Labour and the Popular Welfare

by W. H. Mallock

[46] According to the latest estimates, it exceeds seven hundred million pounds.

[47] The entire population has risen from about twenty-seven million five hundred thousand to thirty-eight millions. But a large part of this increase has taken place amongst the classes who pay income-tax, and are expressly excluded from the above calculations. These classes have risen from one million five hundred thousand to five millions.

[48] These considerations are so obvious, and have been so constantly dwelt upon by all economic writers, other than avowed Socialists, that it is quite unnecessary here to insist on these further. Even the Socialists themselves have recognised how much force there is in them, and have consequently been at pains to meet them by the following curious doctrine. They maintain that a man who makes or inherits a certain sum has a perfect right to possess it, to hoard it, or squander it on himself; but no right to any payment for the use made of it by others. They argue that if he puts it into a business he is simply having it preserved for him; for the larger part of the Capital at any time existing would dwindle and disappear if it were not renewed by being used. Let him put it into a business, say the Socialists, and draw it out as he wants it. Few things can show more clearly than this suggested arrangement the visionary character of the Socialistic mind; for it needs but little thought to show that such an arrangement would defeat its own objects and be altogether impracticable. The sole ground on which the Socialists recommend it, in preference to the arrangement which prevails at present, is that the interest which the owners of the Capital are forbidden to receive themselves would by some means or other be taken by the State instead and distributed amongst the labourers as an addition to their wages, and would thus be the means of supplying them with extra comforts. Now the interest if so applied would, it is needless to say, be not saved but consumed. But the owners of the Capital, who are thus deprived of their interest, are to have the privilege, according to the arrangement we are considering, of consuming their Capital in lieu of the interest that has been taken from them. Accordingly, whereas the interest is all that is consumed now, under this arrangement the Capital would be consumed as well. The tendency, in fact, of the arrangement would be neither more nor less than this: to increase the consumption of the nation at the expense of its savings, until at last all the savings had disappeared. It would be impracticable also for many other reasons, to discuss which here would simply be waste of time. It is enough to observe that the fact of its having been suggested is only a tribute to the insuperable nature of the difficulty it was designed to meet.

[49] The part played in national progress by the mere business sagacity of investors, amounts practically to a constant criticism of inventions, discoveries, schemes, and enterprises of all kinds, and the selection of those that are valuable from amongst a mass of what is valueless and chimerical.

[50] See Mr. Giffen’s Inaugural Address of the Fiftieth Session of the Statistical Society.

[51] The gross amount assessed to income-tax in 1891 was nearly seven hundred million pounds; now more than a hundred million pounds was exempt, as belonging to persons with incomes of less than a hundred and fifty pounds a year. Mr. Giffen maintains (see his evidence given before the Royal Commission on Labour, 7th December 1892) that there is an immense middle-class income not included amongst the wages of the labouring class. This, according to the classification adopted above, which divides the population into those with incomes above, and those with incomes below a hundred and fifty pounds, would raise the collective incomes of the latter to over seven hundred million pounds.

[52] See Mr. Giffen’s Address, as above.

[53] If the number of employers does not increase, it is true that they, unlike the employed, will be richer in proportion to their numbers; but they will be poorer in proportion to the number of men employed by them.

[54] Thus the old theory of the wage-fund, which has so often been attacked of late, has after all this great residuary truth, namely, that the amount of wealth that is spent and taken in wages is limited by the total amount of wealth produced in proportion to the number of labourers who assist in its production. That theory, however, as commonly understood, is no doubt erroneous, though not for the reasons commonly advanced by its critics. The theory of a wage-fund as commonly understood means this—that if there were eight labourers and a capital of four hundred pounds, which would be spent in wages and replaced within a year, and if this were distributed in equal shares of fifty pounds, it would be impossible to increase the share of one labourer without diminishing that of the others; or to employ more labourers without doing the same thing. But the truth is that if means were discovered by which the productivity of any one labourer could be doubled during the first six months, the whole fifty pounds destined for his whole year’s subsistence might be paid to him during the first six months, and the fund would meanwhile have been created with which to pay him a similar sum for the next six months—the employer gaining in the same proportion as the labourer. So, too, with regard to an additional number of labourers—if ability could employ their labour to sufficient advantage, part of the sum destined to support the original labourer for the second six months of the year might be advanced to them, and before the second six months’ wages became due there might be enough to pay an increased wage to all.

[55] This is true even of productive or distributive industries carried out by the State. The real Socialistic principle of production has never been applied by the State, or by any municipal authority; nor has any practical party so much as suggested that it should be. The manager of a State factory has just the same motive to save that an ordinary employer has: he can invest his money, and get interest on it. A State or a municipal business differs only from a private Capitalist’s business either in making no profits, as is the case in the building of ships of war; or of securing the services of Ability at a somewhat cheaper rate, and, in consequence, generally diminishing its efficacy. Of State business carried on at a profit, the Post Office offers the best example; and it is the example universally fixed on by contemporary English Socialists. It is an example, however, which disproves everything that they think it proves; and shows the necessary limitations of the principle involved, instead of the possibility of its extension. For, in the first place, the object aimed at—i.e. the delivery of letters—is one of exceptional simplicity. In the second place, all practical men agree that, could the postal service be carried out by private and competing firms, it would (at all events in towns) be carried out much better; only the advantages gained in this special and exceptional case from the entire service being under a single management, outweigh the disadvantages. And lastly, the business, as it stands, is a State business in the most superficial sense only. The railways and the steamers that carry the letters are all the creations of private enterprise, in which the principle of competition, and the motive force of the natural rewards of Ability, have had free play. Indeed the Post Office, as we now know it, if we can call it Socialistic at all, represents only a superficial layer of State Socialism resting on individualism, and only made possible by its developments. Real State Socialism would be merely the Capitalistic system minus the rewards of that Ability by which alone Capital is made productive.