A Critical Examination of Socialism

by W. H. Mallock

CHAPTER XIV

THE SOCIALISTIC ATTACK ON INTEREST AND THE NATURE OF ITS SEVERAL ERRORS

If we reconsider what we have seen in the last chapter, we shall realise that the moral or theoretical attack on interest, as income which is unjustifiable because it has not been personally earned, is, when tested by the logic of those who make it, an attack, not on interest itself, but on bequest; and that such is the case will become even more evident when we see what the theory comes to, as translated into a practical programme.

The majority of those who attack interest to-day, no matter whether in other respects they are advocates of socialism or opponents of it, agree in declaring that what a man has personally produced he has a perfect right to enjoy and spend as he pleases. The only right they deny to him is the right to any further products which, before the capital has been spent by him, may result from the productive use of it. Now, the practical object with which this restriction is advocated is to render impossible, not accumulations of wealth (for these are recognised as legitimate when the reward of personal talent), but merely their perpetuation in the hands of others who are economically idle. So far, therefore, as this practical object is concerned, it would matter little whether the man by whom the accumulation was made were allowed to receive interest on it during his own lifetime or no, provided that this right to interest were not transmissible to his heir; or even whether he were allowed or were not allowed to leave anything to an heir at all. For the heir at best would merely receive a sum which, since it could not be used by him so as to bring about its own renewal, would be bound soon to exhaust itself; and the general effect of permitting bequests of this sterilised kind would differ from the effect of prohibiting bequests altogether, not because it would tend to render accumulated fortunes permanent, but only because it would protract for a decade or two the process of their inevitable dissipation.

We may, therefore, say that, for the purposes of the present discussion, the modern attack on interest, considered apart from any otherwise socialistic programme, practically translates itself into this—namely, the advocacy of a scheme which, as regards the actual producers of capital, leaves their existing rights both to principal and interest untouched, and would not even extinguish altogether their existing powers of bequest, but would limit the exercise of these to the principal sum only,[23] and prohibit the transmission to any private person of any right whatever to the usufruct of its productive employment.

Here, then, at last, we have something definite to discuss—a single proposed alteration in certain existing arrangements; and by comparing the situation which actually exists to-day with that which the proposed alteration, if carried into effect, would produce, we shall see whether the alteration is workable and practically defensible or no. Let us begin with the situation which actually exists to-day, confining ourselves to those features of it which are vital to the present issue.

Let us take two men of practically contrasted types, each of whom has inherited a capital of fifty thousand pounds. The ultimate object of each is, in one way or another, to make his capital provide him with the life that he most desires; but the first man is thoughtful, far-seeing, and shrewd, while the second cares for nothing but the gaiety and pleasure of the moment; and they deal with their capitals in accordance with their respective characters. The first meets, let us say, with the inventor of an agricultural machine, which will, if successfully manufactured, double the wheat crop of every acre to the cultivation of which it is applied. He places his capital, as a loan, in this inventor's hands. The machine is constructed, and used with the results desired; and the man who has lent the capital receives each year a proportion of the new loaves which are due to the machine's efficiency, and would not have existed otherwise. The second man invests his fortune in any kind of security which has the advantage of being turned easily into cash, and draws out month by month so many hundred pounds, without reference to anything but the pleasures he desires to purchase; and by the end of a few years both his capital and his income have disappeared.

Now, any one judging these men by the current standards of common-sense would, while praising the first as a model of moral prudence, condemn the second as a fool who had brought his ruin upon himself, and curtly dismiss him, if a bachelor, as being nobody's enemy but his own. But before we indorse either of these judgments as adequate, let us consider more minutely what in each case has been really done.

Let us start, then, with noting this. Whether a man invests his capital in any productive machine and then lives on the interest, or else spends it as income on his own personal pleasures, he is doing in one respect precisely the same thing. He is giving something to other men in order that they in return may make certain efforts for his benefit, of a kind which he himself prescribes. This is obviously true when, spending his capital as income, what he pays for is personal service, such as that of a butler or footman who polishes his silver plate. It is equally true when he pays for the plate itself. He is paying the silversmith so to exert his muscles that an ounce or a pound of silver may be wrought into a specific form. If he pays a toy-maker to make him a dancing-doll, he is virtually paying him to dance in his own person. He is paying him to go through a series of prescribed muscular movements. Similarly when he pays a large number of men to construct a productive machine instead of a doll or an ornament, he is paying for the muscular movements from which the machine results. Here we come back to one of the main economic truths to the elucidation of which our earlier chapters were devoted. It was there pointed out that the machinery of the modern world owes its existence to the fact that men of exceptional talent, by possessing the control of goods which a number of other men require, are able in return for the goods to make these other men exert themselves in a variety of minutely prescribed and elaborately co-ordinated ways. In short, all spending is, on the part of those who spend, a determination of the efforts of others in such ways as the spender pleases. Further, as was pointed out in an earlier chapter also, the only goods thus generally exchangeable for effort are those common necessaries of existence for which most men must always work, and which may here be represented by food, the first and the most important of them. Hence, whenever the question arises of how any given capital shall be treated—of whether it shall be invested or else spent as income—this capital must be regarded as existing in the indeterminate form of food, which is equally capable of being treated in one way or the other. And any man's capital represents for him, according to its amount, the power of feeding, and so determining the actions of a definite number of other men for some definite period. Since, therefore, the two capitalists whose conduct we have been taking as an illustration have been supposed by us to possess fifty thousand pounds apiece, we shall give precision to the situation if we say that each, at starting, has the power of feeding, and so determining the actions of, two hundred other men for a period of two years.

So much, then, being settled, let us consider these further facts. Both the capitalists, as we set out with observing, have in employing their capital the same ultimate object—namely, that of securing through the purchased efforts of others a continuous supply of things which will render their lives agreeable. And now in connection with this fact let us go back to another, which has also been pointed out before, that all efforts, the sole object of which is to please from moment to moment the man who directs and pays for them, are, whether embodied in the form of commodities or no, really reducible to some kind of personal service, if a toy-maker, in return for food, makes a dancing-doll for another man, he might just as well have pirouetted for so many hours himself; and if the purchaser would be more amused by a man's antics than by a puppet's, this is precisely what the toy-maker would have been set to do. In short, if we consider only the economic side of the matter, without reference to the moral, whenever a man spends anything on his own personal pleasure, he is virtually paying some other man, or a number of other men to dance for him.[24] What, therefore, both our capitalists desire as their ultimate object, is to keep as many men as they are able to provide with food always dancing for their pleasure, or in readiness to do so when wanted; but in setting themselves to achieve this object in their two different ways, what happens is as follows.