Labour and the Popular Welfare

by W. H. Mallock

To begin, then, with the first. My primary object has been to exhibit the absolute falsehood of the Socialistic doctrine that all wealth is due to labour, and to replace this by a demonstration that under modern conditions of production, labour is not only not the sole producer of wealth, but does not even produce the principal part of it. The principal producing agent, I have pointed out, is what I have called Industrial Ability—or the faculty which, whilst exercised by a few, directs the labour of the many; and if this truth is once accepted, it completely cuts away from Socialism the whole of its existing foundations, and renders absolutely meaningless the whole of its popular rhetoric. For the most powerful argumentative appeal which Socialism can make to the majority is merely some amplification of the statement, which is no doubt plausible, and is advanced by Socialists as an axiom, that the exertions of the majority—or, in other words, Labour—has produced all wealth, and that therefore the majority not only ought to possess it, but will be able to possess it by the simple process of retaining it. But the moment the productive functions of industrial ability are made clear, the doctrine which seemed an axiom is reduced to an absurdity; and what might before have seemed a paradox becomes a simple and intelligible truth—the doctrine, namely, that a comparatively few persons, with certain exceptional gifts, are capable of producing more wealth than all the rest of the community; and that whoever may produce the wealth which the rich classes possess, it is at all events not produced by the multitude, and might, under changed conditions, be no longer produced at all.

Now this doctrine of Ability Mr. Shaw accepts, and completely surrenders and throws overboard the Socialistic doctrine of Labour. He does indeed endeavour to make the surrender seem less complete than it is, partly by irrelevant comments on some minor points,[61] and partly by insisting on certain qualifications which are perfectly true, and to which I have myself often elsewhere alluded, but which, as I shall show presently, are, on his own admission, of small practical importance, and do not appreciably affect the main position. For instance Mr. Shaw argues that it is not always the most able man who, in any given business, is to be found directing it. This also is no doubt true. It merely means, however, that of industrial ability the same thing may be said, which has so truly been said of Government—that it is always in, or passing into, the hands of the most powerful section of the community. Businesses conducted by men of inferior Ability are gradually superseded by businesses conducted by men of superior Ability. Men’s actual positions may be a few years behind or before their capacities, but for all practical purposes they coincide with them and the utmost that Mr. Shaw’s contention could prove would be that some members of a minority are in places which should be occupied by other members of a minority; not that the majority could take the places of either.

But I merely mention these points in passing, and waste no pains in insisting on them or pressing them home, because their practical insignificance is admitted by Mr. Shaw himself. The great body of men—of men selected at random, even if they should enjoy the advantages of superior position and education—“could not,” he says, “invent a wheelbarrow, much less a locomotive.” He amplifies this admission by quoting the case of an acquaintance of his, whose exceptional Ability secured him four thousand pounds a year, because without the assistance of that Ability his employer would have lost more than this sum. “Other men,” he proceeds, “have an eye for contracts, or what not, or are born captains of industry, in which case they go into business on their own account, and make ten, twenty, or two hundred per cent, where you or I should lose five.... All these people are rentiers of Ability.” Again he quotes with emphatic approval a passage from an American writer, whom he praises as a skilled economist; and using this passage as a text, endorses its meaning in these words of his own. “The able man, the actual organiser and employer, alone is able to find a use for mere manual deftness, or for that brute strength, and heavy bank balance, which any fool may possess.” “The capitalist and the labourer run helplessly to the able man.” “He is the only party in the transaction capable of the slightest initiative in production.”

I need not add anything to these admissions. They constitute, as I say, a complete surrender of the Socialistic doctrine of Labour, and an emphatic admission of the primary proposition I advanced as to the productive function of Ability. It is enough then to say, that so far as the question of Labour is concerned, Mr. Shaw throws over completely all the doctrines of the Gotha programme, the Erfurt programme, of Karl Marx and his disciples, of Mr. Hyndman and his Social Democrats—in fact the cardinal doctrine of Socialism as hitherto preached everywhere.

Having disposed then of the point as to which Mr. Shaw agrees with me, I will pass on to the point on which he supposes me to disagree with him; and this is the point to which he devotes the larger part of his article. Everything else is thrown in as a sort of by-play. This point is as follows. Speaking roughly, and adopting the following figures, not because I consider them accurate, but merely because they agree with Mr. Shaw’s, and are for the present purpose as good as any others, above seven hundred million pounds of the national income go to the non-labouring classes. Mr. Shaw, as I gather, would set down about two hundred million pounds of this as the earnings or profits of Ability; whilst he contends that the remainder is the product neither of Ability nor Labour, but of capital or land. It represents the assistance which land and capital give to the two other productive agents; and it goes to those who possess this land and capital, simply on account of the rights which they possess as passive owners. This sum, which Mr. Shaw estimates at about five hundred million pounds,[62] ought, he contends, still to go to the owners—in fact, it must always go to its owners; but the owners should be changed. They should be the whole nation instead of a small class.

Now Mr. Shaw says that my great mistake has relation to these five hundred million pounds. He says that, having argued rightly enough that two hundred million pounds or so are the genuine product or rent of actual and indispensable Ability, I have committed the absurd mistake of confusing with this rent of ability, the rent of land, of houses, and above all, the interest on capital. “Mr. Mallock,” he says, “is an inconsiderate amateur, who does not know the difference between profits and earnings on the one hand, and rent and interest on the other.” And he summarises my views on the subject by saying, that I “see in every railway shareholder the inventor of the locomotive or the steam-engine,” and that I gravely maintain that the three hundred thousand pounds a year which may form the income of one or two great urban landlords is produced by the exercise of some abnormal ability on their parts. This supposed doctrine of mine forms the main subject of Mr. Shaw’s attack. He is exuberantly witty on the subject. He turns the doctrine this way and that, distorting its features into all sorts of expressions, laughing afresh each time he does so. He calls me his “brother” and his “son”; he quotes nursery rhymes at me. He alludes to my own income and the income of the Duke of Westminster, and intimates a desire to know whether the Duke being, so he says, many hundred times as rich as myself, I am many hundred times as big a fool as the Duke. In fact, he has recourse to every argumentative device which his private sense of humour and his excellent taste suggest.

The immediate answer to all this is very simple—namely, that I never gave utterance to any such absurdity as Mr. Shaw attributes to me, but that, on the contrary, I have insisted with the utmost emphasis on this very distinction between profits and earnings, and rent and interest, which he assures his readers I do not even perceive. Mr. Shaw, therefore, has devoted most of his time to trampling only on a misconception of his own. This is the immediate answer to him; but there is a further answer to come, relating to the conclusions I drew from nature of rent and interest, after I had pointed out their contrast to the direct receipts of Ability. Let me show the truth of the immediate answer first.

I do not think that in my two recent articles in this Review there is a single sentence that to any clear-headed man could form an excuse for such a misconception as Mr. Shaw’s, whereas there are pages which ought to have made it impossible. Indeed, a notice in the Spectator disposes of Mr. Shaw by saying that he evades the real point raised by me, not meeting what I did say, and combating what I did not say. But, as I started with observing, magazine articles can rarely be exhaustive, and I will assume that some incompleteness or carelessness of expression on my part might have afforded, had these articles stood alone, some excuse for their critic. Mr. Shaw, however, is at pains to impress us that he has read other writings of mine on the same subject. He even remembers, after an interval of more than ten years, some letters I wrote to the St. James’s Gazette. It might, therefore, have been not unreasonable to expect that he would have referred to my recent volume, Labour and the Popular Welfare, which I expressly referred to in my two articles, and in which I said I had stated my position more fully. As an answer to Mr. Shaw I will quote from that volume now.

The first Book deals with certain statistics as to production in this country, and the growth of the national income as related to the population. In the second Book I deal with the cause of this growth. I point out that the causes of production are not three, as generally stated—viz. Land, Labour, and Capital; but four—viz. Land, Labour, Capital, and Ability; and that the fourth is the sole source of that increase in production which is the distinguishing feature of modern industrial progress. In thus treating Capital as distinct from Ability, I point out—taking a pumping-engine as an example—that capital creates a product which necessarily goes to its owner, quâ owner, whether the owner is an individual or the State. I then proceed to show that fixed capital—e.g. an engine—is the result of circulating capital fossilised; and that circulating capital is productive only in proportion as it is under the control of Ability. For this reason I said that whilst it is in process of being utilised, Capital is connected with Ability as the brain is connected with the mind, it being the material means through which Ability controls Labour; and that thus from a certain point of view the two are inseparable. I need not insist on this truth, because Mr. Shaw admits it. But Mr. Shaw will find a subsequent chapter (Book IV. chap. ii.) bearing the title, Of the Ownership of Capital as distinct from its Employment by Ability. From that chapter I quote the following passage:—

“In dealing with Capital and Ability, I first treated them separately, I then showed that, regarded as a productive agent, Capital is Ability, and must be treated as identical with it. But it is necessary, now we are dealing with distribution, to dissociate them for a moment and treat them separately once more. For even though it be admitted that Ability, working by means of Capital, produces, as it has been shown to do, nearly two-thirds of the national income,[63] and though it may be admitted further that a large portion of this product should go to the able men who are actively engaged in producing it—the men whose Ability animates and vivifies Capital—it may be argued that a portion of it, which is very large indeed, goes as a fact to men who do not exert themselves at all, or who, at any rate, do not exert themselves in the production of wealth. These men, it will be said, live not on the products of Ability, but on the interest of Capital, which they have come accidentally to possess; and it will be asked on what ground Labour is interested in forbearing to touch the possessions of those who produce nothing?... Why should it not appropriate what goes to this wholly non-productive class.”