he says, of a process which lies behind them—namely, the natural process of animal and human evolution; and its special products are like those of exceptionally fertile land. That is to say, the ability which produces modern machines is in reality just as much a force of nature as that which makes live-stock fertile, and brings raw wine to maturity. But the same line of argument will carry us much farther than this. As Dr. Beattie Crozier has shown in his work, The Wheel of Wealth, the part which nature plays in productive machinery is not confined to the brains of the gifted inventors and their colleagues. It is incorporated in, and identified with, the actual machines themselves. The lever, the cam, the eccentric, the crank, the piston, the turbine, the boiler with the vapour imprisoned in it—devices which it has taxed the brains of the greatest men to elaborate and to co-ordinate—were all latent in nature before these men made them actual; and when once such devices are actualised it is nature that makes them go. There is not merely a transformation of so much human energy into the same amount of natural energy; but nature adds to the former a non-human energy of her own; as—to take a good illustration of Dr. Crozier's—obviously happens in the case of a charge of gunpowder, which, "when used for purposes of blasting, has," he observes, "in itself a thousand times the quantity of pure economic power that is bought in the work of the labourers who supply and mix the ingredients." That is to say, whenever human talent invents and produces a machine which adds to the productivity of any one who uses it with sufficient intelligence, the inventor has shut up in his machine some part of the forces of nature, as though it were an efreet whom a magician has shut up in a bottle, and whose services he can keep for himself, or hand over to others. The efreets shut up in machinery will not work for human beings at all, unless there are human magicians who manage thus to imprison them. They therefore belong to the men who, in virtue of their special capacities, are alone capable of the effort requisite to perform this feat; and it matters nothing to others, by whom the efreets' services are borrowed, whether the effort in question occupied a year or a day, or whether it took place yesterday or fifty years ago.

The borrowed efreet produces the same surplus in either case, and interest is a part of this surplus which goes, not to the efreet himself (for this is not possible), but to his master, just as a cab-fare is paid to the cabman and not his horse.