Labour and the Popular Welfare

by W. H. Mallock

[56] Principles of Economics, by Alfred Marshall, book iv. chap. vii.

[57] Though I have aimed at excluding from this volume all controversial matter, I may here hazard the opinion that the Socialistic principle is most properly applied to providing the labourers, not with things that they would buy if they were able to do so, but things that naturally they would not buy. Things procurable by money may be divided into three classes—things that are necessary, things that are superfluous, and things that are beneficial. Clothing is an example of the first class, finery of the second, and education of the third. If a man receives food from the State, otherwise than as a reward for a given amount of labour, his motive to labour will be lessened. If a factory girl, irrespective of her industry, was supplied by the State with fashionable hats and jackets, her motive to labour would be lessened also; for clothing and finery are amongst the special objects to procure which labour is undertaken. But desire to be able to pay for education does not constitute, for most men and women, a strong motive to labour; and therefore education may be supplied by the State, without the efficacy of their labour being interfered with.

[58] In our imaginary community we have at first eight labourers, who produce fifty pounds a year a-piece = four hundred pounds. Then we have eight labourers + one able man, who produce four hundred pounds a year for each labourer = three thousand two hundred pounds. Of this the able man takes two thousand eight hundred pounds. Now, suppose the labourers strike for double wages, and succeed in getting them, their total wages are eight hundred pounds a year instead of four hundred pounds; and the employer’s income is two thousand four hundred pounds instead of two thousand eight hundred pounds. The labourers gain a hundred per cent; the employer loses little more than fourteen per cent. The labourers therefore have a stronger motive in demanding than the employer has in resisting. But let us suppose that, the total income of the community remaining unchanged, the labourers have succeeded in obtaining one thousand eight hundred pounds, thus leaving the employer one thousand four hundred pounds. The situation will now be changed. The labourers could not possibly now gain an increase of a hundred per cent, for the entire income available would not supply this; but let us suppose they strike for an increase of two hundred pounds. If they gained that, their income would be two thousand pounds, and that of the employer one thousand two hundred pounds; but the former situation would be reversed. The employer now would lose more than the labourer would gain. The labourers would gain, in round numbers, only eleven per cent; and the employer would lose fourteen per cent. Therefore the employer would have a stronger motive in resisting than the labourers in demanding.

[59] The possibility of such a result would depend upon two assumptions, which are not in accordance with reality, and for which allowance must be made. The first is the assumption that the labouring population is stationary; the second is that Ability can increase the productivity of Labour equally in all industries. In reality, however, as was noticed in the last chapter, the number of labourers increases constantly, and the improvements in different industries are very unequal; and, owing to these two causes, it often happens that the total value produced in some industries by Labour and Ability together is not so great as is the share that is taken by Labour in others. Thus the labourers employed in the inferior industries could by no possibility raise their wages to the amount received by the labourers employed in the superior ones. Their effort accordingly would be to obtain employment in the latter, and to do so by accepting wages higher indeed than what they receive at present, but lower than those received by the men whose positions they wish to take. Thus, under such circumstances, a union of industrial interests ceases to be any longer possible. By an irresistible and automatic process, there is produced an antagonism between them; and the labourers who enjoy the higher wages will do what is actually done by our Trade Unions: they will form a separate combination to protect their own interests, not only against the employers, but even more directly against other labourers. At a certain stage of their demands, the labourers may be able to combine more readily and more closely than the employers; but when a certain stage has been passed, the case will be the reverse. The employers will be forced more and more into unanimous action, whilst the labourers, by their diverging interests, are divided into groups whose action is mutually hostile.

[60] The reader must always bear in mind the definition given of Labour, as that kind of industrial exertion which is applied to one task at a time only, and while so applied begins and ends with that task; as distinguished from Ability, which influences simultaneously an indefinite number of tasks.

[61] Mr. Shaw, for instance, is at much pains to point out that Ability is not one definite thing, as the power of jumping is, and makes himself merry by asking if Wellington’s Ability could be compared with Cobden’s, or Napoleon’s with Beethoven’s. This is all beside the mark. I have been careful to define the sense in which I used the word Ability—to define it with the utmost exactness. I have said that I use it as meaning productive Ability—industrial Ability. That is to say, those faculties by which men, not labouring themselves, are capable of directing to the best advantage the labour of others, with a view to the production of economic commodities. In the Middle Ages I said that another kind of Ability was more important—i.e. Military Ability, instead of Economic; and the historical importance of this fact, which Mr. Shaw says I discovered only after I had written my first article on Fabian Economics, I insisted on, at much greater length, years ago, when criticising Karl Marx’s “Theory of Value,” in this [the Fortnightly] Review. Again, let Mr. Shaw turn to Labour and the Popular Welfare, p. 328, and he will find what he says put more clearly by myself than by him.

[62] It is interesting to see the analysis which Mr. Shaw gives of the elements which make up the five hundred million pounds (see page 482 of his article). It shows a curious want of sense of proportion, and reads much like a statement that a young man’s bankruptcy was due to the one hundred thousand pounds he has spent on the turf, the fifty thousand pounds he had spent on building a house, the fifty pounds he has spent on a fur coat, and the sixpence he gave last Saturday to the porter at Paddington Station. But there is in it a more serious error than this. Mr. Shaw says, and rightly, that a large part of the millions to which he alludes consists of payments to artists and other professional men (e.g. doctors), by very rich commonplace people competing for their services. But he entirely mistakes the meaning of this fact. I have pointed it out carefully in Labour and the Popular Welfare (Book I. chap. iii.) and have illustrated it by one of the exact cases Mr. Shaw has in view, viz. that of a doctor who gets a fee of one thousand two hundred pounds from “a very rich commonplace person.” I pointed out that in the estimates, from which Mr. Shaw gets his figures of five hundred million pounds, all such payments are counted twice over. The “very rich commonplace person” and the doctor both pay income-tax on and are regarded as possessing the same one thousand two hundred pounds. As matters stand this is right enough, for the patient receives either in good or fancied good an equivalent for his fee in the doctor’s services; but if the sum in question were to be divided up and distributed, there would for distribution be one one thousand two hundred pounds only. By reference to calculations of Professor Leone Levi, with whom I corresponded on these matters, I drew the conclusion that the sum thus counted twice over was about one hundred million pounds annually ten years ago. This would knock off twenty per cent at once from Mr. Shaw’s five hundred million pounds; and I may again mention Mr. Giffen’s emphatic warning that, if we are thinking of any general redistribution, another two hundred million pounds would have to be deducted from the sums which persons like Mr. Shaw imagine await their seizure.

[63] The case may also be put in another way. Interest is the product of capital quâ capital, as opposed to the product of ability as distinct from capital. But the bulk of modern capital is historically the creation of ability, which has miraculously multiplied the few loaves and fishes existing at the close of the last century. Interest may therefore be called the secondary or indirect product of ability, whilst earnings and profits may be called the direct product of ability. Any one who is living on interest at the present moment is almost sure to be living, not on his own ability, but on the products of the ability of some member of his own family who has added to the national wealth within the past two generations. Suppose a man who died in 1830 left a fortune of two hundred thousand pounds, which he made, as Salt did, by the invention and production of some new textile fabric; and suppose that this fortune is now in the hands of a foolish and feeble grandson, who enjoys eight thousand pounds a year. This is evidently not the product of the grandson’s ability; but it is the product of the ability of the grandfather. The truth of this may be easily seen by altering the supposition thus—by supposing that the original maker of the fortune, instead of dying in 1830, is alive now, but as imbecile as we supposed his grandson to be. He has, we will say, long retired from business, and lives on the interest of the capital he made when his faculties were in their vigour. Would any one say that he is not living on his own ability? The only difference is—and it is a difference which, from many points of view, is of the greatest importance—that formerly he was living on the direct product of his ability, and he is now living on its indirect product.

THE END

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